EXHIBIT 10.4

                            ASSET PURCHASE AGREEMENT

         This is an Asset Purchase Agreement (this "Agreement"), dated as of May
8, 2005, by and between (i) National Coal Corporation,  a Tennessee  corporation
("Buyer");  and (ii) LCC Tennessee,  LLC, a Delaware limited  liability  company
("Seller").

                                    RECITALS

         WHEREAS,  Buyer  and  Seller  have  determined  that  it  is  in  their
respective  best  interests  for Seller to transfer  to Buyer,  and for Buyer to
acquire from Seller,  certain assets and  liabilities of Seller on the terms and
conditions contained in this Agreement;

         WHEREAS,  the parties  hereto  desire to make certain  representations,
warranties,  covenants  and  agreements  in  connection  with  the  transactions
contemplated hereby;

         NOW  THEREFORE,  for good and  valuable  consideration,  the receipt of
which is hereby acknowledged, the parties hereby agree as follows:

ARTICLE 1
                                   DEFINITIONS

         1.1      DEFINITIONS.  As used  herein,  the  following  terms have the
meanings set forth below:

                  (a)      "Affiliate"  means,  with  respect  to any  specified
Person,   any  Person  that   (directly  or  indirectly   through  one  or  more
intermediaries) controls, is controlled by, or is under common control with, the
specified  Person.  "Control"  (including the terms  "controlled  by" and "under
common control with") means the possession, directly or indirectly, of the power
to direct or cause the direction of the management policies of a Person, whether
through the ownership of voting securities,  by contract or credit  arrangement,
as trustee or executor, or otherwise.

                  (b)      "Approvals" means the consents and approvals required
or contemplated to be obtained in connection with the transactions  contemplated
hereby, which consents and approvals are listed on SCHEDULE 1.1(B) hereto.

                  (c)      "Assignment  of Lease" means the  Assignment of Lease
in substantially the form of EXHIBIT A to this Agreement.

                  (d)      "Bill  of  Sale"  means  the  Bill of  Sale,  General
Assignment and Assumption  Agreement in  substantially  the form of EXHIBIT B to
this Agreement.

                  (e)      "Bond  Release  Agreement"  means  the  Bond  Release
Agreement in substantially the form of EXHIBIT C to this Agreement.

                  (f)      "Business Day" means any day other than any Saturday,
Sunday or legal holiday in Lexington, Kentucky.


<PAGE>


                  (g)      "Deed" means the Special Warranty Deed  substantially
in the form of EXHIBIT D to this Agreement.

                  (h)      "Equipment" means the equipment set forth on SCHEDULE
1.1(H) hereto.

                  (i)      "Escrow   Agreement"   means  the  Escrow   Agreement
substantially in the form of EXHIBIT E to this Agreement.

                  (j)      "Facility  Lease  Termination  Agreement"  means  the
Permit and Facility Lease Amendment and Termination  Agreement  substantially in
the form of EXHIBIT F to this Agreement.

                  (k)      "Fee Lease  Amendment" means the Amendment to Surface
and  Mineral  Lease  Agreement  substantially  in the form of  EXHIBIT G to this
Agreement.

                  (l)      "Governmental  Authority" means any court,  tribunal,
arbitrator,  authority, agency, commission, official or other instrumentality of
the United States, any foreign country or any domestic or foreign state, county,
city or other political subdivision.

                  (m)      "Improvements"  means the  buildings  and  structures
located on the Owned Real Property.

                  (n)      "Lease  Amendments" means the Fee Lease Amendment and
the Reclamation Agreement Amendment.

                  (o)      "Lease" means the Rail Siding Lease, dated October 9,
1996, as amended, by and between Tennessee Railway Company and Tennessee Mining,
Inc. (which was assigned to Seller).

                  (p)      "Owned Real  Property"  means the real  property  set
forth on SCHEDULE 1.1(P) hereto.

                  (q)      "Permits"  means the  permits  set forth on  SCHEDULE
1.1(Q) hereto.

                  (r)      "Permitted  Liens" means any (a) pledge,  assessment,
security   interest,   lease,   judgment  lien,  tax  lien,   mechanic's   lien,
materialman's  lien, other lien, adverse claim, levy, charge,  option,  right of
first  refusal,  charge,  debenture,  indenture,  deed of  trust,  right-of-way,
restriction,   encroachment,   license,  lease,  security  agreement,  or  other
encumbrance  of any kind,  and other  restrictions  or limitations on the use or
ownership of real or personal property or irregularities in title thereto or any
conditional  sale contract,  title retention  contract or other contract to give
any of the  foregoing  (i) imposed by law which does not  materially  impair the
value,  use or  operation  of the  Purchased  Assets in the  ordinary  course of
business,  such as liens for real estate  taxes not yet  payable and  mechanic's
liens incurred in the ordinary course;  (ii) which is assumed or consented to by
Buyer herein (including those, if any, included in Assumed  Liabilities);  (iii)
created by Buyer;  (iv) in favor of the lessor under the Lease;  or (v) provided
for in, or  contemplated  by,  this  Agreement;  (b)  easements,  rights-of-way,
restrictions or minor defects or  irregularities  in title; and (c) encumbrances
consisting of zoning  restrictions,  easements,  licenses or restrictions on the
use of the Owned Real Property or minor


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<PAGE>


imperfections in title thereto,  which do not materially impair the value or use
of the Owned Real Property for coal mining purposes.

                  (s)      "Person"  means  any  natural  person,   corporation,
limited  liability  company,  general  partnership,  limited  partnership,  sole
proprietorship,  trust,  union,  association,  Governmental  Authority  or other
business organization.

                  (t)      "Purchased   Assets"   means   the   Equipment,   the
Improvements, the Lease, the Owned Real Property and the Permits.

                  (u)      "Reclamation Agreement Amendment" means the Amendment
to  Reclamation  Agreement  substantially  in the  form  of  EXHIBIT  H to  this
Agreement.

                  (v)      "Related  Agreements"  means  (i) the  Assignment  of
Lease, (ii) the Bill of Sale, (iii) the Deed, (iv) the Escrow Agreement, (v) the
Facility  Lease  Termination  Agreement,  (vi) the Lease  Amendments,  (vii) the
Sublease Termination Agreement,  and (viii) any other agreement,  certificate or
similar  document  executed by a party hereto  pursuant to or in connection with
this Agreement.

                  (w)      "Related  Person"  means,  with respect to a specific
Person, any officer,  director,  employee, agent,  shareholder,  representative,
successor or assign of such Person.

                  (x)      "Seller  Bonds"  means the bonds  posted by Seller or
Horizon Natural Resources Company or any of their respective Affiliates with the
Office of Surface Mining in connection with the Permits.

                  (y)      "Sublease Termination Agreement" means the Permit and
Sublease  Amendment  and  Termination  Agreement  substantially  in the  form of
EXHIBIT I to this Agreement.

         1.2      RULES OF INTERPRETATION.

                  (a)      The  singular  includes  the  plural  and the  plural
includes the singular.

                  (b)      The word "or" is not exclusive.

(c) A reference to a Person  includes its  permitted  successors  and  permitted
assigns.

                  (d)      The words  "include,"  "includes" and "including" are
not limiting.

                  (e)      A reference  in a document  to an  Article,  Section,
Exhibit,  Schedule,  Annex or  Appendix  is to the  Article,  Section,  Exhibit,
Schedule,  Annex  or  Appendix  of such  document  unless  otherwise  indicated.
Exhibits,  Schedules,  Annexes and  Appendices  to any document  shall be deemed
incorporated by reference in such document.

                  (f)      References to any  document,  instrument or agreement
(i) shall include all exhibits,  schedules and other attachments  thereto,  (ii)
shall include all documents, instruments or



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<PAGE>

agreements issued or executed in replacement  thereof, and (iii) shall mean such
document,  instrument or agreement,  or replacement or predecessor  thereto,  as
amended,  modified and supplemented from time to time and in effect at any given
time.

                  (g)      The words  "hereof,"  "herein"  and  "hereunder"  and
words of similar  import when used in any document  shall refer to such document
as a whole and not to any particular provision of such document.

                  (h)      References to "days" shall mean calendar days, unless
the term "Business Days" shall be used.

                  (i)      This Agreement is the result of  negotiations  among,
and has been reviewed by the parties hereto.  Accordingly,  this Agreement shall
be deemed to be the product of all parties,  and no ambiguity shall be construed
in favor of or against any party.

                                   ARTICLE 2
                           PURCHASE AND SALE OF ASSETS

         2.1      PURCHASED ASSETS. Upon the terms and subject to the conditions
contained in this Agreement, at the Closing, Seller shall sell, assign, transfer
and convey to Buyer,  and Buyer shall purchase,  acquire and accept from Seller,
all of Seller's  right,  title and interest in the  Purchased  Assets,  free and
clear of all liens and encumberances, except as otherwise provided herein.

         2.2      EXCLUDED  ASSETS.  The parties  acknowledge that Seller is not
selling,  assigning,  transferring  or  conveying  to  Buyer,  and  Buyer is not
purchasing,  acquiring  or  accepting  from  Seller,  any assets  other than the
Purchased Assets.

         2.3      TRANSFER OF PERMITS TO BUYER.

                  (a)      Buyer and Seller acknowledge that the Permits are not
in Seller's  name,  but are currently  contemplated  to be transferred to Seller
from Tennessee Mining,  Inc. ("TMI").  Buyer and Seller further acknowledge that
TMI's  corporate   existence  has  been  terminated  in  connection  with  TMI's
bankruptcy  proceeding.  Buyer  and  Seller  shall use  commercially  reasonable
efforts to effect the transfer of the Permits from TMI to Seller and from Seller
to Buyer.  At least three (3)  Business  Days prior to the Closing  Date,  Buyer
shall deliver to Seller completed and fully executed  originals of all necessary
documents or applications  (including an "operator  assignment") required by the
Office of Surface  Mining and/or the Tennessee  Department  of  Environment  and
Conservation  (collectively,  the "Mining  Authorities") for the transfer of the
Permits to Buyer and the  designation of Buyer as operator.  Thereafter,  Seller
shall,  within  five (5)  Business  Days after the Closing  Date,  file all such
applications  and other  documents with the Mining  Authorities  and Buyer shall
cooperate with TMI and Seller to diligently  pursue the expeditious  transfer of
the Permits.

                  (b)      Notwithstanding  the  provisions  of SECTION  2.3(A),
Buyer and Seller agree and acknowledge that Buyer shall not be designated as the
operator under OSM Permit 3021 unless and until such Permit has been transferred
to Buyer and the corresponding  Seller Bonds have been replaced,  terminated and
surrendered.


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<PAGE>


         2.4      ASSUMED LIABILITIES. At the Closing, Buyer shall assume all of
the liabilities and obligations relating to the Purchased Assets,  whether known
or  unknown  and  whether  arising  before or after the  Closing  (the  "Assumed
Liabilities"),  including:  (a) all liabilities and obligations  relating to the
Purchased Assets for reclamation required by law, contract or otherwise, whether
known or  unknown  and  whether  arising  before or after the  Closing;  (b) all
liabilities and obligations for  environmental  impact,  harm or damage or other
liability or obligation of any nature related to the Purchased  Assets,  whether
known or unknown and whether  arising  before or after the Closing;  and (c) all
liabilities  and  obligations  relating to the Purchased  Assets for  electrical
power, water, telephone and other utilities,  security, road maintenance,  water
treatment,  insurance, taxes, bonding,  engineering support, permitting actions,
reclamation, fines and fees, whether known or unknown and whether arising before
or after the Closing.  Buyer's assumption of the Assumed Liabilities shall be in
addition to, and shall in no way diminish,  modify or otherwise  alter,  any and
all liabilities and obligations Buyer has under any other agreements it has with
Seller or Seller's predecessors or assignors,  including any and all liabilities
and obligations  arising under the Facility Lease Agreement (the "Facility Lease
Agreement"),  entered into  effective as of the 16th day of July,  2004,  by and
between TMI and Buyer,  the Permit  Agreement  of even date between such parties
related thereto, the Sublease Agreement (the "Sublease  Agreement"),  made as of
the 16th  day of  July,  2004,  by and  between  such  parties,  and the  Permit
Agreement  of even date  between such  parties  related  thereto,  except to the
extent those  Agreements  require the payment of rent, which shall be abated and
paid only if the Buyer does not obtain the Permits that relate to the respective
lease property within the Transfer Period, as below defined. Notwithstanding any
provision  of this  Agreement  to the  contrary,  Buyer  shall  not  assume  any
liability  of Horizon  Natural  Resources  Company  or any of its  subsidiaries,
including TMI, that were  discharged,  paid,  compromised or satisfied,  in each
case, in full pursuant to the bankruptcy  proceedings  to which Horizon  Natural
Resources Company and its subsidiaries, including TMI, were parties.

         2.5      NON-ASSIGNMENT OF PURCHASED ASSETS.  Notwithstanding any other
provision of this Agreement or the Related  Agreements to the contrary,  neither
this  Agreement  nor the Related  Agreements  shall  constitute  an agreement to
assign or  transfer  and shall not  effect the  assignment  or  transfer  of any
Purchased Asset if (a) an attempted assignment or transfer thereof,  without the
approval, authorization or consent of, or granting or issuance of any license or
permit by, any third party  thereto  (each such action a  "Necessary  Consent"),
would  constitute a breach thereof and (b) such  Necessary  Consent has not been
obtained. In such event, from and after the Closing Date, Seller and Buyer shall
use commercially reasonable efforts to obtain each such Necessary Consent.

         2.6      REAL PROPERTY ESCROW.

                  (a)      Notwithstanding any provision herein to the contrary,
at the Closing,  the Owned Real Property,  the  Improvements and the Lease shall
not be  transferred to Buyer.  The executed Deed and the executed  Assignment of
Lease  (the  "Escrowed  Documents")  shall  be  held by  Seller  in  escrow  and
distributed as set forth in this SECTION 2.6. The Equipment shall be transferred
to Buyer at the Closing.

                  (b)      With  respect  to  each   Permit,   Buyer  shall  use
commercially  reasonable efforts to cause such Permit to be transferred to Buyer
and the corresponding Seller Bonds to be


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<PAGE>


replaced,  terminated and surrendered within two hundred seventy (270) days from
the Closing Date (the "Transfer Period");  provided,  however, that with respect
to any Permit, (i) the running of the Transfer Period shall be tolled during any
time that the transfer of such Permit is delayed as a direct  consequence of any
action or  inaction  (when  action was  required)  solely on the part of Seller,
including  any such delay  that  arises as a direct  consequence  of any past or
future action or inaction (when action was required) solely by LCC in connection
with the  transfer of the Permits  from TMI to LCC, it  specificially  being the
intention of the Parties that the running of the Transfer Period shall not begin
until such time as the Permits  have  transferred  from TMI to LCC; and (ii) the
Transfer Period may be extended upon the written consent of Seller. Seller shall
deliver  each  Escrowed  Document  to Buyer as soon as all Permits to which such
Escrowed  Document  relates have been  transferred to Buyer and all Seller Bonds
related to such Permits have been replaced, terminated and surrendered.

                  (c)      With respect to each Permit,  if Buyer has not caused
such Permit to be transferred to Buyer and the corresponding  Seller Bonds to be
replaced,  terminated and surrendered  prior to the expiration of the applicable
Transfer Period,  (i) the Escrowed Documents related to such Permit(s) shall, at
the option of Seller (which shall be  exercisable  in Seller's sole and absolute
discretion), no longer be deemed to be in escrow and Seller shall be entitled to
retain the same;  (ii) Buyer and Seller  shall,  at the option of Seller  (which
shall be  exercisable  in Seller's sole and absolute  discretion),  instruct the
Mining Authorities not to proceed with the transfer of such Permit(s); and (iii)
Buyer shall,  at the option of Seller  (which shall be  exercisable  in Seller's
sole and absolute discretion),  reconvey to Seller such Permit and any documents
related  thereto  and any  right,  title or  interest  Buyer  may have  acquired
therein.

