Document:

FIRST
      AMENDMENT TO SECOND AMENDED

    AND
      RESTATED FINANCING AGREEMENT

     

    THIS
      FIRST AMENDMENT TO SECOND AMENDED AND RESTATED FINANCING
      AGREEMENT
      (“this
      Agreement”)
      entered into on this 20th day of September, 2007, to be
      effective, unless another effective date is otherwise herein specified, as
      of
      the date hereof, is by and among The CIT Group/Business Credit, Inc.
      (“CIT”),
      SunTrust Bank (“SunTrust”),
      Wachovia Bank, N.A. (“Wachovia”)
      and
      PNC Bank National Association (“PNC”),
      as
      Lenders, CIT as administrative and collateral agent (“Agent”),
      United Fuel & Energy Corporation, a Texas corporation (“United”),
      and
      Three D Oil Co. of Kilgore, Inc., a Texas corporation (“Three
      D”)
      (United and Three D being herein individually referred to as a “Company”
and
      collectively referred to as the “Companies”),
      and
      United Fuel & Energy Corporation, a Nevada corporation (“Parent”).

     

    RECITALS

     

    A. Companies,
      Agent and Lenders entered into that certain Second Amended and Restated
      Financing Agreement, dated as of March 27, 2007, together with all riders,
      addenda, exhibits and other documents relating thereto (collectively, as amended
      from time to time, the “Financing
      Agreement”).

     

    B. Pursuant
      to the terms and conditions of this Agreement, each of Companies, Agent and
      Lenders are willing to amend the Financing Agreement.

     

    NOW,
      THEREFORE,
      in
      consideration of the premises herein contained and other good and valuable
      consideration, the receipt and sufficiency of which are hereby acknowledged,
      the
      parties, intending to be legally bound, agree as follows, as hereinafter set
      forth:

     

    ARTICLE
      I

    Definitions

     

    1.01 Capitalized
      terms used in this Agreement are defined in the Financing Agreement, as amended
      hereby, unless otherwise stated.

     

    ARTICLE
      II

    Agreements

     

    2.01 Amendment
      to Section 1 of Financing Agreement; Amendments to Definition of “Applicable
      LIBOR Margin”.
      Effective as of August 31, 2007, the definition of “Applicable LIBOR
      Margin” contained in Section
      1
      of the
      Financing Agreement is amended as follows:

     

    (a) Clause
      (i)
      of
paragraph
      (a)
      of the
      definition of “Applicable LIBOR Margin” is amended and restated to read in its
      entirety as follows:

     

    “(i) (A)
      during the period from the Closing Date through August 31, 2007 - 1.75% and
      (B)
      during the period beginning on September 1, 2007 until the Initial
      Adjustment Date - 2.25%; and”

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    (b) The
      pricing table contained in the definition of “Applicable LIBOR Margin” is
      amended and restated to read in its entirety as follows:

     

    “APPLICABLE
      LIBOR MARGIN

    PRICING
      TABLE

     

    
      	
              Fixed
                Charge Coverage Ratio

            	
              Applicable
                LIBOR Margin

            
	 	 
	
              (A) Greater
                than or equal to 2.25 to 1.00

            	
              (A) 1.25%

            
	 	 
	
              (B) Less
                than 2.25 to 1.00, but equal to or greater than 1.75 to
                1.00

            	
              (B) 1.50%

            
	 	 
	
              (C) Less
                than 1.75 to 1.00, but equal to or greater than 1.40 to
                1.00

            	
              (C) 1.75%

            
	 	 
	
              (D) Less
                than 1.40 to 1.00, but equal to or greater than 1.20 to
                1.00

            	
              (D) 2.00%

            
	 	 
	
              (E) Less
                than 1.20 to 1.00

            	
              (E) 2.25%”

            

    

     

    2.02 Amendment
      to Section 1 of the Financing Agreement; Amendment and Restatement of Definition
      of “Initial Adjustment Date”.
      Effective as of August 31, 2007, the definition of “Initial Adjustment Date”
contained in Section
      1
      of the
      Financing Agreement is amended and restated to read in its entirety as
      follows:

     

    “Initial
      Adjustment Date
      shall
      mean the later of (a) November 1, 2007 or (b) the tenth day after the delivery
      to Agent pursuant to Section 7.8(c)
      hereof
      of the financial statements of the Companies for the month ending September
      30,
      2007.”

