Document:

EXHIBIT 10.3
                                                               Execution Version

                             INTERCREDITOR AGREEMENT

         This  INTERCREDITOR  AGREEMENT  is dated as of October  12,  2006,  and
entered into by and between GUGGENHEIM  CORPORATE FUNDING,  LLC, in its capacity
as  administrative  agent for the  holders  of the First  Lien  Obligations  (as
defined  below)  (including  its  successors  and assigns from time to time, the
"FIRST LIEN AGENT"), and WELLS FARGO BANK,  N.A.("TRUSTEE"),  in its capacity as
trustee and collateral  agent for the holders of the Second Lien Obligations (as
defined  below)  (including  its  successors  and assigns from time to time, the
"SECOND  LIEN  AGENT"),   and  acknowledged  and  agreed  to  by  NATIONAL  COAL
CORPORATION.,  a Tennessee  corporation (the "COMPANY"),  NATIONAL COAL CORP., a
Florida  corporation  ("HOLDINGS")  and each of the other Guarantors (as defined
below).  Capitalized terms used herein but not otherwise defined herein have the
meanings set forth in SECTION 1 below.

                                    RECITALS

         WHEREAS,  the Company,  as borrower (in such capacity,  the "FIRST LIEN
DEBTOR"), and the subsidiaries of the Company party thereto from time to time as
guarantors  (collectively,  the "FIRST LIEN  GUARANTORS"),  the lender(s)  party
thereto,  and GUGGENHEIM  CORPORATE FUNDING,  LLC, as the First Lien Agent, have
entered  into  that  certain  Credit  Agreement,  dated as of  October  12 2006,
providing  for  loans to the  First  Lien  Debtor  thereunder  (as  Modified  or
Refinanced from time to time pursuant to a Permitted Modification or a Permitted
Refinancing, the "FIRST LIEN FINANCING AGREEMENT");

         WHEREAS,  as security  for the First Lien  Obligations,  the First Lien
Debtor  executed  and  delivered,  among  other  instruments,  those  First Lien
Collateral  Documents  identified  on Exhibit B attached  hereto and made a part
hereof,  which  instruments were recorded in the recording offices as identified
on Exhibit B hereto;

         WHEREAS,  the Company,  as issuer of the Notes (defined below) (in such
capacity,  the "SECOND LIEN  DEBTOR";  the First Lien Debtor and the Second Lien
Debtor,  collectively,  the "DEBTOR"), and the subsidiaries of the Company party
thereto  from  time  to time  as  guarantors  (collectively,  the  "SECOND  LIEN
GUARANTORS";   the  First  Lien  Guarantors  and  the  Second  Lien  Guarantors,
collectively,  the "Guarantors"),  the purchasers party thereto, and WELLS FARGO
BANK, N.A., as Trustee,  have entered into that certain  Indenture,  dated as of
December  29, 2005 (the  "INDENTURE");  pursuant to which the Second Lien Debtor
has issued its 10.5% Senior  Secured Notes due 2010 (the  "NOTES"),  which Notes
are guaranteed by the Second Lien Guarantors (the "SECOND LIEN GUARANTEES");

         WHEREAS,  as security for the Second Lien Obligations,  the Second Lien
Debtor  executed  and  delivered,  among other  instruments,  those  Second Lien

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Collateral  Documents  identified  on Exhibit C attached  hereto and made a part
hereof,  which  instruments were recorded in the recording offices as identified
on Exhibit C hereto;

         WHEREAS, the parties hereto intend that the First Lien Obligations will
be secured on a first priority basis by Liens on the Common Collateral  pursuant
to the terms of the First Lien Documents;

         WHEREAS,  the parties  hereto  intend that the Second Lien  Obligations
will be secured  on a second  priority  basis by Liens on the Common  Collateral
pursuant to the terms of the Second Lien Collateral Documents; and

         WHEREAS,  the  First  Lien  Documents  and the  Second  Lien  Documents
provide,  among other things,  that the parties  thereto shall set forth in this
Agreement  their  respective  rights  and  remedies  with  respect to the Common
Collateral;

         NOW, THEREFORE, in consideration of the foregoing, the mutual covenants
and obligations herein set forth and for other good and valuable  consideration,
the  sufficiency  and  receipt of which are  hereby  acknowledged,  the  parties
hereto, intending to be legally bound, hereby agree as follows:

         Section 1     DEFINITIONS.

         1.1      DEFINED TERMS.  As used in the Agreement,  the following terms
shall have the following meanings:

         "AGREEMENT" means this Intercreditor  Agreement,  as Modified from time
to time in accordance with the terms hereof.

         "ASSIGNMENT  AND  ACCEPTANCE  AGREEMENT"  has the  meaning set forth in
SECTION 5.7(J) hereof.

         "BANKRUPTCY  CODE"  means Title 11 of the United  States Code  entitled
"Bankruptcy," as now and hereafter in effect, or any successor statute.

         "BANKRUPTCY  LAW" means the  Bankruptcy  Code and any similar  federal,
state or foreign  bankruptcy,  insolvency,  reorganization or other similar laws
affecting the enforcement of creditors' rights generally.

         "BUSINESS  DAY" means a day other than a Saturday,  Sunday or other day
on which commercial banks in New York City are expressly  authorized or required
by law to close.

         "COMMON COLLATERAL" means, at any time of determination,  collectively,
the First Lien  Collateral,  and all of the other  property of Grantor,  in each
case above in which each of the First  Lien  Agent,  on behalf of itself and the
First Lien Claimholders,  and the Second Lien Agent, on behalf of itself and the
Second Lien  Claimholders,  has a valid and  perfected  Lien (which Lien has not
been avoided,  disallowed,  set aside,  invalidated or subordinated  pursuant to
Chapter 5 of the Bankruptcy  Code or otherwise)  securing  payment of First Lien
Obligations or Second Lien Obligations, respectively.

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         "COMPANY" has the meaning set forth in the Preamble hereto.

         "CREDITORS"  means,  collectively,  the First Lien Agent,  on behalf of
itself and the First Lien Claimholders,  and the Second Lien Agent, on behalf of
itself and the Second Lien  Claimholders,  and their  respective  successors and
assigns.

         "CUT-OFF DATE" has the meaning set forth in SECTION 5.7(B) hereof.

         "DEBTOR" has the meaning set forth in the Recitals hereto.

         "DIP FINANCING" means any financing  provided by a lender under Section
364 of the  Bankruptcy  Code or  consent  to the use of  cash  collateral  under
Section 363 of the Bankruptcy Code.

         "DISCHARGE OF FIRST LIEN OBLIGATIONS" means the payment in full in cash
of the  principal  of and  interest  and  premium,  if any,  in  respect  of the
indebtedness of the First Lien Debtor and of the First Lien Guarantors under the
First Lien  Financing  Agreement  or,  with  respect to Hedging  Obligations  or
letters  of  credit  outstanding  thereunder,  delivery  of cash  collateral  or
backstop  letters of credit in respect thereof in compliance with the First Lien
Financing Agreement,  in each case after or concurrently with termination of all
commitments  to extend  credit  thereunder,  and  payment in full in cash of any
other First Lien Obligations  that are due and payable or otherwise  accrued and
owing at or prior to the time such principal,  interest and premium, if any, are
paid.  If after  receipt of any payment of, or of proceeds of Common  Collateral
applied  to  the  payment  of,  any  First  Lien  Obligations,  any  First  Lien
Claimholder  is required to  surrender or return such payment or proceeds to any
Person for any reason, then the First Lien Obligations  intended to be satisfied
and  discharged by such payment or proceeds  shall be reinstated and continue as
if such payment or proceeds had not been received by such holder.

         "DISPOSITION" has the meaning set forth in SECTION 5.1(A)(I).

         "ENFORCEMENT ACTION" means any action under applicable law:

         (1) to foreclose, execute or levy on, collect on, take possession of or
control of, or sell or otherwise realize upon (judicially or  non-judicially) or
to lease,  license or otherwise dispose of (whether publicly or privately),  any
Common  Collateral  or  otherwise  to exercise or enforce  remedial  rights with
respect to Common  Collateral  under the First Lien Documents or the Second Lien
Documents,  as  applicable,  or any  other  applicable  agreement,  document  or
instrument pertaining thereto (including,  without limitation, by way of setoff,
noticing of any public or private sale or other disposition  pursuant to the UCC
or other  applicable  law,  notification  of account  debtors,  notification  of
depositary banks under deposit account control  agreements or exercise of rights
under landlord consents, if applicable),

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<PAGE>

         (2) to solicit bids from third  parties to conduct the  liquidation  or
disposition  of any  Common  Collateral  or to engage or retain  sales  brokers,
marketing agents, investment bankers,  accountants,  appraisers,  auctioneers or
other third  parties  for the  purposes of  valuing,  marketing,  promoting  and
selling any Common Collateral,

         (3) to receive a transfer of Common  Collateral in  satisfaction of any
indebtedness or other obligation secured thereby, or

         (4) to  otherwise  enforce  any  security  interest  or other  right or
remedy, as a secured creditor or otherwise,  pertaining to the Common Collateral
at law,  in equity or pursuant  to the First Lien  Documents  or the Second Lien
Documents,  as  applicable,  or any  other  applicable  agreement,  document  or
instrument pertaining thereto (including,  without limitation,  the commencement
of any applicable legal  proceedings or other actions against or with respect to
all or any portion of the Common  Collateral to facilitate the actions described
in the  immediately  preceding  clauses (1), (2) and (3), and exercising  voting
rights in respect of any equity interests comprising Common Collateral);

PROVIDED  that  "Enforcement   Action"  shall  not  be  deemed  to  include  the
commencement  of, or  joinder in filing of a petition  for  commencement  of, an
Insolvency Proceeding against the owner of Common Collateral.

         "FIRST LIEN AGENT" has the meaning set forth in the preamble hereto.

         "FIRST LIEN ANCILLARY OBLIGATIONS" has the meaning set forth in Section
5.7(a) hereof.

         "FIRST LIEN  CLAIMHOLDERS"  means, at any relevant time, the holders of
First Lien Obligations at such time, including without limitation the First Lien
Lenders and the First Lien Agent under the First Lien Financing Agreement.

         "FIRST LIEN COLLATERAL"  means all of the real property,  and interests
therein,  and all of the  personal  property  of  Grantor,  whether now owned or
hereafter  acquired or existing,  whether  tangible or intangible,  and wherever
located,  with  respect  to which a Lien is granted in favor of First Lien Agent
for the  benefit of itself and the other First Lien  Claimholders  to secure any
First Lien Obligations (which Lien has not been released by First Lien Agent).

         "FIRST LIEN  COLLATERAL  DOCUMENTS"  means the Security  Documents  (as
defined in the First Lien Financing Agreement) and any other agreement, document
or  instrument  (including  any  mortgage  or deed of trust or  fixture  filing)
pursuant to which a Lien is granted securing any First Lien Obligations or under
which rights or remedies with respect to such Liens are governed.

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<PAGE>

         "FIRST LIEN DEBTOR" has the meaning set forth in the Recitals hereto.

         "FIRST LIEN DOCUMENTS"  means the First Lien Financing  Agreement,  the
First  Lien  Guaranty,  the  First  Lien  Collateral  Documents  and  all  other
agreements, documents and instruments at any time entered into by Grantor or any
other  Person  with or in favor of the First  Lien  Agent  and/or the First Lien
Lenders in connection therewith or related thereto, including this Agreement, as
all of the  foregoing  now exist or may  hereafter  be  Modified  pursuant  to a
Permitted Modification or be Refinanced pursuant to a Permitted Refinancing.

         "FIRST  LIEN  FINANCING  AGREEMENT"  has the  meaning  set forth in the
Recitals hereto.

         "FIRST  LIEN  GUARANTORS"  has the  meaning  set forth in the  Recitals
hereto.

         "FIRST LIEN  GUARANTY"  means any guaranty of any First Lien  Guarantor
pursuant  to which such  First Lien  Guarantor  shall  guarantee  the First Lien
Obligations of the First Lien Debtor.

         "FIRST LIEN LENDERS"  means the  "LENDERS"  under and as defined in the
First Lien Financing Agreement and any other lenders from time to time under the
First Lien Financing Agreement.

         "FIRST  LIEN  OBLIGATIONS"  means,  at any time of  determination,  but
subject to the limitations  set forth in Section 5.3(a),  all Obligations (in an
aggregate  amount not to exceed the Maximum First Lien Debt Amount) then secured
by a Lien on the Common Collateral, and owing by Grantor to the First Lien Agent
and/or  the  First  Lien  Lenders,  under the First  Lien  Documents,  including
principal,  premium (if any),  interest (including interest accruing on or after
the filing of any petition in bankruptcy or for  reorganization  relating to the
Grantor  to the  extent a claim for  post-filing  interest  is  allowed  in such
proceedings),  fees, charges, expenses, reimbursement obligations, and all other
amounts payable thereunder or in respect thereof,  including  Obligations of any
Grantor  in respect of Hedging  Obligations  under the First Lien  Documents  in
respect of  interest  on First  Lien  Principal  Obligations.  To the extent any
payment with respect to the First Lien  Obligations  (whether by or on behalf of
Grantor,  as  proceeds  of  security,  enforcement  of any right of  set-off  or
otherwise)  is declared to be  fraudulent or  preferential  in any respect,  set
aside or required  to be paid to a debtor in  possession,  trustee,  receiver or
similar Person,  then the obligation or part thereof  originally  intended to be
satisfied  shall be deemed to be reinstated  and  outstanding as if such payment
had not occurred.

         "FIRST LIEN  PLEDGED  COLLATERAL"  has the meaning set forth in SECTION
5.5 hereof.

         "FIRST LIEN PRINCIPAL OBLIGATIONS" means, at any time of determination,
the aggregate unpaid amount of the First Lien Obligations constituting principal
of indebtedness  (with letters of credit being deemed to have a principal amount
equal to the maximum potential liability of the First Lien Debtor and First Lien
Guarantors thereunder or in respect thereof).

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<PAGE>

         "GOVERNMENTAL  AUTHORITY"  means the government of the United States of
America, any other nation or any political subdivision thereof, whether state or
local,  and any agency,  authority,  instrumentality,  regulatory  body,  court,
central  bank or  other  entity  exercising  executive,  legislative,  judicial,
taxing,  regulatory  or  administrative  powers or functions of or pertaining to
government  (including any  supra-national  bodies such as the European Union or
the European Central Bank).

         "GRANTOR"  means  the  collective  reference  to  the  Debtor  and  the
Guarantors, or any one or more of them, as the context may require.

         "GUARANTORS" has the meaning set forth in the Recitals hereto.

         "HEDGING  OBLIGATIONS" means, with respect to any specified Person, the
obligations of such Person under:

         (1) interest  rate swap  agreements  (whether from fixed to floating or
from floating to fixed),  interest rate cap  agreements and interest rate collar
agreements;

         (2) other agreements or arrangements  designed to manage interest rates
or interest rate risk; and

         (3) other  agreements or  arrangements  designed to protect such Person
against fluctuations in currency exchange rates or commodity prices,

in each  case  entered  into in the  ordinary  course  of  business  and not for
speculative purposes.

         "INDENTURE" has the meaning set forth in the Recitals hereto.

         "INSOLVENCY  PROCEEDING" means (a) any voluntary or involuntary case or
proceeding under Bankruptcy Law with respect to Grantor, (b) any other voluntary
or involuntary insolvency,  reorganization or bankruptcy case or proceeding,  or
any  receivership,   liquidation,   reorganization  or  other  similar  case  or
proceeding with respect to Grantor or with respect to a material  portion of its
assets,  (c) any  liquidation,  dissolution,  reorganization  or  winding  up of
Grantor whether voluntary or involuntary and whether or not involving insolvency
or  bankruptcy or (d) any  assignment  for the benefit of creditors or any other
marshalling of assets and liabilities of Grantor.

         "LIEN"  means  any  mortgage,  deed of  trust,  pledge,  hypothecation,
assignment,  charge,  deposit  arrangement,  encumbrance  (including  easements,
rights-of-way  and the like),  lien (statutory or other),  security  interest or
preference,  priority or other security agreement, transfer intended as security
or preferential  arrangement of any kind or nature whatsoever intended to assure
payment of any indebtedness or other Obligation,  including any conditional sale
or other title  retention  agreement,  the  interest of a lessor under a capital

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lease, or any financing lease having  substantially  the same economic effect as
any of the foregoing,  in the case of securities,  any purchase option,  call or
similar right of a third party with respect to such  securities,  and the filing
of any financing  statement under the Uniform  Commercial Code or comparable law
of any jurisdiction  naming the owner of the asset to which such Lien relates as
debtor.

         "MAJOR EVENT OF DEFAULT" means the occurrence or existence of any event
or  condition  described in the  following  Sections of the  Indenture:  601(1),
601(2),  601(3),  601(4),  601(5)  (solely  in  respect  of  the  covenants  and
agreements of the Company and any other  Grantor  contained in Articles 3, 4, 5,
9, 10 and 11 of the Indenture), and any comparable provisions of any Second Lien
Financing  Agreements   evidencing  any  Permitted   Modification  or  Permitted
Refinancing thereof .

         "MAXIMUM  FIRST LIEN DEBT AMOUNT" means the sum of (i) the  outstanding
amount of First Lien Principal  Obligations not to exceed (x) $10,000,000 in the
aggregate (calculated,  in the case of any such First Lien Principal Obligations
issued at a discount,  at the aggregate amount due at maturity thereof) less (y)
the aggregate amount of all repayments of term indebtedness  constituting  First
Lien Principal  Obligations and all repayments of revolving credit  indebtedness
constituting  First Lien Principal  Obligations  (effected with a  corresponding
commitment  reduction  under the First Lien  Financing  Agreement)  pursuant  to
clause (i) of the second  paragraph of Section 4.10 of the  Indenture  plus (ii)
accrued but unpaid  interest and, if applicable,  premiums on the amount of such
principal not in excess of the amount referred to in clause (i) above plus (iii)
all fees, expenses, reimbursement obligations,  guarantees and all other amounts
of a type not  referred  to in  clause  (i) or (ii)  above  payable  in  respect
thereof)  plus (iv)  Hedging  Obligations  in respect of  interest on First Lien
Principal  Obligations  referred  to in clause  (i)  above,  in each case  above
payable pursuant to the First Lien Documents.

         "MODIFICATION"  means, with respect to any agreement or other document,
any amendment,  supplement,  extension, renewal,  restatement,  restructuring or
other modification  thereof,  and "MODIFY" and "MODIFIED" shall have correlative
meanings.

         "NEW AGENT" has the meaning set forth in SECTION 5.6 hereof.

         "OBLIGATIONS"  means all obligations of every nature  outstanding  from
time  to  time,  whether  for  principal,  interest,  fees,  expenses,  charges,
premiums, indemnification or otherwise.

         "OPINION  OF  COUNSEL"  means an  opinion  from  legal  counsel  who is
reasonably  acceptable  to the  Trustee.  The  counsel  may be an employee of or
counsel to the Company, any Subsidiary of the Company or the Trustee.

         "PERMITTED  MODIFICATION"  means  a  Modification  that  complies  with
SECTION 5.3(A) or (B), as applicable, including each proviso thereto.

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         "PERMITTED  REFINANCING" means a Refinancing that complies with SECTION
5.3(A) or (B), as applicable, including each proviso thereto.

         "PERSON"  means any  natural  person,  corporation,  limited  liability
company, trust, joint venture, association,  company, partnership,  Governmental
Authority or other entity.

         "PURCHASE  COMMITMENT"  has the  meaning  set forth in  SECTION  5.7(B)
hereof.

         "PURCHASE DATE" has the meaning set forth in SECTION 5.7(B) hereof.

         "PURCHASE  OPTION EVENT" means any of (i) the First Lien Agent's or any
First Lien  Claimholder's (A) commencement of any Enforcement Action against the
First Lien Collateral or (B) acceleration of the First Lien  Obligations  (other
than  pursuant  to  commencement  by  any  Person  other  than  any  First  Lien
Claimholder  of an  Insolvency  Proceeding  relating  to  any  Grantor)  or  (C)
commencement  of, or joinder in filing a petition  for the  commencement  of, an
Insolvency  Proceeding  against any Grantor,  (ii) the occurrence of an Event of
Default under the Indenture and (iii) the occurrence of an Insolvency Proceeding
in respect of any Grantor.

         "PURCHASE  OPTION  EVENT  NOTICE"  has the meaning set forth in SECTION
5.7(A) hereof.

         "PURCHASE  OPTION  STANDSTILL  PERIOD"  has the  meaning  set  forth in
SECTION 5.7(A) hereof.

         "PURCHASE NOTICE" has the meaning set forth in SECTION 5.7(F) hereof.

         "PURCHASE  OPTION  PERIOD" has the meaning set forth in SECTION  5.7(B)
hereof.

         "PURCHASE  PERCENTAGE"  has the  meaning  set forth in  SECTION  5.7(F)
hereof.

         "PURCHASE  SHORTFALL"  has the  meaning  set  forth in  SECTION  5.7(D)
hereof.

         "REFINANCE"  means,  in  respect  of any  indebtedness,  to  refinance,
extend, renew, defease, amend, modify, supplement,  restructure, replace, refund
or repay, or to issue other  indebtedness,  in exchange or replacement for, such
indebtedness  in whole or in part,  other than pursuant to a DIP Financing,  and
"REFINANCED" and "REFINANCING" shall have correlative meanings.

         "REPLACEMENT  FIRST LIEN  AGENT" has the  meaning  set forth in Section
5.7(j) hereof.

         "SECOND LIEN AGENT" has the meaning set forth in the preamble hereto.

         "SECOND LIEN CLAIMHOLDERS"  means, at any relevant time, the holders of
Second Lien Obligations at such time,  including  without  limitation the Second
Lien  Noteholders  and the Second  Lien Agent  under the Second  Lien  Financing
Agreements.

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         "SECOND LIEN CLAIMHOLDER  CONSENT" means the written consent of Holders
(as defined in the Indenture,  or any comparable term contained in any successor
Second  Lien  Financing  Agreement)  of Notes (or  other  relevant  Second  Lien
Obligations) in the minimum aggregate  principal amount required under Article 9
of the  Indenture  (or any  comparable  provision of any  successor  Second Lien
Financing Agreement).

         "SECOND LIEN COLLATERAL"  means all of the real property,  and interest
therein,  and all of the  personal  property  of  Grantor,  whether now owned or
hereafter  acquired or existing,  whether  tangible or intangible,  and wherever
located,  with  respect to which a Lien is granted in favor of Second Lien Agent
for the benefit of itself and the other Second Lien  Claimholders  to secure any
Second Lien Obligations (which Lien has not been released by Second Lien Agent).

         "SECOND  LIEN  COLLATERAL  DOCUMENTS"  means the Second Lien  Financing
Agreements, the Second Lien Security Agreement and any other agreement, document
or instrument (including any mortgage, deed of trust or fixture filing) pursuant
to which a Lien is granted  securing any Second Lien  Obligations or under which
rights or remedies with respect to such Liens are governed.

         "SECOND LIEN DEBTOR" has the meaning set forth in the Recitals hereto.

         "SECOND LIEN DOCUMENTS" means the Second Lien Financing  Agreements and
the Second Lien Collateral Documents.

         "SECOND LIEN FINANCING AGREEMENTS" means the Indenture,  the Notes, and
the Second  Lien  Guarantees,  and all of the other  agreements,  documents  and
instruments  at any time  entered into by Grantor or any other Person with or in
favor of the Second  Lien Agent  and/or the Second  Lien  Lenders in  connection
therewith or related thereto,  including this Agreement, as all of the foregoing
now exist or may hereafter be Modified  pursuant to a Permitted  Modification or
be Refinanced pursuant to a Permitted Refinancing.

         "SECOND  LIEN  GUARANTORS"  has the meaning  set forth in the  Recitals
hereto.

         "SECOND  LIEN  GUARANTEES"  has the meaning  set forth in the  Recitals
hereto.

         "SECOND LIEN  NOTEHOLDERS"  means the "HOLDERS" under and as defined in
the  Indenture  and any other  lenders  from time to time under the Second  Lien
Financing Agreements.

