EXHIBIT 10.2

* TEXT OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
CONFIDENTIAL  TREATMENT REQUESTED UNDER 17 C.F.R.  SECTIONS  200.80(b)(4) 200.83
AND 240.24b-2

                                  COAL CONTRACT

         THIS CONTRACT  made and entered into this 6th day of October,  2004, by
and  between  National  Coal  Corporation,  a  Tennessee  corporation  with  its
principal  office at 8915 George  Williams  Road,  Knoxville,  Tennessee  37923,
hereinafter called "SELLER" and East Kentucky Power Cooperative, Incorporated, a
Kentucky corporation with its principal office at 4775 Lexington Road, P. O. Box
707, Winchester, Clark County, Kentucky 40392-0707, hereinafter called "BUYER."

                               W I T N E S S E T H

         THAT for and in consideration of the mutual covenants contained herein,
SELLER  agrees to sell to BUYER and BUYER agrees to purchase  from SELLER,  coal
for BUYER'S Cooper Power Station, Somerset,  Kentucky, under the following terms
and conditions:

1.       QUANTITY AND TERM

         (a)      SELLER does hereby  agree to sell to BUYER and BUYER agrees to
purchase from SELLER, * (*) tons of coal (the total contract  tonnage) over four
(4) years at a rate of * (*) tons of coal per year  (the  "base  annual  tonnage
amount"), subject to Section 5 (d) and 7 herein.

         (b)      Monthly  deliveries  shall  commence  on October 6, 2004,  and
continue  through  September  30, 2008,  for a total  contract  term of four (4)
years.

2.       COAL PRICE

         The base price for all coal  supplied  hereunder  meeting  the  quality
specifications  contained  herein  on an "as  received"  basis as  described  in
Section 4 (f) and f.o.b.  stockpile or unloading  facilities  at BUYER'S  Cooper
Power Station shall be * (*) per million Btu. The base price shall be subject to
price adjustments set forth in Sections 4 (c) and 4 (d).

                  EXAMPLE: The base price of coal with a heat  content of 12,000
                           Btu/lb.  would  be $* per ton.  For coal  with a heat
                           content of 12,300 Btu/lb., it would be $* per ton.


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3.       COAL PRICE ADJUSTMENTS

         The base price of coal under Section 2 of this Contract  shall be fixed
for * with a reopener period as provided below:

         (a)      *.

         (b)      The  parties  hereto  agree that the price  quoted  herein for
coal,  in Sections 2, 4 (c),  and 4 (d) include the cost of  complying  with all
existing federal,  state, or local laws or regulations as of September 30, 2004.
In the event that any federal, state, or local taxes, fees, special assessments,
or  similar   levies,   directly   relating  to  the  mining,   processing,   or
transportation of coal, but specifically NOT including variable compliance costs
of laws or regulations such as, but not limited to, those in the Federal Surface
Mining Control and  Reclamation Act of 1977, does result in a change in costs to
SELLER,  the following  procedures shall be used for  adjustments:  SELLER shall
submit any requests for price adjustment under this Section 3 (b) to BUYER prior
to the time SELLER desires such price adjustment to become  effective,  to allow
BUYER a  reasonable  time in which to review  such  requests.  In the event that
SELLER is unable,  using  reasonable  business  care to calculate the exact cost
increase claimed as a price adjustment hereunder, prior to the desired effective
date, SELLER shall submit its best reasonable  estimate of such cost increase to
BUYER for review and information purposes,  subject to the submission of a final
cost increase schedule.  Failure of SELLER to submit a cost increase schedule or
estimate to BUYER within a reasonable  time prior to the desired  effective date
for a requested price adjustment hereunder shall constitute a waiver of SELLER'S
right to request such price  adjustment for any shipments made prior to SELLER'S
submission  of a  cost  increase  schedule  or  estimate  to  BUYER.  Any  price
adjustment  hereunder  shall be based only on a final schedule of cost increases
and not an estimate submitted as provided hereinabove.

         SELLER  shall use its best  efforts  and  reasonable  business  care to
submit a final detailed breakdown of cost increases claimed as a basis for price
adjustment hereunder to BUYER as soon as the information is available.  Upon the
receipt of said information,  BUYER shall, at its sole option,  accept or reject
the requested price adjustment.

         In the  event  that  the  added  cost  of  said  taxes,  fees,  special
assessments,  or similar levies on the mining,  processing, or transportation of
coal  rise to such a level  that  their  inclusion  in the price per ton of coal
delivered  under this Contract would  increase said price to a level  materially
higher than the then-current  billing price for coal under this Contract and the
delivered  price of coal of  comparable  quality  then  reasonably  available to
BUYER,  and the parties  cannot agree on an acceptable  price,  then BUYER shall
have the right,  at its sole option,  to terminate this Contract with no further
obligation


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or  liability  to SELLER,  except in regard to  payment  for  shipments  of coal
received by BUYER prior to such termination.

