exv10w4






EXHIBIT 10.4




INDEMNIFICATION AGREEMENT




     This Indemnification Agreement (this “Agreement”) dated the 12th day of November 2008, by and
between United Fuel & Energy Corporation, a Nevada corporation (the “Company”), and Joseph M.
Juliano, an individual (“Indemnitee”).



RECITALS




     A. Competent and experienced persons are reluctant to serve or to continue to serve as
officers of corporations or in other capacities unless they are provided with adequate protection
through insurance or indemnification (or both) against claims against them arising out of their
service and activities on behalf of the corporation.



     B. The current uncertainties relating to the availability of adequate insurance have increased
the difficulty for corporations of attracting and retaining competent and experienced persons to
serve in such capacity.



     C. The Board of Directors of the Company (the “Board of Directors”) has determined that the
continuation of present trends in litigation will make it more difficult to attract and retain
competent and experienced persons to serve as officers of the Company, that this situation is
detrimental to the best interests of the Company’s stockholders and that the Company should act to
assure such persons that there will be increased certainty of adequate protection in the future.



     D. As a supplement to and in the furtherance of the Company’s Articles of Incorporation, as
amended (the “Articles”), and Bylaws, as amended (the “Bylaws”), it is reasonable, prudent,
desirable and necessary for the Company contractually to obligate itself to indemnify, and to pay
in advance expenses on behalf of the Company’s Executive Vice President and Chief Operating Officer
to the fullest extent permitted by law so that he will serve or continue to serve the Company free
from concern that he will not be so indemnified and that his expenses will not be so paid in
advance;



     E. This Agreement is not a substitute for, nor does it diminish or abrogate any rights of
Indemnitee under, the Articles and the Bylaws or any resolutions adopted pursuant thereto
(including any contractual rights of Indemnitee that may exist).



     F. Indemnitee is the Executive Vice President and Chief Operating Officer of the Company and
his willingness to continue to serve in such capacity is predicated, in substantial part, upon the
Company’s willingness to indemnify him to the fullest extent permitted by the laws of the State of
Nevada and upon the other undertakings set forth in this Agreement.



AGREEMENT




     NOW, THEREFORE, in consideration of the premises and covenants contained herein, the Company
and Indemnitee hereby agree as follows:



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ARTICLE 1

CERTAIN DEFINITIONS




     Capitalized terms used but not otherwise defined in this Agreement have the meanings set forth
below:



     “Corporate Status” means the status of a person who is or was a director, officer, employee,
partner, member, manager, trustee, fiduciary or agent of the Company or of any other Enterprise
which such person is or was serving at the request of the Company. In addition to any service at
the actual request of the Company, Indemnitee will be deemed, for purposes of this Agreement, to be
serving or to have served at the request of the Company as a director, officer, employee, partner,
member, manager, trustee, fiduciary or agent of another Enterprise if Indemnitee is or was serving
as a director, officer, employee, partner, member, manager, fiduciary, trustee or agent of such
Enterprise and (i) such Enterprise is or at the time of such service was a Controlled Affiliate,
(ii) such Enterprise is or at the time of such service was an employee benefit plan (or related
trust) sponsored on maintained by the Company or a Controlled Affiliate or (iii) the Company or a
Controlled Affiliate directly or indirectly caused Indemnitee to be nominated, elected, appointed,
designated, employed, engaged or selected to serve in such capacity.



     “Controlled Affiliate” means any corporation, limited liability company, partnership, joint
venture, trust or other Enterprise, whether or not for profit, that is directly or indirectly
controlled by the Company. For purposes of this definition, the term “control” means the
possession, directly or indirectly, of the power to direct, or cause the direction of, the
management or policies of an Enterprise, whether through the ownership of voting securities,
through other voting rights, by contract or otherwise; provided, however, that direct or indirect
beneficial ownership of capital stock or other interests in an Enterprise entitling the holder to
cast 30% or more of the total number of votes generally entitled to be cast in the election of
directors (or persons performing comparable functions) of such Enterprise will be deemed to
constitute “control” for purposes of this definition.



     “Disinterested Director” means a director of the Company who is not and was not a party to the
Proceeding in respect of which indemnification is sought by Indemnitee.



     “Enterprise” means the Company and any other corporation, partnership, limited liability
company, joint venture, employee benefit plan, trust or other entity or other enterprise of which
Indemnitee is or was serving at the request of the Company in a Corporate Status.



     “Expenses” means all attorney’s fees, disbursements and retainers, court costs, transcript
costs, fees of experts, witness fees, travel expenses, duplicating costs, printing and binding
costs, telephone charges, postage, fax transmission charges, secretarial services, delivery service
fees and all other disbursements or expenses paid or incurred in connection with prosecuting,
defending, preparing to prosecute or defend, investigating, being or preparing to be a witness in,
or otherwise participating in, a Proceeding, or in connection with seeking indemnification under
this Agreement. Expenses will also include Expenses paid or incurred in connection with any appeal
resulting from any Proceeding, including the premium, security for and other costs relating to any
appeal bond or its equivalent. Expenses, however, will not include amounts paid in settlement by
Indemnitee or the amount of judgments or fines against Indemnitee.



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     “Independent Counsel” means an attorney or firm of attorneys that is experienced in matters of
corporation law and neither currently is, nor in the past five (5) years has been, retained to
represent: (i) the Company or Indemnitee in any matter material to either such party (other than
with respect to matters concerning the Indemnitee under this Agreement and/or the indemnification
provisions of the Articles or Bylaws, or of other indemnitees under similar indemnification
agreements), or (ii) any other party to the Proceeding giving rise to a claim for indemnification
hereunder. Notwithstanding the foregoing, the term “Independent Counsel” does not include any
person who, under the applicable standards of professional conduct then prevailing, would have a
conflict of interest in representing either the Company or Indemnitee in an action to determine
Indemnitee’s rights under this Agreement.



