EXHIBIT 10.5

         Date:  March 10, 2005




                      CONTINUING AND UNCONDITIONAL GUARANTY


         This Continuing and Unconditional  Guaranty is made and entered into as
of the 8th day of March,  2005, by and between  National  Coal Corp.,  a Florida
corporation  (the  "GUARANTOR"),  located at 319 Ebenezer  Road,  Knoxville,  TN
37923, with respect to National Coal Corporation,  a Tennessee  corporation also
located at 319 Ebenezer Road, Knoxville,  TN 37923 (the "BORROWER") which is the
wholly-owned  subsidiary of the Company,  and the various  Purchasers parties to
that certain Note and Warrant Purchase Agreement ("PURCHASE  AGREEMENT") of even
date herewith.


         1.       GUARANTY.  FOR VALUE  RECEIVED,  and to induce each  Purchaser
(the  "Purchaser"),  to make the loan  contemplated  by the Note (as hereinafter
defined),  the undersigned  ("Guarantor") hereby irrevocably and unconditionally
guarantees  to the Purchaser  the full and prompt  payment when due,  whether by
acceleration or otherwise,  and the faithful,  prompt and complete compliance by
Borrower  of and with  any and all  Liabilities  (as  hereinafter  defined)  and
Obligations (as hereinafter defined) of Borrower to the Purchaser. This Guaranty
is intended to provide a  continuing  guarantee  of the payment of  Liabilities,
without limitation as to amounts guaranteed hereunder.

The  undertakings of Guarantor  hereunder are independent of the Liabilities and
Obligations of Borrower and a separate action or actions for payment, damages or
performance may be brought or prosecuted  against  Guarantor for the full amount
of the  Liabilities  and  Obligations,  regardless  of whether  (a) an action is
brought against  Borrower or any other guarantor or to realize upon any security
for the  Liabilities  and/or  Obligations,  (b)  Borrower  is joined in any such
action or actions, or (c) notice is given or demand is made upon Borrower.

The  Purchaser  shall  not be  required  to  proceed  first  against  any  other
guarantor,  Borrower,  or any other  person,  or entity,  whether  primarily  or
secondarily  liable,  or against any  collateral  held by it, before  proceeding
against  Guarantor  for  payment of all the  Liabilities  and  Obligations,  and
Guarantor shall not be entitled to assert as a defense to the  enforceability of
the  Guaranty  any  defense  of  Borrower  with  respect to any  Liabilities  or
Obligations.

         2.       PARAGRAPH   HEADINGS,   GOVERNING  LAW  AND  BINDING   EFFECT.
Guarantor  agrees  that  the  paragraph   headings  in  this  Guaranty  are  for
convenience  only and that they will not  limit  any of the  provisions  of this
Guaranty.  Guarantor  further agrees that this Guaranty shall be governed by and
construed in accordance  with the laws of the State of Tennessee and  applicable
United States federal law.  Guarantor further agrees that this Guaranty shall be
deemed to have been made in the State of Tennessee. This Guaranty is


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binding upon Guarantor and Guarantor's  successors and assigns,  and shall inure
to the benefit of the Purchaser, its successors, endorsees or assigns.

         3.       DEFINITIONS.

                  A.       "Liability"  or  "Liabilities"   shall  mean  without
limitation,  all  liabilities,  overdrafts,  indebtedness,  and  obligations  of
Borrower (and any successor  entity or entities) to the Purchaser  arising under
or related to the Purchase  Agreement,  the Note or the Security Agreement (each
as defined in the Purchase Agreement),  whether direct or indirect,  absolute or
contingent,  joint or several, secured or unsecured, due or not due, contractual
or  tortious,  liquidated  or  unliquidated,  arising  by  operation  of  law or
otherwise,  now or hereafter existing,  whether created directly,  indirectly or
acquired by assignment or otherwise, including but not limited to all extensions
or renewals thereof, and all sums payable under or by virtue thereof,  including
without  limitation,  all amounts of  principal  and  interest,  all  reasonable
expenses (including  reasonable attorney's fees and cost of collection) incurred
in the  collection  thereof or the  enforcement  of rights  thereunder,  whether
arising in the ordinary course of business or otherwise.

