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:

       

      
        
           

        

        
           

          
            

          

        

        
           

        

      

       

      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.

              


      

       

      
        
           

        

        
          2

          
            

          

        

        
           

        

      

       

      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.

       

      
        
           

        

        
          3

          
            

          

        

        
           

        

      

       

      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.

       

      
        
           

        

        
          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.

      


      6.06 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

          
            

          

        

        
           

        

      

       

      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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          7

          
            

          

        

        
           

        

      

       

      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

                


        

         

        
          
             

          

          
             

            
              

            

          

          
             

          

        

         

        
          	 	
                  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