     “Losses” means any loss, liability, judgments, damages, amounts paid in settlement, fines
(including excise taxes and penalties assessed with respect to employee benefit plans), penalties
(whether civil, criminal or otherwise) and all interest, assessments and other charges paid or
payable in connection with or in respect of any of the foregoing.



     “Proceeding” means any threatened, pending or completed action, suit, claim, demand,
arbitration, alternate dispute resolution mechanism, investigation, inquiry, administrative hearing
or any other actual, threatened or completed proceeding, including any and all appeals, whether
brought by or in the right of the Company or otherwise, whether civil, criminal, administrative or
investigative, whether formal or informal, and in each case whether or not commenced prior to the
date of this Agreement, in which Indemnitee was, is or will be involved as a party or otherwise, by
reason of or relating to Indemnitee’s Corporate Status and by reason of or relating to either (i)
any action or alleged action taken by Indemnitee (or failure or alleged failure to act) or of any
action or alleged action (or failure or alleged failure to act) on Indemnitee’s part, while acting
in his Corporate Status or (ii) the fact that Indemnitee is or was serving at the request of the
Company as director, officer, employee, partner, member, manager, trustee, fiduciary or agent of
another Enterprise, in each case whether or not serving in such capacity at the time any Loss or
Expense is paid or incurred for which indemnification or advancement of Expenses can be provided
under this Agreement, except one initiated by Indemnitee to enforce his rights under this
Agreement. For purposes of this definition, the term “threatened” will be deemed to include
Indemnitee’s good faith belief that a claim or other assertion may lead to institution of a
Proceeding.



     References to “serving at the request of the Company” include any service as a director,
officer, employee or agent of the Company which imposes duties on, or involves services by, such
director, officer, employee or agent with respect to any employee benefit plan, its participants or
beneficiaries; and a person who acted in good faith and in a manner he or she reasonably believed
to be in the best interests of the participants and beneficiaries of an employee benefit plan will
be deemed to have acted in a manner “not opposed to the best interests of the Company” as referred
to under applicable law or in this Agreement.



ARTICLE 2

SERVICES TO THE COMPANY




     2.1 Services to the Company. Indemnitee agrees to serve as the Executive Vice President and
Chief Operating Officer of the Company. Indemnitee may at any time and for any reason resign from
such position (subject to any other contractual obligation or any obligation imposed by operation
of law), in which event the Company will have no obligation under this Agreement to continue
Indemnitee in such position. This Agreement will not be construed as



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giving Indemnitee any right to be retained in the employ of the Company (or any other
Enterprise).



ARTICLE 3

INDEMNIFICATION




     3.1 Company Indemnification. Except as otherwise provided in this Article 3, if
Indemnitee was, is or becomes a party to, or was or is threatened to be made a party to, or was or
is otherwise involved in, any Proceeding, the Company will indemnify and hold harmless Indemnitee
to the fullest extent permitted by the Articles, Bylaws and applicable law, as the same exists or
may hereafter be amended, interpreted or replaced (but in the case of any such amendment,
interpretation or replacement, only to the extent that such amendment, interpretation or
replacement permits the Company to provide broader indemnification rights than were permitted prior
thereto), against any and all Expenses and Losses, and any federal, state, local or foreign taxes
imposed as a result of the actual or deemed receipt of any payments under this Agreement, that are
actually and reasonably paid or incurred by Indemnitee in connection with such Proceeding. For
purposes of this Agreement, the meaning of the phrase “to the fullest extent permitted by law” will
include to the fullest extent permitted by the Nevada Revised Statues, as amended (the “NRS”), with
respect to such matters.



     3.2 Mandatory Indemnification if Indemnitee is Wholly or Partly Successful. Notwithstanding
any other provision of this Agreement (other than Section 6.9), to the extent that
Indemnitee has been successful, on the merits or otherwise, in defense of any Proceeding or any
part thereof, the Company will indemnify Indemnitee against all Expenses that are actually and
reasonably paid or incurred by Indemnitee in connection therewith. If Indemnitee is not wholly
successful in such Proceeding, but is successful, on the merits or otherwise, as to one or more but
fewer than all claims, issues or matters in such Proceeding, the Company will indemnify and hold
harmless Indemnitee against all Expenses paid or incurred by Indemnitee in connection with each
successfully resolved claim, issue or matter on which Indemnitee was successful. For purposes of
this Section 3.2, the termination of any Proceeding, or any claim, issue or matter in such
Proceeding, by dismissal with or without prejudice will be deemed to be a successful result as to
such Proceeding, claim, issue or matter.



     3.3 Indemnification for Expenses of a Witness. Notwithstanding any other provision of this
Agreement, to the extent that Indemnitee is, by reason of his Corporate Status, a witness in any
Proceeding to which Indemnitee is not a party, the Company will indemnify Indemnitee against all
Expenses actually and reasonably paid or incurred by Indemnitee on his behalf in connection
therewith.



     3.4 Exclusions. Notwithstanding any other provision of this Agreement, the Company will not be
obligated under this Agreement to provide indemnification in connection with the following:




     (a) Any Proceeding (or part of any Proceeding) initiated or brought voluntarily by
Indemnitee against the Company or its directors, officers, employees or other indemnities,
unless the Board of Directors has authorized or consented to the initiation of the
Proceeding (or such part of any Proceeding); provided, however, that nothing in this
Section 3.4(a) shall limit the right of Indemnitee to be indemnified under
Section 8.4.



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     (b) For an accounting of profits made from the purchase and sale (or sale and purchase)
by Indemnitee of securities of the Company within the meaning of Section 16(b) of the
Exchange Act or any similar successor statute.



