EXHIBIT 10.3

                 INSTALLMENT SALE CONTRACT (SECURITY AGREEMENT)

PURCHASER(S):                               SELLER (DEALER):
NATIONAL COAL CORPORATION                   STOWERS MACHINERY CORPORATION
8915 GEORGE WILLIAMS RD.                    6301 RUTLEDGE PIKE
KNOXVILLE, TN 37923                         P O BOX 14802
                                            KNOXVILLE, TN 37914-1802
COUNTY: KNOX
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Subject to the terms and conditions set forth below and on the following page(s)
hereof,  Seller  hereby  sells the  equipment  described  below  (the  "Unit" or
"Units") to Purchaser,  and Purchaser (if more than one, jointly and severally),
having been  offered  both a cash sale price and a time sale price,  hereby buys
the Units  from  Seller on a time sale basis
--------------------------------------------------------------------------------
NEW (IF USED)                                                         DELIVERED
OR FIRST MODEL    DESCRIPTION OF UNITS              SERIAL #           CASH SALE
USED     USED                                                             PRICE
--------------------------------------------------------------------------------

(1) USED          Caterpillar MOTOR GRADER          93UG3654          107,011.00
(1) USED          Caterpillar WHEEL LOADER          4FR00460          459,987.00
(1) USED          Caterpillar TRACK-TYPE TRACTOR    2VD01732          381,100.00


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FIRST  DESCRIPTION OF ADDITIONAL SECURITY
USED    (MAKE, MODEL & SERIAL NUMBER)           Sub-Total          $  948,098.00
-----------------------------------------       Sales Tax          $        0.00
                                             1. Total Cash Sale
                                                  Price            $  948,098.00
                                                Cash Down Pay          77,131.44
                                                Net Trade-in Allow          0.00
-----------------------------------------   2.  Total Down Payment $   77,131.44
FIRST  DESCRIPTION OF TRADE-IN EQUIPMENT    3.  Unpaid Balance of
USED    (MAKE, MODEL & SERIAL NUMBER)             Cash Prices (1+2)   870,966.56
-----------------------------------------   4.  Official Fees
                                                  (Specify)        $        0.00
                                                DOC FEES                    0.00
                                            5.  Physical Damage
                                                  Insurance        $
-----------------------------------------   6.  Principal Balance
                                                  Amount Financed)
                                                  3+4+5)           $  870,966.56
Trade-in Value                      0.00    7.  Finance Charge
Less Owing to (___ of a ____)                    (Time Price
                                                 Differential)     $   82,464.49
Net Trade-in Allowance              0.00    8.  Time Balance
                                                 (Total of Payments)
Location of Units:                               (6+7)             $  953,613.05
1308 JOE HINTON ROAD, UNIT 1                    Time Sale Balance
KNOXVILLE, TN 37931                         9.   (Total of Payment
                                                 Price) (2+8)      $1,030,744.49
                                           10.  Annual Percentage
                                                 Rate                      7.65%
                                           11.  Date  FINANCE CHARGE
                                                 begins to accrue: 7/14/05

Purchaser  hereby  sells and  conveys  to Seller  the above  described  Trade-in
Equipment  and warrants it to be free and clear of all claims,  liens,  security
interests and encumbrances except to the extent shown above.
1.  PAYMENT:  Purchaser  shall pay to Seller,  at P.O.  Box 730681,  DALLAS,  TX
35373-0681 or such other location Seller designates in writing, the Time Balance
(item 8 above) as follows [check (a) or (b)]:

___  (a) in 30  equal  monthly  installments  of  $0.00  each,  with  the  first
installment  due on 8/14/2005,  and the balance of the  installments  due on the
like day of each month  thereafter,  (except no payments shall be due during the
month(s) of (_____ n/_____)), until the entire indebtedness has been paid; or

___  (b) in accordance with the Payment Schedule attached to this Contract.
(Provisions of section 1 continued on next page.)


