EXHIBIT 10.1


                           AMENDMENT NO. 2 AND WAIVER

         This AMENDMENT NO. 2 AND WAIVER  ("Amendment") dated as of November 12,
2008 (the "Effective Date"), is among National Coal of Alabama, Inc., an Alabama
corporation  (the  "Company"),  the Holders (as  defined  below),  and TCW Asset
Management Company,  as administrative  agent for the Holders (in such capacity,
the "Administrative Agent").

                                    RECITALS

     A.   The  Company,  certain  holders  party  thereto from time to time (the
"Holders"),  and the  Administrative  Agent  are  parties  to the Note  Purchase
Agreement  dated as of October 19, 2007, as amended by the Amendment No. 1 dated
as of August 13, 2008 (as amended,  restated or otherwise  modified from time to
time, the "Note Purchase Agreement").

     B.   The Company, the Holders and the Administrative Agent wish to, subject
to the terms and conditions of this  Amendment,  (1) provide for a waiver of the
Event of Default arising as a result of the Company's failure to comply with the
Current  Ratio  covenant set forth in the Note  Purchase  Agreement and (2) make
certain amendments to the Note Purchase Agreement.

         THEREFORE, the Company, the Holders and the Administrative Agent hereby
agree as follows:

         SECTION 1. DEFINED TERMS. As used in this Amendment,  each of the terms
defined in the opening  paragraph and the Recitals above shall have the meanings
assigned to such terms therein. Each term defined in the Note Purchase Agreement
and used herein without  definition shall have the meaning assigned to such term
in the Note Purchase Agreement, unless expressly provided to the contrary.

         SECTION 2. OTHER DEFINITIONAL PROVISIONS.  Article, Section,  Schedule,
and  Exhibit  references  are to Articles  and  Sections  of and  Schedules  and
Exhibits to this  Amendment,  unless  otherwise  specified.  All  references  to
instruments,  documents,  contracts,  and  agreements  are  references  to  such
instruments,  documents,  contracts,  and agreements as the same may be amended,
supplemented,  and  otherwise  modified  from  time to  time,  unless  otherwise
specified.  The words "hereof",  "herein",  and "hereunder" and words of similar
import when used in this Amendment  shall refer to this Amendment as a whole and
not to any particular  provision of this Amendment.  The term "including"  means
"including, without limitation,".  Paragraph headings have been inserted in this
Amendment as a matter of  convenience  for reference  only and it is agreed that
such  paragraph  headings are not a part of this Amendment and shall not be used
in the interpretation of any provision of this Amendment.

         SECTION 3. WAIVER OF EXISTING DEFAULT.  The Company hereby acknowledges
the  existence  of the Event of  Default  arising  as a result of the  Company's
failure to comply with the Current  Ratio  covenant set forth in Section 8.12 of
the Note Purchase Agreement for the fiscal quarter ended September 30, 2008 (the
"Existing  Default").  The  Holders  hereby  agree,  subject  to the  terms  and
conditions of this Amendment,  to waive the Existing Default.  The waiver by the
Holders  described in this Section 3 is contingent upon the  satisfaction of the
conditions  precedent  set forth below and is limited to the  Existing  Default.


<PAGE>


Such waiver is limited to the extent described herein and shall not be construed
to be a consent to or a permanent  waiver of Section  8.12,  or any other terms,
provisions,  covenants,  warranties or agreements contained in the Note Purchase
Agreement or in any of the other Note  Documents.  The Holders reserve the right
to exercise any rights and remedies  available  to them in  connection  with any
other present or future defaults with respect to the Note Purchase  Agreement or
any other provision of any Note Document. The description herein of the Existing
Default is based upon the information provided to the Holders on or prior to the
date  hereof  and  shall not be deemed to  exclude  the  existence  of any other
Default or Event of  Default.  The  failure of the Holders to give notice to the
Company or any of the other  Guarantors of any such other  Defaults or Events of
Default is not intended to be nor shall be a waiver thereof.  The Company hereby
agrees  and  acknowledges  that the  Holders  require  and will  require  strict
performance by the Company of all of its  obligations,  agreements and covenants
contained in the Note Purchase  Agreement and the other Note  Documents,  and no
inaction or action  regarding  any Default or Event of Default is intended to be
or shall be a waiver thereof.