     

    2.03 Amendment
      to Section 7.8(b) of the Financing Agreement; New Due Date for Delivery of
      Quarterly Financial Statements for the Quarter Ended June 30,
      2007.
      Effective as of August 29, 2007, Agent, Lenders and Companies agree that the
      date by which Companies need to furnish to Agent the financial statements for
      the fiscal quarter ended June 30, 2007 required by Section 7.8(b) of the
      Financing Agreement shall be changed to September 30, 2007.

     

    2.04 Amendment
      to Section 7.8(c) of the Financing Agreement; New Due Date for Delivery of
      July
      2007 Financial Statements.
      Effective as of August 30, 2007, Agent, Lenders and Companies agree that the
      date by which Companies need to furnish to Agent the financial statements for
      July 2007 required by Section
      7.8(c)
      of the
      Financing Agreement shall be changed to September 30, 2007.

     

    
      
        
        

      

      
        2

        
          

        

      

      
        
        

      

    

     

    2.05 Amendment
      to Section 7.10(a) of the Financing Agreement.
      Effective as of May 30, 2007, Section
      7.10(a)
      of the
      Financing Agreement is amended and restated to read in its entirety as
      follows:

     

    “(a) Maintain
      as of the last day of each calendar month indicated below for the number of
      calendar months indicated below, a Fixed Charge Coverage Ratio for such period
      of not less than the ratio indicated below:

     

    
      
        	
                (i)

              	
                Calendar
                  months ending May 31, 2007, June 30, 2007, July 31, 2007,
                  August 31, 2007 and September 30, 2007

              	 	
                (i)

              	
                There
                  shall be no Fixed Charge Coverage Ratio test.

              
	
                (ii)

              	
                One
                  calendar month period ending on October 31, 2007

              	 	
                (ii)

              	
                1.00
                  to 1.00

              
	
                (iii)

              	
                Two
                  calendar month period ending on November 30, 2007

              	 	
                (iii)

              	
                1.00
                  to 1.00

              
	
                (iv)

              	
                Three
                  calendar month period ending on December 31, 2007

              	 	
                (iv)

              	
                1.05
                  to 1.00

              
	
                (v)

              	
                Four
                  calendar month period ending on January 31, 2008

              	 	
                (v)

              	
                1.05
                  to 1.00

              
	
                (vi)

              	
                Five
                  calendar month period ending on February 29, 2008

              	 	
                (vi)

              	
                1.05
                  to 1.00

              
	
                (vii)

              	
                Six
                  calendar month period ending on March 31, 2008

              	 	
                (vii)

              	
                1.05
                  to 1.00

              
	
                (viii)

              	
                Seven
                  calendar month period ending on April 30, 2008

              	 	
                (viii)

              	
                1.05
                  to 1.00

              
	(ix)	
                Eight
                  calendar month period ending on May 31, 2008

              	 	
                (ix)

              	
                1.05
                  to 1.00

              
	
                (x)

              	
                Nine
                  calendar month period ending on June 30, 2008

              	 	
                (x)

              	
                1.05
                  to 1.00

              
	
                (xi)

              	
                Ten
                  calendar month period ending on July 31, 2008

              	 	
                (xi)

              	
                1.05
                  to 1.00

              
	
                (xii)

              	
                Eleven
                  calendar month period ending on August 31, 2008

              	 	
                (xii)

              	
                1.05
                  to 1.00

              
	
                (xiii)

              	
                Twelve
                  calendar month period ending on September 30, 2008, and on the last
                  day of each succeeding calendar month

              	 	
                (xiii)

              	
                1.05
                  to 1.00”

              

      

    

     

    
      
        
        

      

      
        3

        
          

        

      

      
        
        

      

    

     

    2.06 Amendment
      to Section 7 of the Financing Agreement; Addition of New Section
      7.10(c).
      Effective as of the date hereof, Section
      7
      of the
      Financing Agreement is amended by adding to Section
      7,
      a new
Section
      7.10(c)
      to read
      in its entirety as follows:

     

    “(c) Maintain
      for the month of December, 2007, Average Monthly Availability of at least
      $4,000,000. ‘Average Monthly Availability’ shall be determined by adding the
      Availability at the end of each day during December 2007 and by dividing such
      sum by 31.”

