EXHIBIT 4.6

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                                WARRANT AGREEMENT



                          Dated as of December 29, 2005

                                     between

                               NATIONAL COAL CORP.

                                       and

                     WELLS FARGO BANK, NATIONAL ASSOCIATION,

                                as Warrant Agent

                              Warrants to Purchase
                             Shares of Common Stock




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         WARRANT  AGREEMENT,  dated as of December 29, 2005 (this  "Agreement"),
between National Coal Corp., a Florida  corporation  (the "COMPANY"),  and Wells
Fargo Bank, National  Association,  a national banking  association,  as warrant
agent (in such capacity, the "WARRANT AGENT").

         WHEREAS,  the Company  proposes to issue 55,000  common stock  purchase
warrants (the "WARRANTS") to initially  purchase up to an aggregate of 1,732,632
shares of common stock, par value $0.0001 per share (the "COMMON STOCK"), of the
Company (the Common Stock issuable on exercise of the Warrants being referred to
herein as the "WARRANT SHARES"),  each Warrant initially  representing the right
to purchase  31.5024  Warrant  Shares,  in  connection  with the  offering  (the
"OFFERING") by the Company of 55,000 units (the "UNITS"),  each Unit  consisting
of (i) $1,000 principal amount at maturity of the 10.5% Senior Secured Notes due
2010 of the Company (the "Notes") and (ii) one Warrant.

         WHEREAS,  the Company desires the Warrant Agent to act on behalf of the
Company,  and the  Warrant  Agent is  willing so to act in  connection  with the
issuance of Warrant  Certificates  (as  defined)  and other  matters as provided
herein.

         WHEREAS,  the Company has entered into that certain Equity Registration
Rights Agreement, dated as of the date hereof, between the Company and Jefferies
& Company, Inc. for the benefit of holders of the Warrants.

         NOW,  THEREFORE,  in  consideration  of the  premises  and  the  mutual
agreements herein set forth, the parties hereto agree as follows:

Section 1.        CERTAIN DEFINITIONS.

         As used in this Agreement, the following terms shall have the following
respective meanings:

         "144A GLOBAL WARRANT" means a Global Warrant  substantially in the form
of EXHIBIT A hereto sold in reliance on Rule 144A and bearing the Global Warrant
Legend and the Private  Placement Legend and deposited with or on behalf of, and
registered in the name of, the Depositary or its nominee.

         "AFFILIATE" of any specified  Person means any other Person directly or
indirectly  controlling  or  controlled  by or under  direct or indirect  common
control with such specified Person. For purposes of this definition,  "control,"
as  used  with  respect  to  any  Person,  means  the  possession,  directly  or
indirectly,  of the power to direct or cause the direction of the  management or
policies of such Person, whether through the ownership of voting securities,  by
agreement or otherwise; PROVIDED that beneficial ownership of 10% or more of the
Voting  Stock of a Person  will be deemed to be  control.  For  purposes of this
definition,  the terms "controlling,"  "controlled by" and "under common control
with" have correlative meanings.

         "APPLICABLE PROCEDURES" means, with respect to any transfer or exchange
of or for beneficial  interests in any Global Warrant,  the rules and procedures
of the  Depositary,  Euroclear  and  Clearstream  that apply to such transfer or
exchange.


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         "BOARD OF DIRECTORS" means, as to any Person, the board of directors or
similar governing body of such Person or any duly authorized committee thereof.

         "BUSINESS DAY" means any day other than a Legal Holiday.

         "CLEARSTREAM" means Clearstream Banking, S.A.

         "CLOSING DATE" means the date hereof.

         "DEFINITIVE  WARRANT" means a Warrant  Certificate issued in registered
form as a definitive Warrant Certificate.

         "DEPOSITARY"  means, with respect to the Warrants issuable or issued in
whole or in part in global form,  the Person  specified in SECTION 3.3 hereof as
the Depositary with respect to the Warrants,  and any and all successors thereto
appointed  as  Depositary  hereunder  and having  become  such  pursuant  to the
applicable provision of this Agreement.

         "EQUITY  REGISTRATION  RIGHTS AGREEMENT" means the Registration  Rights
Agreement,  dated as of the date  hereof,  between  the  Company and the Initial
Purchaser relating to the resale of Warrant Shares.

         "EUROCLEAR"  means  Euroclear  Bank  S.A./N.V.,   as  operator  of  the
Euroclear system.

         "EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended.

         "EXERCISE  PRICE"  means the  amount  set forth in the form of  Warrant
Certificate attached hereto as EXHIBIT A, as adjusted as herein provided.

         "GLOBAL  WARRANTS" means,  individually and  collectively,  each of the
Restricted Global Warrants and the Unrestricted  Global Warrants,  substantially
in the form of EXHIBIT A hereto issued in accordance with SECTION 3.1(B) and 3.5
hereof.

         "GLOBAL   WARRANT  LEGEND"  means  the  legend  set  forth  in  SECTION
3.5(F)(II),  which is required to be placed on all Global  Warrants issued under
this Agreement.

         "IAI GLOBAL WARRANT" means a Global Warrant  substantially  in the form
of EXHIBIT A hereto sold to Institutional  Accredited  Investors and bearing the
Global Warrant Legend and the Private  Placement Legend and deposited with or on
behalf of and registered in the name of the Depositary or its nominee.

         "INDENTURE" means the indenture, dated as of the date hereof, among the
Company,  the  Guarantors  set forth  therein  and Wells  Fargo  Bank,  National
Association, as trustee and collateral agent, relating to the Notes.

         "INDIRECT  PARTICIPANT" means a Person who holds a beneficial  interest
in a Global Warrant through a Participant.

         "INITIAL PURCHASER" means Jefferies & Company, Inc.


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         "INSTITUTIONAL  ACCREDITED  INVESTOR"  means an institution  that is an
"accredited  investor" as defined in Rule  501(a)(1),  (2), (3) or (7) under the
Securities Act, which is not also a QIB.

         "LEGAL  HOLIDAY"  means a Saturday,  a Sunday or a day on which banking
institutions  in the City of New  York,  the city in which the  corporate  trust
office of the Warrant  Agent is located or at a place of payment are  authorized
by law,  regulation or executive order to remain closed.  If a payment date is a
Legal  Holiday at a place of  payment,  payment may be made at that place on the
next succeeding day that is not a Legal Holiday, and no interest shall accrue on
such payment for the intervening period.

         "NON-U.S. PERSON" means any Person other than a U.S. Person.

         "OFFICER" means, with respect to any Person, the Chairman of the Board,
the Chief Executive Officer,  the President,  the Chief Financial  Officer,  any
Vice President, the Secretary or the Treasurer of such Person.

         "OFFICER'S  CERTIFICATE"  means a  certificate  signed on behalf of the
Company by an Officer of the Company, who must be the Chairman of the Board, the
President,  the Chief  Executive  Officer,  the  Chief  Financial  Officer,  the
Treasurer or the principal accounting officer or a Senior Vice President or Vice
President of the Company.

         "OPINION  OF  COUNSEL"  means an  opinion  from  legal  counsel  who is
reasonably  acceptable  to the Warrant  Agent in form and  substance  reasonably
acceptable to the Warrant Agent. The counsel may be an employee of or counsel to
the Company or any subsidiary of the Company.

         "PARTICIPANT"  means,  with  respect to the  Depositary,  Euroclear  or
Clearstream,  a Person  who has an account  with the  Depositary,  Euroclear  or
Clearstream, respectively (and, with respect to DTC, shall include Euroclear and
Clearstream).

         "PERSON" means any individual, corporation, partnership, joint venture,
association,  joint-stock company, trust, unincorporated  organization,  limited
liability company or government or other entity.

         "PRIVATE  PLACEMENT  LEGEND"  means the  legend  set  forth in  SECTION
3.5(F)(I)  to be placed on all  Warrants  issued  under this  Warrant  Agreement
except where otherwise permitted by the provisions of this Warrant Agreement.

         "QIB" means a "qualified institutional buyer" as defined in Rule 144A.

         "REGISTRABLE  SECURITY"  means,  at any  time,  any of (i) the  Warrant
Shares  (whether or not the related  Warrants have been  exercised) and (ii) any
other securities issued or issuable with respect to any Warrant Shares by way of
stock  dividends or stock split or in connection  with a combination  of shares,
recapitalization, merger, consolidation or other reorganization or otherwise. As
to any particular  Registrable  Securities,  such  securities  shall cease to be
Registrable  Securities  when (a) a  registration  statement with respect to the
offering  of such  securities  by the holder  thereof  shall have been  declared
effective under the Securities Act and such securities  shall have been disposed
of by such holder pursuant to such registration


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statement, (b) such securities may be sold to the public pursuant to Rule 144(k)
(or any similar  provisions then in force, but not Rule 144A)  promulgated under
the Securities Act, (c) such securities shall have been otherwise transferred by
the holder thereof and new certificates for such securities not bearing a legend
restricting  further  transfer  shall have been  delivered by the Company or its
transfer agent and subsequent  disposition of such securities  shall not require
registration  or  qualification  under the Securities Act or (d) such securities
shall have ceased to be outstanding.

         "REGULATION S" means Regulation S promulgated under the Securities Act.

         "REGULATION  S GLOBAL  WARRANT"  means a Global  Warrant in the form of
EXHIBIT A hereto bearing the Global Warrant Legend, the Private Placement Legend
and the Regulation S Legend and deposited with or on behalf of and registered in
the name of the Depositary or its nominee.

         "REGULATION S LEGEND" means the legend set forth in SECTION  3.5(F)(IV)
to be placed on all Regulation S Global  Warrants  issued pursuant to Regulation
S.

         "RESTRICTED  DEFINITIVE WARRANT" means a Definitive Warrant bearing the
Private Placement Legend.

         "RESTRICTED  GLOBAL WARRANT" means a Global Warrant bearing the Private
Placement Legend.

         "RULE 144" means Rule 144 promulgated under the Securities Act.

         "RULE 144A" means Rule 144A promulgated under the Securities Act.

         "RULE 903" means Rule 903 promulgated under the Securities Act.

         "RULE 904" means Rule 904 promulgated under the Securities Act.

         "SECURITIES ACT" means the Securities Act of 1933, as amended.

         "SEPARATION DATE" means the earliest to occur of (i) 180 days following
the  consummation  of the  offering  of the  Units,  (ii)  the  date on  which a
registration statement for a registered exchange offer with respect to the Notes
is declared  effective under the Securities Act, (iii) the date on which a shelf
registration statement with respect to the Warrant Shares is declared effective,
and (iv) such date as Jefferies & Company, Inc., as the initial purchaser of the
Units, in its sole discretion shall determine.

         "TRUSTEE" means the trustee under the Indenture.

         "UNRESTRICTED GLOBAL WARRANT" means a Global Warrant that does not bear
the Private Placement Legend.

         "UNRESTRICTED DEFINITIVE WARRANT" means one or more Definitive Warrants
that do not bear and are not required to bear the Private Placement Legend.


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         "U.S.  PERSON" means a U.S.  person as defined in Rule 902(k) under the
Securities Act.

         "WARRANT COUNTERSIGNATURE ORDER" shall have the meaning as set forth in
SECTION 3.2.

Section 2.        APPOINTMENT OF WARRANT AGENT.

         The Company  hereby  appoints the Warrant Agent to act as agent for the
Company  in  accordance  with the  instructions  set forth  hereinafter  in this
Agreement and the Warrant Agent hereby accepts such appointment  pursuant to the
terms and conditions of this Agreement.

Section 3.        ISSUANCE OF WARRANTS; WARRANT CERTIFICATES.

         3.1.     FORM AND DATING.

         (a)      GENERAL.  The Warrants shall be  substantially  in the form of
EXHIBIT  A  hereto  (each  a  "WARRANT  CERTIFICATE").  The  Warrants  may  have
notations,  legends or  endorsements  required by law,  stock  exchange  rule or
usage. Each Warrant shall be dated the date of its countersignature.

         The terms and provisions  contained in the Warrants  shall  constitute,
and are hereby expressly made, a part of this Warrant Agreement. The Company and
the Warrant Agent,  by their  execution and delivery of this Warrant  Agreement,
expressly agree to such terms and provisions and to be bound hereby and thereby.
However,  to the extent any provision of any Warrant  conflicts with the express
provisions of this Warrant  Agreement,  the provisions of this Warrant Agreement
shall govern and be controlling.

         (b)      GLOBAL  WARRANTS.  Warrants  issued  in global  form  shall be
substantially  in the form of EXHIBIT A attached  hereto  (including  the Global
Warrant  Legend   thereon).   Warrants   issued  in  definitive  form  shall  be
substantially  in the form of EXHIBIT A attached  hereto (but without the Global
Warrant  Legend  thereon).  Each  Global  Warrant  shall  represent  such of the
outstanding  Warrants as shall be specified  therein and each shall provide that
it shall represent the number of outstanding Warrants from time to time endorsed
thereon and that the number of outstanding Warrants represented thereby may from
time to time be reduced or increased,  as appropriate,  to reflect exchanges and
redemptions.  Any  endorsement  of a Global Warrant to reflect the amount of any
increase or decrease in the number of outstanding  Warrants  represented thereby
shall be made by the Warrant Agent in accordance with written instructions given
by the holder thereof as required by SECTION 3.5 hereof.

         (c)      EUROCLEAR   AND   CLEARSTREAM   PROCEDURES   APPLICABLE.   The
provisions of the "Operating  Procedures of the Euroclear System" and "Terms and
Conditions  Governing Use of Euroclear" and the "General Terms and Conditions of
Clearstream  Banking" and "Customer Handbook" of Clearstream shall be applicable
to transfers of beneficial interests in the Regulation S Global Warrant that are
held by Participants through Euroclear or Clearstream.

         3.2.     EXECUTION.

         An Officer  shall sign the  Warrants on behalf of the Company by manual
or facsimile signature.


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         If the Officer  whose  signature  is on a Warrant no longer  holds that
office at the time a Warrant is countersigned, the Warrant shall nevertheless be
valid.

         A  Warrant  shall  not be  valid  until  countersigned  by  the  manual
signature of the Warrant Agent. The signature shall be conclusive  evidence that
the Warrant has been properly issued under this Warrant Agreement.

         The Warrant Agent shall,  upon a written order of the Company signed by
an  Officer (a  "WARRANT  COUNTERSIGNATURE  ORDER"),  countersign  Warrants  for
original issue up to the number stated in the preamble hereto.

         The  Warrant  Agent may appoint an agent  acceptable  to the Company to
countersign  Warrants.  Such an agent  may  countersign  Warrants  whenever  the
Warrant  Agent  may do  so.  Each  reference  in  this  Warrant  Agreement  to a
countersignature by the Warrant Agent includes a countersignature by such agent.
Such an agent has the same rights as the Warrant  Agent to deal with the Company
or an Affiliate of the Company.

         3.3.     WARRANT REGISTRAR AND DEPOSITARY.

         The Company  shall  maintain an office or agency where  Warrants may be
presented for  registration of transfer or for exchange  ("WARRANT  REGISTRAR").
The  Warrant  Registrar  shall  keep a  register  of the  Warrants  and of their
transfer  and  exchange.   The  Company  may  appoint  one  or  more  co-Warrant
Registrars.  The term "Warrant Registrar" includes any co-Warrant Registrar. The
Company  may change any Warrant  Registrar  without  notice to any  holder.  The
Company shall notify the Warrant Agent in writing of the name and address of any
agent not a party to this Warrant Agreement.  If the Company fails to appoint or
maintain  another  entity as Warrant  Registrar,  the Warrant Agent shall act as
such. The Company or any of its subsidiaries may act as Warrant Registrar.

         The Company initially  appoints the Warrant Agent to act as the Warrant
Registrar with respect to the Warrants.

         The Company initially  appoints The Depository Trust Company ("DTC") to
act as Depositary with respect to the Global Warrants.

         3.4.     HOLDER LISTS.

         The Warrant Agent shall  preserve in as current a form as is reasonably
practicable  the most recent list  available to it of the names and addresses of
all  record  holders  of  Warrants.  If the  Warrant  Agent  is not the  Warrant
Registrar, the Company shall promptly furnish to the Warrant Agent at such times
as the Warrant Agent may request in writing,  a list in such form and as of such
date as the Warrant Agent may  reasonably  require of the names and addresses of
the holders as set forth in the Company's books and records.

         3.5.     TRANSFER AND EXCHANGE.

         (a)      TRANSFER AND EXCHANGE OF GLOBAL WARRANTS. A Global Warrant may
not be  transferred  as a whole  except by the  Depositary  to a nominee  of the
Depositary, by a nominee of


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the Depositary to the Depositary or to another nominee of the Depositary,  or by
the  Depositary  or any such nominee to a successor  Depositary  or a nominee of
such successor Depositary.  All Global Warrants will be exchanged by the Company
for Definitive Warrants if (i) the Company delivers to the Warrant Agent written
notice from the Depositary  that it is unwilling or unable to continue to act as
Depositary  or that it is no  longer a  clearing  agency  registered  under  the
Exchange Act and, in either case, a successor Depositary is not appointed by the
Company  within 120 days after the date of such  notice from the  Depositary  or
(ii) the Company in its sole discretion  determines that the Global Warrants (in
whole but not in part) should be exchanged for Definitive  Warrants and delivers
a written  notice to such effect to the Warrant  Agent.  Upon the  occurrence of
either of the preceding events in (i) or (ii) above,  Definitive  Warrants shall
be issued in such names as the  Depositary  shall  instruct the Warrant Agent in
writing. Global Warrants also may be exchanged or replaced, in whole or in part,
as  provided  in  SECTIONS  3.6 and 3.7  hereof.  A  Global  Warrant  may not be
exchanged  for another  Warrant  other than as provided in this SECTION  3.5(A),
however,  beneficial  interests  in a  Global  Warrant  may be  transferred  and
exchanged as provided in SECTION 3.5(B) or (C) hereof.

         (b)      TRANSFER  AND EXCHANGE OF  BENEFICIAL  INTERESTS IN THE GLOBAL
WARRANTS.  The  transfer  and  exchange of  beneficial  interests  in the Global
Warrants  shall be  effected  through the  Depositary,  in  accordance  with the
provisions of this Warrant Agreement and the Applicable  Procedures.  Beneficial
interests in the Restricted  Global Warrants shall be subject to restrictions on
transfer  comparable  to those set forth  herein to the extent  required  by the
Securities  Act.  Transfers of beneficial  interests in the Global Warrants also
shall  require  compliance  with  either  SUBPARAGRAPH  (I) or  (II)  below,  as
applicable,  as well as one or more of the  other  following  subparagraphs,  as
applicable:

                  (i)      TRANSFER OF  BENEFICIAL  INTERESTS IN THE SAME GLOBAL
         WARRANT.  Beneficial  interests in any Restricted Global Warrant may be
         transferred  to  Persons  who take  delivery  thereof  in the form of a
         beneficial interest in the same Restricted Global Warrant in accordance
         with the  transfer  restrictions  set  forth in the  Private  Placement
         Legend.  Beneficial interests in any Unrestricted Global Warrant may be
         transferred  to  Persons  who take  delivery  thereof  in the form of a
         beneficial  interest  in an  Unrestricted  Global  Warrant.  No written
         orders or instructions shall be required to be delivered to the Warrant
         Registrar to effect the transfers described in this SECTION 3.5(B)(I).

                  (ii)     ALL  OTHER  TRANSFERS  AND  EXCHANGES  OF  BENEFICIAL
         INTERESTS IN GLOBAL  WARRANTS.  In  connection  with all  transfers and
         exchanges  of  beneficial  interests  that are not  subject  to SECTION
         3.5(B)(I)  above,  the  transferor  of such  beneficial  interest  must
         deliver to the Warrant  Registrar  both (A) (1) a written  order from a
         Participant  or an  Indirect  Participant  given to the  Depositary  in
         accordance with the Applicable  Procedures  directing the Depositary to
         credit or cause to be credited a beneficial  interest in another Global
         Warrant in an amount equal to the beneficial interest to be transferred
         or exchanged and (2) written  instructions given in accordance with the
         Applicable Procedures containing  information regarding the Participant
         account to be  credited  with such  increase  or both (B) (1) a written
         order  from a  Participant  or an  Indirect  Participant  given  to the
         Depositary in accordance with the Applicable  Procedures  directing the
         Depositary  to cause to be  issued a  Definitive  Warrant  in an amount
         equal to the beneficial


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         interest to be  transferred  or exchanged and (2) written  instructions
         given by the Depositary to the Warrant Registrar containing information
         regarding  the Person in whose name such  Definitive  Warrant  shall be
         registered.  Upon  satisfaction of all of the requirements for transfer
         or exchange of  beneficial  interests in Global  Warrants  contained in
         this  Agreement  and the  Warrants,  the Warrant Agent shall adjust the
         principal amount of the relevant Global Warrant(s)  pursuant to SECTION
         3.5(G) hereof.

