Exhibit
      4.6

     

    SUBORDINATION
      AGREEMENT

    (KY
      USA ENERGY, INC.)

     

    This
      Subordination Agreement (this “Subordination
      Agreement”)
      is
      dated ____________, 2008, by and among KENTUCKY USA ENERGY, INC., a Delaware
      corporation, having an address of 321 Somerset Road, London, Kentucky 40741
      (“Subordinated
      Creditor”),
      KY
      USA ENERGY, INC., a Kentucky corporation (“Borrower”),
      having an address of 321 Somerset Road, London, Kentucky 40741, and NSES 12,
      LLC, a Delaware limited liability company (“Lender”),
      having an address of 38 Grove Street, Building C, Ridgefield, Connecticut
      06877.

     

    Background

     

    1. Borrower
      and Lender are parties to the Senior Secured Credit Agreement dated
      __________________, 2008 (as amended, supplemented, modified or restated from
      time to time, the “Credit
      Agreement”).
      Borrower’s obligations to Lender under the Credit Agreement are secured by a
      senior mortgage lien and first-priority security interest conveying all of
      the
      real and personal property of Borrower.

     

    2. Each
      of
      Lender’s obligations under the Credit Agreement is conditioned upon, among other
      things, the subordination of all obligations owed by Borrower to the
      Subordinated Creditor to the obligations owed by Borrower to Lender under the
      Credit Agreement and the other Loan Documents (as defined in the Credit
      Agreement).

     

    3. Capitalized
      terms not defined in this Subordination Agreement shall have the meanings set
      forth in the Credit Agreement.

     

    Agreements

     

    To
      comply
      with the terms and conditions of the Credit Agreement and for other good and
      valuable consideration, the receipt and sufficiency of which are acknowledged
      by
      the parties, the Subordinated Creditor, Borrower and Lenders agree as
      follows:

     

    Section
      1. Subordination
      of Obligations and Priority.

     

    (a) The
      payment of and any liens or security interests securing payment of any and
      all
      Subordinated Debt (defined below) are expressly subordinated to the extent
      and
      in the manner set forth in this Subordination Agreement to the Senior
      Indebtedness (defined below) and the liens and security interests securing
      the
      Senior Indebtedness. The term “Subordinated
      Debt”
as
      used
      in this Subordination Agreement means any and all indebtedness, liabilities
      and
      obligations of Borrower to the Subordinated Creditor, absolute or contingent,
      direct or indirect, joint, several or independent, now outstanding or owing
      or
      which may hereafter be existing or incurred, arising by operation of law or
      otherwise, due or to become due, or held or to be held by the Subordinated
      Creditor, whether created directly or acquired by assignment, as a
      participation, conditionally, as collateral security from another or otherwise,
      including indebtedness, obligations and liabilities of such Borrower to
      Subordinated Creditor as a member of any partnership, syndicate, association
      or
      other group, and whether incurred by Borrower as principal, surety, endorser,
      guarantor, accommodation party or otherwise, including, without limiting the
      generality of the foregoing, all indebtedness, liabilities and obligations
      of
      Borrower to Subordinated Creditor arising out of any operating agreement or
      similar agreement between Subordinated Creditor and Borrower.

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    (b) Priority.
      The
      agreements of Borrower, Senior Creditor and Subordinated Creditor herein are
      applicable without regard to the date a loan or extension of credit is made
      to
      Borrower.

     

    The
      term
“Senior
      Creditor”
as
      used
      in this Subordination Agreement means Lender.

     

    The
      term
“Senior
      Indebtedness”
as
      used
      in this Subordination Agreement means any and all indebtedness, liabilities
      and
      obligations of Borrower to Senior Creditor absolute or contingent, direct or
      indirect, joint, several or independent, now outstanding or owing or which
      may
      hereafter be existing or incurred, arising by operation of law or otherwise,
      due
      or to become due, or held or to be held by Senior Creditor whether created
      directly or acquired by assignment, as a participation, conditionally, as
      collateral security from another or otherwise, including indebtedness,
      obligations and liabilities of Borrower to Senior Creditor as a member of any
      partnership, syndicate, association or other group, and whether incurred by
      Borrower as principal, surety, endorser, guarantor, accommodation party or
      otherwise and including, without limitation, all Obligations (as defined in
      the
      Credit Agreement) owed by Borrower to Senior Creditor under the Credit Agreement
      and the other Loan Documents.