                  (d)      Until  such  time  as  the  Escrowed  Documents  with
respect to each Permit are  released  from escrow to Buyer,  Buyer shall have no
right,  title or interest in the Owned Real Property,  the  Improvements  or the
Lease,  except the right to have the  Escrowed  Documents  released  from escrow
pursuant to the terms of this Agreement.

         2.7      BOND ESCROW.

                  (a)      Buyer  acknowledges  that  it is  not  obtaining  any
right,  title or interest  in any of the Seller  Bonds.  Buyer shall  obtain all
bonds necessary in connection with the Permits, and shall cause the Seller Bonds
to be replaced,  terminated and  surrendered  as soon as  practicable  after the
Closing. At the Closing,  Buyer shall deliver to U.S. Bank National  Association
(the  "Escrow  Agent")  cash in an  amount  equal to Five  Hundred  Thirty-Eight
Thousand Two Hundred Dollars  ($538,200.00)  to be held pursuant to the terms of
the Escrow Agreement.

                  (b)      With respect to each Permit set forth on Schedule 2.7
if Buyer has caused such Permit to be transferred to Buyer and the corresponding
Seller Bonds to be replaced,  terminated and surrendered prior to the expiration
of the applicable Transfer Period, Seller shall instruct the Escrow Agent to and
the Escrow  shall  transfer  to Buyer the amount of cash  corresponding  to such
Permit on Schedule 2.7 in accordance with the Escrow Agreement.

                  (c)      With  respect to each  Permit  set forth on  Schedule
2.7,  if Buyer has not caused  such  Permit to be  transferred  to Buyer and the
corresponding Seller Bonds to be replaced,


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<PAGE>


terminated and  surrendered  prior to the expiration of the applicable  Transfer
Period,  Seller shall instruct the Escrow Agent to transfer to Seller the amount
corresponding  to such  Permit on  Schedule  2.7 in  accordance  with the Escrow
Agreement.  Provided,  however,  if the non-transfer of any Permit is due to the
fault, or action or failure to act of the Seller, then the Seller shall instruct
the Escrow  Agent to transfer to the Buyer the amount of cash  corresponding  to
such Permit on Schedule 2.7 in accordance with the Escrow Agreement.

                  (d)      In the event  this  Agreement  or any of the  Related
Agreements are  terminated,  rejected or materially  breached by Buyer after the
Closing,  Seller  shall have the rights and remedies set forth in Section 7.2 as
though this Agreement had been terminated pursuant to Article 7 and Seller shall
be entitled to, and shall  instruct the Escrow Agent to transfer to Seller,  all
funds then held pursuant to the Escrow Agreement.

         2.8      TAXES.  Buyer shall pay any and all sales, use or other taxes,
duties or recording  costs,  if any,  imposed on the  transfer of the  Purchased
Assets pursuant to this Agreement or any Related Agreement. All utility charges,
lease  payments  and  royalty  payments  under the  Purchased  Assets and all ad
valorem, real property,  personal property and mineral taxes with respect to the
Purchased  Assets, in each case, other than those for which Buyer is responsible
pursuant to the terms of the Sublease  Agreement or the Facility Lease Agreement
(which  amounts Buyer shall pay to Seller at the Closing),  shall be prorated as
of the Closing Date.  Seller shall be responsible for all such costs relating to
the period prior to the Closing  Date,  and Buyer shall be  responsible  for all
such costs  relating  to the period  beginning  on the Closing  Date.  Buyer and
Seller shall make any such payments  within a reasonable  time period  following
the Closing.

         2.9      TIME AND PLACE OF CLOSING.  Unless this  Agreement  is earlier
terminated  pursuant to its terms, the closing of the transactions  contemplated
hereby (the "Closing")  shall take place within five (5) Business Days after all
conditions  precedent to Closing set forth in this Agreement have been satisfied
or waived (such date on which the Closing occurs, the "Closing Date"); provided,
however,  that Buyer and Seller  shall use  commercially  reasonable  efforts to
cause the  Closing to occur on or before July 8, 2005.  The  Closing  shall take
place at the offices of Frost Brown Todd LLC, 2700 Lexington  Financial  Center,
Lexington, Kentucky.

         2.10     ACCESS RIGHTS.  Buyer hereby  acknowledges and agrees that (a)
in the event some but not all of the  Permits  are  transferred  from  Seller to
Buyer, Seller shall have the right,  without any payment of any kind to Buyer or
any other Person,  to use the areas covered by any of such transferred  Permits,
including  OSM  Permit  3020;  and  (b) in the  event  all  of the  Permits  are
transferred  from  Seller to Buyer,  Seller  shall have the right,  without  any
payment of any kind to Buyer or any other Person, to use the area covered by OSM
Permit 3020, in each case,  to the extent  necessary to enable Seller to conduct
any  permissible  activities  on,  and to be able to access,  properties  owned,
controlled or otherwise operated by Seller or its Affiliates; provided, however,
that if Seller or its  Affiliates or agents haul a material  amount of coal over
the Fork Mountain haulroad after OSM Permit 3020 is transferred to Buyer,  Buyer
and Seller shall share in the  reasonable  maintenance  costs for such  haulroad
during the period that Seller or its  Affiliates  or agents are hauling  coal on
such  haulroad,  based on the relative  tonnage of coal hauled by Seller and its
Affiliates  and agents,  on one hand, and hauled by Buyer and its Affiliates and
agents,  on the other hand.  Buyer further agrees to take all such  commercially


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<PAGE>


reasonable actions as Seller may request to further evidence, or give effect to,
the  rights set forth in this  section,  including  the filing of all  documents
required  to be filed  with any  Governmental  Authority  with  respect  to such
rights.

         2.11     AIG ESCROW. The parties acknowledge that, pursuant to the Bond
Release Agreement,  Affiliates of American International Group will agree to pay
Five  Hundred  Thousand  Dollars  ($500,000.00)  or such other  amount to Buyer,
provided the Seller Bonds are replaced,  terminated and  surrendered  within the
Release Period (as defined in the Bond Release Agreement).

                                   ARTICLE 3
                    REPRESENTATIONS AND WARRANTIES OF SELLER

         In order to induce Buyer to enter into this Agreement, Seller makes the
representations and warranties set forth below.

         3.1      ORGANIZATION.  Seller  is a  limited  liability  company  duly
organized,  validly existing and in good standing under the laws of the state of
its  formation.  Seller has full power,  authority  and  capacity to execute and
deliver this Agreement and the Related  Agreements and, subject to obtaining the
Approvals, to perform its obligations hereunder and thereunder and to consummate
the transactions contemplated hereby and thereby.

         3.2      EXECUTION   AND   DELIVERY.   The   execution,   delivery  and
performance  of this  Agreement and the Related  Agreements  by Seller,  and the
consummation of the transactions contemplated hereby and thereby, have been duly
authorized and approved by Seller, and no other limited liability company action
on the part of Seller is  necessary  to authorize  the  execution,  delivery and
performance  of this  Agreement  and the  Related  Agreements  by Seller and the
consummation of the transactions contemplated hereby and thereby. This Agreement
has been duly and validly executed and delivered by Seller and constitutes,  and
upon the execution and delivery by Seller of the Related Agreements, the Related
Agreements  shall  constitute,  legal,  valid and binding  obligations of Seller
enforceable   against  Seller  in  accordance   with  their  terms,   except  as
enforceability  may  be  limited  by  bankruptcy,  insolvency,  reorganizations,
moratorium or other laws affecting creditors' rights generally.

         3.3      NO  CONFLICTS.   Subject  to  obtaining  the  Approvals,   the
execution and delivery by Seller of this  Agreement and the Related  Agreements,
the  performance  of its  obligations  under  this  Agreement  and  the  Related
Agreements and the  consummation  of the  transactions  contemplated  hereby and
thereby do not and shall not:

                  (a)      Conflict  with or result in a violation  or breach of
any of the terms,  conditions or provisions of its articles of  organization  or
operating agreement;

                  (b)      Conflict  with or result in a violation  or breach of
any term or provision of any license,  law or order  applicable to Seller or any
of the Purchased Assets; or

                  (c)      Conflict  with or result in a violation or breach of,
or  constitute  a default  under,  or require  Seller to obtain  any  consent or
approval under the terms of, any of the Purchased Assets.


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<PAGE>


         3.4      GOVERNMENTAL  APPROVALS AND FILINGS.  Subject to obtaining the
Approvals,  no  consent,  approval  or action of,  filing  with or notice to any
Governmental  Authority on the part of Seller is required in connection with the
execution,  delivery  and  performance  of this  Agreement or any of the Related
Agreements  or the  consummation  of the  transactions  contemplated  hereby  or
thereby.

         3.5      BROKERS. Neither Seller nor any of its Affiliates has incurred
any liability for any fee or commission to any broker, finder, investment banker
or other  intermediary in connection with the transactions  contemplated by this
Agreement.

         3.6      SELLER  HAS  OWNERSHIP  OF,  AND  TITLE  TO AND THE  RIGHT  TO
TRANSFER  TITLE TO THE ASSETS  INTENDED TO BE TRANSFERRED BY THIS AGREEMENT FROM
THE  SELLER TO THE  BUYER.  SELLER IS THE HOLDER OF OR WILL BE THE HOLDER OF THE
PERMIT  WITHIN  THE  TRANSFER  PERIOD,  AND HAS OR WILL HAVE THE LEGAL  ABILITY,
SUBJECT TO THE NECESSARY  GOVERNMENTAL  CONSENTS AND APPROVALS,  TO TRANSFER THE
PERMITS TO THE BUYER WITHIN THE TRANSFER PERIOD.

                                   ARTICLE 4
                    REPRESENTATIONS AND WARRANTIES OF BUYER

         In order to induce Seller to enter into this Agreement, Buyer makes the
representations and warranties set forth below.

         4.1      ORGANIZATION.  Buyer is a corporation duly organized,  validly
existing and in good standing under the laws of the state of its  incorporation.
Buyer has full  power,  authority  and  capacity  to execute  and  deliver  this
Agreement and the Related  Agreements and to perform its  obligations  hereunder
and  thereunder  and to  consummate  the  transactions  contemplated  hereby and
thereby.

         4.2      EXECUTION   AND   DELIVERY.   The   execution,   delivery  and
performance  of this  Agreement  and the Related  Agreements  by Buyer,  and the
consummation of the transactions contemplated hereby and thereby, have been duly
authorized and approved by Buyer,  and no other corporate  action on the part of
Buyer is necessary to authorize the execution,  delivery and performance of this
Agreement  and the  Related  Agreements  by Buyer  and the  consummation  of the
transactions  contemplated hereby and thereby.  This Agreement has been duly and
validly executed and delivered by Buyer and constitutes,  and upon the execution
and delivery by Buyer of the Related  Agreements,  the Related  Agreements shall
constitute,  legal, valid and binding  obligations of Buyer enforceable  against
Buyer in accordance with their terms, except as enforceability may be limited by
bankruptcy,  insolvency,  reorganizations,  moratorium  or other laws  affecting
creditors' rights generally.

         4.3      NO  CONFLICTS.   Subject  to  obtaining  the  Approvals,   the
execution and delivery by Buyer of this  Agreement  and the Related  Agreements,
the  performance  of its  obligations  under  this  Agreement  and  the  Related
Agreements and the  consummation  of the  transactions  contemplated  hereby and
thereby do not and shall not:

                  (a)      Conflict  with or result in a violation  or breach of
any of the terms,  conditions or provisions of its articles of  incorporation or
bylaws;

                  (b)      Conflict  with or result in a violation  or breach of
any term or provision of any law or order applicable to Buyer; or


                                       9
<PAGE>


                  (c)      Conflict  with or result in a violation or breach of,
or  constitute  a default  under,  or  require  Buyer to obtain  any  consent or
approval  under the terms of, any  contract or license to which Buyer is a party
or by which Buyer's assets or properties are bound.

         4.4      GOVERNMENTAL  APPROVALS AND FILINGS.  Subject to obtaining the
Approvals,  no  consent,  approval  or action of,  filing  with or notice to any
Governmental  Authority on the part of Buyer is required in connection  with the
execution,  delivery  and  performance  of this  Agreement or any of the Related
Agreements  or the  consummation  of the  transactions  contemplated  hereby  or
thereby.

         4.5      BROKERS.  Neither Buyer nor any of its Affiliates has incurred
any liability for any fee or commission to any broker, finder, investment banker
or other  intermediary in connection with the transactions  contemplated by this
Agreement.

         4.6      ADEQUATE  FUNDS.  Buyer has or has  access to  adequate  funds
available to it in order to consummate  the  transactions  contemplated  by this
Agreement and the Related  Agreements and to perform its  obligations  hereunder
and thereunder.

         4.7      PERMITTING. Neither Buyer or any of its Affiliates, nor any of
their  respective  Related  Persons  have been  subject to any bond  forfeiture,
permit  suspension or revocation or similar  effort or proceeding  instituted by
any Governmental Authority.  Neither Buyer or any of its Affiliates,  nor any of
their  respective  Related  Persons has been  notified by the Federal  Office of
Surface  Mining or the  agency of any state  administering  the  Surface  Mining
Control and Reclamation Act (30 U.S.C.  ss.ss.  1201 et seq.), or any comparable
state statute,  that it is (a) ineligible to receive  additional  surface mining
permits,  or (b) under  investigation  to determine  whether its  eligibility to
receive such permits should be revoked, i.e., "permit blocked".

                                   ARTICLE 5
                 CONDITIONS PRECEDENT TO PERFORMANCE BY PARTIES

         5.1      CONDITIONS PRECEDENT TO PERFORMANCE BY SELLER. The obligations
of Seller to  consummate  the  transactions  contemplated  by this  Agreement is
subject  to  the  fulfillment,  at or  before  the  Closing,  of  the  following
conditions,  any one or more of  which  may be  waived  by  Seller  in its  sole
discretion:

                  (a)      All  representations  and warranties made by Buyer in
this  Agreement  or the  Related  Agreements  shall be true and  correct  in all
material  respects  on the date of this  Agreement  and on and as of the Closing
Date (except to the extent that any such  representation and warranty is made as
of a specified  date, in which case such  representation  and warranty  shall be
made only as of such specified  date), and the covenants and agreements of Buyer
to be performed on or before the Closing Date shall have been duly  performed in
all material  respects in accordance with this Agreement,  and Seller shall have
received  a  certificate,  dated the  Closing  Date and  signed by an officer of
Buyer, to that effect.


                                       10
<PAGE>


         5.2      CONDITIONS  PRECEDENT TO PERFORMANCE BY BUYER. The obligations
of Buyer to  consummate  the  transactions  contemplated  by this  Agreement are
subject  to  the  fulfillment,  at or  before  the  Closing,  of  the  following
conditions,  any one or  more of  which  may be  waived  by  Buyer  in its  sole
discretion:

                  (a)      All  representations and warranties made by Seller in
this  Agreement  or the  Related  Agreements  shall be true and  correct  in all
material  respects  on the date of this  Agreement  and on and as of the Closing
Date (except to the extent that any such  representation and warranty is made as
of a specified  date, in which case such  representation  and warranty  shall be
made only as of such specified date), and the covenants and agreements of Seller
to be performed on or before the Closing Date, shall have been duly performed in
all material  respects in accordance with this  Agreement,  and Buyer shall have
received  a  certificate,  dated the  Closing  Date and  signed by an officer of
Seller, to that effect.

