Document:

UNITED
      FUEL & ENERGY CORPORATION

     

    NEITHER
      THIS WARRANT NOR THE COMMON STOCK ISSUABLE UPON EXERCISE OF THIS WARRANT HAVE
      BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “ACT”), OR ANY
      APPLICABLE STATE SECURITIES LAWS AND MAY NOT BE SOLD, PLEDGED OR TRANSFERRED
      IN
      THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT FOR SUCH SECURITIES UNDER
      THE
      ACT OR UNLESS AN EXEMPTION FROM SUCH REGISTRATION IS AVAILABLE.

     

    

    
      	
              Warrant

            	 	
              Date:

            
	
              _________
                Shares

            	 	
              ________,
                200_

            
	 	 	 

    

     

    
      	
              UNITED
                FUEL & ENERGY CORPORATION

            
	 	 	 
	
              WARRANT

            

    

    

    UNITED
      FUEL & ENERGY CORPORATION, a Nevada corporation (“Company”), for value
      received hereby grants this warrant (“Warrant”) to [Purchaser], or registered
      assigns (the “Holder”). The Warrant entitles the Holder to purchase from Company
      at any time prior to the Expiration Date (as defined below) up to [ ] shares
      of
      common stock of Company (“Common Stock”). The exercise price for the Warrant
      shall be $____ per share of Common Stock (the “Exercise Price”). This Warrant
      shall be issued in connection with the Securities Purchase Agreement entered
      into by Holder and Company as of this date.

     

    
      
         

      

      
        
        

        
          

        

      

      
         

      

    

     

    1.  Expiration
      Date; Exercise

     

    1.1  Exerciseability.
      The
      Warrant granted hereunder shall be fully exercisable as of the date
      hereof.

     

    1.2  Expiration
      Date.
      The
      Warrant shall expire on the fifth (5) anniversary of the date of this Warrant
      set forth on the first page. After the Expiration Date, the Warrant shall expire
      and be of no further force or effect.

     

    1.3  Callable
      Warrant.
      If
      during any consecutive 20 trading day period (after the effectiveness of the
      registration statement if applicable), the Common Stock of Company closes at
      the
      prices set forth in the following table (“Trading Price”), the Warrant shall be
      callable upon 10 days written notice at $0.01 per share, in the following
      amounts:

     

    
      	
              Number
                of Warrants callable

            	
              Trading
                Price

            
	
              1⁄2
                of Warrants

            	
              $____

            
	
              1⁄2
                of Warrants 

            	
              $____

            

    

    

     

    If
      Company has called the applicable Warrants, then Holder shall exercise such
      Warrants at $____ per share. If Holder does not exercise such Warrants when
      called within 10 days of receiving notice, then such Warrants shall immediately
      expire after such 10 day period.

     

    2.  Adjustments
      of Exercise Price and Number and Kind of Conversion Shares

     

    2.1  In
      the
      event that Company shall at any time hereafter (a) pay a dividend in Common
      Stock or securities convertible into Common Stock; (b) subdivide or split its
      outstanding Common Stock; (c) combine its outstanding Common Stock into a
      smaller number of shares; (d) spin-off to its shareholders a subsidiary or
      operating-business unit; then the number of shares to be issued immediately
      after the occurrence of any such event shall be adjusted so that the Holder
      thereafter may receive the number of shares of Common Stock or the equivalent
      value it would have owned immediately following such action if it had exercised
      the Warrant immediately prior to such action and the Exercise Price shall be
      adjusted to reflect such proportionate increases or decreases in the number
      of
      shares.