                  B.       "Obligations"  shall mean all of the  obligations  of
Borrower under the Note.

                  C.       All capitalized terms used herein without  definition
shall have the  meaning  set forth in the  Purchase  Agreement,  the Note or the
Security  Agreement,  as applicable.  The Purchase  Agreement,  the Note and the
Security  Agreement are sometimes  referred to herein  collectively as the "Loan
Documents".

         4.       WAIVER BY GUARANTOR.  Guarantor waives notice of acceptance of
this Guaranty, notice of any Liabilities or Obligations, presentment, demand for
payment, protest, notice of dishonor or nonpayment of any Liabilities, notice of
intent to  accelerate,  notice of  acceleration,  and  notice of any suit or the
taking of other action by the Purchaser against Borrower, Guarantor or any other
person,  any applicable statute of limitations and any other notice to any party
liable on any Loan Document (including Guarantor).

Guarantor  also waives the benefits of any provision of law  requiring  that the
Purchaser exhaust any right or remedy, or take any action, against the Borrower,
any other  guarantor or any other person or property prior to or  simultaneously
with proceeding against Guarantor hereunder.

The  Purchaser  may at any time and from time to time  (whether  before or after
revocation or termination of this Guaranty)  without notice to Guarantor (except
as required by law),  without  incurring  responsibility  to Guarantor,  without
impairing,  releasing or otherwise  affecting the  obligations of Guarantor,  in
whole or in part,  and without the  endorsement or execution by Guarantor of any
additional consent, waiver or guaranty: (a) change the manner, place or terms of
payment,  or change or extend the time of or renew,  or change any interest rate
or alter any  Liability or Obligation or  installment  thereof,  or any security
therefor;  (b) loan additional  monies or extend  additional credit to Borrower,
with or


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without security, thereby creating new Liabilities or Obligations the payment or
performance of which shall be guaranteed hereunder, and the Guaranty herein made
shall  apply  to  the  Liabilities  and  Obligations  as so  changed,  extended,
surrendered, realized upon or otherwise altered; (c) subject to the terms of the
Loan Documents, sell, exchange,  release,  surrender,  realize upon or otherwise
deal with in any manner  and in any order any  property  at any time  pledged or
mortgaged to secure the  Liabilities or Obligations  and offset against any such
or other  property;  (d) exercise or refrain from  exercising any rights against
Borrower or others  (including  Guarantor)  or act or refrain from acting in any
other  manner;  (e) settle or  compromise  any  Liability or  Obligation  or any
security  therefor and subordinate the payment of all or any part thereof to the
payment  of any  Liability  or  Obligation  of any other  parties  primarily  or
secondarily  liable on any of the  Liabilities  or  Obligations;  (f) release or
compromise  any liability of Guarantor  hereunder or any liability or obligation
of any other parties  primarily or secondarily  liable on any of the Liabilities
or Obligations;  or (g) apply any sums from any sources to any Liability without
regard to any Liabilities remaining unpaid.

         5.       SUBORDINATION.   Guarantor  agrees  that  Guarantor  will  not
demand,  take or receive  from  Borrower,  by  set-off  or in any other  manner,
payment of any debt, now and at any time or times hereafter owing by Borrower to
Guarantor  unless and until all the  Liabilities  shall have been fully paid and
the Obligations fully performed.  Any security  interest,  liens or encumbrances
which Guarantor now has and from time to time hereafter may have upon any of the
assets of Borrower shall be made subordinate,  junior and inferior and postponed
in priority,  operation and effect to any security  interest of the Purchaser in
such assets.