                  (iii)    TRANSFER   OF   BENEFICIAL   INTERESTS   TO   ANOTHER
         RESTRICTED  GLOBAL  WARRANT.  A beneficial  interest in any  Restricted
         Global  Warrant  may be  transferred  to a Person  who  takes  delivery
         thereof in the form of a  beneficial  interest  in  another  Restricted
         Global  Warrant  if the  transfer  complies  with the  requirements  of
         SECTION  3.5(B)(II)  above  and  the  Warrant  Registrar  receives  the
         following:

                           (A)      if the transferee  will take delivery in the
                                    form of a  beneficial  interest  in the 144A
                                    Global  Warrant,  then the  transferor  must
                                    deliver a certificate in the form of EXHIBIT
                                    B hereto,  including the  certifications  in
                                    ITEM (1) thereof; and

                           (B)      if the transferee  will take delivery in the
                                    form  of  a   beneficial   interest  in  the
                                    Regulation  S  Global   Warrant,   then  the
                                    transferor must deliver a certificate in the
                                    form of  EXHIBIT  B  hereto,  including  the
                                    certifications in ITEM (2) thereof, if

                           (C)      if the transferee  will take delivery in the
                                    form  of a  beneficial  interest  in the IAI
                                    Global  Warrant,  then the  transferor  must
                                    deliver a certificate in the form of EXHIBIT
                                    B hereto,  including the  certifications and
                                    certificates and Opinion of Counsel required
                                    by ITEM (3) thereof, if applicable.

                  (iv)     TRANSFER  AND EXCHANGE OF  BENEFICIAL  INTERESTS IN A
         RESTRICTED GLOBAL WARRANT FOR BENEFICIAL  INTERESTS IN THE UNRESTRICTED
         GLOBAL WARRANT. A beneficial  interest in any Restricted Global Warrant
         may be exchanged by any holder thereof for a beneficial  interest in an
         Unrestricted  Global  Warrant  or  transferred  to a Person  who  takes
         delivery   thereof  in  the  form  of  a  beneficial   interest  in  an
         Unrestricted  Global Warrant if the exchange or transfer  complies with
         the requirements of SECTION  3.5(B)(II) above and the Warrant Registrar
         receives the following:

                           (A)      if the holder of such beneficial interest in
                                    a  Restricted  Global  Warrant  proposes  to
                                    exchange  such  beneficial  interest  for  a
                                    beneficial   interest  in  an   Unrestricted
                                    Global  Warrant,  a  certificate  from  such
                                    holder  in the  form of  EXHIBIT  C  hereto,
                                    including the  certifications in ITEM (1)(A)
                                    thereof; or

                           (B)      if the holder of such beneficial interest in
                                    a  Restricted  Global  Warrant  proposes  to
                                    transfer  such  beneficial   interest  to  a
                                    Person  who shall take  delivery  thereof in
                                    the  form  of a  beneficial  interest  in an
                                    Unrestricted  Global Warrant,  a certificate
                                    from such  holder  in the form of  EXHIBIT B
                                    hereto, including the certifications in ITEM
                                    (4) thereof;


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         and,  in each  such case set forth in this  SUBPARAGRAPH  (IV),  if the
         Warrant  Registrar  so  requests  or if the  Applicable  Procedures  so
         require,  an Opinion of Counsel in form  reasonably  acceptable  to the
         Warrant  Registrar  to the effect that such  exchange or transfer is in
         compliance  with  the  Securities  Act and  that  the  restrictions  on
         transfer  contained  herein and in the Private  Placement Legend are no
         longer  required in order to maintain  compliance  with the  Securities
         Act.

         If any such transfer is effected pursuant to SUBPARAGRAPH (IV) above at
a time when an Unrestricted  Global Warrant has not yet been issued, the Company
shall issue and, upon receipt of an Warrant Countersignature Order in accordance
with  SECTION  3.2  hereof,  the Warrant  Agent  shall  countersign  one or more
Unrestricted  Global  Warrants in the number  equal to the number of  beneficial
interests transferred pursuant to SUBPARAGRAPH (IV) above.

         (c)      TRANSFER AND EXCHANGE OF BENEFICIAL  INTERESTS FOR  DEFINITIVE
WARRANTS.

                  (i)      BENEFICIAL INTERESTS IN RESTRICTED GLOBAL WARRANTS TO
         RESTRICTED  DEFINITIVE WARRANTS. If any holder of a beneficial interest
         in a Restricted  Global  Warrant  proposes to exchange such  beneficial
         interest  for a  Restricted  Definitive  Warrant  or to  transfer  such
         beneficial  interest to a Person who takes delivery thereof in the form
         of a Restricted  Definitive Warrant,  then, upon receipt by the Warrant
         Registrar of the following documentation:

                           (A)      if the holder of such beneficial interest in
                                    a  Restricted  Global  Warrant  proposes  to
                                    exchange  such  beneficial  interest  for  a
                                    Restricted Definitive Warrant, a certificate
                                    from such  holder  in the form of  EXHIBIT C
                                    hereto, including the certifications in ITEM
                                    (2)(A) thereof;

                           (B)      if  such   beneficial   interest   is  being
                                    transferred to a QIB in accordance with Rule
                                    144A under the Securities Act, a certificate
                                    to the effect set forth in EXHIBIT B hereto,
                                    including  the  certifications  in ITEM  (1)
                                    thereof;

                           (C)      if  such   beneficial   interest   is  being
                                    transferred  to  a  Non-U.S.  Person  in  an
                                    offshore transaction in accordance with Rule
                                    903 or Rule 904 under the Securities  Act, a
                                    certificate  to  the  effect  set  forth  in
                                    EXHIBIT    B    hereto,     including    the
                                    certifications in ITEM (2) thereof;

                           (D)      if  such   beneficial   interest   is  being
                                    transferred  pursuant to an  exemption  from
                                    the   registration   requirements   of   the
                                    Securities  Act in accordance  with Rule 144
                                    under the  Securities  Act, a certificate to
                                    the  effect  set forth in  EXHIBIT B hereto,
                                    including the  certifications in ITEM (3)(A)
                                    thereof;

                           (E)      if  such   beneficial   interest   is  being
                                    transferred to an  Institutional  Accredited
                                    Investor in reliance  on an  exemption  from
                                    the   registration   requirements   of   the
                                    Securities  Act other than  those  listed in
                                    SUBPARAGRAPHS   (B)  through  (D)  above,  a
                                    certificate  to  the  effect  set  forth  in
                                    EXHIBIT    B    hereto,     including    the
                                    certifications,  certificates and Opinion of
                                    Counsel  required  by ITEM (3)  thereof,  if
                                    applicable; or


                                       9
<PAGE>


                           (F)      if  such   beneficial   interest   is  being
                                    transferred  to  the  Company  or any of its
                                    Subsidiaries,  a  certificate  to the effect
                                    set forth in EXHIBIT B hereto, including the
                                    certifications in ITEM (3)(B) thereof;

the Warrant Agent shall cause, in accordance with the standing  instructions and
procedures  existing between the Depositary and the Warrant Agent, the number of
Warrants  represented  by the  Global  Warrant  to be  reduced  by the number of
Warrants to be represented by the Definitive  Warrant pursuant to SECTION 3.5(G)
hereof,  and the Company shall  execute and the Warrant Agent shall  countersign
and deliver to the Person designated in the instructions a Definitive Warrant in
the  appropriate  amount.  Any  Definitive  Warrant  issued  in  exchange  for a
beneficial  interest in a  Restricted  Global  Warrant  pursuant to this SECTION
3.5(C)  shall  be  registered  in  such  name or  names  as the  holder  of such
beneficial  interest  shall  instruct  the  Warrant  Registrar  through  written
instructions  from the Depositary and the  Participant or Indirect  Participant.
The Warrant Agent shall deliver such Definitive Warrants to the Persons in whose
names such Warrants are so registered. Any Definitive Warrant issued in exchange
for a  beneficial  interest  in a  Restricted  Global  Warrant  pursuant to this
SECTION  3.5(C)(I) shall bear the Private  Placement Legend and shall be subject
to all restrictions on transfer contained therein.

                  (ii)     BENEFICIAL INTERESTS IN RESTRICTED GLOBAL WARRANTS TO
         UNRESTRICTED  DEFINITIVE WARRANTS. A holder of a beneficial interest in
         a Restricted  Global Warrant may exchange such beneficial  interest for
         an  Unrestricted  Definitive  Warrant or may transfer  such  beneficial
         interest  to a Person  who  takes  delivery  thereof  in the form of an
         Unrestricted  Definitive Warrant only if the Warrant Registrar receives
         the following:

                           (A)      if the holder of such beneficial interest in
                                    a  Restricted  Global  Warrant  proposes  to
                                    exchange  such  beneficial  interest  for an
                                    Unrestricted     Definitive    Warrant,    a
                                    certificate  from such holder in the form of
                                    EXHIBIT    C    hereto,     including    the
                                    certifications in ITEM (1)(B) thereof; or

                           (B)      if the holder of such beneficial interest in
                                    a  Restricted  Global  Warrant  proposes  to
                                    transfer  such  beneficial   interest  to  a
                                    Person  who shall take  delivery  thereof in
                                    the  form  of  an  Unrestricted   Definitive
                                    Warrant,  a certificate  from such holder in
                                    the form of EXHIBIT B hereto,  including the
                                    certifications in ITEM (4) thereof;  and, in
                                    each   such   case   set   forth   in   this
                                    SUBPARAGRAPH  (II), if the Warrant Registrar
                                    so requests or if the Applicable  Procedures
                                    so  require,  an  Opinion of Counsel in form
                                    reasonably   acceptable   to   the   Warrant
                                    Registrar  to the effect that such  exchange
                                    or  transfer  is  in  compliance   with  the
                                    Securities Act and that the  restrictions on
                                    transfer contained herein and in the Private
                                    Placement  Legend are no longer  required in
                                    order  to  maintain   compliance   with  the
                                    Securities Act.

                  (iii)    BENEFICIAL  INTERESTS IN UNRESTRICTED GLOBAL WARRANTS
         TO  UNRESTRICTED  DEFINITIVE  WARRANTS.  If any holder of a  beneficial
         interest in an  Unrestricted  Global Warrant  proposes to exchange such
         beneficial  interest  for a  Definitive  Warrant  or to  transfer  such
         beneficial  interest to a Person who takes delivery thereof in the form
         of a Definitive Warrant,  then, upon satisfaction of the conditions set
         forth in SECTION  3.5(B)(II)  hereof, the Warrant Agent shall cause the
         amount of the applicable Global Warrant to be


                                       10
<PAGE>


         reduced accordingly  pursuant to SECTION 3.5(G) hereof, and the Company
         shall  execute and the Warrant Agent shall  countersign  and deliver to
         the Person  designated in the instructions a Definitive  Warrant in the
         appropriate principal amount. Any Definitive Warrant issued in exchange
         for a beneficial interest pursuant to this SECTION 3.5(C)(III) shall be
         registered in such name or names and in such authorized denomination or
         denominations as the holder of such beneficial  interest shall instruct
         the Warrant Registrar through written  instructions from the Depositary
         and the  Participant or Indirect  Participant.  The Warrant Agent shall
         deliver  such  Definitive  Warrants  to the Persons in whose names such
         Warrants are so registered.  Any Definitive  Warrant issued in exchange
         for a beneficial  interest  pursuant to this SECTION  3.5(C)(III) shall
         not bear the Private Placement Legend.

         (d)      TRANSFER AND EXCHANGE OF  DEFINITIVE  WARRANTS FOR  BENEFICIAL
INTERESTS.

                  (i)      RESTRICTED    DEFINITIVE   WARRANTS   TO   BENEFICIAL
         INTERESTS IN RESTRICTED GLOBAL WARRANTS.  If any holder of a Restricted
         Definitive  Warrant  proposes to exchange such Warrant for a beneficial
         interest in a Restricted  Global Warrant or to transfer such Restricted
         Definitive  Warrants to a Person who takes delivery thereof in the form
         of a beneficial  interest in a Restricted  Global  Warrant,  then, upon
         receipt by the Warrant Registrar of the following documentation:

                           (A)      if the holder of such Restricted  Definitive
                                    Warrant  proposes to exchange  such  Warrant
                                    for a  beneficial  interest in a  Restricted
                                    Global  Warrant,  a  certificate  from  such
                                    holder  in the  form of  EXHIBIT  C  hereto,
                                    including the  certifications in ITEM (2)(B)
                                    thereof;

                           (B)      if such  Restricted  Definitive  Warrant  is
                                    being  transferred  to a QIB  in  accordance
                                    with Rule 144A under the  Securities  Act, a
                                    certificate  to  the  effect  set  forth  in
                                    EXHIBIT    B    hereto,     including    the
                                    certifications in ITEM (1) thereof;

                           (C)      if such  Restricted  Definitive  Warrant  is
                                    being transferred to a Non-U.S. Person in an
                                    offshore transaction in accordance with Rule
                                    903 or Rule 904 under the Securities  Act, a
                                    certificate  to  the  effect  set  forth  in
                                    EXHIBIT    B    hereto,     including    the
                                    certifications in ITEM (2) thereof;

                           (D)      if such  Restricted  Definitive  Warrant  is
                                    being  transferred  pursuant to an exemption
                                    from the  registration  requirements  of the
                                    Securities  Act in accordance  with Rule 144
                                    under the  Securities  Act, a certificate to
                                    the  effect  set forth in  EXHIBIT B hereto,
                                    including the  certifications in ITEM (3)(A)
                                    thereof;

                           (E)      if such  Restricted  Definitive  Warrant  is
                                    being   transferred   to  an   Institutional
                                    Accredited   Investor   in  reliance  on  an
                                    exemption from the registration requirements
                                    of  the  Securities  Act  other  than  those
                                    listed  in  SUBPARAGRAPHS  (B)  through  (D)
                                    above, a certificate to the effect set forth
                                    in   EXHIBIT   B   hereto,   including   the
                                    certifications,  certificates and Opinion of
                                    Counsel  required  by ITEM (3)  thereof,  if
                                    applicable; or


                                       11
<PAGE>


                           (F)      if such  Restricted  Definitive  Warrant  is
                                    being  transferred  to the Company or any of
                                    its  Subsidiaries,   a  certificate  to  the
                                    effect   set  forth  in  EXHIBIT  B  hereto,
                                    including the  certifications in ITEM (3)(B)
                                    thereof;

         the Warrant Agent shall cancel the  Restricted  Definitive  Warrant and
         increase or cause to be increased  the amount of, in the case of CLAUSE
         (A) above, the appropriate  Restricted  Global Warrant,  in the case of
         CLAUSE (B) above,  the 144A Global  Warrant,  in the case of CLAUSE (C)
         above, the Regulation S Global Warrant, and in all other cases, the IAI
         Global Warrant.

                  (ii)     RESTRICTED    DEFINITIVE   WARRANTS   TO   BENEFICIAL
         INTERESTS IN  UNRESTRICTED  GLOBAL  WARRANTS.  A holder of a Restricted
         Definitive Warrant may exchange such Warrant for a beneficial  interest
         in  an   Unrestricted   Global  Warrant  or  transfer  such  Restricted
         Definitive  Warrant to a Person who takes delivery  thereof in the form
         of a beneficial  interest in an Unrestricted Global Warrant only if the
         Warrant Registrar receives the following:

                           (A)      if the  holder of such  Definitive  Warrants
                                    proposes to  exchange  such  Warrants  for a
                                    beneficial   interest  in  the  Unrestricted
                                    Global  Warrant,  a  certificate  from  such
                                    holder  in the  form of  EXHIBIT  C  hereto,
                                    including the  certifications in ITEM (1)(C)
                                    thereof; or

                           (B)      if the  holder of such  Definitive  Warrants
                                    proposes  to  transfer  such  Warrants  to a
                                    Person  who shall take  delivery  thereof in
                                    the  form of a  beneficial  interest  in the
                                    Unrestricted  Global Warrant,  a certificate
                                    from such  holder  in the form of  EXHIBIT B
                                    hereto, including the certifications in ITEM
                                    (4) thereof;

         and,  in each  such case set forth in this  SUBPARAGRAPH  (II),  if the
         Warrant  Registrar  so  requests  or if the  Applicable  Procedures  so
         require,  an Opinion of Counsel in form  reasonably  acceptable  to the
         Warrant  Registrar  to the effect that such  exchange or transfer is in
         compliance  with  the  Securities  Act and  that  the  restrictions  on
         transfer  contained  herein and in the Private  Placement Legend are no
         longer  required in order to maintain  compliance  with the  Securities
         Act.

                  Upon   satisfaction   of   the   conditions   of  any  of  the
         subparagraphs  in this  SECTION  3.5(D)(II),  the  Warrant  Agent shall
         cancel the  Definitive  Warrants  and increase or cause to be increased
         the aggregate principal amount of the Unrestricted Global Warrant.

                  (iii)    UNRESTRICTED   DEFINITIVE   WARRANTS  TO   BENEFICIAL
         INTERESTS IN UNRESTRICTED GLOBAL WARRANTS.  A holder of an Unrestricted
         Definitive Warrant may exchange such Warrant for a beneficial  interest
         in an Unrestricted  Global Warrant or transfer such Definitive Warrants
         to a Person  who takes  delivery  thereof  in the form of a  beneficial
         interest in an Unrestricted Global Warrant at any time. Upon receipt of
         a written  request for such an exchange or transfer,  the Warrant Agent
         shall  cancel  the  applicable   Unrestricted  Definitive  Warrant  and
         increase or cause to be increased the amount of one of the Unrestricted
         Global Warrants.


                                       12
<PAGE>


         If any  such  exchange  or  transfer  from a  Definitive  Warrant  to a
         beneficial  interest is effected  pursuant to SUBPARAGRAPHS  (II)(B) or
         (III) above at a time when an  Unrestricted  Global Warrant has not yet
         been  issued,  the Company  shall issue and,  upon receipt of a Warrant
         Countersignature  Order in  accordance  with  SECTION 3.2  hereof,  the
         Warrant  Agent  shall  countersign  one  or  more  Unrestricted  Global
         Warrants in the number equal to the number of  beneficial  interests of
         Definitive Warrants so transferred.

         (e)      TRANSFER AND EXCHANGE OF  DEFINITIVE  WARRANTS FOR  DEFINITIVE
WARRANTS.  Upon  written  request by a holder of  Definitive  Warrants  and such
holder's  compliance  with the  provisions of this SECTION  3.5(E),  the Warrant
Registrar shall register the transfer or exchange of Definitive Warrants.  Prior
to such  registration  of transfer or  exchange,  the  requesting  holder  shall
present or surrender  to the Warrant  Registrar  the  Definitive  Warrants  duly
endorsed  or  accompanied   by  a  written   instruction  of  transfer  in  form
satisfactory  to the Warrant  Registrar  duly  executed by such holder or by its
attorney,  duly authorized in writing. In addition,  the requesting holder shall
provide any additional certifications, documents and information, as applicable,
required pursuant to the following provisions of this SECTION 3.5(E).

                  (i)      RESTRICTED    DEFINITIVE   WARRANTS   TO   RESTRICTED
         DEFINITIVE   WARRANTS.   Any  Restricted   Definitive  Warrant  may  be
         transferred  to and registered in the name of Persons who take delivery
         thereof in the form of a Restricted  Definitive  Warrant if the Warrant
         Registrar receives the following:

                           (A)      if the  transfer  will be made  pursuant  to
                                    Rule 144A,  then the transferor must deliver
                                    a  certificate  in the  form  of  EXHIBIT  B
                                    hereto, including the certifications in ITEM
                                    (1) thereof;

                           (B)      if the  transfer  will be made  pursuant  to
                                    Rule 903 or Rule  904,  then the  transferor
                                    must  deliver a  certificate  in the form of
                                    EXHIBIT    B    hereto,     including    the
                                    certifications in ITEM (2) thereof; or

                           (C)      if the transfer will be made pursuant to any
                                    other   exemption   from  the   registration
                                    requirements of the Securities Act, then the
                                    transferor must deliver a certificate in the
                                    form of  EXHIBIT  B  hereto,  including  the
                                    certifications,  certificates and Opinion of
                                    Counsel  required  by ITEM (3)  thereof,  if
                                    applicable.

                  (ii)     RESTRICTED   DEFINITIVE   WARRANTS  TO   UNRESTRICTED
         DEFINITIVE WARRANTS. Any Restricted Definitive Warrant may be exchanged
         by  the  holder  thereof  for an  Unrestricted  Definitive  Warrant  or
         transferred  to a Person or Persons  who take  delivery  thereof in the
         form of an  Unrestricted  Definitive  Warrant if the Warrant  Registrar
         receives the following:

                           (A)      if the holder of such Restricted  Definitive
                                    Warrants  proposes to exchange such Warrants
                                    for an Unrestricted  Definitive  Warrant,  a
                                    certificate  from such holder in the form of
                                    EXHIBIT    C    hereto,     including    the
                                    certifications in ITEM (1)(D) thereof; or


                                       13
<PAGE>


                           (B)      if the holder of such Restricted  Definitive
                                    Warrants  proposes to transfer such Warrants
                                    to a Person who shall take delivery  thereof
                                    in the  form of an  Unrestricted  Definitive
                                    Warrant,  a certificate  from such holder in
                                    the form of EXHIBIT B hereto,  including the
                                    certifications in ITEM (4) thereof;

         and,  in each  such case set forth in this  SUBPARAGRAPH  (II),  if the
         Warrant Registrar so requests, an Opinion of Counsel in form reasonably
         acceptable to the Warrant Registrar to the effect that such exchange or
         transfer  is in  compliance  with  the  Securities  Act  and  that  the
         restrictions on transfer  contained herein and in the Private Placement
         Legend are no longer required in order to maintain  compliance with the
         Securities Act.