     

    Restrictions
      on Subordinated Creditor. During such time as any Senior Indebtedness remains
      unpaid, Subordinated Creditor will not ask for, demand, sue for, take, receive
      or accept from Borrower, by set off or in any other manner, any payment or
      distribution on account of the Subordinated Debt, nor present any instrument
      evidencing the Subordinated Debt for payment (other than such presentment as
      may
      be necessary to prevent discharge of other liable parties on such instrument);
      provided,
      however,
      nothing
      contained herein shall prevent Subordinated Creditor from receiving any payment
      from Borrower expressly permitted to be made by the Credit
      Agreement.

     

    Prohibition
      of All Payments Following Default. If for any reason any of the Senior
      Indebtedness is not paid when due or is not paid on or before the maturity
      thereof, or if there shall occur and be continuing any event which with the
      giving of notice or lapse of time or both would constitute a default or Event
      of
      Default under any instrument or agreement now or hereafter executed evidencing,
      in connection with, as security for or providing for the issuance of any of
      the
      Senior Indebtedness, then, unless and until such Event of Default or default
      shall have been cured, or unless and until the Senior Indebtedness shall be
      paid
      in full, the Subordinated Creditor will not ask for, sue for, take, demand,
      receive or accept from Borrower, by set off or in any other manner, any payment
      or distribution on account of the Subordinated Debt nor present any instrument
      evidencing the Subordinated Debt for payment (other than such presentment as
      may
      be necessary to prevent discharge of other liable parties on such
      instrument).

     

    
      
        
        

      

      
        2

        
          

        

      

      
        
        

      

    

     

    Payments
      Cannot Create a Default. Subordinated Creditor will not ask for, demand, sue
      for, take, receive or accept from Borrower, by set off or in any other manner,
      any payment or distribution on account of the Subordinated Debt, if the making
      of such payment would constitute, or would result in the occurrence of, a
      violation of the provisions of any instrument or agreement evidencing, in
      connection with, as security for or providing for the issuance of any Senior
      Indebtedness or would result in the occurrence of any event which with the
      giving of notice or lapse of time or both would constitute a default or an
      Event
      of Default under the Credit Agreement or any other Loan Document.

     

    Unauthorized
      Receipt of Payment by Subordinated Creditor. In the event Subordinated Creditor
      shall receive any payment or distribution on account of the Subordinated Debt
      which Subordinated Creditor is not entitled to receive under this Subordination
      Agreement, Subordinated Creditor will hold any amount so received in trust
      for
      Senior Creditor and will promptly turn over such payment to Senior Creditor
      in
      the form received by Subordinated Creditor (together with any necessary
      endorsement) to be applied against the Senior Indebtedness.

     

    Restrictions
      on Actions to Recover Subordinated Debt. Subordinated Creditor will not commence
      any action or proceeding against Borrower to recover all or any part of the
      Subordinated Debt or join with any other creditor, unless Senior Creditor shall
      also join, in bringing any proceedings against Borrower under any bankruptcy,
      reorganization, readjustment of debt, arrangement of debt, receivership,
      liquidation or insolvency law or statute of the federal or any state government
      unless and until all Senior Indebtedness shall have been paid in
      full.

     

    Insolvency
      or Bankruptcy by any Borrower. In the event of any receivership, insolvency,
      bankruptcy, assignment for the benefit of creditors, reorganization or
      arrangement with creditors, adjustment of debt, whether or not pursuant to
      bankruptcy laws, the sale of all or substantially all of the assets,
      dissolution, liquidation, or any other marshaling of the assets and liabilities
      of Borrower, the Subordinated Creditor will at Senior Creditor’s request file
      any claim, proof of claim, proof of interest or other instrument of similar
      character necessary to enforce the obligations of such Borrower in respect
      of
      the Subordinated Debt and will hold in trust for Senior Creditor and pay over
      to
      Senior Creditor, in the form received (together with any necessary endorsement),
      to be applied on the Senior Indebtedness, any and all monies, dividends or
      other
      assets received in any such proceedings on account of the Subordinated Debt
      unless and until the Senior Indebtedness shall be paid in full. In the event
      that the Subordinated Creditor shall fail to take any such action requested
      by
      Senior Creditor, Senior Creditor, may, as attorney in fact for the Subordinated
      Creditor take such action on behalf of the Subordinated Creditor, and the
      Subordinated Creditor hereby appoints Senior Creditor as attorney in fact for
      the Subordinated Creditor to demand, sue for, collect and receive any and all
      such monies, dividends or other assets and give acquittance therefor and to
      file
      any claim, proof of claim, proof of interest or other instrument of similar
      character and to take such other proceedings in Senior Creditor’s own name or in
      the name of the Subordinated Creditor as Senior Creditor may deem necessary
      or
      advisable for the enforcement of this Subordination Agreement, and the
      Subordinated Creditor will execute and deliver to Senior Creditor such other
      and
      further powers of attorney or other instruments as Senior Creditor may request
      in order to accomplish the foregoing.

