Document:

Unassociated Document

    
      EXHIBIT
        10.2

    

     

    INCENTIVE
      STOCK OPTION AGREEMENT

    Pursuant
      to the 

    United
      Fuel & Energy Corporation 

    2005
      Equity Incentive Plan

    

     

    
      	Name of Optionee:	 	William C. Bousema
	 	 	 
	Date of Grant:	 	September 16, 2008
	 	 	 
	Number of Shares:	 	150,000
	 	 	 
	Exercise Price Per
              Share:	 	$0.70
	 	 	 
	Expiration Date:	 	September 16,
              2018

    

     

    This
      Incentive Stock Option Agreement (this “Option Agreement”),
      is
      made as of September 16, 2008 between United Fuel & Energy Corporation, a
      Nevada corporation (the “Company”),
      and
      the above-named individual, an employee of the Company or one of its
      Subsidiaries (the “Optionee”),
      to
      record the granting of an incentive stock option pursuant to the Company’s 2005
      Equity Incentive Plan (the “Plan”).
      Terms
      used herein that are defined in the Plan shall have the meanings ascribed to
      them in the Plan. If there is any inconsistency between the terms of this Option
      Agreement and the terms of the Plan, the Plan’s terms shall supersede and
      replace the conflicting terms herein.

     

    1.  Grant
      of Option.
      The
      Company hereby grants to the Optionee, as of the Grant Date, an option to
      purchase up to the number of Option Shares specified above (the “Option”).
      The
      Option Shares shall be purchasable from time to time during the option term
      specified in Section 2 at the Exercise Price. This Option is intended to qualify
      as an “incentive stock option” as defined in Section 422 of the Code
      (“Incentive
      Stock Option”).
      However, notwithstanding such designation, to the extent that the aggregate
      Fair
      Market Value of Shares subject to Options designated as Incentive Stock Options
      which become exercisable for the first time by the Optionee during any calendar
      year (under all plans of the Company or any Parent or Subsidiary) exceeds
      $100,000, such excess Options, to the extent of the Shares covered thereby
      in
      excess of the foregoing limitation, shall be treated as Non-Statutory Options.
      For this purpose, Incentive Stock Options shall be taken into account in the
      order in which they were granted, and the Fair Market Value of the Shares shall
      be determined as of the date the Option with respect to such Option Shares
      is
      awarded. For purposes hereof, “Non-Statutory
      Stock Option”
means
      an Option not intended to qualify as an Incentive Stock Option.

     

    2.  Option
      Term.
      Unless
      the Optionee directly or by attribution owns more than ten percent (10%) of
      the
      total combined voting power of all classes of stock of the Company or of any
      Parent or Subsidiary of the Company, this Option shall have a term of ten (10)
      years measured from the Grant Date and shall accordingly expire at the close
      of
      business on the Expiration Date, unless sooner terminated in accordance with
      Section
      5.
      If the
      Optionee owns more than ten percent (10%) of the total combined voting power
      of
      all classes of stock of the Company or of any Parent or Subsidiary of the
      Company, then this Option shall have a term of five (5) years measured from
      the
      Grant Date. 

     

    
      
         

      

      
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    3.  Limited
      Transferability.
      During
      Optionee’s lifetime, this Option shall be exercisable only by Optionee and shall
      not be assignable or transferable other than by will or by the laws of descent
      and distribution following Optionee’s death. 

     

    4.  Dates
      of Vesting.
      This
      Option shall become exercisable for the Option Shares in twelve equal quarterly
      installments on the last day of each calendar quarter beginning on December
      31,
      2008. As the Option becomes exercisable for such installments, those
      installments shall accumulate and the Option shall remain exercisable for the
      accumulated installments until the Expiration Date or sooner termination of
      the
      option term under Section
      5.
      

     

    5.  Cessation
      of Service.
      The
      option term specified in Section
      2
      shall
      terminate (and this Option shall cease to be outstanding) prior to the
      Expiration Date should any of the following events occur: 

     

    (a)  If
      the
      Optionee’s service as an employee of the Company is terminated (i) by the
      Company without Cause (as the term “Cause” is defined in that certain Employment
      Agreement between the Company and the Optionee dated the date hereof (the
“Employment
      Agreement”)),
      or
      (ii) by the Optionee for Good Reason (as the term “Good Reason” is defined in
      the Employment Agreement), then the unvested portion of this Option shall fully
      vest and this Option may be exercised in full but must be exercised by the
      Optionee no later than twelve (12) months after the date the Optionee’s
      employment is terminated (and in no event later than the Expiration Date).
      