<PAGE>


SEE FOLLOWING  PAGES(S) FOR ADDITIONAL  TERMS AND CONDITIONS WHICH ARE A PART OF
THIS CONTRACT.

LIABILITY  INSURANCE  COVERAGE FOR BODILY  INJURY AND PROPERTY  DAMAGE CAUSED TO
OTHERS IS NOT INCLUDED IN THIS CONTRACT.

NOTICE TO PURCHASER:  (1) DO NOT SIGN THIS CONTRACT  BEFORE YOU READ IT OR IF IT
CONTAINS ANY BLANK SPACED; (2) YOU ARE ENTITLED TO AN EXACT COPY OF THE CONTRACT
YOU SIGN;  (3) UNDER  THE LAW YOU MAY HAVE THE RIGHT TO PAY OFF IN  ADVANCE  THE
FULL  AMOUNT DUE AND TO OBTAIN A PARTIAL  REFUND OF THE FINANCE  CHARGE;  (40 IF
THIS  CONTRACT IS NOT  EXECUTED BY  PRUCHASES  ON OR BEFORE THE  CONTRACT MAY BE
CONSIDERED NULL AND VOID BY SELLER.


<PAGE>


ATTACHMENT TO INSTALLMENT SALE CONTRACT (SECURITY AGREEMENT)

                           Dated as of __________________________
                           between
                           NATIONAL COAL CORPORTION ("Purchaser")
                           and
                           STOWERS MACHINARY CORPORATION ("Seller")

PAYMENT SCHEDULE

Payment Dates:                Payment Numbers               Payment Amounts Due

begin 8/14/2005               1     -      5                   $   44,238.56
begin 1/14/2006               6     -     30                   $   29,296.81










NATIONAL COAL CORPORATION                 STOWERS MACHINERY CORPORATION
(Purchaser)                               (Seller)

Signature   /s/ Jon E. Nix                Signature  /s/ David Waddilore
            -------------------------                ------------------------
Name (PRINT)    Jon E. Nix                Name (PRINT)   David Waddilore

Title           CEO                       Title          Executive V.P.

Date            7/5/05                    Date           7/6/05

<PAGE>


                         ADDITIONAL TERMS AND CONDITIONS

1. PAYMENT  (continued):  Purchaser  shall pay to Seller a late  payment  charge
equal to the lesser of (1) the  highest  charge  allowed by law or (b) 5% of the
amount of any payment  (including  any  accelerated  payment)  not made when due
under this Contract (or such later date as may be required by  applicable  law).
Upon  prepayment  in full of  acceleration  of the total  unpaid  Time  Balance,
Purchaser  shall receive a rebate of the unearned  portion of the Finance Charge
computed  on an  actuarial  basis less a  processing  fee.  Except as  otherwise
expressly provided herein,  the obligations of Purchaser  hereunder shall not be
affected by any defect in, damage to, loss of or interference with possession or
use of any Unit, by the  attachment of any lien or claim to any Unit, or for any
other cause.

2. DISCLAMER OF WARRANTIES: Purchaser acknowledges and agrees that Seller is not
the  manufacturer  of the Unit(s) and the Purchaser has selected each Unit based
on Purchaser's own judgment without any reliance whatsoever on any statements or
representations made by Seller. AS BETWEEN SELLER AND PURCHASE,  THE UNIT(S) ARE
PROVIDED "AS IS" WITHOUT ANY WATTANTIES OF ANY KIND.  PURCHASER HEREBY EXPRESSLY
DISCLAIMS a) ALL WARRANTIES OF MERCHANTABILITY, b) ALL WARRANTIES OF FITNESS FOR
A PARTICULAR  PURPOSE,  AND c) ALL WARRANTEIS AGAINST  INFRINGEMENT OR THE LIKE.
Seller assigns to Purchaser its interest in any of the manufacturer's warranties
on the Unit(s).