         In the event that any said taxes, fees, special  assessments or similar
levies, whether included in the base price of coal or added to the price of coal
by  escalation  hereunder,  are  reduced  and such  reduction  results in a cost
decrease for SELLER,  BUYER will submit to SELLER a request for price adjustment
which shall include an estimate of the decreased  costs,  and the decreased cost
per ton of coal, at which time SELLER, at its sole option, will accept or reject
the  estimate  of the  decreased  cost.  In the event that  SELLER  rejects  the
estimate  submitted by BUYER,  SELLER will submit its schedule of such decreased
costs to BUYER, which BUYER, at its sole option, will accept or reject.

         In the event that a request for price  adjustment  under this Section 3
(b) reduces the price of coal or would not raise the price of coal  sufficiently
to give BUYER the right to terminate this Contract, as provided hereinabove, and
in either event,  BUYER and SELLER do not agree on the amount of the adjustment,
the parties do hereby agree to first attempt to compromise said changes in costs
and  failing to do so,  they will  select a third and  impartial  representative
within ten (10) days thereafter,  and the three (3) of them will then attempt to
agree upon said changes in costs,  and their  decision will be final and binding
on the parties to this Contract.  If the two (2) parties cannot agree on a third
and  impartial  representative,  then it is agreed that the Senior  Judge of the
Eastern  District of Kentucky shall select said third person,  and his decision,
and the  decision of the three (3)  ultimate  representatives,  shall be binding
upon the parties to this Contract.  Time being of the essence,  a final decision
shall be made within three (3) months after the parties  originally submit their
alleged changes in cost. Each party will bear the cost of its representative and
they shall equally share the cost of a third representative if needed.

4.       QUALITY, SAMPLING, AND ANALYSIS

         (a)      Coal sold  hereunder  for the Cooper Power  Station shall meet
the following specifications:

         HEAT CONTENT -- "as  received"  shall not be less than * Btu per pound,
                  except as provided in Section 4 (c) (I) hereinbelow.

         ASH CONTENT -- "as  received"  shall not be more  than  twelve  percent
                  (*%), except as provided in Section 4 (c) (II) hereinbelow.

         MOISTURE CONTENT -- "as received"  shall not be more than eight percent
                  (*%).


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         SULFUR CONTENT -- "as received"  shall not be more than the  percentage
                  computed by the following formula:

                  Percent Sulfur = *        *

         ASH SOFTENING TEMPERATURE (REDUCING ATMOSPHERE)

               Initial Deformation        --          * Minimum
               Softening (H=W)            --          * Minimum
               Softening (H=1/2W)         --          * Minimum
               Fluid                      --          * Minimum

         GRIND -- Shall not be less than * (*) on a Hardgrove Scale.

         SIZE AND PREPARATION --   Shall  be  *  crushed  R.O.M.  coal  with  no
                  intermediate sizes removed; clean and free of impurities.  The
                  amount of fines (*) shall not exceed * percent (*%).

         (b)      BUYER shall have the right, at its sole option,  to reject any
coal shipment, or any portion on a truckload basis, if upon visual inspection of
such shipment,  the coal is not run-of-mine  having a maximum top size of 2", is
not free of impurities, has fines exceeding * percent (*%), is "hot coal," or if
BUYER  believes that  unloading  the coal would  involve an unusually  hazardous
condition.  When any truckload has been rejected by BUYER upon visual inspection
before  unloading,  SELLER shall remove such shipment  immediately  from BUYER'S
premises at SELLER'S expense.

         It is  further  understood  and  agreed  that  BUYER does not waive its
rights under this Contract by receiving any  shipments of coal,  and  acceptance
thereof shall not be implied unless BUYER fails to give SELLER written notice of
any breaches or defaults  within a reasonable  time after each monthly  sampling
period has ended and the coal analysis has been completed.

         (c)      BUYER agrees to accept  deliveries of coal with a heat content
of at least * Btu/lb. and/or an ash content of up to * percent (**%), subject to
the following price adjustments.  The parties agree that these adjustments shall
help defray BUYER'S costs for blending and burning such lower quality coal. Such
coal  deliveries,  subject to the price  adjustments  provided in this Section 4
(c),  shall be  considered  to conform to the contract  specifications  for heat
content and ash content.

                  I.       Price  Adjustment  for heat content  below * Btu/lb.,
         but not less than * Btu/lb.  on an "as  received"  basis:

         For each 100 Btu/lb.  that the heat content falls below * Btu/lb.,  but
         does not fall below * Btu/lb.,  * ($*) per ton shall be  deducted  from
         the  billing  price.  A pro  rata  adjustment  shall  be  made  for any
         fractional portion of such a 100 Btu/lb. deficiency in heat content.