     

    (b)  If
      the
      Optionee’s service as an employee of the Company is terminated because of the
      Optionee’s death or Disability (as the term “Disability” is defined in the
      Employment Agreement), then the unvested portion of this Option shall fully
      vest
      and this Option may be exercised in full but must be exercised by the Optionee
      (or the Optionee’s legal representative or authorized assignee) no later than
      six (6) months after the date the Optionee’s employment is terminated (and in no
      event later than the Expiration Date). 

     

    (c)  If
      the
      Optionee’s service as an employee of the Company is terminated (i) by the
      Company for Cause (as the term “Cause” is defined in the Employment Agreement),
      or (ii) by the Optionee without Good Reason (as the term “Good Reason” is
      defined in the Employment Agreement), neither the Optionee, the Optionee’s
      estate nor such other person who may then hold this Option shall be entitled
      to
      exercise it as to any shares on or after the date the Optionee’s employment is
      terminated.

     

    6.  Incentive
      Stock Option Provisions. 

     

    (a)  Change
      in Status of Optionee.
      In the
      event of the Optionee’s change in status from an Employee to any other status of
      Director or Consultant, with respect to any Incentive Stock Option that shall
      remain in effect after a change in status from Employee to Director or
      Consultant, such Incentive Stock Option shall cease to be treated as an
      Incentive Stock Option and shall be treated as a Non-Statutory Option on the
      day
      three (3) months and one (1) day following such change in status. Except as
      provided in Sections 6(b) and (c) below, to the extent that the Option
      was unvested on the Termination Date, or if the Optionee does not exercise
      the
      vested portion of the Option within the Post-Termination Exercise Period, the
      Option shall terminate. For purposes hereof: “Employee”
means
      any person, including an Officer or Director, who is an employee of the Company
      or any Related Entity; the payment of a director’s fee by the Company or a
      Related Entity shall not be sufficient to constitute “employment” by the
      Company; “Director”
means
      a
      member of the Board or the board of directors of any Related Entity;
“Consultant”
means
      any person (other than an Employee or a Director, solely with respect to
      rendering services in such person’s capacity as a Director) who is engaged by
      the Company or any Related Entity to render consulting or advisory services
      to
      the Company or such Related Entity; and “Related
      Entity”
means
      any Parent, Subsidiary and any business, corporation, partnership, limited
      liability company or other entity in which the Company, a Parent or a Subsidiary
      holds a substantial ownership interest, directly or indirectly. 

     

    
      
         

      

      
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    (b)  Disability
      of Optionee.
      In the
      event the Optionee’s service as an employee of the Company is terminated as a
      result of his Disability (as the term “Disability” is defined in the Employment
      Agreement), the Optionee may, but only within six (6) months from the date
      the
      Optionee’s employment is terminated (and in no event later than the Expiration
      Date), exercise the amount of the Option, including any amount that was not
      vested on the date the Optionee’s employment was terminated; provided, however,
      that if such Disability is not a “disability” as such term is defined in
      Section 22(e)(3) of the Code and the Option is an Incentive Stock Option,
      such Incentive Stock Option shall cease to be treated as an Incentive Stock
      Option and shall be treated as a Non-Statutory Option on the day three (3)
      months and one (1) day following date the Optionee’s employment was terminated.
      In addition, in the event that the Optionee exercises any portion of the Option
      that was not vested on the date the Optionee’s employment was terminated, such
      Incentive Stock Option shall cease to be treated as an Incentive Stock Option
      and shall be treated as a Non-Statutory Option. To the extent that the Optionee
      does not exercise the Option within the time specified herein, the Option shall
      terminate. 

     

    (c)  Death
      of Optionee.
      In the
      event the Optionee’s service as an employee of the Company is terminated as a
      result of his death, or in the event of the Optionee’s death during the
      Post-Termination Exercise Period, the Optionee’s estate, or a person who
      acquired the right to exercise the Option by bequest or inheritance, may
      exercise the amount of the Option, including any amount that was not vested
      on
      the date the Optionee’s employment was terminated, within six (6) months from
      the date of death (but in no event later than the Expiration Date). In the
      event
      that the Optionee’s estate, or a person who acquired the right to exercise the
      Option by bequest or inheritance exercises any portion of the Option that was
      not vested on the date the Optionee’s employment was terminated, such Incentive
      Stock Option shall cease to be treated as an Incentive Stock Option and shall
      be
      treated as a Non-Statutory Option. To the extent that the Option is not
      exercised within the time specified herein, the Option shall terminate.
“Post-Termination
      Exercise Period”
means
      the period specified in this Agreement commencing on the date of termination
      of
      the Optionee’s service as an employee (other than termination by the Company for
      Cause or termination by the Optionee without Good Reason), during which the
      Optionee or the Optionee’s estate, or a person who acquired the right to
      exercise the Option by bequest or inheritance, as the case may be, may exercise
      the Option. 