         "SECOND LIEN  OBLIGATIONS"  means,  at any time of  determination,  all
Obligations outstanding under the Second Lien Financing Agreements and the other
Second Lien  Documents  owing by the Company or any other  Grantor to the Second
Lien Agent and/or the Second Lien  Noteholders  thereunder,  however  evidenced,
whether as principal,  surety, endorser, guarantor or otherwise, whether arising
(i) during or after the initial or any renewal term of the Second Lien Documents
pursuant to a Permitted  Modification or (ii) after the commencement of any case

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with respect to Grantor under Bankruptcy Law,  including the payment of interest
and other amounts which would accrue and become due but for the  commencement of
such case,  to the extent  such  amounts are  allowed or  allowable  in any such
case), whether direct or indirect, absolute or contingent, joint or several, due
or not due, primary or secondary,  liquidated or unliquidated. To the extent any
payment with respect to the Second Lien Obligations  (whether by or on behalf of
Grantor,  as  proceeds  of  security,  enforcement  of any right of  set-off  or
otherwise)  is declared to be  fraudulent or  preferential  in any respect,  set
aside or required  to be paid to a debtor in  possession,  trustee,  receiver or
similar Person,  then the obligation or part thereof  originally  intended to be
satisfied  shall be deemed to be reinstated  and  outstanding as if such payment
had not occurred.

         "SECOND LIEN PLEDGED  COLLATERAL"  has the meaning set forth in SECTION
5.5 hereof.

         "SECOND LIEN SECURITY AGREEMENT" means the Security Agreement, dated as
of December 29, 2005,  among the Second Lien Debtor,  the Second Lien Guarantors
and the Second Lien Agent.

         "STANDSTILL  PERIOD"  has the  meaning  set forth in SECTION  3.1(A)(I)
hereof.

         "SUBSIDIARY"  means,  with  respect  to any  Person,  any  corporation,
partnership,  association,  joint venture or other business entity of which more
than 50% of the  total  voting  power  of  shares  of  stock or other  ownership
interests entitled (without regard to the occurrence of any contingency) to vote
in the election of the Person or Persons (whether directors,  managers, trustees
or other Persons  performing  similar  functions)  having the power to direct or
cause the direction of the management and policies  thereof is at the time owned
or  controlled,  directly  or  indirectly,  by that Person or one or more of the
other Subsidiaries of that Person or a combination thereof.

         "UNIFORM  COMMERCIAL  CODE" or "UCC" means the Uniform  Commercial Code
(or any  similar  or  equivalent  legislation)  as in effect  in any  applicable
jurisdiction.

         1.2      TERMS  GENERALLY.  The definitions of terms herein shall apply
equally to the  singular  and plural  forms of the terms  defined.  Whenever the
context may require,  any pronoun  shall  include the  corresponding  masculine,
feminine and neuter forms. The words "include", "includes" and "including" shall
be deemed to be followed  by the phrase  "without  limitation."  The word "will"
shall be  construed  to have the same  meaning  and effect as the word  "shall."
Unless the context requires or provides otherwise (a) subject, where applicable,
to the limitations  set forth in this Agreement,  any definition of or reference
to any  agreement,  instrument  or other  document  herein shall be construed as
referring to such  agreement,  instrument or other document as from time to time
amended,  supplemented or otherwise  modified,  (b) any reference  herein to any
Person shall be construed to include such Person's  successors and assigns,  (c)
the words "herein", "hereof" and "hereunder", and words of similar import, shall
be  construed  to  refer  to  this  Agreement  in its  entirety  and  not to any
particular  provision hereof,  (d) all references herein to Exhibits or Sections
shall be  construed to refer to Exhibits or Sections of this  Agreement  and (e)

                                       10
<PAGE>

the words "asset" and "property" shall be construed to have the same meaning and
effect  and to  refer  to  any  and  all  tangible  and  intangible  assets  and
properties, including cash, securities, accounts and contract rights.

         Section 2     LIEN PRIORITIES.

         2.1      RELATIVE PRIORITIES.

                  (a)      Each Creditor hereby  acknowledges its  understanding
that the other  Creditor  has been  granted a Lien upon the  Common  Collateral.
Notwithstanding the date, manner or order of grant,  attachment or perfection of
any Liens securing the Second Lien Obligations  granted on the Common Collateral
or of any Liens  securing  the First  Lien  Obligations  granted  on the  Common
Collateral and  notwithstanding any provision of the UCC or any other applicable
law or the  provisions  of the Second Lien  Documents or any other  circumstance
whatsoever,  each of the Second Lien  Agent,  on behalf of itself and the Second
Lien  Claimholders,  and the First Lien Agent, on behalf of itself and the First
Lien Claimholders hereby agrees that:

                  (i)      all Liens granted under or pursuant to the First Lien
                           Documents on the Common Collateral securing the First
                           Lien  Obligations up to but not exceeding the Maximum
                           First Lien Debt Amount now or hereafter held by or on
                           behalf of the  First  Lien  Agent or any  First  Lien
                           Claimholder, or any agent or trustee therefor, shall,
                           so long as such Liens are valid and perfected, be and
                           remain  senior in all respects and prior to all Liens
                           granted to the Second  Lien Agent or the Second  Lien
                           Claimholders  under or  pursuant  to the Second  Lien
                           Collateral   Documents   on  the  Common   Collateral
                           securing any Second Lien Obligations;

                  (ii)     any Lien granted under or pursuant to the Second Lien
                           Collateral  Documents on the Common Collateral now or
                           hereafter  held by or on  behalf of the  Second  Lien
                           Agent or any Second Lien Claimholders or any agent or
                           trustee therefor,  shall be junior and subordinate in
                           all respects to the Liens  granted  under or pursuant
                           to the First Lien Documents on the Common  Collateral
                           securing the First Lien Obligations up to the Maximum
                           First Lien Debt  Amount,  so long as such Liens under
                           or pursuant to the First Lien Documents are valid and
                           perfected; and

                  (iii)    provided that Second Lien  Claimholder  Consent shall
                           have  been   obtained  to  (i)  the   incurrence   of
                           Obligations  pursuant to the First Lien  Documents in
                           excess of the Maximum First Lien Debt Amount and (ii)
                           the  Liens   granted   pursuant  to  the  First  Lien
                           Documents on any Common Collateral  securing any such
                           excess amounts,  and subject to Section  5.3(a),  all
                           Liens of the Second  Lien  Agent and the Second  Lien
                           Claimholders on the Common  Collateral shall, so long
                           as such Liens are valid and perfected,  have priority
                           over the Liens of the First  Lien  Agent or the First
                           Lien  Claimholders  on the Common  Collateral  to the
                           extent  that the Liens of the First Lien Agent or the
                           First Lien Claimholders secure First Lien Obligations
                           in excess of the Maximum First Lien Debt Amount,  and
                           to the extent  that the Liens of the First Lien Agent
                           or  the  First  Lien   Claimholders   on  the  Common

                                       11
<PAGE>

                           Collateral secure First Lien Obligations in excess of
                           the  Maximum  First Lien Debt  Amount,  but only with
                           respect  to such  excess  amounts,  such Liens of the
                           First  Lien  Agent  and the First  Lien  Claimholders
                           shall be junior and  subordinate  in all  respects to
                           the Liens of the  Second  Lien  Agent and the  Second
                           Lien  Claimholders  granted  under or pursuant to the
                           Second Lien  Documents  on the Common  Collateral  so
                           long as such Liens  under or  pursuant  to the Second
                           Lien Documents are valid and perfected, and the First
                           Lien Agent and First Lien  Claimholders  shall  have,
                           mutatis mutandis, with respect thereto, and to Common
                           Collateral  held  or  received  therefor   (including
                           proceeds),  analogous  obligations  (other  than  the
                           obligations in respect of the  Standstill  Period) to
                           the Second  Lien Agent and Second  Lien  Claimholders
                           under this  Agreement  as the  Second  Lien Agent and
                           Second Lien Claimholders have under this Agreement in
                           favor  of  the  First   Lien  Agent  and  First  Lien
                           Claimholders   with   respect   to  the  First   Lien
                           Obligations not exceeding the Maximum First Lien Debt
                           Amount and the Common Collateral  securing such First
                           Lien Obligations not exceeding the Maximum First Lien
                           Debt  Amount,  and the  Second  Lien Agent and Second
                           Lien Claimholders shall have,  mutatis mutandis,  the
                           same  limitations  on  responsibilities,  duties  and
                           liability  in respect of the  foregoing  as the First
                           Lien  Agent and First  Lien  Claimholders  have under
                           this  Agreement with respect to the Second Lien Agent
                           and Second Lien Claimholders.

                  (b)      The lien  priorities  provided in this SECTION 2.1 in
respect of the Common  Collateral on or in which the Creditors  have a valid and
perfected  Lien shall not be  altered or  otherwise  affected  by any  Permitted
Modification of the Second Lien Documents or Permitted Modification of the First
Lien Documents or any Permitted  Refinancing  of the Second Lien  Obligations or
Permitted  Refinancing of the First Lien Obligations,  or by any action that any
Creditor may take or fail to take in respect of Grantor or the Common Collateral
(other than failure to maintain the validity or perfection  of their  respective
Liens).

         2.2      PROHIBITION  ON  CONTESTING  LIENS.  Each of the  Second  Lien
Agent, for itself and on behalf of each Second Lien  Claimholder,  and the First
Lien Agent, for itself and on behalf of each First Lien Claimholder, agrees that
it will not contest the validity, perfection,  priority (as set forth in SECTION
2.1) or enforceability of the Liens of the other Creditor upon the assets of the
Debtor or the  Guarantors  that are Common  Collateral and that as between First
Lien  Claimholders  and Second Lien  Claimholders,  the terms of this  Agreement
shall govern the priority of their respective valid and perfected Liens on or in
the  Common  Collateral  securing  the First  Lien  Obligations  or Second  Lien
Obligations,  respectively. For avoidance of doubt, the parties confirm that the
assertion in any proceeding or otherwise by one party (Party A) of invalidity or
nonperfection of the other party's (Party B's) security interest as a defense to
a claim or assertion by Party B against  Party A for or alleging  breach of this
Agreement arising out of Party A's exercise of rights or enforcement of remedies

                                       12
<PAGE>

under this  Agreement or any First Lien Documents or Second Lien  Documents,  as
applicable,  shall not be deemed to be a "contest"  for purposes of this SECTION
2.2.  In the  event  that  Second  Lien  Agent or any  Second  Lien  Claimholder
believes,  in good  faith,  that the Lien in  favor of First  Lien  Agent in any
assets of Grantor is invalid or unperfected, prior to the commencement by Second
Lien Agent or any Second  Lien  Claimholder  of any such  exercise  of rights or
enforcement  of  remedies  which  would  violate  this  Agreement  but for  such
invalidity or nonperfection of First Lien Agent's Lien, the Second Lien Agent or
Second Lien  Claimholder will furnish to the First Lien Agent not less than five
Business Days' prior written  notice of the  contemplated  commencement  of such
exercise or enforcement, which notice shall identify the basis for the belief by
the Second Lien Agent or Second Lien Claimholder,  as the case may be, that such
invalidity or nonperfection exists.

         2.3      SIMILAR LIENS AND AGREEMENTS. The parties hereto agree that it
is their intention that the First Lien Collateral constituting Common Collateral
and the Second Lien Collateral  constituting Common Collateral be identical.  In
furtherance  of the foregoing,  the parties  hereto agree,  subject to the other
provisions of this Agreement, upon request by the First Lien Agent or the Second
Lien Agent, to cooperate in good faith (and to direct their counsel to cooperate
in good  faith)  from  time to time in order to  determine  the  specific  items
included in the First Lien  Collateral  and the Second Lien  Collateral  and the
steps taken to perfect  their  respective  Liens thereon and the identity of the
respective  parties obligated under the First Lien Documents and the Second Lien
Documents.

         2.4      LIMITATIONS ON DUTIES AND OBLIGATIONS. Each of the Second Lien
Agent, for itself and on behalf of each Second Lien  Claimholder,  and the First
Lien  Agent,  for itself and on behalf of each  First Lien  Claimholder,  agrees
that,  except in the case of (i) the  obligations  of the First Lien Agent under
SECTION  5.5 as bailee and agent for  perfection  for the Second  Lien Agent and
(ii) the  obligations  of the Second Lien Agent under  SECTION 5.5 as bailee and
agent for perfection for the First Lien Agent,  each of the First Lien Agent (on
behalf of the First Lien  Claimholders)  and the Second Lien Agent (on behalf of
the Second Lien  Claimholders)  shall be solely  responsible  for perfecting and
maintaining  the  perfection  of its Lien in and to each item  constituting  the
Common  Collateral  in which the First  Lien  Agent (on behalf of the First Lien
Claimholders)   or  the  Second  Lien  Agent  (on  behalf  of  the  Second  Lien
Claimholders)  has  been  granted  a  Lien.  The  foregoing  provisions  of this
Agreement  are  intended  solely to govern the  respective  Lien  priorities  as
between  the  Creditors  and shall not impose on either the First Lien Agent (on
behalf of the First Lien  Claimholders)  or the Second  Lien Agent (on behalf of
the Second Lien  Claimholders)  any obligations in respect of the disposition of
proceeds of foreclosure on any Common  Collateral that would conflict with prior
perfected  claims therein in favor of any other Person or any order or decree of
any court or other Governmental Authority or any applicable law.

         Section 3     ENFORCEMENT.

         3.1      EXERCISE OF REMEDIES.

                                       13
<PAGE>

                  (a)      So long as the  Discharge  of First Lien  Obligations
has not occurred, whether or not any Insolvency Proceeding has been commenced by
or against Grantor:

                  (i)      the   Second   Lien   Agent  and  the   Second   Lien
                           Claimholders:

                           (x)      will not take any  Enforcement  Action  with
                                    respect to any Common Collateral;  PROVIDED,
                                    HOWEVER,  that the Second  Lien Agent or the
                                    other Second Lien  Claimholders may take any
                                    such Enforcement  Action with respect to the
                                    Common  Collateral after the expiration of a
                                    period  of 180  days  following  the date on
                                    which the Second  Lien Agent  shall have (1)
                                    declared,  and notified the First Lien Agent
                                    of, the  existence of any "Event of Default"
                                    or event of default,  under or as defined in
                                    the Second Lien Financing  Agreements,  that
                                    is  a  Major  Event  of   Default,   or  (2)
                                    accelerated   any   of   the   Second   Lien
                                    Obligations  under the Second Lien Financing
                                    Agreements   (such  180  day   period,   the
                                    "STANDSTILL PERIOD");  PROVIDED that, at the
                                    time of such exercise,  either any "Event of
                                    Default"  or  event of  default  under or as
                                    defined   in  the  Second   Lien   Financing
                                    Agreements  that is a Major Event of Default
                                    shall  exist  or  any  of  the  Second  Lien
                                    Obligations  shall have been  accelerated or
                                    otherwise  have become due and payable;  and
                                    PROVIDED,     FURTHER,     however,     that
                                    notwithstanding   anything   herein  to  the
                                    contrary,  in no event shall the Second Lien
                                    Agent or any Second  Lien  Claimholder  take
                                    any  Enforcement  Action with respect to the
                                    Common  Collateral if,  notwithstanding  the
                                    expiration  of the  Standstill  Period,  the
                                    First Lien Agent or First Lien  Claimholders
                                    shall have commenced Enforcement Action with
                                    respect  to all or any  material  portion of
                                    the  Common  Collateral  (which  Enforcement
                                    Action of the First Lien Agent is other than
                                    the   exercise  of  set  off  or   analogous
                                    remedies   in   respect  of  cash  and  cash
                                    equivalents  or deposit  or cash  collateral
                                    accounts)   (prompt   notice   of  any  such
                                    exercise to be given by the First Lien Agent
                                    to the Second Lien Agent),

                           (y)      will not contest or protest or object to any
                                    foreclosure  proceeding or action brought by
                                    the  First  Lien  Agent  or any  First  Lien
                                    Claimholder,  or any other  exercise  by the
                                    First   Lien   Agent  or  any   First   Lien
                                    Claimholder  of any rights and remedies,  in
                                    each case relating to the Common  Collateral
                                    (whether  under the First Lien  Documents or
                                    otherwise) provided that such foreclosure or
                                    exercise is in  compliance  with  applicable
                                    law and is not prohibited by SECTION 5.7, or

                                       14
<PAGE>

                           (z)      subject to their rights under clause  (i)(x)
                                    above, will not object to the forbearance by
                                    the  First  Lien  Agent  or the  First  Lien
                                    Claimholders  from  bringing or pursuing any
                                    foreclosure  proceeding  or  action  or  any
                                    other  exercise  of any  rights or  remedies
                                    relating to the Common Collateral,

                                    in each  case in  clauses  (x),  (y) and (z)
                                    above so long as the respective Liens of the
                                    Second Lien Agent and the other  Second Lien
                                    Claimholders  attach to the proceeds thereof
                                    subject to the relative priorities described
                                    in SECTION 2 hereof; and

                  (ii)     notwithstanding anything to the contrary set forth in
                           the Second  Lien  Documents,  but  subject to SECTION
                           3.1(A)(I),  SECTION 5.1(A), SECTION 5.7 and any other
                           express  provision of this Agreement,  and subject to
                           applicable  law,  the First  Lien Agent and the First
                           Lien  Claimholders  shall have the exclusive right to
                           manage  the Common  Collateral  and  enforce  rights,
                           exercise  remedies   (including   set-off)  and  make
                           determinations  regarding the sale, transfer or other
                           disposition  of  Common  Collateral  (whether  by the
                           First Lien  Agent,  any agent of the First Lien Agent
                           or Grantor  with the consent of the First Lien Agent)
                           or   restrictions   with   respect   to  the   Common
                           Collateral,  without  any  consultation  with  or the
                           consent of the Second  Lien Agent or any Second  Lien
                           Claimholder;  PROVIDED  that  (A) in  any  Insolvency
                           Proceeding  commenced  by  or  against  Grantor,  the
                           Second   Lien  Agent  and  each  other   Second  Lien
                           Claimholder may file a claim or statement of interest
                           with  respect  to the  Second  Lien  Obligations  not
                           inconsistent  with the terms and agreements set forth
                           in this Agreement, (B) the Second Lien Agent and each
                           other  Second  Lien  Claimholder  may take any action
                           (not adverse to the prior valid and  perfected  Liens
                           on the  Common  Collateral  securing  the First  Lien
                           Obligations, or the rights of the First Lien Agent or
                           any First Lien  Claimholders to exercise  remedies in
                           respect thereof (except as otherwise provided in this
                           Agreement),  and not  inconsistent  with the terms of
                           this  Agreement)  in order to preserve or protect its
                           Lien  on the  Common  Collateral  (including  actions
                           permitted  pursuant to SECTION  6.3),  (C) the Second
                           Lien Agent and each  other  Second  Lien  Claimholder
                           shall be entitled to file any necessary responsive or
                           defensive  pleadings  in  opposition  to any  motion,
                           claim, adversary proceeding or other pleading made by
                           any Person  objecting  to or  otherwise  seeking  the
                           disallowance,   avoidance,   subordination  or  other
                           modification  of the  claims  or Liens of the  Second
                           Lien  Agent or any other  Second  Lien  Claimholders,
                           including  without  limitation  any claims secured by
                           the  Common  Collateral,  if any,  in each  case in a
                           manner not inconsistent  with the other terms of this
                           Agreement,  (D) the Second  Lien Agent and each other
                           Second Lien Claimholder shall be entitled to file any
                           pleadings,  objections,  motions or  agreements  that
                           assert  rights or  interests  available  to unsecured
                           creditors of Grantor arising under either  Bankruptcy
                           Law or applicable  non-bankruptcy law, (E) the Second
                           Lien Agent and each  other  Second  Lien  Claimholder
                           shall  be  entitled  to file any  proof of claim  and

                                       15
<PAGE>

                           other filings and make any arguments and motions that
                           are, in each case, not inconsistent with the terms of
                           this  Agreement,  with  respect  to the  Second  Lien
                           Obligations  and the  Common  Collateral  and (F) the
                           Second Lien Agent or any Second Lien  Claimholder may
                           exercise  any of its rights or remedies  with respect
                           to the Common Collateral after the termination of the
                           Standstill  Period to the extent  permitted by clause
                           (i)(x) above. In exercising  rights and remedies with
                           respect  to the  Common  Collateral,  subject  to the
                           provisions hereof, the First Lien Agent and the First
                           Lien  Claimholders  may enforce the provisions of the
                           First   Lien   Documents   and   exercise    remedies
                           thereunder,  all in such order and in such  manner as
                           they may  determine  in the  exercise  of their  sole
                           discretion.   Such  exercise  and  enforcement  shall
                           include, subject to the provisions hereof, the rights
                           of an agent  appointed  by them to sell or  otherwise
                           dispose  of  Common  Collateral  in  accordance  with
                           applicable law upon foreclosure, to incur expenses in
                           connection  with  such  sale or  disposition,  and to
                           exercise  all the  rights and  remedies  of a secured
                           creditor  under the  Uniform  Commercial  Code of any
                           applicable  jurisdiction  and of a  secured  creditor
                           under Bankruptcy Laws of any applicable jurisdiction.
                           The First Lien Agent shall comply with the provisions
                           of SECTION 5.7 in  connection  with its  exercise and
                           enforcement of its rights or remedies with respect to
                           the Common Collateral.

                  (b)      The Second  Lien  Agent,  on behalf of itself and the
Second Lien Claimholders,  agrees that prior to the expiration of the Standstill
Period,  it will not take or receive any Common  Collateral  or any  proceeds of
Common  Collateral  in  connection  with the  exercise by it of any  Enforcement
Action with respect to any Common Collateral,  unless and until the Discharge of
First Lien Obligations has occurred,  except as otherwise  expressly provided in
the  proviso in clause (ii) of SECTION  3.1(A),  subject in any event to SECTION
4.2. Without  limiting the generality of the foregoing,  prior to the expiration
of the  Standstill  Period,  unless  and  until  the  Discharge  of  First  Lien
Obligations has occurred,  and except as otherwise expressly provided in SECTION
2.2 and in the  proviso in clause (ii) of SECTION  3.1(A) and any other  express
provision  of this  Agreement,  the sole right of the Second  Lien Agent and the
Second Lien  Claimholders  with respect to the Common  Collateral is to hold and
maintain  perfection of a Lien on the Common  Collateral  pursuant to the Second
Lien  Collateral  Documents for the period and to the extent granted therein and
to receive a share of the proceeds  thereof,  if any, after the Discharge of the
First Lien  Obligations  has occurred in accordance with the terms of the Second
Lien  Documents and  applicable  law. The exercise of rights or  enforcement  of
remedies  by the Second  Lien Agent is subject,  where  applicable,  to the last
sentence of SECTION 2.2.

                  (c)      Subject to its and their rights after the  expiration
of the  Standstill  Period and  subject to SECTION 2.2 and the proviso in clause
(ii) of SECTION 3.1(A) and any other express  provision of this  Agreement,  (i)
the Second Lien Agent, for itself and on behalf of the Second Lien Claimholders,
agrees that the Second Lien Agent and the Second Lien Claimholders will not take
any action that would hinder any exercise of remedies by the First Lien Agent or
the First Lien

                                       16
<PAGE>

Claimholders in respect of the Common  Collateral under the First Lien Documents
or that is otherwise prohibited hereunder,  including any sale, lease, exchange,
transfer or other  disposition of the Common  Collateral prior to the expiration
of the Standstill  Period,  whether by  foreclosure  or otherwise,  and (ii) the
Second  Lien Agent,  for itself and on behalf of the Second  Lien  Claimholders,
hereby waives any and all rights it or the Second Lien  Claimholders may have as
a junior lien  creditor to object to the manner in which the First Lien Agent or
the  First  Lien  Claimholders  seek  to  enforce  or  collect  the  First  Lien
Obligations or the Liens granted in any of the First Lien  Collateral  (PROVIDED
that such  enforcement  or  collection  complies  with  applicable  law and this
Agreement),  regardless  of whether any action or failure to act by or on behalf
of the First Lien Agent or First Lien Claimholders is adverse to the interest of
the Second Lien Claimholders.

                  (d)      The Second Lien Agent hereby  acknowledges and agrees
that  no  covenant,  agreement  or  restriction  contained  in the  Second  Lien
Collateral  Documents  or any  other  Second  Lien  Document  (other  than  this
Agreement) shall be deemed to restrict in any way the rights and remedies of the
First  Lien  Agent or the First  Lien  Claimholders  with  respect to the Common
Collateral as set forth in this Agreement and the First Lien Documents, subject,
however, to the provisions hereof and of applicable law.