         6.       WAIVERS  BY  THE  PURCHASER.  No  delay  on  the  part  of the
Purchaser in exercising any of its options,  powers or rights, and no partial or
single exercise thereof,  shall constitute a waiver thereof. No waiver of any of
its rights hereunder,  and no modification or amendment of this Guaranty,  shall
be deemed to be made by the Purchaser unless the same shall be in writing,  duly
signed on behalf of the  Purchaser;  and each such waiver,  if any,  shall apply
only with respect to the specific instance involved,  and shall in no way impair
the rights of the Purchaser or the  obligations of Guarantor to the Purchaser in
any other respect at any other time.

         7.       PARTIAL  INVALIDITY  AND/OR  ENFORCEABILITY  OF GUARANTY.  The
unenforceability  or  invalidity  of any  provision of this  Guaranty  shall not
affect the  enforceability  or  validity of any other  provision  herein and the
invalidity or  unenforceability  of any provision of any Loan Document as it may
apply to any  person or  circumstance  shall not affect  the  enforceability  or
validity of such provision as it may apply to other persons or circumstances.

In the event the Purchaser is required to relinquish or return any payments, any
collateral securing the Obligations and the Liabilities or the proceeds thereof,
in whole or in part,  which  had been  previously  applied  to or  retained  for
application  against any Liability,  by reason of a proceeding arising under any
applicable  bankruptcy or insolvency law, or for any other reason, this Guaranty
shall  automatically  continue  to be  effective  notwithstanding  any  previous
cancellation or release effected by the Purchaser.


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         8.       CHANGE OF STATUS.  Guarantor  hereby agrees that this Guaranty
shall  remain  the  binding,  legal and  enforceable  obligation  of  Guarantor,
irrespective of any change in name, status or type of entity by Borrower.

         9.       FINANCIAL  AND  OTHER  INFORMATION.   Guarantor  has  made  an
independent  investigation  of the  financial  condition and affairs of Borrower
prior to entering into this  Guaranty,  and Guarantor will continue to make such
investigation, and in entering into this Guaranty, Guarantor has not relied upon
any representation of the Purchaser as to the financial condition,  operation or
creditworthiness of Borrower.  Guarantor further agrees that the Purchaser shall
have no duty or  responsibility  now or hereafter to make any  investigation  or
appraisal of Borrower on behalf of Guarantor  or to provide  Guarantor  with any
credit or other information which may come to its attention now or hereafter.

         10.      NOTICES.  Any and  all  notices  or  other  communications  or
deliveries  required or permitted to be provided  hereunder  shall be in writing
and  shall be deemed  given and  effective  on the  earliest  of (a) the date of
transmission,  if such notice or communication is delivered via facsimile at the
facsimile  number set forth on the signature pages attached hereto prior to 5:30
p.m. (New York City time) on a business day, (b) the next business day after the
date of transmission, if such notice or communication is delivered via facsimile
at the facsimile  number set forth on the signature  pages attached  hereto on a
day that is not a business  day or later than 5:30 p.m.  (New York City time) on
any business day, (c) the second business day following the date of mailing,  if
sent by U.S. nationally recognized overnight courier service, or (d) upon actual
receipt by the party to whom such notice is  required  to be given.  The address
for  such  notices  and  communications  shall be as set  forth in the  Purchase
Agreement.

         11.      GUARANTOR DUTIES. Guarantor shall upon notice or demand by the
Purchaser  promptly  and with due  diligence  pay all  Liabilities  when due and
perform and satisfy all  Obligations  in accordance  with the Loan Documents for
the benefit of the Purchaser.