     

    (d)  Transferability
      of Option.
      The
      Option, if an Incentive Stock Option, may not be transferred in any manner
      other
      than by will or by the laws of descent and distribution and may be exercised
      during the lifetime of the Optionee only by the Optionee. The Option, if a
      Non-Statutory Option may be transferred by will, by the laws of descent and
      distribution, and to the extent and in the manner authorized by the Committee,
      to members of the Optionee’s Immediate Family.  The
      terms
      of the Option shall be binding upon the executors, administrators, heirs and
      successors of the Optionee. “Immediate
      Family”
means
      any child, stepchild, grandchild, parent, stepparent, grandparent, spouse,
      sibling, mother-in-law, father-in-law, son-in-law, daughter-in-law,
      brother-in-law, or sister-in-law and shall also include adoptive relationships.
      

     

    
      
         

      

      
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    7.  Adjustment
      in Option Shares.
      Should
      any change be made to the Common Stock by reason of any stock split, stock
      dividend, recapitalization, combination of shares, exchange of shares or other
      change affecting the outstanding Common Stock as a class without the Company’s
      receipt of consideration, appropriate adjustments shall be made to (i) the
      total
      number and/or class of securities subject to this Option and (ii) the Exercise
      Price in order to reflect such change and thereby preclude a dilution or
      enlargement of benefits hereunder.

     

    8.  Shareholder
      Rights.
      The
      holder of this Option shall not have any shareholder rights with respect to
      the
      Option Shares until such person shall have exercised the Option, paid the
      Exercise Price and become a holder of record of the purchased shares.

     

    9.  Manner
      of Exercising Option. 

     

    (a)  In
      order
      to exercise this Option with respect to all or any part of the Option Shares
      for
      which this Option is at the time exercisable, the Optionee (or any other person
      or persons exercising the Option) must take the following actions:

     

    (i)  Execute
      and deliver to the Company a written notice setting forth the number of Option
      Shares for which the Option is exercised.

     

    (ii)  Pay
      the
      aggregate Exercise Price for the purchased shares in cash or in one or more
      of
      the following forms:

     

    (A)  by
      cancellation of indebtedness of the Company to the Optionee;

     

    (B)  if
      approved by the Committee, by surrender of shares that either: (1) have been
      owned by the Optionee for more than six (6) months and have been paid for within
      the meaning of SEC Rule 144 (and, if such shares were purchased from the Company
      by use of a promissory note, such note has been fully paid with respect to
      such
      shares); or (2) were obtained by the Optionee in the public market;
      or

     

    (C)  with
      respect only to purchases upon exercise of an Option, and provided that a public
      market for the Company’s stock exists:

     

    i.  through
      a
“same day sale” commitment from the Optionee and a broker-dealer that is a
      member of the Financial Industry Regulatory Authority (FINRA Dealer) whereby
      the
      Optionee irrevocably elects to exercise the Option and to sell a portion of
      the
      Option Shares so purchased to pay for the Exercise Price, and whereby the FINRA
      Dealer irrevocably commits upon receipt of such Shares to forward the Exercise
      Price directly to the Company; or

     

    ii.  through
      a
“margin” commitment from the Optionee and a FINRA Dealer whereby the Optionee
      irrevocably elects to exercise the Option and to pledge the Option Shares so
      purchased to the FINRA Dealer in a margin account as security for a loan from
      the FINRA Dealer in the amount of the Exercise Price, and whereby the FINRA
      Dealer irrevocably commits upon receipt of such Shares to forward the Exercise
      Price directly to the Company; or

     

    (D)  by
      any
      combination of the foregoing. 

     

    
      
         

      

      
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    (iii)  Payment
      of the Exercise Price must accompany the written notice delivered to the Company
      in connection with the Option exercise.