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         EXAMPLES:
         ASSUME:                     Contract                Monthly Average
                                  Specification                 Analysis

             Btu                         *                          *

         COMPUTATION:

         BTU:

                  * - * = * / * x $* = $* per ton.

                  Therefore,  $* per ton  would be  deducted  from  the  billing
                  price.

         (d)      BUYER  reserves  the right to reject any  shipments of coal by
SELLER which does not meet the minimum heat  content  requirement  of * Btu/lb.,
maximum  ash  content   requirement   of  *  percent  (*%),  or  other  contract
specifications  contained in Section 4 (a) hereinabove.  In the event that BUYER
elects to accept occasional shipments of nonconforming coal, the following price
adjustments  shall apply to such shipments,  as appropriate,  in addition to the
price adjustments provided in Section 4 (c), hereinabove, and in addition to any
other remedies available to BUYER:

                  I.       Price Adjustment for heat content below * Btu/lb., on
         an "as received" basis:

                  For  each *  Btu/lb.  that  the  heat  content  falls  below *
                  Btu/lb.,  * ($*) per ton shall be  deducted  from the  billing
                  price. A pro rata adjustment  shall be made for any fractional
                  portion of such a * Btu/lb. deficiency in heat content.

                  II.      Price  Adjustment for ash content over * percent (*%)
         on an "as received" basis:

                  For each * percent (*%) that the ash content exceeds * percent
                  (*%), * ($*) per ton shall be deducted from the billing price.
                  A pro rata adjustment shall be made for any fractional portion
                  of such a * percent (*%) excess in ash content.

                  III.     Price  Adjustment  for  sulfur  content  in excess of
         Section 4 (a) specification on an "as received" basis:

                  For each * (*%) the sulfur  content  exceeds the Section 4 (a)
                  specification,  * ($*)  per ton  shall  be  deducted  from the
                  billing  price.  A pro rata  adjustment  shall be made for any
                  fractional portion of such a *% excess in sulfur content.

                  EXAMPLES:
                   ASSUME:              Contract             Monthly Average
                                     Specification              Analysis

                    Btu                     *                       *
                    Ash                     *                       *
                  Sulfur                    *    (1)                *

         (1) Based on * Btu/lb. "as received" in this example.

               COMPUTATION:

               BTU:
                    * - * = * / * x $* = $* per ton.

                    * - * = * / * x $*= $* per ton.

                    Therefore,  $* per ton would be  deducted  from the  billing
                    price.

               ASH:
                    * - * = * x $* = $* per ton.

                    Therefore,  $* per ton would be  deducted  from the  billing
                    price.


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               SULFUR:

                    * - * = * / * x $* = $* per ton.

                    Therefore,  $* per ton would be  deducted  from the  billing
                    price.

         (e)      Price  Adjustment  for sulfur content lower than Section 4 (a)
specification on an "as received" basis:

                  Effective  on  October  6,  2004,  for each * (*%) the  sulfur
                  content is lower than Section 4 (a) specification,  * ($*) per
                  ton shall be added to the billing price. A pro rata adjustment
                  shall be made for any fractional portion of such a *% lower in
                  sulfur content.

                    ASSUME:              Contract             Monthly Average
                                      Specification              Analysis

                     Btu                       *                       *
                     Ash                       *                       *
                    Sulfur                     *    (1)                *

          (1)  Based on * Btu/lb. "as received" in this example.

                  COMPUTATION:

                  SULFUR:

                  * - * = * / * x $* = $** per ton.

                  Therefore, $* per ton would be added to the billing price.

         Each  calendar  quarter  beginning  with  January 1,  2005,  the sulfur
dioxide allowance market will be reviewed. If the market price of sulfur dioxide
allowances falls below * ($*) per ton, the sulfur premium of $* per ton shall be
calculated quarterly as follows:

         The  market  price of SO2  allowances  shall be  determined  by  adding
         together the SO2 market price as obtained  from Cantor  Fitzgerald  and
         Evolution  Markets  for the  second  month  of the  preceding  calendar
         quarter and dividing by two. This average SO2 allowance  price shall be
         deemed to be the market price for SO2 allowances.

         The SO2 allowance  price will be  multiplied by a conversion  rate of *
         (*) and  divided  by 100 to arrive at a "sulfur  cost" per one  percent
         sulfur. The sulfur cost will then be divided by ten (10) to arrive at a
         "sulfur price" per one-tenth percent (.1%) sulfur. The new premium will
         be * of this  sulfur  price  per *  percent.  The new  premium  will be
         rounded off to the nearest cent.


