Document:

United Fuel & Energy Corporation

                           2005 EQUITY INCENTIVE PLAN

1.    NAME.

      The name of the plan is "United Fuel & Energy Corporation 2005 Equity
Incentive Plan".

2.    PURPOSE.

      The purpose of this Plan is to provide incentives to attract, retain and
motivate eligible persons whose present and potential contributions are
important to the success of the Company, and its Parent and Subsidiaries (if
any), by offering them an opportunity to participate in the Company's future
performance through awards of Options, Restricted Stock and Stock Bonuses.
Capitalized terms not defined in the text are defined in Section 3.

3.    DEFINITIONS.

      As used in this Plan, the following terms will have the following
meanings:

      "AWARD" means any award under this Plan, including any Option, Restricted
Stock or Stock Bonus.

      "AWARD AGREEMENT" means, with respect to each Award, the signed written
agreement between the Company and the Participant setting forth the terms and
conditions of the Award.

      "BOARD" means the Board of Directors of the Company.

      "CAUSE" means any cause, as defined by applicable law, for the termination
of a Participant's employment with the Company or a Parent or Subsidiary of the
Company.

      "CODE" means the Internal Revenue Code of 1986, as amended.

      "COMMITTEE" means the committee designated and authorized by the Board of
Directors to govern and administer and grant options, bonuses and stock
issuances under this Plan. If no such committee has been formed, then
"Committee" shall refer to the Board of Directors.

      "COMPANY" means United Fuel & Energy Corporation, a Nevada corporation, or
any successor corporation.

      "DISABILITY" means a disability, whether temporary or permanent, partial
or total, as determined by the Committee.

                                       1
<PAGE>

      "EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended.

      "EXERCISE PRICE" means the price at which a holder of an Option may
purchase the Shares issuable upon exercise of the Option.

      "FAIR MARKET VALUE" means, as of any date, the value of a share of the
Company's Common Stock determined as follows:

            (a) if such Common Stock is publicly traded and is then listed on a
      national securities exchange, its closing price on the date of
      determination on the principal national securities exchange on which the
      Common Stock is listed or admitted to trading as reported in Bloomberg,
      L.P.;

            (b) if such Common Stock is quoted on the Nasdaq National Market,
      its closing price on the Nasdaq National Market on the date of
      determination as reported in Bloomberg, L.P.;

            (c) if such Common Stock is publicly traded but is not listed or
      admitted to trading on a national securities exchange, the average of the
      closing bid and asked prices on the date of determination as reported in
      Bloomberg, L.P.;

            (d) the price per share at which shares of the Company's Common
      Stock are initially offered for sale to the public by the Company's
      underwriters in the initial public offering of the Company's Common Stock
      pursuant to a registration statement filed with the SEC under the
      Securities Act if the Award is made on the effective date of such
      registration statement; or

            (e) if none of the foregoing is applicable, by the Committee in good
      faith.

      "INSIDER" means an officer or director of the Company or any other person
whose transactions in the Company's Common Stock are subject to Section 16 of
the Exchange Act.

      "OPTION" means an award of an option to purchase Shares pursuant to
Section 7.

      "PARENT" means any corporation (other than the Company) in an unbroken
chain of corporations ending with the Company if each of such corporations other
than the Company owns stock possessing 50% or more of the total combined voting
power of all classes of stock in one of the other corporations in such chain.

                                       2
<PAGE>

      "PARTICIPANT" means a person who receives an Award under this Plan.

      "PERFORMANCE FACTORS" means the factors selected by the Committee, in its
sole and absolute discretion, from among the following measures to determine
whether the performance goals applicable to Awards have been satisfied:

            (a)   Net revenue and/or net revenue growth;

            (b)   Earnings before income taxes and amortization and/or earnings
                  before income taxes and amortization growth;

            (c)   Operating income and/or operating income growth;

            (d)   Net income and/or net income growth;

            (e)   Earnings per share and/or earnings per share growth;

            (f)   Total shareholder return and/or total shareholder return
                  growth;

            (g)   Return on equity;

            (h)   Operating cash flow return on income;

            (i)   Adjusted operating cash flow return on income;

            (j)   Economic value added; and

            (k)   Individual business objectives.

      "PERFORMANCE PERIOD" means the period of service determined by the
Committee, not to exceed five years, during which years of service or
performance is to be measured for Restricted Stock Offers or Stock Bonuses.

      "PLAN" means this United Fuel & Energy Corporation 2005 Equity Incentive
Plan, as amended from time to time.

      "RESTRICTED STOCK OFFER" means an offer to sell Shares subject to
restrictions pursuant to Section 8.

      "SEC" means the U.S. Securities and Exchange Commission.

      "SECURITIES ACT" means the Securities Act of 1933, as amended.

      "SHARES" means shares of the Company's Common Stock reserved for issuance
under this Plan, as adjusted pursuant to Sections 4 and 19, and any successor
security.

      "STOCK BONUS" means an award of Shares, or cash in lieu of Shares,
pursuant to Section 9.

                                       3
<PAGE>

      "SUBSIDIARY" means any corporation (other than the Company) in an unbroken
chain of corporations beginning with the Company if each of the corporations
other than the last corporation in the unbroken chain owns stock possessing 50%
or more of the total combined voting power of all classes of stock in one of the
other corporations in such chain.

      "TERMINATION" or "TERMINATED" means, for purposes of this Plan with
respect to a Participant, that the Participant has for any reason ceased to
provide services as an employee, officer, director, consultant, independent
contractor, or advisor to the Company or a Parent or Subsidiary of the Company.
Unless otherwise determined by the Committee, an authorized leave of absence
pursuant to a written agreement or other leave entitling an Employee to
reemployment in a comparable position by law or rule shall not constitute a
termination of employment for purposes of the Plan unless the Employee does not
return at or before the end of the authorized leave or within the period for
which re-employment is guaranteed by law or rule. A "termination" includes an
event which causes a Participant to lose his eligibility to participate in the
Plan (e.g., an individual is employed by a company that ceases to be a
Subsidiary). In the case of a consultant, the meaning of "termination" or
"termination of employment" includes the date that the individual ceases to
provide services to the Company or its Subsidiaries. In the case of a
nonemployee director, the meaning of "termination" includes the date that the
individual ceases to be a director of the Company or its Subsidiaries.

      Notwithstanding the foregoing, the Committee will have sole discretion to
determine whether a Participant has ceased to provide services and the effective
date on which the Participant ceased to provide services (the "Termination
Date"). It also has the authority to prescribe different rules that apply upon
the termination of employment of a particular Participant, which shall be
memorialized in the Participant's original or amended Award Agreement or similar
document.

4.    SHARES SUBJECT TO THE PLAN.

      4.1 Number of Shares Available. Subject to Sections 4.2 and 19, the total
aggregate number of Shares initially reserved and available for grant and
issuance pursuant to this Plan will be 1,500,000 Shares and will include Shares
that are subject to: (a) issuance upon exercise of an Option but cease to be
subject to such Option for any reason other than exercise of such Option; (b) an
Award granted hereunder but forfeited or repurchased by the Company at the
original issue price; and (c) an Award that otherwise terminates without Shares
being issued. At all times the Company shall reserve and keep available a
sufficient number of Shares as shall be required to satisfy the requirements of
all outstanding Options granted under this Plan and all other outstanding but
unvested Awards granted under this Plan.

      4.2 Adjustment of Shares. In the event that the number of outstanding
shares is changed by a stock dividend, recapitalization, stock split, reverse
stock split, subdivision, combination, reclassification or similar change in the
capital structure of the Company without consideration, then (a) the number of
Shares reserved for issuance under this Plan, (b) the Exercise Prices of and
number of Shares subject to outstanding Options, and (c) the number of Shares
subject to other outstanding Awards will be proportionately adjusted, subject to
any required action by the Board or the shareholders of the Company and
compliance with applicable securities laws; provided, however, that fractions of
a Share will not be issued but will either be replaced by a cash payment equal
to the Fair Market Value of such fraction of a Share or will be rounded up to
the nearest whole Share, as determined by the Committee.

                                       4
<PAGE>

5.    ELIGIBILITY.

      ISOs (as defined in Section 7 below) may be granted only to employees
(including officers and directors who are also employees) of the Company or of a
Parent or Subsidiary of the Company. All other Awards may be granted to
employees, officers, directors, consultants, independent contractors and
advisors of the Company or any Parent or Subsidiary of the Company, provided
such consultants, contractors and advisors render bona fide services not in
connection with the offer and sale of securities in a capital-raising
transaction. A person may be granted more than one Award under this Plan.