         Section 4     PAYMENTS.

         4.1      APPLICATION OF PROCEEDS AND PAYMENTS. So long as the Discharge
of First Lien  Obligations has not occurred,  any Common  Collateral or proceeds
thereof  received by the First Lien Agent in  connection  with the sale or other
disposition  of, or collection on, such Common  Collateral  upon the exercise of
remedies, shall be applied by the First Lien Agent to the First Lien Obligations
in such order,  if any, as is specified in the  relevant  First Lien  Documents,
PROVIDED  HOWEVER that  notwithstanding  the foregoing,  amounts received by the
First Lien Agent or any other First Lien  Claimholder  in respect of Obligations
outstanding  under any First Lien  Document  shall be deemed for all purposes of
this Agreement,  including determination of Discharge of First Lien Obligations,
to be applied first to payment and  satisfaction of all  outstanding  First Lien
Obligations  and  thereafter to payment of Obligations  thereunder,  if any, not
constituting  First  Lien  Obligations.  Upon the  Discharge  of the First  Lien
Obligations, the First Lien Agent shall deliver to the Second Lien Agent (except
as may otherwise be required by applicable  law or any court order) any proceeds
of Common Collateral held by it in the same form as received, with any necessary
endorsements,  or as a court of competent  jurisdiction may otherwise direct, to
be applied by the Second  Lien  Agent to the  Second  Lien  Obligations  in such
order, if any, as is specified in the relevant Second Lien Collateral Documents.

         4.2      PAYMENTS  OVER.  So  long  as  the  Discharge  of  First  Lien
Obligations has not occurred, any Common Collateral or proceeds of sale or other
disposition  thereof  received  by the  Second  Lien  Agent or any  Second  Lien
Claimholders in connection  with the exercise of any right or remedy  (including
set-off)  relating to the Common  Collateral  not  otherwise  permitted  by this
Agreement,  and  any  Common  Collateral  or  proceeds  of  the  sale  or  other
disposition  thereof  received  by the  Second  Lien  Agent or any  Second  Lien

                                       17
<PAGE>

Claimholders  solely as a result of an  Enforcement  Action  taken by the Second
Lien Agent or any Second Lien Claimholders in respect of the Common  Collateral,
shall be segregated  and held in trust and forthwith paid over to the First Lien
Agent  for the  benefit  of the  First  Lien  Claimholders  in the same  form as
received,  with any necessary  endorsements,  for immediate  application  to the
repayment of the First Lien Obligations, or as a court of competent jurisdiction
may otherwise direct. The First Lien Agent is hereby authorized to make any such
endorsements  as  agent  for the  Second  Lien  Agent or any  such  Second  Lien
Claimholders.  This authorization is coupled with an interest and is irrevocable
until such time as this Agreement is terminated in accordance with its terms.

         Section 5     OTHER AGREEMENTS.

         5.1      RELEASES.

                  (a)      If, in connection with:

                  (i)      any sale, exchange,  transfer or other disposition of
                           ownership  (collectively,  a  "DISPOSITION")  of  any
                           Common  Collateral  permitted  under the terms of the
                           First Lien  Documents as in effect on the date hereof
                           and not involving  any exercise of remedies  referred
                           to in clause (ii) below, or

                  (ii)     the  exercise  of  any  of  the  First  Lien  Agent's
                           remedies in respect of the Common Collateral provided
                           for in SECTION 3.1 upon or following  acceleration or
                           maturity   of  the   First   Lien   Obligations   and
                           non-payment thereof, including any Disposition of any
                           such Common Collateral  pursuant to any such exercise
                           of remedies,

the  First  Lien  Agent,  for  itself  or on  behalf  of any of the  First  Lien
Claimholders,  releases  any of its Liens on any part of the Common  Collateral,
and/or releases any Grantor from its obligations under its guaranty of the First
Lien  Obligations  the outstanding  equity  interests of which Grantor have been
disposed of in  connection  with a  Disposition  under  clause (i) or (ii) above
(such  Grantor,  a  "DISPOSED  GRANTOR"),  in each case  above (x) other than in
connection  with the Discharge of First Lien  Obligations and (y) in the case of
clause (i) above,  other than after the occurrence and during the continuance of
any Default,  default,  Event of Default or event of default under or as defined
in the Second  Lien  Financing  Agreements,  and upon the request of the Company
pursuant to an Officer's  Certificate  (as defined in the Indenture)  certifying
that all conditions precedent under the Indenture have been met, then the Liens,
if any, of the Second  Lien  Agent,  for itself or for the benefit of the Second
Lien  Claimholders,   on  such  Common  Collateral,   and,  if  applicable,  the
obligations  of such  Disposed  Grantor  under its  guaranty  of the Second Lien
Obligations, shall be automatically, unconditionally and simultaneously released
and the  Second  Lien  Agent,  for itself or on behalf of any such  Second  Lien
Claimholders, promptly shall execute and deliver to the First Lien Agent or such
Grantor such termination  statements,  releases and other documents as the First
Lien Agent or such  Grantor may request to  effectively  confirm  such  release;
PROVIDED that  notwithstanding  the foregoing,  (x) in the case of a Disposition
under SECTION 5.1(A)(I), the Liens, if any, of the Second Lien Agent, for itself

                                       18
<PAGE>

or for the benefit of the Second  Lien  Claimholders,  on any Common  Collateral
and, if applicable,  the obligations of any Disposed  Grantor under its guaranty
of the Second Lien Obligations,  shall not be automatically  released,  and such
Disposition  shall result in an Event of Default or event of default under or as
defined in the Second Lien Financing Agreements, if such Disposition is not then
expressly permitted under the terms of the Second Lien Financing  Agreements and
(y ) in the case of a Disposition under SECTION 5.1(A)(I) or (II), the Liens, if
any, of the Second Lien Agent,  for itself or for the benefit of the Second Lien
Claimholders,  on all proceeds of any Common  Collateral  (including all amounts
and other property received upon such Disposition or exercise of remedies) shall
continue  (subject to the  priorities set forth in SECTION 2.1) and shall not be
automatically released.

                  (b)      Until the Discharge of First Lien Obligations occurs,
the Second Lien Agent, for itself and on behalf of the Second Lien Claimholders,
hereby irrevocably constitutes and appoints the First Lien Agent and any officer
or agent of the First Lien Agent,  with full power of substitution,  as its true
and lawful attorney-in-fact (which appointment is coupled with an interest) with
full  irrevocable  power and authority in the place and stead of the Second Lien
Agent or such Second  Lien  Claimholder  or in the First Lien  Agent's own name,
from time to time in the First  Lien  Agent's  discretion,  for the  purpose  of
carrying  out the terms of this  SECTION  5.1,  but  subject to the  limitations
contained herein, to take any and all appropriate  action and to execute any and
all documents and  instruments  that may be necessary to accomplish the purposes
of this SECTION 5.1 in accordance herewith,  including any endorsements or other
instruments of transfer or release.

                  (c)      Until the Discharge of First Lien Obligations occurs,
to the extent that the First Lien  Claimholders  (i) have  released  any Lien on
Common Collateral or Grantor from its obligation under its guaranty and any such
Lien or guaranty is later reinstated or (ii) obtain any new first priority Liens
or additional  guarantees  from any Grantor,  then the Second Lien  Claimholders
shall be granted a second  priority  Lien on any such Common  Collateral  and an
equivalent additional guaranty, as the case may be

         5.2      INSURANCE.  Unless  and  until  the  Discharge  of First  Lien
Obligations has occurred,  the First Lien Agent and the First Lien  Claimholders
shall have the sole and exclusive right,  subject to the rights of Grantor under
the First Lien Documents, to adjust settlement for any insurance policy covering
the Common  Collateral  in the event of any loss  thereunder  and to approve any
award granted in any condemnation or similar  proceeding (or any deed in lieu of
condemnation) affecting the Common Collateral. Unless and until the Discharge of
First Lien  Obligations  has occurred,  and subject to the rights of the Grantor
under the First Lien  Documents,  all  proceeds  of any such policy and any such
award (or any payments  with respect to a deed in lieu of  condemnation),  if in
respect of the Common Collateral,  shall be paid to the First Lien Agent for the
benefit of the First Lien  Claimholders  pursuant to the terms of the First Lien
Documents,  if, but only if, so required  and  thereafter,  if the  Discharge of
First Lien Obligations has occurred,  or initially,  if such proceeds are not so
required  to be paid to the First Lien  Agent for the  benefit of the First Lien
Claimholders,  and  subject to the rights of the  applicable  Grantor  under the

                                       19
<PAGE>

Second Lien  Collateral  Documents,  to the Second Lien Agent for the benefit of
the Second  Lien  Claimholders  to the  extent  required  under the Second  Lien
Collateral  Documents  and  then,  to the  extent  no  mandatory  prepayment  or
repayment of the Second Lien  Obligations is then required,  to the owner of the
subject property,  or such other Person as may be entitled thereto or as a court
of competent  jurisdiction may otherwise direct,  PROVIDED that if such owner or
other Person is a Grantor,  such proceeds or award (or any payments with respect
thereto) shall constitute  Common  Collateral to the extent  constituting  First
Lien  Collateral in which the security  interest of the First Lien Agent for the
benefit of the First Lien  Claimholders  pursuant to the terms of the First Lien
Documents  is perfected  and be pledged to the Second Lien Agent  (which  pledge
shall be fully  perfected)  pursuant to the terms of the Second Lien  Collateral
Documents for the benefit of the Second Lien Noteholders. Until the Discharge of
First Lien  Obligations  has occurred,  and if such proceeds or award or payment
are  required  to have  been  paid  to the  First  Lien  Agent  pursuant  to the
provisions of the First Lien  Documents,  if the Second Lien Agent or any Second
Lien Claimholders shall, at any time, receive any proceeds of any such insurance
policy or any such award or payment in contravention of this Agreement, it shall
pay such proceeds  over to the First Lien Agent in accordance  with the terms of
SECTION 4.2.

         5.3      CERTAIN  PROVISIONS  OF FIRST LIEN  DOCUMENTS;  AMENDMENTS  TO
FIRST LIEN DOCUMENTS AND SECOND LIEN DOCUMENTS.

                  (a)      The First Lien  Documents  shall not: (i) provide for
or  permit  the  principal  amount  of loans  and  other  extensions  of  credit
thereunder,  including,  without  limitation,  outstanding  First Lien Principal
Obligations,  to exceed  $10,000,000 at any time or the outstanding  Obligations
under the First Lien  Documents  exceed the Maximum  First Lien Debt Amount,  in
each case above without having  previously  obtained the Second Lien Claimholder
Consent) or (ii) provide for a scheduled  final  maturity date of the First Lien
Principal   Obligations  under  the  First  Lien  Financing   Agreement  or  any
Refinancing  thereof that is within one year before or after the scheduled final
maturity  date of the  Notes as in  effect on the date  hereof.  The First  Lien
Documents  may be Modified in  accordance  with their terms,  and the First Lien
Financing Agreement may be Refinanced,  in each case, without the consent of the
Second Lien Agent or the Second Lien Claimholders,  PROVIDED,  HOWEVER,  that in
the case of a Refinancing,  such  Refinancing  is designated by the Company,  by
notice to Second Lien Agent, as a Permitted  Refinancing to which this Agreement
shall apply, and the holders of such Refinancing  debt, if such Refinancing debt
is secured by a Lien on the Common Collateral,  shall bind themselves in writing
to the terms of this Agreement,  and PROVIDED FURTHER that the First Lien Credit
Documents and any such Modification or Refinancing shall not: (i) provide for or
permit the principal amount of loans and other extensions of credit  thereunder,
including, without limitation,  outstanding First Lien Principal Obligations, to
exceed  $10,000,000 at any time or the outstanding  Obligations  under the First
Lien Documents exceed the Maximum First Lien Debt Amount without the Second Lien
Claimholder  Consent) or (ii) extend the  scheduled  final  maturity date of the
First Lien Principal Obligations under the First Lien Financing

                                       20
<PAGE>

Agreement or any  Refinancing  thereof to a date within one year before or after
the scheduled final maturity date of the Notes as in effect on the date hereof .
As a condition to having the benefits of this Agreement, the holders of any such
Refinancing  debt, if such  Refinancing  debt is secured by a Lien on the Common
Collateral, shall bind themselves in writing to the terms of this Agreement.

                  (b)      The  Second  Lien   Documents   may  be  Modified  in
accordance  with their terms,  and the Second Lien  Financing  Agreements may be
Refinanced,  in each case,  without  the  consent of the First Lien Agent or the
First Lien Lenders; PROVIDED,  HOWEVER, that in the case of a Refinancing,  such
Refinancing  is designated by the Company,  by notice to First Lien Agent,  as a
Permitted  Refinancing to which this Agreement  shall apply,  and the holders of
such  Refinancing  debt,  if such  Refinancing  debt is secured by a Lien on the
Common  Collateral,  shall  bind  themselves  in  writing  to the  terms of this
Agreement,  PROVIDED  FURTHER,  that any such Modification or Refinancing of the
Second Lien Documents shall not,  without the consent of the First Lien Agent or
the First Lien Lenders,  (i) provide for or permit the principal amount of loans
and other  extensions  of credit  thereunder  to be  incurred  pursuant  to such
Modification  or Refinancing or thereafter to exceed the amount  permitted to be
incurred  pursuant  to the  provisions  of the First Lien  Documents  as then in
effect,  (ii)  amend  covenants  or  events  of  default,   along  with  related
definitions,  to make them more  restrictive  than those  contained from time to
time in the First Lien Financing Agreement, or (iii) shorten the scheduled final
maturity date of the Notes or any debt  Refinancing the Notes to a date prior to
the  stated  maturity  date of the Notes as in effect on the date  hereof.  As a
condition  to having the  benefits  of this  Agreement,  the holders of any such
Refinancing  debt, if such  Refinancing  debt is secured by a Lien on the Common
Collateral, shall bind themselves in writing to the terms of this Agreement.

         5.4      RIGHTS  AS  UNSECURED   CREDITORS,   ETC..   The  Second  Lien
Obligations shall constitute senior indebtedness of each Grantor,  PARI PASSU in
right of payment to all other senior indebtedness of such Grantor, including the
First Lien Obligations. Except as otherwise set forth in SECTION 3.1, the Second
Lien Agent and the Second Lien  Claimholders may exercise rights and remedies as
creditors  against  Debtor or any other Grantor in accordance  with the terms of
the Second Lien  Documents  and  applicable  law,  PROVIDED that the Second Lien
Agent and the Second  Lien  Claimholders  may not  exercise  any such  rights or
remedies  against the Common  Collateral  except as provided in SECTION 3.1, and
FURTHER  PROVIDED that enforcement of any judgment lien by the Second Lien Agent
or the Second Lien  Claimholders  against the Common Collateral shall be subject
to the same limitations and restrictions as apply to an Enforcement Action under
SECTION 3.1(A)  hereof.  Except as otherwise set forth in SECTION 2.1 or SECTION
3.1,  nothing in this Agreement shall prohibit or subordinate the receipt by the
Second Lien Agent or any Second Lien  Claimholders  of (or its right to receive)
the required  payments of all Second Lien  Obligations or subordinate the claims
of the Second Lien Agent and the Second Lien Claimholders in respect of property
of Grantor that is not Common Collateral.

         5.5      BAILEE FOR PERFECTION, ETC.

                                       21
<PAGE>

                  (a)      First Lien Agent hereby agrees and acknowledges that,
to the extent that it holds,  or a third party (as bailee,  agent or  otherwise)
holds on its behalf, physical possession of or "control" (as defined in the UCC)
over Common Collateral (including proceeds thereof) pursuant to any of the First
Lien  Documents  (the "FIRST LIEN  PLEDGED  COLLATERAL"),  First Lien Agent (and
others holding on its behalf) holds such First Lien Pledged Collateral as bailee
and agent for  perfection  for the  benefit of the Second  Lien Agent and Second
Lien Claimholders and their successors and assigns (such holding for the benefit
of the Second  Lien Agent and Second Lien  Claimholders  being  intended,  among
other things,  to satisfy the requirements of Sections  8-301(a)(2) and 9-313(c)
of the UCC) and in each case  solely  to the  extent  required  to  perfect  and
enforce the  security  interests of Second Lien Agent in such First Lien Pledged
Collateral.

                  (b)      Second  Lien Agent  hereby  agrees  and  acknowledges
that,  to the  extent  that it  holds,  or a third  party (as  bailee,  agent or
otherwise) holds on its behalf,  physical possession of or "control" (as defined
in the UCC) over Common Collateral  (including proceeds thereof) pursuant to any
of the Second Lien Documents (the "SECOND LIEN PLEDGED COLLATERAL") prior to the
Discharge of First Lien  Obligations,  Second Lien Agent (and others  holding on
its behalf)  holds such Second Lien Pledged  Collateral  as bailee and agent for
perfection  for the benefit of the First Lien Agent and First Lien  Claimholders
and their successors and assigns (such holding for the benefit of the First Lien
Agent and First Lien Claimholders being intended, among other things, to satisfy
the  requirements  of Sections  8-301(a)(2) and 9-313(c) of the UCC) and in each
case solely to the extent required to perfect and enforce the security interests
of First Lien Agent in such Second Lien Pledged Collateral.

                  (c)      Subject to the terms of this Agreement and applicable
law, until the Discharge of First Lien Obligations has occurred,  the First Lien
Agent  shall be  entitled  to deal with the First  Lien  Pledged  Collateral  in
accordance  with the terms of the First  Lien  Documents  as if the Liens of the
Second Lien Agent under the Second Lien Collateral  Documents did not exist. The
rights of the  Second  Lien Agent in the  Common  Collateral  shall at all times
prior to the Discharge of First Lien Obligations be subject to the terms of this
Agreement.

                  (d)      The  First  Lien  Agent  shall  have  no   obligation
whatsoever  to the Second  Lien Agent or any Second Lien  Claimholder  to ensure
that the First Lien  Pledged  Collateral  is genuine  or owned by  Grantor.  The
duties or  responsibilities of the First Lien Agent under this SECTION 5.5 shall
be limited  solely to holding the First Lien  Pledged  Collateral  as bailee and
agent for  perfection  for the  benefit of the Second Lien Agent and Second Lien
Claimholders and their successors and assigns, which duty and responsibility the
First  Lien  Agent  shall  fulfill  using the same  degree of care with  respect
thereto  as it  uses  for  similar  property  pledged  to it as  collateral  for
indebtedness  of others to the First Lien Agent,  and the First Lien Agent shall
have no liability in connection  therewith  except for its negligence or willful
misconduct as determined pursuant to a final  non-appealable order of a court of
competent jurisdiction.

                                       22
<PAGE>

                  (e)      The  Second  Lien  Agent  shall  have  no  obligation
whatsoever to the First Lien Agent or any First Lien  Claimholder to ensure that
the Second Lien Pledged Collateral is genuine or owned by Grantor. The duties or
responsibilities  of the Second  Lien  Agent  under  this  SECTION  5.5 shall be
limited solely to holding the Second Lien Pledged Collateral as bailee and agent
for  perfection  for  the  benefit  of the  First  Lien  Agent  and  First  Lien
Claimholders and their successors and assigns, which duty and responsibility the
Second  Lien Agent  shall  fulfill  using the same  degree of care with  respect
thereto  as it  uses  for  similar  property  pledged  to it as  collateral  for
indebtedness of others to the Second Lien Agent, and the Second Lien Agent shall
have no liability in connection  therewith  except for its negligence or willful
misconduct as determined pursuant to a final  non-appealable order of a court of
competent jurisdiction.

                  (f)      The First Lien Agent acting  pursuant to this SECTION
5.5  shall  not have by reason of the First  Lien  Documents,  the  Second  Lien
Collateral  Documents,  this Agreement or any other related document a fiduciary
relationship in respect of the Second Lien Agent or any Second Lien Claimholder.

                  (g)      The Second Lien Agent acting pursuant to this SECTION
5.5  shall  not have by reason of the First  Lien  Documents,  the  Second  Lien
Collateral  Documents,  this Agreement or any other related document a fiduciary
relationship in respect of the First Lien Agent or any First Lien Claimholder.

                  (h)      First   Lien   Agent   and  the  other   First   Lien
Claimholders  (and any third  Person  acting on its or their  behalf,  as agent,
bailee or  otherwise)  shall not have any duty to the  Second  Lien Agent or the
other Second Lien Claimholders with respect to the First Lien Pledged Collateral
or to provide the Second Lien  Claimholders with any rights with respect to such
First Lien Pledged  Collateral EXCEPT (1) as specified in this Agreement and (2)
promptly upon the Discharge of First Lien  Obligations,  subject to SECTIONS 2.2
and 2.4 hereof,  and at the expense of Grantor,  First Lien Agent and each other
First Lien  Claimholder  shall (and shall cause each Person  acting on behalf of
any of the foregoing, as agent, bailee or otherwise,  to) deliver all First Lien
Pledged Collateral (if any), together with any necessary  endorsements and other
documents  (including any applicable  stock powers or bond powers),  then in its
possession or in the possession of its agent or bailee,  or turn over control as
to any First Lien  Pledged  Collateral  for which it or its agent or bailee then
has control, as the case may be, to Second Lien Agent, except to the extent that
(i) First  Lien  Agent or any other  First  Lien  Claimholder  has  retained  or
otherwise  acquired such First Lien Pledged Collateral in satisfaction of all or
any part of the First Lien Obligations,  (ii) such First Lien Pledged Collateral
has been  sold or  otherwise  disposed  of by  First  Lien  Agent or First  Lien
Claimholders  in accordance with this Agreement or by Grantor in accordance with
this  Agreement  and the Second  Lien  Documents  or (iii) it may  otherwise  be
required  by  applicable  law or any  order of any  court or other  Governmental
Authority.  First Lien Agent and, where applicable,  the First Lien Claimholders
shall  cause each  Person  acting on behalf of any of the  foregoing,  as agent,
bailee or otherwise,  to comply with the provisions of this Agreement in respect
of  Common  Collateral  in its  possession  or  control.  Subject  to  and  upon
compliance by the First Lien Agent and First Lien Claimholders (and each such

                                       23
<PAGE>

Person acting on behalf of any of the foregoing) with the duties and obligations
contemplated  by this SECTION 5.5 and the other  provisions  of this  Agreement,
effective  upon such delivery of all such  possession  and control of such First
Lien Pledged  Collateral,  First Lien Agent and First Lien Claimholders shall be
automatically  released from all claims and liabilities  arising pursuant to the
role of First Lien Agent as bailee and agent for perfection  with respect to the
First Lien  Pledged  Collateral.  Each  Grantor  acknowledges  and agrees to the
delivery  by First Lien Agent and each other  First Lien  Claimholder  (and each
such Person  acting on behalf of any of the  foregoing)  to Second Lien Agent of
any such First Lien Pledged  Collateral and waives and releases First Lien Agent
and the other First Lien  Claimholders (and each such Person acting on behalf of
any of the foregoing) from any liability as a result of such action.

                  (i)      Second   Lien  Agent  and  the  other   Second   Lien
Claimholders (and any third Person acting on its or their behalf) shall not have
any duty to the First  Lien  Agent or the other  First  Lien  Claimholders  with
respect to the  Second  Lien  Pledged  Collateral  or to provide  the First Lien
Claimholders with any rights with respect to such Second Lien Pledged Collateral
except as specified in this Agreement.  Second Lien Agent and, where applicable,
the Second Lien Claimholders  shall cause each Person acting on behalf of any of
the foregoing,  as agent, bailee or otherwise,  to comply with the provisions of
this  Agreement in respect of Common  Collateral  in its  possession or control.
Subject  to and upon  compliance  by the  Second  Lien  Agent  and  Second  Lien
Claimholders  (and each such  Person  acting on behalf of any of the  foregoing)
with the duties and  obligations  contemplated by this SECTION 5.5 and the other
provisions of this  Agreement,  effective upon the earlier of Discharge of First
Lien  Obligations  and  delivery  of  possession  and control of all Second Lien
Pledged  Collateral,  if any, then in its  possession  (or the possession of its
agent or bailee),  together with any necessary  endorsements and other documents
(including  any  applicable  stock powers or bond powers),  to First Lien Agent,
Second Lien Agent and Second Lien Claimholders  shall be automatically  released
from all claims and  liabilities  arising  pursuant  to the role of Second  Lien
Agent as bailee and agent for perfection with respect to the Second Lien Pledged
Collateral.  Each Grantor acknowledges and agrees to the delivery by Second Lien
Agent and each other  Second Lien  Claimholder  (and each such Person  acting on
behalf of any of the  foregoing)  to First  Lien Agent of any such  Second  Lien
Pledged  Collateral  and waives  and  releases  Second  Lien Agent and the other
Second Lien  Claimholders  (and each such Person  acting on behalf of any of the
foregoing) from any liability as a result of such action.