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         EXAMPLE:

         Calculation for the quarter beginning January 1, 2005:

         Cantor Fitzgerald SO2 allowance cost--November 2004................$223

         Evolution Markets SO2 allowance cost--November 2004................$234

         223 + 234 = 457 / 2 = 228.5--SO2 Market Price

         * x * = * / 100 = *--Sulfur Cost per one percent sulfur

         * / 10 = *--Sulfur price per one-tenth percent sulfur

         * / * = $*  rounded  off to $* per ton  per  one-tenth  percent  sulfur
         content.

         (f)      For the purpose of computing payment for coal subject to price
adjustment  under  Sections 4 (c), 4 (d), or 4 (e),  the heat,  ash,  and sulfur
contents of the coal "as  received"  shall be deemed to be the monthly  weighted
composite  average  value of the heat,  ash, and sulfur  contents as defined and
computed in  Subsection  (i) of this  Section 4. BUYER and SELLER agree that the
application  of the  price  reductions  provided  in  Section 4 (d) shall not be
considered  liquidated  damages  but is  intended to  partially  defray  BUYER'S
additional  costs for blending and burning said lower  quality  coal;  shall not
constitute  a waiver  by BUYER of any of the terms of this  Contract;  shall not
excuse noncompliance with the contract specifications by any shipment by SELLER;
and shall not affect  BUYER'S  right to exercise  any of its  remedies  provided
hereunder or at law for unsatisfactory  performance of the contract by SELLER or
reject any coal  received that fails to meet the  requirements  of Section 4 (a)
herein or that BUYER has a right to reject pursuant to other  provisions of this
Contract.

         (g)      If the coal  shipped  to BUYER  fails to meet a  minimum  heat
content  requirement of 11,500 Btu per pound, a maximum ash content of * percent
(*%),  or any of the  other  requirements  set forth in  Subsection  (a) of this
Section 4, for two (2) consecutive  weeks based on the analyses made during such
time,   except  for  the  sulfur   requirements   which  are  discussed  further
hereinbelow, or if SELLER fails to deliver coal in scheduled amounts for two (2)
consecutive  weeks without  adequate excuse under Section 7, and notice thereof,
BUYER shall have the right,  upon giving  SELLER  written  notice,  to refuse to
accept further deliveries until SELLER has provided assurance, in the opinion of
BUYER, that all shipments of coal delivered  thereafter will conform to each and
every  requirement  set forth in Section 4 (a). If SELLER fails to furnish BUYER
with such  assurance  within  thirty (30) days after  written  notice is sent to
SELLER,  BUYER may,  at its sole  option,  treat  this  Contract  as  materially
breached  by  SELLER.  It being  understood  and  agreed,  of  course,  that the
aforesaid  assurance procedure is not an exclusive remedy afforded BUYER, but it
is optional and cumulative and in addition to other rights and remedies of BUYER
provided herein and by law.


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         NOTWITHSTANDING ANY OTHER PROVISIONS  CONTAINED HEREIN TO THE CONTRARY,
OR OTHERWISE,  it is understood and agreed that BUYER faces severe  penalties by
the Environmental Protection Agency, and others, in the event of its use of coal
with a sulfur  content  of more  than the  percentages  noted in  Section  4 (a)
hereinabove;  and  therefore,  BUYER  constantly  monitors and tests its coal to
assure itself of sulfur  compliance,  and it cannot  tolerate the receipt of any
substantial amount of coal which does not meet such  specifications.  Therefore,
in the event that  BUYER'S  testing  procedures  reveal that ANY coal  delivered
under this  Contract  fails to meet the above stated sulfur  requirements,  then
BUYER may suspend  shipments  until and unless within  thirty (30) days,  SELLER
assures BUYER of future and continuous compliance with said sulfur requirements.
If SELLER provides  assurance of future  compliance  within this thirty (30) day
period that is satisfactory to BUYER, then deliveries may resume under the terms
of this  Contract.  If,  however,  SELLER fails to provide  BUYER with  adequate
assurance of future compliance,  BUYER shall have the right, at its sole option,
to declare SELLER in material breach of this Contract,  or to allow SELLER up to
an  additional  sixty (60) days to provide  adequate  assurance  of such  future
sulfur  compliance.  In the event that BUYER allows an additional period of time
for the furnishing of such assurance,  SELLER shall either make arrangements for
delivery of adequate  quantities of coal meeting such contract  specification as
provided in Section 4 (a),  hereinabove,  at the then-current contract price, to
meet  SELLER'S  contract  commitment;  or SELLER shall  reimburse  BUYER for any
amount  that  replacement  coal  purchased  by BUYER,  in amounts  not to exceed
scheduled  quantities  under this Contract,  exceeds the  then-current  contract
price.  Such  reimbursement  shall be made by SELLER to BUYER by the 20th day of
the month  following  the receipt of such  replacement  coal. If SELLER does not
provide adequate  assurance of future compliance by the end of any such extended
time period, BUYER may, at its sole option, declare SELLER in material breach of
this  Contract.  This  assurance  procedure is not an exclusive  remedy for such
noncompliance,  but is optional and  cumulative  and in addition to other rights
and remedies of BUYER provided herein or at law.