3.  POSSESSION,  USE AND  MAINTENANCE:  Purchaser  shall  not  (a) use any  Unit
improperly, carelessly, unsafely or in violation of any law or regulation or for
personal,  family,  or  household  purposes  or for any  purpose  other than the
Purchaser's business (including  agricultural  business);  (b) permit the use of
any Unit by anyone other than Purchaser or change the permanent  location of any
Unit from the county and state  specified  above  without  first  prior  written
consent of Seller; or (c) sell, lease, assign or transfer,  or create, or suffer
to exist any lien, claim,  security interest or encumbrance on any of its rights
hereunder  or in any Unit.  The Units are and  shall  remain  personal  property
irrespective  of their use or manner of attachment to realty.  Upon prior notice
to Purchaser,  Seller or its agent shall have the right (but not the obligation)
at all  reasonable  times to inspect  any Unit.  Purchaser  shall at its expense
maintain the Units in good operating order, repair and condition. Purchase shall
not alter  any Unit or affix any  equipment  to any Unit if such  alteration  or
addition  would impair the originally  intended  function or reduce the value of
such Unit.  Any  alteration or addition to any Unit shall be at the sole risk of
Purchaser.

4. TAXES:  Purchaser shall promptly pay all taxes,  assessments,  fees and other
charges  when  levied  or  assessed  against  any Unit or the  ownership  or use
thereof, on this Contract or any payments made or to be made to Seller.

5. WAIVER AND INDEMNITY:  PURCHASES  HEREBY AGREES TO RELEASE DEFEND,  INDEMNIFY
AND HOLD HARMLESS SELLER, ITS DIRECTORS, OFFICERS, EMPLOYEES, AGENTS AND ASSIGNS
FROM AND AGAINST ANY CLAIMS OF  PURCHASER  OR THIRD  PARTIES,  INCLUDING  CLAIMS
BASED UPON BREACH OF CONTRACT,  BREACH OF  WARRANTY,  PERSONAL  INJURY,  PROPETY
DAMAGE,


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STRICT  LIABILITY  OR  NEGLIGENCE,  FOR ANY LOSS,  DAMAGE OR INJURY  CAUSE BY OR
RELATING TO THE DESIGN, MANUFACTURE,  SELECTION, DELIVERY, CONDITION, OPERATION,
USE, OWNERSHIP,  MAINTENANCE OR REPAIR OF ANY UNIT. FURTHER, PURCHASER AGREES TO
BE RESPONSIBLE FOR ALL COSTS AND EXPENSES, INCLUDING REASONABLE ATTORNEY'S FEES,
INCURRED BY SELLER OR ITS DIRECTORS,  OFFICERS, EMPLOYEES, AGENTS AND ASSIGNS IN
DEFENDING SUCH CLAIMS OR IN ENFORCING THIS PROVISION. UNDER NO CONDTION OR CAUSE
OF ACTION SHALL SELLER BE LIABLE FOR ANY LOSS OF ACTUAL OR ANTICIPATED  BUSINESS
OR PROMPTS OR ANYSPECIAL, INDIRECT OR CONSEQUENTIAL DAMAGES.

6. INSURANCE:  Purchaser,  at it expense, shall keep each Unit and all equipment
listed as Additional Security insured against all risks for their full insurable
value and shall maintain  comprehensive  public liability insurance in an amount
reasonably  acceptable to Seller.  All such insurance  shall be in such form and
with such  companies  as Seller  shall  reasonably  approve,  shall be  primary,
without right of contribution  from any insurance  carried by Seller,  and shall
provide that such  insurance may not be cancelled or altered so as to affect the
interest of Seller without at least 30 days' prior written notice to Seller. All
insurance  covering loss or damage too the Units and  Additional  Security shall
name  Seller  (or its  designee)  as loan  payee and be payable to Seller as its
Interest may appear.  Purchaser  agrees to notify Seller of any occurrence which
may  become  the  basis  of an  insurance  claim  hereunder  and not to make any
adjustments with insurers  without Seller's prior written consent.  Prior to the
first  delivery  of any Unit to  Purchase,  Purchaser  shall  deliver  to Seller
satisfactory evidence of such insurance coverage.