     

    
      
        
        

      

      
        3

        
          

        

      

      
        
        

      

    

     

    Senior
      Creditor’s Rights. Senior Creditor may, at any time, and from time to time,
      without the consent of or notice to the Subordinated Creditor, without incurring
      responsibility to the Subordinated Creditor and without impairing or releasing
      any of Senior Creditor’s rights or any of the obligations of the Subordinated
      Creditor under this Subordination Agreement:

     

    (c) Change
      the amount, manner, place or terms of payment, or change or extend for any
      period the time of payment of, or renew, rearrange or otherwise modify or alter,
      the Senior Indebtedness or any instrument or agreement now or hereafter executed
      evidencing, in connection with, as security for or providing for the issuance
      of
      any of the Senior Indebtedness in any manner, or enter into or amend in any
      manner any other agreement relating to the Senior Indebtedness (including
      provisions restricting or further restricting payments of the Subordinated
      Debt);

     

    (d) Sell,
      exchange, release or otherwise deal with all or any part of any property by
      whomsoever at any time pledged or mortgaged to secure, howsoever securing,
      the
      Senior Indebtedness;

     

    (e) Release
      anyone liable in any manner for payment or collection of the Senior
      Indebtedness;

     

    (f) Exercise
      or refrain from exercising any rights against any Borrower or others (including
      the Subordinated Creditor); and

     

    (g) Apply
      any
      sums received by Senior Creditor, by whomsoever paid and however realized,
      to
      payment of the Senior Indebtedness in such a manner as Senior Creditor, in
      its
      sole discretion, may deem appropriate.

     

    Documentation
      of Subordinated Debt. The Subordinated Creditor will:

     

    (h) cause
      all
      Subordinated Debt to be evidenced by a note, debenture or other instrument
      evidencing the Subordinated Debt,

     

    (i) at
      Senior
      Creditor’s request, promptly surrender or cause to be surrendered any such note,
      debenture, or instrument evidencing the Subordinated Debt so that a statement
      or
      legend may be entered thereon to the effect that such note, debenture, or other
      instrument is subordinated to the Senior Indebtedness in favor of Senior
      Creditor in the manner and to the extent set forth in this Subordination
      Agreement,

     

    (j) mark
      the
      books of Subordinated Creditor to show that the Subordinated Debt is
      subordinated to the Senior Indebtedness in the manner and to the extent set
      forth in this Subordination Agreement, and

     

    (k) cause
      all
      financial statements of the Subordinated Creditor hereafter prepared for
      delivery to any person to make specific reference to the provisions of this
      Subordination Agreement.

     

    
      
        
        

      

      
        4

        
          

        

      

      
        
        

      

    

    Execution
      of Instruments. The Subordinated Creditor
      agrees to execute any and all other instruments necessary as required by the
      Senior Creditor to subordinate the Subordinated Debt to the Senior Indebtedness
      as herein provided.

     

    Assignment
      by Subordinated Creditor. Subordinated Creditor will not assign or transfer
      to
      others any claim the Subordinated Creditor has or may have against Borrower
      as
      long as any of the Senior Indebtedness remains outstanding, unless such
      assignment or transfer is expressly made subject to this Subordination
      Agreement.

     

    Warranties
      and Representations. The Subordinated Creditor represents and warrants that
      (a) neither the execution nor delivery of this Subordination Agreement nor
      fulfillment of or compliance with the terms and provisions hereof will conflict
      with, or result in a breach of the terms, conditions or provisions of, or
      constitute a default under, any agreement or instrument (including, without
      limitation, any formation documents) to which Subordinated Creditor is now
      subject, and (b) none of the Subordinated Debt is or will be subordinated
      to any other indebtedness of Borrower other than the Senior Indebtedness unless
      otherwise agreed by Senior Creditor.

     

    Waiver
      of
      Notice of Acceptance. Notice of acceptance of this Subordination Agreement
      is
      waived, acceptance on the part of Senior Creditor being conclusively presumed
      by
      its request for this Subordination Agreement and delivery of the same to
      it.

     

    Assignment
      by Senior Creditor. This Subordination Agreement may be assigned by Senior
      Creditor in connection with any assignment or transfer of the Senior
      Indebtedness.