         SECTION 4. AMENDMENTS TO NOTE PURCHASE AGREEMENT.

         (a)      Section 8.12 of the Note Purchase  Agreement is hereby deleted
                  in its entirety and replaced with the following:

                  SECTION  8.12.  CURRENT  RATIO.  (A) AT THE END OF THE  FISCAL
         QUARTERS  ENDING  DECEMBER 31, 2008 AND MARCH 31, 2009,  THE  COMPANY'S
         CURRENT RATIO WILL NOT BE LESS THAN 0.75 TO 1.00, AND (B) AT THE END OF
         EACH FISCAL  QUARTER  ENDING ON OR AFTER JUNE 30, 2009,  THE  COMPANY'S
         CURRENT RATIO WILL NOT BE LESS THAN 1.00 TO 1.00.

         (b)      Section 8.13 of the Note Purchase  Agreement is hereby deleted
                  in its entirety and replaced with the following:

                  SECTION 8.13.  DEBT TO EBITDA RATIO.  AT THE END OF ANY FISCAL
         QUARTER  LISTED IN THE  FOLLOWING  TABLE,  THE  RATIO OF (A)  COMPANY'S
         CONSOLIDATED  INDEBTEDNESS  AT THE END OF SUCH FISCAL  QUARTER,  TO (B)
         COMPANY'S  EBITDA FOR THE  FOUR-FISCAL  QUARTER PERIOD ENDING WITH SUCH
         FISCAL QUARTER, WILL BE EQUAL TO OR LESS THAN THE RATIO SET OUT IN SUCH
         TABLE OPPOSITE SUCH FISCAL QUARTER:


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<PAGE>


=================================================== ============================
                  FISCAL QUARTER                           MAXIMUM RATIO
--------------------------------------------------- ----------------------------
FOR THE FISCAL QUARTER ENDING MARCH 31, 2009                4.50 TO 1.00
--------------------------------------------------- ----------------------------
FOR THE FISCAL QUARTERS ENDING JUNE 30, 2009 AND            4.25 TO 1.00
SEPTEMBER 30, 2009
--------------------------------------------------- ----------------------------
FOR THE FISCAL QUARTERS ENDING DECEMBER 31, 2009            4.00 TO 1.00
AND MARCH 31, 2010
--------------------------------------------------- ----------------------------
FOR THE FISCAL QUARTERS ENDING JUNE 30, 2010 AND            3.75 TO 1.00
SEPTEMBER 30, 2010
--------------------------------------------------- ----------------------------
FOR EACH FISCAL QUARTER ENDING THEREAFTER                   3.50 TO 1.00
=================================================== ============================

         PROVIDED THAT (i) WITH RESPECT TO THE FISCAL  QUARTER  ENDING MARCH 31,
         2009,  COMPANY'S  EBITDA SHALL BE CALCULATED BY  MULTIPLYING  EBITDA OF
         COMPANY FOR THE TWO FISCAL  QUARTER  PERIOD THEN ENDED BY TWO, AND (ii)
         WITH  RESPECT TO THE FISCAL  QUARTER  ENDING JUNE 30,  2009,  COMPANY'S
         EBITDA SHALL BE  CALCULATED  BY  MULTIPLYING  EBITDA OF COMPANY FOR THE
         THREE FISCAL QUARTER PERIOD THEN ENDED BY 4/3.

         (c)      Section 8.18 of the Note Purchase  Agreement is hereby deleted
                  in its entirety and replaced with the following:

                  SECTION 8.18. MINIMUM EBITDA. AT THE END OF THE FISCAL QUARTER
         ENDING  DECEMBER  31,  2008,  COMPANY'S  EBITDA FOR THE FISCAL  QUARTER
         PERIOD THEN ENDED WILL BE GREATER THAN OR EQUAL TO $3,000,000.