6.    ADMINISTRATION.

      6.1 Committee Authority. This Plan will be administered by the Committee.
Subject to the general purposes, terms and conditions of this Plan, and to the
direction of the Board, the Committee will have full power to implement and
carry out this Plan. Without limitation, the Committee will have the authority
to:

            (a) construe and interpret this Plan, any Award Agreement and any
      other agreement or document executed pursuant to this Plan;

            (b) prescribe, amend and rescind rules and regulations relating to
      this Plan or any Award;

            (c) select persons to receive Awards;

            (d) determine the form and terms of Awards;

            (e) determine the number of Shares or other consideration subject to
      Awards;

            (f) determine whether Awards will be granted singly, in combination
      with, in tandem with, in replacement of, or as alternatives to, other
      Awards under this Plan or any other incentive or compensation plan of the
      Company or any Parent or Subsidiary of the Company;

            (g) grant waivers of Plan or Award conditions;

                                       5
<PAGE>

            (h) determine the vesting, exercisability and payment of Awards;

            (i) correct any defect, supply any omission or reconcile any
      inconsistency in this Plan, any Award or any Award Agreement;

            (j) determine whether an Award has been earned; and

            (k) make all other determinations necessary or advisable for the
      administration of this Plan.

      6.2 Committee Discretion. Any determination made by the Committee with
respect to any Award will be made at the time of grant of the Award or, unless
in contravention of any express term of this Plan or Award, at any later time,
and such determination will be final and binding on the Company and on all
persons having an interest in any Award under this Plan. The Committee may
delegate to one or more officers of the Company the authority to grant an Award
under this Plan to Participants who are not Insiders of the Company.

7.    OPTIONS.

      The Committee may grant Options to eligible persons and will determine
whether such Options will be Incentive Stock Options within the meaning of the
Code ("ISO") or Nonqualified Stock Options ("NQSOs"), the number of Shares
subject to the Option, the Exercise Price of the Option, the period during which
the Option may be exercised, and all other terms and conditions of the Option,
subject to the following:

      7.1 Form of Option Grant. Each Option granted under this Plan will be
evidenced by an Award Agreement which will expressly identify the Option as an
ISO or an NQSO (hereinafter referred to as the "Stock Option Agreement"), and
will be in such form and contain such provisions (which need not be the same for
each Participant) as the Committee may from time to time approve, and which will
comply with and be subject to the terms and conditions of this Plan.

      7.2 Date of Grant. The date of grant of an Option will be the date on
which the Committee makes the determination to grant such Option, unless
otherwise specified by the Committee. The Stock Option Agreement and a copy of
this Plan will be delivered to the Participant within a reasonable time after
the granting of the Option.

      7.3 Exercise Period. Options may be exercisable within the times or upon
the events determined by the Committee as set forth in the Stock Option
Agreement governing such Option; provided, however, that no Option will be
exercisable after the expiration of ten (10) years from the date the Option is
granted; and provided further that no ISO granted to a person who 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 ("Ten Percent Shareholder") will be exercisable after the expiration of
five (5) years from the date the ISO is granted. The Committee also may provide
for Options to become exercisable at one time or from time to time, periodically
or otherwise, in such number of Shares or percentage of Shares as the Committee
determines, provided, however, that in all events a Participant will be entitled
to exercise an Option at the rate of at least 20% per year over five years from
the date of grant, subject to reasonable conditions such as continued
employment; and further provided that an Option granted to a Participant who is
an officer, director or consultant may become fully exercisable, subject to
reasonable conditions such as continued employment, at any time or during any
period established by the Company.

                                       6
<PAGE>

      7.4 Exercise Price. The Exercise Price of an Option will be determined by
the Committee when the Option is granted and may be not less than 85% of the
Fair Market Value of the Shares on the date of grant; provided that: (a) the
Exercise Price of an ISO will be not less than 100% of the Fair Market Value of
the Shares on the date of grant; and (b) the Exercise Price of an Option granted
to a Ten Percent Shareholder will not be less than 110% of the Fair Market Value
of the Shares on the date of grant. Payment for the Shares purchased may be made
in accordance with Section 10 of this Plan.

      7.5 Method of Exercise. Options may be exercised only by delivery to the
Company of a written stock option exercise agreement (the "Exercise Agreement")
in a form approved by the Committee, (which need not be the same for each
Participant), stating the number of Shares being purchased, the restrictions
imposed on the Shares purchased under such Exercise Agreement, if any, and such
representations and agreements regarding the Participant's investment intent and
access to information and other matters, if any, as may be required or desirable
by the Company to comply with applicable securities laws, together with payment
in full of the Exercise Price for the number of Shares being purchased.

      7.6 Termination. Notwithstanding the exercise periods set forth in the
Stock Option Agreement, exercise of an Option will always be subject to the
following:

            (a) If the Participant's service is Terminated for any reason except
death or Disability, then the Participant may exercise such Participant's
Options only to the extent that such Options would have been exercisable upon
the Termination Date no later than three (3) months after the Termination Date
(or such longer time period not exceeding five (5) years as may be determined by
the Committee, with any exercise beyond three (3) months after the Termination
Date deemed to be an NQSO).

            (b) If the Participant's service is Terminated because of the
Participant's death or Disability, then the unvested portion of the Options
shall be fully vested and the Participant's Options may be fully exercised but
must be exercised by the Participant (or the Participant's legal representative)
no later than six (6) months after the Termination Date (or such longer time
period not exceeding five (5) years as may be determined by the Committee, with
any such exercise beyond (i) three (3) months after the Termination Date when
the Termination is for any reason other than the Participant's death or
Disability, or (ii) six (6) months after the Termination Date when the
Termination is for Participant's death or Disability, deemed to be an NQSO).

                                       7
<PAGE>

            (c) Notwithstanding the provisions in paragraph 7.6(a) above, if the
Participant's service is Terminated for Cause, neither the Participant, the
Participant's estate nor such other person who may then hold the Option shall be
entitled to exercise any Option with respect to any Shares whatsoever, after
Termination, whether or not after Termination the Participant may receive
payment from the Company or a Subsidiary for vacation pay, for services rendered
prior to Termination, for services rendered for the day on which Termination
occurs, for salary in lieu of notice, or for any other benefits. For the purpose
of this paragraph, Termination shall be deemed to occur on the date when the
Company dispatches notice or advice to the Participant that his service is
Terminated.

      7.7 Limitations on Exercise. The Committee may specify a reasonable
minimum number of Shares that may be purchased on any exercise of an Option,
provided that such minimum number will not prevent the Participant from
exercising the Option for the full number of Shares for which it is then
exercisable.

      7.8 Limitations on ISO. The aggregate Fair Market Value (determined as of
the date of grant) of Shares with respect to which ISO are exercisable for the
first time by a Participant during any calendar year (under this Plan or under
any other incentive stock option plan of the Company, Parent or Subsidiary of
the Company) will not exceed $100,000. If the Fair Market Value of Shares on the
date of grant with respect to which ISO are exercisable for the first time by a
Participant during any calendar year exceeds $100,000, then the Options for the
first $100,000 worth of Shares to become exercisable in such calendar year will
be ISO and the Options for the amount in excess of $100,000 that become
exercisable in that calendar year will be NQSOs. In the event that the Code or
the regulations promulgated thereunder are amended after the Effective Date of
this Plan to provide for a different limit on the Fair Market Value of Shares
permitted to be subject to ISO, such different limit will be automatically
incorporated herein and will apply to any Options granted after the effective
date of such amendment.

      7.9 Modification, Extension or Renewal. The Committee may modify, extend
or renew outstanding Options and authorize the grant of new Options in
substitution therefore, provided that any such action may not, without the
written consent of a Participant, impair any of such Participant's rights under
any Option previously granted. Any outstanding ISO that is modified, extended,
renewed or otherwise altered will be treated in accordance with Section 424(h)
of the Code. The Committee may reduce the Exercise Price of outstanding Options
without the consent of Participants affected by a written notice to them;
provided, however, that the Exercise Price may not be reduced below the minimum
Exercise Price that would be permitted under Section 7.4 of this Plan for
Options granted on the date the action is taken to reduce the Exercise Price.

      7.10 No Disqualification. Notwithstanding any other provision in this
Plan, no term of this Plan relating to ISO will be interpreted, amended or
altered, nor will any discretion or authority granted under this Plan be
exercised, so as to disqualify this Plan under Section 422 of the Code or,
without the consent of the Participant affected, to disqualify any ISO under
Section 422 of the Code.