     

    2.07 Amendment
      Fee.
      In
      consideration for the agreements set forth herein, Companies shall pay to Agent,
      for the pro rata benefit of Lenders, an amendment fee of $45,000, which
      amendment fee (i) shall be deemed fully earned on the date of execution of
      this
      Agreement, (ii) shall be non-refundable, and (iii) shall be due and payable
      in
      full on the date of execution of this Agreement.

     

    ARTICLE
      III

    Waiver

     

    3.01 Waiver.
      The
      Lenders hereby waive (i) any breach of the representations and warranties of
      the
      Companies set forth in Section 7.15(p) of the Financing Agreement as a result
      of
      the restatement by Parent of its financial statements for the quarter ended
      March 31, 2007, and the year ended December 31, 2006; (ii) any Event of Default
      arising out of any breach described under clause (i) of this Section 3.01;
      and
      (iii) any Event of Default caused by failures to satisfy conditions precedent
      set forth in Section 2 of the Financing Agreement (including conditions
      precedent to any further borrowing under the Financing Agreement) resulting
      from
      any breach described in clause (i) of this Section 3.01.

     

    3.02 No
      Other Waivers.
      Except
      as expressly set forth in Section
      3.01
      above,
      nothing contained herein shall be construed as a waiver by Agent or any Lender
      of any covenant or provision of the Loan Agreement, or any other Loan Document
      or any other contract or instrument between any Company and/or Parent and Agent
      and/or any Lender, and neither Agent’s nor any Lender’s failure at any time or
      times hereafter to require strict performance by any Company and/or Parent
      of
      any provision thereof shall waive, affect or diminish any right of Agent or
      any
      Lender thereafter to demand strict compliance therewith. Each of Agent and
      each
      Lender hereby reserves all rights granted under the Loan Agreement, and each
      other Loan Document and any other contract or instrument between any Company
      and/or Parent and Agent and/or any Lender.

     

    
      
        
        

      

      
        4

        
          

        

      

      
        
        

      

    

     

    ARTICLE
      IV

    Conditions
      Precedent

     

    4.01 Conditions
      to Effectiveness.
      The
      effectiveness of this Agreement is subject to the satisfaction of the following
      conditions precedent, unless specifically waived in writing by
      Agent:

     

    (a) Agent
      shall have received all of the following, each in form and substance
      satisfactory to Agent (each of which shall be deemed to be a “Loan
      Document”
for
      purposes of the Financing Agreement):

     

    (i) This
      Agreement, duly executed by Companies, Parent and Lenders; and

     

    (ii) Such
      additional documents, instruments and information as Agent may
      request.

     

    (b) The
      representations and warranties contained herein and in the Financing Agreement,
      and the other Loan Documents, as each is amended hereby, shall be true and
      correct as of the date hereof, as if made on the date hereof.

     

    (c) No
      Default or Event of Default shall have occurred and be continuing, unless such
      Event of Default has been otherwise specifically waived in writing by Agent
      and
      Lenders.

     

    (d) All
      corporate proceedings taken in connection with the transactions contemplated
      by
      this Agreement and all documents, instruments and other legal matters incident
      thereto shall be satisfactory to Agent and its legal counsel.

     

    (e) Agent
      shall have received payment, in immediately available funds, of the amendment
      fee described in Section
      2.07
      hereof.

     

    ARTICLE
      V

    Ratifications,
      Representations and Warranties

     

    5.01 Ratifications.
      The
      terms and provisions set forth in this Agreement shall modify and supersede
      all
      inconsistent terms and provisions set forth in the Financing Agreement and
      the
      other Loan Documents, and, except as expressly modified and superseded by this
      Agreement, the terms and provisions of the Financing Agreement and the other
      Loan Documents are ratified and confirmed and shall continue in full force
      and
      effect. Each of the parties hereto agrees that the Financing Agreement and
      the
      other Loan Documents, as amended hereby, shall continue to be legal, valid,
      binding and enforceable in accordance with their respective terms.