     

    
      
         

      

      
        2

        
          

        

      

      
         

      

    

     

    2.2  In
      case
      of any reclassification of the outstanding shares of Common Stock (other than
      a
      change covered by Section 2.1 hereof or a change which solely affects the par
      value of such shares) or in the case of any merger or consolidation or merger
      in
      which Company is not the continuing corporation and which results in any
      reclassification or capital reorganization of the outstanding shares), the
      holder shall have the right thereafter (until the Expiration Date) to receive
      upon the exercise hereof, for the same aggregate Exercise Price payable
      hereunder immediately prior to such event, the kind and amount of shares of
      stock or other securities or property receivable upon such reclassification,
      capital reorganization, merger or consolidation, by a holder of the number
      of
      shares of Common Stock obtainable upon the exercise of the Warrant immediately
      prior to such event; and if any reclassification also results in a change in
      shares covered by Section 2.1, then such adjustment shall be made pursuant
      to
      both this Section 2.2 and Section 2.1. The provisions of this Section 2.2
      shall similarly apply to successive reclassifications, capital reorganizations
      and mergers or consolidations, sales or other transfers.

     

    3.  Transfer.
      Subject
      to
      compliance with applicable securities laws, the Warrant is transferable in
      person, or by duly authorized attorney, upon surrender of this Warrant properly
      endorsed and upon payment of any necessary transfer tax or other governmental
      charge imposed upon such transfer. If less than all of the Warrant is
      transferred, Company will, upon transfer, execute and deliver to the Holder
      a
      new certificate for the portion of the Warrant not so transferred.

     

    4.  Reservation
      of Shares. Company shall at all times reserve and keep available out of its
      authorized but unissued shares of Common Stock, such number of shares of Common
      Stock as shall from time to time be issuable upon exercise of the Warrant.
      If at
      any time the number of authorized but unissued shares of Common Stock shall
      not
      be sufficient to permit the exercise of the Warrant, Company shall promptly
      seek
      such corporate action as may necessary to increase its authorized but unissued
      shares of Common Stock to such number of shares as shall be sufficient for
      such
      purpose.

     

    5.  Certificate
      as to Adjustments. In each case of any adjustment in the Exercise Price, or
      number or type of shares issuable upon exercise of the Warrant, Company shall
      compute such adjustment in accordance with the terms of the Warrant and prepare
      a certificate setting forth such adjustment and showing in detail the facts
      upon
      which such adjustment is based, including a statement of the adjusted Exercise
      Price. Company shall promptly send (by facsimile and by either first class
      mail,
      postage prepaid or overnight delivery) a copy of each such certificate to the
      Holder.

     

    
      
         

      

      
        3

        
          

        

      

      
         

      

    

     

    6.  Loss
      or
      Mutilation. Upon receipt of evidence reasonably satisfactory to Company of
      the
      ownership of and the loss, theft, destruction or mutilation of this Warrant,
      and
      of indemnity reasonably satisfactory to it, and (in the case of mutilation)
      upon
      surrender and cancellation of the Warrant, Company will execute and deliver
      in
      lieu thereof a new Warrant of like tenor as the lost, stolen, destroyed or
      mutilated Warrant.

     

    7.  Representations
      and Warranties of Company. Company hereby represents and warrants to Holder
      that:

     

    7.1  Due
      Authorization.
      All
      corporate action on the part of Company, its officers, directors and
      shareholders necessary for (a) the authorization, execution and delivery of,
      and
      the performance of all obligations of Company under this Warrant, and (b) the
      authorization, issuance, reservation for issuance and delivery of all of the
      Common Stock issuable upon exercise of this Warrant, has been duly taken. This
      Warrant constitute a valid and binding obligation of Company enforceable in
      accordance with their terms, subject, as to enforcement of remedies, to
      applicable bankruptcy, insolvency, moratorium, reorganization and similar laws
      affecting creditors’ rights generally and to general equitable
      principles.

     

    7.2  Organization.
      Company
      is a corporation duly organized, validly existing and in good standing under
      the
      laws of the Nevada and has all requisite corporate power to grant this
      Warrant.

     

    7.3  Valid
      Issuance of Stock.
      Any
      shares of Common Stock issued upon exercise of this Warrant will be duly and
      validly issued, fully paid and non-assessable.