     

    (iv)  Furnish
      to the Company appropriate documentation that the person or persons exercising
      the Option (if other than Optionee) have the right to exercise this
      Option.

     

    (v)  Execute
      and deliver to the Company such written representations as may be requested
      by
      the Company in order for it to comply with the applicable requirements of
      federal and state securities laws.

     

    (vi)  Make
      appropriate arrangements with the Company for the satisfaction of all federal,
      state and local income and employment tax withholding requirements applicable
      to
      the Option exercise.

     

    (b)  As
      soon
      as practical after the Exercise Date, the Company shall issue to or on behalf
      of
      the Optionee (or any other person or persons exercising this Option) a
      certificate for the purchased Option Shares, with the appropriate legends
      affixed thereto.

     

    (c)  In
      no
      event may this Option be exercised for any fractional shares.

     

    10.  Corporate
      Transactions.  

     

    (a)  Termination
      of Award to Extent Not Assumed in Corporate Transaction.
      Effective upon the consummation of a Corporate Transaction, this Option shall
      terminate subject to the provisions of this Section
      10.
      Notwithstanding the foregoing, this Option shall not terminate to the extent
      that it is Assumed in connection with the Corporate Transaction. “Assumed”
means
      that pursuant to a Corporate Transaction either (i) the Award is expressly
      affirmed by the Company or (ii) the contractual obligations represented by
      the
      Award are expressly assumed (and not simply by operation of law) by the
      successor entity or its Parent in connection with the Corporate Transaction
      with
      appropriate adjustments to the number and type of securities of the successor
      entity or its Parent subject to the Award and the exercise or purchase price
      thereof which at least preserves the compensation element of the Award existing
      at the time of the Corporate Transaction as determined in accordance with the
      instruments evidencing the agreement to assume the Award. “Corporate
      Transaction”
shall
      mean:

     

    (i)  a
      dissolution or liquidation of the Company;

     

    (ii)  a
      merger
      or consolidation in which the Company is not the surviving corporation (other
      than a merger or consolidation with a wholly-owned subsidiary, a reincorporation
      of the Company in a different jurisdiction, or other transaction in which there
      is no substantial change in the stockholders of the Company or their relative
      stock holdings and the Option is assumed, converted or replaced by the successor
      corporation, which assumption will be binding on the Optionee);

     

    (iii)  a
      merger
      in which the Company is the surviving corporation but after which the
      stockholders of the Company immediately prior to such merger (other than any
      stockholder that merges, or which owns or controls another corporation that
      merges, with the Company in such merger) cease to own their shares or other
      equity interest in the Company;

     

    (iv)  the
      sale
      of substantially all of the assets of the Company; or 

     

    
      
         

      

      
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    (v)  the
      acquisition, sale, or transfer of more than 50% of the outstanding shares of
      the
      Company by tender offer or similar transaction (other than a tender offer or
      similar transaction in which there is no substantial change in the stockholders
      of the Company or their relative stock holdings and the Option is assumed,
      converted or replaced by the successor corporation, which assumption will be
      binding on the Optionee). 

     

    (b)  Acceleration
      of Award Upon Corporate Transaction.
      In the
      event of a Corporate Transaction: 

     

    (i)  for
      the
      portion of the Award hereunder that is Assumed or replaced by the successor
      entity with a comparable award, then this Award (if Assumed), the replacement
      award (if replaced) automatically shall become fully vested and exercisable
      for
      all of the Shares at the time represented by such Assumed or replaced portion
      of
      the Award, immediately upon Termination of the Optionee’s service if such
      service is Terminated by the successor company or the Company without Cause
      within twelve (12) months after
      the
      Corporate Transaction; and 

     

    (ii)  for
      the
      portion of the Award hereunder that is neither Assumed nor replaced by the
      successor entity with a comparable award, such portion of this Award shall
      automatically become fully vested and exercisable for all of the Shares at
      the
      time represented by such portion of this Award, immediately prior to the
      specified effective date of such Corporate Transaction, provided that the
      Optionee’s service has not Terminated prior to such date.  

     

    11.  Compliance
      with Laws and Regulations.

     

    (a)  The
      exercise of this Option and the issuance of the Option Shares upon such exercise
      shall be subject to compliance by the Company and Optionee with all applicable
      requirements of law relating thereto and with all applicable regulations of
      any
      stock exchange (or the Nasdaq Stock Market or Over-the-Counter Bulletin Board,
      if applicable) on which the Common Stock may be listed for trading at the time
      of such exercise and issuance.