                  (j)      In the case of any  deposit  or  securities  accounts
subject  to deposit  account  control  agreements,  securities  account  control
agreements  or analogous  agreements  in favor of First Lien Agent or any rights
with respect to Common  Collateral  obtained by the First Lien Agent pursuant to
collateral  access  agreements  or analogous  agreements  in favor of First Lien
Agent,  after  Discharge of First Lien  Obligations,  and to the extent that the
Second Lien  Obligations  remain  outstanding,  First Lien Agent agrees,  at the
request of Second Lien Agent and at the expense of Grantor,  to (i) with respect
to deposit accounts or securities  accounts,  promptly deliver written notice to
each bank or other

                                       24
<PAGE>

institution at which deposit accounts or securities accounts are maintained that
(A) the First Lien Agent is no longer acting as the "agent" (or in any analogous
capacity) or  otherwise  entitled to act under such  agreement  and (B) from the
date of the notice and at all times thereafter until the Second Lien Obligations
are  paid in  full  or the  Second  Lien  Agent  instructs  the  bank  or  other
institution  at which  deposit  accounts or securities  accounts are  maintained
otherwise,  that the Second Lien Agent is to be deemed the "agent" (or analogous
party) and otherwise be entitled to act for all purposes in connection with such
agreement and that the bank or other  institution at which such deposit accounts
or securities  accounts are maintained is to follow the directions of the Second
Lien  Agent for all  purposes  in  connection  with  such  deposit  accounts  or
securities accounts,  as applicable,  and (ii) with respect to collateral access
agreements or analogous comments in favor of First Lien Agent,  promptly deliver
written notice to the Person party to the applicable Collateral Access Agreement
that (A) the Common  Collateral  located at such location  remains  subject to a
Lien in favor of the  Second  Lien Agent and (B) from the date of the notice and
at all times  thereafter  until the  Second  Lien  Agent  instructs  such  party
otherwise,  the  Second  Lien Agent is to be deemed the  "agent"  (or  analogous
party) for all purposes in connection with such agreement.

         5.6      WHEN  DISCHARGE OF FIRST LIEN  OBLIGATIONS  DEEMED TO NOT HAVE
OCCURRED.  If at the time the Discharge of First Lien Obligations occurs, and in
connection therewith, Grantor enters into any Permitted Refinancing of any First
Lien  Document  evidencing  a  First  Lien  Obligation  and the  holders  of the
Obligations outstanding under such Permitted Refinancing, or an authorized agent
on their behalf, shall have become bound by this Agreement,  then such Discharge
of First Lien Obligations shall automatically be deemed not to have occurred for
all purposes of this  Agreement  (other than with  respect to any actions  taken
prior  to the  date of  designation  of such  Refinancing  by the  Company  as a
Permitted  Refinancing  (as  provided  in  SECTION  5.3(A))  as a result  of the
occurrence of such Disc harge of First Lien  Obligations),  and the  Obligations
under such  Permitted  Refinancing of such First Lien Document up to, but not in
excess of, the Maximum First Lien Debt Amount shall  automatically be treated as
First  Lien  Obligations  for all  purposes  of this  Agreement,  including  for
purposes of the Lien  priorities and rights in respect of Common  Collateral set
forth herein,  and the First Lien Agent under such First Lien Documents shall be
the First Lien  Agent for all  purposes  of this  Agreement.  Upon  receipt of a
notice  stating  that  Debtor  has  entered  into  a  new  First  Lien  Document
constituting a Permitted Refinancing, which notice shall include the identity of
the new First Lien Agent (such agent,  the "NEW  AGENT"),  the Second Lien Agent
shall  promptly  consent to such Permitted  Refinancing  and (a) enter into such
documents and agreements (including amendments or supplements to this Agreement)
as the Company or such New Agent shall reasonably request in order to provide to
the New Agent the rights  contemplated  hereby,  in each case  consistent in all
material  respects  with the terms of this  Agreement and (b) deliver to the New
Agent  any  Pledged  Collateral  then  held by it  together  with any  necessary
endorsements (or otherwise allow the New Agent to obtain control of such Pledged
Collateral).  As a condition to the  foregoing,  the New Agent shall  agree,  on
behalf of itself and the new First Lien  Claimholders,  to be bound by the terms
of this Agreement. If the new First Lien Obligations under the new First Lien

                                       25
<PAGE>

Documents  are  secured by assets of Grantor  that do not also secure the Second
Lien Obligations, then the Second Lien Obligations shall be secured at such time
by a second  priority Lien on such assets to the same extent provided in the new
First  Lien   Collateral   Documents   pursuant  to   documentation   reasonably
satisfactory to the Second Lien Agent.

         5.7      PURCHASE  RIGHT.  No later than the 30th day after the date of
execution  and  delivery of this  Agreement by the parties  hereto,  the Company
shall  furnish to the  Trustee  an  Opinion  of  Counsel  in form and  substance
reasonably  satisfactory  to the Trustee  stating  that,  in the opinion of such
counsel,  the obligation of the Second Lien Agent to deliver the Purchase Option
Event Notice or any other notices under this SECTION 5.7 will not be a violation
of any securities laws (the "TRUSTEE PURCHASE OPTION OPINION").  Notwithstanding
the foregoing and without  affecting the  obligation of the Company set forth in
the preceding  sentence any Second Lien  Claimholder  may furnish or cause to be
furnished to the Trustee the Trustee Purchase Option Opinion.  The obligation of
the Second Lien Agent to deliver any  Purchase  Option Event Notice or any other
notices  under this SECTION 5.7 shall be  conditioned  upon the prior receipt by
the Trustee of Trustee  Purchase  Option  Opinion from the Company or any Second
Lien Claimholder.

                  (a)      Notwithstanding  anything herein to the contrary, (i)
no less than 15 Business  Days prior to (unless,  in the good faith  judgment of
the First Lien Agent,  the delay in taking such action for 15 Business Days will
have any substantially adverse effect upon the value of or ability to realize on
the First Lien  Collateral  or the  ability of the First  Lien  Claimholders  to
collect  the First Lien  Obligations,  in which case the First Lien Agent  shall
provide the Purchase Option Event Notice as promptly as practicable (to maximize
the length of the  Purchase  Option  Standstill  Period  (defined  below) and to
minimize any such substantially adverse effect) prior to) the First Lien Agent's
or any First Lien  Claimholder's  (A)  commencement  of any  Enforcement  Action
against  the  First  Lien  Collateral  or (B)  acceleration  of the  First  Lien
Obligations  (other than pursuant to  commencement  by any Person other than any
First Lien Claimholder of an Insolvency  Proceeding  relating to any Grantor) or
(C) commencement of, or joinder in filing a petition for the commencement of, an
Insolvency  Proceeding  against  any Grantor  (such 15  Business  Day period (or
shorter period, if applicable),  the "PURCHASE OPTION STANDSTILL Period"),  (ii)
promptly (but in any event within five Business Days)  following upon receipt by
the First Lien Agent of written  notice of the occurrence of an Event of Default
under the  Indenture,  and (iii) promptly (but in any event within five Business
Days)  following the  occurrence  of an Insolvency  Proceeding in respect of any
Grantor,  the First Lien Agent shall  deliver to the Second  Lien Agent  written
notice,  by same day or  overnight  courier,  of such  Purchase  Option Event (a
"PURCHASE OPTION EVENT NOTICE") and afford all Second Lien  Claimholders who (x)
hold Notes as of the date of the delivery of the Purchase Option Event Notice to
the  Second  Lien Agent and (y) timely (in  accordance  with this  SECTION  5.7)
notify the Second Lien Agent of their irrevocable  commitments to purchase First
Lien  Obligations  the  collective  opportunity  to purchase (at par and without
premium) all of the First Lien  Obligations  (and all attendant rights under the
First Lien Documents)  pursuant to this SECTION 5.7 at any time after receipt of
such Purchase Option Event Notice by the Second Lien Agent.  The Purchase Option
Event

                                       26
<PAGE>

Notice will specify (A) the Purchase Option Event,  (B) the estimated  aggregate
amount of First Lien Obligations outstanding on the date of such notice, (C) the
aggregate unpaid amount of First Lien Principal  Obligations  outstanding on the
date of such notice, (D) the estimated  aggregate accrued,  unpaid amount of the
First Lien  Obligations  constituting  interest,  fees,  out of pocket  expenses
(including  attorney's fees  (determined  based on standard hourly rates of, and
hours actually  worked by, such attorneys and  reimbursable by Grantor under the
terms of the First Lien  Documents) and  disbursements)  and other amounts owing
not  constituting  First Lien Principal  Obligations (the amounts referred to in
this clause (D), the "FIRST LIEN ANCILLARY OBLIGATIONS") outstanding on the date
of such notice,  (E) the  estimated  aggregate  accrued,  unpaid  amount of each
category of First Lien  Ancillary  Obligations  outstanding  on the date of such
notice,  and attach the form of the  Assignment  and  Acceptance  Agreement  (as
defined below) to be executed by the Second Lien Claimholders,  as assignee, and
each First Lien  Lender and the First Lien Agent  relating  to the  purchase  of
First  Lien   Obligations   pursuant  to  this  SECTION  5.7,   which  shall  be
substantially  in the form attached hereto as Exhibit A, (F) the Cut-Off Date as
defined  below  in  (b)(ii),  and (G) the  Purchase  Date as  defined  below  in
(b)(iii).   Notwithstanding   the  foregoing,   and  without  prejudice  to  the
obligations of the First Lien Agent set forth above,  the Second Lien Agent may,
and at the direction of the Holders of 25 % or more of the outstanding principal
amount of the Second Lien Obligations shall, at any time after the occurrence of
a  Purchase  Option  Event and prior to the giving of a  Purchase  Option  Event
Notice in respect  thereof by the First Lien  Agent,  demand that the First Lien
Agent deliver to the Second Lien Agent a Purchase Option Event Notice specifying
the  information  set  forth in the  preceding  sentence  with  respect  to such
Purchase Option Event and outstanding First Lien Obligations, and the First Lien
Agent  shall,  no later than five  Business  Days after  receipt of such demand,
deliver to the Second Lien Agent such  Purchase  Option Event Notice  specifying
such  information  and  attaching  such form of  agreement,  in which  event the
Purchase Option  Standstill  Period shall commence on the date of such demand by
the Second Lien Agent and shall  continue for 15 Business Days after delivery to
the Second Lien Agent of such Purchase Option Event Notice.  During the Purchase
Option  Standstill  Period,  neither  the First  Lien  Agent nor any First  Lien
Claimholder shall commence or continue any Enforcement  Action against the First
Lien Collateral or accelerate the First Lien Obligations (other than pursuant to
commencement  by  any  Person  other  than  any  First  Lien  Claimholder  of an
Insolvency Proceeding relating to a Grantor).

                  (b)      The Second Lien Agent will promptly (but in any event
within two Business  Days after its receipt  thereof)  send the Purchase  Option
Event Notice to each Second Lien Claimholder together with notice of:

                  (i)      the date of receipt by the Second Lien Agent thereof,

                  (ii)     the date  (the  "CUT-OFF  DATE"),  which  shall be 10
                           Business Days after the Purchase  Option Event Notice
                           was  received by the Second Lien Agent,  by which the
                           Second Lien Agent must receive  irrevocable  purchase
                           commitments  from the  Second  Lien  Claimholders  in
                           order for such commitments to be considered, and

                                       27
<PAGE>

                  (iii)    the proposed date (the "PURCHASE DATE"),  which shall
                           be five  Business  Days after the  Cut-Off  Date,  on
                           which the  purchase  of First Lien  Obligations  will
                           take  effect  if  sufficient   Purchase   Commitments
                           (defined  below) are received and the  conditions  to
                           consummation  of  the  closing  of the  purchase  are
                           satisfied.

         Upon  receipt of such  Purchase  Option Event Notice by the Second Lien
Claimholders,  each  Second  Lien  Claimholder  shall  have from the date of its
receipt  thereof to and including the Cut-Off Date (a "PURCHASE  OPTION PERIOD")
to notify the Second Lien Agent of its commitment (its "PURCHASE COMMITMENT") to
purchase First Lien Obligations  pursuant to this SECTION 5.7 (which  commitment
shall be  irrevocable if the  conditions to  consummation  of the closing of the
purchase  are  satisfied)  and  the  maximum  amount  of  First  Lien  Principal
Obligations  that it is willing to purchase  (which may be more or less than its
pro rata share  thereof) (it being further  understood  that in  delivering  its
Purchase  Commitment,  a Second Lien  Claimholder is  irrevocably  committing to
purchase up to the maximum amount of First Lien Principal  Obligations specified
therein,  plus its pro rata share (based on the Purchase Percentage of the First
Lien Principal  Obligations to be purchased by it) of the accrued,  unpaid First
Lien Ancillary  Obligations as at the Purchase Date, which may exceed the amount
of  accrued,  unpaid  First  Lien  Ancillary  Obligations  as at the date of the
Purchase Option Event Notice). In delivering its Purchase Commitment each Second
Lien  Claimholder  shall  certify  the  aggregate   principal  amount  of  Notes
beneficially  owned by it. If no such  notice  is  received  from a Second  Lien
Claimholder  within such Purchase Option Period,  the option granted pursuant to
this  SECTION  5.7 to such  Second  Lien  Claimholder  to  purchase  First  Lien
Obligations  in respect of such  Purchase  Option Event Notice shall expire (but
without  prejudice to such Second Lien  Claimholder's  rights in respect of such
Purchase  Option Event under SECTION  5.7(G) if the Purchase Date shall not have
occurred).

                  (c)      [Intentionally Omitted]

                  (d)      Each  Second  Lien  Claimholder  will have the right,
pursuant to this SECTION 5.7, to purchase up to its pro rata share (based on the
amount of Second Lien Obligations held by each such Second Lien  Claimholder) of
the First Lien Obligations;  PROVIDED that if any Second Lien Claimholder elects
not to  exercise  in  whole  or in  part  its  option  to  purchase  First  Lien
Obligations,  that Second Lien Claimholder's pro rata share (or relevant portion
thereof as to which such option has not been  exercised)  shall be  allocated by
the Second Lien Agent to the other Second Lien Claimholders,  if any, exercising
their option to purchase more than their  original pro rata shares of First Lien
Obligations under this SECTION 5.7 as contemplated herein. If one or more Second
Lien  Claimholders do not exercise their purchase  option  hereunder or exercise
such purchase option for less than their  respective  original pro rata share of
the First  Lien  Obligations,  then those  Second  Lien  Claimholders  that have
indicated a willingness to purchase more than

                                       28
<PAGE>

their  original  pro rata shares  shall be entitled  to purchase  the  remaining
aggregate  amount  of the  First  Lien  Obligations  each pro rata  based on the
percentage that the amount by which its purchase offer exceeded its original pro
rata share of the First Lien Obligations is of the aggregate of the amounts,  if
any, by which the purchase offers of all such Second Lien Claimholders  exceeded
their  original  pro rata  shares of the First Lien  Obligations.  The amount of
purchased  First Lien  Obligations  to be  allocated  to each such  Second  Lien
Claimholder  shall be determined by the Second Lien Agent on the basis set forth
above.  In the event that the amount of First Lien  Principal  Obligations  that
Second Lien Claimholders  elect to purchase pursuant to this SECTION 5.7 is less
than all of the First Lien Principal Obligations (a "PURCHASE SHORTFALL"),  then
the option set forth in this SECTION 5.7 (including with respect to options that
have been  exercised)  with  respect  to the  Purchase  Option  Event  Notice so
delivered shall expire (but without prejudice to such Second Lien  Claimholder's
rights in respect of such  Purchase  Option  Event under  SECTION  5.7(G) if the
Purchase Date shall not have occurred).  This SECTION 5.7 shall remain in effect
for any subsequent Purchase Option Event.

                  (e)      No later  than the fourth  Business  Day prior to the
proposed  Purchase  Date,  the First Lien Agent shall deliver to the Second Lien
Agent a definitive  statement (the "PAY-OFF  STATEMENT") of the aggregate amount
of First Lien Obligations reasonably estimated to be outstanding and accrued and
unpaid as at the proposed  Purchase Date, which Pay-Off  Statement shall specify
the complete wire transfer  instructions for payment to the First Lien Agent for
the  account  of the First  Lien  Claimholders  by the  purchasing  Second  Lien
Claimholders  of the purchase  price for the First Lien  Obligations,  and shall
specify the  aggregate  reasonably  estimated  amount  thereof at such  proposed
Purchase Date  constituting  (i) outstanding  First Lien Principal  Obligations,
(ii) accrued,  unpaid First Lien Ancillary  Obligations  and (iii) the aggregate
accrued,  unpaid  amount of each  category of First Lien  Ancillary  Obligations
(interest,  fees, out of pocket expenses  (including  estimated  attorney's fees
(determined  based on standard  hourly rates of, and hours  actually  worked by,
such  attorneys  and  reimbursable  by Grantor under the terms of the First Lien
Documents)  and  disbursements  through the Purchase  Date) and other amounts by
category).

                  (f)      The Second  Lien Agent shall  promptly  (but no later
than one  Business  Day after the later of (x) the Cut-Off  Date and (y) date of
receipt of the Pay-Off Statement)  notify, in writing,  (i) the First Lien Agent
either (A) of the irrevocable  Purchase  Commitments of Second Lien Claimholders
to purchase, in the aggregate, all of the First Lien Obligations pursuant hereto
on the proposed  Purchase Date and specifying the percentage of such outstanding
First  Lien  Obligations   being  purchased  by  each  Second  Lien  Claimholder
delivering  an  effective  Purchase  Commitment  (as to each  such  Second  Lien
Claimholder, its "PURCHASE PERCENTAGE") (such notice, the "PURCHASE NOTICE"), or
(B)  that a  Purchase  Shortfall  has  occurred  and that  the  purchase  option
hereunder with respect to the  then-effective  Purchase  Option Event Notice has
expired,  as applicable,  and (ii) each such Second Lien  Claimholder (A) of the
amount of First Lien  Obligations  it is required  to  purchase  pursuant to its
irrevocable Purchase  Commitment,  together with a copy of the Pay-Off Statement
or (B) as provided in clause (i)(B) above, as applicable.

                                       29
<PAGE>

Any  Purchase  Notice sent by the Second Lien Agent on behalf of the Second Lien
Claimholders to the First Lien Agent shall be  irrevocable.  Upon the First Lien
Agent's receipt of the Purchase Notice,  the First Lien Agent and the First Lien
Claimholders  shall not  thereafter  effect any  acceleration  of the First Lien
Obligations  or  commence  any  Enforcement  Action (or  continue  to pursue any
Enforcement Action) upon or with respect to the Common Collateral.

                  (g)      Notwithstanding  anything to the  contrary  contained
elsewhere  herein, if a Purchase Option Event shall have occurred and a Purchase
Shortfall  shall occur with respect to the Purchase Option Event Notice relating
to such Purchase Option Event:

                  (i)      At the  written  request of one or more  Second  Lien
                           Claimholders  to the Second  Lien Agent  following  a
                           Purchase  Shortfall  with  respect  to  any  Purchase
                           Option  Event  Notice,  the Second  Lien Agent  shall
                           request  that the First  Lien  Agent  deliver  to the
                           Second Lien Agent,  and within five  Business Days of
                           such  request the First Lien Agent  shall  deliver to
                           the Second Lien Agent, a statement specifying (i) the
                           estimated  aggregate amount of First Lien Obligations
                           outstanding  on the  date of such  request,  (ii) the
                           aggregate  unpaid  amount  of  First  Lien  Principal
                           Obligations  outstanding on the date of such request,
                           (iii) the  estimated  aggregate  amount of First Lien
                           Ancillary Obligations outstanding on the date of such
                           request,  and (iv) the estimated  aggregate  accrued,
                           unpaid   amount  of  each   category  of  First  Lien
                           Ancillary Obligations outstanding on the date of such
                           request. No more than two requests for statements may
                           be made by the  Second  Lien  Agent to the First Lien
                           Agent  in  respect  of  any  Purchase   Option  Event
                           following a Purchase  Shortfall  in respect  thereof.
                           Upon  receipt by the Second Lien Agent from the First
                           Lien Agent of such  statement,  the Second Lien Agent
                           shall  promptly  forward to the all the  Second  Lien
                           Claimholders a copy of such statement.

                  (ii)     One or more Second Lien  Claimholders  shall have the
                           right  at  any  time  after  such   Purchase   Option
                           Shortfall to purchase  all, but not less than all, of
                           the  then  outstanding   First  Lien  Obligations  in
                           accordance with the provisions set forth  hereinbelow
                           by  delivering  to the  Second  Lien  Agent  Purchase
                           Commitment(s)  providing  in the  aggregate  for  the
                           purchase of all,  but not less than all, of such then
                           outstanding  First Lien Obligations  pursuant to this
                           SECTION 5.7 and specifying the Purchase Percentage of
                           such  outstanding   First  Lien   Obligations   being
                           purchased by each such Second Lien Claimholder (which
                           commitments shall be irrevocable if the conditions to
                           consummation  of  the  closing  of the  purchase  are
                           satisfied) and specifying the proposed  Purchase Date
                           for the consummation of such purchase (which Purchase
                           Date shall be not less than six  Business  Days,  nor
                           more than 10 Business Days, after the date the Second
                           Lien Agent receives such Purchase Commitment(s)), and
                           the Second Lien Agent shall  within one  Business Day
                           after its receipt  thereof  deliver a Purchase Notice
                           in respect of such Purchase  Commitment(s) and notice
                           of such  proposed  Purchase  Date to the  First  Lien
                           Agent.

                                       30
<PAGE>

Upon the First Lien Agent's receipt of the Purchase Notice, the First Lien Agent
and the First Lien Claimholders  shall not thereafter effect any acceleration of
the First Lien  Obligations or commence any  Enforcement  Action (or continue to
pursue any Enforcement Action) upon or with respect to the Common Collateral. No
later than the fourth  Business Day prior to the  proposed  Purchase  Date,  the
First Lien Agent  shall  deliver to the Second Lien Agent a  definitive  Pay-Off
Statement of the aggregate amount of First Lien Obligations reasonably estimated
to be  outstanding  and accrued  and unpaid as at the  proposed  Purchase  Date,
containing  the  information  provided for in SECTION  5.7(E) and specifying the
wire transfer  information  for payment of the purchase price for the First Lien
Obligations.  The Second Lien Agent shall within one Business Day forward a copy
of such  Pay-Off  Statement  to each  Second  Lien  Claimholder  that shall have
delivered an effective Purchase Commitment.

                  (h)      On the  Purchase  Date  specified  in any  applicable
Purchase Notice, the First Lien Agent and First Lien Claimholders shall, subject
to any  required  approval  of any  court or other  regulatory  or  Governmental
Authority then in effect,  if any, sell to the Second Lien Claimholders who have
exercised  their  purchase  option  as  provided  above  all of the  First  Lien
Obligations.  On such  Purchase  Date,  each  of the  Second  Lien  Claimholders
exercising the purchase option hereunder, severally, shall pay to the First Lien
Agent, for the benefit of the First Lien Agent and First Lien  Claimholders,  in
immediately  available funds its Purchase  Percentage of the full amount (at par
and without  premium) of all First Lien Principal  Obligations  then outstanding
together with all accrued,  unpaid Ancillary First Lien Obligations,  all in the
amounts specified in the Pay-Off Statement  (reduced,  however, by the amount of
any payment or  reimbursement  in respect  thereof not  reflected in the Pay-Off
Statement).  To the extent that the actual aggregate outstanding amount of First
Lien  Obligations  outstanding  on the Purchase  Date is less than the aggregate
amount  specified in the Pay-Off  Statement,  the First Lien Agent and the First
Lien Claimholders  shall promptly cause such excess amount to be refunded to the
purchasing Second Lien  Claimholders (pro rata based on the respective  Purchase
Percentages of the First Lien Obligations purchased by them).