         (h)      For purposes of determining  the price and quality of all coal
delivered under this Contract,  except for the purposes of Section 4 (g) and for
coal  rejected by BUYER by visual  inspection  before  unloading,  including the
moisture,  ash, sulfur, and heat content requirements,  the analysis of the coal
shall be deemed to be, and is, the average monthly values of the moisture,  ash,
sulfur,  and heat  content as defined  and  computed in  Subsection  (i) of this
Section 4.


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         (i)      The average monthly values of the moisture,  ash, sulfur,  and
heat content of the coal "as received" shall be the weighted  average  moisture,
ash,  sulfur,  and heat content of all composite  samples  collected  during the
Sample Period.  (As example of this weighted  average,  at present,  samples are
taken from each  truckload  delivered  and an analysis is made of all  composite
samples taken in a given week. These weekly analyses are then weighted according
to the quantities  delivered in each week, and a monthly weighted average figure
is computed.  This procedure  could change,  however,  but the weighted  average
approach will be retained.)  The Sample Period shall be a one (1) month interval
during  which  period of time  several  samples,  the exact  number being at the
BUYER'S option, shall be collected and used for the aforesaid sampling purposes.
The collection,  preparation,  and analysis of coal conducted in determining the
average  monthly values of the moisture,  ash,  sulfur,  and heat content of the
coal shall be performed by BUYER from samples taken at BUYER'S facilities and in
accordance  with the "Coal  Sampling  and  Analysis  Procedures,"  Cooper  Power
Station,  dated July 20, 1978,  and subsequent  amendments to those  procedures,
copies of which are available  from BUYER upon  request,  and all tests shall be
conducted  at BUYER'S  expense.  SELLER  shall be sent a copy of any  changes in
procedures  for sampling and analysis.  SELLER,  at its expense,  shall have the
right  upon  written  notice to BUYER,  to have a  representative  present  when
samples  are  taken,  prepared,  and  analyzed  in BUYER'S  laboratory.  Of each
composite sample prepared for analysis,  a split will be prepared for SELLER and
retained by BUYER for at least fourteen (14) days after the analysis  results of
that sample have been sent to SELLER.  Anytime  within  this  fourteen  (14) day
period, this split shall be made available to SELLER upon request.

5.       DELIVERY AND WEIGHING

         (a)      The prices for all of said coal are as stated in Sections 2, 4
(c), 4 (d), and 4 (e) of this Contract;  and therefore,  the total cost and sole
responsibility  for the  delivery  of all of said coal to BUYER'S  stockpile  or
unloading  facilities  at  Cooper  Power  Station  shall  be  and  is  the  sole
responsibility of SELLER.

         (b) SELLER shall make all  deliveries by truck to BUYER'S  Cooper Power
Station.  The weight shall be  determined  and computed by the scales at BUYER'S
Cooper Power Station. If said scales are not available  temporarily,  then until
such time as the scales are  available,  the quantity of coal delivered by truck
shall be determined on the basis of average truck weights of previous  shipments
of coal received from SELLER and weighed by BUYER.  It being clearly  understood
by the parties that BUYER is purchasing coal from several  different  suppliers,
and, therefore,  SELLER understands and


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<PAGE>


agrees that all  deliveries  shall be made only on Monday  through Friday during
receiving  hours,  which will be determined  by BUYER,  and in the daily amounts
designated and determined by BUYER from time to time at its sole option.

         (c)      The monthly  delivery rates as provided for in Section 1 shall
not be exceeded in any month, nor shall the term of this Contract be extended in
order to make up for  deficiencies  in the delivery  schedule  caused by SELLER,
except at the sole option of BUYER.

         (d)      SELLER agrees to defend,  indemnify,  and hold harmless BUYER,
its directors,  officers,  employees, and agents, from any and all damage, loss,
claim,  demand,  suit,  liability,  penalty,  or  forfeiture  of every  kind and
nature--including,  but not limited to, costs and expenses of defending  against
the same and payment of any settlement or judgment,  therefore, by reason of (a)
injuries or deaths to persons, (b) damages to or destructions of properties, (c)
pollutions,  contaminations of, or other adverse effects on the environment,  or
(d) violations of governmental laws,  regulations,  or orders--whether  suffered
directly by BUYER itself or  indirectly by reason of claims,  demands,  or suits
against it by third parties,  resulting or alleged to have resulted from acts or
omissions  of  SELLER,   its  employees,   agents,   subcontractors,   or  other
representatives  or from their  presence on the  premises of BUYER or  otherwise
from performance of this Contract.