     

    (b)  The
      inability of the Company to obtain approval from any regulatory body having
      authority deemed by the Company to be necessary to the lawful issuance and
      sale
      of any Common Stock pursuant to this Option shall relieve the Company of any
      liability with respect to the non-issuance or sale of the Common Stock as to
      which such approval shall not have been obtained. The Company, however, shall
      use its best efforts to obtain all such approvals.

     

    12.  Section
      409A Limitation.
      In the
      event the Administrator determines at any time that this Option has been granted
      with an exercise price less than Fair Market Value of the Shares subject to
      the
      Option on the date the Option is granted (regardless of whether or not such
      exercise price is intentionally or unintentionally priced at less than Fair
      Market Value, or is materially modified at a time when the Fair Market Value
      exceeds the exercise price), or is otherwise determined to constitute
“nonqualified deferred compensation” within the meaning of Section 409A of the
      Code, notwithstanding any provision of the Plan or this Option Agreement to
      the
      contrary, the Option shall satisfy the additional conditions applicable to
      nonqualified deferred compensation under Section 409A of the Code, in accordance
      with the Plan. The specified exercise date and term shall be the default date
      and term specified in the Plan. Notwithstanding the foregoing, the Company
      shall
      have no liability to any Optionee or any other person if an Option designated
      as
      an Incentive Stock Option fails to qualify as such at any time or if an Option
      is determined to constitute “nonqualified deferred compensation” within the
      meaning of Section 409A of the Code and the terms of such Option do not satisfy
      the additional conditions applicable to nonqualified deferred compensation
      under
      Section 409A of the Code and the Plan.

     

    
      
         

      

      
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    13.  Successors
      and Assigns.
      Except
      to the extent otherwise provided in Section 3 and 6, the provisions of this
      Option Agreement shall inure to the benefit of, and be binding upon, the Company
      and its successors and assigns and the Optionee, the Optionee’s assigns and the
      legal representatives, heirs and legatees of the Optionee’s estate.

     

    14.  Notices.
      Any
      notice required to be given under this Option Agreement shall be in writing
      and
      shall be deemed effective upon personal delivery or three (3) days after deposit
      in the U.S. mail, registered or certified, postage prepaid and properly
      addressed to the party entitled to such notice. Any notice required to be given
      to the Company under the terms of this Option Agreement shall be in writing
      and
      addressed to the Company at its principal corporate offices. Any notice required
      to be given or delivered to the Optionee shall be in writing and addressed
      to
      the Optionee at the address indicated below the Optionee’s signature line on the
      Grant Notice or at such other address as the Optionee may designate by ten
      (10)
      days advance written notice under this paragraph to all other parties to this
      Option Agreement.  

     

    15.  Construction.
      This
      Option Agreement and the Option evidenced hereby are made and granted pursuant
      to the Plan and are in all respects limited by and subject to the terms of
      the
      Plan. 

     

    16.  Governing
      Law; Venue.
      The
      interpretation, performance and enforcement of this Option Agreement shall
      be
      governed by the laws of the State of Nevada without resort to that State’s
      conflict-of-laws rules. For the purpose of litigating any dispute that arises
      under this Option Agreement, the parties hereby consent to exclusive
      jurisdiction in California and agree that such litigation shall be conducted
      in
      the federal or state courts located in Orange County,
      California. 

     

    17.  Discretionary
      Plan; Employment.
      The
      Plan is discretionary in nature and may be suspended or terminated by the
      Company at any time. With respect to the Plan, (a) each grant of an Option
      is a
      one-time benefit which does not create any contractual or other right to receive
      future grants of Options, or benefits in lieu of Options; (b) all determinations
      with respect to any such future grants, including, but not limited to, the
      times
      when the Option shall be granted, the number of Shares subject to each Option,
      the Option Price, and the times when each Option shall be exercisable, will
      be
      at the sole discretion of the Company; (c) if the Optionee is an Employee,
      the
      Optionee’s participation in the Plan shall not create a right to further or
      continued employment with the Optionee’s employer and shall not interfere with
      the ability of the Optionee’s employer to terminate the Optionee’s employment
      relationship at any time with or without cause; (d) the Optionee’s participation
      in the Plan is voluntary; (e) the Option is not part of normal and expected
      compensation for purposes of calculating any severance, resignation, redundancy,
      end of service payment, bonuses, long-service awards, pension or retirement
      benefits, or similar payments; (f) the future value of the Shares underlying
      the
      Options is unknown and cannot be predicted with certainty; (g) if the underlying
      Shares do not increase in value, the Option will have no value; and (h) the
      ability of the Optionee to sell Shares acquired pursuant to this Option may
      be
      limited by applicable securities laws.