     

    5.02 Representations
      and Warranties.
      Each of
      each Company and Parent hereby represents and warrants to Agent and each Lender
      that (a) the execution, delivery and performance of this Agreement and any
      and
      all other Loan Documents executed and/or delivered in connection herewith have
      been authorized by all requisite corporate action on the part of each of each
      Company and Parent and will not violate the Articles of Incorporation or Bylaws
      of any Company or Parent; (b) the representations and warranties contained
      in
      the Financing Agreement, as amended hereby, and any other Loan Document are
      true
      and correct on and as of the date hereof and on and as of the date of execution
      hereof as though made on and as of each such date; and (c) no Default or Event
      of Default under the Financing Agreement, as amended hereby, has occurred and
      is
      continuing, unless such Default or Event of Default has been specifically waived
      in writing by Agent and each Lender. Each of each Company and Parent hereby
      represents and warrants to Agent and each Lender that it is in full compliance
      with all covenants and agreements contained in the Financing Agreement, and
      the
      other Loan Documents, as amended hereby.

     

    
      
        
        

      

      
        5

        
          

        

      

      
        
        

      

    

     

    ARTICLE
      VI

    Miscellaneous
      Provisions

     

    6.01 Survival
      of Representations and Warranties.
      All
      representations and warranties made in the Financing Agreement or any other
      Loan
      Document, including, without limitation, any document furnished in connection
      with this Agreement, shall survive the execution and delivery of this Agreement
      and the other Loan Documents, and no investigation by Agent or any Lender or
      any
      closing shall affect the representations and warranties or the right of Agent
      or
      any Lender to rely upon them.

     

    6.02 Reference
      to Financing Agreement.
      Each of
      the Financing Agreement and the other Loan Documents and any and all other
      agreements, documents or instruments now or hereafter executed and delivered
      pursuant to the terms hereof or pursuant to the terms of the Financing
      Agreement, as amended hereby, is hereby amended so that any reference in the
      Financing Agreement and such other Loan Documents to the Financing Agreement
      shall mean a reference to the Financing Agreement as amended
      hereby.

     

    6.03 Expenses
      of Agent.
      Each of
      each Company and Parent agrees to pay on demand all costs and expenses incurred
      by Agent in connection with the preparation, negotiation and execution of this
      Agreement and the other Loan Documents executed pursuant hereto, and any and
      all
      amendments, modifications, and supplements thereto, including, without
      limitation, the costs and fees of Agent’s legal counsel, and all costs and
      expenses incurred by Agent in connection with the enforcement or preservation
      of
      any rights under the Financing Agreement, as amended hereby, or any other Loan
      Document, including, without limitation, the costs and fees of Agent’s legal
      counsel.

     

    6.04 Severability.
      Any
      provision of this Agreement held by a court of competent jurisdiction to be
      invalid or unenforceable shall not impair or invalidate the remainder of this
      Amendment and the effect thereof shall be confined to the provision so held
      to
      be invalid or unenforceable.

     

    6.05 Successors
      and Assigns.
      This
      Agreement is binding upon and shall inure to the benefit of the parties hereto
      and their respective successors and assigns, except neither any Company nor
      Parent may assign or transfer any of its rights or obligations hereunder without
      the prior written consent of Agent and each Lender.

     

    
      
        
        

      

      
        6

        
          

        

      

      
        
        

      

    

     

    6.06 Counterparts.
      This
      Agreement may be executed in one or more counterparts, each of which when so
      executed shall be deemed to be an original, but all of which when taken together
      shall constitute one and the same instrument.

     

    6.07 Effect
      of Waiver.
      No
      consent or waiver, express or implied, by Agent or any Lender to or for any
      breach of or deviation from any covenant or condition by any Company or Parent
      shall be deemed a consent to or waiver of any other breach of the same or any
      other covenant, condition or duty.