                  (iii)    UNRESTRICTED   DEFINITIVE  WARRANTS  TO  UNRESTRICTED
         DEFINITIVE WARRANTS.  A holder of Unrestricted  Definitive Warrants may
         transfer  such Warrants to a Person who takes  delivery  thereof in the
         form of an Unrestricted  Definitive Warrant.  Upon receipt of a written
         request to  register  such a  transfer,  the  Warrant  Registrar  shall
         register  the  Unrestricted   Definitive   Warrants   pursuant  to  the
         instructions from the holder thereof.

         (f)      LEGENDS. The following legends shall appear on the face of all
Global  Warrants and  Definitive  Warrants  issued under this Warrant  Agreement
unless  specifically  stated  otherwise  in the  applicable  provisions  of this
Warrant Agreement.

                  (i)      PRIVATE PLACEMENT LEGEND.

                           (A)      Except  as  permitted  by  SUBPARAGRAPH  (B)
                                    below,   each   Global   Warrant   and  each
                                    Definitive  Warrant (and all Warrants issued
                                    in   exchange   therefor   or   substitution
                                    thereof)    shall   bear   the   legend   in
                                    substantially the following form:

         "THIS  SECURITY  AND THE WARRANT  SHARES TO BE ISSUED UPON ITS EXERCISE
         HAVE NOT BEEN REGISTERED  UNDER THE SECURITIES ACT OF 1933, AS AMENDED,
         OR ANY STATE SECURITIES LAWS. NEITHER THIS SECURITY, THE WARRANT SHARES
         TO BE ISSUED UPON ITS EXERCISE NOR ANY INTEREST OR PARTICIPATION HEREIN
         MAY BE REOFFERED, SOLD, ASSIGNED,  TRANSFERRED,  PLEDGED, ENCUMBERED OR
         OTHERWISE  DISPOSED  OF IN THE ABSENCE OF SUCH  REGISTRATION  OR UNLESS
         SUCH TRANSACTION IS EXEMPT FROM, OR NOT SUBJECT TO REGISTRATION.

         THE HOLDER OF THIS  SECURITY  AND THE WARRANT  SHARES TO BE ISSUED UPON
         ITS EXERCISE BY ITS ACCEPTANCE  HEREOF (1) REPRESENTS  THAT (A) IT IS A
         "QUALIFIED  INSTITUTIONAL  BUYER"  (AS  DEFINED  IN RULE 144A UNDER THE
         SECURITIES ACT ("RULE  144A")),  (B) IT IS A NON-U.S.  PURCHASER AND IS
         ACQUIRING  THIS  SECURITY AND THE WARRANT  SHARES TO BE ISSUED UPON ITS
         EXERCISE IN AN OFFSHORE  TRANSACTION WITHIN THE MEANING OF REGULATION S
         UNDER THE SECURITIES ACT,  PURSUANT TO RULE 904 OF REGULATION S, OR (C)
         IT IS AN  INSTITUTIONAL  "ACCREDITED  INVESTOR"  WITHIN THE  MEANING OF
         SUBPARAGRAPH  (a)(1),  (2), (3) OR (7) OF RULE 501 UNDER THE SECURITIES


                                       14
<PAGE>


         ACT, AND (2) AGREES TO OFFER, SELL OR OTHERWISE  TRANSFER SUCH SECURITY
         AND THE  WARRANT  SHARES TO BE ISSUED UPON ITS  EXERCISE,  PRIOR TO THE
         DATE WHICH IS TWO YEARS (OR SUCH SHORTER PERIOD AS MAY BE PRESCRIBED BY
         RULE 144(K) (OR ANY SUCCESSOR  PROVISION  THEREOF) UNDER THE SECURITIES
         ACT)  AFTER  THE  LATER  OF THE  ORIGINAL  ISSUE  DATE  HEREOF  (OR ANY
         PREDECESSOR OF THIS SECURITY) AND THE LAST DATE ON WHICH THE COMPANY OR
         ANY  AFFILIATE  OF THE COMPANY WAS THE OWNER OF THIS  SECURITY  (OR ANY
         PREDECESSOR  OF SUCH  SECURITY),  ONLY (A) TO THE COMPANY OR ANY OF ITS
         SUBSIDIARIES,  (B) PURSUANT TO A REGISTRATION  STATEMENT WHICH HAS BEEN
         DECLARED  EFFECTIVE  UNDER THE  SECURITIES  ACT, (C) FOR SO LONG AS THE
         SECURITIES  ARE ELIGIBLE FOR RESALE  PURSUANT TO RULE 144A, TO A PERSON
         IT REASONABLY BELIEVES IS A "QUALIFIED  INSTITUTIONAL BUYER" AS DEFINED
         IN RULE 144A THAT PURCHASES FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF A
         QUALIFIED INSTITUTIONAL BUYER TO WHOM NOTICE IS GIVEN THAT THE TRANSFER
         IS BEING MADE IN  RELIANCE  ON RULE 144A,  (D)  PURSUANT  TO OFFERS AND
         SALES TO  NON-U.S.  PURCHASERS  THAT OCCUR  OUTSIDE  THE UNITED  STATES
         WITHIN THE MEANING OF REGULATION S UNDER THE SECURITIES  ACT,  PURSUANT
         TO  RULE  904 OF  REGULATION  S,  (E) TO AN  INSTITUTIONAL  "ACCREDITED
         INVESTOR" WITHIN THE MEANING OF SUBPARAGRAPH (a)(1), (2), (3) OR (7) OF
         RULE 501 UNDER THE  SECURITIES  ACT THAT IS ACQUIRING  THE SECURITY AND
         THE WARRANT  SHARES TO BE ISSUED UPON ITS EXERCISE FOR ITS OWN ACCOUNT,
         OR FOR THE ACCOUNT OF SUCH AN INSTITUTIONAL  ACCREDITED  INVESTOR,  FOR
         INVESTMENT  PURPOSES  AND NOT WITH A VIEW TO,  OR FOR  OFFER OR SALE IN
         CONNECTION WITH, ANY DISTRIBUTION IN VIOLATION OF THE SECURITIES ACT OR
         (F)  PURSUANT  TO ANOTHER  AVAILABLE  EXEMPTION  FROM THE  REGISTRATION
         REQUIREMENTS OF THE SECURITIES ACT AND THE SECURITIES LAWS OF ANY OTHER
         JURISDICTION,  INCLUDING ANY STATE OF THE UNITED STATES, SUBJECT TO THE
         COMPANY'S AND THE WARRANT AGENT'S,  OR TRANSFER AGENT'S, AS APPLICABLE,
         RIGHT  PRIOR TO ANY SUCH OFFER,  SALE OR  TRANSFER  PURSUANT TO CLAUSES
         (D),  (E),  OR (F) TO REQUIRE  THE  DELIVERY  OF AN OPINION OF COUNSEL,
         CERTIFICATION  AND/OR OTHER  INFORMATION  SATISFACTORY TO EACH OF THEM,
         AND IN EACH OF THE FOREGOING  CASES,  A CERTIFICATE  OF TRANSFER IN THE
         FORM  APPEARING  ON THE OTHER SIDE OF THIS  SECURITY IS  COMPLETED  AND
         DELIVERED BY THE  TRANSFEROR  TO THE WARRANT  AGENT OR TRANSFER  AGENT.
         THIS  LEGEND WILL BE REMOVED  UPON THE REQUEST OF THE HOLDER  AFTER THE
         RESALE RESTRICTION TERMINATION DATE.

         THE HOLDER OF THIS  SECURITY  AND THE WARRANT  SHARES TO BE ISSUED UPON
         ITS EXERCISE,  BY ITS  ACCEPTANCE  HEREOF,  AGREES NOT TO ENGAGE IN ANY
         HEDGING  TRANSACTION  UNLESS IN COMPLIANCE WITH THE SECURITIES ACT. THE
         HOLDER OF THIS  SECURITY  AND THE WARRANT  SHARES TO BE ISSUED UPON ITS
         EXERCISE,  BY ITS


                                       15
<PAGE>


         ACCEPTANCE  HEREOF  AGREES THAT IT WILL  DELIVER TO EACH PERSON TO WHOM
         THIS  SECURITY  OR  ANY  INTEREST   HEREIN  IS   TRANSFERRED  A  NOTICE
         SUBSTANTIALLY TO THE EFFECT OF THESE LEGENDS."

                           (B)      Notwithstanding  the  foregoing,  any Global
                                    Warrant   or   Definitive   Warrant   issued
                                    pursuant to SUBPARAGRAPHS (B)(IV),  (C)(II),
                                    (C)(III),   (D)(II),  (D)(III),  (E)(II)  or
                                    (E)(III)  to  this   SECTION  3.5  (and  all
                                    Warrants  issued  in  exchange  therefor  or
                                    substitution  thereof)  shall  not  bear the
                                    Private Placement Legend.

                  (ii)     GLOBAL WARRANT LEGEND. Each Global Warrant shall bear
         a legend in substantially the following form:

         "THIS  GLOBAL  WARRANT  IS HELD BY THE  DEPOSITARY  (AS  DEFINED IN THE
         WARRANT AGREEMENT GOVERNING THIS WARRANT) OR ITS NOMINEE IN CUSTODY FOR
         THE BENEFIT OF THE BENEFICIAL OWNERS HEREOF, AND IS NOT TRANSFERABLE TO
         ANY PERSON UNDER ANY  CIRCUMSTANCES  EXCEPT THAT (I) THE WARRANT  AGENT
         MAY MAKE SUCH NOTATIONS  HEREON AS MAY BE REQUIRED  PURSUANT TO SECTION
         3.5 OF THE WARRANT AGREEMENT, (II) THIS GLOBAL WARRANT MAY BE EXCHANGED
         IN WHOLE BUT NOT IN PART  PURSUANT  TO  SECTION  3.5(a) OF THE  WARRANT
         AGREEMENT,  (III) THIS GLOBAL  WARRANT MAY BE  DELIVERED TO THE WARRANT
         AGENT FOR CANCELLATION PURSUANT TO SECTION 3.8 OF THE WARRANT AGREEMENT
         AND  (IV)  THIS  GLOBAL  WARRANT  MAY  BE  TRANSFERRED  TO A  SUCCESSOR
         DEPOSITARY WITH THE PRIOR WRITTEN CONSENT OF THE COMPANY."

                  (iii)    UNIT  LEGEND.   Each  Warrant  issued  prior  to  the
         Separation  Date shall  bear a legend in  substantially  the  following
         form:

         "THIS  SECURITY  WAS  INITIALLY  ISSUED AS PART OF AN ISSUANCE OF UNITS
         (THE "UNITS"), EACH OF WHICH CONSISTS OF $1,000 PRINCIPAL AMOUNT OF THE
         COMPANY'S  10.5% SENIOR  SECURED  NOTES DUE 2010 (THE  "NOTES") AND ONE
         WARRANT TO PURCHASE  31.5024 SHARES OF THE COMPANY'S  COMMON STOCK (THE
         "WARRANTS").

         PRIOR TO THE EARLIEST TO OCCUR OF (I) 180 DAYS AFTER THE CLOSING OF THE
         OFFERING OF THE UNITS, (II) THE DATE ON WHICH A REGISTRATION  STATEMENT
         FOR A REGISTERED  EXCHANGE  OFFER WITH RESPECT TO THE NOTES IS DECLARED
         EFFECTIVE  UNDER THE  SECURITIES  ACT,  (III) THE DATE ON WHICH A SHELF
         REGISTRATION  STATEMENT  WITH RESPECT TO THE WARRANT SHARES IS DECLARED
         EFFECTIVE  UNDER THE  SECURITIES  ACT AND (IV) SUCH DATE AS JEFFERIES &
         COMPANY,  INC. IN ITS SOLE  DISCRETION  SHALL  DETERMINE,  THE SECURITY
         EVIDENCED  BY THIS  CERTIFICATE  MAY NOT BE  TRANSFERRED  OR  EXCHANGED
         SEPARATELY FROM, BUT MAY BE TRANSFERRED OR EXCHANGED ONLY AS, A UNIT."


                                       16
<PAGE>


                  (iii)    REGULATION   S  LEGEND.   Each   Warrant  that  is  a
         Registrable Security and issued pursuant to Regulation S shall bear the
         following legend on the face thereof:

         "THIS  WARRANT AND THE  SECURITIES  TO BE ISSUED UPON ITS EXERCISE HAVE
         NOT BEEN REGISTERED UNDER THE SECURITIES ACT AND THE WARRANT MAY NOT BE
         EXERCISED BY OR ON BEHALF OF ANY U.S.  PERSON UNLESS  REGISTERED  UNDER
         THE U.S.  SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES  ACT") OR
         AN EXEMPTION FROM SUCH REGISTRATION IS AVAILABLE.  IN ORDER TO EXERCISE
         THIS  WARRANT,  THE HOLDER MUST  FURNISH TO THE COMPANY AND THE WARRANT
         AGENT EITHER (A) A WRITTEN  CERTIFICATION  THAT IT IS NOT A U.S. PERSON
         AND THE WARRANT IS NOT BEING  EXERCISED  ON BEHALF OF A U.S.  PERSON OR
         (B) A WRITTEN  OPINION OF COUNSEL  TO THE  EFFECT  THAT THE  SECURITIES
         DELIVERED UPON EXERCISE OF THE WARRANT HAVE BEEN  REGISTERED  UNDER THE
         SECURITIES  ACT OR THAT THE DELIVERY OF SUCH  SECURITIES IS EXEMPT FROM
         THE  REGISTRATION  REQUIREMENTS  OF THE  SECURITIES  ACT. TERMS IN THIS
         LEGEND  HAVE THE  MEANINGS  GIVEN  TO THEM BY  REGULATION  S UNDER  THE
         SECURITIES ACT."

         (g)      CANCELLATION  AND/OR  ADJUSTMENT OF GLOBAL  WARRANTS.  At such
time as all  beneficial  interests  in a  particular  Global  Warrant  have been
exercised or exchanged for  Definitive  Warrants or a particular  Global Warrant
has been exercised,  redeemed, repurchased or canceled in whole and not in part,
each such Global  Warrant  shall be returned to or retained  and canceled by the
Warrant Agent in accordance  with SECTION 3.8 hereof.  At any time prior to such
cancellation,  if any  beneficial  interest in a Global  Warrant is exercised or
exchanged for or transferred  to a Person who will take delivery  thereof in the
form of a  beneficial  interest  in another  Global  Warrant  or for  Definitive
Warrants,  the amount of Warrants  represented  by such Global  Warrant shall be
reduced  accordingly and an endorsement  shall be made on such Global Warrant by
the Warrant Agent or by the  Depositary at the direction of the Warrant Agent to
reflect such reduction; and if the beneficial interest is being exchanged for or
transferred  to a  Person  who  will  take  delivery  thereof  in the  form of a
beneficial  interest in another Global Warrant,  such other Global Warrant shall
be increased accordingly and an endorsement shall be made on such Global Warrant
by the Warrant Agent or by the  Depositary at the direction of the Warrant Agent
to reflect such increase.

         (h)      GENERAL PROVISIONS RELATING TO TRANSFERS AND EXCHANGES.

                  (i)      To permit  registrations  of transfers and exchanges,
         the  Company  shall  execute and the  Warrant  Agent shall  countersign
         Global  Warrants and  Definitive  Warrants upon the  Company's  Warrant
         Countersignature Order or at the Warrant Registrar's request.

                  (ii)     No  service  charge  shall be made to a  holder  of a
         beneficial  interest in a Global Warrant or to a holder of a Definitive
         Warrant for any  registration of transfer or exchange,  but the Company
         may require  payment of a sum  sufficient  to cover any transfer tax or
         similar governmental charge payable in connection therewith.


                                       17
<PAGE>


                  (iii)    All Global  Warrants and Definitive  Warrants  issued
         upon any  registration  of transfer  or exchange of Global  Warrants or
         Definitive  Warrants shall be the duly authorized,  executed and issued
         warrants for Common Stock of the Company, not subject to any preemptive
         rights, and entitled to the same benefits under this Warrant Agreement,
         as the Global  Warrants or Definitive  Warrants  surrendered  upon such
         registration of transfer or exchange.

                  (iv)     Prior to the due presentment for the  registration of
         a transfer of any Warrant,  the Warrant  Agent and the Company may deem
         and treat the Person in whose name any  Warrant  is  registered  as the
         absolute owner of such Warrant for all purposes and neither the Warrant
         Agent nor the Company shall be affected by notice to the contrary.

                  (v)      The Warrant Agent shall  countersign  Global Warrants
         and  Definitive  Warrants in accordance  with the provisions of SECTION
         3.2 hereof.

         (i)      FACSIMILE  SUBMISSIONS TO WARRANT AGENT.  All  certifications,
certificates  and  Opinions of Counsel  required to be  submitted to the Warrant
Registrar  pursuant to this SECTION 3.5 to effect a registration  of transfer or
exchange may be submitted by facsimile,  so long as an executed original will be
subsequently delivered if requested by the Warrant Registrar.

         Notwithstanding anything herein to the contrary, as to any certificates
and/or  certifications  delivered  to the  Warrant  Registrar  pursuant  to this
SECTION 3.5, the Warrant  Registrar's duties shall be limited to confirming that
any such  certifications  and  certificates  delivered  to it are in the form of
EXHIBITS B and C attached hereto. The Warrant Registrar shall not be responsible
for  confirming  the  truth  or  accuracy  of  representations  made in any such
certifications or certificates. As to any Opinions of Counsel delivered pursuant
to this SECTION 3.5, the Warrant Registrar may rely upon, and be fully protected
in relying upon, such opinions.

         3.6.     REPLACEMENT WARRANTS.

         If any  mutilated  Warrant is  surrendered  to the Warrant Agent or the
Company and the Warrant  Agent  receives  evidence  to its  satisfaction  of the
destruction,  loss or theft of any  Warrant,  the  Company  shall  issue and the
Warrant  Agent,  upon  receipt  of  a  Warrant   Countersignature  Order,  shall
countersign a replacement  Warrant if the Warrant Agent's  requirements are met.
If required by the  Warrant  Agent or the  Company,  an  indemnity  bond must be
supplied by the holder that is  sufficient  in the judgment of the Warrant Agent
and the Company to protect  the  Company,  the  Warrant  Agent and any agent for
purposes of the countersignature  from any loss that any of them may suffer if a
Warrant is  replaced.  The  Company may charge for its  expenses in  replacing a
Warrant.

         Every replacement  Warrant is an additional  warrant of the Company and
shall be entitled to all of the benefits of this Warrant  Agreement  equally and
proportionately with all other Warrants duly issued hereunder.


                                       18
<PAGE>


3.7.     TEMPORARY WARRANTS.

         Until certificates  representing  Warrants are ready for delivery,  the
Company may prepare and issue and the Warrant  Agent,  upon receipt of a Warrant
Countersignature Order, shall countersign temporary Warrants. Temporary Warrants
shall  be  substantially  in the  form of  certificated  Warrants  but may  have
variations that the Company  considers  appropriate  for temporary  Warrants and
that shall be reasonably  acceptable to the Warrant Agent.  Without unreasonable
delay,  the  Company  shall  prepare and the  Warrant  Agent  shall  countersign
definitive Warrants in exchange for temporary Warrants.

         Holders of temporary  Warrants shall be entitled to all of the benefits
of this Warrant Agreement.

3.8.     CANCELLATION.

         Subject to SECTION 3.5(G)  hereof,  the Company at any time may deliver
Warrants to the Warrant  Agent for  cancellation.  The Warrant  Registrar  shall
forward to the Warrant Agent any Warrants  surrendered to them for  registration
of  transfer,  exchange or  exercise.  The  Warrant  Agent and no one else shall
cancel  all  Warrants  surrendered  for  registration  of  transfer,   exchange,
exercise,  replacement  or  cancellation  and shall  destroy  canceled  Warrants
(subject  to  the  record   retention   requirements   of  the  Exchange   Act).
Certification of the destruction of all canceled  Warrants shall be delivered to
the  Company.  The Company may not issue new Warrants to replace  Warrants  that
have been  exercised  or that  have  been  delivered  to the  Warrant  Agent for
cancellation.

Section 4.        SEPARATION  OF  WARRANTS;   EXERCISE  OF  WARRANTS;  TERMS  OF
                  WARRANTS.