         (e)      SELLER shall provide and  maintain,  and shall require any and
all subcontractors to provide and maintain, with an insurance company authorized
to do business in the Commonwealth of Kentucky and otherwise acceptable to BUYER
the following insurance:

         (i)      Workers Compensation and Employer's Liability Policy: Prior to
the start of the  Work,  SELLER  shall  submit  evidence  of  SELLER'S  Workers'
Compensation and Employer's  Liability  Insurance  Policy,  and each such policy
shall include:

                  1.       Workers'  Compensation  (statutory benefits coverage)
         Insurance accordance with the laws of the Commonwealth of Kentucky

                  2.       Employer's  Liability  with a  minimum  limit  of One
         Million  Dollars  ($1,000,000)  with  respect  to  Bodily  Injury  Each
         Accident/($1,000,000),     Bodily     Injury    by     Disease     Each
         Employee/($1,000,000), and Bodily Injury by Disease Policy Limit.

                  3.       United  States  Longshoremen  and Harbor  Workers Act
         Endorsement (WC 00 01 06), if exposures warrant.

                  4.       Maritime  "Jones Act"  Endorsement  (WC 00 02 01); if
         exposures warrant.


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                  5.       Federal  Employer's  Liability Act Endorsement "FELA"
         (WC 00 01 04), if exposures warrant.

         (ii)     Commercial  General  Liability  Policy:  Prior to the start of
Work,  SELLER shall provide  evidence of SELLER'S  Policy  providing  Commercial
General  Liability  Insurance,  with  combined  single  minimum limit for bodily
injury and property damage of One Million Dollars  ($1,000,000) each Occurrence,
Two Million Dollars ($2,000,000) General Aggregate, and the following coverage:

                  1.       Coverage for premises and operations,  including Work
         let or sublet.

                  2.       No  exclusion  of coverage  for  Blanket  Contractual
         Liability to the extent covered by the policy against liability assumed
         by SELLER under this Contract.

                  3.       No exclusion for Broad Form Property Damage hazard.

                  4.       Said policy shall name BUYER as an Additional Insured
         to the extent necessary to fulfill SELLER'S indemnity obligations under
         Section 5 (d), with SELLER'S policy deemed to be primary.

                  5.       Said policy  shall be  endorsed  to provide  that the
         underwriter(s)  have waived  their  Rights of Recovery  Against  Others
         (subrogation) against BUYER and BUYER'S insurance carrier(s).

                  6.       Coverage  shall be amended to provide  for  Aggregate
         Limit of Liability at each project or jobsite.

                  7.       Should policy contain a deductible  clause for bodily
         injury or property damage liability,  said deductible shall be shown on
         the Certificate of Insurance,  and SELLER'S  carrier shall agree to pay
         any such claims "first dollar" and then recover the  deductible  amount
         from SELLER.

         (iii)    Commercial Automobile Liability Insurance Policy: Prior to the
start of Work, SELLER shall provide evidence of SELLER'S  Commercial  Automobile
Liability  Insurance  Covering  the  use  of all  owned,  non-owned,  and  hired
vehicles,  with a minimum  combined  single limit for bodily injury and property
damage of One  Million  Dollars  ($1,000,000)  each  Accident  with  respect  to
SELLER'S  vehicles  assigned  to or  used in  performance  of  Work  under  this
Contract.  Said policy shall name BUYER as an  Additional  Insured to the extent
necessary to fulfill  SELLER'S  indemnity  obligations  under Section 5 (d) with
said policy  designated to be primary.  Said policy shall include an endorsement
providing that the  underwriter(s)  have waived their Rights of Recovery Against
Others (subrogation) against BUYER and BUYER'S insurance carrier(s).

         (iv)     The above  policies to be provided by SELLER  shall be written
by  companies  satisfactory  to BUYER or  having a Best  Rating of not less than
A--("Excellent").  These policies  shall not be materially  changed or cancelled
except  with a  thirty-day  written


                                       11
<PAGE>


notice to BUYER from the SELLER and the Insurance Carrier. Evidence of coverage,
notification of cancellation, or other changes shall be mailed to:

                        East Kentucky Power Cooperative, Inc.
                        ATTN:  Finance & Risk Management
                        P. O. Box 707
                        Winchester, KY 40392-0707

         BUYER shall not be obligated to review any of SELLER'S  Certificates of
Insurance,  insurance  policies  or  endorsements,  or to  advise  SELLER of any
deficiencies in such documents.  Minimum limits and coverage required under this
Article  should not be  construed  to  necessarily  be adequate for SELLER'S own
insurance and risk  management  needs.  Any receipts of such  documents or their
review by BUYER shall not  relieve  SELLER from or be deemed a waiver of BUYER'S
rights to  insist  on  strict  fulfillment  of  SELLER'S  obligations  under the
Contract.

         BUYER  reserves  the right to request and receive a summary of coverage
of any of the above policies or endorsements. SELLER shall provide notice of any
accidents or claims at the Work site to BUYER'S  Finance & Risk  Management,  at
the above address, and BUYER'S plant authorized representative.