     

    6.08 Headings.
      The
      headings, captions, and arrangements used in this Agreement are for convenience
      only and shall not affect the interpretation of this Agreement

     

    6.09 Applicable
      Law.
      THIS AGREEMENT AND ALL OTHER LOAN DOCUMENTS EXECUTED PURSUANT HERETO SHALL
      BE
      DEEMED TO HAVE BEEN MADE AND TO BE PERFORMABLE IN AND SHALL BE GOVERNED BY
      AND
      CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF
      TEXAS.

     

    6.10 Final
      Agreement.
      THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS REPRESENT THE FINAL AGREEMENT
      BETWEEN THE PARTIES, AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR,
      CONTEMPORANEOUS OR SUBSEQUENT ORAL AGREEMENTS BETWEEN THE PARTIES. THERE ARE
      NO
      UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.

     

    6.11 Release.
      EACH OF EACH COMPANY AND PARENT HEREBY ACKNOWLEDGES THAT IT HAS NO DEFENSE,
      COUNTERCLAIM, OFFSET, CROSS-COMPLAINT, CLAIM OR DEMAND OF ANY KIND OR NATURE
      WHATSOEVER THAT CAN BE ASSERTED TO REDUCE OR ELIMINATE ALL OR ANY PART OF ITS
      LIABILITY TO REPAY THE “OBLIGATIONS” OR TO SEEK AFFIRMATIVE RELIEF OR DAMAGES OF
      ANY KIND OR NATURE FROM AGENT OR ANY LENDER. EACH OF EACH COMPANY AND PARENT
      HEREBY VOLUNTARILY AND KNOWINGLY RELEASES AND FOREVER DISCHARGES EACH OF AGENT
      AND EACH LENDER, ITS PREDECESSORS, AGENTS, EMPLOYEES, SUCCESSORS AND ASSIGNS,
      FROM ALL POSSIBLE CLAIMS, DEMANDS, ACTIONS, CAUSES OF ACTION, DAMAGES, COSTS,
      EXPENSES, AND LIABILITIES WHATSOEVER, KNOWN OR UNKNOWN, ANTICIPATED OR
      UNANTICIPATED, SUSPECTED OR UNSUSPECTED, FIXED, CONTINGENT, OR CONDITIONAL,
      AT
      LAW OR IN EQUITY, ORIGINATING IN WHOLE OR IN PART ON OR BEFORE THE DATE THIS
      AGREEMENT IS EXECUTED, WHICH ANY COMPANY OR PARENT MAY NOW OR HEREAFTER HAVE
      AGAINST AGENT OR ANY LENDER, ITS PREDECESSORS, AGENTS, EMPLOYEES, SUCCESSORS AND
      ASSIGNS, IF ANY, AND IRRESPECTIVE OF WHETHER ANY SUCH CLAIMS ARISE OUT OF
      CONTRACT, TORT, VIOLATION OF LAW OR REGULATIONS, OR OTHERWISE, AND ARISING
      FROM
      ANY “LOANS”, INCLUDING, WITHOUT LIMITATION, ANY CONTRACTING FOR, CHARGING,
      TAKING, RESERVING, COLLECTING OR RECEIVING INTEREST IN EXCESS OF THE HIGHEST
      LAWFUL RATE APPLICABLE, THE EXERCISE OF ANY RIGHTS AND REMEDIES UNDER THE
      FINANCING AGREEMENT OR OTHER LOAN DOCUMENTS, AND NEGOTIATION FOR AND EXECUTION
      OF THIS AGREEMENT.

     

    [REMAINDER
      OF THIS PAGE INTENTIONALLY LEFT BLANK]

     

    
      
        
        

      

      
        7

        
          

        

      

      
        
        

      

    

     

    Executed
      on this 20th day of September, 2007, to be effective as of the
      respective date indicated above.