         Such purchase price shall be remitted by wire transfer in federal funds
to such bank  account of the First Lien Agent as the First Lien Agent shall have
specified in writing to the Second Lien Agent in the Pay-Off  Statement for such
purpose. Interest shall be calculated to but excluding the Business Day on which
such  purchase  and sale shall  occur if the  amounts so paid by the  purchasing
Second Lien Claimholders to the bank account  designated by the First Lien Agent
are  received in such bank  account  prior to 2:00 p.m.,  New York City time and
interest  shall be calculated to and including  such Business Day if the amounts
so paid by such Persons to the bank account  designated  by the First Lien Agent
are received in such bank account later than 2:00 p.m., New York City time.

                  (i)      Any  purchase  pursuant  to the  purchase  option set
forth in this SECTION 5.7 shall be  expressly  made  without  representation  or
warranty of any kind by the First Lien Agent or the First Lien Claimholders,  as
to the First Lien Obligations,  the Common Collateral or otherwise,  and without
recourse to the First Lien Agent and the First Lien Claimholders, except that

                                       31
<PAGE>

First  Lien  Agent and each First Lien  Claimholder,  as to itself  only,  shall
represent and warrant as set forth in Section 7 of the Assignment and Acceptance
Agreement  to be  entered  into as  provided  herein  in  connection  with  such
purchase.

                  (j)      Upon notice to the Company that the purchase of First
Lien  Obligations  pursuant to this SECTION 5.7 has been consummated by delivery
of the  purchase  price to the First Lien Agent,  each  Grantor  shall treat the
applicable  Second Lien  Claimholders as holders of the First Lien  Obligations,
and such Person as the Second Lien  Claimholders  acquiring a majority in amount
of the First Lien  Principal  Obligations  shall have  appointed  to act in such
capacity as the "agent" or "administrative  agent" (or analogous capacity) under
the First Lien Documents,  for all purposes  hereunder and under each First Lien
Document (it being agreed that the Second Lien Agent shall have no obligation to
act as Replacement  First Lien Agent).  In connection with any purchase of First
Lien  Obligations  pursuant to this  SECTION  5.7,  each First Lien  Claimholder
agrees to enter into and deliver to the purchasing  Second Lien  Claimholders on
the Purchase  Date,  as a condition to closing,  an  Assignment  and  Acceptance
Agreement  substantially in the form attached hereto as Exhibit A (the bracketed
provisions  therein to be  appropriately  modified  to reflect  the terms of the
First  Lien  Documents  and  the  then  existing  First  Lien  Obligations)  (an
"ASSIGNMENT  AND ACCEPTANCE  AGREEMENT")  and, at the expense of Grantor,  First
Lien Agent and each other  First Lien  Claimholder  shall (and shall  cause each
Person acting on behalf of any of the foregoing,  as agent, bailee or otherwise,
to)  deliver  all First Lien  Pledged  Collateral  (if any),  together  with any
necessary  endorsements  and other  documents  (including any  applicable  stock
powers or bond powers), then in its possession or in the possession of its agent
or bailee,  or turn over  control as to any First Lien  Pledged  Collateral  for
which it or its agent or  bailee  then has  control,  as the case may be, to the
Replacement  First  Lien  Agent  and  otherwise  take  such  actions  as  may be
appropriate to effect an orderly transition to the Replacement First Lien Agent.

         Section 6     INSOLVENCY PROCEEDINGS.

         6.1      FINANCE AND SALE ISSUES.  If Grantor shall become subject to a
case under the Bankruptcy  Code and if, as  debtor-in-possession,  Grantor moves
for  approval of a DIP  Financing  (i) to be provided in good faith by the First
Lien Agent or any First Lien  Claimholders and that provides for a DIP Financing
in equivalent  amounts (but in no event in an aggregate  principal  amount that,
together  with  the  aggregate  amount  of  First  Lien  Principal   Obligations
outstanding  after  giving  effect to the  application  of  proceeds of such DIP
Financing,  would exceed  $10,000,000),  and at pricing levels  (including fees,
interest  rate and other  costs) and on other  terms and  conditions  (including
representations,  warranties, covenants and events of default) no less favorable
to Grantor than that then reasonably  obtainable from other Persons,  the Second
Lien Agent and each  Second Lien  Claimholder  agree that no  objection  will be
raised by the Second  Lien Agent or such  Second  Lien  Claimholder  to such DIP
Financing,  provided that the aggregate principal amount thereof,  together with
the  aggregate  amount of First Lien  Principal  Obligations  outstanding  after
giving effect to the  application of proceeds of such DIP  Financing,  shall not

                                       32
<PAGE>

exceed  $10,000,000 at any time outstanding or (ii) to be provided in good faith
by the Second Lien Agent or any Second Lien  Claimholders,  which DIP  Financing
either (x) does not provide  for or have the benefit of any priming  Lien having
priority  over the Liens in favor of the  First  Lien  Agent or the  First  Lien
Claimholders  in the Common  Collateral,  or (y) provides for a DIP Financing in
equivalent  amounts,  and at pricing levels  (including fees,  interest rate and
other  costs)  and on other  terms and  conditions  (including  representations,
warranties,  covenants and events of default) no less  favorable to Grantor than
that then  reasonably  obtainable  from other Persons,  the First Lien Agent and
each First Lien Claimholder agrees that no objection will be raised by the First
Lien Agent or such First Lien Claimholder to such DIP Financing.

         6.2      RELIEF FROM THE AUTOMATIC  STAY.  Until the Discharge of First
Lien  Obligations  has occurred,  the Second Lien Agent, on behalf of itself and
the Second  Lien  Claimholders,  agrees that none of them shall seek relief from
the automatic stay or any other stay in respect of the Common  Collateral in any
Insolvency  Proceeding,  if such request for relief would be effective  prior to
the expiration of the Standstill  Period,  without the prior written  consent of
the First Lien Agent.

         6.3      ADEQUATE  PROTECTION.  Nothing in this Agreement  shall affect
the  rights  of any party  hereto  to seek  adequate  protection  or,  except as
otherwise  provided  herein,  the  rights of any  party  hereto to object to any
motion of any other party hereto seeking adequate protection; provided, that the
seeking of such  adequate  protection  does not  violate,  and is not  otherwise
inconsistent with, the agreements set forth in SECTION 6.1 above or elsewhere in
this  SECTION  6.3.  The Second  Lien  Agent,  on behalf of itself and the other
Second Lien Claimholders, agrees that none of them shall contest (or support any
other  Person  contesting)  (a) any request by the First Lien Agent or the other
First Lien  Claimholders  for adequate  protection  in respect of their Liens on
Common  Collateral  or (b) any  objection  by the First  Lien Agent or the other
First Lien Claimholders to any motion, relief, action or proceeding based on the
First  Lien  Agent or the  other  First  Lien  Claimholders  claiming  a lack of
adequate   protection   in  respect  of  their   Liens  on  Common   Collateral.
Notwithstanding the foregoing,  in any Insolvency Proceeding,  (i) if First Lien
Claimholders (or any subset thereof) are granted adequate  protection in respect
of their Liens on Common  Collateral  in the form of  additional  collateral  in
connection with any DIP Financing or use of cash collateral under Section 363 or
Section 364 of Title 11 of the Bankruptcy  Code or any similar  Bankruptcy  Law,
then the Second Lien Agent,  on behalf of itself or any of the other Second Lien
Claimholders,  may seek or request adequate protection in respect of their Liens
on  Common  Collateral  in the  form of a  replacement  Lien on such  additional
collateral,  which Lien hereby is and shall be deemed to be  subordinated to the
Liens  securing the First Lien  Obligations on the same basis as the other Liens
on Common Collateral  securing the Second Lien Obligations  hereby are and shall
be deemed to be so subordinated to the Liens on Common  Collateral  securing the
First Lien  Obligations  under this Agreement,  and (ii) in the event the Second
Lien Agent, on behalf of itself and the other Second Lien Claimholders, seeks or
requests adequate  protection in respect of their Liens on Common Collateral and
such adequate protection is granted in the form of additional  collateral,  then

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the Second  Lien  Agent,  on behalf of itself and each of the other  Second Lien
Claimholders,  agrees  that (x) the Second  Lien  Agent  shall have the right to
request  that it be  granted  a senior  Lien on such  additional  collateral  as
security  for the First  Lien  Obligations  and (y) any Lien on such  additional
collateral  securing the Second Lien  Obligations  shall be  subordinated to the
Liens granted on such collateral securing the First Lien Obligations on the same
basis  as the  other  Liens  on  Common  Collateral  securing  the  Second  Lien
Obligations are so subordinated to the Liens on Common Collateral  securing such
First Lien Obligations under this Agreement.

         6.4      NO WAIVER. Subject to SECTION 2.2 and SECTION 6.3, and subject
to, and except with respect to actions contemplated by, SECTION 6.3, SECTION 6.7
and SECTION  3.1(A)(I)  and any other  action by the Second Lien Agent or any of
the Second Lien  Claimholders  expressly  permitted by this  Agreement,  and the
proviso  in clause  (ii) of  SECTION  3.1(A),  nothing  contained  herein  shall
prohibit or in any way limit the First Lien Agent or any First Lien  Claimholder
from objecting in any Insolvency  Proceeding or otherwise to any action taken by
the Second Lien Agent or any of the Second Lien Claimholders.

         6.5      AVOIDANCE ISSUES. If any First Lien Claimholder is required in
any  Insolvency  Proceeding  or otherwise  to turn over or otherwise  pay to the
estate of Grantor any amount (a "RECOVERY"),  then such First Lien  Claimholders
shall be entitled to a reinstatement of the relevant First Lien Obligations with
respect  to all such  recovered  amounts.  If any  Second  Lien  Claimholder  is
required in any Insolvency Proceeding or otherwise to turn over or otherwise pay
to the estate of Grantor any amount, then such Second Lien Claimholders shall be
entitled to a reinstatement of the relevant Second Lien Obligations with respect
to all such  recovered  amounts.  If this Agreement  shall have been  terminated
prior to such  Recovery,  this  Agreement  shall be reinstated in full force and
effect as at the time of such  Recovery,  and such prior  termination  shall not
diminish,  release, discharge, impair or otherwise affect the obligations of the
parties hereto from such date of reinstatement.

         6.6      REORGANIZATION  SECURITIES.  If, in any Insolvency Proceeding,
debt obligations of the reorganized debtor secured by Liens upon any property of
the reorganized  debtor of the type expressly  included in the Common Collateral
(but not  property  not  included  in the  Common  Collateral)  are  distributed
pursuant to a plan of reorganization or similar dispositive  restructuring plan,
both on  account  of First  Lien  Obligations  and on  account  of  Second  Lien
Obligations,  then, to the extent the debt obligations distributed on account of
the First Lien  Obligations  and on account of the Second Lien  Obligations  are
secured by Liens upon the same  property of the type  expressly  included in the
Common Collateral (but not property not included in the Common Collateral),  the
provisions  of this  Agreement  will  survive  the  distribution  of  such  debt
obligations  pursuant  to such plan and will apply with like effect to the Liens
upon such same property of the type expressly  included in the Common Collateral
(but not  property  not included in the Common  Collateral)  securing  such debt
obligations.

         6.7      POST-PETITION INTEREST.

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<PAGE>

                  (a)      Neither  the Second  Lien  Agent nor any Second  Lien
Claimholder  shall oppose or seek to challenge any claim by the First Lien Agent
or any First Lien  Claimholder  for  allowance in any  Insolvency  Proceeding of
First Lien Obligations consisting of post-petition interest, fees or expenses to
the extent of the value of the valid and perfected Liens of the First Lien Agent
on behalf of the First Lien Claimholders securing the First Lien Obligations (to
the extent the First Lien Claimholders are entitled to such interest,  fees, and
expenses pursuant to the First Lien Documents),  without regard to the existence
of the Lien of the Second Lien Agent on behalf of the Second  Lien  Claimholders
on the Common Collateral.

                  (b)      Neither the First Lien Agent nor any other First Lien
Claimholder shall oppose or seek to challenge any claim by the Second Lien Agent
or any Second Lien  Claimholder  for allowance in any  Insolvency  Proceeding of
Second Lien Obligations consisting of post-petition  interest,  fees or expenses
to the extent of the value of the valid and  perfected  Liens of the Second Lien
Agent on behalf  of the  Second  Lien  Claimholders  securing  the  Second  Lien
Obligations  (to the extent the Second Lien  Claimholders  are  entitled to such
interest, fees, and expenses pursuant to the Second Lien Documents) after taking
into  account  the  First  Lien  Obligations  secured  by a Lien  on the  Common
Collateral.

         6.8      WAIVER. The Second Lien Agent, for itself and on behalf of the
Second Lien  Claimholders,  waives any claim it may  hereafter  have against any
First Lien Claimholder arising out of the election of any First Lien Claimholder
of the application of Section  1111(b)(2) of the Bankruptcy Code,  and/or out of
any cash  collateral or financing  arrangement or out of any grant of a security
interest in connection with the Common  Collateral in any Insolvency  Proceeding
(except as otherwise provided in this Agreement).

         Section 7     RELIANCE; WAIVERS; ETC.

         7.1      RELIANCE.  Other  than  any  reliance  on the  terms  of  this
Agreement,  the  First  Lien  Agent,  on behalf  of  itself  and the First  Lien
Claimholders under its First Lien Documents, acknowledges that it and such First
Lien  Claimholders  have,  independently and without reliance on the Second Lien
Agent or any Second Lien  Claimholders,  and based on documents and  information
deemed by them appropriate, made their own credit analysis and decision to enter
into such First Lien Documents and be bound by the terms of this Agreement,  and
they will continue to make their own credit decision in taking or not taking any
action under the First Lien Documents or this Agreement.  The Second Lien Agent,
on behalf of itself and the Second Lien  Claimholders,  acknowledges that it and
the Second Lien  Claimholders  have,  independently  and without reliance on the
First Lien  Agent or any First  Lien  Claimholder,  and based on  documents  and
information  deemed by them  appropriate,  made  their own credit  analysis  and
decision  to enter into each of the Second  Lien  Documents  and be bound by the
terms of this  Agreement,  and they  will  continue  to make  their  own  credit
decision in taking or not taking any action  under the Second Lien  Documents or
this Agreement.

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<PAGE>

         7.2      NO WARRANTIES OR LIABILITY. The First Lien Agent, on behalf of
itself  and  the  First  Lien  Claimholders  under  its  First  Lien  Documents,
acknowledges  and agrees  that each of the Second Lien Agent and the Second Lien
Claimholders  have  made no  express  or  implied  representation  or  warranty,
including  with  respect to the  execution,  validity,  legality,  completeness,
collectability or enforceability of any of the First Lien Documents,  the Second
Lien  Documents,  the ownership of any Common  Collateral  or the  perfection or
priority of any Liens thereon.  The Second Lien Claimholders will be entitled to
manage and supervise their  respective  loans and extensions of credit under the
Second  Lien  Documents  in  accordance  with  applicable  law and as  they  may
otherwise, in their sole discretion, deem appropriate, consistent with the terms
of this  Agreement.  The Second Lien  Agent,  on behalf of itself and the Second
Lien  Claimholders,  acknowledges  and agrees  that the First Lien Agent and the
First  Lien  Claimholders  have made no express  or  implied  representation  or
warranty,   including  with  respect  to  the  execution,   validity,  legality,
completeness,  collectability  or  enforceability  of  any  of  the  First  Lien
Documents,  the Second Lien Documents, the ownership of any Common Collateral or
the  perfection or priority of any Liens  thereon.  The First Lien  Claimholders
will be entitled to manage and supervise their  respective  loans and extensions
of credit  under  their  respective  First Lien  Documents  in  accordance  with
applicable  law and as they  may  otherwise,  in  their  sole  discretion,  deem
appropriate,  consistent with the terms of this Agreement. The Second Lien Agent
and the Second Lien  Claimholders  shall have no duty to the First Lien Agent or
any of the First Lien Claimholders,  and the First Lien Agent and the First Lien
Claimholders  shall have no duty to the  Second  Lien Agent or any of the Second
Lien  Claimholders,  to act or refrain from acting in a manner which allows,  or
results  in, the  occurrence  or  continuance  of an event of default or default
under any  agreements  with any Grantor  (including the First Lien Documents and
the Second Lien Documents),  regardless of any knowledge  thereof which they may
have or be charged with.  If the First Lien Agent or any First Lien  Claimholder
shall  honor or fail to honor a request by any  Grantor  for a loan,  advance or
other financial accommodation under the First Lien Documents, whether or not the
First Lien Agent or any First Lien  Claimholder  has knowledge that the honoring
or  dishonoring  of such request  would  result in an event of default,  or act,
condition or event which with notice or passage of time or both would constitute
an event of default,  under the Second Lien Documents,  the First Lien Agent and
the other First Lien Claimholders shall not have any liability whatsoever to the
Second Lien Agent or the other Second Lien Claimholders as a result thereof and,
without limiting the generality of the foregoing,  the Second Lien Agent and the
Second  Lien  Claimholders  agree  that the First  Lien Agent and the First Lien
Claimholders  shall  not have  any  liability  for  tortious  interference  with
contractual  relations  or for  inducement  to breach any contract of the Second
Lien Agent and the other Second Lien Claimholders,  but without prejudice to the
express rights of the Second Lien Agent and the Second Lien  Claimholders  under
this Agreement.  If the Second Lien Agent shall honor or fail to honor a request
by any Debtor for a loan, advance or other financial  accommodation under Second
Lien  Documents,  whether or not the Second  Lien Agent has  knowledge  that the
honoring or dishonoring of such request would result in an event of default,  or
act,  condition  or event  which  with  notice or  passage of time or both would
constitute an event of default, under the First Lien Documents,  the Second Lien

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<PAGE>

Agent and the  other  Second  Lien  Claimholders  shall  not have any  liability
whatsoever  to the First Lien Agent and the other First Lien  Claimholders  as a
result of thereof and,  without  limiting the generality of the  foregoing,  the
First  Lien  Agent and the First Lien  Claimholders  agree that the Second  Lien
Agent and the Second Lien Claimholders shall not have any liability for tortious
interference with contractual relations or for inducement to breach any contract
of the First  Lien  Agent and the other  First Lien  Claimholders,  but  without
prejudice  to the  express  rights of the First  Lien  Agent and the First  Lien
Claimholders under this Agreement..

         7.3      NO WAIVER OF LIEN PRIORITIES.

                  (a)      The Second  Lien  Agent,  on behalf of itself and the
Second Lien Claimholders,  agrees that the First Lien Claimholders and the First
Lien Agent shall have no  liability  to the Second Lien Agent or any Second Lien
Claimholders, and the Second Lien Agent, on behalf of itself and the Second Lien
Claimholders,  hereby waives any claim against any First Lien Claimholder or the
First  Lien  Agent,  arising  out of any and all  actions  which the First  Lien
Claimholders  or the  First  Lien  Agent  may take or  permit or omit to take in
respect of the First Lien  Obligations and the First Lien Collateral in a manner
not  inconsistent  with the  provisions of this Agreement or applicable law with
respect to: (i) the First Lien Documents,  (ii) the collection of the First Lien
Obligations  or  (iii)  the  foreclosure  upon,  or sale,  liquidation  or other
disposition of, any First Lien  Collateral.  The Second Lien Agent, on behalf of
itself and the Second Lien Claimholders, agrees that the First Lien Claimholders
and the First Lien Agent have no duty to them in respect of the  maintenance  or
preservation  of the  First  Lien  Collateral  except  to the  extent  expressly
provided in SECTION 5.5; and

                  (b)      The Second  Lien  Agent,  on behalf of itself and the
Second Lien Claimholders, agrees not to assert and hereby waives, to the fullest
extent  permitted by law (and except for rights  provided for in this Agreement,
and the assertion  thereof),  any right to demand,  request,  plead or otherwise
assert or otherwise claim the benefit of, any marshalling,  appraisal, valuation
or other similar right that may otherwise be available under applicable law with
respect to the Common  Collateral or any other similar  rights a junior  secured
creditor may have under applicable law.

                  (c)      No right of the First  Lien  Claimholders,  the First
Lien Agent,  the Second Lien  Claimholders  or the Second Lien Agent,  or any of
them to enforce any provision of this Agreement  shall at any time in any way be
prejudiced  or  impaired by any act or failure to act on the part of the Company
or any other  Grantor,  or by the  noncompliance  by any Person  with the terms,
provisions and covenants of this  Agreement,  any of the First Lien Documents or
any of the Second Lien Documents,  regardless of any knowledge thereof which the
First Lien  Claimholders,  First Lien Agent,  Second Lien Claimholders or Second
Lien Agent, or any of them, may have or otherwise be charged with.

         7.4      OBLIGATIONS UNCONDITIONAL.  All rights, interests,  agreements
and obligations of the First Lien Agent and the First Lien  Claimholders and the
Second  Lien Agent and the Second  Lien  Claimholders,  respectively,  hereunder
shall remain in full force and effect irrespective of:

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<PAGE>

                  (a)      any  lack  of  validity  or   enforceability  of  any
provision of any First Lien Document or any Second Lien Document;

                  (b)      except  as  otherwise   provided  in  this  Agreement
(including  SECTION 5.4), any change in the time, manner or place of payment of,
or in any other  terms of,  all or any of the First Lien  Obligations  or Second
Lien Obligations,  or any amendment or waiver or other  modification,  including
any increase in the amount  thereof,  whether by course of conduct or otherwise,
of the terms of any First Lien Document or any Second Lien Document;

                  (c)      except as otherwise provided in, and subject to, this
Agreement  (including SECTION 5.4), any exchange of any security interest in any
Common  Collateral or any other  collateral,  or any amendment,  waiver or other
modification, whether in writing or by course of conduct or otherwise, of all or
any of the First Lien  Obligations  or Second Lien  Obligations or any guarantee
thereof;

                  (d)      the  commencement  of any  Insolvency  Proceeding  in
respect of Grantor; or

                  (e)      any  other   circumstances   which   otherwise  might
constitute a defense  available to, or a discharge of, Grantor in respect of the
First  Lien  Obligations,  or of  the  Second  Lien  Agent  or any  Second  Lien
Claimholder in respect of this Agreement.

         Section 8     MISCELLANEOUS.

         8.1      CONFLICTS. In the event of any conflict between the provisions
of this  Agreement and the  provisions of the First Lien Documents or the Second
Lien Documents, the provisions of this Agreement shall govern and control.

         8.2      EFFECTIVENESS;    CONTINUING   NATURE   OF   THIS   AGREEMENT;
SEVERABILITY.  This Agreement shall become effective when executed and delivered
by the parties hereto. This is a continuing  agreement of lien subordination and
the First Lien Claimholders may continue,  at any time and without notice to the
Second Lien Agent or any Second  Lien  Claimholder,  to extend  credit and other
financial  accommodations  and lend  monies  to or for the  benefit  of  Grantor
constituting  First Lien  Obligations  in reliance  hereon (except to the extent
otherwise  limited or prohibited by this  Agreement).  The Second Lien Agent, on
behalf of itself and the Second Lien  Claimholders,  hereby  waives any right it
may have under  applicable law to revoke this Agreement or any of the provisions
of this Agreement. The terms of this Agreement shall survive, and shall continue
in full force and effect,  in any Insolvency  Proceeding.  Any provision of this
Agreement which is prohibited or  unenforceable  in any  jurisdiction  shall not
invalidate  the  remaining  provisions  hereof,  and  any  such  prohibition  or
unenforceability   in  any   jurisdiction   shall  not   invalidate   or  render
unenforceable  such  provision  in any other  jurisdiction.  All  references  to

                                       38
<PAGE>

Grantor shall include each Grantor individually, and each such Grantor as debtor
and  debtor-in-possession  and any  receiver or trustee for such Grantor (as the
case may be) in any Insolvency Proceeding. This Agreement shall terminate and be
of no further force and effect,  (i) with respect to the Second Lien Agent,  the
Second Lien Claimholders and the Second Lien Obligations,  upon the later of (1)
the date upon which the First Lien Agent and the First Lien  Claimholders  shall
have complied with their  agreements set forth in SECTION 5 hereof,  and (2) the
first  Business  Day  after the date of  Discharge  of First  Lien  Obligations,
subject to the rights of the First Lien Claimholders under SECTION 6.5.