         5.3      CONDITIONS  TO  EACH  PARTY'S   OBLIGATIONS.   The  respective
obligations of each party to consummate the  transactions  contemplated  by this
Agreement  shall be  subject  to the  fulfillment  or  waiver,  at or before the
Closing, of the following conditions:

                  (a)      There shall not be  outstanding,  as of the  Closing,
any order,  injunction or similar action prohibiting the consummation of all, or
any material portion of, the transactions  contemplated by this Agreement and no
action shall have been commenced,  as of the Closing,  which could reasonably be
expected to prohibit the  consummation  of all, or any material  portion of, the
transactions contemplated hereby.

                  (b)      There  shall  not have been any  action  taken or any
statute enacted by any Governmental  Authority,  as of the Closing,  which would
render the parties unable to consummate the transactions  contemplated hereby or
make the transactions  contemplated  hereby illegal or prohibit the consummation
of the transactions contemplated hereby.

                  (c)      As of the  Closing,  the  parties  hereto  shall have
obtained  all  material  approvals  and  consents,  if  any,  necessary  for the
consummation of the transactions contemplated by this Agreement,  except for the
governmental  consents  and  approvals  required to transfer the Permits and the
consent necessary to assign the Lease.

                                    ARTICLE 6
                                    COVENANTS

         6.1      COMPLIANCE   WITH   PERMITS.   Buyer  shall  comply  with  all
conditions  and  requirements  of, or  pertaining  to,  any  Permits  that Buyer
operates  under  after  the  Closing.  Buyer  shall  bear  any  risk or  expense
associated  with not having  any  Permits  transferred  or  otherwise  in effect
following  the  Closing.  In the event  that any demand is made under any Seller
Bond after the Closing, at the option of Seller (which option shall be exercised
in Seller's  sole and absolute  discretion)  either (a) Buyer shall satisfy such
demand or reimburse  the Person that suffered a loss as a result of such demand;
or (b) Buyer and Seller  shall  instruct the Escrow Agent to satisfy such demand
from the cash held  pursuant to the Escrow  Agreement.  Buyer shall use its best
efforts to cause the  Permits  to be  transferred  to Buyer as soon as  possible
following  the  Closing,  but in no event  later  than the  applicable  Transfer
Period.


                                       11
<PAGE>


         6.2      CURE OF VIOLATIONS.  Buyer shall provide Seller prompt written
notice of any "notice of violation" or other notice of default or violation with
respect to the Permits  being issued after the  execution of this  Agreement and
prior to final transfer of the Permits to Buyer.  All  liabilities for fines and
penalties and all  liabilities  and  obligations  for remedial work or otherwise
arising from or relating to "notices of violation"  and other notices of default
or violation  under any Permit or any law, rule or regulation  applicable to the
Purchased  Assets,  whether  arising  before or after the Closing,  shall be the
responsibility  and liability of Buyer, and shall be cured as soon as reasonably
possible.  Prior to the final transfer of the Permits to Buyer,  Seller may, but
shall have no obligation to, take such actions as Seller reasonably  believes to
be necessary or desirable to cure any "notice of  violation" or other default or
violation  under any Permit or any law,  rule or  regulation  applicable  to the
Purchased Assets,  and Seller may, at its election,  offset the costs associated
therewith against any other amounts owing to Buyer pursuant to this Agreement or
any Related  Agreement.  In the event Seller  cannot or does not offset its cure
costs against amounts owed to Buyer, at the option of Seller (which option shall
be  exercised  in Seller's  sole and  absolute  discretion)  either (a) Seller's
documented  cure costs shall be  reimbursed by Buyer within 30 days after Seller
requests reimbursement;  or (b) Buyer and Seller shall instruct the Escrow Agent
to satisfy such demand from the cash held pursuant to the Escrow Agreement.

         6.3      RECLAMATION.  Buyer shall comply with all  applicable  laws in
connection with the reclamation obligations associated with all of the Permits.

         6.4      PERFORMANCE  UNDER  LEASES.  From and after the Closing  Date,
Buyer  shall (a) assume all  obligations  and  liabilities  of Seller  under the
Lease,  and (b) at the  discretion  of Seller,  take all  actions  necessary  to
satisfy the lessee's  obligations and liabilities under the terms and conditions
of the Lease.

         6.5      BUYER'S  CLOSING  DELIVERIES.  At  the  Closing,  Buyer  shall
deliver the following to Seller:

                  (a)      the  Related  Agreements  to which  Buyer is a party,
duly executed by Buyer;

                  (b)      the Bond Release Agreement, duly executed by Buyer(it
shall be the  responsibility  of the  Seller  to  obtain  the  execution  of the
Agreement by AIG);

                  (c)      a copy of the  resolutions  of the board of directors
of Buyer approving this Agreement and the Related Agreements;

                  (d)      a good standing certificate for Buyer, dated a recent
date  prior to the  Closing  Date and  certified  by the  Secretary  of State of
Tennessee;

                  (e)      incumbency  certificates of Buyer,  dated the Closing
Date,  signed by a duly  authorized  officer  of Buyer,  and giving the name and
bearing a specimen signature of each individual who shall be authorized to sign,
in the name and on behalf of Buyer,  this Agreement and the Related  Agreements;
and


                                       12
<PAGE>


                  (f)      all other documents and  instruments  contemplated to
be delivered by Buyer pursuant to this Agreement.

         6.6      SELLER'S CLOSING DELIVERIES.

                  (a)      At the Closing, Seller shall deliver the following to
Buyer:

                           (i)      the Related  Agreements (other than the Deed
and the  Assignment  of Lease)  to which  Seller is a party,  duly  executed  by
Seller;

                           (ii)     the Bond Release Agreement, duly executed by
the Seller and by an authorized representative of AIG;

                           (iii)    a copy of the  resolutions  of the boards of
directors or other  governing  body of Seller  approving  this Agreement and the
Related Agreements;

                           (iv)     a  good  standing  certificate  for  Seller,
dated a recent date prior to the Closing Date and  certified by the Secretary of
State of its state of formation;

                           (v)      an incumbency certificate, dated the Closing
Date,  signed by a duly  authorized  officer,  member or  manager  of Seller and
giving the name and bearing a specimen signature of each individual who shall be
authorized to sign, in the name and on behalf of Seller,  this Agreement and the
Related Agreements; and

                           (vi)     all other documents and  instruments  (other
than the Deed and the  Assignment  of Lease)  contemplated  to be  delivered  by
Seller pursuant to this Agreement.

                  (b)      Seller shall  deliver the Deed and the  Assignment of
Lease to Buyer pursuant to the terms of Section 2.6

         6.7      INSURANCE.  Without  limiting  the  obligations  of  Buyer  to
protect,  indemnify,  hold  harmless  and  defend  Seller  as  provided  in this
Agreement,  Buyer  agrees,  at its own cost and expense,  to procure and keep in
force and effect the insurance listed on Schedule 6.7 with insurance  carrier(s)
acceptable to Seller until such time as the Permits are  completely  transferred
to Buyer.  Before  commencing,  or permitting any other Person to commence,  any
work  under the  Permits,  Buyer  shall  furnish  Seller  with  certificates  of
insurance  attested by a duly  authorized  representative  of Buyer's  insurance
carrier(s) evidencing that the insurance required hereunder is in full force and
effect and that such  insurance  shall not be  cancelled or  materially  changed
without giving to Seller at least ten (10) days' prior written notice.

         6.8      TITLE.  Seller  has  title  to the  Purchased  Assets.  At the
Closing,  Seller  shall  transfer  the  Equipment to Buyer free and clear of all
material liens, claims, defaults and encumbrances,  except Permitted Liens. Upon
the approval of the transfer of the Permits and the replacement, termination and
surrender of the Seller Bonds, Seller shall transfer the Permits, the Owned Real
Property,  the Lease  (provided  the consent of the lessor  thereunder  has been
obtained) and the  Improvements  to Buyer free and clear of all material  liens,
claims, defaults and encumbrances, except Permitted Liens.


                                       13
<PAGE>


         6.9      PAYMENTS.  At the  Closing,  Buyer  shall  pay to  Seller  all
amounts  due to Seller  under the  Facility  Lease  Agreement  and the  Sublease
Agreement through the Closing Date,  regardless of whether such amounts are then
payable or would become payable after the Closing Date.

                                    ARTICLE 7
                                   TERMINATION

         7.1      TERMINATION.  This  Agreement  may be  terminated  before  the
Closing:

                  (a)      By mutual consent of Buyer and Seller at any time;

                  (b)      By  Seller  if the  Closing  has not  occurred  on or
before May 6, 2005 (as such date may be  extended  by  agreement  of the parties
hereto);  provided,  however,  that as of such date  Seller  is not in  material
default under this Agreement;

                  (c)      Provided the  terminating  party is not  otherwise in
material  default or breach of this Agreement,  and has not failed or refused to
perform  without  justification  hereunder,  by either Buyer or Seller,  without
prejudice to other rights and remedies which the terminating  party may have, if
the other party shall (i) have  materially  failed to perform its  covenants  or
agreements  contained  herein required to be performed,  or (ii) have materially
breached any of its  representations or warranties  contained herein;  provided,
however, that in the case of clause (i) or (ii), the defaulting party shall have
a period of ten (10) days following written notice from the non-defaulting party
to cure any breach of this Agreement, if such breach is curable.

         7.2      EFFECT OF TERMINATION;  REMEDIES.  In the event this Agreement
is terminated  pursuant to this Article 7, this Agreement  shall become null and
void and have no effect (other than  Articles 7, 8, and 9 of this  Agreement and
any indemnification  provisions  contained  elsewhere in this Agreement,  all of
which shall  survive  termination),  with no  liability on the part of Seller or
Buyer, or their respective  Affiliates or Related Persons,  with respect to this
Agreement, except for (i) the liability of a party for its own expenses pursuant
to Section 9.1; and (ii) provided,  however that any such  termination  shall be
without prejudice to the rights of any party hereto arising out of the breach by
any other party of any covenant or agreement contained in this Agreement. In the
event this Agreement or any of the Related Agreements is terminated, rejected or
materially breached after the Closing, Seller shall have the rights and remedies
set forth in this Section as though this Agreement had been terminated  pursuant
to Article 7 and Seller shall have the right to have the  Equipment  returned to
it, in which case  Buyer  shall  execute  all such  documents  and take all such
actions  as Seller  shall  reasonably  request  to effect  the  transfer  of the
Equipment from Buyer to Seller.

                                   ARTICLE 8
                                 INDEMNIFICATION

         8.1      INDEMNITY BY SELLER. Seller shall indemnify and hold Buyer and
its  officers,   directors,   members,   managers,   employees  and   Affiliates
(collectively, the "Buyer Indemnitees") harmless from and against, and shall pay
to the Buyer Indemnitees the full amount of, any loss, claim, damage,  liability
or expense (including reasonable attorneys' fees but excluding all


                                       14
<PAGE>


special,  exemplary,  punitive  and  consequential  damages)  (each,  a  "Loss")
resulting to the Buyer  Indemnitees,  either  directly or  indirectly,  from any
inaccuracy in any  representation or warranty,  or any breach of any covenant or
agreement,  by  Seller  contained  in this  Agreement  or in any of the  Related
Agreements.

         8.2      INDEMNITY BY BUYER. Buyer shall indemnify and hold Seller, TMI
and their  officers,  directors,  members,  managers,  employees and  Affiliates
(collectively,  the "Seller  Indemnitees")  harmless from and against, and shall
pay to the Seller  Indemnitees  the full  amount of, any Loss  resulting  to the
Seller  Indemnitees,  either  directly or  indirectly,  from:  (a) the Purchased
Assets, (b) the Assumed Liabilities, (c) any violation (or claimed violation) by
Buyer  of  any  law,  rule  or   regulation,   or  (d)  any  inaccuracy  in  any
representation or warranty, or any breach of any covenant or agreement, by Buyer
contained in this Agreement or in any of the Related Agreements.

         8.3      REMEDIES;  RIGHT OF OFFSET.  Upon the  occurrence of any event
for which any Seller Indemnitee is entitled to indemnification  from Buyer under
this  Agreement,  it shall have all the rights and remedies at law and in equity
available to it. Without  limiting the  foregoing,  if Buyer fails or refuses to
pay any such amounts promptly after the request of any Seller  Indemnitee,  then
such Seller Indemnitee, at its election, may offset any such amounts against any
amounts owed to Buyer or any of its Affiliates by such Seller  Indemnitee.  Upon
the  occurrence  of any event for which any  Buyer  Indemnitee  is  entitled  to
indemnification  from Seller under this Agreement,  it shall have all the rights
and  remedies  at law  and in  equity  available  to it.  Without  limiting  the
foregoing, if Seller fails or refuses to pay any such amounts promptly after the
request of any Buyer Indemnitee,  then such Buyer  Indemnitee,  at its election,
may offset any such amounts against any amounts owed to Seller or its Affiliates
by such Buyer Indemnitee.

         8.4      CONTROL OF INDEMNIFIED MATTERS. If a third-party claim is made
against an indemnified party that may result in a loss to the indemnified party,
the indemnifying  party shall be entitled to participate in the defense thereof,
and if it so chooses, to assume the defense thereof with counsel selected by the
indemnifying party and reasonably  satisfactory to the indemnified party. If the
indemnifying  party elects to assume the defense of such third-party  claim, the
indemnifying  party  shall  not be  liable  to the  indemnified  party for legal
expenses  subsequently  incurred by the indemnified party in connection with the
defense thereof. If the indemnifying party assumes such defense, the indemnified
party shall have the right to participate  in the defense  thereof and to employ
counsel,  at  its  own  expense,  separate  from  the  counsel  employed  by the
indemnifying  party,  it being  understood  that the  indemnifying  party  shall
control such defense.  The  indemnifying  party shall be liable for the fees and
expenses of counsel  employed  by the  indemnified  party for any period  during
which the  indemnifying  party  has not  assumed  the  defense  thereof.  If the
indemnifying  party chooses to defend or prosecute any third-party claim, all of
the parties hereto shall cooperate in the defense or prosecution  thereof.  Such
cooperation  shall  include the  retention  and (upon the  indemnifying  party's
request) the  provision  to the  indemnifying  party of records and  information
which are reasonably  relevant to such  third-party  claim, and making employees
available on a mutually  convenient and reasonable  basis to provide  additional
information and explanation of any material provided  hereunder.  Whether or not
the  indemnifying  party shall have assumed the defense of a third-party  claim,
the indemnified  party shall not admit any liability with respect to, or settle,
compromise or discharge, such third-party claim without the indemnifying party's
prior written


                                       15
<PAGE>


consent (which consent shall not be unreasonably withheld).  Notwithstanding any
provision  in this  SECTION  8.4, an  indemnifying  party shall have no right to
participate  in or in any way assume the defense of a third-party  claim if such
third-party  claim  seeks  an  order,  injunction,  non-monetary  claim or other
equitable relief against the indemnified party; provided,  however, that in such
case the indemnifying party shall be liable for the fees and expenses of counsel
for the indemnified party.

         8.5      REIMBURSEMENT.   For   purposes  of   clarification   and  not
limitation,  the parties hereto acknowledge and agree that Buyer shall reimburse
Seller for all Losses it incurs with respect to the Purchased  Assets  following
the Closing.