ARTICLE 4

ADVANCEMENT OF EXPENSES




     4.1 Expense Advances. Except as set forth in Section 4.2, the Company will, if
requested by Indemnitee, advance, to the fullest extent permitted by law, to Indemnitee
(hereinafter an “Expense Advance”) any and all Expenses actually and reasonably paid or incurred by
Indemnitee in connection with any Proceeding (whether prior to or after its final disposition).
Indemnitee’s right to each Expense Advance will not be subject to the satisfaction of any standard
of conduct and will be made without regard to Indemnitee’s ultimate entitlement to indemnification
under the other provisions of this Agreement, or under provisions of the Articles or Bylaws or
otherwise. Each Expense Advance will be unsecured and interest free and will be made by the Company
without regard to Indemnitee’s ability to repay the Expense Advance; provided, however, that, if
applicable law requires, an Expense Advance will be made only upon delivery to the Company of an
undertaking (hereinafter an “Undertaking”), by or on behalf of Indemnitee, to repay such Expense
Advance if it is ultimately determined, by final decision by a court or arbitrator, as applicable,
from which there is no further right to appeal, that Indemnitee is not entitled to be indemnified
for such Expenses under the Articles, Bylaws, the NRS, this Agreement or otherwise. An Expense
eligible for an Expense Advance will include any and all reasonable Expenses incurred pursuing an
action to enforce the right of advancement provided for in this Article 4, including
Expenses incurred preparing and forwarding statements to the Company to support the Expense
Advances claimed.



     4.2 Exclusions. Indemnitee will not be entitled to any Expense Advance in connection with any
of the matters for which indemnity is excluded pursuant to Section 3.4.



     4.3 Timing. An Expense Advance pursuant to Section 4.1 will be made within five
business days after the receipt by the Company of a written statement or statements from Indemnitee
requesting such Expense Advance (which statement or statements will include, if requested by the
Company, reasonable detail underlying the Expenses for which the Expense Advance is requested),
whether such request is made prior to or after final disposition of such Proceeding. Such request
must be accompanied by or preceded by the Undertaking, if then required by the NRS or any other
applicable law.



ARTICLE 5

CONTRIBUTION IN THE EVENT OF JOINT LIABILITY




     5.1 Contribution by Company. To the fullest extent permitted by law, if the indemnification
provided for in this Agreement is unavailable to Indemnitee for any reason whatsoever, the Company,
in lieu of indemnifying Indemnitee, will contribute to the amount of Expenses and Losses actually
and reasonably incurred or paid by Indemnitee in connection with any Proceeding in proportion to
the relative benefits received by the Company and all officers, directors and employees of the
Company other than Indemnitee who are jointly liable with Indemnitee (or would be if joined in such
Proceeding), on the one hand, and Indemnitee, on the other hand, from the transaction from which
such Proceeding arose; provided, however, that the proportion determined on the basis of relative
benefit may, to the extent necessary to conform to law, be further adjusted by reference to the
relative fault of the Company and all officers, directors and employees of the Company other than
Indemnitee who are jointly liable



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with Indemnitee (or would be if joined in such Proceeding), on the one hand, and Indemnitee,
on the other hand, in connection with the events that resulted in such Expenses and Losses, as well
as any other equitable considerations which applicable law may require to be considered. The
relative fault of the Company and all officers, directors and employees of the Company other than
Indemnitee who are jointly liable with Indemnitee (or would be if joined in such Proceeding), on
the one hand, and Indemnitee, on the other hand, will be determined by reference to, among other
things, the degree to which their actions were motivated by intent to gain personal profit or
advantage, the degree to which their liability is primary or secondary, and the degree to which
their conduct was active or passive.



     5.2 Indemnification for Contribution Claims by Others. To the fullest extent permitted by law,
the Company will fully indemnify and hold Indemnitee harmless from any claims of contribution which
may be brought by other officers, directors or employees of the Company who may be jointly liable
with Indemnitee for any Loss or Expense arising from a Proceeding.



ARTICLE 6

PROCEDURES AND PRESUMPTIONS FOR THE

DETERMINATION OF ENTITLEMENT TO INDEMNIFICATION




     6.1 Notification of Claims; Request for Indemnification. Indemnitee agrees to notify promptly
the Company in writing of any claim made against Indemnitee for which indemnification will or could
be sought under this Agreement; provided, however, that a delay in giving such notice will not
deprive Indemnitee of any right to be indemnified under this Agreement unless, and then only to the
extent that, the Company did not otherwise learn of the Proceeding and such delay is materially
prejudicial to the Company’s ability to defend such Proceeding; and, provided, further, that notice
will be deemed to have been given without any action on the part of Indemnitee in the event the
Company is a party to the same Proceeding. The omission to notify the Company will not relieve the
Company from any liability for indemnification which it may have to Indemnitee otherwise than under
this Agreement. Indemnitee may deliver to the Company a written request to have the Company
indemnify and hold harmless Indemnitee in accordance with this Agreement. Subject to Section
6.9, such request may be delivered from time to time and at such time(s) as Indemnitee deems
appropriate in his sole discretion. Following such a written request for indemnification,
Indemnitee’s entitlement to indemnification shall be determined according to Section 6.2.
The Secretary of the Company will, promptly upon receipt of such a request for indemnification,
advise the Board of Directors in writing that Indemnitee has requested indemnification. The Company
will be entitled to participate in any Proceeding at its own expense.



     6.2 Determination of Right to Indemnification. Upon written request by Indemnitee for
indemnification pursuant to Section 6.1 hereof with respect to any Proceeding, a
determination, if, but only if, required by applicable law, with respect to Indemnitee’s
entitlement thereto will be made by one of the following, at the election of Indemnitee: (1) so
long as there are Disinterested Directors with respect to such Proceeding, a majority vote of the
Disinterested Directors, even though less than a quorum of the Board of Directors, (2) so long as
there are Disinterested Directors with respect to such Proceeding, a committee of such
Disinterested Directors designated by a majority vote of such Disinterested Directors, even though
less than a quorum of the Board of Directors or (3) Independent Counsel in a written opinion
delivered to the Board of Directors, a copy of which will also be delivered to Indemnitee. The
election by Indemnitee to use a particular person, persons or entity to make such determination is
to be included in the written request for indemnification submitted by Indemnitee (and if no
election is



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made in the request it will be assumed that Indemnitee has elected the Independent Counsel to
make such determination). The person, persons or entity chosen to make a determination under this
Agreement of the Indemnitee’s entitlement to indemnification will act reasonably and in good faith
in making such determination.



