Aug. 17--KNOXVILLE -- To reduce costs during a tough economy, National Coal Corp. said it will cut the base salaries of top executives and board members by 10 percent for one year, although the executives will be compensated by receiving non-qualified stock options, according to a filing with the Securities and Exchange Commission.

The Knoxville-based company's board of directors on Aug. 10 voted to cut the salaries of all employees with an annual base salary of at least $150,000 effective Sept. 1, 2009 through Aug. 31, 2010. These employees included Daniel Roling, president and CEO; Michael Castle, senior vice president and chief financial officer and William Snodgrass, chief operating officer and senior vice president of business development. Roling's new base pay would be $540,000, and both Castle and Snodgrass would have a base pay of $270,000.

The salary cuts will save the company $193,000.

Four board directors, Robert Heinlein, Gerald Malys, Kenneth Scott and Mark Solocheck agreed to reduce their annual director's fees by 10 percent for the same one-year period, for a savings of $27,000. Scott, who is board chairman, would earn $63,000 and the others would earn $45,000.

For their salary reductions, each officer and director would receive an award of non-qualified stock options to purchase shares of National Coal common stock. The options have a term of 10 years, an exercise price of 97 cents and which vest 100 percent on the first anniversary of the date of grant.

Last week, National Coal, which operates mines in East Tennessee, reported a second-quarter loss of $6.34 million, or 19 cents per share. The second quarter results included significant losses at the company's subsidiary, National Coal of Alabama.

On July 1, National Coal of Alabama defaulted on a $50 million credit facility, and the lender foreclosed on the company as of Aug. 3.

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