Document:

Ethanol Marketing Contract

 Exhibit 10.32 
 ETHANOL MARKETING AGREEMENT 
 This Ethanol Marketing Agreement (“Agreement”) is made and entered into as of
the 3rd day of December, 2007 by and between HUSKER AG, LLC, a Nebraska limited liability company (“Husker”) and AVENTINE RENEWABLE ENERGY, INC., a Delaware corporation (“ARE”) (each a “Party”, and collectively the
“Parties”). 
 In consideration of the mutual terms and conditions contained herein, the Parties agree as follows: 
  

	1.	Term and Termination: The term of this Agreement shall commence on the date hereof and shall continue for a primary term of one (1) year from the first day of the first
month commencing after the date of the first Bill of Lading delivered hereunder for Ethanol produced at the Plant (as hereafter defined) and thereafter; automatically renewing for successive one (1) year terms, unless terminated on the
expiration date of the one (1) year primary term, or on the expiration date of any subsequent one (1) year renewal term, in each case by either Party with at least six (6) months written notice prior to such expiration date. If one of
the parties breaches the terms of this Agreement, the other party may give the breaching party a notice in writing which specifically sets out the nature and extent of the breach, and the steps that must be taken to cure the breach. After receiving
the written notice, the breaching party will then have thirty (30) days to cure the breach, if the breach does not involve a failure to market and distribute the ethanol as required by this Agreement. If the breach does involve a failure to
market and distribute the ethanol as required by this Agreement, then the breaching party will have five (5) calendar days after receiving the written notice to cure the breach. If the breaching party does not cure any breach within the
applicable cure period, then the non-breaching party will have the right to terminate this Agreement immediately. 

  

	2.	Quantity and Quality 

  

	 	A.	Subject to the terms of Section 2.B. below, Husker shall sell exclusively to ARE the total output of fuel grade ethanol (“Ethanol”) produced at Husker’s
Plainview, Nebraska facility (“Plant”), currently anticipated to be approximately seventy (70) million gallons per year. Ethanol shall be delivered FOB the Plant, and title shall pass on the date of the Bill of Lading. Ethanol
produced for the intended use as an alternative or racing fuel shall not be excluded from this Agreement. 

  

	 	B.	Notwithstanding the foregoing provision of this Agreement, Husker shall retain the right to ratably market up to one hundred twenty thousand (120,000) gallons per month of
Husker’s total production of Ethanol, provided that any and all such sales shall be within one hundred (100) miles of the Plant. Husker shall give sufficient advance written notice of such gallons to ARE as the parties may agree. Upon
receipt of such notice from Husker, ARE shall grant written permission to Husker to make such gallons available for marketing by Husker as soon as possible, and such permission shall not be unreasonably withheld. Under no circumstance shall any
gallons committed to customers of ARE be available for marketing by Husker. Once permission is granted to Husker by ARE, the requested gallons shall become the sole responsibility of Husker. 

  

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	 	C.	Such Ethanol shall meet or exceed all industry standards and any specifications required by ARE’s customers. ARE shall have the right to reject any Ethanol which does not meet
such standards and such standards are subject to change by ARE. ARE’s current specifications are attached as Exhibit A hereto. 

  

	3.	ARE shall, with respect to the Plant: 

  

	 	A.	Market all of the Ethanol produced at the Plant, at the price outlined in Section 5; 

  

	 	B.	Remit payment to Husker for the Ethanol purchased by ARE hereunder as provided in Section 5; and 

  

	 	C.	Be responsible for scheduling all shipments of Ethanol to be purchased by ARE hereunder with Husker. 

  

	4.	Husker shall, with respect to the Plant: 

  

	 	A.	Provide to ARE on a timely basis annual production forecasts, monthly updates to the rolling twelve month production forecasts, monthly updates, daily plant inventory balances and
shipment information, and other information reasonably requested by ARE; Husker shall use its reasonable best efforts to meet the monthly production targets reflected in the then-current annual production forecast. 

  

	 	B.	Notify ARE promptly of any material unscheduled shut-down, suspension or significant decrease in production at the Plant that was not reported in the rolling twelve month production
forecasts or monthly updates provided under Section 4.A. above; 

  

	 	C.	Provide to ARE specifications and certificates of analysis of the Ethanol sold to ARE that are consistent with the specifications referred to in Section 2.B. above; Husker
shall, at its expense, provide or cause to be provided all testing and related test equipment at or in the vicinity of the Plant to determine compliance with such specifications and ARE or its representative shall, at ARE’S expense, have the
right to perform periodic tests to determine compliance with such specifications. 

