1

 
following each vesting date, the Company shall deliver to the Participant a stock certificaterepresenting the vested Award Shares.     (c) **Escrow of Shares**. During the period of time between the Date of Grant and the earlier ofeach vesting date or the date on which any Award Shares are forfeited (the “***Restriction Period***”),the Award Shares shall be registered in the name of the Participant and held in escrow by theCompany, and the Participant hereby agrees to provide one or more stock powers in substantially theform attached hereto as Exhibit A endorsed by the Participant in blank corresponding toeach stock certificate representing the Award Shares. Upon vesting of any Award Shares, acertificate representing the vested Award Shares shall be delivered to the Participant as promptlyas practicable following such vesting date and the Company will destroy the stock powercorresponding to the certificate representing such vested Award Shares.     (d) **Effect of Termination of Services as an Employee**. If the Participant’s service as anemployee of the Company is terminated (i) by the Company for Cause (as the term “Cause” is definedin that certain Employment Agreement between the Company and the Participant dated as of March 30,2008, as amended (the “***Employment Agreement***”)), or (ii) by the Participant without Good Reason (asthe term “Good Reason” is defined in the Employment Agreement), then any unvested Award Sharesshall be immediately forfeited without further consideration to the Participant and the Company mayuse the stock powers corresponding to each stock certificate representing all unvested Award Sharesto transfer record ownership of all such unvested Award Shares from the Participant to the Companyor third party, in the Company’s sole discretion. If the Participant’s service as an employee ofthe Company is terminated (i) by the Company without Cause (as the term “Cause” is defined in theEmployment Agreement), (ii) by the Participant for Good Reason (as the term “Good Reason” isdefined in the Employment Agreement), (iii) upon the Participant’s death, or (iv) upon theParticipant’s Disability (as the term “Disability” is defined in the Employment Agreement), thenany unvested Award Shares shall immediately vest and the Company shall deliver to the Participant(or, in the event of Participant’s death, the Participant’s estate) the stock certificatesrepresenting the vested Award Shares.     (e) **Section ****83(b)****Election**. Participant understands that, under Section 83 of the InternalRevenue Code (the “*Code*”), the difference between the fair market value of the Award Shares as ofthe Date of Grant and their fair market value at the time any forfeiture restrictions applicable tosuch shares lapse may be reportable as ordinary income at that time. Participant understands thatParticipant may elect to be taxed at the time the Award is granted hereunder to the extent of thefull fair market value thereof as of the Date of Grant rather than when and as such Award Sharescease to be subject to forfeiture, by filing an election under Section 83(b) of the Code with theInternal Revenue Service within 30 days after the Date of Grant. If it is likely that the fairmarket value of the Award Shares at the time any forfeiture restrictions lapse will exceed the fairmarket value thereof as of the Date of Grant, the election may avoid adverse tax consequences inthe future. Participant understands that the failure to make this filing within said 30-day periodwill result in the recognition of ordinary income by Participant (in the event the fair marketvalue of the Award Shares increases after the Date of Grant) as the forfeiture restrictions lapse.PARTICIPANT ACKNOWLEDGES THAT IT IS PARTICIPANT’S SOLE RESPONSIBILITY, AND NOT THE COMPANY’S, TOFILE A TIMELY ELECTION UNDER SECTION 83(B), EVEN IF PARTICIPANT REQUESTS THE COMPANY OR ITSREPRESENTATIVE TO MAKE THIS FILING ON PARTICIPANT’S BEHALF.     (f) **Rights as a Stockholder**. The Participant is entitled to receive all dividends and otherdistributions made with respect to the Award Shares registered in his or her
2