         8.3      AMENDMENTS;  WAIVERS. No amendment,  modification or waiver of
any of the  provisions  of this  Agreement by the Second Lien Agent or the First
Lien Agent shall be deemed to be made unless the same shall be in writing signed
by the First Lien Agent and the Second Lien Agent or its authorized  agent,  and
each  waiver,  if any,  shall be a waiver  only  with  respect  to the  specific
instance involved and shall in no way impair the rights of the party making such
waiver  or the  obligations  of the  other  parties  to such  party in any other
respect or at any other time. Notwithstanding the foregoing, neither any Grantor
nor any other Person  (other than First Lien Agent,  on behalf of itself and the
other First Lien  Claimholders,  and Second Lien Agent,  on behalf of itself and
the other  Second  Lien  Claimholders)  shall  have any right to  consent  to or
approve  any  amendment,  modification  or  waiver  of  any  provision  of  this
Agreement.

         8.4      INFORMATION  CONCERNING FINANCIAL CONDITION OF THE COMPANY AND
ITS SUBSIDIARIES.  The First Lien Agent and the First Lien Claimholders,  on the
one hand,  and the Second  Lien Agent and the Second Lien  Claimholders,  on the
other hand, shall each be responsible for keeping themselves informed of (a) the
financial condition of the Company and its Subsidiaries and all endorsers and/or
guarantors of the First Lien  Obligations or the Second Lien Obligations and (b)
all other  circumstances  bearing upon the risk of  nonpayment of the First Lien
Obligations or the Second Lien  Obligations.  The First Lien Agent and the First
Lien  Claimholders  shall have no duty to advise  the  Second  Lien Agent or any
Second  Lien  Claimholder,  and  the  Second  Lien  Agent  and the  Second  Lien
Claimholders shall have no duty to advise the First Lien Agent or any First Lien
Claimholder,  of information known to it or them regarding such condition or any
such circumstances or otherwise. In the event the First Lien Agent or any of the
First Lien Claimholders, in its or their sole discretion, undertakes at any time
or from time to time to provide any such information to the Second Lien Agent or

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<PAGE>

any Second  Lien  Claimholder,  it or they shall be under no  obligation  (w) to
make,  and the First  Lien Agent and the First  Lien  Claimholders  shall not be
deemed to make,  any express or implied  representation  or warranty,  including
with respect to the accuracy, completeness, truthfulness or validity of any such
information so provided, (x) to provide any additional information or to provide
any  such  information  on  any  subsequent  occasion,   (y)  to  undertake  any
investigation  or (z) to disclose  any  information  which such party  wishes to
maintain confidential or is otherwise required to maintain confidential.  In the
event the Second  Lien Agent or any of the Second Lien  Claimholders,  in its or
their sole  discretion,  undertakes  at any time or from time to time to provide
any such information to the First Lien Agent or any First Lien  Claimholder,  it
or they shall be under no obligation  (w) to make, and the Second Lien Agent and
the  Second  Lien   Claimholders   shall  not  make,   any  express  or  implied
representation   or  warranty,   including   with   respect  to  the   accuracy,
completeness,  truthfulness or validity of any such information so provided, (x)
to provide any additional  information or to provide any such information on any
subsequent  occasion,  (y) to undertake any investigation or (z) to disclose any
information  which,  pursuant  to  accepted  or  reasonable  commercial  finance
practices,  such party wishes to maintain  confidential or is otherwise required
to maintain confidential.

         8.5      SUBROGATION.  The Second Lien  Agent,  on behalf of itself and
the Second Lien Claimholders, hereby agrees that it will not exercise any rights
of  subrogation  it may acquire as a result of any payment  hereunder  until the
Discharge of First Lien Obligations has occurred.

         8.6      APPLICATION  OF PAYMENTS;  ETC.  All payments  received by the
First Lien Agent or the First Lien  Claimholders  may be applied,  reversed  and
reapplied, in whole or in part, to such part of the First Lien Obligations as is
provided for in the First Lien Documents,  PROVIDED,  however, that for purposes
of this Agreement, including any determination of whether the Discharge of First
Lien  Obligations  has  occurred,  the  provisions  of SECTION 4.1 shall govern.
Without  prejudice  to the rights of the Second  Lien Agent and the Second  Lien
Claimholders  hereunder,  including their rights and remedies upon expiration of
the  Standstill  Period as  provided  in SECTION  3.1(A)(I),  and subject to and
except as other provided in SECTION 5.1(A),  the Second Lien Agent, on behalf of
itself and the Second Lien Claimholders,  assents to any substitution,  exchange
or release of any collateral  which may at any time secure any part of the First
Lien Obligations (without prejudice to the Liens and other rights therein of the
Second Lien Agent and the Second Lien  Claimholders)  and to the addition of any
other Person primarily or secondarily liable therefor.

         8.7      WAIVER OF JURY TRIAL.  EACH PARTY HERETO HEREBY WAIVES, TO THE
FULLEST EXTENT  PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A TRIAL BY
JURY IN ANY LEGAL PROCEEDING  DIRECTLY OR INDIRECTLY  ARISING OUT OF OR RELATING
TO THIS AGREEMENT, ANY OTHER FIRST LIEN DOCUMENT, ANY OTHER SECOND LIEN DOCUMENT
OR THE TRANSACTIONS  CONTEMPLATED  HEREBY OR THEREBY (WHETHER BASED ON CONTRACT,
TORT  OR  ANY  OTHER   THEORY).   EACH  PARTY  HERETO  (A)  CERTIFIES   THAT  NO
REPRESENTATIVE,  AGENT OR ATTORNEY OF ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY
OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF LITIGATION,  SEEK
TO  ENFORCE  THE  FOREGOING  WAIVER AND (B)  ACKNOWLEDGES  THAT IT AND THE OTHER
PARTIES  HERETO HAVE BEEN INDUCED TO ENTER INTO THIS  AGREEMENT  BY, AMONG OTHER
THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION.

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<PAGE>

         8.8      NOTICES.  All notices to the Second Lien  Claimholders and the
First Lien Claimholders permitted or required under this Agreement shall also be
sent to the Second  Lien Agent and the First Lien  Agent,  respectively.  Unless
otherwise specifically provided herein, any notice hereunder shall be in writing
and may be  personally  served or sent by  facsimile  or United  States  mail or
courier  service and shall be deemed to have been given when delivered in person
or by courier  service and signed for against receipt  thereof,  upon receipt of
facsimile or telex or PDF (portable document format) email attachment,  or three
Business  Days  after  depositing  it in the  United  States  mail with  postage
prepaid,  and in each case  properly  addressed.  For the purposes  hereof,  the
addresses  of the  parties  hereto  shall  be as set  forth  in the  First  Lien
Financing Agreement or Second Lien Financing Agreements,  as applicable,  or, as
to each party,  at such other  address as may be  designated  by such party in a
written notice to all of the other parties.

         8.9      GOVERNING LAW; JURISDICTION; CONSENT TO SERVICE OF PROCESS.

                  (a)      This Agreement  shall be construed in accordance with
and governed by the law of the State of New York. Each party hereby  irrevocably
and unconditionally  submits,  for itself and its property,  to the nonexclusive
jurisdiction  of the Supreme  Court of the State of New York sitting in New York
County and of the United States  District Court of the Southern  District of New
York,  and any  appellate  court from any thereof,  in any action or  proceeding
arising out of or relating to this Agreement,  or for recognition or enforcement
of any  judgment  relating  thereto,  and  each  of the  parties  hereto  hereby
irrevocably  and  unconditionally  agrees that all claims in respect of any such
action or proceeding  may be heard and  determined in such New York State or, to
the extent  permitted by law, in such Federal court.  Each of the parties hereto
agrees  that a  final  judgment  in any  such  action  or  proceeding  shall  be
conclusive and may be enforced in other jurisdictions by suit on the judgment or
in any other manner provided by law. Nothing in this Agreement,  any other First
Lien Document or any other Second Lien Document  shall affect any right that any
First Lien  Claimholder or Second Lien  Claimholder  may otherwise have to bring
any  action or  proceeding  relating  to this  Agreement,  any other  First Lien
Document  or any other  Second  Lien  Document  against  Grantor or any of their
respective properties in the courts of any jurisdiction.

                  (b)      Each   party   hereto    hereby    irrevocably    and
unconditionally  waives, to the fullest extent it may legally and effectively do
so, any objection  which it may now or hereafter  have to the laying of venue of
any suit, action or proceeding arising out of or relating to this Agreement, any
other  First  Lien  Document  or any other  Second  Lien  Document  in any court
referred to in paragraph (b) of this Section.  Each of the parties hereto hereby
irrevocably  waives,  to the fullest extent  permitted by law, the defense of an
inconvenient  forum to the  maintenance of such action or proceeding in any such
court.

                  (c)      Each party to this Agreement  irrevocably consents to
service of process in the manner provided for notices in SECTION 8.8. Nothing in
this  Agreement,  any other First Lien Document or any Second Lien Document will
affect the right of any party to this  Agreement  to serve  process in any other
manner permitted by law.

                                       41
<PAGE>

         8.10     BINDING ON SUCCESSORS  AND ASSIGNS.  This  Agreement  shall be
binding upon the First Lien Agent, the First Lien Claimholders,  the Second Lien
Agent, the Second Lien Claimholders, Grantor and their respective successors and
assigns.

         8.11     SPECIFIC PERFORMANCE.

                  (a)      Subject to  PARAGRAPH  (B) below,  neither  the First
Lien Agent nor the Second  Lien Agent may demand  specific  performance  of this
Agreement.

                  (b)      The Second Lien Agent may demand specific performance
of the First  Lien  Agent's  duties,  as bailee and agent for  perfection  under
SECTION 5.5 hereof,  to hold items of Common  Collateral  for the benefit of the
Second  Lien Agent and to turn them over to the Second Lien Agent upon the terms
and  conditions  described  therein,  and  waives no defense  relating  to or in
furtherance  of such demand for specific  performance.  The First Lien Agent may
demand  specific  performance of the Second Lien Agent's  duties,  as bailee and
agent  for  perfection  under  SECTION  5.5  hereof,  to hold  items  of  Common
Collateral  for the benefit of the First Lien Agent and to turn them over to the
First Lien Agent upon the terms and conditions  described therein, and waives no
defense relating to or in furtherance of such demand for specific performance.

         8.12     HEADINGS.  Section  headings in this  Agreement  are  included
herein for convenience of reference only and shall not constitute a part of this
Agreement for any other purpose or be given any substantive effect.

         8.13     COUNTERPARTS.  This Agreement may be executed in  counterparts
(and by different parties hereto in different counterparts), each of which shall
constitute an original,  but all of which when taken together shall constitute a
single contract. Delivery of an executed counterpart of a signature page of this
Agreement or any document or  instrument  delivered  in  connection  herewith by
facsimile  or by PDF  (portable  document  format)  email  attachment  shall  be
effective as delivery of a manually  executed  counterpart  of this Agreement or
such other document or instrument, as applicable.

         8.14     AUTHORIZATION.  By its signature,  each Person  executing this
Agreement  on behalf of a party  hereto  represents  and  warrants  to the other
parties hereto that it is duly authorized to execute this Agreement, in the case
of the First Lien Agent, on behalf of the First Lien Lenders and, in the case of
the Second Lien Agent, on behalf of the Second Lien Lenders.

         8.15     PROVISIONS  SOLELY TO DEFINE RELATIVE  RIGHTS;  NO THIRD PARTY
BENEFICIARIES.  This Agreement and the rights and benefits hereunder shall inure
to the  benefit  of each of the First  Lien  Claimholders  and the  Second  Lien
Claimholders and their respective successors and assigns. The provisions of this
Agreement  are and are intended  solely for the purpose of defining the relative
rights of the First Lien Agent and the other First Lien  Claimholders on the one
hand and the Second  Lien Agent and the other  Second Lien  Claimholders  on the
other hand.  Neither any Grantor nor any other  Person other than the First Lien
Agent and the other  First Lien  Claimholders  and the Second Lien Agent and the

                                       42
<PAGE>

other  Second Lien  Claimholders  shall have or be entitled to assert  rights or
benefits hereunder or rely on the provisions hereof, and neither any Grantor nor
any  debtor in  possession,  trustee,  receiver  or  similar  Person in  respect
thereof, shall have or be entitled to assert rights or benefits hereunder in any
capacity as a successor,  transferee or assignee of a First Lien  Claimholder or
Second  Lien  Claimholder.  Nothing in this  Agreement  is  intended to or shall
impair the obligations of Grantor, which are absolute and unconditional,  to pay
the First Lien  Obligations and the Second Lien Obligations as and when the same
shall become due and payable in accordance with their terms.

                                       43
<PAGE>

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

                                  GUGGENHEIM CORPORATE FUNDING, LLC, as First
                                  Lien Agent,

                                  By:   /S/ STEPHEN D. SAUTEL
                                        ----------------------------------------
                                        Name: Stephen D. Sautel
                                        Title: Managing Director

                                 ACKNOWLEDGMENT

STATE OF New York)
COUNTY OF New York)

         Before me,  MANDY  TENNER,  a Notary  Public of said  County and State,
personally appeared STEPHEN D. SAUTEL, with whom I am personally  acquainted (or
proved  to me on the  basis  of  satisfactory  evidence),  and who,  upon  oath,
acknowledged  himself to be MANGING  DIRECTOR of Guggenheim  Corporate  Funding,
LLC, a DELAWARE limited liability company, the within named bargainor,  and that
he as such  MANAGING  DIRECTOR,  being duly  authorized  so to do,  executed the
foregoing instrument for the purposes therein contained, by signing the his name
as a MANAGING DIRECTOR.

         Witness  my hand  and  seal,  at  Office  in NEW  YORK,  this 12 day of
OCTOBER, 2006.
                                  /S/ MANDY TENNER
                                  ----------------------------------------------
                                  Notary Public

                           My Commission Expires:             6/26/10
                                                 -------------------------------

<PAGE>

                                  WELLS FARGO BANK, N.A.,
                                  as Trustee and Second Lien Agent

                                  By:   /S/ JANE Y. SCHWEIGER
                                        ----------------------------------------
                                        Name: Jane Y. Schweiger
                                        Title: Vice President

                                 ACKNOWLEDGMENT

STATE OF Minnesota)
COUNTY OF Dakota)

         Before me, KIM NGAN THUY  NGUYEN,  a Notary  Public of said  County and
State,  personally  appeared  JANE  Y.  SCHWEIGER,  with  whom  I am  personally
acquainted  (or proved to me on the basis of  satisfactory  evidence),  and who,
upon oath,  acknowledged himself to be VICE PRESIDENT of Wells Fargo Bank, N.A.,
a national banking association,  the within named bargainor, and that he as such
VICE PRESIDENT being duly authorized so to do, executed the foregoing instrument
for the purposes therein contained, by signing the his name as a VICE PRESIDENT.

         Witness  my hand and seal,  at Office  in  Minnesota,  this 10TH day of
OCTOBER , 2006.

                                  /S/ KIM NGAN THUY NGUYEN
                                  ----------------------------------------------
                                  Notary Public

                           My Commission Expires:    1/31/09
                                                 -------------------------------

<PAGE>

Acknowledged and agreed:

NATIONAL COAL CORPORATION,
as Debtor

By:  /S/ DANIEL A. ROLING
     -----------------------------
Name:  Daniel A. Roling
Title: Chief Executive Officer

NATIONAL COAL CORP.,
as Guarantor

By:  /S/ DANIEL A. ROLING
     -----------------------------
Name:  Daniel A. Roling
Title: Chief Executive Officer

NC TRANSPORTATION, INC.,
as Guarantor

By: /S/ CHARLES W. KITE
    ------------------------------
     Name: Charles W. Kite
     Title: General Counsel

By: /S/ T. MICHAEL LOVE
    ------------------------------
     Name: T. Michael Love
     Title: Secretary

NC RAILROAD, INC.,
as Guarantor

By: /S/ CHARLES W. KITE
    ------------------------------
     Name: Charles W. Kite
     Title: President

<PAGE>

                                 ACKNOWLEDGMENTS

STATE OF Tennessee)
COUNTY OF Knox)

         Before me,  CHARLES W. KITE, a Notary  Public of said County and State,
personally appeared DANIEL A. ROLING,  with whom I am personally  acquainted (or
proved  to me on the  basis  of  satisfactory  evidence),  and who,  upon  oath,
acknowledged  himself  to be CEO  of  National  Coal  Corporation,  a  Tennessee
corporation,  the within named  bargainor,  and that he as such CEO,  being duly
authorized so to do, executed the foregoing  instrument for the purposes therein
contained, by signing the his name as a CEO.

         Witness my hand and seal, at Office in KNOXVILLE,  TN, this 11TH day of
OCTOBER, 2006.

                                  /S/ CHARLES W. KITE
                                  ----------------------------------------------
                                  Notary Public

                           My Commission Expires:    2/19/08
                                                 -------------------------------

STATE OF Tennessee)
COUNTY OF Knox)

         Before me,  CHARLES W. KITE, a Notary  Public of said County and State,
personally appeared DANIEL A. ROLING,  with whom I am personally  acquainted (or
proved  to me on the  basis  of  satisfactory  evidence),  and who,  upon  oath,
acknowledged  himself to be CEO of National Coal Corp.,  a Florida  corporation,
the within named bargainor, and that he as such CEO, being duly authorized so to
do, executed the foregoing  instrument for the purposes  therein  contained,  by
signing the his name as a CEO.

         Witness my hand and seal, at Office in KNOXVILLE,  TN, this 11TH day of
OCTOBER, 2006.

                                           /S/ CHARLES W. KITE
                                  ----------------------------------------------
                                  Notary Public

                           My Commission Expires:    2/19/08
                                                 -------------------------------

<PAGE>

                                 ACKNOWLEDGMENT

STATE OF Tennessee)
COUNTY OF Knox)

         Before me,  STEVEN  KOPMAN,  a Notary  Public of said County and State,
personally  appeared T. MICHAEL LOVE,  with whom I am personally  acquainted (or
proved  to me on the  basis  of  satisfactory  evidence),  and who,  upon  oath,
acknowledged  himself to be  SECRETARY of NC  Transportation,  Inc., a TENNESSEE
corporation,  the within named bargainor,  and that he as such SECRETARY,  being
duly  authorized so to do,  executed the foregoing  instrument  for the purposes
therein contained, by signing the his name as a SECRETARY.

         Witness  my hand and seal,  at Office  in  ______________,  this day of
_____________, 2006.

                                  /S/ STEVEN KOPMAN
                                  ----------------------------------------------
                                  Notary Public

                           My Commission Expires:             7/6/09
                                                 -------------------------------

<PAGE>

STATE OF Tennessee)
COUNTY OF Knox)

         Before me,  STEVEN  KOPMAN,  a Notary  Public of said County and State,
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  PRESIDENT  of  NC  Railroad,  Inc.,  a  TENNESSEE
corporation,  the within named bargainor,  and that he as such PRESIDENT , being
duly  authorized so to do,  executed the foregoing  instrument  for the purposes
therein contained, by signing the his name as a PRESIDENT.

         Witness  my hand and seal,  at Office  in  ______________,  this day of
_____________, 2004.

                                  /S/ STEVE KOPMAN
                                  ----------------------------------------------
                                  Notary Public

                           My Commission Expires:    7/6/09
                                                 -------------------------------

<PAGE>

                                    EXHIBIT A
                                       to
                             INTERCREDITOR AGREEMENT

                       ASSIGNMENT AND ACCEPTANCE AGREEMENT

         This  ASSIGNMENT  AND  ACCEPTANCE   AGREEMENT  (this   "ASSIGNMENT  AND
ACCEPTANCE")    dated   as   of    _____________,    200_   is   made    between
________________________  ("ASSIGNOR") and  ____________________  (individually,
each an "ASSIGNEE PARTY" and collectively,  "ASSIGNEE").  Capitalized terms used
herein and not  otherwise  defined  herein  shall have the meanings set forth in
that  certain  Intercreditor  Agreement,  dated  as of  ____________,  200_  (as
amended,  restated,  supplemented  or modified  from time to time in  accordance
therewith, the "INTERCREDITOR  AGREEMENT"),  by and between GUGGENHEIM CORPORATE
FUNDING,  LLC, in its capacity as First Lien Agent,  and WELLS FARGO BANK, N.A.,
in its capacity as Second Lien Agent.

                              W I T N E S S E T H:

         WHEREAS, as provided under the First Lien Financing Agreement, Assignor
(i) committed to extend credit to Borrower in an aggregate  amount not to exceed
$10,000,000 , and (ii) made a loan to Borrower constituting First Lien Principal
Obligations;

         WHEREAS,  pursuant to the  provisions  of the  Intercreditor  Agreement
Assignor  is  required  to assign to  Assignee  all  rights and  obligations  of
Assignor under the First Lien Financing  Agreement in respect of [(i)] its share
of the First  Lien  Principal  Obligations,  constituting  the  percentage  (the
"ASSIGNED  PERCENTAGE")  of the aggregate  First Lien Principal  Obligations set
forth in Part A of  SCHEDULE 1 hereto,  in the amount set forth in Part B[-1] of
SCHEDULE 1 hereto (the  "ASSIGNED  OBLIGATIONS  AMOUNT"),  and of the First Lien
Ancillary Obligations related thereto (such rights and obligations in respect of
such share assigned  hereunder,  the "ASSIGNED  OBLIGATIONS") [and (ii) its Term
Loan  Commitment  under and as defined in the First  Lien  Financing  Agreement,
constituting the Assigned Percentage of the aggregate Term Loan Commitments,  in
the amount set forth in Part B-2 of SCHEDULE 1 hereto (the "ASSIGNED  COMMITMENT
AMOUNT") (such rights and  obligations  in respect of such Term Loan  Commitment
assigned hereunder, the "ASSIGNED COMMITMENT")], on the terms and subject to the
conditions  set forth herein and Assignee  wishes to accept  assignment  of such
rights and to assume such obligations from Assignor on such terms and subject to
such conditions;

         NOW,  THEREFORE,  in  consideration  of the  foregoing  and the  mutual
agreements contained herein, the parties hereto agree as follows:

<PAGE>

         2.       ASSIGNMENT AND ACCEPTANCE.

                  (a)      Subject   to  the  terms  and   conditions   of  this
                           Assignment  and  Acceptance,  Assignor  hereby sells,
                           transfers  and  assigns  to  Assignee,  and  Assignee
                           hereby   purchases,   assumes  and  undertakes   from
                           Assignor, without recourse and without representation
                           or warranty  (except as  provided in this  Assignment
                           and Acceptance) (i) the Assigned Obligations [and the
                           Assigned  Commitment]  and (ii) all  related  rights,
                           benefits, obligations, liabilities and indemnities of
                           the Assignor  under and in connection  with the First
                           Lien  Financing  Agreement  and the other  First Lien
                           Documents,  so that after giving effect thereto,  the
                           amount[s]  of  Assigned   Obligations  [and  Assigned
                           Commitment]  of  each  Assignee  Party  shall  be the
                           product[s] of (x) the  percentage  set forth opposite
                           such  Assignee  Party's  name on Part C of SCHEDULE 1
                           hereto (such  percentage,  such Assignee Party's "PRO
                           RATA SHARE") and (y) the Assigned  Obligations Amount
                           [or Assigned Commitment Amount, respectively].

