EXHIBIT 10.3
 
SECOND AMENDMENT TO SECOND AMENDED AND RESTATED
FINANCING AGREEMENT AND OTHER LOAN DOCUMENTS

THIS SECOND AMENDMENT TO SECOND AMENDED AND RESTATED FINANCING AGREEMENT AND
OTHER LOAN DOCUMENTS (“this Agreement”) entered into on this 5th day of October,
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”), and Wachovia Bank, N.A. (“Wachovia”),
as Required Lenders, CIT as administrative and collateral agent (“Agent”), and
United Fuel & Energy Corporation, a Texas corporation (“United”), and Three D
Oil Co. of Kilgore, Inc., a Texas corporation (“Three D”), and Cardlock Fuels
System, Inc., a California corporation (“Cardlock”) (United, Three D and
Cardlock 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. United, Three D, Agent, Required Lenders and PNC Bank National Association
(“PNC”, with PNC and Required Lenders being hereinafter referred to as
“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. Companies and Parent have requested that Agent and Required Lenders consent
to the acquisition by Parent from Frank P. Greinke, as Trustee under the Greinke
Business Living Trust, dated April 20, 1999 (the “Greinke Trust”) of all the
issued and outstanding capital stock of Cardlock for a purchase price of
$36,961,915, such purchase price to be payable in the 24,641,276 shares of
Parent’s common stock, par value $0.001 per share, the acquisition to be
consummated on the terms specified in that certain Mutual Stock Purchase
Agreement, dated September 14, 2007, executed by Parent, Cardlock, Frank P.
Greinke and Greinke Trust which has been supplied to Agent without exhibits or
schedules (the “Cardlock Stock Purchase Agreement”) (the “Cardlock
Transaction”).

C. Pursuant to the terms and conditions of this Agreement, (i) Agent and
Required Lenders are willing to consent to the consummation of the Cardlock
Transaction, and (ii) each of Companies, Agent and Required Lenders are willing
to amend the Financing Agreement as hereinafter set forth, including, without
limitation, to amend the Financing Agreement to make Cardlock a party to and a
co-borrower under the Financing Agreement and to make Cardlock a joint and
several co-obligor for payment of the Obligations, and (iii) each of the parties
hereto are willing 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, as
hereinafter set forth:
 
 
 

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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 Consent to Cardlock Transaction. Subject to the satisfaction of the
conditions precedent specified in Article IV of this Agreement, each of Agent
and Required Lenders hereby agrees to the consummation of the Cardlock
Transaction. The foregoing consent is strictly limited to the consummation of
the Cardlock Transaction as described in the Recitals to this Agreement and such
consent shall not apply to or constitute a consent to any future transaction
involving Companies or Parent and shall in no way constitute any course of
dealing or other basis for altering any obligation of any Company or Parent or
any right, privilege or remedy of Agent or any Lender.

2.02 References to “Company” and “Companies” in Financing Agreement. Effective
as of the date of execution of this Agreement, all references in the Financing
Agreement to “Company” and “Companies” in the Financing Agreement shall be
deemed to include references to Cardlock, as well as to United and Three D.

2.03 Grant by Cardlock of Security Interest in Collateral. Cardlock hereby
agrees that by becoming a party to the Financing Agreement, it is subject to all
the provisions of the Financing Agreement, including, without limitation, the
grant of a continuing security interest in, and lien upon, all of its right,
title and interest in all of its property, whether now owned or existing or
hereafter created, acquired or arising and wheresoever located, as specified in
Section 6.1 of the Financing Agreement. In accordance therewith, in order to
secure the prompt payment and performance of the Obligations, Cardlock hereby
grants to Agent, for the benefit of Lenders, a continuing security interest in,
and general lien upon, all of its right, title and interest in all of its
property, whether now owned or existing or hereafter created, acquired or
arising and wheresoever located, including, without limitation, all of its:

(a)
Accounts;

(b)
Inventory;

(c)
General Intangibles;

(d)
Documents of Title;

(e)
Real Estate;

(f)
Other Collateral; and

(g)
Equipment.

 
 
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The Companies hereby agree and acknowledge that no asset of Cardlock shall be
considered for inclusion in the Borrowing Base until: (i) Agent determines, in
its sole discretion, that Agent has a first priority and fully perfected
security interest in such asset and such asset is otherwise “eligible” for
inclusion in the Borrowing Base pursuant to the terms, conditions and provisions
of the Financing Agreement; (ii) Agent receives evidence satisfactory to Agent,
in its sole discretion, that Agent has been named as mortgagee, loss payee and
additional insured on all property of Cardlock and liability insurance policies
of Cardlock pursuant to issued endorsements in form and substance satisfactory
to Agent; and (iii) Agent determines, in its sole discretion, that payments from
account debtors of Cardlock are being paid into the Blocked Accounts in a manner
and pursuant to documentation satisfactory to Agent.