  

	 	D.	Be responsible for compliance with all federal, state and local rules, regulations and requirements regarding the shipment of Ethanol from the Plant, including but not limited to,
all U.S. Department of Transportation (“DOT”) requirements relating to shipment of hazardous materials (e.g. proper paperwork, railcars meeting DOT requirements, etc.). ARE reserves the right to audit Husker’s records, procedures, and
any other documentation related to the proper loading of Ethanol. 

  

	 	E.	Provide for a minimum of ten (10) days storage on the Plant’s premises at Husker’s cost; 

  

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	 	F.	For all gallons sold to ARE, use certified meters or weight-scales that provide both gross and net 60° Fahrenheit temperature compensated gallons; and 

 

	 	G.	Provide any of the information to be provided by Husker pursuant to this Section 4 to ARE electronically in data form, if such information is available in such form.

  

	 	H.	Provide the labor, equipment and facilities necessary to facilitate ARE’s loading schedule provided. Husker shall be responsible for actual demurrage, switching costs, and wait
time incurred resulting from this failure. 

  

	5.	Pricing and Commission 

 A. Sales Price. The
per gallon sale price Husker shall receive for the Ethanol sold to ARE under this Agreement shall be based on the Alliance Net Pool Price, as defined below, which shall be adjusted to reflect the Pooled Volume Adjustment and/or Pooled Volume
True-Up, as applicable. An illustrative example of the calculation of Alliance Net Pool Price is attached as Exhibit B hereto. 
 “Alliance Net Pool Price” shall mean, with respect to any month, (i) the weighted average gross price per gallon received by ARE for all fuel grade Ethanol that was (A) supplied by an alliance partner or produced
by ARE and (B) sold during such month by ARE, minus (ii) all costs (on a per gallon basis) incurred by ARE in conjunction with the handling, movement and sale of such Ethanol, including but not limited to terminal lease charges,
throughput charges, terminal shrinkage costs, freight charges, tariffs, costs of leasing railcars, trucks, river barges and ocean going vessels, government taxes and assessments, insurance, inspection fees, administrative costs, working capital
carrying costs, bad debt expense, costs of purchasing and delivering replacement ethanol due to lost or interrupted Ethanol production and other costs, but excluding direct marketing costs incurred in marketing such Ethanol. ARE shall use
commercially reasonable efforts to contain the costs described in clause (ii) above so as to maximize the Alliance Net Pool Price. 
 If
ARE’s pooled volume of fuel grade Ethanol at the end of a month is higher than its pooled volume at the end of the immediately preceding month because pooled sales volumes were less than the aggregate volume supplied by the alliance partners or
produced by ARE during such month, the Alliance Net Pool Price for such month shall be calculated as if the amount of such increase was included as gallons supplied by the alliance partners and/or produced by ARE and sold by ARE during such month at
a price per gallon equal to the estimated Alliance Net Pool Price for the immediately following month (as determined in good faith by ARE). The amount by which the Alliance Net Pool Price for any month is increased or decreased as a result of the
foregoing sentence is the “Pooled Volume Adjustment” for such month. 
  