         SECTION 5.   COMPANY   REPRESENTATIONS  AND  WARRANTIES.   The  Company
represents and warrants that: (a) the representations  and warranties  contained
in the Note Purchase Agreement, and the representations and warranties contained
in the other Note  Documents,  are true and correct in all material  respects on
and as of the Effective  Date as if made on as and as of such date except to the
extent that any such  representation or warranty  expressly relates solely to an
earlier date, in which case such  representation or warranty is true and correct
in all material  respects as of such earlier  date;  (b) after giving  effect to
this  Amendment,  no Default has occurred and is continuing;  (c) the execution,
delivery and  performance of this  Amendment are within the corporate  power and
authority of the Company and have been duly authorized by appropriate  corporate
and governing action and proceedings;  (d) this Amendment constitutes the legal,
valid, and binding obligation of the Company  enforceable in accordance with its
terms, except as limited by applicable bankruptcy,  insolvency,  reorganization,
moratorium,  or similar laws  affecting  the rights of creditors  generally  and
general principles of equity; (e) there are no governmental or other third party
consents,  licenses and  approvals  required in connection  with the  execution,
delivery,  performance,  validity and enforceability of this Amendment;  and (f)
the Liens under the Security  Documents are valid and  subsisting and secure the
Company's obligations under the Note Documents.


                                       3
<PAGE>


         SECTION 6.  CONDITIONS TO  EFFECTIVENESS.  This Amendment  shall become
effective  and  enforceable  against the parties  hereto,  and the Note Purchase
Agreement  shall be amended  as  provided  herein,  upon the  occurrence  of the
following conditions precedent

         (a)      The Administrative Agent shall have received multiple original
                  counterparts,  as requested by the  Administrative  Agent,  of
                  this Amendment duly and validly executed and delivered by duly
                  authorized officers of the Company, the Administrative  Agent,
                  and the Required Holders.

         (b)      No Default  shall have  occurred and be  continuing  as of the
                  Effective Date.

         (c)      The  representations and warranties in this Amendment shall be
                  true and correct in all material respects.

         (d)      The Company shall have paid all costs and expenses  which have
                  been invoiced and are payable  pursuant to Section 12.4 of the
                  Note Purchase Agreement.

         SECTION 7.  ACKNOWLEDGMENTS AND AGREEMENTS.

         (a)      The  Company   acknowledges   that  on  the  date  hereof  all
                  Obligations are payable without defense, offset,  counterclaim
                  or recoupment.

         (b)      The  Administrative  Agent and the  Holders  hereby  expressly
                  reserve all of their  rights,  remedies,  and claims under the
                  Note Documents. Other than as expressly set forth in Section 3
                  above,  nothing in this Amendment shall constitute a waiver or
                  relinquishment  of (i) any  Default or Event of Default  under
                  any of the Note Documents,  (ii) any of the agreements,  terms
                  or conditions  contained in any of the Note  Documents,  (iii)
                  any  rights or  remedies  of the  Administrative  Agent or any
                  Holder with respect to the Note Documents,  or (iv) the rights
                  of the Administrative  Agent or any Holder to collect the full
                  amounts owing to them under the Note Documents.

         (c)      Each of the Company,  the Administrative Agent and the Holders
                  does hereby  adopt,  ratify,  and  confirm  the Note  Purchase
                  Agreement, as amended hereby, and acknowledges and agrees that
                  the Note Purchase Agreement, as amended hereby, is and remains
                  in full force and  effect,  and the Company  acknowledges  and
                  agrees that its  liabilities  and  obligations  under the Note
                  Purchase Agreement, as amended hereby, are not impaired in any
                  respect by this Amendment.

         (d)      From and after the Effective  Date, all references to the Note
                  Purchase Agreement and the Note Documents shall mean such Note
                  Purchase  Agreement and such Note Documents as amended by this
                  Amendment.