     

    7.4  Governmental
      Consents.
      All
      consents, approvals, orders, authorizations or registrations, qualifications,
      declarations or filings with any federal or state governmental authority on
      the
      part of Company required in connection with the consummation of the transactions
      contemplated herein have been obtained.

     

    
      
         

      

      
        4

        
          

        

      

      
         

      

    

     

    8.  Notices
      of Record Date. In
      case,
      Company shall take a record of the holders of its Common Stock (or other stock
      or securities at the time receivable upon the exercise of this Warrant), for
      the
      purpose:

     

    8.1  of
      entitling them to receive any dividend or other distribution, or any right
      to
      subscribe for or purchase any shares of stock of any class or any other
      securities or to receive any other right; or

     

    8.2  of
      any
      consolidation or merger of Company with or into another corporation, any capital
      reorganization of Company, any reclassification of the capital stock of Company,
      or any conveyance of all or substantially all of the assets of Company to
      another corporation in which holders of Company stock are to receive stock,
      securities or property of another corporation; or

     

    8.3  of
      any
      voluntary dissolution, liquidation or winding-up of Company; or

     

    8.4  of
      any
      redemption or conversion of all outstanding Common Stock; then, and in each
      such
      case, Company will mail or cause to be mailed to the Holder a copy of the notice
      with respect to the foregoing received by it from Company specifying, as the
      case may be, (a) the date on which a record is to be taken for the purpose
      of
      such dividend, distribution or right, or (b) the date on which such
      reorganization, reclassification, consolidation, merger, conveyance,
      dissolution, liquidation, winding-up, redemption or conversion is to take place,
      and the time, if any is to be fixed, as of which the holders of record of Common
      Stock or (such stock or securities as at the time are receivable upon the
      exercise of this Warrant), shall be entitled to exchange their shares of Common
      Stock (or such other stock or securities), for securities or other property
      deliverable upon such reorganization, reclassification, consolidation, merger,
      conveyance, dissolution, liquidation or winding-up. Company shall use all
      reasonable efforts to ensure such notice shall be delivered at least 15 days
      prior to the date therein specified.

     

    9.  Severability.
      If any
      term, provision, covenant or restriction of the Warrant is held by a court
      of
      competent jurisdiction to be invalid, void or unenforceable, the remainder
      of
      the terms, provisions, covenants and restrictions of the Warrant shall remain
      in
      full force and effect and shall in no way be affected, impaired or invalidated
      to the same extent as if Company is owner of the underlying Common
      Stock.

     

    
      
         

      

      
        5

        
          

        

      

      
         

      

    

     

    10.  Notices.
      All notices, requests, consents and other communications required hereunder
      shall be in writing and by first class mail or by registered or certified mail,
      postage prepaid, return receipt requested, and (other than in connection with
      the exercise of the Warrant) shall be deemed to have been duly made when
      received or, if sent registered or certified mail, postage prepaid, return
      receipt requested, on the third day following deposit in the mails: if addressed
      to the Holder, to the address set forth on the Securities Purchase Agreement
      between the Holder and Company; and if addressed to Company, Attention,
      President, 405 North Marienfeld, Suite 300, Midland, Texas 79701 or such other
      address as it may designate in writing.

     

    11.  No
      Rights
      as Shareholder. The Holder shall have no rights as a shareholder of Company
      with
      respect to the shares issuable upon exercise of the Warrant until the actual
      exercise hereunder.

     

    UNITED
      FUEL & ENERGY CORPORATION

    

     

    By:
      __________________________________

    Charles
      K. McArthur, President and Chief Executive Officer

     

     

    
      
         

      

      
        6

        
          

        

      

      
         

      

    

     

    EXHIBIT
      “A”

     

    NOTICE
      OF
      EXERCISE

     

    (To
      be signed only upon exercise of the Warrant)

     

    To: UNITED
      FUEL & ENERGY CORPORATION.