7.  EVENTS OF  DEFAULT:  Each of the  following  shall  constitute  an "Event of
Default" hereunder: (a) Purchaser shall fail to make any payments to Seller when
due  hereunder  or fail to observe or perform any other  covenant,  agreement or
warranty  made by purchaser  hereunder;  (b) any  representation  or warranty of
Purchaser  obtained herein or in any document  furnished to Seller in connection
herewith shall be incorrect or misleading  when made; (c) any Unit or additional
security shall become lost, stolen,  destroyed irreparably damaged or subject to
any sale, lien, claim, security interest or encumbrance (either than in favor of
Seller or its assignee);  (d) any default shall occur under any other  agreement
between  Purchaser  and Seller;  (e) Purchaser or any guarantee of this Contract
shall cease to do business, become insolvent, make an assignment for the benefit
of  creditors  or  file  any  petition  under  any  bankruptcy,  reorganization,
insolvency  or moratorium  law, or any other law for the relief of debtors;  (f)
any  involuntary  petition shall be filed under any bankruptcy  statute  against
Purchaser or any guarantor of the Contract or any  receiver,  trustee or similar
official shall be appointed to take possession of the properties of Purchaser or
any guarantor of this Contract unless such petitioner  appointment  ceases to be
in  effect  within 30 days of said  filing  or  appointment;  (g)  Seller  shall
reasonably  deem itself to be insecure;  or (h) any breach or repudiation by any
guarantor  shall occur under any guaranty  obtained by Seller in connection with
this Contract.

8. REMEDIES:  If any event of Default shall occur, Seller may, at its option, do
any one or more of the  following:  (a) Declare all amounts due or in become due
under this  Contract,  excluding  any  unearned  portion of the Finance  Charge,
immediately  due and payable;  (b) recover any  additional  damages and expenses
sustained by Seller by reason the breach of any covenant,


<PAGE>


representation or warranty contained in this Contract;  (c) enforce the security
interest  granted  hereunder;  (d) without  notice,  liability or legal process,
enter upon the premises where any of the Units or additional  security maybe and
take  possession  thereof,  and 9e) require  Purchaser to assemble the Units and
additional  security and make them available to Seller at a place  designated by
Seller which is reasonably convenient to both parties. Time is of the essence of
this Contract.  Seller shall have all rights given to a secured party by law and
may retain all monies  theretofore  paid by Purchaser  hereunder as compensation
for the  reasonable  use of the Units by  Purchaser.  Seller may, at its option,
undertake  commercially  reasonable  efforts  to sell the Units  and  additional
security,  and the  proceeds  of any such  sale  shall  be  applied:  First,  to
reimburse Seller for all reasonable expenses of retaking, holding, preparing for
sale,  and selling the Units and  additional  security,  including all taxes and
reasonable  attorneys'  fees, and second,  to the extent not previously  paid by
Purchaser,  in pay Seller all amounts then due or accrued  under this  contract,
including any accelerated  payments and later payment charges. Any surplus shall
be paid  to the  person  entitled  thereto.  Purchaser  shall  promptly  pay any
deficiency to Seller.  Purchase acknowledges that sales for each or on credit to
a wholesaler,  retailer or user of the Units or additional security, and with or
without the Units or additional  security  being  present at such sale,  are all
commercially reasonable.  Purchaser agrees to pay all reasonable attorneys' fees
(in the extent permitted by applicable law) and all costs and expenses  incurred
by Seller in enforcing  this  Contract.  The remedies  provided  herein shall be
cumulative  and in  addition  to all  other  remedies  at law or in  equity.  If
Purchaser  fails to perform any of its obligations  under this Contract,  Seller
may (but need  not) at any time  thereafter  perform  such  obligation,  and the
expenses  incurred in connection  therewith  shall be payable by Purchaser  upon
demand.