         (a)      The Notes and  Warrants  will not be  separately  transferable
until the Separation Date. Subject to the terms of this Agreement,  each Warrant
holder  shall  have the right,  which may be  exercised  at any time  during the
period  commencing  on the opening of business on the first  anniversary  of the
Closing  Date until  5:00 p.m.,  New York City time on  December  15,  2010 (the
"EXERCISE  PERIOD"),  to receive  from the  Company the number of fully paid and
nonassessable  Warrant  Shares  which the holder may at the time be  entitled to
receive on exercise of such  Warrants  upon  payment of the  aggregate  Exercise
Price for all Warrant Shares being purchased by such holder (i) in cash, by wire
transfer  or by  certified  or official  bank check  payable to the order of the
Company, (ii) by tendering Notes having a principal amount at the time of tender
equal to the  aggregate  Exercise  Price then in effect for all  Warrant  Shares
being purchased by such holder,  (iii) by tendering  Warrants as set forth below
or (iv) any combination of cash, Notes or Warrants.  Each holder may elect, upon
exercise of its Warrants during the Exercise  Period,  to receive Warrant Shares
on a net basis,  such that,  without the exchange of any funds,  the holder will
receive  such  number of Warrant  Shares as shall  equal the  product of (A) the
number of Warrant Shares for which such Warrant is exercisable as of the date of
exercise  (if the  Exercise  Price were being paid in cash) and (B) the Cashless
Exercise  Ratio.  The  "CASHLESS  EXERCISE  RATIO"  shall equal a fraction,  the
numerator  of which is the Market  Value (as defined  below) per share of Common
Stock on the date of exercise  minus the Exercise Price per share as of the date
of exercise  and the  denominator  of which is the Market Value per share on the
date of exercise.  Each Warrant not exercised  prior to 5:00 p.m., New York City
time, on December 15,


                                       19
<PAGE>


2010 (the "EXPIRATION DATE") shall become void and all rights thereunder and all
rights in respect  thereof under this Agreement shall cease as of such time. The
Warrant Agent shall have no obligation to calculate the Cashless Exercise Ratio.

         The "MARKET VALUE" per share of Common Stock as of any date shall equal
(i) if Common Stock is primarily traded on a securities exchange,  the last sale
price of such  Common  Stock on such  securities  exchange  on the  trading  day
immediately prior to the date of  determination,  or if no sale occurred on such
day, the mean among the closing  "bid" and "asked"  prices on such day,  (ii) if
the principal  market for Common Stock is in the  over-the-counter  market,  the
closing sale price of such Common Stock on the trading day immediately  prior to
the date of the  determination,  as  published by the  National  Association  of
Securities  Dealers Automated  Quotation System or similar  organization,  or if
such price is not so published on such day, the mean among the closing "bid" and
"asked" prices, if available, on such day, which prices may be obtained from any
reputable  pricing  service,  broker or dealer  reasonably  satisfactory  to the
Company, and (iii) if neither CLAUSE (I) nor CLAUSE (II) is applicable, the fair
market value on the date of  determination of Common Stock as determined in good
faith by the Board of Directors of the Company.

         (b)      In the event that the closing  sale price of the Common  Stock
on a securities exchange or in the  over-the-counter  market exceeds 150% of the
Exercise  Price for a period of at least  twenty  (20)  trading  days out of any
consecutive  thirty  (30) day  trading  period at any time  during the  Exercise
Period,  all Warrants shall be required to be, and shall be deemed,  without any
further  action by the  Company  or any  holder  of a  Warrant,  exercised  (the
"MANDATORY  CONVERSION").  In the event of a Mandatory  Conversion,  the Company
will  deliver  an  Officer's  Certificate  certifying  as to the  date  of  such
Mandatory Conversion, the conversion rate and the number of Warrant Shares to be
issued,  and the  Warrant  Agent  will  effect  such  exercise  (with or without
compliance by the holders with CLAUSE (C) below) by delivering Warrant Shares to
holders of record on a net basis, such that,  without the exchange of any funds,
each  holder  will  receive  such  number of Warrant  Shares as shall  equal the
product of (A) the number of Warrant  Shares for which such  Warrant held by the
holder  is  exercisable  as of the  date  of the  Mandatory  Conversion  (if the
Exercise  Price  were being paid in cash) and (B) the  Cashless  Exercise  Ratio
(which shall be determined  in good faith by the Company).  If any fraction of a
Warrant Share would be issuable in the event of a Mandatory Conversion, pursuant
to SECTION 9 hereof, the Company shall calculate the amount in cash equal to the
Fair Market Value per Warrant  Share and pay such amount,  as  determined on the
day  immediately  preceding  the date the  Warrant is  presented  for  exercise,
multiplied  by  such  fraction,   computed  to  the  nearest  whole  U.S.  cent.
Immediately following a Mandatory Conversion, all Warrant Certificate and Global
Warrants shall be automatically  cancelled.  (c) In order to exercise all or any
of the Warrants  represented by a Warrant  Certificate  pursuant to SECTION 4(A)
hereof,  (i) in the  case of a  Definitive  Warrant,  the  holder  thereof  must
surrender upon exercise the Warrant  Certificate to the Company at the corporate
trust  office of the Warrant  Agent set forth in SECTION 17 hereof,  (ii) in the
case of a book-entry  interest in a Global Warrant,  the exercising  Participant
whose name appears on a securities  position  listing of the  Depositary  as the
holder of such book-entry interest must comply with the Depositary's  procedures
relating to the exercise of such book-entry  interest in such Global


                                       20
<PAGE>


Warrant  and  (iii)  in the  case of  interests  in  both  Global  Warrants  and
Definitive Warrants, the holder thereof or the Participant, as applicable, shall
deliver to the Company at the  corporate  trust office of the Warrant  Agent the
form of election to purchase on the reverse  thereof duly  completed and signed,
which  signature  shall be medallion  guaranteed  by an  institution  which is a
member of a  Securities  Transfer  Association  recognized  signature  guarantee
program,  and shall provide  payment to the Warrant Agent for the account of the
Company of the Exercise  Price,  for the number of Warrant  Shares in respect of
which such Warrants are then exercised.  Payment of the aggregate Exercise Price
shall be made in accordance with SECTION 4(A) hereof.

         (d)      Subject to the provisions of SECTION 5 hereof, upon compliance
with  CLAUSES  (B) and (C)  above,  the  Company  shall  deliver  or cause to be
delivered with all reasonable dispatch, to or to the written order of the holder
and in such  name or  names  as the  holder  may  designate,  a  certificate  or
certificates  for the number of whole Warrant Shares  issuable upon the exercise
of such  Warrants  or other  securities  or  property  to which  such  holder is
entitled hereunder, together with cash as provided in SECTION 9 hereof; PROVIDED
that if any  consolidation,  merger or lease or sale of assets is proposed to be
effected by the Company or its subsidiaries as described in SECTION 8(K) hereof,
or a tender offer or an exchange offer for shares of Common Stock shall be made,
upon such  surrender of Warrants and payment of the aggregate  Exercise Price in
accordance with SECTION 4(B) above, the Company shall, as soon as possible,  but
in any event not later than two business days thereafter, deliver or cause to be
delivered the full number of Warrant  Shares  issuable upon the exercise of such
Warrants  in the  manner  described  in this  sentence  or other  securities  or
property  to which such  holder is  entitled  hereunder,  together  with cash as
provided in SECTION 9 hereof.  All  certificates  in this  SECTION 4(D) shall be
deemed to have been  issued and any  Person so  designated  to be named  therein
shall be deemed to have become a holder of record of such  Warrant  Shares as of
the  date of the  surrender  of such  Warrants  and  payment  of the  applicable
Exercise Price.

         (e)      The  Warrants  shall be  exercisable,  at the  election of the
holders  thereof,  either in full or from time to time in part. If less than all
the Warrants  represented by a Warrant  Certificate are exercised,  such Warrant
Certificate shall be surrendered and a new Warrant Certificate of the same tenor
and for the number of Warrants which were not exercised shall be executed by the
Company  and  delivered  to the  Warrant  Agent  and  the  Warrant  Agent  shall
countersign the new Warrant Certificate, registered in such name or names as may
be directed in writing by the holder, and shall deliver or cause to be delivered
the new  Warrant  Certificate  to the Person or Persons  entitled to receive the
same.  Each Global Warrant will represent  such of the  outstanding  Warrants as
will be  specified  therein  and  each  shall  provide  that it  represents  the
aggregate number of outstanding  Warrants from time to time endorsed thereon and
that the aggregate number of outstanding  Warrants  represented thereby may from
time to time be reduced or increased,  as appropriate,  to reflect exchanges and
exercises.  Any  endorsement  of a Global  Warrant to reflect  the amount of any
increase or decrease in the aggregate number of outstanding Warrants represented
thereby will be made by the Warrant Agent, in accordance with instructions given
by the holder or Participant thereof as required by SECTION 3.5 hereof.

         (f)      All Warrant Certificates surrendered upon exercise of Warrants
shall be cancelled by the Warrant  Agent.  All  cancelled  Warrant  Certificates
shall then be  cancelled  as provided in SECTION  3.8.  The Warrant  Agent shall
report  promptly  but, in no event later than two Business


                                       21
<PAGE>


Days, to the Company with respect to Warrants  exercised and concurrently pay to
the Company all monies  received  by the Warrant  Agent for the  purchase of the
Warrant Shares through the exercise of such Warrants.

         (g)      The Warrant Agent shall keep copies of this  Agreement and any
notices given or received  hereunder  available for inspection by the holders of
Warrants  during normal  business hours at its office.  The Company shall supply
the  Warrant  Agent  from  time to time  with  such  numbers  of  copies of this
Agreement as the Warrant Agent may request.

Section 5.        PAYMENT OF TAXES.

         The Company shall pay all documentary  stamp taxes  attributable to the
initial issuance of Warrant Shares upon the exercise of Warrants;  PROVIDED that
the  Company  shall not be required to pay any tax or taxes which may be payable
in respect of any transfer involved in the issue of any Warrant  Certificates or
any  certificates for Warrant Shares in a name other than that of the registered
holder of a Warrant Certificate  surrendered upon the exercise of a Warrant, and
the Company shall not be required to issue or deliver such Warrant  Certificates
unless or until the Person or Persons requesting the issuance thereof shall have
paid to the  Company  the  amount of such tax or shall have  established  to the
satisfaction of the Company that such tax has been paid.

Section 6.        RESERVATION OF WARRANT SHARES; REGISTRATION OF WARRANT SHARES.

         (a)      The Company  shall at all times  reserve  and keep  available,
free from preemptive rights, out of the aggregate of its authorized but unissued
Common Stock and/or the authorized and issued Common Stock held in its treasury,
for the purpose of enabling it to satisfy any obligation to issue Warrant Shares
upon  exercise of Warrants,  the maximum  number of shares of Common Stock which
may then be deliverable upon the exercise of all outstanding Warrants.

         (b)      The  Company  or, if  appointed,  the  transfer  agent for the
Common Stock (the "TRANSFER AGENT") and every subsequent  transfer agent for any
shares of the Company's  capital stock  issuable upon the exercise of any of the
rights of purchase aforesaid will be irrevocably  authorized and directed at all
times to reserve such number of authorized  shares as shall be required for such
purpose.  The  Company  shall  keep a copy of this  Agreement  on file  with the
Transfer  Agent and with every  subsequent  transfer agent for any shares of the
Company's  capital  stock  issuable  upon the exercise of the rights of purchase
represented by the Warrants.  The Company will promptly notify the Warrant Agent
of every subsequent transfer agent for any shares of the Company's capital stock
issuable  upon  the  exercise  of the  rights  of  purchase  represented  by the
Warrants. The Warrant Agent is hereby irrevocably authorized to requisition from
time to time from such Transfer Agent the stock  certificates  required to honor
outstanding  Warrants upon exercise thereof in accordance with the terms of this
Agreement.  The Company  shall  supply such  Transfer  Agent with duly  executed
certificates for such purposes and shall provide or otherwise make available any
cash which may be payable as  provided in SECTION 9 hereof.  The  Company  shall
furnish  such  Transfer  Agent  a  copy  of  all  notices  of  adjustments,  and
certificates related thereto,  transmitted to each holder pursuant to SECTION 11
hereof.

         (c)      Before or  concurrently  with  taking any action  which  would
cause an  adjustment  pursuant to SECTION 8 hereof to reduce the Exercise  Price
below the then par value (if any) of the


                                       22
<PAGE>


Warrant  Shares,  the Company shall take any corporate  action which may, in the
opinion of its  counsel  (which  may be counsel  employed  by the  Company),  be
necessary in order that the Company may validly and legally issue fully paid and
nonassessable Warrant Shares at the Exercise Price as so adjusted.

         (d)      The Company  covenants  that all Warrant  Shares  which may be
issued  upon   exercise  of  Warrants   shall,   upon  issue,   be  fully  paid,
nonassessable, free of preemptive rights and free from all taxes, liens, charges
and security interests with respect to the issuance thereof.

Section 7.        OBTAINING STOCK EXCHANGE LISTINGS.

         The  Company  shall  from  time to time  take all  action  which may be
reasonably necessary so that the Warrant Shares, immediately upon their issuance
upon  the  exercise  of  Warrants,  will be  listed  on a  principal  securities
exchange, automated quotation system or other market within the United States of
America, if any, on which other shares of Common Stock are then listed, if any.

Section 8.        ADJUSTMENT  OF  EXERCISE  PRICE AND NUMBER OF  WARRANT  SHARES
                  ISSUABLE.

         The Exercise Price and the number of Warrant  Shares  issuable upon the
exercise of each Warrant shall be subject to  adjustment  from time to time upon
the  occurrence  of the events  enumerated  in this  SECTION 8.  Notwithstanding
anything to the contrary in this Agreement, in no event shall the Exercise Price
be less than the lower of the par value of the  Common  Stock or $0.01 per share
of Common Stock. For purposes of this SECTION 8, "COMMON STOCK" means shares now
or hereafter  authorized  of any class of common  shares of the Company  however
designated,  that has the right  (subject  to any  prior  rights of any class or
series of preferred  stock) to participate in any  distribution of the assets or
earnings of the Company without limit as to per share amount.

         In  addition  to the  adjustments  required  under this  SECTION 8, the
Company may, at any time reduce the Exercise Price to any amount greater than or
equal to $0.01 per share for any  period of time (but not less than 20  Business
Days) deemed appropriate by the Board of Directors of the Company.

         (a)      ADJUSTMENT  FOR CHANGE IN CAPITAL  STOCK.  If the  Company (i)
pays a dividend or makes a distribution on its Common Stock payable in shares of
its Common Stock, (ii) subdivides its outstanding  shares of Common Stock into a
greater number of shares,  (iii) combines its outstanding shares of Common Stock
into a smaller number of shares,  (iv) makes a distribution  on its Common Stock
in  shares  of its  capital  stock  other  than  Common  Stock or (v)  issues by
reclassification  of its Common Stock any shares of its capital stock,  then the
Exercise Price in effect immediately prior to such action shall,  subject to the
second  sentence of the first  paragraph of this  SECTION 8, be  proportionately
adjusted so that the holder of any then outstanding Warrant exercised after such
action may receive the  aggregate  number and kind of shares of capital stock of
the Company which such holder would have owned immediately following such action
assuming the exercise of such Warrant immediately prior to such action.


                                       23
<PAGE>


         The adjustment shall become effective immediately after the record date
in the case of a dividend or distribution  and  immediately  after the effective
date in the case of a subdivision, combination or reclassification.

         If,  after an  adjustment  pursuant to CLAUSE (V) above,  a holder of a
Warrant upon exercise of it may receive shares of two or more classes of capital
stock of the Company, the Company shall determine, in good faith, the allocation
of the adjusted Exercise Price between the classes of capital stock.  After such
allocation,  the  exercise  privilege  and the  Exercise  Price of each class of
capital  stock  shall  after  such  action be  subject  to  adjustment  on terms
comparable  to  those  applicable  to  Common  Stock  in this  SECTION  8.  Such
adjustment  shall be made  successively  whenever  any event  listed above shall
occur.

         (b)      ADJUSTMENT FOR RIGHTS ISSUE.  If the Company  distributes  any
rights,  options or warrants to all holders of its Common Stock  entitling  them
for a period  expiring  within 45 days after the record  date set forth below to
subscribe  for  shares  of  Common  Stock or  securities  convertible  into,  or
exchangeable  or exercisable  for,  shares of Common Stock, in either case, at a
price per share less than the Fair Market Value (as defined in SUBSECTION (G) of
this  SECTION 8) per share on that  record  date,  the  Exercise  Price shall be
adjusted in accordance with the formula:



                                               O        +        N X P
                                                                 -----
                  E'    =     E       x                            M
                                               ------------------------
                                                           O + N

where:

                  E'    =     the adjusted Exercise Price.
                  E     =     the current Exercise Price.
                  O     =     the number of shares of Common Stock
                              outstanding on the record date.
                  N     =     the number of additional shares of Common Stock
                              issued pursuant to such rights, options or
                              warrants.
                  P     =     the price per share of the additional shares.
                  M     =     the Fair Market Value per share of Common Stock on
                              the record date.

         The  adjustment  shall be made  successively  whenever any such rights,
options or warrants are issued and shall become effective  immediately after the
record  date for the  determination  of  stockholders  entitled  to receive  the
rights,  options  or  warrants.  If at the end of the period  during  which such
rights, options or warrants are exercisable, not all rights, options or warrants
shall have been exercised, the Exercise Price shall be immediately readjusted to
what it would  have  been if "N" in the  above  formula  had been the  number of
shares actually issued.

         (c)      ADJUSTMENT FOR OTHER DISTRIBUTIONS. If the Company distributes
to all  holders of its Common  Stock any of its assets  (including  cash),  debt
securities, preferred stock or any rights


                                       24
<PAGE>


or warrants to purchase assets  (including  cash),  debt  securities,  preferred
stock or other  securities of the Company,  the Exercise Price shall be adjusted
in accordance with the formula:

                  E'     =    E       x        M         -          F
                                               ----------------------
                                                         M

where:

                  E'     =    the adjusted Exercise Price.
                  E      =    the current Exercise Price.
                  M      =    the Fair Market Value per share of Common
                              Stock on the record date mentioned below.
                  F      =    the fair  market  value on the record date
                              of the  debt  securities,  preferred  stock,
                              assets, securities, rights or warrants to be
                              distributed  in  respect  of  one  share  of
                              Common Stock as  determined in good faith by
                              the Board of Directors of the Company.

         The   adjustment   shall  be  made   successively   whenever  any  such
distribution  is made and shall become  effective  immediately  after the record
date for the determination of stockholders entitled to receive the distribution.

         This  SECTION  8(C)  shall not apply to cash  dividends  or other  cash
distributions paid out of consolidated  current or retained earnings as shown on
the  books  of the  Company  prepared  in  accordance  with  generally  accepted
accounting principles. In addition, this SECTION 8(C) shall not apply to rights,
options or warrants referred to in SECTION 8(B) hereof.

         (d)      ADJUSTMENT FOR COMMON STOCK ISSUE.

                  (i)      If the Company  issues  shares of Common  Stock for a
         consideration  per share less than the Fair  Market  Value per share on
         the  date the  Company  fixes  the  offering  price of such  additional
         shares,  the Exercise  Price shall be adjusted in  accordance  with the
         formula:

                                                                P
                                                               ---
                  E'    =     E       x        O        +       M
                                               -------------------
                                                        A

where:

                  E'    =     the adjusted Exercise Price.
                  E     =     the then current Exercise Price.
                  O     =     the number of shares outstanding immediately
                              prior to the issuance of such additional shares.
                  P     =     the aggregate consideration received for the
                              issuance of such additional shares.


                                       25
<PAGE>

                  M     =     the Fair Market Value per share on the date of
                              issuance of such additional shares.
                  A     =     the number of shares outstanding immediately
                              after the issuance of such additional shares.

         The adjustment shall be made successively whenever any such issuance is
made, and shall become effective immediately after such issuance.

                  (ii)     This SECTION 8(D) shall not apply to:

                  (1)      any of the transactions described in SUBSECTIONS (A),
         (B) and (C) of this SECTION 8,

                  (2)      the exercise of Warrants,

                  (3)      the  conversion,  exchange or exercise of  securities
         outstanding as of the date hereof and convertible  into or exchangeable
         or exercisable for Common Stock or other securities and the issuance of
         any  securities  which  requires an adjustment to be made under SECTION
         8(E) or does  not  require  an  adjustment  pursuant  to the  last  two
         paragraphs of SECTION 8(E),

                  (4)      the issuance of Common Stock (and warrants or options
         exercisable therefore) to employees, officers, consultants or directors
         of the Company or its  subsidiaries  under bona fide  employee  benefit
         plans  or  otherwise  by  written  agreement  adopted  by the  Board of
         Directors  and approved  when  required by law by the holders of Common
         Stock,  if such Common Stock would otherwise be covered by this SECTION
         8(D)  (but  only to the  extent  that the  aggregate  number  of shares
         excluded  hereby and issued  after the date of this  Warrant  Agreement
         shall not exceed 25% of the Common Stock outstanding at the time of the
         adoption of any such plan or written agreement),

                  (5)      the  issuance  of  Common  Stock to  shareholders  or
         equity  holders of any Person that merges with or into the Company,  or
         with or into any  subsidiary  of the  Company,  in  proportion  to such
         shareholders'  or  equity  holders'  stock or equity  holdings  of such
         Person  immediately  prior to such  merger,  in  connection  with  such
         merger; PROVIDED that if such Person is an Affiliate of the Company and
         any such  transaction or series of transactions  has an aggregate value
         of $1,000,000 or more, the Board of Directors,  including a majority of
         the independent directors, shall have determined that the consideration
         received by the  Company in such  merger is fair to the Company  from a
         financial  point  of  view;  provided  further  that  if the  Board  of
         Directors shall not include at least one  independent  director who was
         appointed, nominated or designated to the Board of Directors other than
         through  any right of  appointment,  nomination  or  designation  by an
         Affiliate of the Company,  the Company  shall have  obtained a fairness
         opinion from a nationally recognized  investment banking,  appraisal or
         valuation  firm which is not an  Affiliate of the Company to the effect
         that the  consideration  received by the Company in such merger is fair
         to the Company from a financial point of view,


                                       26
<PAGE>


                  (6)      the  issuance  of  securities  upon  the  conversion,
         exchange or exercise of other securities,  warrants, options or similar
         rights if the effective  conversion,  exchange or exercise price is not
         less than the Fair Market Value per share of such  security at the time
         the  security,  warrant,  option or right so  converted,  exchanged  or
         exercised was issued or granted, or

                  (7)      the  issuance of shares of Common  Stock  pursuant to
         rights,   options  or  warrants  which  were  originally  issued  in  a
         Non-Affiliate  Sale (as defined below)  together with one or more other
         securities as part of a unit at a price per unit.

