UNITED STATES SECURITIES AND EXCHANGE COMMISSION

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

FORM 8-K

CURRENT REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934

TOJanuary 7, 2009 ~~SECTION~~(December 1331, OR2008) Date 15of report (d)Date OFof ~~THE~~earliest event reported)

SECURITIES EXCHANGE ACT OF 1934

August 11, 2008

(August 8, 2008)

Date of report

(Date of earliest event reported)

UNITED FUEL & ENERGY CORPORATION

(Exact Name of Registrant as Specified in Its Charter)

Nevada
(State or Other Jurisdiction of Incorporation)
333-68008		91-2037688
(Commission File Number)		(IRS Employer Identification No.)
405 N. Marienfeld, Midland, Texas		79701
(Address of Principal Executive Offices)		(Zip Code)
(432) 571-8000
(Registrant’s Telephone Number, Including Area Code)
(Former Name or Former Address, if Changed Since Last Report)

Nevada
(State or Other Jurisdiction of Incorporation)


000-32473		91-2037688
(Commission File Number)		(IRS Employer Identification No.)

1800 W. Katella Ave., Suite 102
Orange, CA		92867
(Address of Principal Executive Offices)		(Zip Code)

(714) 923-3025
(Registrant’s Telephone Number, Including Area Code)

(Former Name or Former Address, if Changed Since Last Report)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):

o		Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

o		Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

o		Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

o		Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Item 1.01 Entry into a Material Definitive Agreement.

On ~~August 8~~ December 31, 2008, weUnited ~~and~~Fuel ~~the~~& ~~lenders~~Energy ~~under~~Corporation, ~~our~~a ~~Second~~Texas ~~Amended~~corporation (“United Fuel”), a wholly-owned subsidiary of United Fuel & Energy Corporation, a Nevada corporation (the “Company”), entered into and closed ~~Restated~~an ~~Financing~~Asset Purchase Agreement dated ~~March 27~~December 31, ~~2007~~2008 (the “Purchase Agreement”), by and ~~The~~between ~~Greinke~~United ~~Personal~~Fuel and ~~Living~~Propane ~~Trust~~Direct ~~entered~~Enterprises, LLC, a Texas limited liability company (“Propane ~~into~~Direct”), pursuant to which United Fuel agreed to sell substantially all of the assets of its propane distribution business to Propane Direct, excluding approximately a ~~Seventh~~$3.4 million ~~Amendment~~portion of the accounts receivable that are being retained by United Fuel, and Propane Direct agreed to assume all the liabilities arising out of the ownership or operation of such assets (the “Propane Disposition”). The Propane Disposition occurred simultaneously with the signing of the Purchase Agreement. The Propane Direct entity involved in the Propane Disposition is not related to Propane Direct, LLC, the Oklahoma limited liability company from whom United Fuel acquired certain propane-related assets in 2007 as described in the Company’s Current Report on Form 8-K filed on June 6, 2007.

~~The purpose~~Thomas ofE. ~~the Seventh Amendment to our Second Amended and Restated Financing Agreement is to~~Kelly, ~~among other things, provide: (i) a replacement for~~ the ~~Forbearance~~ ~~Agreement~~Company’s ~~and~~Vice ~~Sixth~~Chairman ~~Amendment to our Second Amended~~ and ~~Restated Financing Agreement; (ii)~~ a ~~waiver~~member of the ~~previous~~Company’s ~~events~~board of ~~default; (iii)~~ ~~an increase~~directors, inis ~~the~~a ~~interest~~manager ~~rates applicable to the revolver~~ and ~~the~~principal ~~term~~beneficial ~~loans; (iv)~~owner ~~new~~of ~~EBITDA~~Propane ~~and~~Direct ~~fixed charge coverage ratio covenant requirements; (v) a reduction in the annual limit on capital expenditures from $5 million to $3 million; (vi) a requirement for an equipment~~ and ~~real~~also ~~estate appraisal on all~~serves ~~collateral~~as ~~supporting~~Propane ~~the lenders~~Direct’s ~~term~~chief ~~loans;~~executive ~~(vii)~~officer. ~~a requirement that we reduce our over-90 day accounts receivable balance to no greater than $4~~Mr.~~5 million~~ byKelly ~~October 31, 2008; (viii) a requirement that we maintain accounts~~has ~~payable~~personally ~~terms~~guaranteed ofPropane noDirect’s ~~less~~promissory ~~than~~notes 30issued ~~days~~ to ~~our affiliate, Southern Counties Oil~~ ~~Co.~~United ~~and~~Fuel ~~its~~as ~~affiliates;~~described ~~and (ix) additional and expanded reporting requirements on a more frequent basis~~below.