6.       PAYMENT AND NOTICE

         (a)      Each  Friday  EKPC will  make a payment  of * per ton for coal
delivered  during the previous week.  The balance owed for  deliveries  during a
calendar  month will be payable by the 20th of the month  following the calendar
month in which the coal was delivered.

         All said payments  shall be made payable to National Coal  Corporation,
and shall be mailed to SELLER at 8915 George Williams Road, Knoxville, Tennessee
37923, unless designated otherwise by SELLER in writing to BUYER.

         (b)      All notices  required or permitted to be given hereunder shall
be in writing and shall be deemed  properly  given if mailed to the proper party
at the following addresses:

               BUYER:      EAST KENTUCKY POWER COOPERATIVE, INC.
                           4775 LEXINGTON ROAD
                           P. O. BOX 707
                           WINCHESTER, KENTUCKY 40392-0707

               SELLER:     NATIONAL COAL CORPORATION
                           8915 GEORGE WILLIAMS ROAD
                           KNOXVILLE, TENNESSEE  37923


                                       12
<PAGE>


7.       INTERRUPTION OF OPERATION--FORCE MAJEURE

         It is  specifically  understood and agreed that the obligations of both
parties under this Contract are subject to riots,  strikes,  or Acts of God that
directly  affect the operations of either of said parties.  In the event of such
an  occurrence,  then said affected  party shall be excused from  performance of
this Contract, but only for such time as said occurrence is in effect, and after
said  occurrence  has ended or been  resolved,  then both parties shall be fully
bound to  perform  under the terms of this  Contract  for the  duration  of this
Contract,  except  that  any  deficiencies  in the  production  or  sale of coal
hereunder  caused by force majeure will only be made up by mutual consent of the
parties, nor will the term of this agreement be extended by force majeure unless
the parties so agree.  No other acts or events  shall  excuse  either party from
full  performance  of this  Contract  except as may be stated under the terms of
this Contract.

         "Force Majeure" as used herein shall mean a cause beyond the control of
SELLER or BUYER,  as the case may be,  whether  foreseen  or  unforeseen,  which
wholly or  materially  prevents the mining,  loading,  or delivery of coal at or
from the  property,  or  receiving,  transporting  or delivery  of same,  or the
unloading, storing, or burning of coal by BUYER at its destination and which the
party  claiming  force  majeure  could not have  prevented  with the exercise of
reasonable prudence.  Examples (without  limitations) of force majeure, but only
if beyond the control of SELLER or BUYER, as the case may be, are the following:

               Acts of God;  acts of the  public  enemy;  insurrections;  riots,
               strikes; labor disputes; shortage of supplies; fires, explosions;
               floods;  breakdowns  of or damage to plants,  mine  equipment  or
               facilities;  interruptions to or contingencies of transportation;
               embargoes;  orders  or  acts  of  civil  or  military  authority.
               Malfunctions  of  computer  hardware,  software,  or any  type of
               equipment   resulting  from  so-called  "Year  2000   compliance"
               problems  that could  reasonably  be  foreseen  and were within a
               non-performing  party's ability to prevent or correct,  shall not
               be   considered   to  be  force   majeure   events   that  excuse
               non-performance by BUYER or SELLER hereunder.

         If because of force majeure  either BUYER or SELLER are unable to carry
out their obligation under this Agreement,  and if such party promptly gives the
other party hereto  written notice of such force majeure,  the  obligations  and
liabilities of the party giving such notices and the  corresponding  obligations
of the other party shall be suspended to the extent made necessary by and during
the  continuance of such force majeure,  provided,  however,  that the disabling
effects of such force  majeure  shall be eliminated as soon as and to the extent
practicable.  During any period when BUYER asserts a force majeure condition and
said condition  results in a reduction of coal  deliveries,  BUYER shall prorate
deliveries of coal meeting the specifications


                                       13
<PAGE>


contained  in  Section 4 (a) herein  among its  suppliers  based on  contractual
commitments.