                                   ARTICLE 9
                                  MISCELLANEOUS

         9.1      EXPENSES.  Except as specifically  set forth in this Agreement
or any Related Agreement, the parties shall bear their own expenses,  including,
without limitation, fees, disbursements and other costs of any brokers, finders,
investment  bankers,  attorneys,  accountants and other advisors,  in connection
with this Agreement, the Related Agreements,  and the transactions  contemplated
hereby  and  thereby.   For  purposes  of  clarification,   the  parties  hereto
acknowledge  and agree that Buyer  shall pay all costs and  expenses  associated
with the  transfer of the  Permits.  In any action or  proceeding  commenced  in
connection  with a  breach  of this  Agreement  or any  Related  Agreement,  the
prevailing  party  therein  shall be  entitled  to an  award  of its  reasonable
attorneys' fees and costs.

         9.2      NOTICES.   All   notices,    requests,   demands   and   other
communications  made in connection  with this Agreement  shall be in writing and
shall be (a) mailed by registered or certified mail,  return receipt  requested,
postage prepaid, (b) transmitted by hand delivery, (c) sent by facsimile, or (d)
sent by nationally  recognized overnight courier for next Business Day delivery,
addressed as follows:

                  (a)      If to Seller:

                           LCC Tennessee, LLC
                           Attention: President, Dan Geiger
                           200 West Vine Street, Suite 300
                           Lexington, Kentucky 40507
                           Telephone:       (859) 246-4220
                           Facsimile:       (859) 246-1748

                           with copies to:

                           Greenbaum Doll & McDonald PLLC
                           Attention:  Martin Cunningham
                           300 West Vine Street, Suite 1100
                           Lexington, Kentucky 40507
                           Telephone:       (859)231-8500
                           Facsimile:       (859)255-2742


                                       16
<PAGE>


                  (b)      If to Buyer:

                           National Coal Corporation
                           Attention: President, Jon E. Nix
                           8915 George Williams Road
                           Knoxville, Tennessee 37923
                           Telephone:       (865) 690-6900
                           Facsimile:       (865) 691-9982


or, in each case, such other address as may be specified in writing to the other
party hereto.

         All such notices,  requests,  demands, waivers and other communications
shall be deemed to have been received (w) if by registered or certified mail, on
the first  Business Day after the delivery date  documented by the United States
Postal Service for the delivery thereof,  (x) if by hand delivery,  on the first
Business  Day  after  such  actual  delivery,   (y)  if  by  facsimile  and  the
transmitting   party   receives  a   transmission   receipt  dated  the  day  of
transmission,  on the  next  Business  Day  after  transmission,  and  (z) if by
nationally  recognized  overnight  courier,  on the next  Business Day after the
delivery date documented by such courier.

         9.3      AMENDMENT;   WAIVERS,  ETC.  No  amendment,   modification  or
discharge of this Agreement, and no waiver hereunder,  shall be valid or binding
unless  set  forth in  writing  and duly  executed  by the  party  against  whom
enforcement of the amendment,  modification,  discharge or waiver is sought. Any
such waiver shall  constitute a waiver only with respect to the specific  matter
described  in such  writing  and shall in no way  impair the rights of the party
granting such waiver in any other respect or at any other time.

         9.4      HEADINGS.  The headings  contained in this  Agreement  are for
reference  purposes  only  and  shall  not  affect  in any  way the  meaning  or
interpretation of this Agreement.

         9.5      ASSIGNMENT.  Buyer  shall not  assign  this  Agreement  or any
rights or  obligations  under this  Agreement (by operation of law or otherwise)
without the prior written consent of Seller.

         9.6      PARTIES IN INTEREST. This Agreement and the Related Agreements
shall be binding upon and inure solely to the benefit of the parties  hereto and
their  successors  and permitted  assigns,  and nothing in this Agreement or any
Related  Agreement,  expressed or implied,  is intended to confer upon any other
Person any rights or remedies of any nature under or by reason of this Agreement
or any Related Agreement;  provided,  however,  that the Buyer Indemnitees,  the
Seller Indemnitees and the Related Persons of Seller and its Affiliates may rely
on the provisions of this Agreement or any Related Agreement  applicable to such
Persons.

         9.7      BULK SALES OR TRANSFER LAWS. Buyer hereby waives compliance by
Seller with the  provisions of the bulk sales or transfer laws of all applicable
jurisdictions.

         9.8      COUNTERPARTS.  This  Agreement  may be executed in one or more
counterparts,  each of which shall be deemed to constitute an original,  but all
of which shall constitute one and the


                                       17
<PAGE>


same instrument,  and shall become effective when one or more  counterparts have
been signed by each of the parties hereto.

         9.9      GOVERNING LAW. This Agreement and the Related Agreements shall
be governed by and  construed  and enforced in  accordance  with the laws of the
Commonwealth of Kentucky, without regard to its conflicts of law rules.

         9.10     JURISDICTION.  Each of the  parties  hereto  agrees  that  any
proceeding  brought to enforce  the rights or  obligations  of any party  hereto
under this Agreement or any Related  Agreement shall be commenced and maintained
in Circuit Court in Boyd County,  Kentucky or the United States  District  Court
for the Eastern District of Kentucky,  Lexington Division, and such courts shall
have  exclusive  jurisdiction  over any  such  proceeding.  Each of the  parties
consents to the exercise of jurisdiction over it and its properties with respect
to any  proceeding  arising out of or in  connection  with this  Agreement,  any
Related  Agreement or the transactions  contemplated  hereby or thereby,  or the
enforcement of any rights under this Agreement or any Related Agreement.

         9.11     SEVERABILITY.   If  any   provision   of  this   Agreement  is
inoperative or unenforceable for any reason,  such circumstances  shall not have
the effect of rendering the provision in question  inoperative or  unenforceable
in any other  case or  circumstance,  or of  rendering  any other  provision  or
provisions herein contained invalid, inoperative, or unenforceable to any extent
whatsoever,  so long as this  Agreement,  taken as a whole,  still expresses the
material  intent of the  parties.  The  invalidity  of any one or more  phrases,
sentences,  clauses,  sections or subsections of this Agreement shall not affect
the remaining portions of this Agreement.

         9.12     ENTIRE  AGREEMENT.  This Agreement and the Related  Agreements
constitute the entire agreement  between the parties with respect to the subject
matter  hereof,  and supersede all prior  agreements  and  understandings,  both
written and oral, between the parties with respect to the subject matter hereof.

         9.13     DISCLAIMER.  EXCEPT AS EXPRESSLY SET FORTH IN THIS  AGREEMENT,
SELLER IS NOT MAKING ANY  REPRESENTATIONS OR WARRANTIES  REGARDING THE PURCHASED
ASSETS,  EXPRESS OR IMPLIED.  WITHOUT LIMITING THE FOREGOING BUYER  ACKNOWLEDGES
THAT THE PURCHASED ASSETS ARE CONVEYED "AS IS", "WHERE IS" AND "WITH ALL FAULTS"
AND THAT ALL WARRANTIES OF  MERCHANTABILITY  OR FITNESS FOR A PARTICULAR PURPOSE
ARE DISCLAIMED.  FURTHERMORE  BUYER  ACKNOWLEDGES THAT SELLER AND ITS AFFILIATES
AND THEIR  RESPECTIVE  RELATED PERSONS HAVE MADE NO  REPRESENTATION  OR WARRANTY
CONCERNING (I) ANY USE TO WHICH THE PURCHASED ASSETS MAY BE PUT, (II) ANY FUTURE
REVENUES,  COSTS,  EXPENDITURES,  CASH FLOW,  RESULTS OF  OPERATIONS,  FINANCIAL
CONDITION OR PROSPECTS  THAT MAY RESULT FROM THE  OWNERSHIP,  USE OR SALE OF THE
PURCHASED ASSETS OR THE ASSUMPTION OF THE ASSUMED  LIABILITIES,  (III) ANY OTHER
INFORMATION  OR DOCUMENTS  MADE  AVAILABLE TO BUYER OR ITS AFFILIATES OR RELATED
PERSONS,  (IV) THE CONDITION OF THE PURCHASED ASSETS, OR (V) COMPLIANCE WITH ANY
ENVIRONMENTAL LAWS OR OTHER LAWS.


                                       18
<PAGE>


         9.14     NO  CONSEQUENTIAL  DAMAGES.  In connection  with any breach of
this Agreement or any Related Agreement, the parties hereby waive, to the extent
permitted  by law,  any right to receive or claim any  consequential,  punitive,
special or  incidental  damages,  or any damages  other than, or in addition to,
actual damages.

                  [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]


                                       19
<PAGE>


         IN WITNESS WHEREOF, this Agreement has been duly executed and delivered
as of the date first above written.

BUYER:                         NATIONAL COAL CORPORATION


                               By:      /S/ JON E. NIX
                                        ----------------------------------------
                               Name:    JON E. NIX
                                        ----------------------------------------
                               Title:   CHIEF EXECUTIVE OFFICER
                                        ----------------------------------------


SELLER:                        LCC TENNESSEE, LLC


                               By:      /S/ DAN GEIGER
                                        ----------------------------------------
                               Name:    DAN GEIGER
                                        ----------------------------------------
                               Title:   PRESIDENT
                                        ----------------------------------------


                                       20
<PAGE>


                                   EXHIBIT A

                               ASSIGNMENT OF LEASE


         This   Assignment   of   Lease   (this   "Agreement"),   dated   as  of
______________,  is between LCC  Tennessee,  LLC, a Delaware  limited  liability
company (the "Seller") and National Coal  Corporation,  a Tennessee  corporation
(the "Buyer").

                                    RECITALS

         A.       The Buyer and the Seller are  parties  to that  certain  Asset
Purchase  Agreement  (the  "Purchase  Agreement")  dated May 8, 2005 between the
parties hereto.  Capitalized  terms used herein but not otherwise defined herein
shall have the meanings given to them in the Purchase Agreement.

         B.       The  Seller is a party to the lease  described  on  Schedule A
hereto (the "Lease").

         C.       The  Seller  desires  to  assign to the  Buyer,  and the Buyer
desires to assume,  all of the Seller's right,  title and interest in and to the
Lease, pursuant to the terms of the Purchase Agreement.

         NOW  THEREFORE,  for good and valuable  consideration,  the receipt and
sufficiency  of which are  hereby  acknowledged,  the  parties  hereto  agree as
follows:

         1.       ASSIGNMENT. The Seller hereby assigns, transfers and sets over
unto the Buyer all of its right, title, interest,  duties and obligations in, to
and under the Lease.

         2.       ASSUMPTION.  The  Buyer  hereby  assumes  all of the  Seller's
right,  title,  interest,  duties and obligations in, to and under the Lease and
agrees to be bound by all of the terms and  conditions  of the Lease and to pay,
perform and discharge, all duties and obligations of the Seller under the Lease,
and agrees to indemnify and hold the Seller harmless from and against, and shall
pay to the Seller the full  amount of, any loss,  claim,  damage,  liability  or
expense (including  reasonable  attorneys' fees) resulting to the Seller, either
directly or indirectly, from such duties and obligations.

         3.       CONFLICT.  This  Agreement  is  subject  to all the  terms and
conditions of the Purchase  Agreement.  No provision of this Agreement  shall be
deemed  to  enlarge,  alter or amend  the terms or  provisions  of the  Purchase
Agreement.  Notwithstanding  anything to the contrary set forth herein, if there
is any conflict between the terms and conditions of this Agreement and the terms
and  conditions  of the  Purchase  Agreement,  the terms and  conditions  of the
Purchase Agreement shall control.

         4.       GOVERNING  LAW.  This  Agreement  shall  be  governed  by  and
construed according to the laws of the State of Tennessee,  without regard to or
application of its conflict of laws principles.  Provided however,  jurisdiction
for  litigation  of any dispute  arising  under this  agreement  shall be in the
courts of general jurisdiction for Fayette County, Kentucky.

         5.       COUNTERPARTS.  This  Agreement  may be executed in one or more
counterparts  (including  by means of  facsimile  signature  pages) and all such
counterparts taken together shall constitute one and the same Agreement.


<PAGE>


         6.       SEVERABILITY.  If  any  provision  of  this  Agreement  or its
application  will be  invalid,  illegal or  unenforceable  in any  respect,  the
validity,  legality  and  enforceability  of  all  other  applications  of  that
provision,  and of all other provisions and applications hereof, will not in any
way be affected or impaired.  If any court shall determine that any provision of
this Agreement is in any way  unenforceable,  such provision shall be reduced to
whatever extent is necessary to make such provision enforceable.

         7.       ENTIRE AGREEMENT. All prior negotiations and agreements by and
among  the  parties  hereto  with  respect  to the  subject  matter  hereof  are
superseded by this Agreement, the Purchase Agreement and the Related Agreements,
and there are no representations,  warranties, understandings or agreements with
respect to the subject  matter  hereof other than those  expressly  set forth in
this Agreement, the Purchase Agreement and the Related Agreements.

         8.       HEADINGS.  Section  headings are not to be considered  part of
this Agreement,  are solely for  convenience of reference,  and shall not affect
the meaning or interpretation of this Agreement or any provision in it.



                  [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]


                                       2
<PAGE>


         IN WITNESS  WHEREOF,  the parties  hereto have caused their  authorized
representatives to execute this Agreement as of the date first set forth above.


SELLER:                                     LCC TENNESSEE, LLC


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


BUYER:                                      NATIONAL COAL CORPORATION


                                            By:
                                                     ---------------------------
                                                     Charles W. Kite
                                                     Senior Vice President


                                       S-1
<PAGE>


                                   SCHEDULE A


1.       Rail Siding  Lease,  dated  October 9, 1996 (as amended) by and between
         Tennessee  Railway  Company and  Tennessee  Mining,  Inc.  for property
         located in Devonia, Tennessee,


<PAGE>


                                    EXHIBIT B

            BILL OF SALE, GENERAL ASSIGNMENT AND ASSUMPTION AGREEMENT


         This is a Bill of Sale,  General  Assignment and  Assumption  Agreement
(this "Bill of Sale"),  dated as of  _____________,  between (i) LCC  Tennessee,
LLC, a Delaware limited liability company (the "Seller"), and (ii) National Coal
Corporation, a Tennessee corporation (the "Buyer").

                                    RECITALS

         This  Bill of Sale is being  entered  into to effect  the  transactions
contemplated  by  the  Asset  Purchase   Agreement,   dated  May  8,  2005  (the
"Agreement"), between the Buyer and the Seller.

         NOW, THEREFORE,  for good and valuable  consideration,  the receipt and
sufficiency  of which are  hereby  acknowledged,  the  parties  hereto  agree as
follows:

         1.       DEFINITIONS.  All  capitalized  terms  not  otherwise  defined
herein shall have the respective meanings set forth in the Agreement.

         2.       ASSIGNMENT.   Pursuant  to  the  Agreement,   subject  to  all
necessary  governmental  approvals and to the extent the Seller has the right to
do so, the Seller does hereby  unconditionally  and irrevocably  grant,  convey,
transfer,  assign  and  deliver  to the Buyer as of the date  hereof  all of the
Permits and the  Equipment,  free and clear of all liens,  claims,  defaults and
encumbrances, except as contemplated by the Agreement.

         3.       ACKNOWLEDGMENT  AND  ASSUMPTION.  The Buyer hereby assumes and
agrees to pay,  perform and  discharge  the Assumed  Liabilities,  and agrees to
indemnify and hold the Seller and its Affiliates harmless from and against,  and
shall pay to the  Seller  or its  Affiliates  the full  amount  of,  any loss or
liability (including  reasonable attorneys' fees) resulting to the Seller or its
Affiliates, either directly or indirectly, from the Assumed Liabilities.