     

    18.  Grant/Exercise
      Subject to Applicable Regulatory Approvals.
      Any
      grant of Options under the Plan is specifically conditioned on, and subject
      to,
      any required regulatory approvals. If necessary approvals for the grant or
      exercise are not obtained, the Options may be cancelled or rescinded, or they
      may expire, as determined by the Company in its sole and absolute discretion.
      The Company may restrict the exercise of any Option if the Shares issuable
      pursuant to the Option have not yet been registered pursuant to the Securities
      Act of 1933, as amended; provided, however, this limitation shall not apply
      during the six (6) months immediately prior to the Expiration Date or if the
      Optionee agrees in writing that the Shares issuable upon the exercise will
      be
      restricted securities and bear a restrictive legend. 

     

    
      
         

      

      
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    19.  Electronic
      Signatures.
      Delivery of a copy of this Option Agreement bearing an original signature by
      facsimile transmission (whether directly from one facsimile device to another
      by
      means of a dial-up connection or whether mediated by the worldwide web), by
      electronic mail in “portable document format” (“.pdf”) form, or by any other
      electronic means intended to preserve the original graphic and pictorial
      appearance of a document, will have the same effect as physical delivery of
      the
      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]

     

    
      
         

      

      
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    IN
      WITNESS WHEREOF, the parties have executed this Option Agreement on the Date
      of
      Grant first written above.

     

     

    
      COMPANY:

    

     

    
      UNITED
        FUEL & ENERGY CORPORATION

      a
        Nevada
        corporation

    

     

    

    By:
      /s/
      Frank P.
      Greinke                                             
   

    Name:
      Frank P. Greinke

    Title:
      President and Chief Executive Officer

    

     

    

    OPTIONEE:
      

    

    

    /s/
      William C.
      Bousema                                             
   

    WILLIAM
      C. BOUSEMA

    

    Address:
      ______________________________    

    _______________________________

    _______________________________

     

     

    [Signature
      page to Incentive Stock Option Agreement]

     

    
      
         

      

      
        9Unassociated Document

    EXHIBIT
      10.3

     

    RESTRICTED
      STOCK AGREEMENT

     

    THIS
      RESTRICTED STOCK AGREEMENT (the “Agreement”),
      is
      made, effective as of the 16th day of September, 2008 (hereinafter the
“Date
      of Grant”),
      between United Fuel & Energy Corporation, a Nevada corporation (the
“Company”),
      and
      William C. Bousema (the “Participant”).

     

    RECITALS:

     

    WHEREAS,
      the Company has adopted the United Fuel & Energy Corporation 2005 Equity
      Incentive Plan (the “Plan”),
      pursuant to which awards of shares of the Company’s common stock, par value
      $0.001 per share (the “Common
      Stock”),
      may
      be granted; and

     

    WHEREAS,
      the Board of Directors of the Company has determined that it is in the best
      interests of the Company and its stockholders to grant to the Participant an
      award of shares of Common Stock as a grant of Restricted Stock under the Plan,
      subject to the terms set forth herein.

     

    NOW
      THEREFORE, for and in consideration of the premises and the covenants of the
      parties contained in this Agreement, and for other good and valuable
      consideration, the receipt of which is hereby acknowledged, the parties hereto,
      for themselves, their successors and assigns, hereby agree as
      follows:

     

    1.  Grant
      of Restricted Stock. 
      The Company hereby grants to the Participant on the Date of Grant 150,000 shares
      of Common Stock (the “Award”)
      on the
      terms and conditions set forth in this Agreement and as otherwise provided
      in
      the Plan.  The Award shall vest in accordance with Section 3
      hereof.

     

    2.  Incorporation
      by Reference, Etc. 
      The
      provisions of the Plan are hereby incorporated herein by reference. Except
      as
      otherwise expressly set forth herein, this Agreement shall be construed in
      accordance with the provisions of the Plan and any capitalized terms not
      otherwise defined in this Agreement shall have the definitions set forth in
      the
      Plan. The Compensation
      Committee of the Board of Directors of the Company (the “Committee”)
      shall
      have final authority to interpret and construe the Plan and this Agreement
      and
      to make any and all determinations under them, and its decision shall be final,
      binding and conclusive upon the Participant and his legal representative in
      respect of any questions arising under the Plan or this Agreement.