9. SECURITY INTEREST; PRUCHASE ASSURANCES AND REPRESENTATIONS: To secure payment
of  Purchaser's  indebtedness  to Seller  hereunder and the  performance  of all
obligations  of  Purchaser  hereunder,  Purchaser  hereby  grants  to  Seller  a
continuing  security  interest  in the  Units,  and in the  equipment,  of  any,
described as Additional  Security on the front of this  Contract,  including all
attachments,  accessories  and optional  features for such Units and  Additional
Security (whether or not installed therein) and all substitutions, replacements,
additional and accessions thereto and proceeds off all the foregoing  including,
but not limited to,  proceeds to the form of chattel paper.  Purchaser  will, at
its expense, do any act and execute,  acknowledge,  deliver,  file, register and
record any Documents  which Seller deems  desirable in its discretion to protect
Seller's security interest and Seller's rights and benefits under this Contract.
Purchaser hereby irrevocably appoints Seller as Purchaser's Attorney-in-Fact for
the signing and filing of such documents and authorizes Seller to delegate these
limited powers. Purchaser acknowledges the signature of Seller or said delegates
upon such documents to be the same as Purchaser's  own for all purposes and with
the present  intent to  authenticate  the  document.  Purchaser  represents  and
warrants to Seller that (a) Purchaser has the power to make, deliver and perform
under this Contract;  (b) the person  executing and delivering  this Contract is
authorized to so on behalf of Purchaser;  (c) this Contract  constitutes a valid
obligation of Purchaser,  legally  binding under and  enforceable  in accordance
with its terms, and (d) all credit, financial and other information submitted to
Seller in  connection  with this  Contract  is and  shall be true,  correct  and
complete.  Purchaser further represents and warrants to Seller that Purchaser is
and shall remain a Corporation  registered in the state of TENNESSEE  ("Business
Location");  and Purchaser will not change its form of business  organization or
business  Location  without  prior  written  notice to Seller.  10.  ASSIGNMENT;
COUNTERPARTS:  The rights and  remedies  of Seller  under this  Contract  may be
assigned by Seller at any time. If this Contract is assigned by Seller, the term
"Seller"  shall  thenceforth  mean  Seller's  assignee,  and  if  assigned  to a
partnership,  shall  thenceforth  mean such  partnership  and,  for  purposes of
Sections 2, 4, 5 and 6, each partner in such partnership. If notified by Seller,
Purchaser shall release any claim  Purchases may have against Seller  hereunder.
No assignment of this Contract or any right or obligation  hereunder may be made
by Purchaser without the prior written consent of Seller. This Contract shall be
binding upon and  (ILLEGIBLE)  to the benefit of Seller and  Purchaser and their
respective  successors  and  assigns.  Although  multiple  counterparts  of this
document  may  be  signed;  only  the  counterpart  accepted,  acknowledged  and
certified by  Caterpillar  Financial  Service  Corporation on the signature page
thereof as the original will continue original chattel paper.


<PAGE>


11. EFFECT OF WAIVER;  ENTIRE AGREEMENT;  MODIFICATION OF CONTRACT;  NOTICES: No
delay or omission to exercise any right or remedy  according to Seller hereunder
shall  impair any such right or remedy nor shall it be  conserved to be a waiver
of any  breach or default of  Purchaser.  Any waiver or consent by Seller  under
this  Contract  must  be  in  writing  specifically  set  forth.  This  Contract
completely  states the rights of Seller and Purchaser  with respect to the Units
and  supersedes  all prior  agreements  with  respect  thereto.  No variation or
modification  of this  Contract  shall be valid  unless in writing.  All notices
hereunder shall be in writing,  addressed to each party at the address set forth
on the front of this  Contract  or as such  other  address as may  hereafter  be
furnished in writing.

12.  APPLICABLE  LAW,  JURISDICTION  AND JURY  TRIAL  WAIVER,  PROVISIONS;  This
Agreement  shall be  governed  by and  construed  under the laws of the State of
Tennessee, without giving effect to the conflict-in-laws principles thereof, and
Purchaser  hereby  consents to one  jurisdiction  of any state or federal  court
located within the State of Tennessee. THE PARTIES HERETO HEREBY WAIVE THE RIGHT
TO TRIAL BY JURY IN ANY ACTION ARISING OUT OF OR RELATED TOT HIS AGREEMENT,  THE
OBLIGATIONS OR THE COLLATERAL.