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 In the event that the actual Alliance Net Pool Price for a month is different from the estimated Alliance
Net Pool Price used in calculating the Pooled Volume Adjustment for the immediately preceding month, an adjustment to the Alliance Net Pool Price in the current month shall be made by an offset which is equal to the amount of such difference. Such
adjustment is the “Pooled Volume True-Up.” Payment shall be made in accordance with paragraph C below. A Pooled Volume True-Up shall occur at the time of payment for the last delivery of Ethanol under this Agreement to reflect the actual
Alliance Net Pool Price for the final month of the term of this Agreement. 
 B. Commission. For each gallon of Ethanol sold to ARE
under this Agreement, ARE shall deduct from the Alliance Net Pool Price a commission equal to [***] percent ([***]%) of the Alliance Net Pool Price. If Husker meets the requirements outlined in Section 7.B. below (unit train and barge
facilities available for the transport of Ethanol), an amount equal to [***] percent ([***]%) will be deducted from Husker’s commission to ARE. 
 C. Payment. For all quantities of Ethanol purchased by ARE from Husker and shipped from the
Plant during a one-week period beginning on Monday and ending on the following Sunday, ARE shall pay the estimated Alliance Net Pool Price referred to in Section 5.A. less commissions referred to in Section 5.B., to Husker by ACH or wire
no later than fifteen (15) business days following the end of said one-week period. If at calendar month’s end, the actual Alliance Net Pool Price exceeds the estimated Alliance Net Pool Price, ARE shall pay Husker on or before the
15th business day of the following calendar month an amount equal to the product of (x) the difference between the actual and estimated
Alliance Net Pool Price (in each case less commissions) and (y) the aggregate quantity of Ethanol purchased by ARE from Husker and shipped from the Plant under this Agreement during the prior calendar month. If the actual Alliance Net Pool
Price is less than the estimated Alliance Net Pool Price, Husker shall pay ARE and ARE shall have the right to withhold and set off from future payments to Husker, an amount equal to the product of (x) the difference between the actual and
estimated Alliance Net Pool Price (in each case less commissions) and (y) the aggregate quantity of Ethanol purchased by ARE from Husker and shipped from the Plant under this Agreement during such month. 
 D. Supporting Records. ARE shall keep a set of books and records in accordance with generally accepting accounting principals with respect to all
sales of Ethanol hereunder and all costs and commissions associated therewith, and shall make such books and records reasonably available to Husker’s independent outside accounting representatives (upon execution by such independent outside
accounting representative of a mutually agreeable confidentiality agreement) at ARE’s office at any time by appointment during normal business hours upon at least five (5) business days prior written notice; provided that Husker
shall be entitled to no more than one (1) such visit in any year and Husker ‘s independent outside accounting representatives shall be permitted to disclose to Husker only aggregate summary information of the results of its review, and not
any contract or customer specific information. In addition, ARE shall provide Husker by e-mail or fax with supporting documentation regarding the calculation of the estimated Alliance Net Pool Price with each weekly payment for Ethanol. 

 

	 	***	Material has been omitted pursuant to a request for confidential treatment and such material has been filed separately with the Securities and Exchange Commission.

  

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	6.	Responsibility for Dedicated Railcars. ARE shall work in conjunction with Husker to determine the size of a rail car fleet to effectively and efficiently transport the
Ethanol produced at your location. Husker shall be responsible for entering into all rail car leases necessary to accommodate the delivery of your Ethanol production. ARE will manage the rail cars in Husker’s fleet using all reasonable and best
efforts to maximize efficiencies and minimize costs. It is understood that Husker will require one hundred seventy five (175) rail cars to be leased to efficiently transport the Ethanol produced at your location. It is understood that ARE, in
the best interest of all of its customers, may utilize Husker’s rail cars for other ARE customers provided Husker does not have a need for said rail cars. If Husker’s rail cars are used elsewhere by ARE, it is understood that Husker shall
be reimbursed for the actual cost of said rail car leases during the time utilized elsewhere by ARE. It is also understood that at times additional rail cars beyond what Husker has leased may be needed to efficiently transport your Ethanol
production. If additional rail cars are needed, Husker shall bear the actual lease cost of said rail cars temporarily used in conjunction with the transportation of Husker’s Ethanol production. 

  

	7.	Truck, Rail, and Barge Loading Facilities. 

 A. ARE
and Husker shall work in conjunction to determine truck, rail, and barge loading facilities that are convenient, accessible, and appropriate for your location. This includes, but is not limited to, access, loadouts, and rail track footage used in
the placement of rail cars. All loading facilities shall meet all industry and government standards concerning construction and safety and shall be capable of efficiently loading the nameplate capacity of the Ethanol produced at Husker’s
location and any expansions beyond said nameplate capacity. Demurrage charges, switchout costs, and wait times resulting from the inability of Husker to provide sufficient loadout facilities or labor to comply with ARE’s loadout schedule will
be the sole responsibility of Husker. It is understood that Husker will need approximately 7200 feet of rail car track storage to accommodate Husker’s expected annual Ethanol production. If Husker intends to expand its annual Ethanol
production, all load out facilities and transportation storage must meet ARE’s guidelines to efficiently transport Husker’s expanded production. 
 B. In the event that Husker provides unit train (the number of rail cars in a unit train is defined by each individual railroad) and/or barge loading abilities, and due to ARE’s efficiencies gained by Husker
providing the infrastructure and loadout facilities to transport by either unit trains or by barge, ARE will deduct [***] percent ([***]%) from Husker’s commission paid to ARE for the sale of your Ethanol defined in section 5.B. aforementioned
above. To receive this reduction in commission, Husker shall maintain all loadout facilities and keep them in good working condition so as ARE may use these loadout facilities at all times. All loadout facilities must meet industry and governmental
regulations concerning construction and safety. 
  