8.       CHANGES IN LEGISLATION

         It is fully  contemplated by both parties that BUYER is purchasing said
coal  for the  primary  purpose  of  using  it as fuel  for the  generation  and
production  of  electrical  power  under  present  governmental   standards  and
regulations,  and it is  understood  and agreed  that in the event any  federal,
state, or local law,  regulation,  or standard has been or is enacted that would
prohibit or make commercially uneconomical BUYER'S purchase or use in its Cooper
Power  Station of the grade or quality of coal  hereinbefore  specified for such
purpose, such as stricter or relaxed  environmental quality standards,  then all
obligations  under  this  Contract  by BUYER to use and  SELLER to sell the said
prohibitive  grade or quality of coal will be discharged and excused on the date
specified in said law, regulation,  or standard.  However,  said parties will be
fully  bound  and  legally  obligated  to  perform  under  the  exact  terms and
conditions of this Contract up and until said date. It is also  understood  that
in the event that during the term of this Contract there is any federal,  state,
or local law,  regulation,  or  standard  enacted  which  prevents  or  severely
penalizes SELLER from mining, removing, and delivering coal to BUYER, other than
the aforesaid  taxes,  fees,  special  assessments,  or similar levies for which
escalation is provided for in Section 3 herein,  and SELLER is unable to correct
or modify such condition  without  unreasonable  expense,  then SELLER and BUYER
may, upon the effective  date specified in such  legislation  or regulation,  be
discharged  and excused from the respective  obligations  under this Contract to
sell and purchase coal.

9.       BREACH OF CONTRACT

         It is fully  understood  and agreed that a material  breach of contract
shall  specifically  include,  but is not specifically  limited to:  unjustified
nonpayment  by BUYER,  failure by SELLER to provide  coal in the  quantities  or
meeting the specifications  stated in this Contract,  violation by SELLER of the
provisions of Section 10, or the insolvency,  bankruptcy,  or assignment for the
benefit of creditors of either party.

10.      SECURITY FOR PERFORMANCE

         To assure, in part,  performance under this Contract,  by no later than
October 6, 2004,  SELLER shall  provide  BUYER with a * Dollar ($*)  Performance
Bond from a surety which is approved by BUYER and in a form acceptable to BUYER.
Said  bond  shall be paid and  delivered  to BUYER in the  event of  default  or
material  breach of this


                                       14
<PAGE>


Contract by SELLER or the  insolvency or bankruptcy of SELLER.  It is understood
and  agreed by the  parties,  however,  that said  security  does not  represent
"liquidated  damages," but it is additional security from SELLER to BUYER in the
event of a default or breach of this contract by SELLER.

11.      WAIVER OF BREACH AND REMEDIES

         No waiver of a breach of this contract shall be construed or held to be
a waiver of subsequent or any other breaches.  All remedies  afforded under this
Contract shall be cumulative and in addition to every remedy provided by law.

12.      NON-ASSIGNABILITY

         This Contract is personal as between BUYER and SELLER, and except that,
after prior written notice to the other party, BUYER may assign its rights under
this Contract only to the Rural Utilities  Service,  rights or obligations under
this Contract are otherwise  neither  assignable nor transferable  except by the
written  consent  of said  parties,  which  consent  shall  not be  unreasonably
withheld.

13.      FAIR COMPETITIVE BIDDING

         This  Contract  has  been  awarded  to  SELLER  pursuant  to a fair and
confidential  competitive  bidding  process.  By entering this Contract,  SELLER
represents  and  warrants  that  it did  not  promise  or  deliver  anything  of
significant value to, or solicit or receive any confidential competitive bidding
information  regarding  this  Contract  from,  any officer,  director,  agent or
employee of BUYER, or any member of their  families.  BUYER shall have the right
to terminate this  Agreement  should it determine  that this  representation  of
SELLER is false.

14.      CAPTIONS

         The captions to sections hereof are for convenience  only and shall not
be considered in construing the intent of the parties.

15.      APPLICABLE LAW

         This Contract shall be construed under the laws of the  Commonwealth of
Kentucky,  and it is agreed that any disputes that may arise under this Contract
between the parties that culminates in litigation, shall be instituted and tried
in Clark County, Kentucky.


                                       15
<PAGE>


16.      NONDISCRIMINATION

         This  Contract is subject to the  provisions of Sections 1 through 7 of
Section 202,  SubPart B, of Presidential  Executive  Order 11246,  September 24,
1965,  which  is  hereby  incorporated  by  reference  and  made a part  of this
Contract.

17.      ENTIRE AGREEMENT

         This instrument  contains the entire contract between the parties,  and
there are no representations,  understandings,  or agreements,  oral or written,
which are not included or expressly referred to herein.  This Contract cannot be
changed except by duly authorized representatives of all parties in writing.

         IN TESTIMONY WHEREOF, WITNESS the signatures of the undersigned, on the
date first above written, in triplicate  originals,  which are executed in Clark
County,  Kentucky,  for and on behalf of said  parties  and  pursuant  to a duly
authorized resolution by their respective Board of Directors.


ATTEST:                           SELLER:   National Coal Corporation

/s/ Charles W. Kite                         /s/ J. A. Davis
------------------------------        BY:   ------------------------------------
Senior Vice President,                      VP Sales & Marketing
General Counsel


ATTEST:                            BUYER:   East Kentucky Power Cooperative, Inc

/s/ Della E. Damron                         /s/ Roy M. Polk
------------------------------        BY:   ------------------------------------
For and on behalf of the                    President & Chief Executive Officer
Corporate Secretary


                                       16