         (e)      ADJUSTMENT FOR  CONVERTIBLE  SECURITIES  ISSUE. If the Company
issues any securities convertible into or exchangeable or exercisable for Common
Stock (other than  securities  issued in  transactions  described in SUBSECTIONS
(A), (B) and (C) of this SECTION 8 or excluded from the  application  of Section
8(d) pursuant to clause (ii) of Section 8(d)) for a  consideration  per share of
Common Stock initially deliverable upon conversion, exchange or exercise of such
securities  less than the Fair Market Value per share on the date of issuance of
such  securities,  the Exercise  Price shall be adjusted in accordance  with the
formula:

                                                                P
                                                               ---
                  E'    =     E           x         O    +      M
                                                    --------------
                                                    O    +      D

where:

                  E'    =     the adjusted Exercise Price.
                  E     =     the then current Exercise Price.
                  O     =     the number of shares outstanding immediately
                              prior to the issuance of such securities.
                  P     =     the aggregate consideration received for the
                              issuance of such securities.
                  M     =     the Fair Market Value per share on the date of
                              issuance of such securities.
                  D     =     the maximum number of shares deliverable upon
                              conversion or in exchange for such securities at
                              the initial conversion, exchange or exercise rate.

         The adjustment shall be made successively whenever any such issuance is
made, and shall become effective immediately after such issuance.

         If all of the Common Stock  deliverable  upon  conversion,  exchange or
exercise of such  securities  have not been issued when such  securities  are no
longer outstanding,  then the Exercise Price shall promptly be readjusted to the
Exercise  Price  which  would  then be in  effect  had the  adjustment  upon the
issuance  of such  securities  been  made on the basis of the  actual  number of
shares of Common  Stock  issued  upon  conversion,  exchange or exercise of such
securities.

         This  SUBSECTION  (E) shall not apply to warrants or other  convertible
securities issued to shareholders,  debt holders or equity holders of any Person
that merges with or into the Company,


                                       27
<PAGE>


or  with  or  into  any  subsidiary  of  the  Company,  in  proportion  to  such
shareholders',  debt holders' or equity holders' stock,  debt or equity holdings
of such Person immediately prior to such merger, in connection with such merger,
PROVIDED  that if such  Person  is an  Affiliate  of the  Company,  the Board of
Directors,  including  a  majority  of the  independent  directors,  shall  have
determined that the consideration received by the Company in such merger is fair
to the Company  from a financial  point of view;  PROVIDED  further  that if the
Board of  Directors  shall not include at least one  Disinterested  Director (as
defined in SECTION  8(G)  below),  the  Company  shall have  obtained a fairness
opinion from a nationally recognized investment banking,  appraisal or valuation
firm  which  is  not an  Affiliate  of  the  Company  to  the  effect  that  the
consideration received by the Company in such merger is fair to the Company from
a financial point of view.

         (f)      CONSIDERATION   RECEIVED.  For  purposes  of  any  computation
respecting  consideration  received  pursuant to SUBSECTIONS (D) and (E) of this
SECTION 8, the following shall apply:

                  (1)      in the case of the issuance of shares of Common Stock
         for cash, the consideration  shall be the amount of such cash, PROVIDED
         that in no case  shall  any  deduction  be  made  for any  commissions,
         discounts   or  other   expenses   incurred  by  the  Company  for  any
         underwriting of the issue or otherwise in connection therewith;

                  (2)      in the case of the issuance of shares of Common Stock
         for  a  consideration  in  whole  or  in  part  other  than  cash,  the
         consideration  other  than cash  shall be deemed to be the fair  market
         value  thereof as  determined  in good faith by the Board of  Directors
         (irrespective of the accounting treatment thereof), whose determination
         shall be conclusive and  non-appealable,  and described in a resolution
         of the Board of Directors which shall be filed with the Warrant Agent;

                  (3)      in the case of the issuance of securities convertible
         into  or  exchangeable   or  exercisable  for  shares,   the  aggregate
         consideration received therefor shall be deemed to be the consideration
         received by the Company for the  issuance of such  securities  plus the
         additional minimum consideration, if any, to be received by the Company
         upon the conversion, exchange or exercise thereof (the consideration in
         each case to be  determined  in the same  manner as provided in CLAUSES
         (1) and (2) of this SUBSECTION (F)); and

                  (4)      in the case of the issuance of shares of Common Stock
         pursuant  to  rights,  options or  warrants  which  rights,  options or
         warrants  were  originally  issued  together  with  one or  more  other
         securities  as part of a unit at a price  per unit,  the  consideration
         shall  be  deemed  to be the  fair  value of such  rights,  options  or
         warrants at the time of issuance thereof as determined in good faith by
         the Board of Directors  whose  determination  shall be  conclusive  and
         non-appealable  and described in a resolution of the Board of Directors
         which  shall  be filed  with  the  Warrant  Agent  plus the  additional
         consideration, if any, to be received by the Company upon the exercise,
         conversion  or exchange  thereof (as  determined  in the same manner as
         provided in CLAUSES (1) and (2) of this SUBSECTION (F)).

         (g)      FAIR MARKET  VALUE.  For purposes of SECTIONS 8 (B),  (C), (D)
and (E) hereof, the "FAIR MARKET VALUE" per share of Common Stock at any date of
determination  shall be (1) in connection  with a sale by the Company to a party
that is not an Affiliate of the Company in an


                                       28
<PAGE>


arm's-length  transaction (a  "NON-AFFILIATE  SALE"),  the price per security at
which such security is sold and (2) in  connection  with any sale by the Company
to an Affiliate  of the  Company,  (A) the last price per security at which such
security  was  sold  in a  Non-Affiliate  Sale  within  the  three-month  period
preceding such date of  determination  and (B), if CLAUSE (A) is not applicable,
the  fair  market  value  of such  security  determined  in good  faith by (i) a
majority of the Board of Directors  of the Company,  including a majority of the
Disinterested  Directors,  and approved in a Board  resolution  delivered to the
Warrant Agent or (ii) a nationally recognized  investment banking,  appraisal or
valuation firm, which is not an Affiliate of the Company,  in each case,  taking
into account,  among all other factors deemed relevant by the Board of Directors
or such investment  banking,  appraisal or valuation firm, the trading price and
volume  of such  security  on any  national  securities  exchange  or  automated
quotation system on which such security is traded.

         For purposes of this SECTION 8(G),  "DISINTERESTED  DIRECTOR" means, in
connection with any issuance of securities that gives rise to a determination of
the Fair Market Value thereof,  each member of the Board of Directors who is not
an  officer,  employee,  director  or other  Affiliate  of the party to whom the
Company is proposing to issue the securities giving rise to such determination.

         For purposes of this SECTION 8(G),  "AFFILIATE" of any specified Person
means (A) any other Person  directly or indirectly  controlling or controlled by
or under direct or indirect  common control with such  specified  Person and (B)
any  director  or  officer  of  such  specified  Person.  For  purposes  of this
definition  "CONTROL"   (including,   with  correlative   meanings,   the  terms
"CONTROLLING,"  "CONTROLLED  BY" and "UNDER COMMON  CONTROL  WITH") as used with
respect to any Person, shall mean the possession, directly or indirectly, of the
power to direct or cause the  direction  of the  management  or policies of such
Person,  whether  through the  ownership of voting  securities,  by agreement or
otherwise.

         (h)      WHEN DE MINIMIS  ADJUSTMENT MAY BE DEFERRED.  No adjustment in
the Exercise Price need be made unless the adjustment  would require an increase
or decrease of at least 1% in the Exercise Price.  Any adjustments  that are not
made  shall  be  carried  forward  and  taken  into  account  in any  subsequent
adjustment.  All calculations  under this SECTION 8 shall be made to the nearest
cent or to the  nearest  1/100th  of a  share,  as the  case  may be,  it  being
understood that no such rounding shall be made under SECTION 8(P).

         (i)      WHEN NO ADJUSTMENT  REQUIRED.  With respect to Warrants of any
holder,  no adjustment need be made for a transaction  referred to SECTION 8(A),
(B),  (C),  (D), (E) or (F) hereof,  if such holder is to  participate  (without
being required to exercise its Warrants) in the  transaction on a basis and with
notice that the Board of  Directors  determines  to be fair and  appropriate  in
light of the basis and notice on which  holders of Common Stock  participate  in
the  transaction.  No adjustment  need be made for (i) rights to purchase Common
Stock pursuant to a Company plan for reinvestment of dividends or interest, (ii)
a change  in the par  value or no par value of the  Common  Stock or (iii)  that
would result in the  Exercise  Price being less than the par value of the Common
Stock.  To the extent the Warrants become  convertible  into cash, no adjustment
need be made thereafter as to the cash. Interest will not accrue on the cash.

         (j)      NOTICE OF ADJUSTMENT. Whenever the Exercise Price is adjusted,
the Company shall provide the notices required by SECTION 11 hereof.


                                       29
<PAGE>


         (k)      REORGANIZATION OF COMPANY.  Immediately after the date hereof,
if the Company  consolidates  or merges with or into, or transfers or leases all
or  substantially  all its assets  to, any  Person,  upon  consummation  of such
transaction the Warrants shall automatically become exercisable for the kind and
amount of  securities,  cash or other assets which the holder of a Warrant would
have owned immediately after the consolidation, merger, transfer or lease if the
holder had exercised the Warrant  immediately  prior to the  consummation of the
transaction.  Concurrently  with  the  consummation  of  such  transaction,  the
corporation  formed by or surviving  any such  consolidation  or merger if other
than the Company, or the Person to which such sale or conveyance shall have been
made,  shall enter into (i) a  supplemental  Warrant  Agreement so providing and
further  providing for adjustments which shall be as nearly equivalent as may be
practical  to the  adjustments  provided  for in this  SECTION  8(K)  and (ii) a
supplement  to the  Equity  Registration  Rights  Agreement  providing  for  the
assumption of the Company's obligations thereunder.  The successor Company shall
mail to Warrant holders a notice  describing the supplemental  Warrant Agreement
and  Equity  Registration   Rights  Agreement.   If  the  issuer  of  securities
deliverable upon exercise of Warrants under the supplemental  Warrant  Agreement
is an Affiliate of the formed, surviving, transferee or lessee corporation, such
issuer shall join in the supplemental  Warrant Agreement and Equity Registration
Rights Agreement. If this SECTION 8(K) shall be applicable,  SECTIONS 8(A), (B),
(C), (D), (e) and (F) hereof shall not be applicable.

         (l)      COMPANY   DETERMINATION  FINAL.  Any  determination  that  the
Company or the Board of Directors must make pursuant to SECTION 8(A),  (C), (D),
(E), (F), (G), (H) or (I) hereof is conclusive and non-appealable.

         (m)      WARRANT AGENT'S  DISCLAIMERS.  The Warrant Agent shall have no
duty to determine when an adjustment under this SECTION 8 should be made, how it
should be made or what it should be.  The  Warrant  Agent  shall have no duty to
determine  whether a supplemental  warrant  agreement under SECTION 8(K) need be
entered into or whether any provisions of a supplemental warrant agreement under
SECTION 8(K) hereof are correct.  The Warrant Agent shall not be responsible for
the Company's failure to comply with SECTION 8.

         (n)      WHEN ISSUANCE OR PAYMENT MAY BE DEFERRED. In any case in which
this SECTION 8 shall require that an  adjustment  in the Exercise  Price be made
effective  as of a record date for a specified  event,  the Company may elect to
defer  until the  occurrence  of such  event (i)  issuing  to the  holder of any
Warrant  exercised  after such record date the Warrant  Shares and other capital
stock of the Company,  if any,  issuable  upon such  exercise over and above the
Warrant  Shares and other  capital stock of the Company,  if any,  issuable upon
such exercise on the basis of the Exercise  Price and (ii) paying to such holder
any amount in cash in lieu of a fractional  share pursuant to SECTION 11 hereof;
PROVIDED  that the  Company  shall  deliver  to such  holder a due bill or other
appropriate instrument evidencing such holder's right to receive such additional
Warrant  Shares,  other capital stock and cash upon the  occurrence of the event
requiring such adjustment.

         (o)      ADJUSTMENT  IN NUMBER OF SHARES.  Upon each  adjustment of the
Exercise Price pursuant to this SECTION 8, each Warrant outstanding prior to the
making of the  adjustment in the Exercise  Price shall  thereafter  evidence the
right to receive  upon  payment of the  adjusted  Exercise  Price that number of
shares of Common Stock (calculated to the nearest  hundredth)  obtained from the
following formula:


                                       30
<PAGE>


                              N'       =        N        x        E
                                                                  --
                                                                  E'
where:

                  N'    =     the adjusted number of Warrant Shares issuable
                              upon exercise of a Warrant by payment of the
                              adjusted Exercise Price.
                  N     =     the number or Warrant Shares previously issuable
                              upon exercise of a Warrant by payment of the
                              Exercise Price prior to adjustment.
                  E'    =     the adjusted Exercise Price.
                  E     =     the Exercise Price prior to adjustment.

         (p)      FORM  OF  WARRANTS.  Irrespective  of any  adjustments  in the
Exercise Price or the number or kind of shares  purchasable upon the exercise of
the Warrants,  Warrants theretofore or thereafter issued may continue to express
the same  price and  number  and kind of shares  as are  stated in the  Warrants
initially issuable pursuant to this Agreement.

Section 9.        FRACTIONAL INTERESTS.

         The Company shall not be required to issue fractional Warrant Shares on
the  exercise of  Warrants.  If more than one  Warrant  shall be  presented  for
exercise in full at the same time by the same holder, the number of full Warrant
Shares which shall be issuable  upon the exercise  thereof  shall be computed on
the basis of the aggregate  number of Warrant Shares  purchasable on exercise of
the Warrants so presented.  If any fraction of a Warrant Share would, except for
the  provisions  of this  SECTION 9, be issuable on the exercise of any Warrants
(or specified portion  thereof),  the Company shall calculate the amount in cash
equal to the Fair  Market  Value  per  Warrant  Share  and pay such  amount,  as
determined  on the day  immediately  preceding the date the Warrant is presented
for exercise,  multiplied by such  fraction,  computed to the nearest whole U.S.
cent.

Section 10.       LIQUIDATED DAMAGEs.

         (a)      The  Company  acknowledges  and agree that the  holders of the
Warrants  will suffer  damages if the Company  fails to fulfill its  obligations
under the Equity Registration Rights Agreement and that it would not be feasible
to ascertain the extent of such damages with precision. Accordingly, the Company
agrees that if:

                  (i)      the  registration  statement  required to be filed by
         the Equity  Registration  Rights Agreement is not declared effective on
         or prior to the 240th day  following the issue date of the Warrants or,
         if that day is not a Business Day, the next day that is a Business Day;
         or

                  (ii)     the  registration  statement  required to by filed by
         the Equity  Registration  Rights Agreement does not remain continuously
         effective for the Effectiveness  Period (subject to any Delay Periods),
         in each case as defined in the Equity Registration Rights Agreement,


                                       31
<PAGE>


(each such event referred to in clauses (i) and (ii) a "REGISTRATION  DEFAULT"),
liquidated damages in the form of cash payments  ("LIQUIDATED  DAMAGES") will be
due and payable on the affected Warrants. The rate of Liquidated Damages will be
$0.63  per  Warrant  for the  first  90-day  period  immediately  following  the
occurrence of a  Registration  Default,  increasing  by an additional  $0.63 per
Warrant with respect to each subsequent  90-day period up to a maximum amount of
additional  interest of $2.52 per Warrant,  from and including the date on which
any such Registration Default shall occur to, but excluding,  the earlier of (1)
the date on which all  Registration  Defaults have been cured or (2) the date on
which all the Warrants  otherwise  become freely  transferable  by Holders other
than affiliates of the Issuer without further  registration under the Securities
Act.

         Notwithstanding  the  foregoing,  (1) the amount of Liquidated  Damages
payable  shall not  increase by more than the  foregoing  rates if more than one
Registration  Default has  occurred  and is pending and (2) a holder of Warrants
who is not entitled to the benefits of such  registration  statement (I.E., such
holder  has not  elected  to  include  information)  shall  not be  entitled  to
Liquidated Damages with respect to a Registration Default.

         (b)      So long as Warrants  remain  outstanding,  the  Company  shall
notify the Warrant  Agent and DTC within five Business Days after each and every
date on which an event occurs in respect of which Liquidated Damages is required
to be paid.  Any amounts of Liquidated  Damages due with respect to the Warrants
pursuant  to clauses  (a)(i) or  (a)(ii)  of this  SECTION 10 will be payable to
Persons who are registered  holders of Warrants at the close of business on each
June 1 and  December 1, in cash  semi-annually  on each June 15 and  December 15
(each a "DAMAGES  PAYMENT DATE"),  commencing with the first such date occurring
after any such Liquidated Damages commence to accrue. If the Company is required
make a payment of Liquidated Damages in accordance with the preceding  sentence,
the Company shall  deposit such amounts of  Liquidated  Damages with the Warrant
Agent,  as paying agent with respect to the Warrants,  and payment of Liquidated
Damages  may be made by  check  mailed  to the  holders  of  Warrants  at  their
addresses  set forth in the register of holders;  PROVIDED  that payment by wire
transfer  of  immediately  available  funds  will be  required  with  respect to
Liquidated  Damages on all Global Warrants and any other Warrants the holders of
which will have  provided  wire  transfer  instructions  to the Warrant Agent at
least two Business Days prior to the payment date.

Section 11.       NOTICES TO WARRANT HOLDERS.

         (a)      Upon any  adjustment of the Exercise Price pursuant to SECTION
8 hereof,  the Company shall promptly  thereafter (i) cause to be filed with the
Warrant Agent a certificate of a firm of independent public accountants selected
by the Board of Directors of the Company (who may be the regular auditors of the
Company)  setting  forth the Exercise  Price after such  adjustment  and setting
forth in reasonable  detail the method of  calculation  and the facts upon which
such  calculations  are based and setting forth the number of Warrant Shares (or
portion  thereof)  issuable after such  adjustment in the Exercise  Price,  upon
exercise  of a  Warrant  and  payment  of the  adjusted  Exercise  Price,  which
certificate  shall be conclusive  evidence of the correctness of the matters set
forth therein,  and (ii) cause, at the Company's expense, to be given to each of
the  registered  holders of  Warrants at the  address  appearing  on the Warrant
register for each such registered  holder written notice of such  adjustments by
first-class mail, postage


                                       32
<PAGE>


prepaid. Where appropriate,  such notice may be given in advance and included as
a part of the notice  required to be mailed under the other  provisions  of this
SECTION 11.

         (b)      In the event:

                  (i)      that the Company shall  authorize the issuance to all
         holders of shares of Common  Stock of rights,  options or  warrants  to
         subscribe  for or  purchase  shares  of  Common  Stock or of any  other
         subscription rights or warrants;

                  (ii)     that the Company shall authorize the  distribution to
         all holders of shares of Common Stock of evidences of its  indebtedness
         or assets  (other  than  dividends  or cash  distributions  paid out of
         consolidated  current or retained earnings as shown on the books of the
         Company  prepared in  accordance  with  generally  accepted  accounting
         principles   or  dividends   payable  in  shares  of  Common  Stock  or
         distributions);

                  (iii)    of any  consolidation  or merger to which the Company
         is a party and for which approval of any stockholders of the Company is
         required, or of the conveyance or transfer of the properties and assets
         of the Company substantially as an entirety, or of any reclassification
         or change of Common Stock issuable upon exercise of the Warrants (other
         than a change in par value,  or from par value to no par value, or from
         no  par  value  to  par  value,  or as a  result  of a  subdivision  or
         combination),  or a tender  offer or exchange  offer by the Company for
         shares of Common Stock;

                  (iv)     of  the   voluntary   or   involuntary   dissolution,
         liquidation or winding up of the Company; or

                  (v)      that the Company  proposes to take any action  (other
         than actions of the  character  described in SECTION 8(A) hereof) which
         would require an adjustment of the Exercise Price pursuant to SECTION 8
         hereof;

then the Company  shall cause to be filed with the Warrant  Agent and shall,  at
the Company's  expense,  cause to be given to each registered holder of Warrants
at the address appearing on the Warrant register,  at least 10 days prior to the
applicable record date hereinafter specified,  or promptly in the case of events
for which there is no record date,  by  first-class  mail,  postage  prepaid,  a
written  notice stating (x) the date as of which the holders of record of shares
of Common Stock to be entitled to receive any such rights, options,  warrants or
distribution are to be determined,  (y) the initial expiration date set forth in
any tender offer or exchange  offer for shares of Common Stock,  or (z) the date
on which any such  consolidation,  merger,  conveyance,  transfer,  dissolution,
liquidation or winding up is expected to become  effective or  consummated,  and
the date as of which it is expected  that  holders of record of shares of Common
Stock  shall be  entitled  to  exchange  such  shares  for  securities  or other
property, if any, deliverable upon such reclassification, consolidation, merger,
conveyance,  transfer,  dissolution,  liquidation  or winding up. The failure to
give the notice  required  by this  SECTION 11 or any defect  therein  shall not
affect the legality or validity of any  distribution,  right,  option,  warrant,
consolidation, merger, conveyance, transfer, dissolution, liquidation or winding
up, or the vote upon any action.


