SUBORDINATED PROMISSORY NOTE

Exhibit 10.1 THIS SUBORDINATED PROMISSORY NOTE IS SUBJECT TO THE TERMS OF THAT CERTAIN SUBORDINATION AGREEMENT AMONG PROPANE DIRECT ENTERPRISES, LLC, UNITED FUEL & ENERGY CORPORATION, AND CITIBANK, N.A., DATED ON THE DATE HEREOF, AS IT MAY BE MODIFIED, AMENDED, OR RESTATED (THE " SUBORDINATION AGREEMENT "). THIS CHATTEL PAPER IS SUBJECT TO A SECURITY INTEREST IN FAVOR OF THE CIT GROUP/BUSINESS CREDIT, INC., AS AGENT FOR ITSELF AND OTHER LENDERS. FURTHER ENCUMBRANCE OR ASSIGNMENT OF THIS CHATTEL PAPER VIOLATES THE RIGHTS OF THE CIT GROUP/BUSINESS CREDIT, INC. AND SUCH OTHER LENDERS. SUBORDINATED PROMISSORY NOTE

     FOR VALUE RECEIVED, the undersigned, PROPANE DIRECT ENTERPRISES, LLC, a Texas limited liability company, whose address is 505 N. Big Spring, Suite 101, Midland, Texas 79701 ( "Borrower" ) hereby promises to pay to the order of UNITED FUEL & ENERGY CORPORATION , a Texas corporation ( "Lender" ) the principal sum of ONE MILLION FIVE HUNDRED FOURTEEN THOUSAND FOUR HUNDRED TWENTY AND 87/100 DOLLARS ($1,514,420.87) , with interest on the unpaid principal balance thereof from date hereof until maturity at the rate hereinafter provided, both principal and interest payable as hereinafter provided in lawful money of the United States of America at Lender’s offices at 1800 W. Katella Ave., Suite 102, Orange, California, 92867, or at such other place as from time to time may be designated by the holder of this Note.      The unpaid principal of this Note from time to time outstanding shall bear interest prior to maturity at a per annum rate equal to (i) the London Interbank Offered Rate (defined below), plus (ii) three percent (3.0%). "London Interbank Offered Rate" means the rate per annum, determined by Lender in accordance with its customary procedures utilizing such electronic or other quotation sources as it considers appropriate, at which U.S. dollar deposits are offered in the London interbank market at or about 11:00 a.m. (London time) two (2) Business Days prior to the commencement of the applicable Interest Period (the "Index" ). The Index is not necessarily the lowest rate charged by Lender on its loans. If the Index becomes unavailable during the term of this loan, Lender may designate a substitute index after notifying Borrower. The interest rate change will not occur more often than each Interest Period. "Interest Period" means (i) initially, the period commencing on the last day of the Initial Interest Period (defined below), and ending one (1) month thereafter, and (ii) thereafter each one (1) month period commencing on the last day of the next preceding Interest Period. "Initial Interest Period" means the period commencing on the date of this Note and ending on February 1, 2009. The interest rate on this Note during the Initial Interest Period shall be based on an a Interest Period of one (1) month although the actual number of days constituting the Initial Interest Period may be more or less. Borrower understands that Lender may make loans based on other rates as well. All calculations of interest chargeable under this Note shall be made on the basis of actual days elapsed (including the first day but excluding the last) and a year of 360 days, unless such calculations would result in a rate in excess of the Highest Lawful Rate, in which case interest shall be calculated on the basis of actual days elapsed and a year of 365 or 366 days, as appropriate. NOTICE: Under no circumstances will the interest rate on this Note be more than the Highest Lawful Rate.      Interest only on the outstanding principal balance of this Note shall be due and payable monthly on the 1st day of each month commencing February 1, 2009 and continuing through April 1, 2009. Commencing on May 1, 2009, and continuing on the 1st day of each month