         (e)      This  Amendment  is a Note  Document  for the  purposes of the
                  provisions of the other Note Documents.  Without  limiting the
                  foregoing,  any  breach of  representations,  warranties,  and
                  covenants  under this Amendment shall be a Default or Event of
                  Default, as applicable, under the Note Purchase Agreement.

         SECTION 8. COUNTERPARTS.  This Amendment may be signed in any number of
counterparts,  each of  which  shall  be an  original  and all of  which,  taken
together,  constitute a single  instrument.  This  Amendment  may be executed by
facsimile signature and all such signatures shall be effective as originals.


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<PAGE>


         SECTION 9. SUCCESSORS AND ASSIGNS. This Amendment shall be binding upon
and inure to the benefit of the parties hereto and their  respective  successors
and assigns permitted pursuant to the Note Purchase Agreement.

         SECTION 10.  INVALIDITY.  In the  event  that  any  one or  more of the
provisions  contained in this  Amendment  shall for any reason be held  invalid,
illegal  or  unenforceable  in  any  respect,  such  invalidity,  illegality  or
unenforceability shall not affect any other provision of this Amendment.

         SECTION  11.  GOVERNING  LAW.  This  Amendment  shall be deemed to be a
contract made under and shall be governed by and  construed in  accordance  with
the laws of the State of New York.

                            [SIGNATURE PAGES FOLLOW.]


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<PAGE>


         EXECUTED effective as of the date first above written.


COMPANY:                            NATIONAL COAL OF ALABAMA, INC.,
                                    an Alabama corporation



                                    By:     /s/ Michael R. Castle
                                            ------------------------------
                                    Name:       Michael R. Castle
                                    Title:      SVP/CFO


                                       6
<PAGE>


ADMINISTRATIVE AGENT:               TCW ASSET MANAGEMENT COMPANY, as
                                    Administrative Agent


                                    By:     /s/ Richard Punches
                                            ------------------------------
                                    Name:   Richard Punches
                                    Title:  VP


                                    By:     /s/ Curt S. Taylor
                                            ------------------------------
                                    Name:   Curt S. Taylor
                                    Title:  SVP


                                       7
<PAGE>


HOLDERS:                            TCW ENERGY FUND XIV, L.P., a Delaware
                                    limited partnership

                                    By: TCW Asset Management Company, its
                                        general partner


                                    By:     /s/ Richard Punches
                                            ------------------------------
                                    Name:   Richard Punches
                                    Title:  VP


                                    By:     /s/ Curt S. Taylor
                                            ------------------------------
                                    Name:   Curt S. Taylor
                                    Title:  SVP


                                    TCW ENERGY FUND XIV-A, L.P., a Delaware
                                    limited partnership

                                    By: TCW Asset Management Company, its
                                        general partner


                                    By:     /s/ Richard Punches
                                            ------------------------------
                                    Name:   Richard Punches
                                    Title:  VP


                                    By:     /s/ Curt S. Taylor
                                            ------------------------------
                                    Name:   Curt S. Taylor
                                    Title:  SVP


                                       8
<PAGE>


                                    TCW ENERGY FUND XIV-B, L.P., a Delaware
                                    limited partnership

                                    By: TCW Asset Management Company, its
                                        general partner


                                    By:     /s/ Richard Punches
                                            ------------------------------
                                    Name:   Richard Punches
                                    Title:  VP


                                    By:     /s/ Curt S. Taylor
                                            ------------------------------
                                    Name:   Curt S. Taylor
                                    Title:  SVP


                                    TCW ENERGY FUND XIV (CAYMAN), L.P., a
                                    Delaware limited partnership

                                    By: TCW Asset Management Company
                                        International Limited, its general
                                        partner


                                    By:     /s/ Richard Punches
                                            ------------------------------
                                    Name:   Richard Punches
                                    Title:  VP


                                    By:     /s/ Curt S. Taylor
                                            ------------------------------
                                    Name:   Curt S. Taylor
                                    Title:  SVP


                                       9