     

    3.  Terms
      and Conditions.

     

    (a)  Restrictions. 
      The shares of Common Stock comprising the Award granted hereunder (the
“Award
      Shares”)
      may
      not be sold, pledged or otherwise transferred (other than by will or the laws
      of
      decent and distribution or as otherwise permitted by the Committee) and may
      not
      be subject to lien, garnishment, attachment or other legal
      process. 

     

    (b)  Vesting. 
      The Award shall vest in twelve equal quarterly installments on the last day
      of
      each calendar quarter beginning on December 31, 2008. In
      order
      for Award Shares to vest under
      this
      Agreement, the Participant must be continuously serving as an employee of the
      Company from the Date of Grant through the date of vesting. As soon as
      practicable following each vesting date, the Company shall deliver to the
      Participant a stock certificate representing the vested Award Shares.

     

    
      
        
        

      

      
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    (c)  Escrow
      of Shares.
      During
      the period of time between the Date of Grant and the earlier of each 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 the Company, and the Participant hereby agrees to provide one or
      more
      stock powers in substantially the form attached hereto as Exhibit
      A
      endorsed
      by the Participant in blank corresponding to each stock certificate representing
      the Award Shares. Upon vesting of any Award Shares, a certificate representing
      the vested Award Shares shall be delivered to the Participant as promptly as
      practicable following such vesting date and the Company will destroy the stock
      power corresponding to the certificate representing such vested Award Shares.
      

     

    (d)  Effect
      of Termination of Services as an Employee.
      If the
      Participant’s service as an employee of the Company is terminated (i) by the
      Company for Cause (as the term “Cause” is defined in that certain Employment
      Agreement between the Company and the Participant dated the date hereof (the
      “Employment
      Agreement”)),
      or
      (ii) by the Participant without Good Reason (as the term “Good Reason” is
      defined in the Employment Agreement), then any unvested Award Shares shall
      be
      immediately forfeited without further consideration to the Participant and
      the
      Company may use the stock powers corresponding to each stock certificate
      representing all unvested Award Shares to transfer record ownership of all
      such
      unvested Award Shares from the Participant to the Company or third party, in
      the
      Company’s sole discretion. If the Participant’s service as an employee of the
      Company is terminated (i) by the Company without Cause (as the term “Cause” is
      defined in the Employment Agreement), (ii) by the Participant for Good Reason
      (as the term “Good Reason” is defined in the Employment Agreement), (iii) upon
      the Participant’s death, or (iv) upon the Participant’s Disability (as the term
“Disability” is defined in the Employment Agreement), then any 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
      certificates representing the vested Award Shares.

     

    (e)  Section
      83(b) Election.
      Participant understands that, under Section 83 of the Internal Revenue Code
      (the
“Code”),
      the
      difference between the fair market value of the Award Shares as of the Date
      of
      Grant and their fair market value at the time any forfeiture restrictions
      applicable to such shares lapse may be reportable as ordinary income at that
      time. Participant understands that Participant may elect to be taxed at the
      time
      the Award is granted hereunder to the extent of the full fair market value
      thereof as of the Date of Grant rather than when and as such Award Shares cease
      to be subject to forfeiture, by filing an election under Section 83(b) of the
      Code with the Internal Revenue Service within 30 days after the Date of Grant.
      If it is likely that the fair market value of the Award Shares at the time
      any
      forfeiture restrictions lapse will exceed the fair market value thereof as
      of
      the Date of Grant, the election may avoid adverse tax consequences in the
      future. Participant understands that the failure to make this filing within
      said
      30-day period will result in the recognition of ordinary income by Participant
      (in the event the fair market value 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, TO FILE A TIMELY
      ELECTION UNDER SECTION 83(B), EVEN IF PARTICIPANT REQUESTS THE COMPANY OR ITS
      REPRESENTATIVE TO MAKE THIS FILING ON PARTICIPANT’S BEHALF.

     

    (f)  Rights
      as a Stockholder.
      The
      Participant is entitled to receive all dividends and other distributions made
      with respect to the Award Shares registered in his or her name and is entitled
      to vote or execute proxies with respect to such Award Shares registered in
      his
      or her name, unless and until the Award Shares are forfeited pursuant to
Section
      3(d)
      above.
      Upon and following the vesting date, the Participant shall be the record owner
      of the Award Shares unless and until such shares are sold or otherwise disposed
      of, and as record owner shall be entitled to all rights of a common stockholder
      of the Company.  Prior to the vesting date, the Participant shall not be
      deemed to be the owner of the Award Shares. 