13. SEVERBILITY,  SURVIVAL OF COVENANTS: If any provision of this Contract shall
be invalid under any applicable  law, such provision shall be deemed omitted but
the  reaming  provisions  hereof  shall  be given  effect.  All  obligations  of
Purchaser  under this contract  shall survive the  expiration or  termination of
this Contract to the extent required for their full observance and performance.

PURCHASER  ACKNOWLEDGES  RECEIPT  OF A FULLY  COMPLETED  COPY  OF THIS  CONTRACT
EXECUTED BY BOTH PURCHASER AND SELLER.


<PAGE>


Purchaser(s) and Seller have duly executed this Contract as of July 6, 2005.

Purchaser(s):                               Seller:

NATIONAL COAL CORPORTION                    STOWERS MACHINERY CORPORATION

Signature   /s/ Jon E. Nix                Signature  /s/ David Waddilore
            -------------------------                ------------------------
Name (PRINT)    Jon E. Nix                Name (PRINT)   David Waddilore

Title           CEO                       Title          Executive V.P.


<PAGE>


                  Rider No. 1 dated _____________, 2005 to the
                            Installment Sale Contract
                      Between Stowers Machinery Corporation
                          And National Coal Corporation

         WHEREAS,  Stowers  Machinery  Corporation  ("Dealer") and National Coal
Corporation  ("Purchaser") are parties to that certain Installment Sale Contract
(the "CONTRACT"), dated of even date herewith;

         WHEREAS,  Dealer will  assign the  Contract  to  Caterpillar  Financial
Services  Corporation ("CAT FINANCIAL")  pursuant to that certain  Assignment of
ISC dated of even date herewith; and

         NOW  THEREFORE,  in  consideration  of  the  mutual  agreements  herein
contained and other good and valuable consideration, the receipt and sufficiency
of which are hereby  acknowledged,  the parties hereto,  intending to be legally
bound, agree as follows:

1.       SECTION 7 is hereby  amended to  provide  for an  additional  "Event of
Default" (as defined in the Contract) as follows: "(i) a Change of Control shall
occur or exist.  "CHANGE IN CONTROL" shall mean the occurrence of one or more of
the following  events;  (a) any sale,  lease,  exchange or other  transfer (in a
single transaction or a series of related  transactions) of 51% of the assets of
Purchaser,   (b)  the   acquisition   of  ownership,   directly  or  indirectly,
beneficially  or of record,  by an person,  entity,  organization or group which
shall  collectively or individually  total 51% or more of the outstanding shares
of the voting  stock of  Purchaser;  or (c) Jon Nix shall no longer  serve as an
officer or director of Purchaser."

2.       Except as amended hereby, the Contract remains in full force and effect
and  enforceable in accordance  with its terms.  The amendments set forth herein
shall be effective as of the date hereof.

IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be executed
by their respective  officers duly authorized thereto as of the date first above
written.


NATIONAL COAL CORPORATION                 STOWERS MACHINERY CORPORATION

Signature   /s/ Jon E. Nix                Signature  /s/ David Waddilore
            -------------------------                ------------------------
Name (PRINT)    Jon E. Nix                Name (PRINT)   David Waddilore

Title           CEO                       Title          Executive V.P.


<PAGE>


                  CROSS-COLLATERAL AND CROSS-DEFAULT AGREEMENT

Caterpillar Financial Corporation

Gentlemen:

You have purchased one or more  conditional  sales contracts or lease agreements
(herein designated "Accounts"), arising from the bona fide sale, or lease to us,
by various  vendors or lessors of equipment  and  inventory  (herein  designated
"Collateral"),  and/or  you have made  direct  loans to, or  otherwise  extended
credit, to us evidenced Accounts creating security interests in Collateral.

