FOURTH
      AMENDMENT TO AMENDED AND RESTATED

    LOAN
      AGREEMENT

    


    This
      Fourth Amendment to Amended and Restated Loan Agreement (this “Fourth
      Amendment”) is entered into as of the 29th day of March, 2006, to be effective
      as of June 30, 2005 (the “Effective Date”) by and among THREE
      D OIL CO. OF KILGORE, INC.,
      a Texas
      corporation (“Borrower”), UNITED
      FUEL & ENERGY CORPORATION,
      a Texas
      corporation (“United” or a “Guarantor”), THOMAS
      E. KELLY,
      an
      individual residing in Midland County, Texas (“Kelly” or a “Guarantor”) (United
      and Kelly are collectively referred to herein as “Guarantors”), and CITIBANK
      TEXAS, N.A., a
      national banking association, formerly known as First American Bank, SSB
      (“Lender”).

    


    


    RECITALS:

    


    A. Borrower,
      Guarantors and Lender entered into that certain Amended and Restated Loan
      Agreement dated as of October 10, 2003, as amended by First Amendment to Amended
      and Restated Loan Agreement and Consent dated as of July 14, 2004, by Second
      Amendment to Amended and Restated Loan Agreement and Consent dated August 6,
      2004, and by Third Amendment to Amended and Restated Loan Agreement dated
      October 10, 2004 (the “Loan Agreement”).

    


    B. Pursuant
      to the terms of the Loan Agreement, Borrower executed that certain Term Note
      dated October 10, 2003, in the original principal amount of $1,500,000, payable
      to the order of Lender (the “Term Note”).

    


    C. Borrower
      and Guarantors have requested that Lender amend certain provisions of the Loan
      Agreement, which Lender has agreed to do subject to the terms and conditions
      contained herein.

    


    NOW
      THEREFORE, in consideration of the premises and the mutual covenants herein
      contained and other good and valuable consideration, it is hereby agreed between
      Lender, Borrower and Guarantors as follows:

    


    


    Agreement

    


    1. Definitions.
      Except
      as otherwise expressly provided herein, all capitalized terms used but not
      defined herein shall have the respective meanings ascribed thereto in the Loan
      Agreement.

     

    
      
         

      

      
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    2. Amendment
      to Loan Agreement.
      Effective as of the Effective Date, Section 7.13 of the Loan Agreement (Debt
      Service Coverage Ratio) is hereby amended in its entirety to read as
      follows:

    


    7.13 Debt
      Service Coverage Ratio.
      Borrower will not permit its Debt Service Coverage Ratio to be less than 1.25
      to
      1.0 as of the last day of any fiscal quarter of Borrower ending on or after
      September 30, 2006.

    


    3. Conditions
      Precedent.
      The
      effectiveness of this Fourth Amendment shall be subject to the satisfaction
      of
      each of the following conditions precedent:

    


    (a) Borrower
      and Guarantors shall have executed and delivered to Lender this Fourth Amendment
      and all other required documents, all in form and substance satisfactory to
      Lender;

    


    (b) CIT
      shall
      have waived its right under Section 14 of the Intercreditor Agreement to receive
      a copy of this Fourth Amendment at least ten (10) days prior to the execution
      thereof; and

    


    (c) The
      Boards of Directors of Borrower and United shall have approved the execution,
      delivery and performance of this Fourth Amendment and all other required
      documents by resolutions satisfactory to Lender and its counsel, and appropriate
      certificates as to such actions, showing the parties authorized to execute
      the
      same and all items required herein, shall have been delivered to
      Lender.

    


    4. Representations.
      As an
      inducement to Lender to enter into this Fourth Amendment, Borrower and
      Guarantors jointly and severally represent and warrant to Lender that (i) the
      representations and warranties contained in the Loan Agreement are true and
      correct as of the execution date hereof, (ii) neither Borrower nor Guarantors
      have breached any of the covenants contained in the Loan Agreement or the other
      Loan Papers (except as may have been waived in writing by Lender), and (iii)
      no
      Event of Default now exists, nor does there exist any condition or event which,
      with notice and/or lapse of time, would constitute an Event of
      Default.

    


    5. No
      Waiver.
      Neither
      the execution by Lender of this Fourth Amendment nor anything contained herein
      shall in anywise be construed or operate as a waiver by Lender of any Event
      of
      Default (whether now existing or that may occur hereafter) or any of Lender's
      rights under the Loan Agreement, as hereby amended, or under any of the other
      Loan Papers.

    


    6. Ratification.
      Except
      as provided herein, all terms and provisions of the Loan Agreement shall remain
      unchanged. Borrower and Guarantors hereby ratify, affirm and reaffirm all of
      the
      terms and provisions of the Loan Agreement as amended hereby, of the Term Note,
      of the Guaranties, of the Security Documents and of the other Loan Papers,
      in
      each case to the extent such party is a party thereto.

     

    
      
         

      

      
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    7. Governing
      Law.
      This
      Fourth Amendment is being executed and delivered, and is intended to be
      performed, in the State of Texas, and the substantive laws of the State of
      Texas
      shall govern the validity, construction, enforcement and interpretation of
      this
      Fourth Amendment and all other documents and instruments referred to herein,
      unless otherwise specified therein.

    


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

    


    9. Counterparts.
      This
      Fourth Amendment may be executed in any number of separate counterparts
      (including by facsimile transmission), each of which shall be deemed to be
      an
      original, but all of which taken together shall constitute one and the same
      instrument.

    


    


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    EXECUTED
      effective as of the Effective Date. 

    


    
      	 	 	 
	
              BORROWER:

            	THREE
              D OIL CO. OF
              KILGORE, INC.
	 
 	 
 	 
 
	 	By:  	/s/ Bobby
              W.
              Page
	 	
              
Bobby
              W. Page
	 	Vice
              President and Chief Financial Officer



    
      


      
        	 	 	 
	
                GUARANTORS:

              	 
	 
 	 
 	 
 
	 	By:  	/s/ Thomas
                E.
                Kelly
	 	
                
THOMAS
                E. KELLY



      

        	 	 	 
	 	UNITED
                FUEL &
                ENERGY CORPORATION
	 
 	 
 	 
 
	 	By:  	/s/ Bobby
                W.
                Page
	 	
                
Bobby
                W. Page
	 	Vice
                President and Chief Financial
                Officer




    

    
      


      
        	 	 	 
	
                LENDER:

              	CITIBANK
                TEXAS,
                N.A.
	 
 	 
 	 
 
	 	By:  	/s/ Frank
                K.
                Stowers
	 	
                
Frank
                K. Stowers
	 	Senior Vice
                President



      
 

    

    
      
         

      

      
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