	8.	Indemnity: ARE shall indemnify, defend, and hold Husker and its affiliates, subsidiaries, parents, and its and their respective directors, officers, members, employees, and
agents harmless from and against any and all claims, losses, awards, judgments, settlements, fines, penalties, liabilities, damages, costs or expenses (including reasonable out-of-pocket Attorney’s fees and expenses) incurred on account of any
injury or death of persons or damages to property to the extent caused by or arising out of the negligence or willful misconduct of ARE, its officers, employees, or agents in performing ARE’s obligations under this Agreement.

  

	 	***	Material has been omitted pursuant to a request for confidential treatment and such material has been filed separately with the Securities and Exchange Commission.

  

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 Husker shall indemnify, defend, and hold ARE and its affiliates, subsidiaries, parents, and its and their respective
directors, officers, stockholders, employees, and agents harmless from and against any and all claims, losses, awards, judgments, settlements, fines, penalties, liabilities, damages, costs or expenses (including reasonable out-of-pocket
Attorney’s fees and expenses) incurred on account of any injury to or death of persons or damages to property to the extent caused by or arising out of the negligence or willful misconduct of Husker, its officers, employees, or agents in
performing Husker’s obligations under this Agreement. In addition, Husker shall indemnify and hold ARE and its affiliates, subsidiaries, parents, and its and their respective directors, officers, stockholders, employees, and agents harmless
from and against any and all claims, losses, awards, judgments, settlements, fines, penalties, liabilities, damages, costs or expenses (including reasonable out-of-pocket Attorney’s fees and expenses) to the extent caused by or arising out of
(i) any defects in, or otherwise relating to the quality or condition of, the Ethanol supplied by Husker, and (ii) noncompliance with applicable federal, state or local rules, regulations or requirements regarding shipment of Ethanol from
the Plant as more fully set forth in Section 4.D above, and (iii) any breach of Husker’s warranty under Section 21. 
  

	9.	Force Majeure: 

 A. In the event either Party is
rendered unable, wholly or in part, by Force Majeure to carry out its obligations under this Agreement, it is agreed that on such Party’s giving notice in writing, or by telephone and confirmed in writing, to the other Party as soon as possible
after the commencement of such Force Majeure event, the obligations of the Party giving such notice, so far as and to the extent they are affected by such Force Majeure, shall be suspended from the commencement of such Force Majeure and during the
remaining period of such Force Majeure, but for no longer period, and such Force Majeure shall so far as possible remedied with all reasonable dispatch; provided, however, the obligation to make payments then accrued hereunder prior to the
occurrence of such Force Majeure shall not be suspended. 
 B. The term “Force Majeure” as used in this Agreement shall mean
strikes, lockouts or industrial disturbances; riots or civil disturbances; interference by civil or military authorities; wars, blockades, insurrection, or acts of other public enemy or acts of terrorism; epidemics, landslides, lightning,
earthquakes, fires, storms, floods, washouts or other acts of God; arrests or restraints of governments and people; compliance with federal, state or local laws, rules or regulations, acts, orders, directives, requisitions or requests of any
official or agency of federal, state or local governments; fires, explosions, freezing, failures, disruptions, breakdowns or accidents to transportation equipment or facilities; prorationing by transporters; the necessity of testing, making repairs,
alterations or enlargements to transportation equipment or facilities; embargoes, priorities, expropriation or condemnation by government or governmental authorities; and any other cause which is not reasonably within the control of the Party
claiming suspension; and for this purpose, Force Majeure shall also mean economic conditions which, in the business judgment of Husker’s board of directors, require the Plant to be shut down on a temporary or permanent basis. 
  

	10.	 Limitation of Damages: NEITHER PARTY SHALL BE LIABLE OR OTHERWISE RESPONSIBLE TO THE OTHER PARTY HEREUNDER FOR CONSEQUENTIAL, EXEMPLARY, SPECIAL, INCIDENTAL
OR PUNITIVE DAMAGES AS TO ANY ACTION OR OMISSION, WHETHER CHARACTERIZED AS A CONTRACT BREACH OR TORT OR 

  

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OTHERWISE THAT ARISES OUT OF OR RELATES TO THIS AGREEMENT OR ITS PERFORMANCE EXCEPT FOR ANY SUCH AMOUNTS PAID BY A PARTY TO A NON-AFFILIATE THIRD PARTY,
WHICH WOULD THEREFORE BE CONSIDERED ACTUAL DAMAGES INCURRED BY SUCH PARTY. 