                  (b)      With  effect  on and  after  the  Effective  Date (as
                           defined  in SECTION 5 hereof),  each  Assignee  Party
                           shall  be  a  party  to  the  First  Lien   Financing
                           Agreement  and  succeed  to all of the  rights and be
                           obligated  to  perform  all of the  obligations  of a
                           Lender  under the  First  Lien  Financing  Agreement,
                           including the requirements concerning confidentiality
                           and the  payment of  indemnification  [, and its Term
                           Loan  Commitment  under and as  defined  in the First
                           Lien Financing Agreement prior to the Effective Date,
                           if any,  shall be increased in an amount equal to the
                           product of (x) its  respective Pro Rata Share and (y)
                           the Assigned Commitment].  Each Assignee Party agrees
                           that it will perform in  accordance  with their terms
                           all of the  obligations  which  by the  terms  of the
                           First Lien  Financing  Agreement  are  required to be
                           performed by it as a Lender.  It is the intent of the
                           parties  hereto  that the  Term  Loan  Commitment  of
                           Assignor  under  and as  defined  in the  First  Lien
                           Financing  Agreement shall, as of the Effective Date,
                           be reduced to zero and Assignor shall  relinquish all
                           its rights and be released  from all its  obligations
                           under the First Lien  Financing  Agreement;  PROVIDED
                           that Assignor  shall not  relinquish its rights under
                           the  First  Lien  Financing  Agreement,  as  provided
                           therein, to the extent such rights relate to the time
                           prior to the Effective Date.

         3.       PAYMENTS.  As  consideration  for  the  sale,  assignment  and
                  transfer contemplated in SECTION 1 hereof, each Assignee Party
                  shall pay to Assignor  on the  Effective  Date in  immediately
                  available  funds an  amount  equal to the  product  of (x) the
                  amount set forth in Part D of SCHEDULE 1 hereto,  representing
                  the principal amount of all Assigned Obligations, purchased at
                  par,  including  all  documented  principal,  interest,  fees,
                  costs, charges and expenses,  including reasonable  attorneys'
                  fees and  legal  expenses,  and (y) a  fraction  equal to such
                  Assignee Party's Pro Rata Share.

         4.       REALLOCATION  OF  PAYMENTS.  Any  interest,   fees  and  other
                  payments  accrued to the  Effective  Date with  respect to the
                  Assigned  Obligations [and Assigned  Commitment]  shall be for
                  the account of Assignor. Any interest, fees and other payments
                  accrued on and after the  Effective  Date with  respect to the
                  Assigned  Obligations [and Assigned  Commitment]  shall be for
                  the account of Assignee.  Each of Assignor and Assignee agrees
                  that it will hold in trust for the other  party any  interest,

                                       A-2
<PAGE>

                  fees and other amounts which it may receive to which the other
                  party is entitled  pursuant to the preceding  sentence and pay
                  to the  other  party  any such  amounts  which it may  receive
                  promptly upon receipt.

         5.       INDEPENDENT CREDIT DECISION.  Each Assignee Party acknowledges
                  that  it has  received  a copy  of the  First  Lien  Financing
                  Agreement  and the Schedules  and Exhibits  thereto,  together
                  with copies of the most  recent  financial  statements  of the
                  Company and its  Subsidiaries,  and such other  documents  and
                  information  as it has  deemed  appropriate  to  make  its own
                  credit  and legal  analysis  and  decision  to enter into this
                  Assignment   and   Acceptance   and   agrees   that  it  will,
                  independently  and without reliance upon Assignor,  First Lien
                  Agent or any First Lien Lender and based on such documents and
                  information as it shall deem appropriate at the time, continue
                  to make its own  credit and legal  decisions  in taking or not
                  taking action under the First Lien Financing Agreement.

         6.       EFFECTIVE DATE; NOTICES.

                  (a)      As between Assignor and Assignee,  the effective date
                           for  this   Assignment   and   Acceptance   shall  be
                           _______________,   200_   (the   "EFFECTIVE   DATE");
                           PROVIDED that the following conditions precedent have
                           been satisfied on or before the Effective Date:

                           (i)      this  Assignment  and  Acceptance  shall  be
                                    executed and  delivered by Assignor and each
                                    Assignee  Party and shall be recorded in the
                                    Register maintained by First Lien Agent;

                           (ii)     the consent of First Lien Agent (and so long
                                    as no Event of  Default  or event of default
                                    shall have occurred and be  continuing,  the
                                    consent  of  [Administrative   Borrower  (as
                                    defined   in  the   First   Lien   Financing
                                    Agreement)])  as required  for an  effective
                                    assignment of the Assigned  Obligations [and
                                    Assigned Commitment] by Assignor to Assignee
                                    shall have been duly  obtained  and shall be
                                    in full force and effect as of the Effective
                                    Date;

                           (iii)    written notice of such assignment,  together
                                    with  payment  instructions,  addresses  and
                                    related  information  with  respect  to each
                                    Assignee  Party,  shall  have been  given to
                                    Borrower and First Lien Agent;

                           (iv)     each  Assignee  Party  shall pay to Assignor
                                    all  amounts  due  to  Assignor   from  such
                                    Assignee  Party  under this  Assignment  and
                                    Acceptance; and

                           (v)      each  Assignee   Party  shall  furnish  cash
                                    collateral  to First Lien Agent in an amount
                                    equal to the  product  of (x) such  Assignee
                                    Party's  Pro Rata Share and (y) such  amount
                                    as First Lien Agent determines is reasonably
                                    necessary  to secure  First  Lien  Agent and
                                    Assignor in  connection  with any issued and
                                    outstanding Letter of Credit  Accommodations
                                    (as  defined  in the  First  Lien  Financing
                                    Agreement) but not in any event in an amount
                                    greater than 105% of the  aggregate  undrawn
                                    face   amount  of  such   Letter  of  Credit

                                       A-3
<PAGE>

                                    Accommodations  (any excess cash  collateral
                                    for  a  Letter  of   Credit   Accommodations
                                    remaining    after   the    expiration    or
                                    termination thereof to be promptly paid over
                                    to Second Lien Agent).

                           (vi)     Assignee  shall  reimburse  First Lien Agent
                                    and  Assignor  from  time  to  time  for any
                                    documented  expense  (including   reasonable
                                    attorneys'   fees  and  legal  expenses)  in
                                    connection with any commissions, fees, costs
                                    or  expenses  related to any checks or other
                                    payments   provisionally   credited  to  the
                                    Assigned     Obligations    [and    Assigned
                                    Commitment]  assigned hereby as to which the
                                    Assignor has not yet received final payment,
                                    to the extent not previously  paid by Debtor
                                    and Guarantors.

                  (b)      Promptly  following the execution of this  Assignment
                           and  Acceptance,  Assignor  shall deliver to Borrower
                           and First Lien  Agent,  for  acknowledgment  by First
                           Lien  Agent,  a  Notice  of  Assignment  in the  form
                           attached hereto as SCHEDULE 2.

         7.       REPRESENTATIONS AND WARRANTIES.

                  (a)      Assignor  represents  and warrants that (i) it is the
                           legal  and  beneficial  owner of the  interest  being
                           assigned by it  hereunder  and that such  interest is
                           free  and  clear  of  any  security  interest,  lien,
                           encumbrance or other adverse  claim,  (ii) it is duly
                           organized  and  existing  and it has the full  power,
                           right and  authority  (A) to assign all of its right,
                           title and interest in and to the Assigned Obligations
                           [and all of its rights and  obligations  to and under
                           the Assigned Commitment], and (B) to take, and it has
                           taken,  all action  necessary  to execute and deliver
                           this   Assignment   and   Acceptance  and  any  other
                           documents  required  or  permitted  to be executed or
                           delivered by it in  connection  with this  Assignment
                           and  Acceptance   and  to  fulfill  its   obligations
                           hereunder,   (iii)  no  notices   to,  or   consents,
                           authorizations   or  approvals  of,  any  Person  are
                           required  (other than any already  given or obtained)
                           for its due  execution,  delivery and  performance of
                           this  Assignment and  Acceptance,  and apart from any
                           agreements or undertakings or filings required by the
                           First Lien Financing Agreement, no further action by,
                           or notice to, or filing with,  any Person is required
                           of it for such  execution,  delivery or  performance,
                           (iv) this  Assignment  and  Acceptance  has been duly
                           executed  and  delivered  by it and  constitutes  the
                           legal,  valid and  binding  obligation  of  Assignor,
                           enforceable  against  Assignor in accordance with the
                           terms  hereof,   subject,   as  to  enforcement,   to
                           bankruptcy,  insolvency,  moratorium,  reorganization
                           and other laws of general application  relating to or
                           affecting  creditors' rights and to general equitable
                           principles.

                  (b)      Assignor  makes no  representation  or  warranty  and
                           assumes  no   responsibility   with  respect  to  any
                           statements,  warranties or representations made in or
                           in connection with the First Lien Financing Agreement
                           or any  of  the  other  Financing  Agreements  or the
                           execution,   legality,   validity,    enforceability,
                           genuineness,  sufficiency  or value of the First Lien
                           Financing   Agreement  or  any  other  instrument  or
                           document furnished  pursuant thereto.  Assignor makes
                           no representation or warranty in connection with, and
                           assumes  no  responsibility   with  respect  to,  the
                           solvency,   financial   condition  or  statements  of
                           Debtor,   Guarantors  or  any  of  their   respective

                                       A-4
<PAGE>

                           Affiliates,  or  the  performance  or  observance  by
                           Debtor, Guarantors or any other Person, of any of its
                           respective obligations under the First Lien Financing
                           Agreement  or  any  other   instrument   or  document
                           furnished in connection therewith.

                  (c)      First Lien Agent  represents  and  warrants  that the
                           amount of the Assigned Obligations hereby assigned is
                           as  reflected  in the books and  records of the First
                           Lien Agent (but without representation or warranty as
                           to the  collectability,  validity  or  enforceability
                           thereof)  and  is the  aggregate  amount  of  unpaid,
                           outstanding  First Lien  Obligations  owing by Debtor
                           under the First Lien Documents on the Effective Date.

                  (d)      Each Assignee Party  represents  and warrants,  as to
                           itself  only,  that  (i)  it is  duly  organized  and
                           existing and it has full power and authority to take,
                           and has taken,  all action  necessary  to execute and
                           deliver this  Assignment and Acceptance and any other
                           documents  required  or  permitted  to be executed or
                           delivered by it in  connection  with this  Assignment
                           and  Acceptance,   and  to  fulfill  its  obligations
                           hereunder,   (ii)  no   notices   to,  or   consents,
                           authorizations   or  approvals  of,  any  Person  are
                           required  (other than any already  given or obtained)
                           for its due  execution,  delivery and  performance of
                           this  Assignment and  Acceptance,  and apart from any
                           agreements or undertakings or filings required by the
                           First Lien Financing Agreement, no further action by,
                           or notice to, or filing with,  any Person is required
                           of it for such  execution,  delivery or  performance;
                           and (iii) this  Assignment  and  Acceptance  has been
                           duly executed and delivered by it and constitutes the
                           legal,  valid and binding obligation of such Assignee
                           Party,  enforceable  against such  Assignee  Party in
                           accordance  with the  terms  hereof,  subject,  as to
                           enforcement, to bankruptcy,  insolvency,  moratorium,
                           reorganization and other laws of general  application
                           relating to or affecting creditors' rights to general
                           equitable principles.

         8.       FURTHER ASSURANCES. Assignor and Assignee each hereby agree to
execute and  deliver  such other  instruments,  and take such other  action,  as
either  party  may  reasonably  request  in  connection  with  the  transactions
contemplated by this  Assignment and  Acceptance,  including the delivery of any
notices or other  documents or instruments to Debtor or First Lien Agent,  which
may be required in connection  with the assignment  and assumption  contemplated
hereby.

         9.       INDEMNIFICATION.  Upon the Effective Date, each Assignee Party
agrees to  indemnify  and hold First Lien Agent and Assignor  harmless  from and
against all loss, cost, damage or expense (including  reasonable attorneys' fees
and legal expenses) suffered or incurred by First Lien Agent and Assignor to the
extent arising from or attributable to acts or omissions of such Assignee Party,
in respect of the Assigned  Obligations [and Assigned  Commitment] and the First
Lien Financing Agreement and the other First Lien Documents, occurring after the
Effective Date.

         10.      MISCELLANEOUS.

                  (a)      Any  amendment  or  waiver of any  provision  of this
                           Assignment  and  Acceptance  shall be in writing  and
                           signed by the parties hereto.  No failure or delay by
                           either party hereto in exercising any right, power or

                                       A-5
<PAGE>

                           privilege hereunder shall operate as a waiver thereof
                           and any  waiver of any  breach of the  provisions  of
                           this  Assignment  and  Acceptance  shall  be  without
                           prejudice to any rights with respect to any other for
                           further breach thereof.

                  (b)      All payments made hereunder shall be made without any
                           set-off or counterclaim.

                  (c)      Assignor and each  Assignee  Party shall each pay its
                           own costs and expenses  incurred in  connection  with
                           the   negotiation,    preparation,    execution   and
                           performance of this Assignment and Acceptance.

                  (d)      This Assignment and Acceptance may be executed in any
                           number of counterparts  and all of such  counterparts
                           taken  together shall be deemed to constitute one and
                           the same instrument.

                  (e)      THIS  ASSIGNMENT AND ACCEPTANCE  SHALL BE GOVERNED BY
                           AND CONSTRUED IN ACCORDANCE WITH THE LAW OF THE STATE
                           OF NEW YORK.  Assignor and each  Assignee  Party each
                           irrevocably submits to the non-exclusive jurisdiction
                           of any State or  Federal  court  sitting  in New York
                           County,  New York over any suit, action or proceeding
                           arising  out of or relating  to this  Assignment  and
                           Acceptance and irrevocably  agrees that all claims in
                           respect of such action or proceeding may be heard and
                           determined  in such New York State or Federal  court.
                           Each party to this  Assignment and Acceptance  hereby
                           irrevocably  waives,  to the  fullest  extent  it may
                           effectively  do so, the  defense  of an  inconvenient
                           forum  to  the   maintenance   of  such   action   or
                           proceeding.

                  (f)      ASSIGNOR   AND  EACH   ASSIGNEE   PARTY  EACH  HEREBY
                           KNOWINGLY,  VOLUNTARILY AND  INTENTIONALLY  WAIVE ANY
                           RIGHTS THEY MAY HAVE TO A TRIAL BY JURY IN RESPECT OF
                           ANY  LITIGATION  BASED  HEREON,  OR  ARISING  OUT OF,
                           UNDER,  OR IN  CONNECTION  WITH THIS  ASSIGNMENT  AND
                           ACCEPTANCE,  THE FIRST LIEN FINANCING AGREEMENT,  ANY
                           OF THE OTHER  FIRST  LIEN  DOCUMENTS  OR ANY  RELATED
                           DOCUMENTS  AND  AGREEMENTS  OR ANY COURSE OF CONDUCT,
                           COURSE OF DEALING,  OR  STATEMENTS  (WHETHER  ORAL OR
                           WRITTEN).

                                      A-6
<PAGE>

         IN WITNESS  WHEREOF,  Assignor and each Assignee Party have caused this
Assignment and Acceptance to be executed and delivered by their duly  authorized
officers as of the date first above written.

                                  [ASSIGNOR]

                                  By:

                                  Title:

                                  [ASSIGNEE PARTIES]

                                  By:

                                  Title:

                                  GUGGENHEIM CORPORATE FUNDING, LLC

                                  By:

                                  Title:

                                  CONSENTED TO:

                                  NATIONAL COAL CORPORATION

                                  By:

                                  Title:

<PAGE>

                                   SCHEDULE 1

PART A - ASSIGNED PERCENTAGE

[--]%

PART B[-1] - ASSIGNED OBLIGATIONS AMOUNT

$[__________________]

[PART B-2 - ASSIGNED COMMITMENT AMOUNT

$[__________________]      ]

PART C - PRO RATA SHARES

ASSIGNEE PARTY                                               PERCENTAGE
[Name]                                                       [__]%
[Name]                                                       [__]%
[Name]                                                       [__]%

PART D - AGGREGATE PAYMENT AMOUNT

$[__________________]

                                      -1-
<PAGE>

                                   SCHEDULE 2
                       NOTICE OF ASSIGNMENT AND ACCEPTANCE

                                                                        __, 20__
Attn:
Re:

         Ladies and Gentlemen:

         GUGGENHEIM CORPORATE FUNDING, LLC, in its capacity as agent pursuant to
the First Lien Financing  Agreement (as  hereinafter  defined) acting for and on
behalf of the parties  thereto as lenders (in such capacity,  "AGENT"),  and the
financial  institutions  and other entities  parties to the First Lien Financing
Agreement as lenders (individually, each a "LENDER" and collectively, "LENDERS")
have entered  into  financing  arrangements  pursuant to which Agent and Lenders
will make loans and  advances  and provide  other  financial  accommodations  to
National Coal Corporation,  a Tennessee corporation ("BORROWER") as set forth in
the First  Lien  Financing  Agreement,  dated  October  12,  2006,  by and among
Borrower, the entities parties thereto as Guarantors,  Agent and Lenders (as the
same now exists or may hereafter be amended, modified,  supplemented,  extended,
renewed,  restated or replaced, the "FIRST LIEN FINANCING  AGREEMENT"),  and the
other agreements,  documents and instruments  referred to therein or at any time
executed and/or delivered in connection therewith or related thereto (all of the
foregoing,  together with the First Lien  Financing  Agreement,  as the same now
exist or may hereafter be amended, modified,  supplemented,  extended,  renewed,
restated or replaced,  being  collectively  referred to herein as the "FINANCING
AGREEMENTS").  Capitalized  terms not  otherwise  defined  herein shall have the
respective meanings ascribed thereto in the First Lien Financing Agreement.

         1. We hereby give you notice of, and request your  acknowledgement  of,
the    assignment   by    __________________________    (the    "Assignor")   to
___________________________   (individually,   each  an  "Assignee   Party"  and
collectively,  "Assignee")  such that  after  giving  effect  to the  assignment
Assignee  shall  have its  interest,  if any,  under  the First  Lien  Financing
Agreement increased by an amount equal to ________ (__%)(1) percent of the total
Obligations  [and  Term  Loan  Commitments]   pursuant  to  the  Assignment  and
Acceptance  Agreement  attached hereto (the  "Assignment and  Acceptance").  [We
understand that the Assignor's Commitment shall be reduced to zero.]

         2. Each Assignee Party agrees that, upon receiving the  acknowledgement
of Agent of such  assignment,  such Assignee Party will be bound by the terms of
the First Lien  Financing  Agreement  as fully and to the same extent as if such
Assignee Party were the Lender originally  holding such interest under the First
Lien Financing Agreement.

--------
(1) This should equal the "Assigned Percentage" from Part A of Schedule 1.

                                      -2-
<PAGE>

         3. The following administrative details apply to Assignee:

                  I  (A)     Notice address:

                             Assignee Party name:

                             Address:

                             Attention:

                             Telephone:

                             Telecopier:

                     (B)     Payment instructions:

                             Account No.:

                             At:

                             Reference:

                             Attention:

                 II  (A)     Notice address:

                             Assignee Party name:

                             Address:

                             Attention:

                             Telephone:

                             Telecopier:

                     (B)     Payment instructions:

                             Account No.:

                             At:

                             Reference:

                             Attention:

                                      -3-
<PAGE>

You are entitled to rely upon the  representations,  warranties and covenants of
each of Assignor and Assignee contained in the Assignment and Acceptance.

                                      -4-
<PAGE>

                                    EXHIBIT B

                    RECORDED FIRST LIEN COLLATERAL DOCUMENTS

TENNESSEE:

1.       Campbell County

         a. Fee and Leasehold Deed of Trust, Assignment of Leases and Subleases,
Security Agreement,  Fixture Filing and As-Extracted  Collateral Filing dated as
of  _____________,  2006, by National Coal Corporation,  Grantor,  to William C.
Gullett,  Esq.,  as Trustee,  for the benefit of Guggenheim  Corporate  Funding,
Inc., as Collateral Agent, Beneficiary, of record in Book ____, page ____ in the
Campbell County Register's Office;

         b. UCC-1 Financing Statement  (covering  as-extracted  collateral),  by
National Coal  Corporation,  Debtor, in favor of Guggenheim  Corporate  Funding,
Inc.,  Secured Party,  of record in Book ____,  page ____ in the Campbell County
Register's Office; and

         c. UCC-1  Financing  Statement  (covering  fixtures),  by National Coal
Corporation,  Debtor, in favor of Guggenheim  Corporate  Funding,  Inc., Secured
Party,  of record in Book  ____,  page ____ in the  Campbell  County  Register's
Office.

2.       Scott County

         a. Fee and Leasehold Deed of Trust, Assignment of Leases and Subleases,
Security Agreement,  Fixture Filing and As-Extracted  Collateral Filing dated as
of  _____________,  2006, by National Coal Corporation,  Grantor,  to William C.
Gullett,  Esq.,  as Trustee,  for the benefit of Guggenheim  Corporate  Funding,
Inc., as Collateral Agent, Beneficiary,  of record in Trust Book ____, page ____
in the Scott County Register's Office;

         b. UCC-1  Financing  Statement  (covering  fixtures),  by National Coal
Corporation,  Debtor, in favor of Guggenheim  Corporate  Funding,  Inc., Secured
Party,  of record in Trust Book ____,  page ____ in the Scott County  Register's
Office; and

         c. UCC-1 Financing Statement  (covering  as-extracted  collateral),  by
National Coal  Corporation,  Debtor, in favor of Guggenheim  Corporate  Funding,
Inc., Secured Party, of record in Trust Book ____, page ____ in the Scott County
Register's Office.

3.       Anderson County

         a. Fee and Leasehold Deed of Trust, Assignment of Leases and Subleases,
Security Agreement,  Fixture Filing and As-Extracted  Collateral Filing dated as
of  _____________,  2006, by National Coal Corporation,  Grantor,  to William C.
Gullett,  Esq.,  as Trustee,  for the benefit of Guggenheim  Corporate  Funding,
Inc., as Collateral Agent, Beneficiary, of record in Book ____, page ____ in the
Anderson County Register's Office;

                                      -5-
<PAGE>

         b. UCC-1 Financing Statement  (covering  as-extracted  collateral),  by
National Coal  Corporation,  Debtor, in favor of Guggenheim  Corporate  Funding,
Inc.,  Secured Party,  of record in Book ____,  page ____ in the Anderson County
Register's Office; and

         c. UCC-1  Financing  Statement  (covering  fixtures),  by National Coal
Corporation,  Debtor, in favor of Guggenheim  Corporate  Funding,  Inc., Secured
Party,  of record in Book  ____,  page ____ in the  Anderson  County  Register's
Office.

4.       Knox County

         a. Fee and Leasehold Deed of Trust, Assignment of Leases and Subleases,
Security Agreement,  Fixture Filing and As-Extracted  Collateral Filing dated as
of  _____________,  2006, by National Coal Corporation,  Grantor,  to William C.
Gullett,  Esq.,  as Trustee,  for the benefit of Guggenheim  Corporate  Funding,
Inc.,   as    Collateral    Agent,    Beneficiary,    recorded   at   instrument
__________________ in the Knox County Register's Office; and

         b. UCC-1  Financing  Statement  (covering  fixtures),  by National Coal
Corporation,  Debtor, in favor of Guggenheim  Corporate  Funding,  Inc., Secured
Party, recorded at instrument #___________________ in the Knox County Register's
Office.

KENTUCKY:

1.       Bell County

         a. Fee and  Leasehold  Mortgage,  Assignment  of Leases and  Subleases,
Security Agreement,  Fixture Filing and As-Extracted  Collateral Filing dated as
of _____________,  2006, by National Coal Corporation,  Mortgagor, to Guggenheim
Corporate Funding, Inc., as Collateral Agent,  Mortgagee,  of record in Mortgage
Book ____, page ____ in the Bell County Clerk's Office;

         b. UCC-1  Financing  Statement  (covering  fixtures),  by National Coal
Corporation,  Debtor, in favor of Guggenheim  Corporate  Funding,  Inc., Secured
Party,  of record in  Fixture  Filing  Book  ___,  page ____ in the Bell  County
Clerk's Office; and

         c. UCC-1 Financing Statement  (covering  as-extracted  collateral),  by
National Coal  Corporation,  Debtor, in favor of Guggenheim  Corporate  Funding,
Inc., Secured Party, of record in Fixture Filing Book ___, page ____ in the Bell
County Clerk's Office.