                                       8
<PAGE>

8.    RESTRICTED STOCK OFFER.

      A Restricted Stock Offer is an offer by the Company to sell to an eligible
person Shares that are subject to restrictions. The Committee will determine to
whom an offer will be made, the number of Shares the person may purchase, the
price to be paid (the "Purchase Price"), the restrictions to which the Shares
will be subject, and all other terms and conditions of the Restricted Stock
Offer, subject to the following:

      8.1 Form of Restricted Stock Offer. All purchases under a Restricted Stock
Offer made pursuant to this Plan will be evidenced by an Award Agreement (the
"Restricted Stock Purchase Agreement") that will be in such form (which need not
be the same for each Participant) as the Committee will from time to time
approve, and will comply with and be subject to the terms and conditions of this
Plan. The offer of Restricted Stock will be accepted by the Participant's
execution and delivery of the Restricted Stock Purchase Agreement and full
payment for the Shares to the Company within thirty (30) days from the date the
Restricted Stock Purchase Agreement is delivered to the person. If such person
does not execute and deliver the Restricted Stock Purchase Agreement along with
full payment for the Shares to the Company within thirty (30) days, then the
offer will terminate, unless otherwise extended by the Committee.

      8.2 Purchase Price. The Purchase Price of Shares sold pursuant to a
Restricted Stock Offer will be determined by the Committee on the date the
Restricted Stock Offer is granted and may not be less than 85% of the Fair
Market Value of the Shares on the grant date, except in the case of a sale to a
Ten Percent Shareholder, in which case the Purchase Price will be 100% of the
Fair Market Value. Payment of the Purchase Price must be made in accordance with
Section 10 of this Plan.

      8.3 Terms of Restricted Stock Offers. Restricted Stock Offers shall be
subject to such restrictions as the Committee may impose. These restrictions may
be based upon completion of a specified number of years of service with the
Company or upon completion of the performance goals as set out in advance in the
Participant's individual Restricted Stock Purchase Agreement. Restricted Stock
Offers may vary from Participant to Participant and between groups of
Participants. Prior to the grant of a Restricted Stock Offer, the Committee
shall: (a) determine the nature, length and starting date of any Performance
Period for the Restricted Stock Offer; (b) select from among the Performance
Factors to be used to measure performance goals, if any; and (c) determine the
number of Shares that may be awarded to the Participant. Prior to the payment of
any Restricted Stock Offer, the Committee shall determine the extent to which
such Restricted Stock Offer has been earned. Performance Periods may overlap and
Participants may participate simultaneously with respect to Restricted Stock
Offers that are subject to different Performance Periods and have different
performance goals and other criteria.

                                       9
<PAGE>

      8.4 Termination During Performance Period. If a Participant is Terminated
during a Performance Period for any reason, then such Participant will be
entitled to payment (whether in Shares, cash or otherwise) with respect to the
Restricted Stock Offer only to the extent earned as of the date of Termination
in accordance with the Restricted Stock Purchase Agreement, unless the Committee
determines otherwise.

9.    STOCK BONUSES.

      9.1 Awards of Stock. A Stock Bonus is an award of Shares (which may
consist of Restricted Stock) for services rendered to the Company or any Parent
or Subsidiary of the Company. A Stock Bonus will be awarded pursuant to an Award
Agreement (the "Stock Bonus Agreement") that will be in such form (which need
not be the same for each Participant) as the Committee will from time to time
approve, and will comply with and be subject to the terms and conditions of this
Plan. A Stock Bonus may be awarded upon satisfaction of such performance goals
as are set out in advance in the Participant's individual Stock Bonus Agreement
(the "Performance Stock Bonus Agreement") that will be in such form (which need
not be the same for each Participant) as the Committee will from time to time
approve, and will comply with and be subject to the terms and conditions of this
Plan. Stock Bonuses may vary from Participant to Participant and between groups
of Participants, and may be based upon the achievement of the Company, Parent or
Subsidiary and/or individual performance factors or upon such other criteria as
the Committee may determine.

      9.2 Terms of Stock Bonuses. The Committee will determine the number of
Shares to be awarded to the Participant. If the Stock Bonus is being earned upon
the satisfaction of performance goals pursuant to a Performance Stock Bonus
Agreement, then the Committee will: (a) determine the nature, length and
starting date of any Performance Period for each Stock Bonus; (b) select from
among the Performance Factors to be used to measure the performance, if any; and
(c) determine the number of Shares that may be awarded to the Participant. Prior
to the payment of any Stock Bonus, the Committee shall determine the extent to
which such Stock Bonus has been earned. Performance Periods may overlap and
Participants may participate simultaneously with respect to Stock Bonuses that
are subject to different Performance Periods and different performance goals and
other criteria. The number of Shares may be fixed or may vary in accordance with
such performance goals and criteria as may be determined by the Committee. The
Committee may adjust the performance goals applicable to the Stock Bonuses to
take into account changes in law and accounting or tax rules and to make such
adjustments as the Committee deems necessary or appropriate to reflect the
impact of extraordinary or unusual items, events or circumstances to avoid
windfalls or hardships.

      9.3 Form of Payment. The earned portion of a Stock Bonus may be paid to
the Participant by the Company either currently or on a deferred basis, with
such interest or dividend equivalent, if any, as the Committee may determine.
Payment may be made in the form of cash or whole Shares or a combination
thereof, either in a lump sum payment or in installments, all as the Committee
will determine.

                                       10
<PAGE>

10.   PAYMENT FOR SHARE PURCHASES.

      Payment for Shares purchased pursuant to this Plan may be made in cash (by
check) or, where expressly approved for the Participant by the Committee and
where permitted by law:

            (a) by cancellation of indebtedness of the Company to the
Participant;

            (b) by surrender of shares that either: (1) have been owned by the
Participant 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 Participant in the public market;

            (c) by waiver of compensation due or accrued to the Participant for
services rendered;

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

                  (1) through a "same day sale" commitment from the Participant
and a broker-dealer that is a member of the National Association of Securities
Dealers (an "NASD Dealer") whereby the Participant irrevocably elects to
exercise the Option and to sell a portion of the Shares so purchased to pay for
the Exercise Price, and whereby the NASD Dealer irrevocably commits upon receipt
of such Shares to forward the Exercise Price directly to the Company; or

                  (2) through a "margin" commitment from the Participant and a
NASD Dealer whereby the Participant irrevocably elects to exercise the Option
and to pledge the Shares so purchased to the NASD Dealer in a margin account as
security for a loan from the NASD Dealer in the amount of the Exercise Price,
and whereby the NASD Dealer irrevocably commits upon receipt of such Shares to
forward the Exercise Price directly to the Company; or

            (e) by any combination of the foregoing.

11.   WITHHOLDING TAXES.

      11.1 Withholding Generally. Whenever Shares are to be issued in
satisfaction of Awards granted under this Plan, the Company may require the
Participant to remit to the Company an amount sufficient to satisfy federal,
state and local withholding tax requirements prior to the delivery of any
certificate or certificates for such Shares. Whenever, under this Plan, payments
in satisfaction of Awards are to be made in cash, such payment will be net of an
amount sufficient to satisfy federal, state, and local withholding tax
requirements.

                                       11
<PAGE>

      11.2 Stock Withholding. When, under applicable tax laws, a participant
incurs tax liability in connection with the exercise or vesting of any Award
that is subject to tax withholding and the Participant is obligated to pay the
Company the amount required to be withheld, the Committee may allow the
Participant to satisfy the minimum withholding tax obligation by electing to
have the Company withhold from the Shares to be issued that number of Shares
having a Fair Market Value equal to the minimum amount required to be withheld,
determined on the date that the amount of tax to be withheld is to be
determined. All elections by a Participant to have Shares withheld for this
purpose will be made in accordance with the requirements established by the
Committee and will be in writing in a form acceptable to the Committee.

12.   PRIVILEGES OF STOCK OWNERSHIP.

      12.1 Voting and Dividends. No Participant will have any of the rights of a
shareholder with respect to any Shares until the Shares are issued to the
Participant. After Shares are issued to the Participant, the Participant will be
a shareholder and will have all the rights of a shareholder with respect to such
Shares, including the right to vote and receive all dividends or other
distributions made or paid with respect to such Shares; provided, that if such
Shares are Restricted Stock, then any new, additional or different securities
the Participant may become entitled to receive with respect to such Shares by
virtue of a stock dividend, stock split or any other change in the corporate or
capital structure of the Company will be subject to the same restrictions as the
Restricted Stock.