  

	11.	Independent Contractor: It is expressly understood that the relationship of ARE to Husker is that of an independent contractor and nothing contained herein shall be construed
to create any partnership, agency, or employer/employee relationship. ARE may freely choose the customers from whom business shall be solicited and the time and place for solicitation. 

  

	12.	Notices: Any notices required to be given under this Agreement shall be in writing and be sufficiently given when delivered in person or deposited in the U.S. mail
(registered or certified), postage prepaid, addressed as follows: 

  

			
	Husker:	  	
		  	 HUSKER AG, LLC
 54048 Highway 20
 Plainview, Nebraska 68769
 Attn: Mike Kinney

		
	ARE:	  	 AVENTINE RENEWABLE ENERGY, INC.
 P. O. Box
1800
 Pekin, IL 61555
 Attn: Ron Miller

  

	13.	Insurance: Each Party shall maintain, at all times while this Agreement is in effect, and each at its own sole cost and expense, comprehensive general liability insurance
with a combined single limit for bodily injury and property damage of not less than $1,000,000 for any one occurrence. Each Party shall promptly after execution of this Agreement furnish the other Party a Certificate of Insurance evidencing the
foregoing insurance coverage, and shall promptly provide the other Party with prior written notice of any change to or cancellation of such Certificate of Insurance or insurance coverage. The insurance requirements set forth herein are minimum
coverage requirements and are not to be construed in any way as a limitation on liability under this Agreement. 

  

	14.	Entire Agreement: This Agreement contains the entire agreement between the Parties and supersedes all previous agreements, either oral or written, between the Parties. The
language of this Agreement shall not be construed in favor of or against either Party, but shall be construed as if; the language was drafted mutually by both Parties. No modifications hereof shall be valid unless made in writing and signed by both
Parties. 

  

	15.	Waiver: The failure of either Party to enforce any of its rights hereunder on any particular occasion shall not constitute a waiver of such rights on any subsequent occasion.

  

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	16.	Assignment: This Agreement may not be assigned by either Party without the prior written consent of the other Party, which consent shall not be unreasonably withheld;
provided, however, that either party may assign its rights and duties under this Agreement in connection with the sale, merger, exchange or acquisition of all or substantially all of the assets or stock of the respective party and such party may
assign its rights and duties under this Agreement to another company controlling, or controlled by, or under common control with such party, all without having to obtain the express written consent of the other party to this Agreement

  

	17.	Headings: Any paragraph headings are used for convenience only and are not intended and shall not be used in interpreting any provisions of this Agreement.

  

	18.	No Third Party Beneficiary: Except as otherwise provided herein, nothing contained in this Agreement shall be considered or construed as conferring any right or benefit on a
person not a Party to this Agreement and neither this Agreement nor the performance hereunder shall be deemed to have created a joint venture or partnership between the Parties. 

  

	19.	Governing Law: This Agreement shall be governed by the laws of the State of Nebraska without regard to the conflict of laws provisions thereof. Each of the parties hereto
irrevocably submits to the jurisdiction of any state or federal court sitting in the State of Nebraska in any action or proceeding brought to enforce or otherwise arising out of or relating to this Agreement. 

  

	20.	Arbitration: Any dispute arising out of or in connection with this Agreement shall be submitted to arbitration. The arbitration shall be conducted according to the Commercial
Arbitration Rules of the American Arbitration Association. The place of arbitration shall be Omaha, Nebraska or such other place as may be agreed upon by the Parties. Both Parties shall attempt to agree upon one arbitrator, but if they are unable to
agree, each shall appoint an arbitrator and these two shall appoint a third arbitrator. Expenses of the arbitrator(s) shall be divided equally between the Parties. Judgment upon the award rendered by the arbitrator(s) may be entered in any court
having jurisdiction thereof, and shall be enforceable against the Parties in accordance with the 1958 Convention on the Recognition and Enforcement of Foreign Arbitral Awards, as amended. 

  

	21.	Severability: If any term or provision of this Agreement is held by a court of competent jurisdiction to be invalid, void or unenforceable, the remainder of the terms and
provisions of this Agreement shall remain in full force and effect and shall in no way be affected, impaired or invalidated so long as the economic or legal substance of the transactions contemplated hereby is not affected in any manner materially
adverse to a Party. Upon such determination, the Parties shall negotiate in good faith to modify this Agreement so as to effect the original intent of the Parties as closely as possible in an acceptable manner so that the transactions contemplated
hereby be consummated as originally contemplated to the fullest extent possible. 