2.04 Amendments to Existing Promissory Notes. Cardlock hereby agrees that by
becoming a party to the Financing Agreement, Cardlock is now jointly and
severally liable, along with United and Three D, for payment and performance of
all Obligations pursuant to the terms and provisions of the Financing Agreement
and the other Loan Documents, including, without limitation, the provisions of
Section 15 of the Financing Agreement. Cardlock hereby agrees that it is
accordingly jointly and severally liable with the other Companies for payment of
the indebtedness evidenced by the Promissory Notes. Therefore, each of the
parties hereto agrees that Cardlock shall hereafter be considered to be a maker
of each existing Promissory Note and that each reference in each existing
Promissory Note to “Company” or “Companies” shall hereafter be deemed to also
refer to Cardlock.

2.05 Amendment to Schedule 7(1) to Financing Agreement. Effective as of the date
hereof, Schedule 7(1) to Financing Agreement (Company Information) is hereby
deleted in its entirety and replaced with Schedule 7(1) attached hereto.

2.06 Amendment to Schedule 7(15)(g) to Financing Agreement. Effective as of the
date hereof, Schedule 7(15)(g) to Financing Agreement (Real Property Owned and
Leased/Collateral Locations) is hereby deleted in its entirety and replaced with
Schedule 7(15)(g) attached hereto.

2.07 Amendment to Schedule 7(15)(q) to Financing Agreement. Effective as of the
date hereof, Schedule 7(15)(q) to Financing Agreement (Subsidiaries) is hereby
deleted in its entirety and replaced with Schedule 7(15)(q) attached hereto.

2.08 Additional Agreements. Companies hereby agree (i) to deliver to Agent
within thirty (30) days of the date hereof amended and restated Promissory
Notes, duly executed by each Company, whereby the existing Promissory Notes are
amended and restated to reflect each Company as maker and to reflect the
respective unpaid principal amount of such Promissory Note, (ii) to deliver to
Agent within thirty (30) days of the date hereof, such documentation executed by
Cardlock regarding the Blocked Accounts as shall be required by Agent, in form
and substance satisfactory to Agent, and (iii) to use their best efforts to get
the existing lessors of Cardlock to disclaim any interest in fuel or other
inventory of Cardlock that may from time to time be in any tanks leased to
Cardlock or otherwise located upon or related to any improvements leased to
Cardlock.
 
 
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ARTICLE III
Limited Waiver to Cardlock Transaction

3.01 No Waivers. Subject to the satisfaction of the conditions precedent
specified in Article IV of this Agreement and in addition to the provisions of
Section 2.01 of this Agreement, each of Agent and each Required Lender hereby
waives the covenants in the Financing Agreement to the extent such covenants
would be deemed violated solely due to the consummation of the Cardlock
Transaction. 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.

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 Required Lenders;

(ii) Stock Pledge Agreement covering all shares of capital stock in Cardlock now
or hereafter owned by Parent, duly executed by Parent, substantially in the form
of Annex I attached hereto; together with the original stock certificates
evidencing such capital stock; together with an undated stock power for each
such certificate, executed in blank by Parent;

(iii) Guaranty as to all indebtedness of Companies to Agent and Lenders, duly
executed by Parent, substantially in the form of Annex II attached hereto;

(iv) Subordination Agreement subordinating payment of all indebtedness of
Companies to Parent to prior payment in full of the Obligations, duly executed
by Parent, substantially in the form of Annex III attached hereto; and

(v) Such additional documents, instruments and information as Agent may request.
 
 
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(b) Agent shall also have received all of the following additional information
and documentation, each in form and substance satisfactory to Agent:

(i) Evidence that the Cardlock Transaction has been consummated consistent with
the description of the Cardlock Transaction contained in the Recitals to this
Agreement, together with copies of all documents, agreements, materials and
certificates executed or issued in connection with the Cardlock Transaction,
including, without limitation, the Cardlock Stock Purchase Agreement, including
all exhibits and schedules thereto; and

(ii) If needed, evidence that Parent and Companies have obtained the consent of
Sterling Bank to the Cardlock Transaction;

(c) 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;

(d) 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 Required Lenders; and

(e) 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 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 Required Lender. Each Company 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.
 
 
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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.

6.06 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.
 
 
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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.
 

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Executed on this 5th day of October, 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              
CARDLOCK FUELS SYSTEM, INC.,
 
a California 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

 
 
 

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ACCEPTED at Dallas, Texas, this 5th day of October, 2007, to be effective as of
the respective date indicated above.
             
THE CIT GROUP/BUSINESS CREDIT, INC.,
 
as Agent and Lender
         
By: 
/s/ Alan R. Schancke
 
Name: 
Alan R. 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

 
 

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