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 ”).

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.

1

(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