                                      -6-
<PAGE>

2.       Leslie County

         a. Fee and  Leasehold  Mortgage,  Assignment  of Leases and  Subleases,
Security Agreement,  Fixture Filing and As-Extracted  Collateral Filing dated as
of  ________________,   2006,  by  National  Coal  Corporation,   Mortgagor,  to
Guggenheim Corporate Funding, Inc., as Collateral Agent, Mortgagee, of record in
Mortgage Book ___, page ____ in the Leslie County Clerk's Office;

         b. UCC-1  Financing  Statement  (covering  fixtures),  by National Coal
Corporation,  Debtor, in favor of Guggenheim  Corporate  Funding,  Inc., Secured
Party,  of record in Fixture  Filing  Book ___,  page ___ in the  Leslie  County
Clerk's Office; and

         c. UCC-1 Financing Statement  (covering  as-extracted  collateral),  by
National Coal  Corporation,  Debtor, in favor of Guggenheim  Corporate  Funding,
Inc.,  Secured  Party,  of record in Fixture  Filing Book ___,  page ____ in the
Leslie County Clerk's Office.

3.       Harlan County

         a. Fee and  Leasehold  Mortgage,  Assignment  of Leases and  Subleases,
Security Agreement,  Fixture Filing and As-Extracted  Collateral Filing dated as
of  ________________,   2006,  by  National  Coal  Corporation,   Mortgagor,  to
Guggenheim Corporate Funding, Inc., as Collateral Agent, Mortgagee, of record in
Mortgage Book ___, page ____ in the Harlan County Clerk's Office;

         b. UCC-1 Financing Statement  (covering  as-extracted  collateral),  by
National Coal  Corporation,  Debtor, in favor of Guggenheim  Corporate  Funding,
Inc.,  Secured  Party,  of record in Fixture  Filing Book ___,  page ____ in the
Harlan County Clerk's Office; and

         c. UCC-1  Financing  Statement  (covering  fixtures),  by National Coal
Corporation,  Debtor, in favor of Guggenheim  Corporate  Funding,  Inc., Secured
Party,  of record in Fixture  Filing  Book ___,  page ____ in the Harlan  County
Clerk's Office.

                                      -7-
<PAGE>

                                    EXHIBIT C

                    RECORDED SECOND LIEN COLLATERAL DOCUMENTS

TENNESSEE:

1.       Campbell County

         a. Fee and Leasehold Deed of Trust, Assignment of Leases and Subleases,
Security Agreement,  Fixture Filing and As-Extracted  Collateral Filing dated as
of December 29,  2005,  by National  Coal  Corporation,  Grantor,  to William C.
Gullett,  Esq.,  as  Trustee,  for the  benefit  of Wells  Fargo  Bank  National
Association,  as Collateral Agent, Beneficiary, of record in Book T467, page 247
in the Campbell County Register's Office;

         b. UCC-1 Financing Statement  (covering  as-extracted  collateral),  by
National Coal Corporation,  Debtor, in favor of Wells Fargo Bank, N.A.,  Secured
Party,  of record  in Book  T467,  page 294 in the  Campbell  County  Register's
Office; and

         c. UCC-1  Financing  Statement  (covering  fixtures),  by National Coal
Corporation,  Debtor,  in favor of Wells Fargo Bank,  N.A.,  Secured  Party,  of
record in Book T467, page 298 in the Campbell County Register's Office.

2.       Scott County

         a. Fee and Leasehold Deed of Trust, Assignment of Leases and Subleases,
Security Agreement,  Fixture Filing and As-Extracted  Collateral Filing dated as
of December 29,  2005,  by National  Coal  Corporation,  Grantor,  to William C.
Gullett,  Esq.,  as  Trustee,  for the  benefit  of Wells  Fargo  Bank  National
Association, as Collateral Agent, Beneficiary, of record in Trust Book 220, page
835 in the Scott County Register's Office;

         b. UCC-1  Financing  Statement  (covering  fixtures),  by National Coal
Corporation,  Debtor,  in favor of Wells Fargo Bank,  N.A.,  Secured  Party,  of
record in Trust Book 220, page 882 in the Scott County Register's Office; and

         c. UCC-1 Financing Statement  (covering  as-extracted  collateral),  by
National Coal Corporation,  Debtor, in favor of Wells Fargo Bank, N.A.,  Secured
Party,  of record in Trust  Book 220,  page 886 in the Scott  County  Register's
Office.

3.       Anderson County

         a. Fee and Leasehold Deed of Trust, Assignment of Leases and Subleases,
Security Agreement,  Fixture Filing and As-Extracted  Collateral Filing dated as
of December 29,  2005,  by National  Coal  Corporation,  Grantor,  to William C.
Gullett,  Esq.,  as  Trustee,  for the  benefit  of Wells  Fargo  Bank  National
Association, as Collateral Agent, Beneficiary, of record in Book 1412, page 1137
in the Anderson County Register's Office;

                                      -8-
<PAGE>

         b. UCC-1 Financing Statement  (covering  as-extracted  collateral),  by
National Coal Corporation,  Debtor, in favor of Wells Fargo Bank, N.A.,  Secured
Party,  of record in Book  1412,  page 1184 in the  Anderson  County  Register's
Office; and

         c. UCC-1  Financing  Statement  (covering  fixtures),  by National Coal
Corporation,  Debtor,  in favor of Wells Fargo Bank,  N.A.,  Secured  Party,  of
record in Book 1412, page 1187 in the Anderson County Register's Office.

4.       Knox County

         a. Fee and Leasehold Deed of Trust, Assignment of Leases and Subleases,
Security Agreement,  Fixture Filing and As-Extracted  Collateral Filing dated as
of December 29,  2005,  by National  Coal  Corporation,  Grantor,  to William C.
Gullett,  Esq.,  as  Trustee,  for the  benefit  of Wells  Fargo  Bank  National
Association,   as  Collateral   Agent,   Beneficiary,   recorded  at  instrument
#200512290056145 in the Knox County Register's Office; and

         b. UCC-1  Financing  Statement  (covering  fixtures),  by National Coal
Corporation, Debtor, in favor of Wells Fargo Bank, N.A., Secured Party, recorded
at instrument #200512290056146 in the Knox County Register's Office.

5.       Tennessee Secretary of State

         a. UCC-1 Financing Statement (covering personal property),  by National
Coal  Corporation,  Debtor,  in favor of Wells Fargo Bank, N.A.,  Secured Party,
recorded at instrument #106-200503 in the UCC records of the Tennessee Secretary
of State's Office.

KENTUCKY:

1.       Bell County

         a. Fee and  Leasehold  Mortgage,  Assignment  of Leases and  Subleases,
Security Agreement,  Fixture Filing and As-Extracted  Collateral Filing dated as
of December 29, 2005, by National Coal  Corporation,  Mortgagor,  to Wells Fargo
Bank National Association, as Collateral Agent, Mortgagee, of record in Mortgage
Book 247, page 868 in the Bell County Clerk's Office;

         b. UCC-1  Financing  Statement  (covering  fixtures),  by National Coal
Corporation,  Debtor,  in favor of Wells Fargo Bank,  N.A.,  Secured  Party,  of
record in Fixture Filing Book 5, page 815 in the Bell County Clerk's Office; and

                                      -9-
<PAGE>

         c. UCC-1 Financing Statement  (covering  as-extracted  collateral),  by
National Coal Corporation,  Debtor, in favor of Wells Fargo Bank, N.A.,  Secured
Party,  of record in Fixture  Filing Book 5, page 820 in the Bell County Clerk's
Office.

2.       Leslie County

         a. Fee and  Leasehold  Mortgage,  Assignment  of Leases and  Subleases,
Security Agreement,  Fixture Filing and As-Extracted  Collateral Filing dated as
of December 29, 2005, by National Coal  Corporation,  Mortgagor,  to Wells Fargo
Bank National Association, as Collateral Agent, Mortgagee, of record in Mortgage
Book 108, page 465 in the Leslie County Clerk's Office;

         b. UCC-1  Financing  Statement  (covering  fixtures),  by National Coal
Corporation,  Debtor,  in favor of Wells Fargo Bank,  N.A.,  Secured  Party,  of
record in Fixture Filing Book 8, page 227 in the Leslie County  Clerk's  Office;
and

         c. UCC-1 Financing Statement  (covering  as-extracted  collateral),  by
National Coal Corporation,  Debtor, in favor of Wells Fargo Bank, N.A.,  Secured
Party, of record in Fixture Filing Book 8, page 221 in the Leslie County Clerk's
Office.

3.       Harlan County

         a. Fee and  Leasehold  Mortgage,  Assignment  of Leases and  Subleases,
Security Agreement,  Fixture Filing and As-Extracted  Collateral Filing dated as
of December 29, 2005, by National Coal  Corporation,  Mortgagor,  to Wells Fargo
Bank National Association, as Collateral Agent, Mortgagee, of record in Mortgage
Book 339, page 536 in the Harlan County Clerk's Office;

         b. UCC-1 Financing Statement  (covering  as-extracted  collateral),  by
National Coal Corporation,  Debtor, in favor of Wells Fargo Bank, N.A.,  Secured
Party, of record in Fixture Filing Book 7, page 456 in the Harlan County Clerk's
Office; and

         c. UCC-1  Financing  Statement  (covering  fixtures),  by National Coal
Corporation,  Debtor,  in favor of Wells Fargo Bank,  N.A.,  Secured  Party,  of
record in Fixture Filing Book 7, page 462 in the Harlan County Clerk's Office.

                                      -10-Unassociated Document

    

      Exhibit
        10.2

    

     

    
      NEITHER
        THIS NOTE NOR THE SECURITIES ISSUABLE UPON CONVERSION HEREOF HAVE BEEN THE
        SUBJECT OF REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR
        UNDER
        THE SECURITIES LAWS OF ANY STATE, AND THE SAME HAVE BEEN (OR WILL BE, WITH
        RESPECT TO THE SECURITIES ISSUABLE UPON CONVERSION HEREOF) ISSUED IN RELIANCE
        ON
        EXEMPTIONS FROM THE REGISTRATION REQUIREMENTS OF SAID ACT AND SUCH LAWS.
        NEITHER
        THIS NOTE NOR THE SECURITIES ISSUABLE UPON CONVERSION HEREOF MAY BE SOLD,
        TRANSFERRED, PLEDGED, HYPOTHECATED OR OTHERWISE DISPOSED OF EXCEPT AS PERMITTED
        UNDER SUCH SECURITIES LAWS, PURSUANT TO REGISTRATION OR EXEMPTION
        THEREFROM.

       

      2%
        SECURED CONVERTIBLE PROMISSORY NOTE

       

      
        	
                $50,000

              	
                Ridgefield,
                  Connecticut

              

      

      September
        13, 2006

      

      FOR
        VALUE
        RECEIVED, the undersigned, Global Matrechs, Inc., a Delaware corporation
        (the
“Maker”),
        hereby promises to pay to Southridge Partners LP (the “Payee”)
        the
        principal sum of fifty thousand dollars ($50,000) in one installment due
        on
        March 31, 2007 (the “Maturity
        Date”)
        together with interest from and after the date hereof at the rate of two
        percent
        (2%) per annum computed on the unpaid principal balance on the basis of a
        360-day year. All payments made hereunder shall be made in immediately available
        funds. By acceptance of this Note, the Payee represents, warrants, covenants
        and
        agrees that it will abide by and be bound by its terms. 

       

      1. Conversion.
        The
        Payee shall have the option at any time to convert all or a portion of the
        outstanding principal and interest on this Note into a number of shares of
        common stock, $0.001 par value per share (the “Common
        Stock”)
        equal
        to a fraction, the numerator of which shall be the amount of principal and
        interest being so converted and the denominator of which shall be equal to
        the
        Conversion Price (the “Conversion
        Shares”).
“The
        “Conversion
        Price”
shall
        be equal to eighty percent (80%) of the average of the five lowest closing
        bid
        prices for the ten (10) trading days immediately preceding the Conversion
        Date.
        The “Conversion Date” shall be defined as the date in which the Issuer receives
        written notice by Holder of its election to convert all or a portion of the
        Note
        pursuant to this Section 1.

       

      2. Restrictions
        on Conversion.
        Notwithstanding anything to the contrary contained herein, the number of
        Conversion Shares that may be acquired by the Payee upon any conversion of
        this
        Note (or otherwise in respect hereof) shall be limited to the extent necessary
        to insure that, following such conversion, the total number of shares of
        Common
        Stock then beneficially owned by such Payee and its affiliates and any other
        persons whose beneficial ownership of Common Stock would be aggregated with
        the
        Payee’s for purposes of Section 13(d) of the Securities Exchange Act of 1934, as
        amended (the “Exchange
        Act”),
        does
        not exceed 4.999% of the total number of issued and outstanding shares of
        Common
        Stock (including for such purpose the shares of Common Stock issuable upon
        such
        conversion). For such purposes, beneficial ownership shall be determined
        in
        accordance with Section 13(d) of the Exchange Act and the rules and regulations
        promulgated thereunder.

       

      
        
           

        

        
           

          
            

          

        

        
           

        

      

      3. Prepayment The
        Maker
        shall have the right to redeem this Note at any time by providing written
        notice
        to the Payee by making a cash payment to the Payee of the outstanding principal
        amount of the Note multiplied by 120%, plus all accrued interest: Written
        notice
        to the Payee shall be received at least 5 business days prior to the date
        of
        redemption payment (“Redemption Date”). If the redemption payment is not made on
        or before the Redemption Date, the redemption notice shall be rendered null
        and
        void and the Payee thereafter shall have the right to convert any portion
        of the
        outstanding principal of the Note.

       

      4. Adjustment
        for Dividends, Distributions, Subdivisions, Combinations, Mergers,
        Consolidations or Sale of Assets.

       

      (a) Manner
        of Adjustment.

       

      (i) Stock
        Dividends, Distributions or Subdivisions.
        In the
        event the Maker shall issue shares of Common Stock in a stock dividend, stock
        distribution or subdivision, the Conversion Price in effect immediately before
        such stock dividend, stock distribution or subdivision shall, concurrently
        with
        the effectiveness of such stock dividend, stock distribution or subdivision,
        be
        proportionately decreased and the number of shares of Common Stock issuable
        upon
        conversion of this Note shall be proportionately increased.

       

      (ii) Combinations
        or Consolidations.
        In the
        event the outstanding shares of Common Stock shall be combined or consolidated,
        by reclassification or otherwise, into a lesser number of shares of Common
        Stock, the Conversion Price in effect immediately prior to such combination
        or
        consolidation shall, concurrently with the effectiveness of such combination
        or
        consolidation, be proportionately increased and the number of shares of Common
        Stock issuable upon conversion of this Note shall be proportionately
        decreased.

       

      (iii) Adjustment
        for Reclassification, Exchange or Substitution.
        In the
        event that the class of securities issuable upon the conversion of this Note
        shall be changed into the same or a different number of shares of any class
        or
        classes of stock, whether by capital reorganization, reclassification or
        otherwise, then and in each such event the Payee shall have the right thereafter
        to convert this Note for the kind and amount of shares of stock and other
        securities and property receivable upon such reorganization, reclassification,
        or other change, by Payees of the number of shares of the class of securities
        into which such Note might have been convertible for immediately prior to
        such
        reorganization, reclassification, or change, all subject to further adjustment
        as provided herein.

       

      (iv) Adjustment
        for Merger, Consolidation or Sale of Assets.
        In the
        event that the Maker shall merge or consolidate with or into another entity
        or
        sell all or substantially all of its assets, this Note shall thereafter be
        convertible for the kind and amount of shares of stock or other securities
        or
        property to which a Payee of the number of shares of Common Stock of the
        Maker
        deliverable upon conversion of this Note would have been entitled upon such
        consolidation, merger or sale; and, in such case, appropriate adjustment
        (as
        determined in good faith by the Maker’s Board of Directors) shall be made in the
        application of the provisions set forth in this Section 4 with respect to
        the rights and interest thereafter of the Payee of this Note, to the end
        that
        the provisions set forth in this Section 4 shall thereafter be applicable,
        as nearly as reasonably may be, in relation to any shares of stock or other
        property thereafter deliverable upon the conversion of this Note.

       

      
        
           

        

        
          2

          
            

          

        

        
           

        

      

      (b) Certificate
        as to Adjustments.
        Upon
        the occurrence of each adjustment or readjustment of the Conversion Price
        pursuant to this Section 4, the Maker at its expense shall promptly compute
        such adjustment or readjustment in accordance with the terms hereof and furnish
        to the Payee a certificate setting forth such adjustment or readjustment
        and
        showing in detail the facts upon which such adjustment or readjustment is
        based.

       

      (c) Closing
        of Books.
        The
        Maker shall at no time close its transfer books against the transfer of any
        shares of Common Stock issued or issuable upon the conversion of this Note
        in
        any manner which interferes with the timely and proper issuance of such
        shares.

       

      5. Miscellaneous.

       

      (a) Restricted
        Securities.
        By
        acceptance hereof, the Payee understands and agrees that this Note is a
“restricted security” under the federal securities laws inasmuch as it is being
        acquired from the Maker in a transaction not involving a public offering
        and has
        not been the subject of registration under the Securities Act and that under
        such laws and applicable regulations such securities may be resold in the
        absence of registration under the Securities Act only in certain limited
        circumstances. The Payee hereby represents that it is familiar with Rule
        144, as
        promulgated by the Securities and Exchange Commission under the Securities
        Act,
        as currently in effect, and understands the resale limitations imposed thereby
        and by the Securities Act.

       

      (b) Legends.
        It is
        understood that this Note shall bear the legend (in addition to any legends
        which may be required, in the opinion of the Maker’s counsel, by the securities
        laws of the state where the Payee is located) set forth on the first page
        of
        this Note.

       

      6. The
        following shall constitute an “Event of Default”:

      

      
        	 	
                a.

              	
                The
                  Maker shall default in the payment of principal or interest on
                  this Note
                  and same shall continue for a period of twenty (20) days;
                  or

              

      

      

      
        	 	
                b.

              	
                The
                  Maker shall (1) make an assignment for the benefit of creditors
                  or
                  commence proceedings for its dissolution; or (2) apply for or consent
                  to
                  the appointment of a trustee, liquidator or receiver for its or
                  for a
                  substantial part of its property or business;
                  or

              

      

      

      
        	 	
                c.

              	
                A
                  trustee, liquidator or receiver shall be appointed for the Maker
                  or for a
                  substantial part of its property or business without its consent
                  and shall
                  not be discharged within sixty (60) days after such appointment;
                  or

              

      

      

      
        
           

        

        
          3

          
            

          

        

        
           

        

      

      
        	 	
                d.

              	
                Any
                  governmental agency or any court of competent jurisdiction at the
                  instance
                  of any governmental agency shall assume custody or control of the
                  whole or
                  any substantial portion of the properties or assets of the Maker
                  and shall
                  not be dismissed within sixty (60) days thereafter;
                  or

              

      

      

      
        	 	
                e.

              	
                Except
                  for any judgments, settlements or related litigations or actions
                  disclosed
                  in the Maker’s Annual Report on Form 10-K for the year ended December 31,
                  2003, any money judgment, writ or warrant of attachment, or similar
                  process in excess of One Hundred Fifty Thousand ($150,000) Dollars
                  in the
                  aggregate shall be entered or filed against the Maker or any of
                  its
                  properties or other assets and shall remain unpaid, unvacated,
                  unbonded or
                  unstayed for a period of sixty (60) days;
                  or

              

      

      

      
        	 	
                f.

              	
                Bankruptcy,
                  reorganization, insolvency or liquidation proceedings or other
                  proceedings
                  for relief under any bankruptcy law or any law for the relief of
                  debtors
                  shall be instituted by or against the Maker and, if instituted
                  against the
                  Maker, shall not be dismissed within sixty (60) days after such
                  institution or the Maker shall by any action or answer approve
                  of, consent
                  to, or acquiesce in any such proceedings or admit the material
                  allegations
                  of, or default in answering a petition filed in any such proceeding;
                  

              

      

      

      Upon
        the
        occurrence of an Event of Default, or at any time thereafter, and in each
        and
        every such case, unless such Event of Default shall have been waived in writing
        by the Payee (which waiver shall not be deemed to be a waiver of any subsequent
        default) at the option of the Payee and in the Payee's sole discretion, the
        Payee may consider all obligations under this Note immediately due and payable,
        without presentment, demand, protest or notice of any kind, all of which
        are
        hereby expressly waived by the Company, anything herein or in any note or
        other
        instruments contained to the contrary notwithstanding, and the Payee may
        immediately enforce any and all of the Payee's rights and remedies provided
        herein or any other rights or remedies afforded by law. Upon the occurrence
        of
        any Event of Default as set forth herein and during any period that the Company
        shall have failed to make payment of any principal or Interest due hereunder,
        at
        the option of Payee and without notice to the Company, the Interest shall
        be
        added to the outstanding principal balance hereof, and the entire outstanding
        principal balance, as so adjusted, shall bear interest thereafter until paid
        at
        an annual rate of eighteen percent (18%) (the “Default Rate”). 

       

      7. Presentment.
        Except
        as set forth herein, the Maker waives presentment, demand and presentation
        for
        payment, notice of nonpayment and dishonor, protest and notice of protest
        and
        expressly agrees that this Note or any payment hereunder may be extended
        from
        time to time by the Payee without in any way affecting the liability of the
        Maker.

       

      
        
           

        

        
          4

          
            

          

        

        
           

        

      

      8
        . All
        provisions herein made are expressly limited so that in no event whatsoever,
        whether by reason of advancement of proceeds hereof, acceleration of maturity
        of
        the unpaid balance hereof or otherwise, shall the amount paid or agreed to
        be
        paid to Payee for the use of the money advanced or to be advanced hereunder
        exceed the maximum rate of interest allowed to be charged under applicable
        law
        (the “Maximum Rate”), regardless of whether or not there has been an
        acceleration of the payment of principal as set forth herein. If, from any
        circumstances whatsoever, the fulfillment of any provision of this Note or
        any
        other agreement or instrument now or hereafter evidencing, securing or in
        any
        way relating to the indebtedness evidenced hereby shall involve the payment
        of
        interest in excess of the Maximum Rate, then, ipso
        facto,
        the
        obligation to pay interest hereunder shall be reduced to the Maximum Rate;
        and
        if from any circumstance whatsoever, Payee shall ever receive interest, the
        amount of which would exceed the amount collectible at the Maximum Rate,
        such
        amount as would be excessive interest shall be applied to the reduction of
        the
        principal balance remaining unpaid hereunder and not to the payment of interest.
        This provision shall control every other provision in any and all other
        agreements and instruments existing or hereafter arising between the Maker
        and
        Payee with respect to the indebtedness evidenced hereby. 

       

      9. In
        the
        event this Note is placed in the hands of an attorney for collection, or
        if
        Payee incurs any costs incident to the collection of the indebtedness evidenced
        hereby, the Maker agrees to pay to Payee an amount equal to all such costs,
        including without limitation all reasonable attorneys' fees and all court
        costs.

       

      10. Notices.

       

      (c) Notices
        to the Payee.
        Whenever any provision of this Note requires a notice to be given or a request
        to be made to the Payee by the Maker, then and in each such case, any such
        notice or request shall be in writing and shall be sent by registered or
        certified mail, return receipt requested with postage thereon fully prepaid
        to
        the Payee at its address set forth on the first page of this Note or at such
        other address as the Payee may from time to time designate in
        writing.

       

      (d) Notices
        to the Maker.
        Whenever any provision of this Note requires a notice to be given or a request
        to be made to the Maker by the Payee, any such notice or request shall be
        in
        writing and shall be sent by registered or certified mail, return receipt
        requested with postage thereon fully prepaid to the Maker at its address
        set
        forth on the signature page or at such other address as the Maker may from
        time
        to time designate in writing.

       

      11. Construction;
        Governing Law.
        The
        validity and construction of this Note and all matters pertaining hereto
        are to
        be determined in accordance with the laws of the state of New York without
        regard to the conflicts of law principles thereof.

       

      12. Amendments.
        Neither
        this Note nor any of its provisions may be changed, waived or modified without
        the written consent of both the Maker and the Payee.

       

      13. Successors.
        This
        Note shall be a binding obligation of any successor of the Maker. 

       

      
        
           

        

        
          5

          
            

          

        

        
           

        

      

      IN
        WITNESS WHEREOF, the Maker, by its appropriate officers thereunto duly
        authorized, has executed this Note as of this 13th day of September,
        2006.

       

      Global
        Matrechs, Inc. 

      

      By:
        /s/
        Michael Sheppard   

      Name:
        Michael Sheppard

      Title:
        President

      

      Address:   
        90 Grove Street, Suite 201

      Ridgefield,
        CT 06877

      

      
        
           

        

        
          6

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