     6.3 Selection of Independent Counsel. If the determination of entitlement to indemnification
pursuant to Section 6.2 will be made by an Independent Counsel, the Independent Counsel
will be selected as provided in this Section 6.3. The Independent Counsel will be selected
by Indemnitee (unless Indemnitee requests that such selection be made by the Board of Directors, in
which event the immediately following sentence will apply) and Indemnitee will give written notice
to the Company advising it of the identity of the Independent Counsel so selected. If the
Independent Counsel is selected by the Board of Directors, the Company will give written notice to
Indemnitee advising him of the identity of the Independent Counsel so selected. In either event,
Indemnitee or the Company, as the case may be, may, within ten days after such written notice of
selection is given, deliver to the Company or to Indemnitee, as the case may be, a written
objection to such selection; provided, however, that such objection may be asserted only on the
ground that the Independent Counsel so selected does not meet the requirements of “Independent
Counsel” as defined in this Agreement, and the objection will set forth with particularity the
factual basis of such assertion. Absent a proper and timely objection, the person so selected will
act as Independent Counsel. If a written objection is made and substantiated, the Independent
Counsel selected may not serve as Independent Counsel unless and until such objection is withdrawn
or a court has determined that such objection is without merit. If, within 30 days after submission
by Indemnitee of a written request for indemnification pursuant to Section 6.1, no
Independent Counsel is selected, or an Independent Counsel for which an objection thereto has been
properly made remains unresolved, either the Company or Indemnitee may petition the appropriate
court of the State of Nevada or other court of competent jurisdiction for resolution of any
objection which has been made by the Company or Indemnitee to the other’s selection of Independent
Counsel and/or for the appointment as Independent Counsel of a person selected by the court or by
such other person as the court may designate, and the person with respect to whom all objections
are so resolved or the person so appointed will act as Independent Counsel under Section
6.2. The Company will pay any and all fees and expenses incurred by such Independent Counsel in
connection with acting pursuant to Section 6.2 hereof, and the Company will pay all fees
and expenses incident to the procedures of this Section 6.3, regardless of the manner in
which such Independent Counsel was selected or appointed.



     6.4 Burden of Proof. In making a determination with respect to entitlement to indemnification
hereunder, the person, persons or entity making such determination will presume that Indemnitee is
entitled to indemnification under this Agreement. Anyone seeking to overcome this presumption will
have the burden of proof and the burden of persuasion, by clear and convincing evidence. In making
a determination with respect to entitlement to indemnification hereunder which under this
Agreement, the Articles, Bylaws or applicable law requires a determination of Indemnitee’s good
faith and/or whether Indemnitee acted in a manner which he or she reasonably believed to be in or
not opposed to the best interests of the Company, the person, persons or entity making such
determination will presume that Indemnitee has at all times acted in good faith and in a manner he
or she reasonably believed to be in or not opposed to the best interests of the Company. Anyone
seeking to overcome this presumption will have the burden of proof and the burden of persuasion, by
clear and convincing evidence. Indemnitee will be deemed to have acted in good faith if
Indemnitee’s action with respect to a particular Enterprise is based on the records or books of
account of such Enterprise, including financial statements, or on information supplied to
Indemnitee by the



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officers of such Enterprise in the course of their duties, or on the advice of legal counsel
for such Enterprise or on information or records given or reports made to such Enterprise by an
independent certified public accountant or by an appraiser or other expert selected by such
Enterprise; provided, however this sentence will not be deemed to limit in any way the other
circumstances in which Indemnitee may be deemed to have met such standard of conduct. In addition,
the knowledge and/or actions, or failure to act, of any other director, officer, agent or employee
of such Enterprise will not be imputed to Indemnitee for purposes of determining the right to
indemnification under this Agreement.



     6.5 No Presumption in Absence of a Determination or As Result of an Adverse Determination;
Presumption Regarding Success. Neither the failure of any person, persons or entity chosen to make
a determination as to whether Indemnitee has met any particular standard of conduct or had any
particular belief to make such determination, nor an actual determination by such person, persons
or entity that Indemnitee has not met such standard of conduct or did not have such belief, prior
to or after the commencement of legal proceedings by Indemnitee to secure a judicial determination
that Indemnitee should be indemnified under this Agreement under applicable law, will be a defense
to Indemnitee’s claim or create a presumption that Indemnitee has not met any particular standard
of conduct or did not have any particular belief. In addition, the termination of any Proceeding by
judgment, order, settlement (whether with or without court approval) or conviction, or upon a plea
of nolo contendere, or its equivalent, will not create a presumption that Indemnitee did not meet
any particular standard of conduct or have any particular belief or that a court has determined
that indemnification is not permitted by this Agreement or applicable law. In the event that any
Proceeding to which Indemnitee is a party is resolved in any manner other than by final adverse
judgment (as to which all rights of appeal therefrom have been exhausted or lapsed) against
Indemnitee (including, without limitation, settlement of such Proceeding with or without payment of
money or other consideration) it will be presumed that Indemnitee has been successful on the merits
or otherwise in such Proceeding. Anyone seeking to overcome this presumption will have the burden
of proof and the burden of persuasion, by clear and convincing evidence.