         12.      REMEDIES. Upon the failure of Guarantor to fulfill Guarantor's
duty to pay all  Liabilities and perform and satisfy all Obligations as required
hereunder,  the Purchaser shall have available all of the remedies of a creditor
of  Guarantor  and of a secured  party  under all  applicable  law,  and without
limiting the generality of the  foregoing,  the Purchaser may, at its option and
without  notice or  demand:  (a)  declare  any  Liability  or  Obligation  to be
immediately due and payable,  at which point such Liability and Obligation shall
become  immediately  due  and  payable;  and  (b)  set-off  against  any  or all
liabilities of Guarantor all money owed by the Purchaser or any of its agents or
affiliates  in any  capacity to  Guarantor  whether or not due, and also set-off
against all other  Liabilities  of Guarantor to the  Purchaser all money owed by
the Purchaser in any capacity to Guarantor,  and if exercised by the  Purchaser,
the  Purchaser  shall be deemed to have  exercised  such right of set-off and to
have made a charge  against any such money  immediately  upon the  occurrence of
such default although made or entered on the books subsequent thereto.


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         13.      ATTORNEY  FEES,  COST AND  EXPENSES.  Guarantor  shall pay all
costs  of  collection  and  reasonable  attorney's  fees,  including  reasonable
attorney's  fees  in  connection   with  any  suit,   mediation  or  arbitration
proceeding,   out  of  court  payment  agreement,   trial,  appeal,   Bankruptcy
proceedings  or  otherwise,  incurred or paid by the  Purchaser in enforcing the
payment of any Liability or the enforcement of any Obligation.

         14.      REPRESENTATIONS  AND  WARRANTIES.   Guarantor  represents  and
warrants  to the  Purchaser  that (i)  Guarantor  has full  corporate  power and
capacity to execute and deliver this  Guaranty  and each other Loan  Document to
which  Guarantor  is a party  and to  incur  and  perform  the  obligations  and
undertakings  provided  herein and  therein;  (ii) no consent or approval of any
governmental  authority or any third party is or will be required as a condition
to the  enforceability  of this  Guaranty and each other Loan  Document to which
Guarantor is a party;  (iii) this Guaranty and each other Loan Document to which
Guarantor is a party has been duly  executed and  delivered by the Guarantor and
is  enforceable  against the Guarantor in  accordance  with the terms hereof and
thereof;  (iv) there is no  litigation  or  proceeding  involving  the Guarantor
pending or, to the  knowledge  of the  Guarantor,  threatened  before any court,
tribunal or governmental  authority,  which may in any way materially  adversely
affect  the  financial  condition  or  property  of  the  Guarantor,  except  as
previously  disclosed in writing to the  Purchaser;  (v) there is no law,  rule,
regulation  or  order  pertaining  to  the  Guarantor  and no  provision  of any
agreement,   mortgage  or  contract   binding  on  the  Guarantor  or  affecting
Guarantor's  property,  which could conflict with, be breached by, be in default
or in any way prevent,  the execution,  delivery or carrying out of the terms of
this  Guaranty and each other Loan Document to which  Guarantor is a party;  and
(vi) Guarantor is the sole  shareholder of Borrower and is receiving  immediate,
direct and substantial  benefit from the  transactions  contemplated by the Loan
Documents.

         15.      CONTROLLING   DOCUMENT.  To  the  extent  that  this  Guaranty
conflicts  with or is in any way  incompatible  with any  provision of any other
Loan  Document,  the terms of the Note  shall  govern  over any issue  addressed
therein,  and issues not addressed in the Note shall be governed by the terms of
the Loan Document that most specifically addresses such issues.


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         16.      NOTICE OF FINAL AGREEMENT.  THIS WRITTEN  GUARANTY  REPRESENTS
THE FINAL AGREEMENT  BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE
OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENTIAL AGREEMENTS OF THE PARTIES. THERE ARE
NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.

                  IN WITNESS  WHEREOF,  the undersigned has caused this Guaranty
to be executed as of the date written above.

GUARANTOR:


NATIONAL COAL CORP.,
a Florida corporation

By:

    /S/ JON E. NIX
----------------------------------
Jon Nix


Title: Chief Executive Officer


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