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thereafter prior to maturity, the principal of this Note shall be due and payable in monthly installments of $17,437.50 each for the payments due May 1 through October 1 of each year until scheduled maturity, and $35,403.42 each for the payments due November 1 through April 1 until scheduled maturity, and interest on the unpaid principal balance of this Note shall be payable as it accrues on the same dates as and in addition to the installments of principal. On January 31, 2014, the then unpaid principal balance of this Note and all accrued and unpaid interest on this Note shall be finally due and payable in full, without presentment, demand, protest or any other notice of any kind, all of which are hereby expressly waived. All payments on this Note shall be applied first to accrued interest and then to principal.      This Note is not a revolving line of credit, and the total amount of all advances hereunder shall not exceed $1,514,420.87.      All past due principal and/or interest or installments thereof shall bear interest from maturity at the Highest Lawful Rate. For so long as any Event of Default exists under this Note or under any of the other Loan Documents (hereinafter defined), regardless of whether or not there has been an acceleration of the indebtedness evidenced by this Note, and at all times after the maturity of the indebtedness evidenced by this Note (whether by acceleration or otherwise), and in addition to all other rights and remedies of Lender hereunder, interest shall accrue on the outstanding principal balance hereof at the Highest Lawful Rate, and such accrued interest shall be immediately due and payable. " Highest Lawful Rate " means the maximum interest rate permitted under applicable law.      Subject to the terms of the Loan Documents, upon the failure to pay any installment of the principal of or interest on this Note as above promised or upon the occurrence of an Event of Default specified in this Note or any other Loan Document, the holder of this Note or any part thereof shall have the option of declaring the principal balance hereof and the interest accrued hereon to be immediately due and payable. The term " Loan Documents " shall mean this Note and any other instrument or agreement executed in connection with this Note, including but not limited to, (i) each Personal Guaranty executed by Tom Kelly, Brock Hardy, and Max Hardy of even date herewith, and (ii) Limited Guaranty executed by Michael Montgomery of even date herewith.      Subject to the terms and conditions of the Subordination Agreement, Borrower shall have the right to prepay, without penalty, at any time and from time to time prior to maturity, all or any part of the unpaid principal balance of this Note and/or all or any part of the unpaid interest accrued to the date of such prepayment, provided that any such principal thus paid is accompanied by accrued interest on such principal. All prepayments of principal shall be applied in the inverse order of maturity.       1.  Initial Advance . The obligation of Lender to make the initial advance hereunder shall be subject to satisfaction of each of the following conditions precedent:      (a) There shall have been executed, where appropriate, and delivered by Borrower and any guarantors (and/or any other requisite party thereto) executed Loan Documents and such other documents or instruments as Lender may reasonably require.      (b) No Material Adverse Change shall have occurred in the financial condition, assets or business prospects of Borrower or any guarantor.

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      2.  Representations and Warranties . In order to induce Lender to enter into this Note, Borrower represents and warrants to Lender as of the date hereof, which representations and warranties shall survive the delivery of the Notes, as follows:      (a)  Existence and Authority . Borrower is a limited liability company duly organized, legally existing and in good standing under the laws of the State of Texas. Borrower is duly qualified in all other jurisdictions wherein its operations, transaction of business or ownership of property makes such qualification necessary.      (b)  Powers . Borrower is duly authorized and empowered to execute and deliver this Note, the other Loan Documents and all other instruments referred to or mentioned herein to which it is a party, and all action (limited liability company or otherwise) on Borrower’s part requisite for the due creation, issuance and delivery of the Notes and the due execution and delivery of this Note and the other Loan Document to which it is a party has been duly and effectively taken. This Note is, and the other Loan Documents when duly executed and delivered will be, legal, valid and binding obligations of Borrower, to the extent it is a party thereto, enforceable in accordance with their terms (subject to any applicable bankruptcy, insolvency or other laws generally affecting the enforcement of creditors’ rights). The Loan Documents do not violate any provisions of Borrower’s certificate of formation, company agreement or other governing documents, or of any contract or other agreement, law or regulation to which Borrower is subject, and the same do not require the consent or approval of any other person or entity, including without limitation, any regulatory authority or governmental body of the United States, of any state or of any political subdivision of the United States or of any State.      (c)  Financial Statements . The pro forma and projected financial statements of Borrower which have been delivered to Lender, are complete and correct, and fairly present the pro forma and projected financial condition and results of operations of Borrower, as of the dates and for the periods stated.      (d)  Liabilities . As of the date hereof, Borrower has no material liabilities, direct or contingent, other than those set forth in the pro forma financial statements referenced in Section (c) immediately preceding above. Borrower knows of no fact, circumstance, act, condition or development that will or could cause a Material Adverse Change. " Material Adverse Change " is defined as a material adverse effect on, as applicable (i) the validity, performance, or enforceability of any Loan Document, (ii) the financial condition or business operations of Borrower, or (iii) the ability of Borrower to fulfill its obligations under the terms and conditions of the Loan Documents.      (e)  Litigation . Borrower is not involved in, or is not aware of the threat of, any litigation, nor are there any outstanding or unpaid judgments against Borrower.      (f)  Taxes . All tax returns required to be filed by Borrower in all jurisdictions have been filed, and all taxes, assessments, fees and other governmental charges upon Borrower or upon any of its property, income or franchises, which are due and payable, have been paid, or adequate reserves determined in conformity with United States generally accepted accounting principles as promulgated by the Financial Accounting Standards Board (" GAAP ") have been provided for payment thereof.      (g)  Purpose of Loan . The proceeds of any advances (i) are not and will not be used directly or indirectly for the purpose of purchasing or carrying, or for the purpose of extending credit to others for the purpose of purchasing or carrying, any "margin stock" as that term is