     

    
      	 	
              UNITED
                FUEL & ENERGY CORPORATION, 

              a
                Texas corporation

            
	 	 
	 	
              By: 

            	
              /s/
                Bobby W. Page

            
	 	
              Name:

            	
              Bobby
                W. Page

            
	 	
              Title:
                

            	
              Vice
                President and Chief Financial Officer

            
	 	 	 
	 	
              THREE
                D OIL CO. OF KILGORE, INC.,

              a
                Texas corporation

            
	 	 	 
	 	
              By:

            	
              /s/
                Bobby W. Page

            
	 	
              Name: 

            	
              Bobby
                W. Page

            
	 	
              Title: 

            	
               Vice
                President and Chief Financial Officer

            
	 	 	 
	 	
              UNITED
                FUEL & ENERGY CORPORATION,

            
	 	
              a
                Nevada corporation

            
	 	 
	 	
              By:

            	
              /s/
                Bobby W. Page

            
	 	
              Name: 

            	
              Bobby
                W. Page

            
	 	
              Title:
                

            	
              Vice
                President and Chief Financial Officer

            

    

    

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    ACCEPTED
      at Dallas, Texas, this 20th day of September, 2007, to be
      effective as of the respective date indicated above.

    
      	 	
              THE
                CIT GROUP/ BUSINESS CREDIT, INC.,

              as
                Agent and Lender

            
	 	 	 
	 	By:	
              /s/
                Alan Schnacke

            
	 	Name:	Alan
              Schnacke
	 	Title:	
              Vice
                President

            
	 	 	 
	 	SUNTRUST
              BANK, 
              as
                Lender

            
	 	 	
            
	 	By:	
              /s/
                Brian R O’Fallon

            
	 	Name:	Brian
              R O’Fallon
	 	Title:	
              Director

            
	 	 	 
	 	WACHOVIA
              BANK, N.A., 
              as
                Lender

            
	 	 	
            
	 	By:	
              /s/
                Thomas P. Floyd

            
	 	Name:	Thomas
              P. Floyd
	 	Title:	
              Vice
                President

            
	 	 	 
	 	PNC
              BANK NATIONAL ASSOCIATION, 
              as
                Lender

            
	 	 	
            
	 	By:	
              /s/
                Ron Eckhoff

            
	 	Name:	Ron
              Eckhoff
	 	Title:	
              Vice
                PresidentFIRST
      AMENDMENT TO THE

    ATSI
      COMMUNICATIONS, INC.

    2005
      STOCK COMPENSATION PLAN

    

    WHEREAS,
      ATSI Communications, Inc., a Nevada corporation (the “Company”) maintains the
      ATSI Communications, Inc. 2005 Stock Compensation Plan (the “Plan”) to attract
      and retain highly qualified and experienced directors, officers and employees
      and to give such directors, officers and employees a proprietary interest in
      the
      success of the Company and its subsidiaries. The Plan encourages ownership
      of
      common stock, $.001 par value (“Common Stock”), of the Company by the directors,
      officers and employees of the Company and its affiliates and provides increased
      incentive for such persons to render services and to exert maximum effort for
      the success of the Company’s business. The Plan provides eligible directors,
      officers and employees the opportunity to participate in the enhancement of
      stockholder value by the grants of warrants, options, restricted common,
      unrestricted common and other awards under the Plan. In addition, the Company
      expects the Plan to further strengthen the identification of the directors,
      officers and employees with the stockholders; and

    

    WHEREAS,
      on August 15, 2007, the Board of Directors of the Company (the “Board”) approved
      this first amendment to the Plan to increase the maximum aggregate number of
      Common Stock which may be subject to Awards issued under the Plan (the “First
      Amendment”); and

    

    WHEREAS,
      the Plan provides that the Board may amend the Plan at any time, subject to
      requirements imposed by law or stock exchange requirements; and

    

    NOW,
      THEREFORE, in accordance with the foregoing, the Plan shall be amended as
      follows:

    

    Effective
      as of August 15, 2007, subject to any adjustments as provided in Section 8
      of
      the Plan, the aggregate number of shares that may be issued under the Plan
      as
      provided in Section 3 is 17,500,000 shares of Common Stock. 

    

    IN
      WITNESS WHEREOF and as evidence of the adoption of the First Amendment set
      forth
      herein, the Board has caused this First Amendment to be executed this
      15th
      day of
      August, 2007.

     

    
      	 	 	 
	
            	By:  	 /s/
              Arthur L. Smith
	 	
              
                

              

              Name:
                Arthur L. Smith

              Title: President
                and Chief Executive Officer

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