                                       33
<PAGE>


         (c)      Nothing  contained in this  Agreement or in any of the Warrant
Certificates  shall be construed as conferring  upon the holders of Warrants the
right to vote or to consent or to receive notice as  stockholders  in respect of
the meetings of  stockholders or the election of directors of the Company or any
other matter, or any rights whatsoever as stockholders of the Company.

Section 12.       MERGER, CONSOLIDATION OR CHANGE OF NAME OF WARRANT AGENT.

         (a)      Any corporation  into which the Warrant Agent may be merged or
with which it may be consolidated,  or any corporation resulting from any merger
or consolidation to which the Warrant Agent shall be a party, or any corporation
succeeding to the business of the Warrant  Agent,  shall be the successor to the
Warrant  Agent  hereunder  without the  execution  or filing of any paper or any
further act on the part of any of the parties  hereto.  In case at the time such
successor  to the  Warrant  Agent  shall  succeed to the agency  created by this
Agreement,  and in case at that time any of the Warrant  Certificates shall have
been  countersigned  but not delivered,  any such successor to the Warrant Agent
may adopt the  countersignature  of the original  Warrant Agent;  and in case at
that time any of the Warrant Certificates shall not have been countersigned, any
successor to the Warrant Agent may countersign such Warrant  Certificates either
in the name of the predecessor  Warrant Agent or in the name of the successor to
the Warrant Agent;  and in all such cases such Warrant  Certificates  shall have
the full force and  effect  provided  in the  Warrant  Certificates  and in this
Agreement.

         (b)      In case at any  time the name of the  Warrant  Agent  shall be
changed  and at such  time  any of the  Warrant  Certificates  shall  have  been
countersigned  but not delivered,  the Warrant Agent whose name has been changed
may adopt the  countersignature  under its prior name,  and in case at that time
any of the Warrant  Certificates shall not have been countersigned,  the Warrant
Agent may countersign such Warrant  Certificates  either in its prior name or in
its changed name, and in all such cases such Warrant Certificates shall have the
full  force  and  effect  provided  in the  Warrant  Certificates  and  in  this
Agreement.

Section 13.       WARRANT AGENT.

         The Warrant Agent undertakes the duties and obligations imposed by this
Agreement upon the following terms and  conditions,  by all of which the Company
and the holders of Warrants, by their acceptance thereof, shall be bound:

         (a)      The   statements   contained   herein   and  in  the   Warrant
Certificates  shall be taken as  statements of the Company and the Warrant Agent
assumes no responsibility  for the correctness of any of the same except such as
describe  the  Warrant  Agent or action  taken or to be taken by it. The Warrant
Agent assumes no responsibility  with respect to the distribution of the Warrant
Certificates except as herein otherwise specifically provided.

         (b)      The Warrant Agent shall not be responsible  for any failure of
the Company to comply with any of the covenants  contained in this  Agreement or
in the Warrant Certificates to be complied with by the Company.


                                       34
<PAGE>


         (c)      The  Warrant  Agent  may  consult  at any  time  with  counsel
satisfactory  to it (who may be counsel for the Company)  and the Warrant  Agent
shall incur no  liability or  responsibility  to the Company or to any holder of
any Warrant  Certificate in respect of any action taken,  suffered or omitted by
it hereunder in good faith and in  accordance  with the opinion or the advice of
such  counsel.  The Warrant  Agent shall not be liable for any error of judgment
made in good faith by any officer  within its  corporate  trust  department or a
person performing similar functions,  unless it is proved that the Warrant Agent
was grossly  negligent in ascertaining  the pertinent  facts.  The Warrant Agent
shall not be liable with respect to any action it takes or omits to take in good
faith in  accordance  with a written  direction  received by it pursuant to this
Agreement or which it reasonably  believes to be authorized or within its rights
or powers under this Agreement.  The Warrant Agent may act through its attorneys
and agents and shall not be responsible  for the misconduct or negligence of any
agent  appointed  with due  care.  The  duties  of the  Warrant  Agent  shall be
determined  solely by the express  provisions of this  Agreement and the Warrant
Agent need  perform  only  those  duties as are  specifically  set forth in this
Agreement and no covenants or obligations  shall be implied in or read into this
Agreement  against the Warrant Agent.  The permissive right of the Warrant Agent
to take any action under this  Agreement  shall not be construed as a duty to so
act.

         (d)      The Warrant  Agent shall incur no liability or  responsibility
to the Company or to any holder of any Warrant  Certificate for any action taken
or not taken in reliance on any Warrant Certificate, notice, resolution, waiver,
statement,  instrument,  opinion,  report, request,  direction,  consent, order,
certificate, or other paper, document or instrument believed by it to be genuine
and to have been signed,  sent or presented by the proper party or parties.  The
Warrant  Agent  shall not be bound to make any  investigation  into the facts or
matters stated in any such Warrant  Certificate,  certificate of shares or other
evidence of indebtedness,  notice,  resolution,  waiver, statement,  instrument,
opinion, report, request, direction,  consent, order, certificate or other paper
or document.

         (e)      The  Company  agrees to pay to the  Warrant  Agent  reasonable
compensation for all services  rendered by the Warrant Agent in the execution of
this  Agreement,  to reimburse  the Warrant  Agent for all  expenses,  taxes and
governmental  charges and other  charges of any kind and nature  incurred by the
Warrant Agent in the execution of this Agreement (including  reasonable fees and
expenses of counsel).  The Company shall indemnify the Warrant Agent against any
and all  losses,  liabilities  or  expenses  incurred by it arising out of or in
connection  with the  acceptance  or  administration  of its  duties  under this
Warrant Agreement,  including the costs and expenses of enforcing this Agreement
against the Company and defending itself against any claim (whether  asserted by
the Company or any holder or any other person) or liability in  connection  with
the exercise or performance of any of its powers or duties hereunder,  except to
the extent any such loss,  liability or expense may be attributable to its gross
negligence or bad faith.  The Warrant Agent shall notify the Company promptly of
any claim for which it may seek  indemnity.  Failure by the Warrant  Agent to so
notify the Company shall not relieve the Company of its  obligations  hereunder.
The Company shall defend the claim and the Warrant Agent shall  cooperate in the
defense; PROVIDED that any settlement of a claim shall be approved in writing by
the Warrant  Agent, which


                                       35
<PAGE>


approval shall not be unreasonably withheld, conditional or delayed. The Warrant
Agent may have separate  counsel and the Company shall pay the  reasonable  fees
and expenses of such counsel.  The Company need not pay for any settlement  made
without  its  consent,   which  consent  shall  not  be  unreasonably  withheld,
conditioned  or delayed.  The rights,  privileges,  protections,  immunities and
benefits given to the Warrant Agent, including, without limitation, its right to
be indemnified,  are extended to, and shall be enforceable by, the Warrant Agent
in each of its capacities  hereunder,  including the Warrant  Agent's  officers,
directors,  agents and  employees,  and each agent,  custodian  and other person
employed to act hereunder.

         (f)      The Warrant  Agent shall be under no  obligation  to institute
any  action,  suit or legal  proceeding  or to take any other  action  likely to
involve expense unless the Company or one or more registered holders of Warrants
shall furnish the Warrant Agent with  reasonable  security and indemnity for any
costs and expenses which may be incurred,  but this  provision  shall not affect
the power of the Warrant  Agent to take such action as it may  consider  proper,
whether  with or without any such  security or  indemnity.  All rights of action
under this Agreement or under any of the Warrants may be enforced by the Warrant
Agent  without  the  possession  of  any  of  the  Warrant  Certificates  or the
production  thereof at any trial or other proceeding  relative thereto,  and any
such action, suit or proceeding instituted by the Warrant Agent shall be brought
in its name as  Warrant  Agent and any  recovery  of  judgment  shall be for the
ratable benefit of the registered  holders of the Warrants,  as their respective
rights or interests may appear.

         (g)      The Warrant Agent, and any stockholder,  director,  officer or
employee of it, may buy, sell or deal in any of the Warrants or other securities
of the Company or become pecuniarily  interested in any transaction in which the
Company  may be  interested,  or  contract  with or lend money to the Company or
otherwise act as fully and freely as though it were not Warrant Agent under this
Agreement.  Nothing  herein shall  preclude the Warrant Agent from acting in any
other capacity for the Company or for any other legal entity.

         (h)      The Warrant Agent shall act hereunder  solely as agent for the
Company, and its duties shall be determined solely by the provisions hereof. The
Warrant  Agent shall not be liable for anything  which it may do or refrain from
doing in connection with this Agreement  except for its own gross  negligence or
bad faith.

         (i)      The  Warrant  Agent shall not at any time be under any duty or
responsibility  to any holder of any Warrant  Certificate to make or cause to be
made any  adjustment  of the Exercise  Price or number of the Warrant  Shares or
other  securities or property  deliverable as provided in this Agreement,  or to
determine whether any facts exist which may require any of such adjustments,  or
with respect to the nature or extent of any such adjustments, when made, or with
respect to the method  employed in making the same.  The Warrant  Agent makes no
representation as to, and shall not be accountable with respect to, the validity
or value or the kind or amount of any  Warrant  Shares or of any  securities  or
property  which may at any time be issued or delivered  upon the exercise of any
Warrant or with respect to whether any such Warrant  Shares or other  securities


                                       36
<PAGE>


will when issued be validly issued and fully paid and  nonassessable,  and makes
no representation with respect thereto.

         (j)      The Warrant  Agent shall not be required to risk or expend its
own funds or otherwise  incur any  liability  (financial  or  otherwise)  on the
performance of its obligations and duties hereunder. The Warrant Agent shall not
be required to give any bond or surety in respect of the performance or exercise
of its powers or duties hereunder.

         (k)      The  obligations  of the Company  under this  Section 13 shall
survive the  exercise  and the  expiration  of the Warrant  Certificates  or the
resignation and removal of the Warrant Agent.

         (l)      The  Warrant  Agent  shall  not be  under  any  liability  for
interest  on,  and shall  not be  required  to  invest,  any  monies at any time
received by it pursuant to any of the  provisions  of this  Agreement  or of the
Warrant  Certificates.  Money and assets held by the  Warrant  Agent need not be
segregated  from other funds or assets held by the Warrant  Agent  except to the
extent required by law.

         (m)      No Warrant  Agent  under this  Agreement  shall be  personally
liable for any action or omission of any predecessor or successor Warrant Agent.

         (n)      As a condition  to taking any action  requested by the Company
under this Agreement,  the Warrant Agent may request an Opinion of Counsel and a
certificate of an Officer of the Company to the effect that the requested action
complies with the applicable provisions of this Agreement.

         (o)      The  Warrant  Agent  and the  Warrant  Registrar  shall not be
responsible for the computation of any amounts under this Agreement,  including,
without  limitation,  any  adjustment to the Exercise  Price or any amount to be
paid in respect of any  fractional  share.  The  Warrant  Agent and the  Warrant
Registrar  shall not be  responsible  for  determining  whether  any  Liquidated
Damages are due or calculating the amount of any Liquidated Damages.

         (p)      Whether or not therein expressly so provided,  every provision
of this Agreement that in any way relates to the Warrant Agent is subject to the
provisions of this SECTION 13.

Section 14.       CHANGE OF WARRANT AGENT.

         If the Warrant  Agent  shall  resign or become  incapable  of acting as
Warrant Agent,  the Company shall appoint a successor to such Warrant Agent.  If
the Company shall fail to make such appointment within a period of 30 days after
it has been notified in writing of such resignation or incapacity by the Warrant
Agent or by the registered holder of a Warrant  Certificate,  then the resigning
or incapable  Warrant Agent or the registered holder of any Warrant may apply to
any court of competent  jurisdiction  for the  appointment of a successor to the
Warrant Agent.  Pending appointment of a successor to such Warrant Agent, either
by the  Company or by such a court,  the duties of the  Warrant  Agent  shall be
carried out by the


                                       37
<PAGE>


Company.  The  holders of a majority  of the  unexercised  Warrants,  by written
notice to the Warrant  Agent and the  Company,  shall be entitled at any time to
remove the Warrant  Agent and appoint a successor  to such Warrant  Agent.  Such
successor to the Warrant Agent need not be approved by the Company or the former
Warrant  Agent.  After  appointment  the successor to the Warrant Agent shall be
vested with the same powers,  rights,  duties and  responsibilities as if it had
been  originally  named as Warrant Agent without  further act or deed;  PROVIDED
that the former Warrant Agent shall deliver and transfer to the successor to the
Warrant  Agent any  property  at the time held by it  hereunder  and execute and
deliver any further assurance, conveyance, act or deed necessary for the purpose
upon written request  therefor.  Failure to give any notice provided for in this
SECTION 14,  however,  or any defect  therein,  shall not affect the legality or
validity of the appointment of a successor to the Warrant Agent.

Section 15.       REPORTS.

         (a)      The  Company  agrees  with  each  holder,  for so  long as any
Warrants  remain  outstanding  and during any period in which the Company (i) is
not subject to Section 13 or 15(d) of the Exchange Act, to make available,  upon
request  of any  holder,  to such  holder or  beneficial  owner of  Warrants  in
connection with any sale thereof and any prospective  purchaser of such Warrants
designated by such holder or beneficial owner, the information  required by Rule
144(A)(d)(4)  under the Act in order to permit resales of such Warrants pursuant
to Rule 144A, and (ii) is subject to Section 13 or 15(d) of the Exchange Act, to
make all filings  required thereby in a timely manner in order to permit resales
of such Warrants pursuant to Rule 144A.

         (b)      The Company  shall provide the Warrant Agent with a sufficient
number of copies of all such reports  that the Warrant  Agent may be required to
deliver to the holders of the Warrants  under this SECTION 15. Any such delivery
shall be on the instructions of and at the expense of the Company.

Section 16.       CUSIP NUMBERS.

         A "CUSIP"  number  shall be printed on the  Warrants,  and the  Warrant
Agent  shall  use  the  CUSIP  number  in  notices  purchase  or  exercise  as a
convenience  to  Holders;  PROVIDED  that  any such  notice  may  state  that no
representation  is made as to the  correctness  or accuracy of the CUSIP  number
printed in the notice or on the Warrants and that reliance may be placed only on
the other  identification  numbers  printed on the  Warrants.  The Company shall
promptly notify the Warrant Agent of any change in the CUSIP number.

Section 17.       NOTICES TO COMPANY AND WARRANT AGENT.

         Any notice or demand  authorized by this  Agreement to be given or made
by the  Warrant  Agent or by the  registered  holder of any Warrant to or on the
Company  shall be  sufficiently  given or made when received if deposited in the
mail,  first class or  registered,  postage  prepaid,  addressed  (until another
address is filed in writing by the Company with the Warrant Agent) as follows:


                                       38
<PAGE>


                                National Coal Corp.
                                8915 George Williams Road
                                Knoxville, TN  37923
                                Attention:  General Counsel

         With a copy to:

                                Mayer, Brown, Rowe & Maw LLP
                                71 S. Wacker Drive
                                Chicago, IL  60606
                                Facsimile No.: (312) 706-8157
                                Attention: James Junewicz

         In case the  Company  shall fail to  maintain  such office or agency or
shall fail to give such notice of the  location or of any change in the location
thereof,  presentations may be made and notices and demands may be served at the
corporate trust office of the Warrant Agent.

         Any notice  pursuant to this Agreement to be given by the Company or by
the  registered  holder(s)  of  any  Warrant  to  the  Warrant  Agent  shall  be
sufficiently  given when  received  if  deposited  in the mail,  first-class  or
registered,  postage  prepaid,  addressed  (until  another  address  is filed in
writing by the  Warrant  Agent with the  Company)  to the  Warrant  Agent at its
corporate trust office as follows:

                                Wells Fargo Bank, National Association
                                213 Court Street
                                Suite 703
                                Middletown, CT 06457
                                Facsimile No.: (860) 704-6219
                                Attention: Joseph O'Donnell

         Any notice or communication to a registered  holder of Warrants will be
mailed by first class mail,  certified or registered,  return receipt requested,
or by  overnight  air  courier  guaranteeing  next day  delivery  to its address
appearing on the Warrant register.  Failure to mail a notice or communication to
such a holder or any defect in it will not affect its  sufficiency  with respect
to other such holders.

Section 18.       SUPPLEMENTS AND AMENDMENTS.

         The Company and the Warrant  Agent may from time to time  supplement or
amend this Agreement without the approval of any holders of Warrants in order to
cure any ambiguity or to correct or supplement  any provision  contained  herein
which may be defective or inconsistent  with any other provision  herein,  or to
make any other  provisions in regard to matters or questions  arising  hereunder
which the Company and the Warrant  Agent may deem  necessary  or  desirable  and
which shall not in any way  materially  adversely  affect the  interests  of the
holders of Warrants.  In  formulating  its opinion on such matters,  the Warrant
Agent shall be entitled to  request,  and shall be  justified  in relying on, an
Opinion of Counsel or such other evidence as it deems appropriate. Any amendment
or supplement to this Agreement that has a materially


                                       39
<PAGE>


adverse  effect on the  interests of the holders of Warrants  shall  require the
written  consent of the holders of a majority of the then  outstanding  Warrants
(excluding  Warrants held by the Company or any of its Affiliates).  The consent
of each holder of Warrants affected shall be required for any amendment pursuant
to which the Exercise  Price would be increased or the number of Warrant  Shares
purchasable upon exercise of Warrants would be decreased (other than pursuant to
adjustments provided in this Agreement).

Section 19.       SUCCESSORS.

         All  the  covenants  and  provisions  of this  Agreement  by or for the
benefit of the Company or the Warrant  Agent shall bind and inure to the benefit
of their respective successors and assigns hereunder.

Section 20.       TERMINATION.

         This  Agreement  shall  terminate  at 5:00 p.m.,  New York City time on
December 15, 2010.  Notwithstanding the foregoing, this Agreement will terminate
on any earlier date if all  Warrants  have been  exercised.  The  provisions  of
SECTION 13 shall survive such termination.

Section 21.       GOVERNING LAW.

         (a)      This Agreement and each Warrant  Certificate  issued hereunder
shall be deemed to be a  contract  made  under the laws of the State of New York
and for all purposes shall be construed in accordance  with the internal laws of
said State.

         (b)      Each  of  the  parties  hereto  irrevocably  consents  to  the
non-exclusive jurisdiction of Supreme Court of New York, New York county and the
United States  District  Court for the Southern  District of New York,  New York
county and waives trial by jury in any action or proceeding with respect to this
Agreement.

Section 22.       BENEFITS OF THIS AGREEMENT.

         Nothing in this  Agreement  shall be construed to give to any person or
corporation other than the Company, the Warrant Agent and the registered holders
of Warrants any legal or equitable right,  remedy or claim under this Agreement;
but this Agreement  shall be for the sole and exclusive  benefit of the Company,
the Warrant Agent and the registered holders of Warrants.

Section 23.       COUNTERPARTS.

         This Agreement may be executed in any number of  counterparts  and each
of such counterparts shall for all purposes be deemed to be an original, and all
such counterparts shall together constitute but one and the same instrument.

                            [Signature Page Follows]


                                       40
<PAGE>


         IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed, as of the day and year first above written.

                                NATIONAL COAL CORP.


                                By:      /s/ Jon E. Nix
                                      ------------------------------------------
                                      Name:  Jon E. Nix
                                      Title: CEO



                                WELLS FARGO BANK, NATIONAL ASSOCIATION,
                                as Warrant Agent


                                By:      /s/ Jane Y. Schweiger
                                      ------------------------------------------
                                      Name:  Jane Y. Schweiger
                                      Title: Vice President


                                       41
<PAGE>


                                    EXHIBIT A

                          [FORM OF WARRANT CERTIFICATE]


THIS  SECURITY AND THE WARRANT  SHARES TO BE ISSUED UPON ITS  EXERCISE  HAVE NOT
BEEN  REGISTERED  UNDER THE  SECURITIES  ACT OF 1933,  AS AMENDED,  OR ANY STATE
SECURITIES LAWS. NEITHER THIS SECURITY, THE WARRANT SHARES TO BE ISSUED UPON ITS
EXERCISE  NOR ANY  INTEREST  OR  PARTICIPATION  HEREIN MAY BE  REOFFERED,  SOLD,
ASSIGNED,  TRANSFERRED,  PLEDGED,  ENCUMBERED  OR  OTHERWISE  DISPOSED OF IN THE
ABSENCE OF SUCH  REGISTRATION OR UNLESS SUCH  TRANSACTION IS EXEMPT FROM, OR NOT
SUBJECT TO REGISTRATION.