     6.6 Timing of Determination. The Company will use its reasonable best efforts to cause any
determination required to be made pursuant to Section 6.2 to be made as promptly as
practicable after Indemnitee has submitted a written request for indemnification pursuant to
Section 6.1. If the person, persons or entity chosen to make a determination does not make
such determination within 30 days after the later of the date (a) the Company receives Indemnitee’s
request for indemnification pursuant to Section 6.1 and (b) on which an Independent Counsel
is selected pursuant to Section 6.3, if applicable (and all objections to such person, if
any, have been resolved), the requisite determination of entitlement to indemnification will be
deemed to have been made and Indemnitee will be entitled to such indemnification, so long as (i)
Indemnitee has fulfilled his obligations pursuant to Section 6.8 and (ii) such
indemnification is not prohibited under applicable law; provided, however, that such 30 day period
may be extended for a reasonable time, not to exceed an additional 15 days, if the person, persons
or entity making the determination with respect to entitlement to indemnification in good faith
requires such additional time for the obtaining of or evaluating of documentation and/or
information relating thereto.



     6.7 Timing of Payments. All payments of Expenses, including any Expense Advance, and other
amounts by the Company to the Indemnitee pursuant to this Agreement will be made as soon as
practicable after a written request or demand therefor by Indemnitee is presented to the Company,
but in no event later than thirty (30) days after (i) such demand is presented or (ii) such later
date as a determination of entitlement to indemnification is made in



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accordance with Section 6.6, if applicable; provided, however, that an Expense Advance
will be made within the time provided in Section 4.3 hereof.



     6.8 Cooperation. Indemnitee will cooperate with the person, persons or entity making a
determination with respect to Indemnitee’s entitlement to indemnification, including providing to
such person, persons or entity, upon reasonable advance request, any documentation or information
which is not privileged or otherwise protected from disclosure and which is reasonably available to
Indemnitee and reasonably necessary to such determination. Any Expenses incurred by Indemnitee in
so cooperating with the person, persons or entity making such determination will be borne by the
Company (irrespective of the determination as to Indemnitee’s entitlement to indemnification) and
the Company will indemnify Indemnitee therefor and will hold Indemnitee harmless therefrom.



     6.9 Time for Submission of Request. Indemnitee will be required to submit any request for
Indemnification pursuant to this Article 6 within a reasonable time, not to exceed two
years, after any judgment, order, settlement, dismissal, arbitration award, conviction, acceptance
of a plea of nolo contendere (or its equivalent) or other full or partial final determination or
disposition of the Proceeding (with the latest date of the occurrence of any such event to be
considered the commencement of the two year period).



ARTICLE 7

LIABILITY INSURANCE




     7.1 Company Insurance. Subject to Section 7.3, the Company will obtain and maintain a
policy or policies of insurance with one or more reputable insurance companies providing Indemnitee
with coverage in such amount as will be determined by the Board of Directors for Losses and
Expenses paid or incurred by Indemnitee as a result of acts or omissions of Indemnitee in his
Corporate Status, and to ensure the Company’s performance of its indemnification obligations under
this Agreement; provided, however, in all policies of director and officer liability insurance
obtained by the Company, Indemnitee will be named as an insured party in such manner as to provide
Indemnitee with the same rights and benefits as are afforded to the most favorably insured
directors or officers, as applicable, of the Company under such policies. Any reductions to the
amount of director and officer liability insurance coverage maintained by the Company as of the
date hereof will be subject to the approval of the Board of Directors.



     7.2 Notice to Insurers. If, at the time of receipt by the Company of a notice from any source
of a Proceeding as to which Indemnitee is a party or participant, the Company will give prompt
notice of such Proceeding to the insurers in accordance with the procedures set forth in the
respective policies, and the Company will provide Indemnitee with a copy of such notice and copies
of all subsequent correspondence between the Company and such insurers related thereto. The Company
will thereafter take all necessary or desirable actions to cause such insurers to pay, on behalf of
Indemnitee, all amounts payable as a result of such Proceeding in accordance with the terms of such
policies.



     7.3 Insurance Not Required. Notwithstanding Section 7.1, the Company will have no
obligation to obtain or maintain the insurance contemplated by Section 7.1 if the Board of
Directors determines in good faith that such insurance is not reasonably available, if the premium
costs for such insurance are disproportionately high compared to the amount of coverage provided,
or if the coverage provided by such insurance is limited by exclusions so as



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to provide an insufficient benefit. The Company will promptly notify Indemnitee of any such
determination not to provide insurance coverage.



ARTICLE 8

REMEDIES OF INDEMNITEE




     8.1 Action by Indemnitee. In the event that (i) a determination is made pursuant to
Article 6 of this Agreement that Indemnitee is not entitled to indemnification under this
Agreement, (ii) an Expense Advance is not timely made pursuant to Section 4.3 of this
Agreement, (iii) no determination of entitlement to indemnification is made within the applicable
time periods specified in Section 6.6 or (iv) payment of indemnified amounts is not made
within the applicable time periods specified in Section 6.7, Indemnitee will be entitled to
an adjudication in an appropriate court of the State of Nevada, or in any other court of competent
jurisdiction, of his entitlement to such indemnification or payment of an Expense Advance.
Alternatively, Indemnitee, at Indemnitee’s option, may seek an award in arbitration to be conducted
by a single arbitrator pursuant to the Commercial Arbitration Rules of the American Arbitration
Association. The provisions of Nevada law (without regard to its conflict of laws rules) will apply
to any such arbitration. The Company will not oppose Indemnitee’s right to seek any such
adjudication or award in arbitration.