         4.       CONFLICT.  This Bill of Sale is  subject  to all the terms and
conditions of the  Agreement.  No provision of this Bill of Sale shall be deemed
to enlarge,  diminish,  alter or amend the terms or provisions of the Agreement.
Notwithstanding  anything  to the  contrary  set forth  herein,  if there is any
conflict between the terms and conditions of this Bill of Sale and the terms and
conditions of the  Agreement,  the terms and  conditions of the Agreement  shall
control.

         5.       BINDING  EFFECT.  This Bill of Sale shall be binding  upon and
inure to the benefit of the parties hereto and their  respective  successors and
permitted assigns.

         6.       COUNTERPARTS. This Bill of Sale may be executed in one or more
counterparts  (including  by means of  facsimile  signature  pages) and all such
counterparts taken together shall constitute one and the same agreement.

         7.       GOVERNING  LAW.  This Bill of Sale  shall be  governed  by and
construed according to the laws of the Commonwealth of Kentucky,  without regard
to or application of its conflict of laws principles.


<PAGE>


         8.       ENTIRE AGREEMENT. All prior negotiations and agreements by and
among  the  parties  hereto  with  respect  to the  subject  matter  hereof  are
superseded  by  this  Bill  of  Sale,  the  Agreement,  and  the  other  Related
Agreements,  and there are no  representations,  warranties,  understandings  or
agreements  with respect to the subject matter hereof other than those expressly
set forth in this Bill of Sale, the Agreement and the other Related Agreements.

         9.       HEADINGS.  Section  headings are not to be considered  part of
this Bill of Sale, are solely for convenience of reference, and shall not affect
the meaning or interpretation of this Bill of Sale or any provision in it.

         10.      FURTHER  ASSURANCES.   Each  party  hereto  agrees,  upon  the
reasonable  request  of the  other  party  hereto  (and  at such  other  party's
expense),  to make,  execute and deliver any and all documents or instruments of
any kind or  character,  and to  perform  all such  other  actions,  that may be
reasonably necessary or proper to effectuate,  confirm, perform or carry out the
terms or provisions of this Bill of Sale.

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                                       2
<PAGE>


         IN WITNESS  WHEREOF,  the parties  hereto have caused their  authorized
representatives  to  execute  this  Bill of Sale as of the date  first set forth
above.



SELLER:                                     LCC TENNESSEE, LLC


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


BUYER:                                      NATIONAL COAL CORPORATION


                                            By:
                                                     ---------------------------
                                                     Charles W. Kite
                                                     Senior Vice President


                                      S-1


<PAGE>


                                    EXHIBIT C

                             BOND RELEASE AGREEMENT


         This  Bond  Release   Agreement   (this   "Agreement"),   dated  as  of
____________,  is among (i) National Coal Corporation,  a Tennessee  corporation
("National"),  (ii) LCC Tennessee,  LLC, a Delaware  limited  liability  company
("LCC") and (iii) American  International  Specialty Lines Insurance Company and
Insurance Company of the State of Pennsylvania (collectively, "Surety").

                                    RECITALS

         A.       National  and LCC are parties to that certain  Asset  Purchase
Agreement (the "Purchase Agreement"), dated May 8, 2005.

         B.       LCC and Surety are among the  parties  to the  Permitting  and
Reclamation Plan Agreement,  dated August 31, 2004 (the "Reclamation Agreement")
which  addresses  bonds  issued  by  Surety  for  certain  of LCC's  reclamation
obligations.

         C.       Pursuant to the Purchase  Agreement,  National is obligated to
effect the release of the surety bonds listed on SCHEDULE A hereto (the "Bonds")
issued by Surety on behalf of LCC or its affiliates.

         NOW, THEREFORE,  for good and valuable  consideration,  the receipt and
sufficiency  of which are  hereby  acknowledged,  the  parties  hereto  agree as
follows:

         1.       BOND  RELEASE;  PAYMENT.  If  all of the  original  Bonds  are
released and returned to Surety within the Release Period,  Surety hereby agrees
that,  within ten (10) days after receipt of all of the original  Bonds,  Surety
shall pay to  National,  by check or wire  transfer at the  election of National
(such  election to be made by National by written notice to Surety no later than
five (5) days after Surety's receipt of the original  Bonds),  $500,000 from the
AIG Reclamation  Collateral  Account (as defined in the Reclamation  Agreement).
Notwithstanding  any  provision of the  Reclamation  Agreement to the  contrary,
Surety  hereby  acknowledges  and  agrees  that,  if the only Bonds that are not
released and returned to Surety within the Release Period relate to Permits that
cannot be  transferred  to  National  as a direct  consequence  of any action or
failure to act (where  action is  required)  solely by LCC,  Surety shall pay to
National an amount equal to $500,000 multiplied by a fraction,  the numerator of
which is the aggregate  current bond penal amount of all original Bonds received
by Surety within the Release  Period,  and the denominator of which is aggregate
current bond penal amount of all Bonds.  Surety hereby  acknowledges  and agrees
that neither LCC nor any of its  affiliates  shall be obligated,  as a result of
such payment, to pay any amount to Surety or any of its affiliates in connection
with the  Reclamation  Agreement or otherwise.  For purposes of this  Agreement,
"Release  Period"  shall  mean a period of time  beginning  on the day after the
Closing Date (as defined in the Purchase Agreement) and extending for the sum of
(a) one hundred eighty (180) days, plus (b) the greatest number of days, if any,
by which the transfer of a Permit that is not transferred to National during the
180-days set forth in the immediately  preceding  subclause (a) has been delayed
(i) as a direct  consequence  of any action or  failure to act (when  action was
required)  solely by LCC,  including any such delay that arises from any past or
future  action or failure to act (when  action  was  required)  solely by LCC in
connection with the transfer of the Permits from Tennessee Mining,  Inc. to LCC,
it


<PAGE>


being the  intention of the Parties  that the Release  Period shall not begin to
run until such time as the Permits have  transferred  from Tennessee Mining Inc.
to LCC, or (ii) as a direct  consequence  of any lawsuit  filed  against  Buyer,
Seller or the Office of Surface Mining by the Sierra Club,  the Tennessee  Clean
Water  Network,  Save Our Cumberland  Mountains,  Cumberland  Trail  Associates,
Appalachian  Voice or  Southern  Appalachian  Bio  Diversity  Project  and which
lawsuit has as its principal purpose the delay or denial of the Transfer of such
Permit; provided,  however, that (y) subclause (b) shall not include any days of
delay that arise from any action or inaction  occurring after the Release Period
(as extended by subclause  (b)) ends,  and (z)  subclause (b) shall include only
the total  number  of days by which  the  transfer  of the one  Permit  has been
delayed the longest number of days,  not the cumulative  number of days by which
the transfer of all Permits has been or may be delayed.

         2.       GOVERNING  LAW.  This  Agreement  shall  be  governed  by  and
construed according to the laws of the Commonwealth of Kentucky,  without regard
to or application of its conflict of laws principles.

         3.       COUNTERPARTS.  This  Agreement  may be executed in one or more
counterparts  (including  by means of  facsimile  signature  pages) and all such
counterparts taken together shall constitute one and the same Agreement.

         4.       SEVERABILITY.  If  any  provision  of  this  Agreement  or its
application  will be  invalid,  illegal or  unenforceable  in any  respect,  the
validity,  legality  and  enforceability  of  all  other  applications  of  that
provision,  and of all other provisions and applications hereof, will not in any
way be affected or impaired.  If any court shall determine that any provision of
this Agreement is in any way  unenforceable,  such provision shall be reduced to
whatever extent is necessary to make such provision enforceable.

         5.       ENTIRE AGREEMENT. All prior negotiations and agreements by and
among  the  parties  hereto  with  respect  to the  subject  matter  hereof  are
superseded  by this  Agreement  and the  Purchase  Agreement,  and  there are no
representations,  warranties,  understandings  or agreements with respect to the
subject matter hereof other than those  expressly set forth in this Agreement or
the Purchase Agreement.

         6.       HEADINGS.  Section  headings are not to be considered  part of
this Agreement,  are solely for  convenience of reference,  and shall not affect
the meaning or interpretation of this Agreement or any provision in it.

         7.       ACKNOWLEDGEMENT  OF LIENS.  National hereby  acknowledges  and
agrees that,  notwithstanding  any contrary  provision set forth in the Purchase
Agreement,  the Purchased Assets (as defined in the Purchase  Agreement) will be
transferred to National subject to the security interests of Surety.

                  [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]


                                       2
<PAGE>


         IN WITNESS  WHEREOF,  the parties  hereto have caused their  authorized
representatives to execute this Agreement as of the date first set forth above.

NATIONAL:                                 NATIONAL COAL CORPORATION


                                          By:
                                                   -----------------------------
                                                   Charles W. Kite
                                                   Senior Vice President


SURETY:                                   AMERICAN INTERNATIONAL SPECIALTY
                                          LINES INSURANCE COMPANY


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


                                          INSURANCE COMPANY OF THE STATE
                                          OF PENNSYLVANIA


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


LCC:                                      LCC TENNESSEE, LLC


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


                                       S-1
<PAGE>


                                   SCHEDULE A

                                      BONDS

<TABLE>
<CAPTION>

                                                             CURRENT BOND
PERMIT NO.      JOB NAME/LOCATION       INC.    BOND NO.        AMOUNT        SURETY         COMPANY
  <S>        <S>                        <C>    <C>           <C>               <C>      <C>
  3020       Fork Mountain Haul Road    -      ESD7313691    $ 21,500.00       AIG      Tennessee Mining
  3021       Gum Branch Refuse          -      ESD7313692     455,000.00       AIG      Tennessee Mining
  3022       Baldwin Tipple #1          -      ESD7313693      52,000.00       AIG      Tennessee Mining
  3023       Baldwin Prep Plant         -      ESD7313694     207,000.00       AIG      Tennessee Mining
  3024       Jellico #1 & #2 Mine       -      ESD7313663     165,200.00       AIG      Tennessee Mining
  3026       Fork Mountain              2      ESD7313664      92,500.00       AIG      Tennessee Mining
                                                             -----------
                                               TOTAL         $993,200.00
                                                             ===========
</TABLE>


<PAGE>


                                    EXHIBIT D

                              SPECIAL WARRANTY DEED


THIS INSTRUMENT WAS PREPARED BY:

Bryan K. Mattingly
FROST BROWN TODD LLC
250 West Main Street
Suite 2700
Lexington, Kentucky 40507-1749
(859) 231-0000


STATE OF                                    )
         -----------------------------------

COUNTY OF                                   )
          ----------------------------------

         The  undersigned   Affiant  affirms  that  to  the  best  of  Affiant's
knowledge,  information and belief, the actual consideration for the transfer or
value of the  property  transferred,  whichever  is greater,  is $26,350,  which
amount is equal to or greater  than the amount  which the  property  transferred
would command at a fair and voluntary sale.


                                          --------------------------
                                          Affiant/Grantee

         Subscribed and sworn to before me this ____ day of _____________, 2005.


                                          --------------------------
                                          Notary Public

                                          My Commission expires:
                                                                 ---------------

--------------------------------------------------------------------------------
                              SPECIAL WARRANTY DEED

ADDRESS OF NEW OWNERS         SEND TAX BILL TO:              TAX/PARCEL NUMBERS:
AS FOLLOWS:                   8915 George Williams Road      Exhibit A
8915 George Williams Road     Knoxville, Tennessee 37923
Knoxville, Tennessee 37923
--------------------------------------------------------------------------------

         LCC TENNESSEE,  LLC, a Delaware limited liability company, with offices
at 200 West Vine Street, Suite 300, Lexington,  Kentucky 40507 ("GRANTOR"),  for
no cash  consideration and certain  obligations to be assumed pursuant to and in
furtherance  of the  obligation  of  GRANTOR  to convey  certain  properties  to
NATIONAL COAL


<PAGE>


CORPORATION, a Tennessee corporation, with offices at 8915 George Williams Road,
Knoxville,  Tennessee 37923  ("GRANTEE"),  in accordance with that certain Asset
Purchase Agreement,  dated May 8, 2005, between GRANTOR and GRANTEE (as the same
may be hereafter amended or supplemented,  the "Asset Purchase Agreement"),  and
other  valuable  consideration,  the receipt and  sufficiency  whereof is hereby
acknowledged,  has bargained and sold, and by these presents does bargain, sell,
transfer and convey, and SPECIALLY  WARRANTS,  TO THE LIMITED EXTENT HEREINAFTER
SET FORTH, unto GRANTEE,  all of the right, title and interest of GRANTOR in and
to the  properties  more  particularly  identified  and set  forth on  Exhibit A
attached hereto and made a part hereof,  together with any improvements  thereon
and the appurtenances thereunto belonging,  all of such property lying and being
in Anderson County, Tennessee. The transfer of the properties covered hereby are
subject to the terms of the Asset Purchase Agreement.

         GRANTEE assumes and agrees to pay all taxes and assessments relating to
the conveyed properties as of the date of closing and thereafter,  regardless of
when  invoiced.

         Except  for (i) any and all  matters  which  appear of record or as are
evident on the ground  relating  to such  properties,  (ii)  governmental  laws,
ordinances  and  regulations  affecting the conveyed  properties,  and (iii) the
taxes described in the preceding paragraph assumed by GRANTEE,  GRANTOR warrants
title  against  liens  and  encumbrances  created  by,  through  or in behalf of
GRANTOR,  and not  otherwise.  GRANTOR  further  covenants  with  respect to the
conveyances  made hereunder that GRANTOR is lawfully seized and possessed of the
property described on Exhibit A, has full power and lawful authority to sell and
convey the same,  and will  forever  warrant  and defend the title  against  the
lawful  claims of all  persons  claiming  by,  through or under  GRANTOR but not
further nor  otherwise.


                                       2
<PAGE>


         This  conveyance  is  further  made and  accepted  upon  the  following
covenants,  which  shall be binding  upon and  enforceable  against  GRANTEE and
GRANTEE's successors and assigns, and shall be deemed covenants running with the
land:

         1.       GRANTEE  acknowledges that the within conveyed properties have
been held for mining or mining  related  purposes and agrees that no claim shall
ever be asserted against GRANTOR, or any company or entity presently or formerly
associated with or operating under GRANTOR,  for damages,  injunctive  relief or
regulatory  relief  arising  directly  or  indirectly  out  of  any  surface  or
subsurface condition or occurrence,  known or unknown, now existing or hereafter
occurring or discovered and whether or not such  condition or occurrence  arises
out of or is the result of mining  related  activities  on the  within  conveyed
properties or other properties;

         2.       Between  GRANTOR  and  GRANTEE,  GRANTEE  assumes all risk and
responsibility  for any  injuries or damages  sustained  by any person or to any
property,  in whole or in part,  resulting  from,  arising out of, or in any way
connected with the possession or use of the property by GRANTEE;

         3.       GRANTOR  does not warrant or  represent  subjacent  or lateral
support of the surface or subsurface of the properties;

         4.       GRANTOR does not warrant or represent  that the properties are
safe,  habitable  or  otherwise  suitable  for the  purposes  for which they are
intended  to be used by GRANTEE  or for any other  purpose  whatsoever.  GRANTEE
represents  that GRANTEE has inspected the  properties  and agrees to accept the
same "as is",  "where is"; and


                                       3
<PAGE>


         The  undersigned  person  executing  this Deed on behalf of the GRANTOR
represents  and certifies  that he is a duly elected  officer of GRANTOR and has
been fully  empowered  by proper  resolution  of the Board of Directors or other
governing  body of GRANTOR to execute and deliver  this Deed;  that  GRANTOR has
full  limited  liability  company  capacity to convey the real estate  described
herein;  and that all necessary  limited liability company action for the making
of such conveyance has been taken and done.