      12.2 Financial Statements. The Company will provide financial statements
to each Participant prior to such Participant's purchase of Shares under this
Plan by listing such financial statements for each quarterly and annual period
as required by federal securities laws on the Internet at www.sec.gov.

13.   NON-TRANSFERABILITY OF AWARDS.

      Awards of Stock, Option and Restricted Stock Offer granted under this
Plan, and any interest therein, will not be transferable or assignable by the
Participant, and may not be made subject to execution, attachment or similar
process, other than by will or by the laws of descent and distribution. Awards
of Options granted under this Plan, and any interest therein, will not be
transferable or assignable by the Participant, and may not be made subject to
execution, attachment or similar process, other than by will or by the laws of
descent and distribution, by instrument to an inter vivos or testamentary trust
in which the options are to be passed to beneficiaries upon the death of the
trustor, or by gift to "immediate family" as that term is defined in 17 C.F.R.
240.16a-1(e). During the lifetime of the Participant an Award will be
exercisable only by the Participant. During the lifetime of the Participant, any
elections with respect to an Award may be made only by the Participant unless
otherwise determined by the Committee and set forth in the Award Agreement with
respect to Awards that are not ISOs.

      This restriction shall cease to apply to Shares received as a Stock Bonus
or Restricted Stock Offer under this Plan at the time ownership of such shares
vests in the recipient of the Award. Similarly, this restriction shall not apply
to shares of stock received upon the exercise of vested Options.

                                       12
<PAGE>

14.   CERTIFICATES.

      All certificates for Shares or other securities delivered under this Plan
will be subject to such stop transfer orders, legends and other restrictions as
the Committee may deem necessary or advisable, including restrictions under any
applicable federal, state or foreign securities law, or any rules, regulations
and other requirements of the SEC or any stock exchange or automated quotation
system upon which the Shares may be listed or quoted.

15.   ESCROW; PLEDGE OF SHARES.

      To enforce any restrictions on a Participant's Shares, the Committee may
require the Participant to deposit all certificates representing Shares,
together with stock powers or other instruments of transfer approved by the
Committee appropriately endorsed in blank, with the Company or an agent
designated by the Company to hold in escrow until such restrictions have lapsed
or terminated, and the Committee may cause a legend or legends referencing such
restrictions to be placed on the certificates. Any Participant who is permitted
to execute a promissory note as partial or full consideration for the purchase
of Shares under this Plan will be required to pledge and deposit with the
Company all or part of the Shares so purchased as collateral to secure the
payment of the Participant's obligation to the Company under the promissory
note; provided, however, that the Committee may require or accept other or
additional forms of collateral to secure the payment of such obligation and, in
any event, the Company will have full recourse against the Participant under the
promissory note notwithstanding any pledge of the Participant's Shares or other
collateral. In connection with any pledge of the Shares, the Participant will be
required to execute and deliver a written pledge agreement in such form as the
Committee will from time to time approve. The Shares purchased with the
promissory note may be released from the pledge on a pro rata basis as the
promissory note is paid.

16.   EXCHANGE OF AWARDS.

      The Committee may, at any time or from time to time, authorize the
Company, with the consent of the respective Participants, to issue new Awards in
exchange for the surrender and cancellation of any or all outstanding Awards.

17.   SECURITIES LAW AND OTHER REGULATORY COMPLIANCE.

      An Award will not be effective unless such Award is in compliance with all
applicable federal and state securities laws, rules and regulations of any
governmental body, and the requirements of any stock exchange or automated
quotation system upon which the Shares may then be listed or quoted, as they are
in effect on the date of grant of the Award and also on the date of exercise or
other issuance. Notwithstanding any other provision in this Plan, the Company
will have no obligation to issue or deliver certificates for Shares under this
Plan prior to: (a) obtaining any approvals from governmental agencies that the
Company determines are necessary or advisable; and/or (b) completion of any
registration or other qualification of such Shares under any state or federal
law or ruling of any governmental body that the Company determines to be
necessary or advisable. The Company will be under no obligation to register the
Shares with the SEC or to effect compliance with the registration, qualification
or listing requirements of any state securities laws, stock exchange or
automated quotation system, and the Company will have no liability for any
inability or failure to do so.

                                       13
<PAGE>

18.   NO OBLIGATION TO EMPLOY.

      Nothing in this Plan or any Award granted under this Plan will confer or
be deemed to confer on any Participant any right to continue in the employ of,
or to continue any other relationship with, the Company or any Parent or
Subsidiary of the Company or limit in any way the right of the Company or any
Parent or Subsidiary of the Company to terminate Participant's employment or
other relationship at any time, with or without cause.

19.   CORPORATE TRANSACTIONS.

      19.1 Determination upon Corporate Transaction. In the event of a Corporate
Transaction, unless otherwise specifically prohibited under applicable laws, or
by the rules and regulations of any governing governmental agencies or national
securities exchange or trading system, or unless the Committee shall otherwise
specify in the Award Agreement, the Board, in its sole discretion, may:

            (a) elect to terminate Options in exchange for a cash payment equal
to the amount by which the Fair Market Value of the Shares subject to such
Option to the extent the Option has vested exceeds the exercise price with
respect to such Shares;

            (b) elect to terminate Options provided that each Participant is
first notified of and given the opportunity to exercise his/her vested Options
for a specified period of time (of not less than 15 days) from the date of
notification and before the Option is terminated;

            (c) permit Awards to be assumed by a new parent corporation or a
successor corporation (or its parent) and replaced with a comparable Award of
the parent corporation or successor corporation (or its parent);

            (d) amend an Award Agreement or take such other action with respect
to an Award that it deems appropriate; or

            (e) implement any combination of the foregoing.

      A "Corporate Transaction" shall mean any of (a) a dissolution or
liquidation of the Company, (b) 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 shareholders of the Company or their relative stock holdings and the Awards
granted under this Plan are assumed, converted or replaced by the successor
corporation, which assumption will be binding on all Participants), (c) a merger
in which the Company is the surviving corporation but after which the
shareholders of the Company immediately prior to such merger (other than any
shareholder 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, (d) the sale of substantially all of the assets
of the Company, or (e) the acquisition, sale, or transfer of more than 50% of
the outstanding shares of the Company by tender offer or similar transaction.

                                       14
<PAGE>

      19.2 Other Treatment of Awards. Subject to any greater rights granted to
Participants under the foregoing provisions of this Section 19, in the event of
the occurrence of any transaction described in Section 19.1, any outstanding
Awards will be treated as provided in the applicable agreement or plan of
merger, consolidation, dissolution, liquidation, or sale of assets.

      19.3 Assumption of Awards by the Company. The Company, from time to time,
also may substitute or assume outstanding awards granted by another company,
whether in connection with an acquisition of such other company or otherwise, by
either; (a) granting an Award under this Plan in substitution of such other
company's award; or (b) assuming such award as if it had been granted under this
Plan if the terms of such assumed award could be applied to an Award granted
under this Plan. Such substitution or assumption will be permissible if the
holder of the substituted or assumed award would have been eligible to be
granted an Award under this Plan if the other company had applied the rules of
this Plan to such grant. In the event the Company assumes an award granted by
another company, the terms and conditions of such award will remain unchanged
(except that the exercise price and the number and nature of Shares issuable
upon exercise of any such option will be adjusted appropriately pursuant to
Section 424(a) of the Code). In the event the Company elects to grant a new
Option rather than assuming an existing option, such new Option may be granted
with a similarly adjusted Exercise Price.

20.   ADOPTION AND EFFECTIVE DATE.

      This United Fuel & Energy Corporation 2005 Equity Incentive Plan is
effective as of February 7, 2005, the date it was adopted by the Board.

21.   SHAREHOLDER APPROVAL.

      This Plan shall be approved by the shareholders of the Company within
twelve (12) months before or after the date this Plan is adopted by the Board.

                                       15
<PAGE>

22.   TERM OF PLAN/GOVERNING LAW.

      Unless earlier terminated as provided herein, this Plan will terminate on
March 7, 2015. This Plan and all agreements thereunder shall be governed by and
construed in accordance with the laws of the State of Texas. Unless otherwise
provided in the Award Agreement, recipients of an Award under the Plan are
deemed to submit to the exclusive jurisdiction and venue of the federal or state
courts whose jurisdiction covers Midland, Texas to resolve any and all issues
that may arise out of or relate to the Plan or any related Award Agreement.