     

    The
      undersigned hereby elects to purchase shares of Common Stock (the “Warrant
      Shares”) of UNITED FUEL & ENERGY CORPORATION. (“Company”), pursuant to the
      terms of the enclosed Warrant (the “Warrant”). The undersigned tenders herewith
      payment of the exercise price pursuant to the terms of the Warrant.

     

    The
      undersigned hereby represents and warrants to, and agrees with Company as
      follows: 

     

    1. Holder
      is
      acquiring the Warrant Shares for its own account, for investment purposes
      only.

     

    2. Holder
      understands that an investment in the Warrant Shares involves a high degree
      of
      risk, and Holder has the financial ability to bear the economic risk of this
      investment in the Warrant Shares, including a complete loss of such investment.
      Holder has adequate means for providing for its current financial needs and
      has
      no need for liquidity with respect to this investment.

     

    3. Holder
      has such knowledge and experience in financial and business matters that it
      is
      capable of evaluating the merits and risks of an investment in the Warrant
      Shares and in protecting its own interest in connection with this
      transaction.

     

    4. Holder
      understands that the Warrant Shares have not been registered under the
      Securities Act or under any state securities laws. Holder is familiar with
      the
      provisions of the Securities Act and Rule 144 thereunder and understands that
      the restrictions on transfer on the Warrant Shares may result in Holder being
      required to hold the Warrant Shares for an indefinite period of
      time.

     

    5. Holder
      agrees not to sell, transfer, assign, gift, create a security interest in,
      or
      otherwise dispose of, with or without consideration (collectively, “Transfer”)
      any of the Warrant Shares except pursuant to an effective registration statement
      under the Securities Act or an exemption from registration. As a further
      condition to any such Transfer, except in the event that such Transfer is made
      pursuant to an effective registration statement under the Securities Act, if
      in
      the reasonable opinion of counsel to Company any Transfer of the Warrant Shares
      by the contemplated transferee thereof would not be exempt from the registration
      and prospectus delivery requirements of the Securities Act, Company may require
      the contemplated transferee to furnish Company with an investment letter setting
      forth such information and agreements as may be reasonable requested by Company
      to ensure compliance by such transferee with the Securities Act.

     

    
      
         

      

      
        7

        
          

        

      

      
         

      

    

     

    Until
      the
      effectiveness of the registration statement each certificate evidencing the
      Warrant Shares will bear the following legend:

     

    “THE
      SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE
      SECURITIES ACT OF 1933 (THE “ACT”) OR ANY APPLICABLE STATE SECURITIES LAWS AND
      MAY NOT BE EXERCISED, SOLD, PLEDGED OR TRANSFERRED IN THE ABSENCE OF AN
      EFFECTIVE REGISTRATION STATEMENT FOR SUCH SECURITIES UNDER THE ACT OR UNLESS
      AN
      EXEMPTION FROM SUCH REGISTRATION IS AVAILABLE.

     

    

     

    
      	
              Number
                of Warrant Exercised: ________

            	 
	
              Dated:

            	 
	 	
              [Name]

            

    

    

    
      
         

      

      
        8Unassociated Document

    

      NOVEMBER
        30, 2005 AMENDMENT TO AMENDED AND RESTATED

      FINANCING
        AGREEMENT

      

      

      THIS
        NOVEMBER 30, 2005 AMENDMENT TO AMENDED AND RESTATED FINANCING
        AGREEMENT
        (“this
        Agreement”)
        entered into on this 29th day of March, 2006, to be effective, unless another
        effective date is otherwise herein specified, as of November 30, 2005
        (“Effective
        Date”),
        is by
        and among The CIT Group Business Credit, Inc. (“CIT”)
        and
        SunTrust Bank (“SunTrust”),
        as
        Lenders (“Lenders”),
        CIT,
        as administrative and collateral agent (“Agent”)
        and
        Eddins-Walcher Company (“Eddins”)
        and
        Three D Oil Co. of Kilgore, Inc. (“Three D”)
        (Eddins and Three D being herein individually referred to as a
“Company”
and
        collectively referred to as the “Companies”).