                  [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]


                                       4
<PAGE>


         IN WITNESS WHEREOF,  GRANTOR and GRANTEE have caused this instrument to
be executed and their seals to be affixed this 8th day of July, 2005.

                                          LCC TENNESSEE, LLC


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

                                          ("GRANTOR")


                                          NATIONAL COAL CORPORATION


                                          By:
                                                   -----------------------------
                                                   Charles W. Kite
                                                   Senior Vice President

                                          ("GRANTEE")

STATE OF                                 )
         --------------------------------
                                         )  SS:
COUNTY OF                                )
          -------------------------------

         Before me,  ___________________  the undersigned,  Notary Public in and
for the County and State aforesaid, personally appeared __________________, with
whom I am personally  acquainted  (or proved to me on the basis of  satisfactory
evidence), and who upon oath acknowledged  himself/herself to be _______________
of LCC Tennessee,  LLC, the within- named grantor,  a Delaware limited liability
company,  and that  he/she  as such  _____________  being  authorized  so to do,
executed the foregoing instrument for the purposes therein contained, by signing
the name of the company by himself/herself as ___________________.

         Witness my hand and seal, at office in ______________,  ______________,
this the ____ day of _______________, 2005.


                                          --------------------------------------
                                          NOTARY PUBLIC

                                          My Commission Expires:
                                                                 ---------------


                                      S-1
<PAGE>


STATE OF                                 )
         --------------------------------
                                         )  SS:
COUNTY OF                                )
          -------------------------------

         Before me,  ___________________  the undersigned,  Notary Public in and
for the County and State  aforesaid,  personally  appeared Charles W. Kite, with
whom I am personally  acquainted  (or proved to me on the basis of  satisfactory
evidence), and who upon oath acknowledged himself to be Senior Vice President of
National Coal Corporation,  the within-named  grantee, a Tennessee  corporation,
and that he as such Senior Vice President,  being  authorized so to do, executed
the foregoing instrument for the purposes therein contained, by signing the name
of the corporation by himself/herself as Senior Vice President.

         Witness my hand and seal, at office in ______________,  ______________,
this the ____ day of _______________, 2005.



                                          --------------------------------------
                                          NOTARY PUBLIC

                                          My Commission Expires:
                                                                 ---------------


                                      S-2
<PAGE>


                                    EXHIBIT A



Being all that  real  property  conveyed  from  Tennessee  Mining,  Inc.  to LCC
Tennessee,  LLC, pursuant to that certain Special Corporate Warranty Deed, filed
of record in the Office of the Register of Deeds for Anderson County,  Tennessee
at Book No.  1377,  Page No. 2337.  It has a parcel  number of 01 049 049 044.00
000.


<PAGE>


                                    EXHIBIT E

                                ESCROW AGREEMENT


         This Escrow Agreement (this "Agreement"),  dated as of ___________,  is
among  (i)  National  Coal  Corporation  ("Buyer"),   (ii)  LCC  Tennessee,  LLC
("Seller"),  and (iii)  U.S.  Bank  National  Association,  a  national  banking
association,  as  escrow  agent  (the  "Escrow  Agent").  Capitalized  terms not
otherwise  defined  herein  shall have the  meanings  given to such terms in the
Purchase Agreement (as defined below).

                                    RECITALS

         A.       This   Agreement   is  being   entered   into  to  effect  the
transactions contemplated by the Asset Purchase Agreement dated May 8, 2005 (the
"Purchase Agreement"), between Buyer and Seller.

         B.       Pursuant to the Purchase Agreement,  Buyer is depositing funds
with the Escrow  Agent to be held by the  Escrow  Agent in the manner and as set
forth below.

         NOW, THEREFORE, the parties hereby agree as follows:

         1.       DEPOSIT INTO ESCROW. Simultaneously with the execution of this
Agreement,  Buyer shall deposit with the Escrow Agent, and upon such deposit the
Escrow  Agent  shall  acknowledge  receipt of, an amount  equal to Five  Hundred
Thirty-Eight Thousand Two Hundred Dollars ($538,200) (the "Escrow Funds").

         2.       INVESTMENT OF ESCROW  FUNDS;  DISBURSEMENT  OF EARNINGS.  Upon
receipt of the Deposit, the Escrow Agent shall, pending the disbursement thereof
pursuant  to this  Agreement,  invest  the Escrow  Funds in the U.S.  Bank Money
Market  Account in  accordance  with  Exhibit A hereto.  All  interest and other
earnings  accrued on the Escrow Funds shall be included in the Escrow Funds.  If
all of the  Permits  are  transferred  to Buyer and all of the Seller  Bonds are
replaced,  terminated and surrendered,  in each case, prior to the expiration of
the applicable  Transfer  Period (as defined  below),  Seller shall instruct the
Escrow  Agent to transfer  all  earnings  accrued on the Escrow  Funds to Buyer.
Otherwise,  Seller  shall  instruct the Escrow Agent to transfer all earnings on
the  Escrow  Funds to  Seller;  provided,  however,  if the only  Permit(s)  not
transferred  to the Buyer arise due to the fault,  action,  or failure to act of
the Seller,  then the Seller  shall  instruct  the Escrow  Agent to transfer all
earnings  on the Escrow  Funds to the Buyer.  For  purposes  of this  Agreement,
"Transfer  Period" shall mean, with respect to each applicable Permit and Seller
Bond, two hundred seventy (270) days from the date of this Agreement;  provided,
however, that with respect to any Permit, (a) the running of the Transfer Period
shall be tolled  during any time that the transfer of such Permit is delayed (i)
as a direct  consequence  of any action or inaction  (when action was  required)
solely on the part of Seller,  including  any such delay that arises as a direct
consequence  of any past or future action or inaction (when action was required)
solely by Seller in connection  with the transfer of the Permits from  Tennessee
Mining,  Inc. to Seller,  it  specifically  being the  intention  of the parties
hereto that the running of the  Transfer  Period shall not begin until such time
as the Permits have transferred from Tennessee  Mining,  Inc. to Seller; or (ii)
as a direct consequence of any lawsuit filed against Buyer, Seller or the Office
of Surface  Mining by the Sierra Club, the Tennessee  Clean Water Network,  Save
Our Cumberland  Mountains,  Cumberland Trail  Associates,  Appalachian  Voice or
Southern


<PAGE>


Appalachian Bio Diversity Project and which lawsuit has as its principal purpose
the delay or denial of the Transfer of such Permit;  and (b) the Transfer Period
may be extended upon the written consent of Seller.

         3.       DISBURSEMENT OF ESCROW FUNDS.

                  (a)      With  respect to each  Permit set forth on Schedule 1
hereto,  if Buyer has  caused  such  Permit to be  transferred  to Buyer and the
corresponding  Seller Bonds to be replaced,  terminated and surrendered prior to
the expiration of the applicable Transfer Period,  Seller shall, within five (5)
days of each such  event,  instruct  the Escrow  Agent to  transfer to Buyer the
amount corresponding to such Permit on Schedule 1.

                  (b)      With  respect to each Permit set forth on Schedule 1,
if  Buyer  has not  caused  such  Permit  to be  transferred  to  Buyer  and the
corresponding  Seller Bonds to be replaced,  terminated and surrendered prior to
expiration of the applicable Transfer Period, Seller shall, within five (5) days
of each such event,  instruct  the Escrow Agent to transfer to Seller the amount
corresponding to such Permit on Schedule 1.

                  (c)      With  respect to each  Permit set forth on Schedule 1
hereto,  if Buyer has taken all action  required  of it for the  transfer of any
Permit to it,  but the  Permit  can not be  transferred  to the Buyer due to the
fault,  action or failure to act of the Seller,  then in such  circumstance  the
Seller shall, within five (5) days of each such event, instruct the Escrow Agent
to transfer to the Buyer the amount corresponding to such Permit on Schedule 1.

                  (d)      All   transfers   of   funds    provided   in   above
subparagraphs  (a),  (b),  and (c) shall be completed by the Escrow Agent within
five (5) business days of the Seller's notice to the Escrow Agent

                  (e)      In the event  the  Purchase  Agreement  or any of the
Related  Agreements  are  terminated,  rejected or materially  breached by Buyer
after the Closing,  Seller shall instruct the Escrow Agent to transfer to Seller
all of the Escrow Funds then held by the Escrow Agent and all earnings thereon.

         4.       ESCROW AGENT. The Escrow Agent shall be liable only to deposit
and invest the Escrow  Funds as provided in this  Agreement,  and to pay out the
Escrow Funds in accordance  with the  provisions of this  Agreement.  The Escrow
Agent is acting solely in a depository capacity as an accommodation to the other
parties to this  Agreement and shall not be liable or  responsible to anyone for
any  damages,  losses or  expenses of any nature  whatsoever  except for actions
taken in bad faith or constituting gross negligence or willful  misconduct.  The
Escrow  Agent may at any time resign and either  deliver  the Escrow  Funds to a
successor  escrow agent  designated in writing to the Escrow Agent by all of the
other  parties  hereto or file an  interpleader  action in a court of  competent
jurisdiction  and  deposit the Escrow  Funds with the court,  in either of which
events the Escrow  Agent shall be relieved of all further  duty,  responsibility
and liability under this Agreement.

         5.       ESCROW AGENT FEE. The Escrow Agent's fee shall be One Thousand
Dollars ($1,000.00) annually and shall be paid by Buyer.


                                       2
<PAGE>


         6.       WARRANTIES;  ACKNOWLEDGEMENT.  Each  party  to this  Agreement
represents to the other parties to this Agreement  that such party's  execution,
delivery and  performance  of this  Agreement  has been duly  authorized  by all
appropriate  action,  the individual  executing and delivering this Agreement on
its behalf has been duly and  properly  empowered  to do so, and this  Agreement
does not violate any covenant, term, provision, instrument,  indenture, contract
or other  agreement  to which  it is a party  or by  which  it is  bound.  Buyer
acknowledges  and agrees  that it has no right,  title or interest in the Escrow
Funds unless and until it timely performs its obligations  under Section 3(a) of
this Agreement.

         7.       NOTICES. All notices and other communications  hereunder shall
be in writing and shall be delivered  personally  or shall be sent by registered
mail, certified mail or express mail service, postage prepaid and return receipt
requested,  by nationally recognized overnight courier service, or by facsimile,
provided receipt is promptly confirmed by the sending operator, addressed to the
applicable party as follows:

                  (a)      If to Buyer:

                           National Coal Corporation
                           Attention:  President, Jon E. Nix
                           8915 George Williams Road
                           Knoxville, Tennessee 37923
                           Telephone:  (865) 690-6900
                           Facsimile:  (865) 691-9982

                  (b)      If to Seller:

                           LCC Tennessee, LLC
                           Attention:  President, Dan Geiger
                           200 West Vine Street, Suite 300
                           Lexington, Kentucky 40507
                           Telephone:  (859) 246-4220
                           Facsimile:  (859) 246-1748

                           With a copy to:


                           Greenbaum Doll & McDonald PLLC
                           Attention:  Martin Cunningham
                           300 West Vine Street, Suite 1100
                           Lexington, Kentucky 40507
                           Telephone:       (859)231-8500
                           Facsimile:       (859)255-2742


                                       3
<PAGE>


                  (c)      If to Escrow Agent:

                           U.S. Bank National Association
                           425 Walnut ML CNOHW6CT
                           Cincinnati, Ohio  45202
                           Attention: Corporate Trust Department/Kathy Sias
                           Facsimile:  (513) 632-4582

Notices  shall be deemed to have been  given and  received  upon (i) the date of
their personal delivery or electronically  confirmed  transmission by facsimile,
(ii) the next  business day after  delivery to a nationally  recognized  courier
service with instructions for delivery upon the next business day, and (iii) two
(2) days after deposit in the United States mail, provided, however, that if the
second  day  after  such  deposit  is not a day  upon  which  mail is  regularly
delivered, then upon the next day of regular mail delivery thereafter.

         8.       BINDING  EFFECT.  This  Agreement  shall be  binding  upon the
parties hereto and their respective successors and permitted assigns;  provided,
however,  that no party hereto may assign this  Agreement or delegate its duties
hereunder without the prior written consent of the other parties hereto.

         9.       GOVERNING  LAW.  This  Agreement  shall  be  governed  by  and
construed in accordance with the laws of the  Commonwealth of Kentucky,  without
regard to, or application of, its conflict of laws rules.

         10.      COUNTERPARTS AND FACSIMILE  SIGNATURES.  This Agreement may be
signed by different  parties on different  counterpart  copies hereof (including
via  facsimile),  and  said  counterparts  shall  together  constitute  a single
agreement.  This  Agreement  shall  become  effective  upon the  Escrow  Agent's
execution of the  Agreement  and its receipt of a signed  counterpart  page from
each of Buyer and Seller, whether such signature is by facsimile or otherwise.

         11.      ENTIRE AGREEMENT. All prior negotiations and agreements by and
among  the  parties  hereto  with  respect  to the  subject  matter  hereof  are
superseded  by this  Agreement,  the Purchase  Agreement,  and the other Related
Agreements,  and there are no  representations,  warranties,  understandings  or
agreements  with respect to the subject matter hereof other than those expressly
set forth in this  Agreement,  the  Purchase  Agreement,  and the other  Related
Agreements.

         12.      AMENDMENT. This Agreement may be amended only with the written
consent of all of the parties.

         13.      ASSIGNMENT.   No   assignment,    transfer,    conveyance   or
hypothecation  of any right,  title or interest in and to the subject  matter of
this  Agreement  shall be binding upon the Escrow Agent  unless  written  notice
thereof  shall be served upon the Escrow Agent and all fees,  costs and expenses
incident to such transfer of interest shall have been paid.

         14.      COMPLIANCE  WITH  COURT  ORDERS.  The  Escrow  Agent is hereby
expressly  authorized  to comply with and obey any and all orders,  judgments or
decrees of any court,  and, if the Escrow Agent obeys or complies  with any such
order, judgment or decree of any court, it shall


                                       4
<PAGE>


not be  liable  to any of the  parties  hereto  or any  other  person,  firm  or
corporation by reason of such compliance,  notwithstanding  that any such order,
judgment or decree subsequently is reversed,  modified,  annulled,  set aside or
vacated, or found to have been entered without jurisdiction.

         15.      NO WAIVERS.  No waiver with respect to this Agreement shall be
enforceable  unless in writing and signed by the party against whom  enforcement
is  sought.  Except as  otherwise  expressly  provided  herein,  no  failure  to
exercise, delay in exercising, or single or partial exercise of any right, power
or remedy by any party hereto,  and no course of dealing between or among any of
the parties hereto, shall constitute a waiver of, or shall preclude any other or
further exercise of the same or any other right, power or remedy.

         16.      SEVERABILITY.  If any provision of this Agreement is construed
to be invalid,  illegal or unenforceable,  then the remaining  provisions hereof
shall not be affected thereby and shall be enforceable without regard thereto.

                  [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]


                                       5
<PAGE>


         IN WITNESS WHEREOF,  the parties have entered into this Agreement as of
the date first written above.

BUYER:                                    NATIONAL COAL CORPORATION

                                          By:
                                                   -----------------------------
                                                   Charles W. Kite
                                                   Senior Vice President


SELLER:                                   LCC TENNESSEE, LLC

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



ESCROW AGENT:                             U.S. BANK NATIONAL ASSOCIATION

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


                                      S-1
<PAGE>


                                    EXHIBIT A

                      U.S. BANK TRUST NATIONAL ASSOCIATION
                         U.S. BANK MONEY MARKET ACCOUNTS
                         U.S. BANK NATIONAL ASSOCIATION
                          ACCOUNT DESCRIPTION AND TERMS

The U.S. Bank money market  accounts are U.S. Bank National  Association  ("U.S.
Bank")  deposit  accounts  designed to meet the needs of Global Escrow and other
Corporate Trust customers of U.S. Bank Trust National Association.  The accounts
pay competitive  variable  interest rates,  which are determined  based upon the
customer's aggregated balance. These accounts are insured by the Federal Deposit
Insurance Corporation.