THE  HOLDER OF THIS  SECURITY  AND THE  WARRANT  SHARES  TO BE  ISSUED  UPON ITS
EXERCISE BY ITS  ACCEPTANCE  HEREOF (1)  REPRESENTS  THAT (A) IT IS A "QUALIFIED
INSTITUTIONAL  BUYER" (AS DEFINED IN RULE 144A UNDER THE  SECURITIES  ACT ("RULE
144A")),  (B) IT IS A NON-U.S.  PURCHASER AND IS ACQUIRING THIS SECURITY AND THE
WARRANT SHARES TO BE ISSUED UPON ITS EXERCISE IN AN OFFSHORE  TRANSACTION WITHIN
THE MEANING OF REGULATION S UNDER THE  SECURITIES  ACT,  PURSUANT TO RULE 904 OF
REGULATION S, OR (C) IT IS AN  INSTITUTIONAL  "ACCREDITED  INVESTOR"  WITHIN THE
MEANING OF SUBPARAGRAPH (a)(1), (2), (3) OR (7) OF RULE 501 UNDER THE SECURITIES
ACT, AND (2) AGREES TO OFFER,  SELL OR OTHERWISE  TRANSFER SUCH SECURITY AND THE
WARRANT  SHARES TO BE ISSUED UPON ITS  EXERCISE,  PRIOR TO THE DATE WHICH IS TWO
YEARS  (OR SUCH  SHORTER  PERIOD AS MAY BE  PRESCRIBED  BY RULE  144(K)  (OR ANY
SUCCESSOR  PROVISION  THEREOF) UNDER THE SECURITIES  ACT) AFTER THE LATER OF THE
ORIGINAL  ISSUE DATE HEREOF (OR ANY  PREDECESSOR  OF THIS SECURITY) AND THE LAST
DATE ON WHICH THE COMPANY OR ANY  AFFILIATE OF THE COMPANY WAS THE OWNER OF THIS
SECURITY (OR ANY PREDECESSOR OF SUCH  SECURITY),  ONLY (A) TO THE COMPANY OR ANY
OF ITS  SUBSIDIARIES,  (B) PURSUANT TO A REGISTRATION  STATEMENT  WHICH HAS BEEN
DECLARED  EFFECTIVE  UNDER THE SECURITIES ACT, (C) FOR SO LONG AS THE SECURITIES
ARE  ELIGIBLE  FOR  RESALE  PURSUANT  TO RULE  144A,  TO A PERSON IT  REASONABLY
BELIEVES  IS A  "QUALIFIED  INSTITUTIONAL  BUYER" AS  DEFINED  IN RULE 144A THAT
PURCHASES  FOR ITS OWN ACCOUNT OR FOR THE  ACCOUNT OF A QUALIFIED  INSTITUTIONAL
BUYER TO WHOM  NOTICE IS GIVEN THAT THE  TRANSFER  IS BEING MADE IN  RELIANCE ON
RULE 144A,  (D) PURSUANT TO OFFERS AND SALES TO NON-U.S.  PURCHASERS  THAT OCCUR
OUTSIDE  THE  UNITED  STATES  WITHIN  THE  MEANING  OF  REGULATION  S UNDER  THE
SECURITIES  ACT,  PURSUANT TO RULE 904 OF REGULATION S, (E) TO AN  INSTITUTIONAL
"ACCREDITED INVESTOR" WITHIN THE MEANING OF SUBPARAGRAPH (a)(1), (2), (3) OR (7)
OF RULE 501 UNDER THE  SECURITIES  ACT THAT IS  ACQUIRING  THE  SECURITY AND THE
WARRANT  SHARES TO BE ISSUED UPON ITS EXERCISE  FOR ITS OWN


                                       A-1
<PAGE>


ACCOUNT, OR FOR THE ACCOUNT OF SUCH AN INSTITUTIONAL  ACCREDITED  INVESTOR,  FOR
INVESTMENT  PURPOSES AND NOT WITH A VIEW TO, OR FOR OFFER OR SALE IN  CONNECTION
WITH,  ANY  DISTRIBUTION  IN VIOLATION OF THE  SECURITIES ACT OR (F) PURSUANT TO
ANOTHER AVAILABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES
ACT AND THE SECURITIES  LAWS OF ANY OTHER  JURISDICTION,  INCLUDING ANY STATE OF
THE UNITED STATES, SUBJECT TO THE COMPANY'S AND THE WARRANT AGENT'S, OR TRANSFER
AGENT'S, AS APPLICABLE, RIGHT PRIOR TO ANY SUCH OFFER, SALE OR TRANSFER PURSUANT
TO CLAUSES  (D),  (E), OR (F) TO REQUIRE THE  DELIVERY OF AN OPINION OF COUNSEL,
CERTIFICATION AND/OR OTHER INFORMATION SATISFACTORY TO EACH OF THEM, AND IN EACH
OF THE FOREGOING  CASES,  A CERTIFICATE OF TRANSFER IN THE FORM APPEARING ON THE
OTHER SIDE OF THIS SECURITY IS COMPLETED AND DELIVERED BY THE  TRANSFEROR TO THE
WARRANT AGENT OR TRANSFER AGENT. THIS LEGEND WILL BE REMOVED UPON THE REQUEST OF
THE HOLDER AFTER THE RESALE RESTRICTION TERMINATION DATE.

THIS  SECURITY  WAS  INITIALLY  ISSUED  AS PART OF AN  ISSUANCE  OF  UNITS  (THE
"UNITS"),  EACH OF WHICH  CONSISTS OF $1,000  PRINCIPAL  AMOUNT OF THE COMPANY'S
10.5% SENIOR  SECURED  NOTES DUE 2010 (THE  "NOTES") AND ONE WARRANT TO PURCHASE
31.5024 SHARES OF THE COMPANY'S COMMON STOCK (THE "WARRANTS").

PRIOR TO THE EARLIEST TO OCCUR OF (I) 180 DAYS AFTER THE CLOSING OF THE OFFERING
OF THE UNITS,  (II) THE DATE ON WHICH A REGISTRATION  STATEMENT FOR A REGISTERED
EXCHANGE  OFFER  WITH  RESPECT  TO THE  NOTES IS  DECLARED  EFFECTIVE  UNDER THE
SECURITIES  ACT,  (III) THE DATE ON WHICH A SHELF  REGISTRATION  STATEMENT  WITH
RESPECT TO THE WARRANT SHARES IS DECLARED EFFECTIVE UNDER THE SECURITIES ACT AND
(IV) SUCH  DATE AS  JEFFERIES  &  COMPANY,  INC.  IN ITS SOLE  DISCRETION  SHALL
DETERMINE,  THE SECURITY EVIDENCED BY THIS CERTIFICATE MAY NOT BE TRANSFERRED OR
EXCHANGED SEPARATELY FROM, BUT MAY BE TRANSFERRED OR EXCHANGED ONLY AS, A UNIT.

THE  HOLDER OF THIS  SECURITY  AND THE  WARRANT  SHARES  TO BE  ISSUED  UPON ITS
EXERCISE,  BY ITS  ACCEPTANCE  HEREOF,  AGREES  NOT  TO  ENGAGE  IN ANY  HEDGING
TRANSACTION  UNLESS IN COMPLIANCE  WITH THE  SECURITIES  ACT. THE HOLDER OF THIS
SECURITY  AND  THE  WARRANT  SHARES  TO BE  ISSUED  UPON  ITS  EXERCISE,  BY ITS
ACCEPTANCE  HEREOF  AGREES  THAT IT WILL  DELIVER  TO EACH  PERSON  TO WHOM THIS
SECURITY OR ANY INTEREST  HEREIN IS  TRANSFERRED A NOTICE  SUBSTANTIALLY  TO THE
EFFECT OF THESE LEGENDS.

THIS  GLOBAL  WARRANT  IS HELD BY THE  DEPOSITARY  (AS  DEFINED  IN THE  WARRANT
AGREEMENT  GOVERNING  THIS WARRANT) OR ITS NOMINEE IN CUSTODY FOR THE BENEFIT OF
THE BENEFICIAL  OWNERS HEREOF,  AND IS NOT  TRANSFERABLE TO ANY PERSON UNDER ANY
CIRCUMSTANCES  EXCEPT


                                       A-2
<PAGE>


THAT (I) THE  WARRANT  AGENT MAY MAKE SUCH  NOTATIONS  HEREON AS MAY BE REQUIRED
PURSUANT TO SECTION 3.5 OF THE WARRANT  AGREEMENT,  (II) THIS GLOBAL WARRANT MAY
BE EXCHANGED IN WHOLE BUT NOT IN PART PURSUANT TO SECTION  3.5(a) OF THE WARRANT
AGREEMENT,  (III) THIS GLOBAL  WARRANT MAY BE DELIVERED TO THE WARRANT AGENT FOR
CANCELLATION  PURSUANT  TO SECTION 3.8 OF THE  WARRANT  AGREEMENT  AND (IV) THIS
GLOBAL  WARRANT  MAY BE  TRANSFERRED  TO A SUCCESSOR  DEPOSITARY  WITH THE PRIOR
WRITTEN CONSENT OF THE COMPANY.


                                      A-3
<PAGE>


                               NATIONAL COAL CORP.

                               WARRANT CERTIFICATE

CUSIP No.
No. Warrants

         This Warrant  Certificate  certifies that Cede & Co., or its registered
assigns,  is the registered  holder of [ _____ ] Warrants  expiring December 15,
2010 (the "WARRANTS") to purchase shares of common stock, par value $0.0001 (the
"COMMON STOCK"),  of National Coal Corp., a Florida corporation (the "COMPANY").
Each Warrant entitles the registered holder upon exercise at any time until 5:00
p.m. New York City Time on December 15, 2010 to receive from the Company [ ___ ]
fully paid and  nonassessable  shares of Common Stock (the "WARRANT  SHARES") at
the initial  exercise  price (the  "EXERCISE  PRICE") of $8.50 per share payable
upon surrender of this Warrant  Certificate and payment of the Exercise Price at
the office or agency of the Warrant  Agent (as  hereinafter  defined),  but only
subject to the  conditions  set forth  herein and in the Warrant  Agreement  (as
hereinafter  defined) referred to on the reverse hereof.  The Exercise Price and
number of Warrant  Shares  issuable upon exercise of the Warrants are subject to
adjustment  upon the  occurrence  of  certain  events  set forth in the  Warrant
Agreement.

         No Warrant  may be  exercised  after  5:00 p.m.,  New York City Time on
December 15, 2010.  To the extent not  exercised by such time,  any such Warrant
shall become void.

         Reference  is hereby made to the  further  provisions  of this  Warrant
Certificate  set forth on the reverse hereof and such further  provisions  shall
for all purposes have the same effect as though fully set forth at this place.

         This Warrant Certificate shall not be valid unless countersigned by the
Warrant Agent, as such term is used in the Warrant Agreement.

         This  Warrant  Certificate  shall  be  governed  by  and  construed  in
accordance with the internal laws of the State of New York.

                                * * * * * * * * *


                                      A-4
<PAGE>


         IN WITNESS WHEREOF,  the Company has caused this Warrant Certificate to
be signed below.

DATED:

                                NATIONAL COAL CORP.


                                By:
                                   ---------------------------------------------
                                     Name:
                                     Title:



Countersigned:

WELLS FARGO BANK, NATIONAL ASSOCIATION,
as Warrant Agent


By:_____________________________________
     Authorized Signature


                                      A-5

<PAGE>


                        [Reverse of Warrant Certificate]

         The Warrants  evidenced by this Warrant  Certificate are part of a duly
authorized  issue of  Warrants  expiring  at 5:00  p.m.  New York  City  time on
December 15, 2010  entitling the holder on exercise to receive  shares of Common
Stock,  and are issued or to be issued pursuant to a Warrant  Agreement dated as
of December 29, 2005 (the "WARRANT  AGREEMENT"),  duly executed and delivered by
the Company to Wells Fargo Bank,  National  Association,  as the initial warrant
agent (the "WARRANT AGENT"),  which Warrant Agreement is hereby  incorporated by
reference in and made a part of this  instrument and is hereby referred to for a
description  of the  rights,  limitation  of  rights,  obligations,  duties  and
immunities  thereunder  of the Warrant  Agent,  the Company and the holders (the
words "holders" or "holder" meaning the registered holders or registered holder)
of the Warrants.  Capitalized terms used but not defined herein have the meaning
ascribed to such terms in the Warrant Agreement. A copy of the Warrant Agreement
may be obtained by the holder hereof upon written request to the Company.

         Warrants  may be  exercised at any time on or before 5:00 p.m. New York
City time on December 15, 2010.  In order to exercise all or any of the Warrants
represented by this Warrant Certificate,  the holder must deliver to the Warrant
Agent at its  corporate  trust  office set forth in  Section  17 of the  Warrant
Agreement this Warrant  Certificate  and the form of election to purchase on the
reverse hereof duly  completed and signed,  which  signature  shall be medallion
guaranteed  by  an  institution  which  is a  member  of a  Securities  Transfer
Association  recognized  signature  guarantee  program,  and upon payment to the
Warrant  Agent for the account of the  Company of the  Exercise  Price,  for the
number of Warrant  Shares in respect of which such Warrants are then  exercised.
No adjustment  shall be made for any dividends on any Common Stock issuable upon
exercise  of this  Warrant.  In  addition,  if  certain  events set forth in the
Warrant  Agreement  occur,  this Warrant  will be exercised  without any further
action on the part of the holder.

         The Warrant  Agreement  provides  that upon the  occurrence  of certain
events the Exercise  Price set forth on the face hereof may,  subject to certain
conditions,  be adjusted;  provided that no adjustment  may be made that reduces
the  Exercise  Price below the par value of the Common  Stock.  If the  Exercise
Price is adjusted,  the Warrant Agreement  provides that the number of shares of
Common Stock  issuable upon the exercise of each Warrant  shall be adjusted.  No
fractions  of a share of Common  Stock will be issued  upon the  exercise of any
Warrant,  but the Company will pay the cash value thereof determined as provided
in the Warrant Agreement.

         The  Company  has  agreed  pursuant  to an Equity  Registration  Rights
Agreement  dated as of  December  29,  2005  between the Company and the Initial
Purchaser  (the  "EQUITY   REGISTRATION  RIGHTS  AGREEMENT")  to  file  a  shelf
registration  statement  covering resales of the Warrants and Warrant Shares and
to  use  commercially  reasonable  efforts  to  have  that  resale  registration
statement  declared effective within 240 days of the issue date, and to keep the
resale  registration  statement  effective for two years following the effective
date of the  registration  statement  (unless the securities are sold earlier or
cease to be restricted securities).

         Warrant Certificates, when surrendered at the corporate trust office of
the  Warrant  Agent by the  registered  holder  thereof  in  person  or by legal
representative or attorney duly authorized


                                       A-6
<PAGE>


in  writing,  may be  exchanged,  in the manner and  subject to the  limitations
provided in the Warrant  Agreement,  but without  payment of any service charge,
for another Warrant Certificate or Warrant Certificates of like tenor evidencing
in the aggregate a like number of Warrants.

         Upon due  presentation  for  registration  of transfer of this  Warrant
Certificate  at the  corporate  trust office of the Warrant  Agent a new Warrant
Certificate  or  Warrant  Certificates  of  like  tenor  and  evidencing  in the
aggregate  a like  number of Warrants  shall be issued to the  transferee(s)  in
exchange for this Warrant  Certificate,  subject to the limitations  provided in
the Warrant  Agreement,  without charge except for any tax or other governmental
charge imposed in connection therewith.

         Each holder,  by its acceptance of this Warrant,  agrees to be bound by
the terms of the Warrant Agreement and the Equity Registration Rights Agreement,
and all such replacements thereof, and each holder hereby authorizes the Warrant
Agent to bind the holders to the extent provided in the Warrant Agreement.

         The  Company and the  Warrant  Agent may deem and treat the  registered
holder(s)  hereof  as  the  absolute   owner(s)  of  this  Warrant   Certificate
(notwithstanding  any  notation of  ownership  or other  writing  hereon made by
anyone),  for the purpose of any exercise  hereof,  of any  distribution  to the
holder(s)  hereof,  and for all other purposes,  and neither the Company nor the
Warrant  Agent  shall be  affected  by any notice to the  contrary.  Neither the
Warrants nor this Warrant  Certificate  entitles any holder hereof to any rights
of a stockholder of the Company.


                                       A-7
<PAGE>


                         [Form of Election to Purchase]

                    (To Be Executed Upon Exercise Of Warrant)

         The  undersigned  hereby  irrevocably  elects to  exercise  the  right,
represented by this Warrant Certificate,  to receive __________ shares of Common
Stock and herewith tenders payment for such shares to the order of NATIONAL COAL
CORP.,  [cash]  [Warrants]  [Notes]  equal [in fair market  value] [in principal
amount] to  $__________  in accordance  with the terms hereof.  The  undersigned
requests  that a  certificate  for  such  shares  be  registered  in the name of
_______________,  whose  address is  __________________  and that such shares be
delivered to ___________, whose address is ____________________________. If said
number  of shares is less  than all of the  shares of Common  Stock  purchasable
hereunder,  the undersigned requests that a new Warrant Certificate representing
the   remaining   balance  of  such  shares  be   registered   in  the  name  of
______________________,  whose  address is  ____________________,  and that such
Warrant Certificate be delivered to whose address is __________________________.


                                    ____________________________________
                                    Signature




Date:

                                    ____________________________________
                                    Signature Guaranteed


Signatures must be guaranteed by an "eligible guarantor institution" meeting the
requirements  of the Warrant Agent,  which  requirements  include  membership or
participation in the Security Transfer Agent Medallion Program ("STAMP") or such
other "signature guarantee program" as may be determined by the Warrant Agent in
addition  to,  or in  substitution  for,  Stamp,  all  in  accordance  with  the
Securities Exchange Act of 1934, as amended.


                                      A-8
<PAGE>


                               NATIONAL COAL CORP.

                             COUNTERSIGNATURE ORDER



Wells Fargo Bank, National Association
213 Court Street
Suite 703
Middletown, CT 06457


                  Re:    55,000 WARRANTS TO PURCHASE COMMON STOCK

Ladies and Gentlemen:

                  Pursuant to Section 3.2 of the Warrant  Agreement dated as the
date hereof (the "Warrant  Agreement"),  among  National  Coal Corp.,  a Florida
corporation  (the "Company"),  and Wells Fargo Bank,  National  Association,  as
warrant agent (the "Warrant  Agent"),  relating to the Company's 55,000 Warrants
(as defined in the Warrant  Agreement)  to purchase its Common Stock (as defined
in the  Warrant  Agreement),  you are  hereby  directed  (i) to  countersign  on
December  29,  2005,  in the  manner  provided  in the  Warrant  Agreement,  the
Warrants,  heretofore  duly  executed  by a proper  officer of the  Company  and
delivered  to you as  provided in the Warrant  Agreement,  (ii) to deliver  such
countersigned  Warrants  in  the  denominations  and  registered  in  the  names
heretofore  requested  by  Jefferies  &  Company,  Inc.  and  (iii)  to hold the
certificates  representing  the Warrants,  as custodian for The Depository Trust
Company.


                                    Very truly yours,

                                    NATIONAL COAL CORP.



                                    By:   ______________________________________
                                          Name:
                                          Title:


                                      A-9
<PAGE>


                                    EXHIBIT B

                         FORM OF CERTIFICATE OF TRANSFER

National Coal Corp.
8915 George Williams Road
Knoxville, TN  37923

Wells Fargo Bank, National Association
213 Court Street
Suite 703
Middletown, CT 06457



         Re:      Warrants

         Reference is hereby made to the Warrant Agreement, dated as of December
29, 2005 (the "WARRANT Agreement"),  between National Coal Corp., as issuer (the
"COMPANY"),  and Wells  Fargo  Bank,  National  Association,  as warrant  agent.
Capitalized  terms used but not defined  herein shall have the meanings given to
them in the Warrant Agreement.

         ___________________,  (the  "TRANSFEROR") owns and proposes to transfer
the ___________  Warrant[s] or interest in such Warrant[s]  specified in Annex A
hereto (the "TRANSFER"),  to  ________________________  (the  "TRANSFEREE"),  as
further  specified  in ANNEX A hereto.  In  connection  with the  Transfer,  the
Transferor hereby certifies that:

                             [CHECK ALL THAT APPLY]

         1.       |_| CHECK IF  TRANSFEREE  WILL TAKE  DELIVERY OF A  BENEFICIAL
INTEREST IN THE 144A GLOBAL  WARRANT OR A  DEFINITIVE  WARRANT  PURSUANT TO RULE
144A.  The Transfer is being  effected  pursuant to and in accordance  with Rule
144A under the United States Securities Act of 1933, as amended (the "SECURITIES
ACT"),  and,  accordingly,  the  Transferor  hereby  further  certifies that the
beneficial  interest or Definitive Warrant is being transferred to a Person that
the  Transferor  reasonably  believed and believes is purchasing  the beneficial
interest or Definitive Warrant for its own account,  or for one or more accounts
with respect to which such Person exercises sole investment discretion, and such
Person and each such account is a  "qualified  institutional  buyer"  within the
meaning of Rule 144A in a transaction  meeting the requirements of Rule 144A and
such Transfer is in compliance  with any applicable  blue sky securities laws of
any state of the United States.  Upon  consummation of the proposed  Transfer in
accordance with the terms of the Warrant Agreement,  the transferred  beneficial
interest or Definitive  Warrant will be subject to the  restrictions on transfer
enumerated in the Private  Placement  Legend  printed on the 144A Global Warrant
and/or the  Definitive  Warrant and in the Warrant  Agreement and the Securities
Act.