 
name and is entitled to vote or execute proxies with respect to such Award Shares registeredin his or her name, unless and until the Award Shares are forfeited pursuant to Section3(d) above. Upon and following the vesting date, the Participant shall be the record owner ofthe Award Shares unless and until such shares are sold or otherwise disposed of, and as recordowner shall be entitled to all rights of a common stockholder of the Company. Prior to the vestingdate, the Participant shall not be deemed to be the owner of the Award Shares.     (g) **Compliance With Securities Laws; Internal Revenue Code Section 409A**. The Company willnot be required to issue any shares of Common Stock pursuant to this Agreement if, in the opinionof counsel for the Company, such issuance would violate the Securities Act of 1933, as amended, orany other applicable federal or state securities laws or regulations. Prior to the issuance of anyshares pursuant to this Agreement, the Company may require that the Participant (or theParticipant’s legal representative upon the Participant’s death or disability) enter into suchwritten representations, warranties and agreements as the Company may reasonably request in orderto comply with applicable securities laws or with this Agreement. The Company may also delayissuance of shares of Common Stock hereunder to the extent set forth in Treasury Regulation Section1.409A-2(b)(7).     4. **Miscellaneous**.     (a) **Notices**. All notices, demands and other communications provided for or permittedhereunder shall be made in writing and shall be by registered or certified first-class mail, returnreceipt requested, telecopier, courier service or personal delivery. All such notices, demands andother communications shall be deemed to have been duly given when delivered by hand, if personallydelivered; when delivered by courier, if delivered by commercial courier service; five (5) businessdays after being deposited in the mail, postage prepaid, if mailed; and when receipt ismechanically acknowledged, if telecopied.     (b) **Severability**. The invalidity or unenforceability of any provision of this Agreement shallnot affect the validity or enforceability of any other provision of this Agreement, and each otherprovision of this Agreement shall be severable and enforceable to the extent permitted by law.     (c) **No Rights to Continued Service**. Nothing contained in this Agreement shall be construed asgiving the Participant any right to be retained, in any position, as an employee, consultant ordirector of the Company or its Subsidiaries or shall interfere with or restrict in any way theright of the Company or its Subsidiaries, which are hereby expressly reserved, to remove, terminateor discharge the Participant at any time for any reason whatsoever.     (d) **Bound by Plan**. By signing this Agreement, the Participant acknowledges that he hasreceived a copy of the Plan and has had an opportunity to review the Plan and agrees to be bound byall the terms and provisions of the Plan.     (e) **Successors**. The terms of this Agreement shall be binding upon and inure to the benefit ofthe Company and its successors and assigns, and of the Participant and the beneficiaries,executors, administrators, heirs and successors of the Participant.     (f) **Entire Agreement**. This Agreement and the Plan contain the entire agreement andunderstanding of the parties hereto with respect to the subject matter contained herein andsupersedes all prior communications, representations and negotiations in respect
3

 
thereto. No change, modification or waiver of any provision of this Agreement shall be validunless the same is in writing and signed by the parties hereto.     (g) **Governing Law**. This Agreement shall be construed and interpreted in accordance with thelaws of the State of Nevada without regard to principles of conflicts of law thereof, or principalsof conflicts of laws of any other jurisdiction that could cause the application of the laws of anyjurisdiction other than the State of Nevada.     (h) **Signature in Counterparts**. This Agreement may be signed in counterparts, each of whichshall be an original, with the same effect as if the signatures thereto and hereto were upon thesame instrument.     (i) **Electronic Signatures**. Delivery of a copy of this Agreement bearing an original signatureby facsimile transmission (whether directly from one facsimile device to another by means of adial-up connection or whether mediated by the worldwide web), by electronic mail in “portabledocument format” (“.pdf”) form, or by any other electronic means intended to preserve the originalgraphic and pictorial appearance of a document, will have the same effect as physical delivery ofthe paper document bearing the original signature. “Originally signed” or “original signature”means or refers to a signature that has not been mechanically or electronically reproduced.***[Remainder of page intentionally left blank; signature page to follow]***
4

 
     IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the day firstwritten above.      **UNITED FUEL & ENERGY CORPORATION**