Interest rates  currently  offered on the accounts are determined at U.S. Bank's
discretion  and may change daily.  U.S.  Bank uses the daily  balance  method to
calculate interest on these accounts.  This method applies a daily periodic rate
to the  principal  in the  accounts  each day.  The  average  daily  balance  is
calculated  by adding the  principal in an account for each day of the month and
dividing that figure by the number of days in the period. Interest is compounded
on a monthly basis.

The owner of the accounts is U.S. Bank Trust  National  Association as Agent for
its customers.  All account  deposits and withdrawals are performed by U.S. Bank
Trust National Association. U.S. Bank Trust National Association is an affiliate
of U.S. Bank.

For further  information,  call your account  representative  at U.S. Bank Trust
National Association.

                         AUTOMATIC AUTHORIZATION LETTER

In the absence of specific written direction to the contrary, U.S. Bank National
Association  (or U.S. Bank) is hereby  directed to invest and reinvest  proceeds
and other available moneys in U.S. Bank money market account.


NATIONAL COAL CORPORATION                 LLC  TENNESSEE, LLC


By:                                       By:
         ----------------------------             ------------------------------
         Charles W. Kite                  Name:
                                                  ------------------------------
         Senior Vice President            Title:
                                                  ------------------------------

Date:                                     Date:
         ----------------------------             ------------------------------


<PAGE>


                                   SCHEDULE 1



                          PERMIT NO.             BOND AMOUNT
                          ----------             -----------

                            3020                  $ 21,500
                            3022                    52,000
                            3023                   207,000
                            3024                   165,200
                            3026                    92,500


<PAGE>


                                    EXHIBIT F

          PERMIT AND FACILITY LEASE AMENDMENT AND TERMINATION AGREEMENT


         THIS PERMIT AND FACILITY  LEASE  AMENDMENT  AND  TERMINATION  AGREEMENT
(this  "Amendment"),  is made and entered into  effective as of  ______________,
between National Coal Corporation,  a Tennessee corporation  ("Buyer"),  and LCC
Tennessee, LLC, a Delaware limited liability company ("Seller").

                                   WITNESSETH:

         WHEREAS,  Buyer and Seller  (as  successor  in  interest  to  Tennessee
Mining,  Inc.) are parties to that Permit  Agreement,  dated as of July 16, 2004
(the "Permit Agreement") and that related Facility Lease Agreement,  dated as of
July 16, 2004 (the "Facility Lease");

         WHEREAS, the parties hereto are parties to an Asset Purchase Agreement,
dated May 8, 2005 (the "APA"); and

         WHEREAS,  the parties hereto wish to enter into this Amendment to amend
the Permit  Agreement  and the  Facility  Lease as a result of the  transactions
contemplated by the APA.

         NOW THEREFORE,  for and in  consideration  of the mutual  covenants and
conditions  contained herein,  Buyer and Seller do now hereby agree to amend the
Permit Agreement and Facility Lease as follows:

         1.       AMENDMENT.  The Permit  Agreement and Facility  Lease shall be
amended as follows:

                  (a)      Upon  transfer of OSM Permit No.  3022 to Buyer,  and
replacement,  termination  and  surrender of the  corresponding  Seller Bond (as
defined in the APA),  the reference to such permit shall be deleted from EXHIBIT
A to the Permit  Agreement and EXHIBIT A to the Facility  Lease in its entirety,
and all other  references to such permit shall also be deleted from the Facility
Lease in their entirety,  and the lands encompassed thereby and the improvements
thereon  shall no longer be subject to the  Facility  Lease or  included  in the
definition of the Leased Premises (as defined in the Facility Lease).

                  (b)      Upon  transfer of OSM Permit No.  3023 to Buyer,  and
replacement,  termination  and surrender of the  corresponding  Seller Bond, the
reference to such permit shall be deleted from EXHIBIT A to the Permit Agreement
and EXHIBIT A to the Facility Lease in its entirety, and all other references to
such permit shall also be deleted from the Facility Lease in their entirety, and
the lands  encompassed  thereby and the improvements  thereon shall no longer be
subject  to the  Facility  Lease or  included  in the  definition  of the Leased
Premises (as defined in the Facility Lease).

         2.       SUSPENSION OF RENTAL OBLIGATIONS.  All obligations for payment

of  facility  rental  set forth in  Section  4 of the  Facility  Lease  shall be
suspended on the Closing Date (as defined in the APA); provided,  however,  that
in the event that  either of the  permits  described  in Section 1 hereof is not
transferred  to  Buyer,  or  replacement,   termination  and  surrender  of  the


<PAGE>


corresponding  Seller Bond does not occur, in each case,  prior to expiration of
the applicable  Transfer  Period (as defined in the APA),  such facility  rental
obligations  shall be reinstated,  effective  retroactively to the Closing Date,
and shall be in full force and effect.

         3.       TERMINATION. Upon the satisfaction of the conditions set forth
in Section 1 hereof with  respect to  transfer of all of the permits  referenced
therein  to Buyer  and  replacement,  termination  and  surrender  of all of the
corresponding  Seller Bonds,  the Permit  Agreement and the Facility Lease shall
terminate, and shall be of no further force or effect;  provided,  however, that
all provisions  contained  therein that survive  termination by the terms of the
Permit  Agreement  or the Facility  Lease shall  remain in effect,  as shall all
provisions  relating to (a) Buyer's obligation to conduct reclamation and remedy
non-compliance,  including,  without  limitation,  the  obligations set forth in
Section 6 of the Facility Lease and the  obligations set forth in Sections 4 and
5 of the Permit Agreement;  and (b) all of Buyer's indemnification  obligations,
including,  without  limitation,  the  obligations set forth in Section 7 of the
Facility Lease and Section 3 of the Permit Agreement.

         4.       FULL FORCE AND EFFECT.  Except as amended hereby,  and subject
to the other  provisions  hereof,  the Facility  Lease and the Permit  Agreement
shall remain in full force and effect.

                            [SIGNATURE PAGE FOLLOWS]


                                       2
<PAGE>


         IN  WITNESS  WHEREOF,   the  parties  hereto  have  caused  their  duly
authorized  representatives  to execute this Amendment  effective as of the date
first set forth above.

BUYER:                                    NATIONAL COAL CORPORATION


                                          By:
                                                   -----------------------------
                                                   Charles W. Kite
                                                   Senior Vice President

SELLER:                                   LCC TENNESSEE, LLC


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

STATE OF
         --------------------------------)
COUNTY OF
          -------------------------------)

         The foregoing  instrument  was executed and  acknowledged  before me, a
Notary  Public,  this ____ day of ________,  2005, by Charles W. Kite, as Senior
Vice President of National Coal Corporation, on behalf of said company.

         My Commission expires:                      .
                                ---------------------


                                          _______________________________
                                          Notary Public

STATE OF
         --------------------------------)
COUNTY OF
          -------------------------------)

         The foregoing  instrument  was executed and  acknowledged  before me, a
Notary Public, this ____ day of ________,  2005, by  ___________________________
as _____________ of LCC Tennessee, LLC, on behalf of said company.

         My Commission expires:                      .
                                ---------------------


                                          _______________________________
                                          Notary Public


                                      S-1
<PAGE>


                                    EXHIBIT G

                AMENDMENT TO SURFACE AND MINERAL LEASE AGREEMENT


         THIS   AMENDMENT  TO  SURFACE  AND  MINERAL   LEASE   AGREEMENT   (this
"Amendment"),  is made and entered into effective as of ______________,  between
National  Coal  Corporation,   a  Tennessee  corporation  ("Lessor"),   and  LCC
Tennessee, LLC, a Delaware limited liability company ("Lessee").

                                   WITNESSETH:

         WHEREAS,  Lessor  is a  successor  in  interest  to  Cumberland  Timber
Company,  L.L.C.,  and Lessee is a successor  in interest to  Tennessee  Mining,
Inc.,  under that certain  Surface and Mineral  Lease  Agreement  dated June 27,
2002, as amended by that certain  Amendment No. 1 to  Reclamation  Agreement and
Amendment No. 1 to Surface and Mineral Lease, made and entered into effective as
of the 8th day of July, 2004, by and between Tennessee  Mining,  Inc. and Lessor
(together  with any further  amendments or  modifications,  the  "Lease"),  with
respect to certain  surface and mineral rights to coal in, under and upon tracts
of property located in Anderson and Campbell Counties, Tennessee;

         WHEREAS, the parties hereto are parties to an Asset Purchase Agreement,
dated May 8, 2005 (the "APA"); and

         WHEREAS,  the parties hereto wish to enter into this Amendment to amend
the Lease as a result of the transactions contemplated by the APA.

         NOW THEREFORE,  for and in  consideration  of the mutual  covenants and
conditions contained herein,  Lessor and Lessee do now hereby agree to amend the
Lease as follows:

         1.       AMENDMENT. The Lease shall be amended as follows:

                  (a)      The reference to OSM Permit No. 3019,  referred to in
EXHIBIT A to the Lease as  "Windrock  Deep Mine OSM Permit No.  3019  located on
Buffalo Mountain,  Latitude: 36 10 11, Longitude:  84 19 45, Being a part of the
same property  conveyed to Cumberland  Timber,  L.L.C.,  by Deed from  Tennessee
Mining,  Inc. dated August 8, 2002, and recorded in Book 1286,  Page 470, of the
Recorder's Office of Anderson County, Tennessee",  shall be deleted from EXHIBIT
A to the Lease in its  entirety,  and the  lands  encompassed  thereby  shall no
longer be  included  in the  definition  of Leased  Premises  (as defined in the
Lease).

                  (b)      Upon  transfer  of OSM  Permit  No.  3020 to  Lessor,
referred to in EXHIBIT A to the Lease as "Fork Mountain Haul Road OSM Permit No.
3020 located on Fork Mountain,  Latitude: 36 13 35, Longitude: 84 27 35, Being a
part of the same property  conveyed to Cumberland  Timber,  L.L.C., by Deed from
Tennessee  Mining,  Inc. dated August 8, 2002,  and recorded in Book 1286,  Page
470, of the Recorder's Office of Anderson County,  Tennessee",  and replacement,
termination  and surrender of the  corresponding  Seller Bond (as defined in the
APA),  the reference to such permit shall be deleted from EXHIBIT A to the Lease
in its entirety,  and the lands encompassed  thereby shall no longer be included
in the definition of Leased Premises.


<PAGE>


                  (c)      Upon  transfer  of OSM  Permit  No.  3026 to  Lessor,
referred  to in EXHIBIT A to the Lease as "Fork  Mountain  Deep & Surface  Mine,
Increment 2, OSM Permit No. 3026 located on Fork Mountain,  Latitude:  36 09 00,
Longitude:  84 25 07, Being a part of the same  property  conveyed to Cumberland
Timber,  L.L.C., by Deed from Tennessee  Mining,  Inc. dated August 8, 2002, and
recorded in Book 1286,  Page 470, of the Recorder's  Office of Anderson  County,
Tennessee",  and  replacement,  termination  and surrender of the  corresponding
Seller  Bonds,  the  reference to such permit shall be deleted from EXHIBIT A to
the Lease in its entirety,  and the lands encompassed thereby shall no longer be
included in the definition of Leased Premises.

                  (d)      Upon  transfer  of OSM Permit No.  3024 to Lessor and
replacement,  termination  and surrender of the  corresponding  Seller Bond, the
reference  to such  permit,  if any,  shall be  deleted  from the  Lease and any
exhibit  thereto  in its  entirety,  and the  lands  encompassed  thereby  shall
thereafter not be included in the definition of Leased Premises.

                  (e)      A new  Section  13.3  shall be added to the  Lease to
read in its entirety as follows:

                                    13.3 Lessor hereby  acknowledges  and agrees
                           that (a) in the event  some but not all of OSM Permit
                           3020,  OSM Permit 3021,  OSM Permit 3022,  OSM Permit
                           3023,  OSM Permit 3024, OSM Permit 3026 and all NPDES
                           permits  and other  air,  water and  similar  permits
                           related to the aforementioned  permits (collectively,
                           the "Permits") are transferred from Lessee to Lessor,
                           Lessee  shall have the right,  without any payment of
                           any kind to Lessor or any other person or entity,  to
                           enter and otherwise  use the property  covered by any
                           of such non-transferred Permits, including OSM Permit
                           3020;  and (b) in the  event all of the  Permits  are
                           transferred from Lessee to Lessor,  Lessee shall have
                           the right,  without any payment of any kind to Lessor
                           or any other person or entity, to enter and otherwise
                           use the property  covered by OSM Permit 3020,  in the
                           case of each of subclause  (a) and (b), to the extent
                           necessary to enable Lessee to conduct any permissible
                           activities  on, and to be able to access,  properties
                           owned,  controlled or otherwise operated by Lessee or
                           its affiliates;  provided, however, that if Lessee or
                           its  affiliates  or agents haul a material  amount of
                           coal over the Fork Mountain haulroad after OSM Permit
                           3020 is  transferred  to  Lessor,  Lessor  and Lessee
                           shall share in the reasonable  maintenance  costs for
                           such  haulroad  during the period  that Lessee or its
                           affiliates   or  agents  are  hauling  coal  on  such
                           haulroad,  based  on the  relative  tonnage  of  coal
                           hauled by Lessee and its  affiliates  and agents,  on
                           one hand, and hauled by Lessor and its affiliates and
                           agents,  on the other hand.  Lessor further agrees to
                           take  all such  commercially  reasonable  actions  as


                                       2
<PAGE>


                           Lessee  may  request  to  further  evidence,  or give
                           effect  to,  the  rights  set forth in this  section,
                           including the filing of all documents  required to be
                           filed with any governmental authority with respect to
                           such rights.  Notwithstanding  any other provision of
                           this  Agreement  to the  contrary,  this Section 13.3
                           shall survive the  termination  or expiration of this
                           Agreement.

         2.       FULL FORCE AND  EFFECT.  Except as amended  hereby,  the Lease
shall remain in full force and effect.

                            [SIGNATURE PAGES FOLLOW]


                                       3
<PAGE>


         IN  WITNESS  WHEREOF,   the  parties  hereto  have  caused  their  duly
authorized  representatives  to execute this Amendment  effective as of the date
first set forth above.

LESSOR:                                   NATIONAL COAL CORPORATION


                                          By:
                                                   -----------------------------
                                                   Charles W. Kite
                                                   Senior Vice President


LESSEE:                                   LCC TENNESSEE, LLC


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

STATE OF                            )
         ---------------------------
COUNTY OF                           )
          --------------------------

         The foregoing  instrument  was executed and  acknowledged  before me, a
Notary  Public,  this ____ day of ________,  2005, by Charles W. Kite, as Senior
Vice President of National Coal Corporation, on behalf of said company.

         My Commission expires:                               .
                                ------------------------------


                                          _______________________________
                                          Notary Public

STATE OF                            )
         ---------------------------
COUNTY OF                           )
          --------------------------

         The foregoing  instrument  was executed and  acknowledged  before me, a
Notary Public, this ____ day of ________,  2005, by  ___________________________
as _____________ of LCC Tennessee, LLC, on behalf of said company.