         2.       |_| CHECK IF  TRANSFEREE  WILL TAKE  DELIVERY OF A  BENEFICIAL
INTEREST IN THE REGULATION S GLOBAL WARRANT OR A DEFINITIVE  WARRANT PURSUANT TO
REGULATION S.


                                      B-1
<PAGE>


The Transfer is being  effected  pursuant to and in accordance  with Rule 903 or
Rule 904  under the  Securities  Act and,  accordingly,  the  Transferor  hereby
further  certifies  that (i) the  Transfer  is not being made to a person in the
United States and (x) at the time the buy order was  originated,  the Transferee
was outside the United  States or such  Transferor  and any Person acting on its
behalf  reasonably  believed and believes  that the  Transferee  was outside the
United  States  or (y) the  transaction  was  executed  in,  on or  through  the
facilities  of  a  designated   offshore  securities  market  and  neither  such
Transferor  nor any Person acting on its behalf knows that the  transaction  was
prearranged with a buyer in the United States,  (ii) no directed selling efforts
have been  made in  contravention  of the  requirements  of Rule  903(b) or Rule
904(b) of Regulation S under the Securities  Act,  (iii) the  transaction is not
part  of a  plan  or  scheme  to  evade  the  registration  requirements  of the
Securities  Act and (iv) if the  proposed  transfer  is being  made prior to the
expiration of the  Restricted  Period,  the transfer is not being made to a U.S.
Person or for the  account or benefit of a U.S.  Person  (other  than an Initial
Purchaser).  Upon  consummation of the proposed  transfer in accordance with the
terms  of  the  Warrant  Agreement,   the  transferred  beneficial  interest  or
Definitive Warrant will be subject to the restrictions on Transfer enumerated in
the Private  Placement  Legend printed on the Regulation S Global Warrant and/or
the Definitive Warrant and in the Warrant Agreement and the Securities Act.

         3.       |_| CHECK AND COMPLETE IF  TRANSFEREE  WILL TAKE DELIVERY OF A
BENEFICIAL  INTEREST IN THE IAI GLOBAL WARRANT OR A DEFINITIVE  WARRANT PURSUANT
TO ANY PROVISION OF THE SECURITIES ACT OTHER THAN RULE 144A OR REGULATION S. The
Transfer  is  being  effected  in  compliance  with  the  transfer  restrictions
applicable to beneficial  interests in Restricted Global Warrants and Restricted
Definitive  Warrants and pursuant to and in accordance  with the  Securities Act
and any applicable  blue sky securities  laws of any state of the United States,
and accordingly the Transferor hereby further certifies that (check one):

                  (a)      |_| such Transfer is being  effected  pursuant to and
         in accordance with Rule 144 under the Securities Act; or

                  (b)      |_| such Transfer is being effected to the Company or
         a subsidiary thereof or

                  (c)      |_|   such   Transfer   is  being   effected   to  an
         Institutional Accredited Investor and pursuant to an exemption from the
         registration  requirements  of the Securities Act other than Rule 144A,
         Rule 144 or Rule 904, and the Transferor  hereby further certifies that
         it has not  engaged in any general  solicitation  within the meaning of
         Regulation D under the  Securities  Act and the Transfer  complies with
         the  transfer  restrictions  applicable  to  beneficial  interests in a
         Restricted  Global  Warrant or Restricted  Definitive  Warrants and the
         requirements of the exemption claimed, which certification is supported
         by (1) a certificate  executed by the Transferee in the form of EXHIBIT
         D to the Warrant Agreement and (2) if the Company requests,  an Opinion
         of Counsel  provided by the  Transferor  or the  Transferee  (a copy of
         which the Transferor has attached to this certification), to the effect
         that such  Transfer is in  compliance  with the  Securities  Act.  Upon
         consummation  of the proposed  transfer in accordance with the terms of
         the  Warrant  Agreement,   the  transferred   beneficial   interest  or
         Definitive  Warrant  will be subject to the  restrictions  on  transfer
         enumerated in the Private Placement Legend printed on the IAI



                                      B-2
<PAGE>

         Global  Warrant  and/or  the  Definitive  Warrants  and in the  Warrant
         Agreement and the Securities Act.

         4.       |_| CHECK IF  TRANSFEREE  WILL TAKE  DELIVERY OF A  BENEFICIAL
INTEREST IN AN  UNRESTRICTED  GLOBAL  WARRANT OR OF AN  UNRESTRICTED  DEFINITIVE
WARRANT.

                  (a)      |_| CHECK IF TRANSFER  IS  PURSUANT TO RULE 144.  (i)
         The Transfer is being effected  pursuant to and in accordance with Rule
         144  under  the  Securities  Act and in  compliance  with the  transfer
         restrictions contained in the Warrant Agreement and any applicable blue
         sky  securities  laws of any state of the  United  States  and (ii) the
         restrictions  on transfer  contained in the Warrant  Agreement  and the
         Private  Placement  Legend  are  not  required  in  order  to  maintain
         compliance with the Securities  Act. Upon  consummation of the proposed
         Transfer in  accordance  with the terms of the Warrant  Agreement,  the
         transferred beneficial interest or Definitive Warrant will no longer be
         subject to the  restrictions  on  transfer  enumerated  in the  Private
         Placement  Legend  printed  on  the  Restricted  Global  Warrants,   on
         Restricted Definitive Warrants and in the Warrant Agreement.

                  (b)      |_| CHECK IF TRANSFER IS  PURSUANT TO  REGULATION  S.
         (i) The Transfer is being effected  pursuant to and in accordance  with
         Rule 903 or Rule 904 under the  Securities  Act and in compliance  with
         the transfer  restrictions  contained in the Warrant  Agreement and any
         applicable  blue sky securities  laws of any state of the United States
         and  (ii)  the  restrictions  on  transfer  contained  in  the  Warrant
         Agreement and the Private Placement Legend are not required in order to
         maintain  compliance with the Securities Act. Upon  consummation of the
         proposed   Transfer  in  accordance  with  the  terms  of  the  Warrant
         Agreement,  the transferred  beneficial  interest or Definitive Warrant
         will no longer be subject to the restrictions on transfer enumerated in
         the Private Placement Legend printed on the Restricted Global Warrants,
         on Restricted Definitive Warrants and in the Warrant Agreement.

                  (c)      |_| CHECK IF TRANSFER IS PURSUANT TO OTHER EXEMPTION.
         (i) The Transfer is being effected  pursuant to and in compliance  with
         an exemption from the  registration  requirements of the Securities Act
         other than Rule 144,  Rule 903 or Rule 904 and in  compliance  with the
         transfer  restrictions  contained  in the  Warrant  Agreement  and  any
         applicable  blue sky securities  laws of any State of the United States
         and  (ii)  the  restrictions  on  transfer  contained  in  the  Warrant
         Agreement and the Private Placement Legend are not required in order to
         maintain  compliance with the Securities Act. Upon  consummation of the
         proposed   Transfer  in  accordance  with  the  terms  of  the  Warrant
         Agreement,  the transferred  beneficial  interest or Definitive Warrant
         will not be subject to the  restrictions on transfer  enumerated in the
         Private  Placement Legend printed on the Restricted  Global Warrants or
         Restricted Definitive Warrants and in the Warrant Agreement.


                                      B-3
<PAGE>


         This certificate and the statements  contained herein are made for your
benefit and the benefit of the Company.

                                          [Insert Name of Transferor]


                                          By:
                                               ---------------------------------
                                               Name:
                                               Title:






Dated:  _____________________


                                      B-4
<PAGE>


                       ANNEX A TO CERTIFICATE OF TRANSFER

5.       The Transferor owns and proposes to transfer the following:

         [CHECK ONE OF (a) OR (b)]

         (a)      |_| a beneficial interest in the:

                  (i)      |_| 144A Global Warrant, or
                  (ii)     |_| Regulation S Global Warrant, or
                  (iii)    |_| IAI Global Warrant, or

         (b)      |_| a Restricted Definitive Warrant.

6.       After the Transfer the Transferee will hold:

         [CHECK ONE]

         (a)      |_| a beneficial interest in the:

                  (i)      |_| 144A Global Warrant, or
                  (ii)     |_| Regulation S Global Warrant, or
                  (iii)    |_| Unrestricted Global Warrant; or
                  (iv)     |_| Regulation S Global Warrant; or

         (b)      |_| a Restricted Definitive Warrant; or

         (c)      |_| an Unrestricted Definitive Warrant,

         in accordance with the terms of the Warrant Agreement.


                                      B-5
<PAGE>


                                    EXHIBIT C

                         FORM OF CERTIFICATE OF EXCHANGE

National Coal Corp.
8915 George Williams Road
Knoxville, TN  37923

Wells Fargo Bank, National Association
213 Court Street
Suite 703
Middletown, CT 06457


         Re:      Warrants

                              (CUSIP ____________)

         Reference is hereby made to the Warrant Agreement, dated as of December
29, 2005 (the "WARRANT Agreement"),  between National Coal Corp., as issuer (the
"COMPANY"),  and Wells  Fargo  Bank,  National  Association,  as warrant  agent.
Capitalized  terms used but not defined  herein shall have the meanings given to
them in the Warrant Agreement.

         __________________________, (the "OWNER") owns and proposes to exchange
________________ Warrant[s] or interest in such Warrant[s] specified herein (the
"EXCHANGE"). In connection with the Exchange, the Owner hereby certifies that:

         1.       EXCHANGE  OF  RESTRICTED  DEFINITIVE  WARRANTS  OR  BENEFICIAL
INTERESTS IN A RESTRICTED GLOBAL WARRANT FOR UNRESTRICTED DEFINITIVE WARRANTS OR
BENEFICIAL INTERESTS IN AN UNRESTRICTED GLOBAL WARRANT.

                  (a)      |_| CHECK IF EXCHANGE IS FROM BENEFICIAL  INTEREST IN
         A RESTRICTED  GLOBAL WARRANT TO BENEFICIAL  INTEREST IN AN UNRESTRICTED
         GLOBAL  WARRANT.  In  connection  with  the  Exchange  of  the  Owner's
         beneficial  interest in a  Restricted  Global  Warrant for a beneficial
         interest  in an  Unrestricted  Global  Warrant  in an  equal  principal
         amount, the Owner hereby certifies (i) the beneficial interest is being
         acquired  for the  Owner's  own  account  without  transfer,  (ii) such
         Exchange has been effected in compliance with the transfer restrictions
         applicable  to the Global  Warrants and  pursuant to and in  accordance
         with  the  United  States  Securities  Act of  1933,  as  amended  (the
         "SECURITIES  ACT"), (iii) the restrictions on transfer contained in the
         Warrant  Agreement and the Private Placement Legend are not required in
         order  to  maintain  compliance  with the  Securities  Act and (iv) the
         beneficial interest in an Unrestricted Global Warrant is being acquired
         in compliance with any applicable blue sky securities laws of any state
         of the United States.

                  (b)      |_| CHECK IF EXCHANGE IS FROM BENEFICIAL  INTEREST IN
         A RESTRICTED  GLOBAL WARRANT TO  UNRESTRICTED  DEFINITIVE


                                      C-1
<PAGE>


         WARRANT.  In  connection  with the  Exchange of the Owner's  beneficial
         interest in a Restricted Global Warrant for an Unrestricted  Definitive
         Warrant, the Owner hereby certifies (i) the Definitive Warrant is being
         acquired  for the  Owner's  own  account  without  transfer,  (ii) such
         Exchange has been effected in compliance with the transfer restrictions
         applicable  to the  Restricted  Global  Warrants and pursuant to and in
         accordance with the Securities Act, (iii) the  restrictions on transfer
         contained in the Warrant Agreement and the Private Placement Legend are
         not required in order to maintain  compliance  with the  Securities Act
         and (iv) the Definitive  Warrant is being  acquired in compliance  with
         any  applicable  blue sky  securities  laws of any state of the  United
         States.

                  (c)      |_| CHECK IF EXCHANGE IS FROM  RESTRICTED  DEFINITIVE
         WARRANT TO BENEFICIAL  INTEREST IN AN UNRESTRICTED  GLOBAL WARRANT.  In
         connection with the Owner's Exchange of a Restricted Definitive Warrant
         for a beneficial interest in an Unrestricted Global Warrant,  the Owner
         hereby certifies (i) the beneficial  interest is being acquired for the
         Owner's own  account  without  transfer,  (ii) such  Exchange  has been
         effected in  compliance  with the transfer  restrictions  applicable to
         Restricted  Definitive  Warrants and pursuant to and in accordance with
         the Securities Act, (iii) the restrictions on transfer contained in the
         Warrant  Agreement and the Private Placement Legend are not required in
         order  to  maintain  compliance  with the  Securities  Act and (iv) the
         beneficial interest is being acquired in compliance with any applicable
         blue sky securities laws of any state of the United States.

                  (d)      |_| CHECK IF EXCHANGE IS FROM  RESTRICTED  DEFINITIVE
         WARRANT TO  UNRESTRICTED  DEFINITIVE  WARRANT.  In connection  with the
         Owner's Exchange of a Restricted Definitive Warrant for an Unrestricted
         Definitive  Warrant,  the Owner hereby  certifies (i) the  Unrestricted
         Definitive  Warrant  is being  acquired  for the  Owner's  own  account
         without  transfer,  (ii) such  Exchange has been effected in compliance
         with the transfer  restrictions  applicable  to  Restricted  Definitive
         Warrants and pursuant to and in  accordance  with the  Securities  Act,
         (iii) the restrictions on transfer  contained in the Warrant  Agreement
         and the Private  Placement Legend are not required in order to maintain
         compliance with the Securities Act and (iv) the Unrestricted Definitive
         Warrant is being acquired in compliance  with any  applicable  blue sky
         securities laws of any state of the United States.

         2.       EXCHANGE  OF  RESTRICTED  DEFINITIVE  WARRANTS  OR  BENEFICIAL
INTERESTS IN RESTRICTED  GLOBAL WARRANTS FOR RESTRICTED  DEFINITIVE  WARRANTS OR
BENEFICIAL INTERESTS IN RESTRICTED GLOBAL WARRANTS.

                  (a)      |_| CHECK IF EXCHANGE IS FROM BENEFICIAL  INTEREST IN
         ARESTRICTED  GLOBAL  WARRANT  TO  RESTRICTED   DEFINITIVE  WARRANT.  In
         connection  with the Exchange of the Owner's  beneficial  interest in a
         Restricted  Global  Warrant for a  Restricted  Definitive  Warrant in a
         number equal to the number of beneficial interests exchanged, the Owner
         hereby  certifies  that  the  Restricted  Definitive  Warrant  is being
         acquired   for  the  Owner's  own  account   without   transfer.   Upon
         consummation  of the proposed  Exchange in accordance with the terms of
         the Warrant  Agreement,  the Restricted  Definitive Warrant issued will
         continue to be subject to the  restrictions  on transfer  enumerated in
         the  Private  Placement  Legend  printed on the  Restricted  Definitive
         Warrant and in the Warrant Agreement and the Securities Act.


                                      C-2
<PAGE>


                  (b)      |_| CHECK IF EXCHANGE IS FROM  RESTRICTED  DEFINITIVE
         WARRANT TO  BENEFICIAL  INTEREST IN A  RESTRICTED  GLOBAL  WARRANT.  In
         connection  with the  Exchange  of the  Owner's  Restricted  Definitive
         Warrant  for a  beneficial  interest in the [CHECK ONE] |_| 144A Global
         Warrant,  |_| Regulation S Global Warrant,  |_| IAI Global Warrant in a
         number equal to the number of beneficial interests exchanged, the Owner
         hereby certifies (i) the beneficial  interest is being acquired for the
         Owner's own account  without  transfer and (ii) such  Exchange has been
         effected in compliance with the transfer restrictions applicable to the
         Restricted  Global  Warrants and pursuant to and in accordance with the
         Securities  Act,  and  in  compliance  with  any  applicable  blue  sky
         securities laws of any state of the United States. Upon consummation of
         the  proposed  Exchange  in  accordance  with the terms of the  Warrant
         Agreement,  the  beneficial  interest  issued  will be  subject  to the
         restrictions  on transfer  enumerated in the Private  Placement  Legend
         printed on the relevant  Restricted  Global  Warrant and in the Warrant
         Agreement and the Securities Act.

         This certificate and the statements  contained herein are made for your
benefit and the benefit of the Company.

                                          [Insert Name of Transferor]


                                          By:
                                             -----------------------------------
                                               Name:
                                               Title:






Date: _______________________


                                      C-3
<PAGE>


<PAGE>


                                    EXHIBIT D

                            FORM OF CERTIFICATE FROM
                   ACQUIRING INSTITUTIONAL ACCREDITED INVESTOR

National Coal Corp.
8915 George Williams Road
Knoxville, TN  37923

Wells Fargo Bank, National Association
213 Court Street
Suite 703
Middletown, CT 06457


         Re:      Warrants

         Reference is hereby made to the Warrant Agreement, dated as of December
29, 2005 (the "WARRANT Agreement"),  between National Coal Corp., as issuer (the
"COMPANY"),  and Wells  Fargo  Bank,  National  Association,  as warrant  agent.
Capitalized  terms used but not defined  herein shall have the meanings given to
them in the Warrant Agreement.

         In connection with our proposed purchase of:

                  (a)      |_|  a  beneficial   interest  in  a  Global  Warrant
         representing the right to acquire __________ Warrant Shares, or

                  (b)      |_| a Definitive  Warrant  representing  the right to
         acquire __________ Warrant Shares,

we confirm that:

         3.       We understand  that any  subsequent  transfer of the Warrants,
Warrant Shares or any interest  therein is subject to certain  restrictions  and
conditions set forth in the Warrant  Agreement and the undersigned  agrees to be
bound by, and not to resell, pledge or otherwise transfer the Warrants,  Warrant
Shares or any interest therein except in compliance with, such  restrictions and
conditions  and the  United  States  Securities  Act of 1933,  as  amended  (the
"SECURITIES ACT").

         4.       We  understand  that the  offer and sale of the  Warrants  and
Warrant Shares have not been  registered  under the Securities Act, and that the
Warrants,  Warrant  Shares and any  interest  therein may not be offered or sold
except as permitted in the following  sentence.  We agree, on our own behalf and
on behalf of any accounts for which we are acting as hereinafter stated, that if
we should sell the Warrants, the Warrant Shares or any interest therein, we will
do so only (A) to the Company or any subsidiary thereof,  (B) in accordance with
Rule 144A under the  Securities  Act to a  "qualified  institutional  buyer" (as
defined  therein),  (C) to an  institutional  "accredited  investor" (as defined
below) that,  prior to such transfer,  furnishes (or has furnished


                                      D-1
<PAGE>


on its behalf by a U.S. broker-dealer) to you and to the Company a signed letter
substantially  in the form of this letter and, if requested  by the Company,  an
Opinion of Counsel in form  reasonably  acceptable  to the Company to the effect
that such transfer is in  compliance  with the  Securities  Act, (D) outside the
United States in accordance  with Rule 904 of Regulation S under the  Securities
Act, (E) pursuant to the  provisions of Rule 144(k) under the  Securities Act or
(F) pursuant to an effective  registration  statement  under the Securities Act,
and we further agree to provide to any person purchasing the Definitive  Warrant
or beneficial  interest in a Global Warrant from us in a transaction meeting the
requirements of CLAUSES (A) through (E) of this paragraph a notice advising such
purchaser that resales thereof are restricted as stated herein.

         5.       We understand  that, on any proposed resale of the Warrants or
beneficial  interest  therein,  we will be  required  to  furnish to you and the
Company such certifications, legal opinions and other information as you and the
Company may  reasonably  require to confirm that the proposed sale complies with
the foregoing restrictions. We further understand that the Warrants purchased by
us will bear a legend to the foregoing effect.

         6.       We are an institutional  "accredited  investor" (as defined in
Rule  501(a)(1),  (2), (3) or (7) of Regulation D under the Securities  Act) and
have such  knowledge and  experience in financial and business  matters as to be
capable of  evaluating  the merits and risks of our  investment in the Warrants,
and we and any  accounts  for  which we are  acting  are  each  able to bear the
economic risk of our or its investment.

         7.       We are acquiring the Warrants or beneficial  interest  therein
purchased by us for our own account or for one or more  accounts  (each of which
is an institutional  "accredited investor") as to each of which we exercise sole
investment discretion.

         We agree not to engage in any hedging  transactions  with regard to the
Warrants unless such hedging  transactions are in compliance with the Securities
Act.

         You and the  Company  are  entitled  to rely upon this  letter  and are
irrevocably authorized to produce this letter or a copy hereof to any interested
party in any  administrative  or legal  proceedings  or  official  inquiry  with
respect to the matters covered hereby.

                                           [Insert Name of Transferor]


                                           By:
                                              ----------------------------------
                                                Name:
                                                Title:






Dated:  _______________________


                                      D-2