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defined in Regulation U of the Board of Governors of the Federal Reserve System, as amended; and (ii) will be otherwise used for lawful purposes.      (h)  ERISA . All employee benefits plans maintained by Borrower are in compliance with all funding and other requirements of the Employee Retirement Income Security Act of 1974, as amended (" ERISA "), and none have been terminated or have accrued any funding deficiency for which Borrower would be liable under said statute.      (i)  Permits and Franchises, Etc . Borrower has all rights, licenses, permits, franchises, patents, trademarks, trademark rights and copyrights that are required in order for it to conduct its business as now conducted without known conflict with the rights of others. Borrower is not aware of any fact or condition that might cause any of such rights not to be renewed in due course.      (j)  Subsidiaries . Borrower has no subsidiaries and does not own any stock in any other corporation or association. Borrower is not a member of any general or limited partnership, joint venture or association of any type whatsoever.      (k)  Hazardous Wastes and Substances . Borrower and its properties are in compliance in all material respects with applicable state and federal environmental laws and regulations and Borrower is not aware of, and has not received any notice of, any violation of any applicable state or federal environmental law or regulation and there has not heretofore been filed any complaint, nor commenced any administrative procedure, against Borrower, or any of its predecessors, alleging a violation of any environmental law or regulation. Except in compliance with relevant environmental laws, Borrower has not installed, used, generated, stored or disposed of any hazardous waste, toxic substance, asbestos or related material (" Hazardous Materials ") on its properties. For the purposes of this Note, Hazardous Materials shall include, but shall not be limited to, substances defined as "hazardous substances" or "toxic substances" in the Comprehensive Environmental Response Compensation and Liability Act of 1980, as amended, 42 U.S.C. §9061, et seq., Hazardous Materials Transportation Act, 49 U.S.C. §1802, et seq., and the Resource Conservation and Recovery Act, 42 U.S.C. §6901, et seq., or as "hazardous substances," "hazardous waste" or "pollutant or contaminant" in any other applicable federal, state or local environmental law or regulation.      (l)  Compliance with Laws . Borrower is in compliance in all material respects with all laws and orders of all governmental authorities that are applicable to it or its business, operations or properties.      (m)  General . There are no significant material facts or conditions relating to the Loan Documents, or the financial condition or business of Borrower that could, collectively or individually, cause a Material Adverse Change and that have not been related, in writing, to Lender as an attachment to this Note; and all writings heretofore or hereafter exhibited or delivered to Lender by or on behalf of Borrower are and will be genuine and in all respects what they purport and appear to be.      (n)  Public Utility Holding Company Act . Neither Borrower nor any subsidiary is a "holding company", or "subsidiary company" of a "holding company", or an "affiliate" of a "holding company" or of a "subsidiary company" of a "holding company", or a "public utility" within the meaning of the Public Utility Holding Company Act of 1935, as amended.

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      3.  Affirmative Covenants . As an inducement to Lender to enter into this Note, Borrower covenants and agrees that, from the date hereof and until termination of this Note and payment in full of the obligation, unless otherwise agreed to by Lender in writing:      (a)  Financial Statements and Other Information . Borrower and each guarantor will promptly furnish or cause to be furnished to Lender copies of (i) such information regarding their business and affairs and financial condition as Lender may reasonably request, and (ii) without request, the following:      (i) as soon as available and in any event within ninety (90) days after the end of each fiscal year of Borrower, an audited balance sheet of Borrower as of the close of such fiscal year and the related audited statements of income, cash flows, contingent obligations and owners’ equity of Borrower for such year, prepared in accordance with GAAP;      (ii) as soon as available and in any event within fifteen (15) days after the end of each calendar month, a balance sheet of Borrower as of the end of such month and the related statements of income (including information relating to the amount of commodity-based inventory sold), cash flows, contingent obligations and owners’ equity of Borrower for such month;      (iii) as soon as available and in any event within five (5) days after the 1st and 15th of each calendar month, a schedule of accounts receivable listing all accounts receivable of Borrower as of the 1st and 15th of such month setting forth (i) the name of each account debtor, together with a schedule of the date each account is, or is expected to be, due and receivable or, as may be required by Lender, detail by invoice number, amount, invoice date and terms, and (ii) an aging of all accounts setting forth accounts 30 days past due or less, accounts over 30 days past due less than 61 days past due, accounts over 60 days past due but less than 91 days past due, accounts over 90 days past due but less than 121 days past due, and accounts over 120 days past due;      (iv) as soon as available and in any event within thirty (30) days after the filing of same, copies of all federal and state tax returns filed by Borrower;      (v) immediately upon becoming aware of the existence of, or any material change in the status of, any litigation which could create a Material Adverse Change if determined adversely against Borrower or any guarantor, a written communication to Lender of such matter;      (vi) immediately upon becoming aware of an Event of Default or the existence of any condition or event that constitutes, or with notice or lapse of time, or both, would constitute an Event of Default, a verbal notification to Lender specifying the nature and period of existence thereof and what action Borrower or any guarantors are taking or propose to take with respect thereto and, immediately thereafter, a written confirmation to Lender of such matters;      (vii) immediately upon becoming aware that any person has given notice or taken any other action with respect to a claimed default under any material indenture, mortgage, deed of trust, promissory note, loan agreement, note agreement or joint venture agreement or any other material agreement or undertaking to which Borrower, any guarantor or any subsidiary of Borrower is a party, a verbal notification to Lender

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specifying the notice given or action taken by such person and the nature of the claimed default and what action Borrower or any guarantors are taking or propose to take with respect thereto and, immediately thereafter, a written communication to Lender of such matters; and      (viii) immediately upon becoming aware of the commencement of any material action or material proceeding against Borrower, a guarantor, any subsidiary of Borrower or any of their respective properties by any governmental agency, including, without limitat