23.   AMENDMENT OR TERMINATION OF PLAN.

      The Board may at any time terminate or amend this Plan in any respect,
including without limitation amendment of any form of Award Agreement or
instrument to be executed pursuant to this Plan; provided, however, that the
Board will not, without the approval of the shareholders of the Company under
applicable corporate or , amend this Plan in any manner that requires such
shareholder approval under the Code, if applicable, or by any stock exchange or
market on which the Common Stock of the Company is listed for trading.

24.   NONEXCLUSIVITY OF THE PLAN.

      Neither the adoption of this Plan by the Board, the submission of this
Plan to the shareholders of the Company for approval, nor any provision of this
Plan will be construed as creating any limitations on the power of the Board to
adopt such additional compensation arrangements as it may deem desirable,
including, without limitation, the granting of stock options and bonuses
otherwise than under this Plan, and such arrangements may be either generally
applicable or applicable only in specific cases.

25.   ACTION BY COMMITTEE.

      Any action permitted or required to be taken by the Committee or any
decision or determination permitted or required to be made by the Committee
pursuant to this Plan shall be taken or made in the Committee's sole and
absolute discretion.

26.   GENERAL

      26.1 Gender and Number. Except where otherwise indicated by the context,
any masculine term used herein also shall include the feminine; the plural shall
include the singular and the singular shall include the plural.

      26.2 Severability. If any provision of the Plan shall be held illegal or
invalid for any reason, the illegality or invalidity shall not affect the
remaining parts of the Plan, and the Plan shall be construed and enforced as if
the illegal or invalid provision had not been included.

      26.3 Requirements of Law. The granting of Awards and the issuance of
Shares under the Plan shall be subject to all applicable laws, rules, and
regulations, and to such approvals by any governmental agencies or national
securities exchanges as may be required.

                                       16
<PAGE>

      26.4 Securities Law Compliance. With respect to Insiders, transactions
under this Plan are intended to comply with all applicable conditions of Rule
16b-3 or its successors under the Exchange Act, unless determined otherwise by
the Board. To the extent any provision of the Plan or action by the Committee
fails to so comply, it shall be deemed null and void, to the extent permitted by
law and deemed advisable by the Board.

      26.5 Listing. The Company may use reasonable endeavors to register Shares
issued pursuant to Awards with the United States Securities and Exchange
Commission or to effect compliance with the registration, qualification, and
listing requirements of any state or foreign securities laws, stock exchange, or
trading system. However, the Company is not obligated to undertake such
registration and has no plans to pursue such registration as of this date.

      26.6 Inability to Obtain Authority. The inability of the Company to obtain
authority from any regulatory body having jurisdiction, which authority is
deemed by the Company's counsel to be necessary to the lawful issuance and sale
of any Shares hereunder, shall relieve the Company of any liability in respect
of the failure to issue or sell such Shares as to which such requisite authority
shall not have been obtained.

      26.7 No Additional Rights. Neither the Award nor any benefits arising
under this Plan shall constitute part of an employment contract between the
Participant and the Company or any Subsidiary, and accordingly, subject to
Section 10.2, this Plan and the benefits hereunder may be terminated at any time
in the sole and exclusive discretion of the Committee without giving rise to
liability on the part of the Company for severance payments.

      26.8 Noncertificated Shares. To the extent that the Plan provides for
issuance of certificates to reflect the transfer of Shares, the transfer of such
Shares may be effected on a noncertificated basis, to the extent not prohibited
by applicable law or the rules of any stock exchange or trading system.

                    *****************************************

DATED AS OF February 7, 2005            United Fuel & Energy Corporation

                                        By: /s/ Scott Heller
                                           -------------------------------------
                                           Scott Heller, Chief Executive Officer

                                       17EMPLOYMENT AGREEMENT

      This Employment Agreement ("Agreement") is made as of the 1st day of May
2004 (the "Effective Date"), between UNITED FUEL & ENERGY CORPORATION, a
corporation having its principal place of business in Midland, Texas, and its
wholly-owned subsidiaries (collectively, the "Company"), and BOBBY W. PAGE
("Employee").

      WHEREAS, the Company is currently engaged in the distribution of fuel
products through the following methods: (a) gasoline and diesel sales through
unattended re-fueling stations for commercial vehicles and fleets (known as
card-lock sites); (b) wholesale distribution of gasoline and diesel products to
commercial customers, which car dealers, gas stations, state and municipal
government, trucking companies, and oil field service companies; (c) wholesale
distribution of lubricant products (including gear oil, gas engine oil,
heavy-duty motor oil, hydraulic oil, transmission oil, hi-temp [specialty]
greases, and synthetics) to commercial customers, which include power generation
facilities, gas engine compressors, fleets, and oil field equipment; (d)
stand-by bobtail trucking services to oil field companies; and (e) sale and
distribution, through bulk plants, of regular propane (used in heating) and
refrigerant propane (used in commercial facilities for chilling) to residential
and commercial customers; all in the State of Texas and the eastern portion of
the State of New Mexico (the "Business"); and

      WHEREAS, the Company desires to obtain the services of Employee and
Employee desires to be employed by the Company upon the terms and conditions
hereinafter set forth; and

      WHEREAS, as an ancillary and integral part of this Agreement, the Company
desires to obtain Employee's covenant not to compete and other covenants, and
Employee desires to make a covenant not to compete and such other covenants as
hereinafter set forth;

      NOW, THEREFORE, in consideration of the covenants herein contained, and
other good and valuable consideration, the receipt and adequacy of which are
hereby forever acknowledged, the parties, with the intent of being legally bound
hereby, agree as follows:

1.    Position and Responsibilities.

      1.1   Position. The Company agrees to employ Employee, and Employee agrees
            to accept employment as a Vice President, Chief Financial Officer
            and Secretary of the Company, all in accordance with the terms and
            conditions of this Agreement. Employee shall perform such duties and
            responsibilities as are normally related to such position in
            accordance with the standards of the industry and any additional
            duties normally associated with this position now or hereafter
            assigned to Employee by the Company. Employee shall use his best
            efforts to promote the interests of the Company. This Agreement
            shall supersede any and all employment agreements, letters of
            intent, term sheets, arrangements and/or any other understanding,
            whether written or oral, between Employee and the Company, regarding
            any and all matters relating to employment, compensation, benefits,
            or similar matters.

<PAGE>
                                     - 2 -

      1.2   Other Activities. Employee shall devote his full business time,
            attention, and skill to perform any assigned duties, services, and
            responsibilities while employed by the Company, for the furtherance
            of the Company's business, in a diligent, loyal, and conscientious
            manner. Employee shall diligently provide full time services to the
            Company by performing all services, acts, or things necessary or
            advisable to manage and conduct the business of the Company, subject
            to the Bylaws of the Company and the policies set forth by the Board
            of Directors of the Company ("the Board) not inconsistent with the
            provisions of this Agreement. Employee shall not, during the term of
            this Agreement: (a) accept any other employment, or (b) engage,
            directly or indirectly, in any other business activity (whether or
            not pursued for pecuniary advantage) that might interfere with
            Employee's duties and responsibilities hereunder or create a
            conflict of interest with the Company. The foregoing limitations
            shall not be construed to prohibit Employee from: (i) investing in
            and advising management of a non-competing business (provided such
            activities do not materially interfere or conflict with the
            performance of Employee's duties under this Agreement), or (ii)
            investing in the stock of any competing corporation listed on a
            national securities exchange or traded in the over-the-counter
            market if Employee does not manage or advise the corporation's
            business and Employee and his associates (as that term is defined in
            Regulation 15(A) promulgated under the Securities Exchange Act of
            1934, as in effect on the date of this Agreement), collectively, do
            not own more than 2% of the corporation's stock.

      1.3   No Conflict. Employee represents and warrants that Employee's
            execution of this Agreement, Employee's employment with the Company,
            and the performance of Employee's proposed duties under this
            Agreement shall not violate any obligations Employee may have to any
            other employer, person, or entity, including any obligations with
            respect to proprietary or confidential information of any other
            person or entity. Further, Employee shall indemnify the Company for
            any claim, including, but not limited to, reasonable attorneys' fees
            and expenses of investigation, by any such third party that such
            third party may now have or may hereafter come to have against the
            Company, based upon or arising out of any non-competition agreement,
            invention, or secrecy agreement between Employee and such third
            party which was in existence as of the date of this Agreement.