     

    Notices.
      All notices and other communications provided for hereunder shall be in writing
      (including by facsimile transmission). All such written notices shall be mailed,
      faxed or delivered, to the applicable address, or facsimile number set out
      below
      or to such other address, or facsimile number, as shall be designated by such
      party in a notice to the other parties. All such notices and other
      communications shall be deemed to be given or made upon the earlier to occur
      of
      (i) actual receipt by the relevant party hereto and (ii) (A) if
      delivered by hand or by courier, upon delivery; (B) if delivered by mail,
      four (4) Business Days after deposit in the mails, postage prepaid; and
      (C) if delivered by facsimile, when sent and the sender has received
      electronic confirmation of error free receipt. In no event shall a voicemail
      message be effective as a notice, communication or confirmation
      hereunder.

    

      
        	
                If
                  to Senior Creditor:

              	 
	 	 	 
	 	
                NSES
                  12, LLC

              	 
	 	
                38
                  Grove Street, Building C

              	 
	 	
                Ridgefield,
                  Connecticut 06877

              	 
	 	
                Attention:

              	
                Roger
                  Eustance

              	 
	 	
                Telephone:

              	
                (203)
                  431-0330 x872

              	 
	 	
                Facsimile:

              	 	 
	 	
                E-Mail:

              	
                reustance@newstreamcapital.com

              


      

       

      
        
          
          

        

        
          5

          
            

          

        

        
          
          

        

      

       

      
        	
                If
                  to Borrower, to:

              	 
	 	 	 
	 	
                KY
                  USA Energy, Inc.

              	 
	 	
                321
                  Somerset Road

              	 
	 	
                London,
                  Kentucky 40741

              	 
	 	
                Attention:

              	 	 
	 	
                Telephone:

              	 	 
	 	
                Facsimile:

              	 	 
	 	
                E-Mail:

              	 	 
	 	 	 
	
                If
                  to Subordinated Creditor:

              	 
	 	 	 
	 	
                Kentucky
                  USA Energy, Inc.

              	 
	 	
                321
                  Somerset Road

              
	 	
                London,
                  KY 40741

              
	 	
                Attention:

              	
                Steven
                  D. Eversole

              
	 	
                Telephone:

              	
                (606)
                  878-5987

              
	 	
                Facsimile:

              	
                (606)
                  878-[____]

              
	 	
                E-Mail:

              	 	 


      

    

     

    Governing
      Law..
      This
      Subordination Agreement shall be construed under and governed by the laws of
      the
      State of New York and applicable federal law.

     

    Severability.
      If any provision (or portion of any provision) of this Subordination Agreement
      is rendered or declared invalid, illegal or unenforceable by reason of any
      existing or subsequently enacted legislation or by a final decision of any
      court
      of competent jurisdiction, the parties shall promptly meet and negotiate
      substitute provisions for those rendered invalid, illegal or unenforceable,
      but
      all of the remaining provisions will remain in full force and
      effect.

     

    Counterparts.
      This Subordination Agreement may be executed in two or more counterparts, and
      it
      shall not be necessary that the signatures of all parties be contained together
      on any one counterpart of this Subordination Agreement. Each counterpart will
      be
      deemed an original, but all counterparts taken together will constitute one
      and
      the same agreement.

     

    Section
      2. SUBMISSION
      TO JURISDICTION; WAIVER OF JURY TRIAL.

     

    (a) SUBORDINATED
      CREDITOR AND BORROWER EACH, TO THE FULL EXTENT PERMITTED BY LAW, HEREBY
      KNOWINGLY, INTENTIONALLY AND VOLUNTARILY, WITH AND UPON THE ADVICE OF COMPETENT
      COUNSEL, (i)
      SUBMITS
      TO PERSONAL JURISDICTION IN THE STATE OF NEW YORK FOR ANY SUIT, ACTION OR
      PROCEEDING BY ANY PERSON ARISING FROM OR RELATING TO THIS AGREEMENT,
      (ii)
      AGREES
      THAT ANY SUCH ACTION, SUIT OR PROCEEDING MAY BE BROUGHT IN ANY STATE OR FEDERAL
      COURT OF COMPETENT JURISDICTION SITTING IN THE STATE OF NEW YORK, (iii)
      SUBMITS
      TO THE JURISDICTION OF SUCH COURTS, AND (iv)
      TO THE
      FULLEST EXTENT PERMITTED BY LAW, AGREES THAT THEY WILL NOT BRING ANY ACTION,
      SUIT OR PROCEEDING IN ANY OTHER FORUM (BUT NOTHING HEREIN SHALL AFFECT THE
      RIGHT
      OF LENDER TO BRING ANY ACTION, SUIT OR PROCEEDING IN ANY OTHER
      FORUM).