     

    
      
        
        

      

      
        2

        
          

        

      

      
        
        

      

    

     

    (g)  Compliance
      With Securities Laws; Internal Revenue Code Section 409A.  
      The
      Company will not be required to issue any shares of Common Stock pursuant to
      this Agreement if, in the opinion of counsel for the Company, such issuance
      would violate the Securities Act of 1933, as amended, or any other applicable
      federal or state securities laws or regulations. Prior to the issuance of any
      shares pursuant to this Agreement, the Company may require that the Participant
      (or the Participant’s legal representative upon the Participant’s death or
      disability) enter into such written representations, warranties and agreements
      as the Company may reasonably request in order to comply with applicable
      securities laws or with this Agreement. The Company may also delay issuance
      of
      shares of Common Stock hereunder to the extent set forth in Treasury Regulation
      Section 1.409A-2(b)(7).

     

    4.  Miscellaneous.

     

    (a)  Notices.
      All
      notices, demands and other communications provided for or permitted hereunder
      shall be made in writing and shall be by registered or certified first-class
      mail, return receipt requested, telecopier, courier service or personal
      delivery. All
      such
      notices, demands and other communications shall be deemed to have been duly
      given when delivered by hand, if personally delivered; when delivered by
      courier, if delivered by commercial courier service; five (5) business days
      after being deposited in the mail, postage prepaid, if mailed; and when receipt
      is mechanically acknowledged, if telecopied.

     

    (b)  Severability.
      The
      invalidity or unenforceability of any provision of this Agreement shall not
      affect the validity or enforceability of any other provision of this Agreement,
      and each other provision 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 as giving the Participant any
      right to be retained, in any position, as an employee, consultant or director
      of
      the Company or its Subsidiaries or shall interfere with or restrict in any
      way
      the right of the Company or its Subsidiaries, which are hereby expressly
      reserved, to remove, terminate or discharge the Participant at any time for
      any
      reason whatsoever.

     

    (d)  Bound
      by Plan.
      By
      signing this Agreement, the Participant acknowledges that he has received a
      copy
      of the Plan and has had an opportunity to review the Plan and agrees to be
      bound
      by all the terms and provisions of the Plan.

     

    (e)  Successors.
      The
      terms of this Agreement shall be binding upon and inure to the benefit of the
      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 and understanding of the
      parties hereto with respect to the subject matter contained herein and
      supersedes all prior communications, representations and negotiations in respect
      thereto. No change, modification or waiver of any provision of this Agreement
      shall be valid unless the same is in writing and signed by the parties hereto.
      

     

    
      
        
        

      

      
        3

        
          

        

      

      
        
        

      

    

     

    (g)  Governing
      Law.
      This
      Agreement shall be construed and interpreted in accordance with the laws of
      the
      State of Nevada without regard to principles of conflicts of law thereof, or
      principals of conflicts of laws of any other jurisdiction that could cause
      the
      application of the laws of any jurisdiction other than the State of
      Nevada.

     

    (h)  Signature
      in Counterparts.
      This
      Agreement may be signed in counterparts, each of which shall be an original,
      with the same effect as if the signatures thereto and hereto were upon the
      same
      instrument.

     

    (i)  Electronic
      Signatures.
      Delivery of a copy of this Agreement bearing an original signature by facsimile
      transmission (whether directly from one facsimile device to another by means
      of
      a dial-up connection or whether mediated by the worldwide web), by electronic
      mail in “portable document format” (“.pdf”) form, or by any other electronic
      means intended to preserve the original graphic and pictorial appearance of
      a
      document, will have the same effect as physical delivery of the 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
      first written above.

     

    
      	 	 	 
	 	
              UNITED
                FUEL & ENERGY CORPORATION

            
	 
 	 
 	 
 
	 	By:  	/s/ Frank P. Greinke
	 	
              
Frank
              P. Greinke
	 	Chief
              Executive Officer

    

     

    
       

      
        	 	 	 
	 	/s/
                William C.
                Bousema
	 	
                
WILLIAM
                C. BOUSEMA
	 	        
                	
              

      

    

     

    [Signature
      page to Restricted Stock Agreement]

     

    
      
        
        

      

      
        5

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