         My Commission expires:                               .
                                ------------------------------


                                          _______________________________
                                          Notary Public


                                      S-1
<PAGE>


                                    EXHIBIT H

                       AMENDMENT TO RECLAMATION AGREEMENT


         THIS AMENDMENT TO RECLAMATION AGREEMENT (this "Amendment"), is made and
entered into effective as of _________,  between  National Coal  Corporation,  a
Tennessee  corporation  ("Lessor"),  and LCC Tennessee,  LLC, a Delaware limited
liability company ("Lessee").

                                   WITNESSETH:

         WHEREAS,  Lessor  is a  successor  in  interest  to  Cumberland  Timber
Company,  L.L.C.,  and Lessee is a successor  in interest to  Tennessee  Mining,
Inc.,  under that certain  Reclamation  Agreement  dated June 26, 2002 (together
with any amendments or modifications thereto,  including that Amendment No. 1 to
Reclamation  Agreement  and  Amendment  No. 1 to Surface and Mineral Lease dated
July 7, 2004,  the  "Agreement"),  with  respect to certain  tracts of  property
located in Anderson and Campbell Counties, Tennessee;

         WHEREAS, the parties hereto are parties to an Asset Purchase Agreement,
dated May 8, 2005 (the "APA"); and

         WHEREAS,  the parties hereto wish to enter into this Amendment to amend
the Agreement as a result of the transactions contemplated by the APA.

         NOW THEREFORE,  for and in  consideration  of the mutual  covenants and
conditions contained herein, Lessor and Lessee do now hereby agree as follows:

         1.       AMENDMENT. The Agreement shall be amended as follows:

                  (a)      Upon  transfer  of OSM  Permit  No.  3024 to  Lessor,
referred to in EXHIBIT A to the Agreement as "Jellico No. 1 and No. 2 Mine,  OSM
Permit No.  3024,  located in  Anderson  County,  Tennessee",  and  replacement,
termination  and surrender of the  corresponding  Seller Bond (as defined in the
APA),  the  reference  to such  permit  shall be deleted  from  EXHIBIT A to the
Agreement in its entirety,  and the lands encompassed thereby shall no longer be
included in the definition of Leased Premises (as defined in the Agreement).

                  (b)      A new Section 10.2 shall be added to the Agreement to
read in its entirety as follows:

                           10.2 Lessor hereby  acknowledges  and agrees that (a)
                  in the event some but not all of OSM Permit  3020,  OSM Permit
                  3021,  OSM Permit 3022,  OSM Permit 3023, OSM Permit 3024, OSM
                  Permit  3026 and all NPDES  permits  and other air,  water and
                  similar   permits  related  to  the   aforementioned   permits
                  (collectively,  the "Permits") are transferred  from Lessee to
                  Lessor,  Lessee  shall have the right,  without any payment of
                  any kind to Lessor or any other person or entity, to enter and
                  otherwise   use   the   property   covered   by  any  of  such
                  non-transferred Permits, including OSM Permit 3020; and (b) in
                  the event all of the  Permits are  transferred  from Lessee to
                  Lessor, Lessee shall have the right,


                                       4
<PAGE>


                  without any payment of any kind to Lessor or any other  person
                  or entity,  to enter and otherwise use the property covered by
                  OSM Permit 3020, in the case of each of subclause (a) and (b),
                  to the  extent  necessary  to  enable  Lessee to  conduct  any
                  permissible   activities   on,  and  to  be  able  to  access,
                  properties owned,  controlled or otherwise  operated by Lessee
                  or its affiliates;  provided,  however,  that if Lessee or its
                  affiliates  or agents haul a material  amount of coal over the
                  Fork Mountain haulroad after OSM Permit 3020 is transferred to
                  Lessor,  Lessor  and  Lessee  shall  share  in the  reasonable
                  maintenance  costs for such  haulroad  during the period  that
                  Lessee or its  affiliates  or agents are hauling  coal on such
                  haulroad,  based on the  relative  tonnage  of coal  hauled by
                  Lessee and its affiliates and agents,  on one hand, and hauled
                  by Lessor and its  affiliates  and agents,  on the other hand.
                  Lessor further agrees to take all such commercially reasonable
                  actions as Lessee may  request  to further  evidence,  or give
                  effect to, the rights set forth in this section, including the
                  filing  of  all  documents  required  to  be  filed  with  any
                  governmental   authority   with   respect   to  such   rights.
                  Notwithstanding  any other  provision of this Agreement to the
                  contrary,  this Section 10.2 shall survive the  termination or
                  expiration of this Agreement.

         2.       FULL FORCE AND EFFECT. Except as amended hereby, the Agreement
shall remain in full force and effect.

                            [SIGNATURE PAGES FOLLOW]


                                       2
<PAGE>


         IN  WITNESS  WHEREOF,   the  parties  hereto  have  caused  their  duly
authorized  representatives  to execute this Amendment  effective as of the date
first set forth above.

LESSOR:                                   NATIONAL COAL CORPORATION


                                          By:
                                                   -----------------------------
                                                   Charles W. Kite
                                                   Senior Vice President


LESSEE:                                   LCC TENNESSEE, LLC


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

STATE OF                            )
         ---------------------------
COUNTY OF                           )
          --------------------------

         The foregoing  instrument  was executed and  acknowledged  before me, a
Notary  Public,  this ____ day of ________,  2005, by Charles W. Kite, as Senior
Vice President of National Coal Corporation, on behalf of said company.

         My Commission expires:                               .
                                ------------------------------


                                          _______________________________
                                          Notary Public

STATE OF                            )
         ---------------------------
COUNTY OF                           )
          --------------------------

         The foregoing  instrument  was executed and  acknowledged  before me, a
Notary Public, this ____ day of ________,  2005, by  ___________________________
as _____________ of LCC Tennessee, LLC, on behalf of said company.

         My Commission expires:                               .
                                ------------------------------


                                          _______________________________
                                          Notary Public


                                      S-1
<PAGE>


                                    EXHIBIT I

             PERMIT AND SUBLEASE AMENDMENT AND TERMINATION AGREEMENT


         THIS PERMIT AND SUBLEASE  AMENDMENT  AND  TERMINATION  AGREEMENT  (this
"Amendment"),  is made and entered into effective as of ______________,  between
National Coal Corporation, a Tennessee corporation ("Buyer"), and LCC Tennessee,
LLC, a Delaware limited liability company ("Seller").

                                   WITNESSETH:

         WHEREAS,  Buyer and Seller  (as  successor  in  interest  to  Tennessee
Mining,  Inc.) are parties to that Permit  Agreement,  dated as of July 16, 2004
(the "Permit Agreement") and that related Sublease  Agreement,  dated as of July
16, 2004 (the "Sublease Agreement");

         WHEREAS, the parties hereto are parties to an Asset Purchase Agreement,
dated May 8, 2005 (the "APA"); and

         WHEREAS,  the parties hereto wish to enter into this Amendment to amend
the Permit Agreement and the Sublease  Agreement as a result of the transactions
contemplated by the APA.

         NOW THEREFORE,  for and in  consideration  of the mutual  covenants and
conditions  contained herein,  Buyer and Seller do now hereby agree to amend the
Permit Agreement and Sublease Agreement as follows:

         1.       AMENDMENT.  The Permit Agreement and Sublease  Agreement shall
be amended as follows:

                  (a)      Upon  transfer of OSM Permit No.  3020 to Buyer,  and
replacement,  termination  and  surrender of the  corresponding  Seller Bond (as
defined in the APA),  the reference to such permit shall be deleted from EXHIBIT
A to the Permit  Agreement in its  entirety,  and all  references to such permit
shall also be deleted from the Sublease  Agreement  in their  entirety,  and the
lands encompassed  thereby shall no longer be subject to the Sublease  Agreement
or included  in the  definition  of the  Property  (as  defined in the  Sublease
Agreement).

                  (b)      Upon  transfer of OSM Permit No.  3026 to Buyer,  and
replacement,  termination  and surrender of the  corresponding  Seller Bond, the
reference to such permit shall be deleted from EXHIBIT A to the Permit Agreement
in its  entirety,  and all  references to such permit shall also be deleted from
the Sublease  Agreement in their  entirety,  and the lands  encompassed  thereby
shall no  longer  be  subject  to the  Sublease  Agreement  or  included  in the
definition of the Property (as defined in the Sublease Agreement).

         2.       SUSPENSION OF TONNAGE ROYALTY.  All obligations for payment of
royalties  set forth in Sections  3(a),  (b) and (c) of the  Sublease  Agreement
shall be  suspended  on the  Closing  Date (as  defined  in the APA);  provided,
however,  that in the event that  either of the permits  described  in Section 1
hereof is not transferred to Buyer, or replacement, termination and surrender of
the corresponding  Seller Bond does not occur, in each case, prior to expiration
of the applicable  Transfer Period (as defined in the APA), such royalty payment
obligations  shall be reinstated,  effective  retroactively to the Closing Date,
and shall be in full force and effect.


<PAGE>


         3.       TERMINATION. Upon the satisfaction of the conditions set forth
in Section 1 hereof with  respect to  transfer of all of the permits  referenced
therein  to Buyer  and  replacement,  termination  and  surrender  of all of the
corresponding  Seller Bonds,  the Permit  Agreement  and the Sublease  Agreement
shall terminate, and shall be of no further force or effect; provided,  however,
that all provisions  contained therein that survive  termination by the terms of
the Permit Agreement or the Sublease  Agreement shall remain in effect, as shall
all provisions  relating to (a) Buyer's  obligation to conduct  reclamation  and
remedy non-compliance,  including, without limitation, the obligations set forth
in Section  4(c) of the  Sublease  Agreement  and the  obligations  set forth in
Sections 4 and 5 of the Permit Agreement; and (b) all of Buyer's indemnification
obligations, including, without limitation, the obligations set forth in Section
8 of the Sublease Agreement and Section 3 of the Permit Agreement.

         4.       FULL FORCE AND EFFECT.  Except as amended hereby,  and subject
to the other provisions  hereof, the Sublease Agreement and the Permit Agreement
shall remain in full force and effect.

                            [SIGNATURE PAGE FOLLOWS]


                                       2
<PAGE>


         IN  WITNESS  WHEREOF,   the  parties  hereto  have  caused  their  duly
authorized  representatives  to execute this Amendment  effective as of the date
first set forth above.

BUYER:                                    NATIONAL COAL CORPORATION


                                          By:
                                                   -----------------------------
                                                   Charles W. Kite
                                                   Senior Vice President

SELLER:                                   LCC TENNESSEE, LLC


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

STATE OF
         --------------------------------)
COUNTY OF
          -------------------------------)

         The foregoing  instrument  was executed and  acknowledged  before me, a
Notary  Public,  this ____ day of ________,  2005, by Charles W. Kite, as Senior
Vice President of National Coal Corporation, on behalf of said company.

         My Commission expires:                      .
                                ---------------------


                                          _______________________________
                                          Notary Public

STATE OF
         --------------------------------)
COUNTY OF
          -------------------------------)

         The foregoing  instrument  was executed and  acknowledged  before me, a
Notary Public, this ____ day of ________,  2005, by  ___________________________
as _____________ of LCC Tennessee, LLC, on behalf of said company.

         My Commission expires:                      .
                                ---------------------


                                          _______________________________
                                          Notary Public


                                      S-1
<PAGE>


                                 SCHEDULE 1.1(B)

                                    APPROVALS


1.       Approval by Mining Authorities for transfer of the Permits.

2.       Consent required pursuant to the Lease.

3.       Any  consent  required  from any  surety or  similar  Person  providing
         bonding or other financial assistance to Seller.


<PAGE>


                                 SCHEDULE 1.1(H)

                                    EQUIPMENT


1.       Cat 963 Track Loader (S/N 74PT5826)

2.       Cat D8N Dozer (S/N9TC04454)

3.       Cat 416B Rubber-Tired Backhoe (S/N 8ZK10467)

4.       Cat 12G Grader (S/N Unknown)

5.       Cat 988B Coal Loader (S/N 50W09880)

6.       Low-boy truck and trailer (S/N Unknown)


<PAGE>


                                 SCHEDULE 1.1(P)

                               OWNED REAL PROPERTY


Being all that  real  property  conveyed  from  Tennessee  Mining,  Inc.  to LCC
Tennessee,  LLC, pursuant to that certain Special Corporate Warranty Deed, filed
of record in the Office of the Register of Deeds for Anderson County, Tennessee,
at Book No. 1377, Page No. 2337.


<PAGE>


                                 SCHEDULE 1.1(Q)

                                     PERMITS

1.       OSM Permit 3020

2.       OSM Permit 3021

3.       OSM Permit 3022

4.       OSM Permit 3023

5.       OSM Permit 3024

6.       OSM Permit 3026

7.       All NPDES permits and other air, water and similar  permits  related to
         the permits listed above.


<PAGE>


                                  SCHEDULE 2.7

                         PERMIT NO.             BOND AMOUNT
                         ----------             -----------

                            3020                  $ 21,500
                            3022                    52,000
                            3023                   207,000
                            3024                   165,200
                            3026                    92,500


<PAGE>


                                  SCHEDULE 5.7

                         MINIMUM INSURANCE REQUIREMENTS


REQUIRED INSURANCE COVERAGE

Workers' Compensation                             Statutory
Employer's Liability (per accident)               $1,000,000

Commercial General Liability (per occurrence)     $1,000,000 CSL
Bodily Injury & Property Damage                   (Combined Single Limit)

Automobile Liability                              $1,000,000 CSL
Bodily Injury & Property Damage

Excess or Umbrella Liability                      $5,000,000 CSL
(Inclusive of above limits)

Coverage on the Improvements                      $1,000,000 CSL

THE FOLLOWING APPLY TO ALL POLICIES:

         1.       Seller shall be included as additional insured on all policies
                  (except Workers' Compensation coverage).

         2.       All policies shall contain a Waiver of Subrogation in favor of
                  Seller and its insurers.

         3.       Seller  shall   receive  ten  (10)  days  written   notice  of
                  cancellation or any material change.

         4.       Coverage  under all  insurance  required  to be carried by the
                  holder of, or operator under,  the Permits or their Affiliates
                  or agents  shall be primary  insurance  exclusive of any other
                  existing valid and collectible insurance.

         5.       All policies described herein shall have adequate  territorial
                  and  navigation  limits for the location of the  operations of
                  the Permit  holder or operator or their  Affiliates  or agents
                  under the Permits.

         6.       All  insurance  shall be with  insurers  acceptable  to Seller
                  (insurer  shall be a  licensed  or  registered  company in the
                  State of Tennessee  and must have a Best's  rating of at least
                  B+7).

         A.       WORKERS' COMPENSATION AND EMPLOYER'S LIABILITY shall include:

         1.       Statutory Workers' Compensation for state of hire or operation
                  including Federal Black Lung Benefits

         2.       Employer's Liability


<PAGE>


         3.       Voluntary Compensation

         4.       Alternate Employer or Borrowed Servant Liability

         B.       COMMERCIAL GENERAL LIABILITY (Occurrence Form) shall include:

         1.       Premises/Operations

         2.       Independent Contractors

         3.       Personal Injury

         4.       Products/Completed Operations

         5.       Blanket Contractual Liability

         6.       Cross Liability/Severability of Interests

         7.       Explosion, Collapse and Underground

         8.       Subsidence Coverage

         C.       COMPREHENSIVE AUTOMOBILE LIABILITY shall include:

         1.       Owned vehicles

         2.       Non Owned vehicles

         3.       Hired vehicles

         D.       EXCESS LIABILITY (Occurrence Form) shall comply with the Terms
                  and Conditions of the following underlying coverages:

         1.       Employer's Liability

         2.       Commercial General Liability

         3.       Comprehensive Automobile Liability

Seller  reserves the right to require  certified  copies of any or all policies.
The above minimum insurance requirements are subject to change at the discretion
of Seller.