     8.2 De Novo Review if Prior Adverse Determination. In the event that a determination is made
pursuant to Article 6 that Indemnitee is not entitled to indemnification, any judicial
proceeding or arbitration commenced pursuant to this Article 8 will be conducted in all
respects as a de novo trial or arbitration, as applicable, on the merits and Indemnitee will not be
prejudiced by reason of that adverse determination. In any judicial proceeding or arbitration
commenced pursuant to this Article 8, Indemnitee will be presumed to be entitled to
indemnification under this Agreement, the Company will have the burden of proving Indemnitee is not
entitled to indemnification and the Company may not refer to or introduce evidence of any
determination pursuant to Article 6 adverse to Indemnitee for any purpose. If Indemnitee
commences a judicial proceeding or arbitration pursuant to this Article 8, Indemnitee will
not be required to reimburse the Company for any Expense Advance made pursuant to Article 4
until a final determination is made with respect to Indemnitee’s entitlement to indemnification (as
to which all rights of appeal have been exhausted or lapsed).



     8.3 Company Bound by Favorable Determination by Reviewing Party. If a determination is made
that Indemnitee is entitled to indemnification pursuant to Article 6, the Company will be
bound by such determination in any judicial proceeding or arbitration commenced pursuant to this
Article 8, absent (i) a misstatement by Indemnitee of a material fact or an omission of a
material fact necessary to make Indemnitee’s statements in connection with the request for
indemnification not materially misleading or (ii) a prohibition of such indemnification under law.



     8.4 Company Bears Expenses if Indemnitee Seeks Adjudication. In the event that Indemnitee,
pursuant to this Article 8, seeks a judicial adjudication or arbitration of his rights
under, or to recover damages for breach of, this Agreement, any other agreement for
indemnification, the indemnification or advancement of expenses provisions in the Articles or
Bylaws, payment of Expenses in advance or contribution hereunder or to recover under any director
and officer liability insurance policies maintained by the Company, the Company will, to the
fullest extent permitted by law, indemnify and hold harmless Indemnitee against any and all
Expenses which are paid or incurred by Indemnitee in connection with such judicial adjudication or
arbitration, regardless of whether Indemnitee ultimately is determined to be entitled to such



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indemnification, payment of Expenses in advance or contribution or insurance recovery. In
addition, if requested by Indemnitee, the Company will (within five days after receipt by the
Company of the written request therefor), pay as an Expense Advance such Expenses, to the fullest
extent permitted by law.



     8.5 Company Bound by Provisions of this Agreement. The Company will be precluded from
asserting in any judicial or arbitration proceeding commenced pursuant to this Article 8
that the procedures and presumptions of this Agreement are not valid, binding and enforceable and
will stipulate in any such judicial or arbitration proceeding that the Company is bound by all the
provisions of this Agreement.



ARTICLE 9

NON-EXCLUSIVITY, SUBROGATION; NO DUPLICATIVE PAYMENTS;

MORE FAVORABLE TERMS




     9.1 Non-Exclusivity. The rights of indemnification and to receive Expense Advances as provided
by this Agreement will not be deemed exclusive of any other rights to which Indemnitee may at any
time be entitled under applicable law, the Articles, the Bylaws, any agreement, a vote of
stockholders, a resolution of the directors or otherwise. To the extent Indemnitee otherwise would
have any greater right to indemnification or payment of any advancement of Expenses under any other
provisions under applicable law, the Articles, Bylaws, any agreement, vote of stockholders, a
resolution of directors or otherwise, Indemnitee will be entitled under this Agreement to such
greater right. No amendment, alteration or repeal of this Agreement or of any provision hereof
limits or restricts any right of Indemnitee under this Agreement in respect of any action taken or
omitted by such Indemnitee prior to such amendment, alteration or repeal. To the extent that a
change in the NRS, whether by statute or judicial decision, permits greater indemnification than
would be afforded currently under the Articles, Bylaws and this Agreement, it is the intent of the
parties hereto that Indemnitee enjoy by this Agreement the greater benefits so afforded by such
change. No right or remedy herein conferred is intended to be exclusive of any other right or
remedy, and every other right and remedy will be cumulative and in addition to every other right
and remedy given hereunder or now or hereafter existing at law or in equity or otherwise. The
assertion or employment of any right or remedy hereunder, or otherwise, will not prevent the
concurrent assertion or employment of any other right or remedy.



     9.2 Subrogation. In the event of any payment by the Company under this Agreement, the Company
will be subrogated to the extent of such payment to all of the rights of recovery of Indemnitee
with respect thereto and Indemnitee will execute all papers required and take all action necessary
to secure such rights, including execution of such documents as are necessary to enable the Company
to bring suit to enforce such rights (it being understood that all of Indemnitee’s reasonable
Expenses related thereto will be borne by the Company).



     9.3 No Duplicative Payments. The Company will not be liable under this Agreement to make any
payment of amounts otherwise indemnifiable (or any Expense for which advancement is provided)
hereunder if and to the extent that Indemnitee has otherwise actually received such payment under
any insurance policy, contract, agreement or otherwise. The Company’s obligation to indemnify or
advance Expenses hereunder to Indemnitee in respect of Proceedings relating to Indemnitee’s service
at the request of the Company as a director, officer, employee, partner, member, manager, trustee,
fiduciary or agent of any other Enterprise will be reduced by any amount Indemnitee has actually
received as indemnification or advancement of Expenses from such other Enterprise.



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     9.4 More Favorable Terms. In the event the Company enters into an indemnification agreement
with another officer or director, as the case may be, containing terms more favorable to the
indemnitee thereof than the terms contained herein (and absent special circumstances justifying
such more favorable terms), Indemnitee will be afforded the benefit of such more favorable terms
and such more favorable terms will be deemed incorporated by reference herein as if set forth in
full herein. As promptly as practicable following the execution thereof, the Company will (a) send
a copy of the agreement containing more favorable terms to Indemnitee, and (b) prepare, execute and
deliver to Indemnitee an amendment to this Agreement containing such more favorable terms.