<PAGE>
                                     - 3 -

2.    Compensation and Benefits.

      2.1   Base Salary. As compensation for the services to be rendered by
            Employee, the Company shall pay Employee a Base Salary equivalent to
            one hundred fifty thousand dollars ($150,000.00), paid in equal
            installments in accordance with the Company's regular payroll
            practices ("Base Salary"). Such Base Salary shall be subject to such
            withholding and deductions as required by law and as may be mutually
            agreed to by Employee and the Company. Employee's Base Salary shall
            increase to one hundred seventy-five thousand dollars ($175,000.00)
            beginning May 1, 2005, provided Employee remains continuously
            employed by the Company to that date. Employee's Base Salary will be
            reviewed from time to time in accordance with the established
            procedures of the Company for adjusting salaries for
            similarly-situated employees and increased in the sole discretion of
            the Company. Employee's Base Salary may not be decreased during the
            Term of this Agreement unless the Company implements a Company-wide
            salary reduction.

      2.2   Bonus. As additional compensation for employment under this
            Agreement, Employee will receive a bonus of twenty-five thousand
            dollars ($25,000.00) on April 29, 2005 if Employee has been
            continuously employed by the Company to that date. Any other bonuses
            or incentive pay will be determined and paid by the Company from
            time to time, or not at all, in its sole discretion.

      2.3   Stock Options. In addition to the other compensation provided for in
            this Agreement, the parties agree that Employee will become entitled
            in the future to an option to purchase the number of shares of
            common stock of the Company in an amount not less that three percent
            (3%), but not to exceed 300,000 shares, of the common stock of the
            Company issued and outstanding at the time specified below, at a
            price per share equal to the fair market value of a share of common
            stock of the Company at the time of the issuance of such stock
            option. Such stock option is to be issued upon the effective date of
            the anticipated reverse merger of the Company.

      2.4   Fringe Benefits. In addition to the Base Salary payable to Employee
            under this Agreement, and so long as Employee meets the applicable
            eligibility requirements, Employee shall be eligible to participate
            in the benefits made generally available by the Company to
            similarly-situated employees, in accordance with the benefit plans
            established by the Company from time to time, and as may be amended
            from time to time, in the Company's sole discretion. The Company
            reserves the right to terminate any benefit plan for any reason or
            no reason. Employee shall be entitled to three (3) weeks paid
            vacation each year, consistent with Company policy for senior
            executive officers.

<PAGE>
                                     - 4 -

      2.5   Business Expenses. Throughout the Term of this Agreement, the
            Company shall reimburse Employee for all reasonable and necessary
            business expenses which may be incurred by Employee in the course of
            performing his duties. Authorized expenses shall be reimbursed by
            the Company in accordance with policies and practices adopted, from
            time to time, by the Company concerning expense reimbursement for
            employees and shall be reimbursed upon timely presentation to the
            Company of an itemized expense statement with respect thereto,
            including substantiation of expenses incurred and such other
            documentation as may be required by the Company's reimbursement
            policies from time to time and in accordance with Internal Revenue
            Service guidelines.

3.    Term. This Agreement shall be effective as of the Effective Date, and
      shall continue in effect for a three (3) year period ending April 30,
      2007, unless earlier terminated in accordance with Section 4 (the "Initial
      Term"); provided however, that this Agreement shall be automatically
      extended beyond the Initial Term for a period of one (1) year, and
      successive one-year periods thereafter (the "Renewal Term"), unless either
      party notifies the other party of the termination of this Agreement in
      writing by placing such notice in the United States mail, certified,
      return receipt requested, postage prepaid to the address shown below, at
      least thirty (30) days prior to the end of the Initial Term or any Renewal
      Term. The term of this Agreement, whether during the Initial Term or any
      Renewal Term, shall be referred to as the "Term."

4.    Termination. This Agreement and Employee's employment may be terminated in
      any one of the followings ways:

      a.    Death. The death of Employee shall immediately and automatically
            terminate this Agreement.

      b.    Disability. If Employee is under a Disability (as defined below),
            the Company may terminate his employment under this Agreement during
            the continuance of the Disability by providing at least thirty (30)
            days prior written notice. The Board, in the exercise of its
            reasonable judgment acting in good faith, shall determine whether
            Employee is under a Disability. The determination may not be
            arbitrary or unreasonable, and the Board shall take into
            consideration the opinion of Employee's personal physician, if
            reasonably available, as well as applicable provisions of the
            Americans with Disabilities Act and the opinion of any qualified
            physician selected by the Company to evaluate Employee, but the
            determination by the Board shall be final and binding on the parties
            to this Agreement, provided such determination is made consistent
            with the provisions of this Agreement. "Disability," as used in this
            Agreement, means the Employee is unable, by reason of illness or
            physical or mental incapacity or disability (from any cause
            whatsoever) to perform the essential functions of his position under
            this Agreement, whether with or without reasonable accommodation by
            the Company, in substantially the manner and to the extent required
            under this Agreement before the commencement of the Disability, for
            a total period of ninety (90) days in any one hundred eighty (180)
            day period.

<PAGE>
                                     - 5 -

      c.    Cause. The Company may terminate this Agreement and Employee's
            employment immediately upon written notice to Employee for cause.
            "Cause" as used in this Agreement shall mean the occurrence of any
            of the following events:

            (1)   a material breach by Employee of any of the terms and
                  conditions of this Agreement, or Employee's intentional
                  non-performance (other than by reason of Disability) of any of
                  Employee's duties or responsibilities under this Agreement or
                  of any reasonable, lawful instructions from the Board, which
                  has not been cured by Employee after reasonable notice and
                  opportunity to cure;

            (2)   Employee's dishonesty, fraud, disloyalty, or misconduct with
                  respect to the business or affairs of the Company which the
                  Board determines in the exercise of its reasonable judgment
                  has been or is likely to be injurious to the interest,
                  property, operations, business, or reputation of the Company;

            (3)   Employee's conviction of a crime other than a minor traffic
                  violation or similar minor offense;

            (4)   the good faith determination by the Board in the exercise of
                  its reasonable judgment that Employee has committed an act
                  that: (i) materially and negatively affects the Company's
                  business or reputation (including its relationships with its
                  customers, suppliers, or employees); (ii) constitutes moral
                  turpitude; or (iii) indicates alcohol or drug abuse by
                  Employee that adversely affects his performance under this
                  Agreement; or

            (5)   Employee's gross negligence in the performance of any of his
                  duties or responsibilities under this Agreement.

      d.    Without Cause. The Company may terminate this Agreement and
            Employee's employment hereunder without Cause and for any or no
            reason by providing thirty (30) days written notice to Employee
            placed in the United States mail, certified, return receipt
            requested, postage prepaid to the address shown below. Any such
            termination is effective upon the date of service of the notice in
            accordance with this Agreement.

<PAGE>
                                     - 6 -

      e.    Resignation or Retirement. Employee may terminate this Agreement and
            his employment hereunder upon at least (30) days written notice to
            the Company placed in the United States mail, certified, return
            receipt requested, postage prepaid to the address shown below.

      f.    Change in Control. This Agreement and Employee's employment
            hereunder may be terminated in connection with a Change in Control,
            as defined in Section 9.

5.    Effect of Termination. If Employee's employment under this Agreement is
      terminated, the following shall occur:

      a.    Employee's Base Salary shall cease to accrue;

      b.    Employee shall cease to accrue vacation days and any other paid time
            off (including sick days and personal days). Employee shall be paid
            for accrued unused vacation time in accordance with the Company's
            policies and practices. Employee shall not be paid for unused sick
            days or other paid time off;

      c.    Employee shall submit any claims for reimbursement of business
            expenses incurred within the time period required under the
            Company's policies generally, or the Company will not be obligated
            to reimburse such expenses;

      d.    Employee shall return all Company property in accordance with
            Section 7;

      e.    The obligations and restrictions imposed on Employee under Section 8
            shall continue in full force and effect;

      f.    Any vested benefits of Employee under any plan or agreement shall
            not be affected; and

      g.    The Company shall continue to have all other rights available under
            this Agreement.

6.    Compensation After Termination. If Employee's employment under this
      Agreement is terminated by:

      a.    Employee's death or Disability, Employee or Employee's estate shall
            not be paid any Base Salary or severance pay after the date of death
            or the date of determination of Employee's Disability. To the extent
            consistent with Company policy for all senior executive officers,
            Employee or Employee's estate may receive other benefits upon his
            death or Disability.