       

       

      RECITALS

       

      A. Companies,
        Agent and Lenders entered into that certain Amended and Restated Financing
        Agreement, dated as of April 8, 2005, 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 this Agreement, each Company, each Lender and
        Agent
        are willing to amend the Financing Agreement and to agree to certain other
        agreements, all as hereinafter set forth.

       

      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:

       

       

      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 Amendments
        to Financing Agreement.
        Agent,
        Lenders and Companies hereby amend the Financing Agreement as
        follows:

       

      (a) Amendment
        to Section 1 of Financing Agreement; Addition of New
        Definition.
        Effective as of the Effective Date, the following new definition is hereby
        added
        to Section 1 of the Financing Agreement, such new definition to be inserted
        in its proper alphabetical order and to read in its entirety as
        follows:

       

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

       

      “November
        30, 2005 Amendment
        shall
        mean that certain November 30, 2005 Amendment to Amended and Restated Financing
        Agreement executed by Companies, Lenders and Agent.”

       

      (b) Amendment
        and Restatement of Paragraph 7.10(b) of Section 7 of the Financing
        Agreement.
        Effective as of the Effective Date, Paragraph 7.10(b) of Section 7 of
        the Financing Agreement is amended and restated to read in its entirety as
        follows:

       

      “(b) (i)
        Maintain as of the last day of November, 2005, for the one calendar month
        period
        ending on such day, Daily Average Availability of at least $400,000 and,
        (ii)
        thereafter, maintain as of the last day of each calendar month, beginning
        with
        December, 2005, for the one calendar month period ending on such day, Daily
        Average Availability of at least $400,000”; and

       

      (c) Amendment
        and Restatement of Paragraph 8.2 of Section 8 of the Financing
        Agreement.
        Effective as of the Effective Date, Paragraph 8.2 of Section 8 of the
        Financing Agreement is amended and restated to read in its entirety as
        follows:

       

      “8.2
        Notwithstanding any provision in this Section 8, the first $3,000,000
        outstanding under the Revolving Loans at any time prior to Companies maintaining
        $3,500,000 of Daily Average Availability for a consecutive three-month period,
        shall bear interest at the Chase Bank Rate, plus
        3.00%
        per annum to be payable as set forth above.”

       

       

      ARTICLE
        III

      No
        Waivers

       

      3.01 No
        Waivers.
        Nothing
        contained herein shall be construed as a waiver by Agent or Lenders of any
        covenant or provision of the Financing Agreement or any other Loan Document
        or
        any other contract or instrument between any Company, Agent or Lenders, and
        Agent’s or Lenders’ failure at any time or times hereafter to require strict
        performance by any Company of any provision thereof shall not waive, affect
        or
        diminish any right of Agent or Lenders thereafter to demand strict compliance
        therewith. Each of each Lender and Agent hereby reserves all rights granted
        under the Financing Agreement, and each other Loan Document and any other
        contract or instrument between any Company and Agent or Lenders.

       

       

      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:

       

      
        
          
          

        

        
          2

          
            

          

        

        
          
          

        

      

       

      (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;

       

      (ii) Consent,
        Ratification and Release executed by Thomas E. Kelly, United Fuel & Energy
        Corporation, a Texas corporation, and United Fuel & Energy Corporation, a
        Nevada corporation; and

       

      (iii) 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 Lenders;
        and

       

      (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.

       

       

      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
        Company hereby represents and warrants to Agent and Lenders 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
        will
        not violate the Articles of Incorporation or Bylaws of any Company; (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
        Lenders. Each Company hereby represents and warrants to Agent and Lenders
        that
        it is in full compliance with all covenants and agreements contained in the
        Financing Agreement, and the other Loan Documents, as amended
        hereby.