ARTICLE 10

DEFENSE OF PROCEEDINGS




     10.1 Company Assuming the Defense. Subject to Section 10.3 below, in the event the
Company is obligated to pay in advance the Expenses of any Proceeding pursuant to Article
4, the Company will be entitled, by written notice to Indemnitee, to assume the defense of such
Proceeding, with counsel approved by Indemnitee, which approval will not be unreasonably withheld.
The Company will identify the counsel it proposes to employ in connection with such defense as part
of the written notice sent to Indemnitee notifying Indemnitee of the Company’s election to assume
such defense, and Indemnitee will be required, within ten days following Indemnitee’s receipt of
such notice, to inform the Company of its approval of such counsel or, if it has objections, the
reasons therefor. If such objections cannot be resolved by the parties, the Company will identify
alternative counsel, which counsel will also be subject to approval by Indemnitee in accordance
with the procedure described in the prior sentence.



     10.2 Right of Indemnitee to Employ Counsel. Following approval of counsel by Indemnitee
pursuant to Section 10.1 and retention of such counsel by the Company, the Company will not
be liable to Indemnitee under this Agreement for any fees and expenses of counsel subsequently
incurred by Indemnitee with respect to the same Proceeding; provided, however, that (a) Indemnitee
has the right to employ counsel in any such Proceeding at Indemnitee’s expense and (b) the Company
will be required to pay the fees and expenses of Indemnitee’s counsel if (i) the employment of
counsel by Indemnitee has been previously authorized by the Company, (ii) Indemnitee reasonably
concludes that there is an actual or potential conflict between the Company (or any other person or
persons included in a joint defense) and Indemnitee in the conduct of such defense or
representation by such counsel retained by the Company or (iii) the Company does not continue to
retain the counsel approved by Indemnitee.



     10.3 Company Not Entitled to Assume Defense. Notwithstanding Section 10.1, the Company
will not be entitled to assume the defense of any Proceeding brought by or on behalf of the Company
or any Proceeding as to which Indemnitee has reasonably made the conclusion provided for in
Section 10.2(b)(ii).



ARTICLE 11

SETTLEMENT




     11.1 Company Bound by Provisions of this Agreement. Notwithstanding anything in this Agreement
to the contrary, the Company will have no obligation to indemnify Indemnitee under this Agreement
for any amounts paid in settlement of any Proceeding effected without the Company’s prior written
consent.



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     11.2 When Indemnitee’s Prior Consent Required. The Company will not, without the prior written
consent of Indemnitee, consent to the entry of any judgment against Indemnitee or enter into any
settlement or compromise which (i) includes an admission of fault of Indemnitee, any non-monetary
remedy imposed on Indemnitee or a Loss for which Indemnitee is not wholly indemnified hereunder or
(ii) with respect to any Proceeding with respect to which Indemnitee may be or is made a party or a
participant or may be or is otherwise entitled to seek indemnification hereunder, does not include,
as an unconditional term thereof, the full release of Indemnitee from all liability in respect of
such Proceeding, which release will be in form and substance reasonably satisfactory to Indemnitee.
Neither the Company nor Indemnitee will unreasonably withhold its consent to any proposed
settlement; provided, however, Indemnitee may withhold consent to any settlement that does not
provide a full and unconditional release of Indemnitee from all liability in respect of such
Proceeding.



ARTICLE 12

DURATION OF AGREEMENT




     12.1 Duration of Agreement. This Agreement will continue until and terminate upon the latest
of (a) the statute of limitations applicable to any claim that could be asserted against an
Indemnitee with respect to which Indemnitee may be entitled to indemnification and/or an Expense
Advance under this Agreement, (b) ten years after the date that Indemnitee has ceased to serve as
an officer of the Company or as a director, officer, employee, partner, member, manager, fiduciary
or agent of any other Enterprise which Indemnitee served at the request of the Company, or (c) if,
at the later of the dates referred to in (a) and (b) above, there is pending a Proceeding in
respect of which Indemnitee is granted rights of indemnification or the right to an Expense Advance
under this Agreement or a Proceeding commenced by Indemnitee pursuant to Article 8 of this
Agreement, one year after the final termination of such Proceeding, including any and all appeals.



ARTICLE 13

MISCELLANEOUS




     13.1 Entire Agreement. This Agreement constitutes the entire agreement and understanding of
the parties in respect of the subject matter hereof and supersedes all prior understandings,
agreements or representations by or among the parties, written or oral, to the extent they relate
in any way to the subject matter hereof; provided, however, it is agreed that the provisions
contained in this Agreement are a supplement to, and not a substitute for, any provisions regarding
the same subject matter contained in the Articles, the Bylaws and any employment or similar
agreement between the parties.



     13.2 Assignment; Binding Effect; Third Party Beneficiaries. No party may assign either this
Agreement or any of its rights, interests or obligations hereunder without the prior written
approval of the other party and any such assignment by a party without prior written approval of
the other parties will be deemed invalid and not binding on such other parties; provided, however,
that the Company may assign all (but not less than all) of its rights, obligations and interests
hereunder to any direct or indirect successor to all or substantially all of the business or assets
of the Company by purchase, merger, consolidation or otherwise and will cause such successor to be
bound by and expressly assume the terms and provisions hereof. All of the terms, agreements,
covenants, representations, warranties and conditions of this Agreement are binding upon, and inure
to the benefit of and are enforceable by, the parties and their respective successors, permitted
assigns, heirs, executors and personal and legal



13









 






representatives. There are no third party beneficiaries having rights under or with respect to
this Agreement.