<PAGE>
                                     - 7 -

      b.    The Company for Cause, the Company shall have no further obligations
            under this Agreement or otherwise with respect to Employee's
            employment from and after the termination date. Employee shall not
            be entitled to any severance pay or other compensation.

      c.    The Company without Cause, Employee shall be paid the greater of the
            Base Salary then in effect for the remaining Term of this Agreement
            or, after the end of the second year, 12 months salary at the Base
            Salary rate.

      d.    The Employee through resignation or retirement, the Employee will be
            paid his Base Salary and the benefits referred to in Section 2.4 on
            a pro rata basis through the last day worked. Employee shall be
            expected to continue to perform his duties under this Agreement
            between the date of written notice to the Company and the effective
            date of resignation or retirement; provided, however, that the
            Company reserves the right, in its sole discretion, to relieve
            Employee of his duties and continue Employee's Base Salary and
            benefits through the effective date of resignation or retirement.

      e.    Expiration of the Term of the Agreement, Employee shall not be
            entitled to any severance pay or other compensation and all
            obligations of the parties shall end, except that the obligations
            and restrictions imposed on Employee under Section 8 shall continue
            in full force and effect.

7.    Return of Company Property. Upon the termination of Employee's employment
      with the Company, for any reason, and at any time upon the Company's
      request, Employee shall deliver to the Company all Company property,
      including: (a) all documents, contracts, writings, disks, diskettes,
      computer files or programs, computer-generated materials, information,
      documentation, or data stored in any medium, recordings and drawings
      pertaining to trade secrets, proprietary or confidential information, or
      other inventions and works of the Company; (b) all records, designs,
      plans, sketches, specifications, patents, business plans, financial
      statements, accountings, flow charts, manuals, notebooks, memoranda, lists
      (including price lists and customer lists), and other property delivered
      to or compiled by Employee, by or on behalf of the Company or any of its
      representatives, vendors, or customers which pertain to the business of
      the Company, all of which shall be and remain the property of the Company,
      and shall be subject, at all times, to its discretion and control; (c) all
      equipment, devices, products, and tangible personal property entrusted to
      Employee by the Company, including but not limited to computers, printers
      and other computer equipment or accessories, cellular telephones, pagers,
      keys, access cards, identification cards, and credit cards; and (d) all
      correspondence, reports, records, notes, charts, advertisement materials,
      and other similar data pertaining to the business, activities, or future
      plans of the Company, in the possession or control of Employee, shall be
      delivered promptly to the Company without request by it. Employee shall
      certify to the Company, in writing, within five (5) days of any request by
      the Company, that, to the best of his knowledge and belief, all such
      materials have been returned to the Company.

<PAGE>
                                     - 8 -

8.    Covenant Not to Compete.

      8.1   Acknowledgements. Employee acknowledges that he will be employed by
            the Company in a confidential relationship wherein Employee, in the
            course of his employment with the Company, will become familiar with
            and aware of information as to the Company and its customers, the
            Company's specific manner of doing business, including the
            processes, techniques, and trade secrets utilized by the Company,
            and the Company's future plans with respect thereto, all of which
            have been and will continue to be established and maintained at
            great expense to the Company, which information is a trade secret
            and constitutes valuable good will of the Company. Employee further
            acknowledges that Employee's services to the Company will be unique
            in nature and of extraordinary value to the Company, and that the
            Company would be irreparably damaged if Employee were to provide
            similar services, or reveal trade secrets or confidential
            information, to any person or entity competing with the Company or
            engaged in a similar business. Employee further acknowledges that
            the Company would be irreparably damaged if Employee were to disrupt
            the Company's existing relationships with its employees,
            contractors, consultants, agents, or customers. Employee further
            acknowledges that the agreements and covenants contained in this
            Section 8 are essential to protect the Company and the goodwill of
            the Business.

      8.2   Restriction on Competition. During the Restricted Period (as defined
            below) and within the Territory (as defined below), Employee agrees
            that he may not, directly or indirectly, for himself or on behalf of
            or in conjunction with any other person(s), company, partnership,
            limited liability company, corporation, entity, or business of
            whatever nature,

            a.    Engage, as an officer, director, shareholder, owner, partner,
                  joint venturer, principal, individual proprietor, or in any
                  other capacity, whether as an agent, employee, independent
                  contractor, consultant, or advisor, or as a sales
                  representative, in the Business (as defined above) or any
                  other business whose products or services compete in whole or
                  in part with the Company or with any material portion of the
                  Company during the Restricted Period and within the Territory;

            b.    Call upon any person who is, at that time, an employee of the
                  Company, for the purpose or with the intent of enticing such
                  employee away from or out of the employ of the Company;

            c.    Call upon any person or entity which is, at that time, or
                  which has been, within the two (2) years prior to that time, a
                  customer or prospective customer of the Company with whom
                  Employee has had material contact (as defined below), for the
                  purpose of soliciting or selling products and services similar
                  in nature to those which are or were provided by the Company
                  to such customer; or persuade or attempt to persuade any
                  agent, vendor, supplier, client, customer, prospective
                  customer, independent contractor, or other person who has a
                  business or professional relationship with the Company to
                  cease to do business with the Company, reduce the amount of
                  business that it historically has done with the Company, or
                  otherwise adversely or materially alter its business or
                  professional relationship with the Company. For purposes of
                  this subsection, "material contact" exists between Employee
                  and an actual or prospective customer of the Company if
                  Employee: (i) personally dealt with such customer; (ii)
                  coordinated or supervised dealings with such customer; or

<PAGE>
                                     - 9 -

                  (iii) obtained Confidential Information (as defined below)
                  about such customer in the ordinary course of business through
                  Employee's association with the Company; provided, however,
                  that "material contact" shall not exist if Employee had a
                  relationship with such customer that predates Employee's
                  employment with the Company and such customer became a
                  customer of the Company without Employee utilizing any of the
                  resources or goodwill of the Company. "Confidential
                  Information," as used in this Agreement, means any information
                  relating to the Company's business or affairs of the Business,
                  including information relating to financial statements,
                  customer identities, customer specifications, potential
                  customers, employees, suppliers, servicing methods, equipment,
                  drawings, patterns, devices, programs, strategies and
                  information, analyses, profit margins or other proprietary
                  information used by the Company in connection with the
                  Business, but Confidential Information excludes any
                  information which is in the public domain or becomes known in
                  the industry through no wrongful act on Employee's part.
                  Employee acknowledges that the Confidential Information is
                  vital, sensitive, confidential, and proprietary to the
                  Company;

            d.    Call upon any prospective acquisition or merger candidate, on
                  the Employee's own behalf or on behalf of any competitor,
                  which candidate was, to the Employee's actual knowledge after
                  due inquiry, either called upon by the Company or for which
                  the Company made an acquisition or merger analysis, for the
                  purpose of acquiring such entity, provided that the Employee
                  shall not be charged with violating this section unless and
                  until the Employee shall have knowledge or notice that such
                  prospective acquisition or merger candidate was called upon,
                  or that an acquisition or merger analysis was made by the
                  Company for the purpose of acquiring or merging with such
                  entity; or

            e.    Disclose any Confidential Information regarding customers,
                  whether existing or prospective, of the Company to any person,
                  firm, partnership, corporation, or business for any reason or
                  purpose whatever.

"Restricted Period," as used in this Agreement, means the period beginning on
the Effective Date and ending one (1) year after the termination or expiration
date of this Agreement. "Territory," as used in this Agreement, means the area
within a one hundred (100) mile radius of Midland, Texas.

<PAGE>
                                     - 10 -

Notwithstanding the above, nothing in this Agreement shall prohibit Employee
from investing in the stock of any competing corporation listed on a national
securities exchange or traded in the over-the-counter market if Employee is not
involved in the corporation's business and Employee and his associates (as that
term is defined in Regulation 15(A) promulgated under the Securities Exchange
Act of 1934, as in effect on the date of this Agreement), collectively, do not
own more than two percent (2%) of the corporation's stock.

      8.3   Remedies. Due to the difficulty of measuring economic losses to the
            Company as a result of a breach of the foregoing covenants, and
            because of the immediate and irreparable damage that could be caused
            to the Company for which it would have no other adequate remedy, the
            foregoing covenants may be enforced by the Company, in the event of
            a breach by the Employee, by injunctive relief and/or restraining
            orders. If a court having jurisdiction determines for any reason
            that the Company is not entitled to injunctive relief, the Company
            shall be entitled to recover from Employee all losses and damages
            suffered by the Company as a result of the breach (including treble,
            punitive, incidental, and consequential damages) and all profit,
            remuneration, or other consideration that Employee gains from
            breaching this covenant; and reimbursement from Employee of all
            costs incurred by the Company in enforcing the covenant or otherwise
            defending or prosecuting any mediation, arbitration, or litigation
            arising out of the covenant, including attorneys' fees and court
            costs. The Company may exercise any of the foregoing remedies
            concurrently, independently, or successively.