~~As consideration~~The ~~for~~purchase price payable by Propane Direct under the ~~Seventh~~terms ~~Amendment,~~of wethe ~~have~~Purchase ~~agreed~~Agreement was approximately $9.8 million, subject to ~~pay~~certain ~~our~~post-closing ~~lenders~~adjustments set forth in athe Purchase Agreement. The purchase price was paid by the delivery of three promissory ~~non-refundable~~notes ~~amendment~~of ~~fee~~Propane Direct in favor of United Fuel: (i) a short term unsecured promissory note for approximately $~~200,000~~7.7 million ~~payable~~(the in“Bridge ~~four~~Note”); ~~equal~~(ii) a ~~monthly~~subordinated unsecured ~~installments~~promissory ~~beginning~~note onfor ~~August~~approximately 8,$1.5 million ~~2008~~(the “Subordinated Note”); and (iii) a deed of trust note for approximately $0.6 million (the “Deed of Trust Note”).

~~The foregoing~~United ~~description~~Fuel ofaccepted the ~~Seventh~~Bridge ~~Amendment~~Note isas ~~not~~part ~~complete~~of ~~and~~the isconsideration ~~qualified~~for the Propane Disposition at closing in ~~its~~order ~~entirety~~to byfacilitate ~~reference~~the closing on December 31, 2008. United Fuel was unable to obtain the ~~full~~consent ~~text~~of one of its lenders for the ~~Seventh~~Propane Disposition ~~Amendment,~~prior ato ~~copy~~Propane Direct’s lender’s wire transfer deadline. When United Fuel did receive the consent of ~~which~~its islender ~~filed~~later ~~herewith~~in asthe ~~Exhibit~~day 10on December 31, 2008, it accepted the Bridge Note from Propane Direct in lieu of cash at closing.1 The Bridge Note had a maturity date of January 7, 2009 and iswas ~~incorporated~~repaid ~~herein~~in full in cash by Propane Direct on ~~reference~~January 5, 2008.

~~Seventh Amendment~~The ~~has~~Subordinated ~~been~~Note ~~included~~bears tointerest ~~provide~~at ~~investors~~a ~~and~~floating ~~security~~rate ~~holders~~equal ~~with information~~to ~~regarding~~the ~~its~~London ~~terms.~~Interbank Offered ItRate is(LIBOR) plus ~~not~~3.00% ~~intended~~and tohas ~~provide~~a ~~any~~maturity ~~other~~date ~~factual information~~of ~~about~~January 31, us2014. ~~The~~Interest only ~~representations,~~on ~~warranties and covenants contained in~~ the ~~Seventh~~outstanding ~~Amendment~~principal ~~were~~balance ~~made~~of ~~only~~the ~~for~~Subordinated ~~purposes~~Note ofshall ~~that~~be ~~agreement~~due and as ~~of specific~~payable ~~dates,~~monthly ~~were~~on ~~solely for~~ the ~~benefit~~first day of ~~the~~each ~~parties~~month tocommencing ~~the~~on ~~Seventh Amendment~~February 1, ~~and~~2009. Commencing ~~may~~on beMay 1, ~~subject~~2009, toand ~~limitations~~continuing ~~agreed~~on ~~upon by~~ the ~~contracting parties,~~first ~~instead~~day of ~~establishing~~each ~~these~~month ~~matters~~thereafter prior asto ~~facts~~maturity, ~~and~~the ~~may~~principal ~~be subject to standards~~ of ~~materiality~~the ~~applicable~~Subordinated toNote ~~the~~shall ~~contracting~~be ~~parties~~due ~~that~~and ~~differ~~payable in ~~from those~~monthly ~~applicable~~installments toof ~~investors~~$17,437.50 ~~Investors~~for ~~are~~the ~~not~~payments ~~third-party~~due ~~beneficiaries under the~~May ~~Seventh~~1 ~~Amendment~~through ~~and~~October ~~should~~1 ~~not~~of ~~rely~~each year, onand $35,403.42 for the ~~representations,~~payments ~~warranties and covenants~~due orNovember ~~any~~1 ~~descriptions~~through ~~thereof~~April as1. ~~characterizations~~Interest ofon the unpaid ~~actual~~principal ~~state~~ balance of ~~facts~~the orSubordinated ~~condition~~Note ofshall ~~United~~be ~~Fuel~~payable &as ~~Energy~~it ~~Corporation.~~accrues ~~Moreover,~~on the ~~information~~same ~~concerning~~dates ~~the~~as ~~subject~~and ~~matter~~in ofaddition to the ~~representations~~installments ~~and~~of ~~warranties may~~principal. ~~change~~The ~~after~~Subordinated ~~the~~Note is ~~date~~subordinate ofto ~~the~~Propane ~~Seventh~~Direct’s ~~Amendment,~~indebtedness ~~which~~to ~~subsequent~~its ~~information~~bank ~~may~~lender orand ~~may~~is ~~not~~personally guaranteed beby ~~fully~~certain ~~reflected~~principal inbeneficial ~~the~~owners ~~public~~and ~~disclosures~~officers of ~~United~~Propane ~~Fuel~~Direct, ~~& Energy~~including ~~Corporation~~Mr. Kelly.