       

      
        
          
          

        

        
          3

          
            

          

        

        
          
          

        

      

       

      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
        and Lenders 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 Lender.
        Each
        Company agrees to pay on demand all costs and expenses incurred by Agent
        and
        Lenders 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 and Lenders’ legal counsel, and all
        costs and expenses incurred by Agent and Lenders 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 and each Lender’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 no Company may assign
        or
        transfer any of its rights or obligations hereunder without the prior written
        consent of Agent and Lenders.

       

      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 shall
        be
        deemed a consent to or waiver of any other breach of the same or any other
        covenant, condition or duty.

       

      
        
          
          

        

        
          4

          
            

          

        

        
          
          

        

      

       

      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 COMPANY 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 COMPANY HEREBY VOLUNTARILY AND KNOWINGLY RELEASES
        AND FOREVER DISCHARGES 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 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 “REVOLVING CREDIT 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]

      

      
        
          
          

        

        
          5

          
            

          

        

        
          
          

        

      

      Executed
        on this 29th day of March, 2006, to be effective as of the respective date
        indicated above.

       

       

       

      EDDINS-WALCHER
        COMPANY

       

       

      By:
        /s/ Bobby W.
        Page                               

      Name:
        Bobby W.
        Page                               

      Title:
        Vice President &
CFO                       

       

       

      THREE
        D OIL CO. OF KILGORE, INC.

       

      
         

        By:
          /s/ Bobby W.
          Page                               

        Name:
          Bobby W.
          Page                               

        Title:
          Vice President &
CFO                       

         

        
          
            
            

          

          
            
            

            
              

            

          

          
            
            

          

        

      ACCEPTED
        at Dallas, Texas, this 29th day of March, 2006, to be effective as of the
        respective date indicated above.

       

       

      THE
        CIT GROUP/BUSINESS CREDIT, INC., as Agent and a Lender

       

       

       

      By:
        /s/ Alan
        Schnacke                       

           
        Alan Schnacke, Vice President

       

       

      SUNTRUST
        BANK, as a Lender

       

       

       

      By:
        /s/ Mark
        Pickering                       

      Name:
        Mark
        Pickering                       

      Title:
        Vice
        President                           

       

       

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

       

      CONSENT,
        RATIFICATION AND RELEASE

       

       

      Each
        of
        the undersigned hereby consents to the terms of the within and foregoing
        Agreement, confirms and ratifies the terms of each document it has executed
        in
        connection with the Obligations (collectively, the “Documents”),
        and
        acknowledges that the Documents to which it is a party are in full force
        and
        effect and ratifies the same, that it has no defense, counterclaim, set-off
        or
        any other claim to diminish its liability under such Documents, that its
        consent
        is not required to the effectiveness of the within and foregoing Agreement,
        and
        that no consent by it is required for the effectiveness of any future amendment,
        modification, forbearance or other action with respect to the Revolving Line
        of
        Credit, the Collateral, or any of the other Loan Documents.
        EACH OF THE UNDERSIGNED 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 THE AGREEMENT IS EXECUTED, WHICH THE UNDERSIGNED 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 “REVOLVING CREDIT 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.

       

      UNITED
        FUEL & ENERGY CORPORATION, a Texas corporation

       

       

      By:
        /s/ Bobby W.
        Page                               

      Name:
        Bobby W.
        Page                               

      Title:
        Vice President &
CFO                       

       

      UNITED
        FUEL & ENERGY CORPORATION, a Nevada corporation

      

      
         

        By:
          /s/ Bobby W.
          Page                               

        Name:
          Bobby W.
          Page                               

        Title:
          Vice President &
CFO                       

         

      

       

      
        /s/
          Thomas E.
          Kelly                                    

      

      Thomas
        E. Kelly

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