In order to induce you to extend  our time of  payment on one or more  Accounts,
and/or to make additional loans to us, and/or to purchase  additional  Accounts,
and   inconsideration  of  you  so  doing,  and  for  other  good  and  valuable
consideration, the receipt of which we hereby acknowledge, we agree as follows:

All presently  existing and hereafter  acquired  Collateral in which you have or
shall have a security interest,  shall secure the payment and performance of all
of our liabilities and obligations to you, of every kind and character,  whether
joint or several, direct or indirect,  absolute or contingent,  due or to become
due,  and whether  under  presently  existing or hereafter  created  Accounts or
agreements, or otherwise.

We further  agree that your  security  interesting  the  property  covered by an
Account now held,  or hereafter  acquired by you,  shall not be  terminated,  in
whole or in part,  until and unless all  indebtedness  of every kind,  due or to
become  due,  owed by us to you are to  retain  your  security  interest  in all
property  covered by all  Accounts  held or acquired  by you,  as  security  for
payment and performance under each such Account,  notwithstanding  the fact that
one or more of such Accounts may become fully paid.

This instrument is intended to create  cross-default and cross-security  between
and among all the within described Accounts now owned, or hereafter acquired, by
you.

A default  under any Account or agreement  shall be deemed to be a default under
all other Accounts and agreements.  A default shall result if we fail to pay any
sum when due, on any Account or agreement, or if we beach any of the other terms
and conditions  thereof,  or if we became  insolvent,  cease to do business as a
going concern, make an assignment for the benefit of creditors, or if a petition
for a receiver  or if  bankruptcy  is filed by or  against  us, or if any of our
property  is seized,  attached  or levied  upon.  Upon our  default,  any or all
Accounts and  agreements  shall,  at your  option,  become  immediately  due and
payable,  without notice or demand to us or any other party  obligated  thereon,
and you shall  have,,  and may  exercise  any and all rights and  remedies  of a
secured party under the Uniform  Commercial  Code, as enacted in the  applicable
jurisdiction  and as  otherwise  granted  to you  under  any  Account  or  other
agreement.  We hereby waive, to the maximum extent  permitted by law, notices of
default,  notices of repossession  and sale or other  disposition of Collateral,
and all other  notices,  and in the event any such notice can not be waived,  we
agree that if such notice is mailed to us, postage prepaid, to


<PAGE>


the address  shown below at least five (5) days prior to the  exercise by you of
any of your rights or remedies,  such notice  shall be deemed to be  reasonable,
and shall fully satisfy any requirement for giving notice.

All rights  granted to you hereunder  shall be cumulative  and not  alternative,
shall be in addition to and shall in no manner  impair or affect your rights and
remedies under any existing Account, agreement, statute or rule of law.

This Agreement shall be governed by and construed under the laws of the State of
Tennessee, without giving effect to the conflict-of-laws principles thereof, and
we hereby  consent to the  jurisdiction  of any state or federal  court  located
within the State of  Tennessee.  THE PARTIES  HERETO  HEREBY  WAIVE THE RIGHT TO
TRIAL BY JURY IN ANY ACTION  ARISING  OUT OF OR RELATED TO THIS  AGREEMENT,  THE
OBLIGATIONS OR THE COLLATERAL.

This agreement may not be varied or altered, nor its provisions waived except by
your duly executed written agreement.  This agreement shall inure to the benefit
of  your  successors  and  assigns,   and  shall  be  binding  upon  our  heirs,
administrators, executors, legal representatives, successors and assigns.

IN  WITNESS  WHEREOF,  this  agreement  is  executed  this  ___________  day  of
______________.

NATIONAL COAL CORPORATION                 STOWERS MACHINERY CORPORATION

Signature   /s/ Jon E. Nix                Signature  /s/ David Waddilore
            -------------------------                ------------------------
Name (PRINT)    Jon E. Nix                Name (PRINT)   David Waddilore

Title           CEO                       Title          Executive V.P.