      8.4   Reasonable Restraint. Employee acknowledges and agrees that the
            foregoing covenants in this Section 8 are reasonable and necessary
            to protect the Company's legitimate business interests and do not
            impose any limitations greater than those necessary to protect those
            interests.

      8.5   Severability. The covenants in this Section 8 are severable and
            separate, and the unenforceability of any specific covenant shall
            not affect the provisions of any other covenant. Moreover, in the
            event any court of competent jurisdiction shall determine that the
            scope, time, or territorial restriction of any specific covenant as
            set forth is unreasonable, then it is the intention of the parties
            that such restriction be enforced to the fullest extent which the
            court deems reasonable, and the Agreement shall thereby be reformed.

      8.6   Independent Provisions. All of the covenants in this Section 8 shall
            be construed as an agreement independent of any other provision in
            this Agreement, and the existence of any claim or cause of action of
            the Employee against the Company, whether predicated on this
            Agreement or otherwise, shall not constitute a defense to the
            enforcement by the Company of any of such covenants. It is
            specifically agreed that the period of one (1) year following
            termination of employment stated at the beginning of this Section 8,
            during which the agreements and covenants of the Employee made in
            this Section 8 shall be effective, shall be computed by excluding
            from such computation any time during which the Employee is in
            violation of any provision of this Section 8.

<PAGE>
                                     - 11 -

9.    Change in Control. In the event of a Change in Control (as defined below)
      that results in the termination of Employee's employment or that causes
      Employee to take a material reduction in Base Salary, the following shall
      occur: (a) Employee shall be entitled to receive (12) months Base Salary
      if the event occurs after completion of employee's second year or, if
      within the first two years of employment the balance of the term remaining
      of this agreement, payable thirty (30) days after the occurrence of the
      Change in Control; and (b) all options granted to Employee to purchase
      shares of common stock of the Company shall immediately become fully
      vested and exercisable. A "Change in Control" shall occur for purposes of
      this Agreement if: (a) members of the Board as of the date of this
      Agreement cease for any reason at any time to constitute at least a
      majority of the Board, except to the extent that the incumbent Board
      consents to such change; (b) the shareholders of the Company as of the
      Effective Date no longer own more than fifty percent (50%) of the issued
      and outstanding common stock of the Company; (c) the Company sells all or
      substantially all of the assets of the Company; or (d) Employee is
      required by the Company to relocate and work from a location more than
      fifty (50) miles from Midland, Texas. This provision shall be binding upon
      any successor in interest to the Company, which shall assume all
      obligations of the Company set forth in this Section.

10.   Additional Provisions.

      10.1  Amendments; Waivers; Remedies. This Agreement may not be amended or
            waived except by a writing signed by Employee and by a duly
            authorized representative of the Company. Employee agrees that he
            may not, at any time during the Term of this Agreement, rely on any
            oral representations of any sort or character regarding his
            employment status, salary, bonuses, or benefits. Failure to exercise
            any right under this Agreement shall not constitute a waiver of such
            right. Any waiver of any breach of this Agreement shall not operate
            as a waiver of any subsequent breaches. All rights or remedies
            specified for a party herein shall be cumulative and in addition to
            all other rights and remedies of the party hereunder or under
            applicable law.

      10.2  Assignment. The performance of Employee is personal hereunder, and
            Employee agrees that Employee shall have no right to assign and
            shall not assign or purport to assign any rights or obligations
            under this Agreement. This Agreement may be assigned or transferred
            by the Company to: (i) any subsidiary or affiliate of the Company to
            which the Business is assigned at any time, or (ii) the purchaser of
            all or substantially all of the Company's assets. Nothing in this
            Agreement shall prevent the consolidation, merger, or sale of the
            Company or a sale of any or all or substantially all of its assets.

<PAGE>
                                     - 12 -

      10.3  Binding Effect. Subject to the foregoing restriction on assignment
            by Employee, this Agreement shall inure to the benefit of and be
            binding upon each of the parties; the affiliates, officers,
            directors, agents, successors, and assigns of the Company; and the
            heirs, devisees, spouses, legal representatives, and successors of
            Employee.

      10.4  Notices. For purposes of this Agreement, notices and all other
            communications provided for in this Agreement shall be in writing
            and shall be deemed to have been duly received five (5) days after
            being placed in the United States mail, certified, return receipt
            requested, postage prepaid, addressed as follows:

                  If to Employee:

                  Bobby W. Page
                  1207 Douglas Ave.
                  Midland, TX  79701

                  If to the Company:

                  United Fuel & Energy Corp.
                  405 N. Marienfeld
                  Third Floor
                  Midland, TX  79701

      or to such other address as either party may have furnished to the other
      in writing in accordance herewith, except that notices of change of
      address sent to an address other than as listed above sent through the
      United States mail shall be effective only upon receipt, or if sent by any
      other means, upon delivery.

      10.5  Severability. If any provision of this Agreement shall be held to be
            invalid, unenforceable, or void, such provision shall be enforced to
            the fullest extent permitted by law, and the remainder of this
            Agreement shall remain in full force and effect and shall be
            enforced to the fullest extent permitted by law. In the event that
            the time period or scope of any provision is declared by a court of
            competent jurisdiction to exceed the maximum time period or scope
            that such court deems enforceable, then such court shall reduce the
            time period or scope to the maximum time period or scope permitted
            by law.

      10.6  Taxes. All amounts paid under this Agreement (including, without
            limitation, Base Salary) shall be reduced by all applicable state
            and federal tax withholdings and any other withholdings required by
            any applicable jurisdiction.

      10.7  Governing Law. The validity, interpretation, enforceability and
            performance of this Agreement shall be governed by and construed in
            accordance with the laws of the State of Texas, without regard to
            conflict of laws principles.

<PAGE>
                                     - 13 -

      10.8  Interpretation. This Agreement shall be construed as a whole,
            according to its fair meaning, and not in favor of or against any
            party. Sections and section headings contained in this Agreement are
            for reference purposes only, and shall not affect, in any manner,
            the meaning or interpretation of this Agreement. Whenever the
            context requires, references to the singular shall include the
            plural and the plural the singular.

      10.9  Authority. Each party represents and warrants that such party has
            the right, power, and authority to enter into and execute this
            Agreement and to perform and discharge all of the obligations
            hereunder, and that this Agreement constitutes the valid and legally
            binding agreement and obligation of such party and is enforceable in
            accordance with its terms.

      10.10 Additional Assurances. The provisions of this Agreement shall be
            self-operative and shall not require further agreement by the
            parties except as may be herein specifically provided to the
            contrary; provided, however, that at the request of the Company,
            Employee shall execute such additional instruments and take such
            additional acts as the Company may deem necessary to effectuate this
            Agreement.

      10.11 Entire Agreement. This Agreement is the final, complete, and
            exclusive agreement of the parties with respect to the subject
            matter hereof and supersedes and merges all prior or contemporaneous
            representations, discussions, proposals, negotiations, conditions,
            communications, and agreements, whether written or oral, between the
            parties relating to the subject matter hereof and all past courses
            of dealing or industry custom. No oral statements or prior written
            material not specifically incorporated herein shall be of any force
            and effect, and no changes in or additions to this Agreement shall
            be recognized unless incorporated herein by amendment, as provided
            herein (such amendment to become effective on the date stipulated
            therein).

      10.12 Employee Acknowledgment. Employee acknowledges that, before signing
            this Agreement, he was advised of his right to consult with an
            attorney of his choice to review this Agreement and that Employee
            had sufficient opportunity to have an attorney review the provisions
            of this Agreement and negotiate its terms. Employee further
            acknowledges that he had a full and adequate opportunity to review
            this Agreement before signing it; that he carefully read and fully
            understood all the provisions of this Agreement before signing it,
            including the rights and obligations of the parties; and that he has
            entered into this Agreement knowingly and voluntarily.

<PAGE>
                                     - 14 -

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

      EMPLOYEE:

      /s/ Bobby W. Page
      -----------------------------------
      Bobby W. Page

      UNITED FUEL & ENERGY CORPORATION

      By: /s/ Scott Heller
      -----------------------------------
      Title: President/COO

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00085-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00085-of-00352.parquet"}]]