~~Item~~The Deed of Trust Note bears interest at a floating rate equal to LIBOR plus 4.00% and 2has a maturity date of January 31, 2014.03 Commencing on February ~~Creation~~1, 2009, and continuing on the first day of aeach month thereafter prior to maturity, the principal of the Deed of Trust Note shall be due and payable in monthly installments of $10,573.77. Interest on the unpaid principal balance of the Deed of Trust Note shall be payable as it accrues on the same dates as and in addition to the installments of principal. The Deed of Trust Note is secured by first lien deeds of trust on three parcels of real property included in the assets sold to Propane Direct ~~Financial~~pursuant ~~Obligation~~to orthe anPurchase ~~Obligation~~Agreement ~~under~~and anis personally ~~Off-Balance~~guaranteed ~~Sheet~~by certain principal beneficial owners and officers of Propane ~~Arrangement~~Direct, including Mr. Kelly. United Fuel will use the net proceeds from the sale of athe assets ~~Registrant~~of its propane distribution business to repay certain term loans and borrowings under its revolving credit facility.

~~The information set forth above in Item 1.01 regarding the Seventh Amendment is hereby incorporated into this Item~~ 2~~.03 by reference.~~

The Purchase Agreement contains customary representations, warranties and indemnification provisions. The preceding description of the Purchase Agreement is a summary of its material terms, does not purport to be complete, and is qualified in its entirety by the copy of the Purchase Agreement, which is filed herewith as Exhibit 2.1. In addition, the preceding descriptions of the Subordinated Note and the Deed of Trust Note are a summary of their material terms, do not purport to be complete, and are qualified in their entirety by copies of the Subordinated Note and the Deed of Trust Note, which are filed herewith as Exhibit 10.1 and Exhibit 10.2, respectively.

Item 2.01 Completion of Acquisition or Disposition of Assets.

The information set forth in Item 1.01 is hereby incorporated by reference into this Item 2.01.

The amount of consideration paid by Propane Direct to United Fuel in connection with the Propane Disposition was negotiated between Propane Direct and the Company and approved by the Company’s board of directors (excluding Thomas E. Kelly). In addition, the audit committee of the Company’s board of directors, which is composed entirely of independent directors, also approved the Propane Disposition. The aggregate purchase price of approximately $9.8 million for the assets sold in the Propane Disposition included the negotiated price of approximately $7.8 million set forth in the Purchase Agreement, plus approximately $0.5 million in inventory valued at the lesser of the current fair market value on the closing date or the price at which the inventory was acquired, plus approximately $2.0 million for the balance of the wholesale accounts receivable that were not excluded from the assets sold to Propane Direct valued at 100% of book value, less the amount of approximately $0.5 million in cash collected on “pre-buy” customer contracts being assumed by Propane Direct.

Item 9.01 Financial Statements and Exhibits.

(da) ~~Exhibits~~ Financial Statements of Businesses Acquired.

	Exhibit Number	Description
	Exhibit 10.1	Seventh Amendment to Second Amended and Restated Financing Agreement dated August 8, 2008, by and among The CIT Group/Business Credit, Inc., Wachovia Bank, N.A., PNC Bank, National Association, SunTrust Bank, The Greinke Personal Living Trust, Frank P. Greinke, Trustee, United Fuel & Energy Corporation, a Texas corporation, Three D Oil Co. of Kilgore, Inc., Cardlock Fuels System, Inc., and United Fuel & Energy Corporation, a Nevada corporation.

Not applicable.

(b) Pro Forma Financial Information.

Not applicable.

(c) Shell Company Transactions.

Not applicable.

(d) Exhibits.


Exhibit Number		Exhibit Description

2.1		Asset Purchase Agreement dated December 31, 2008, by and between United Fuel & Energy Corporation, a Texas corporation, and Propane Direct Enterprises, LLC, a Texas limited liability company.

10.1		Subordinated Promissory Note dated December 31, 2008 issued by Propane Direct, LLC to United Fuel & Energy Corporation, a Texas corporation.

10.2		Deed of Trust Promissory Note dated December 31, 2008 issued by Propane Direct, LLC to United Fuel & Energy Corporation, a Texas corporation.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this Report to be signed on its behalf by the undersigned hereunto duly authorized.

	UNITED FUEL & ENERGY CORPORATION	~~UNITED FUEL & ENERGY CORPORATION~~
Date: August 11, 2008	By:	/s/ D. Lyndon James
Date: January 7, 2009	By:	/s/ William C. Bousema
		D. Lyndon James
		William C. Bousema
		Interim Chief Financial Officer, Vice President and Secretary
		Executive Vice President, Chief Financial Officer and Secretary

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