     13.3 Notices. All notices, requests and other communications provided for or permitted to be
given under this Agreement must be in writing and be given by personal delivery, by certified or
registered United States mail (postage prepaid, return receipt requested), by a nationally
recognized overnight delivery service for next day delivery, or by facsimile transmission, as
follows (or to such other address as any party may give in a notice given in accordance with the
provisions hereof):



	 	 	 
	If to the Company:

	 	United Fuel & Energy Corporation
	 

	 	1800 Katella Avenue, Suite 102
	 

	 	Anaheim, California, 92863
	 

	 	Attn: Chief Executive Officer
	 

	 	Fax No:                                         
	 
	 	 
	If to Indemnitee:

	 	Joseph M. Juliano
	 

	 	1800 Katella Avenue, Suite 102
	 

	 	Anaheim, California 92863
	 

	 	Fax No:                                         





All notices, requests or other communications will be effective and deemed given only as follows:
(i) if given by personal delivery, upon such personal delivery, (ii) if sent by certified or
registered mail, on the fifth business day after being deposited in the United States mail, (iii)
if sent for next day delivery by overnight delivery service, on the date of delivery as confirmed
by written confirmation of delivery, (iv) if sent by facsimile, upon the transmitter’s confirmation
of receipt of such facsimile transmission, except that if such confirmation is received after 5:00
p.m. (in the recipient’s time zone) on a business day, or is received on a day that is not a
business day, then such notice, request or communication will not be deemed effective or given
until the next succeeding business day. Notices, requests and other communications sent in any
other manner, including by electronic mail, will not be effective.




     13.4 Specific Performance; Remedies. Each party acknowledges and agrees that the other party
would be damaged irreparably if any provision of this Agreement were not performed in accordance
with its specific terms or were otherwise breached. Accordingly, the parties will be entitled to an
injunction or injunctions to prevent breaches of the provisions of this Agreement and to enforce
specifically this Agreement and its provisions in any action or proceeding instituted in any court
of the United States or any state thereof having jurisdiction over the parties and the matter, in
addition to any other remedy to which they may be entitled, at law or in equity. Except as
expressly provided herein, the rights, obligations and remedies created by this Agreement are
cumulative and in addition to any other rights, obligations or remedies otherwise available at law
or in equity. Except as expressly provided herein, nothing herein will be considered an election of
remedies.



     13.5 Headings. The article and section headings contained in this Agreement are inserted for
convenience only and will not affect in any way the meaning or interpretation of this Agreement.



     13.6 Governing Law. This Agreement will be governed by and construed in accordance with the
laws of the State of Nevada, without giving effect to any choice of law principles.



14









 





     13.7 Amendment. This Agreement may not be amended or modified except by a writing signed by
all of the parties.



     13.8 Extensions; Waivers. Any party may, for itself only, (i) extend the time for the
performance of any of the obligations of any other party under this Agreement, (ii) waive any
inaccuracies in the representations and warranties of any other party contained herein or in any
document delivered pursuant hereto and (iii) waive compliance with any of the agreements or
conditions for the benefit of such party contained herein. Any such extension or waiver will be
valid only if set forth in a writing signed by the party to be bound thereby. No waiver by any
party of any default, misrepresentation or breach of warranty or covenant hereunder, whether
intentional or not, may be deemed to extend to any prior or subsequent default, misrepresentation
or breach of warranty or covenant hereunder or affect in any way any rights arising because of any
prior or subsequent such occurrence. Neither the failure nor any delay on the part of any party to
exercise any right or remedy under this Agreement will operate as a waiver thereof, nor will any
single or partial exercise of any right or remedy preclude any other or further exercise of the
same or of any other right or remedy.



     13.9 Severability. The provisions of this Agreement will be deemed severable and the
invalidity or unenforceability of any provision will not affect the validity or enforceability of
the other provisions hereof; provided that if any provision of this Agreement, as applied to any
party or to any circumstance, is judicially determined not to be enforceable in accordance with its
terms, the parties agree that the court judicially making such determination may modify the
provision in a manner consistent with its objectives such that it is enforceable, and/or to delete
specific words or phrases, and in its modified form, such provision will then be enforceable and
will be enforced.



     13.10 Counterparts; Effectiveness. This Agreement may be executed in two or more counterparts,
each of which will be deemed an original but all of which together will constitute one and the same
instrument. This Agreement will become effective when one or more counterparts have been signed by
each of the parties and delivered to the other parties, which delivery may be made by exchange of
copies of the signature page by facsimile transmission or email of a .pdf or .tiff formatted
document.



     13.11 Construction. This Agreement has been freely and fairly negotiated among the parties. If
an ambiguity or question of intent or interpretation arises, this Agreement will be construed as if
drafted jointly by the parties and no presumption or burden of proof will arise favoring or
disfavoring any party because of the authorship of any provision of this Agreement. Any reference
to any law will be deemed also to refer to such law as amended and all rules and regulations
promulgated thereunder, unless the context requires otherwise. The words “include,” “includes,” and
“including” will be deemed to be followed by “without limitation.” Pronouns in masculine, feminine,
and neuter genders will be construed to include any other gender, and words in the singular form
will be construed to include the plural and vice versa, unless the context otherwise requires. The
words “this Agreement,” “herein,” “hereof,” “hereby,” “hereunder,” and words of similar import
refer to this Agreement as a whole and not to any particular subdivision unless expressly so
limited. The parties intend that each representation, warranty, and covenant contained herein will
have independent significance. If any party has breached any representation, warranty, or covenant
contained herein in any respect, the fact that there exists another representation, warranty or
covenant relating to the same subject matter (regardless of the relative levels of specificity)
which the party has not breached will not detract from or mitigate the fact that the party is in
breach of the first representation, warranty, or covenant. Time is of the essence in the
performance of this Agreement.



15









 





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



	 	 	 	 	 
	 	UNITED FUEL & ENERGY CORPORATION

 	 
	 	By:  	/s/ William C. Bousema
 	 
	 	 	William C. Bousema 	 
	 	 	Executive Vice President, Chief Financial

Officer and Secretary 	 
	 
	 	INDEMNITEE

 	 
	 	/s/ JOSEPH M. JULIANO
 	 
	 	JOSEPH M. JULIANO 	 
	 	 	 
	 




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