     

    
      
        
        

      

      
        6

        
          

        

      

      
        
        

      

    

     

    (b) SUBORDINATED
      CREDITOR, BORROWER AND LENDER EACH, BY ACCEPTING THIS AGREEMENT, TO THE FULL
      EXTENT PERMITTED BY LAW, HEREBY KNOWINGLY, INTENTIONALLY AND VOLUNTARILY, WITH
      AND UPON THE ADVICE OF COMPETENT COUNSEL, WAIVES, RELINQUISHES AND FOREVER
      FORGOES THE RIGHT TO A TRIAL BY JURY IN ANY ACTION OR PROCEEDING BASED UPON,
      ARISING OUT OF, OR IN ANY WAY RELATING TO THIS AGREEMENT OR ANY CONDUCT, ACT
      OR
      OMISSION OF LENDER, SUBORDINATED CREDITOR OR PARTNERS, MEMBERS, MANAGERS,
      EMPLOYEES, AGENTS OR ATTORNEYS, OR ANY OTHER PERSON AFFILIATED WITH LENDER,
      SUBORDINATED CREDITOR OR BORROWER, IN EACH OF THE FOREGOING CASES, WHETHER
      SOUNDING IN CONTRACT, TORT OR OTHERWISE, SUBORDINATED CREDITOR AND BORROWER
      EACH
      HEREBY CONSENTS AND AGREES TO SERVICE OF ANY SUMMONS, COMPLAINT OR OTHER LEGAL
      PROCESS, IN CONNECTION WITH ANY SUIT, ACTION OR PROCEEDING ARISING FROM OR
      RELATING TO THIS AGREEMENT BY REGISTERED OR CERTIFIED U.S. MAIL, POSTAGE
      PREPAID, RETURN RECEIPT REQUESTED TO SUBORDINATED CREDITOR OR BORROWER, AS
      APPLICABLE, AT THE ADDRESS SET FORTH HEREINABOVE.

     

    ENTIRE
      AGREEMENT; AMENDMENT. THIS SUBORDINATION AGREEMENT REFLECTS THE ENTIRE AGREEMENT
      OF THE PARTIES WITH RESPECT TO THE MATTERS COVERED BY THIS SUBORDINATION
      AGREEMENT AND CANNOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS
      OR
      SUBSEQUENT ORAL AGREEMENTS AMONG ANY OF THE PARTIES. THERE ARE NO UNWRITTEN
      ORAL
      AGREEMENTS AMONG THE PARTIES. THIS SUBORDINATION AGREEMENT MAY BE AMENDED AND
      THE RIGHTS OF ANY PARTY UNDER THIS SUBORDINATION AGREEMENT MAY BE WAIVED ONLY
      PURSUANT TO A WRITTEN AGREEMENT SIGNED BY EACH OF THE PARTIES TO THIS
      SUBORDINATION AGREEMENT.

     

    [Signatures
      Begin on the Following Page.]

     

    
      
        
        

      

      
        7

        
          

        

      

      
        
        

      

    


    IN
      WITNESS WHEREOF, the undersigned have caused this instrument to be executed
      by
      their duly authorized undersigned officers effective as of the date first set
      forth above.

    

      
        	 	
                SUBORDINATED
                  CREDITOR:

              
	 	 
	 	
                Kentucky
                  USA Energy, Inc.,

              
	 	
                a
                  Delaware corporation

              
	 	 
	 	
                By:

              	 
	 	 	
                Steven
                  D. Eversole

              
	 	 	
                President
                  and Chief Executive Officer

              


      

    

     

    Signature
      Page to the Subordination Agreement

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    


    
      	 	
              BORROWER:

            
	 	 
	 	
              KY
                USA Energy, Inc.,

            
	 	
              a
                Kentucky corporation

            
	 	 
	 	 
	 	
              By:

            	 
	 	
              Name:

            	 
	 	
              Title:

            	 


    

    


    Signature
      Page to the Subordination Agreement

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    


    
      	 	
              LENDER:

            
	 	 
	 	
              NSES
                12, LLC,

            
	 	
              a
                Delaware limited liability company

            
	 	 
	 	 
	 	
              By:

            	 
	 	
              Name:

            	 
	 	
              Title:

            	 


    

    


    Signature
      Page to the Subordination Agreement