  

	22.	 Confidentiality: The terms of this Agreement and any non-public information provided to either Party pursuant to this Agreement (including without limitation
pursuant to Section 5.D. hereof) or as a result of Husker being an alliance partner (as that term is used in the definition of “Alliance Net Pool Price” under Section 5.A. above) are confidential and the Party 

  

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receiving such information (i) will hold, and will cause its employees, officers, directors, agents, accountants and advisors to hold, all such
information in confidence, unless it is compelled to disclose such information by judicial or administrative process or by other requirements of law and (ii) will use, and will cause its employees, officers, directors, agents, accountants and
advisors to use, such information only in connection with the implementation of this Agreement, and for no other purpose. In this regard, such information may be considered “insider information” under the securities laws of the United
States and shall not be shared with others (except as permitted under the preceding sentence) and shall not be used to buy, sell or otherwise invest in securities of Husker, ARE or any of the alliance partners. 

  

	23.	Public Announcements: Any public announcements concerning the transaction contemplated by this Agreement shall be approved in advance by the Parties, except for disclosures
required by law, in which case the disclosing party shall provide a copy of the disclosure to the other party prior to its public release. As Husker is subject to SEC filing requirements, notwithstanding any other provision herein to the contrary,
SEC required filings will not be subject to advance disclosure except as allowed by the SEC. 

 In WITNESS WHEREOF, the Parties
hereto have caused this Agreement to be duly executed as of the date first written above. 
  

							
	AVENTINE RENEWABLE ENERGY, INC.	 	HUSKER AG, LLC
				
	By:	 	 /s/ Ronald Miller
	 		 	 /s/ Mike Kinney

		 	Ronald Miller, President	 		 	Mike Kinney, Chairman of the Board
			
	Date: 11-21-07	 		 	Date: 11-20-07

  

 9Form of Global 12 1/2% Senior Secured Exchange Note

 Exhibit 4.9 
 THIS NOTE HAS BEEN ISSUED WITH ORIGINAL ISSUE DISCOUNT (“OID”) FOR PURPOSES OF SECTIONS 1271 ET SEQ. OF THE INTERNAL REVENUE CODE OF 1986, AS AMENDED. THE ISSUE DATE OF THIS NOTE IS JANUARY 30, 2007. FOR INFORMATION REGARDING THE
ISSUE PRICE, AMOUNT OF OID PER $1,000 OF PRINCIPAL AMOUNT AND THE YIELD TO MATURITY FOR PURPOSES OF THE OID RULES, PLEASE CONTACT THE BASELINE OIL & GAS CORP. OF THE ISSUER AT 411 NORTH SAM HOUSTON PARKWAY EAST, SUITE 300, HOUSTON, TEXAS
77060, (281) 591-6100. 
 THIS NOTE IS A GLOBAL NOTE WITHIN THE MEANING OF THE INDENTURE HEREINAFTER REFERRED TO AND IS REGISTERED IN THE NAME OF A
DEPOSITORY OR A NOMINEE OF A DEPOSITORY OR A SUCCESSOR DEPOSITORY. THIS NOTE IS NOT EXCHANGEABLE FOR NOTES REGISTERED IN THE NAME OF A PERSON OTHER THAN THE DEPOSITORY OR ITS NOMINEE EXCEPT IN THE LIMITED CIRCUMSTANCES DESCRIBED IN THE INDENTURE,
AND NO TRANSFER OF THIS NOTE (OTHER THAN A TRANSFER OF THIS NOTE AS A WHOLE BY THE DEPOSITORY TO A NOMINEE OF THE DEPOSITORY OR BY A NOMINEE OF THE DEPOSITORY TO THE DEPOSITORY OR ANOTHER NOMINEE OF THE DEPOSITORY) MAY BE REGISTERED EXCEPT IN THE
LIMITED CIRCUMSTANCES DESCRIBED IN THE INDENTURE. 
 UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY, A
NEW YORK CORPORATION (“DTC”), TO THE ISSUER OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH OTHER NAME AS IS REQUESTED BY AN
AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE TO CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS
WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN. 

 BASELINE OIL & GAS CORP. 
 12 1/2% SENIOR SECURED NOTES DUE 2012 
  

					
	CUSIP No. 069827 AG8	  	 	  	 
	No.1	  	$115,000,000	  	

 Baseline Oil & Gas Corp., a Nevada corporation (the “Company,” which
term includes any successor entity), for value received promises to pay to Cede & Co. or registered assigns the principal sum of ONE HUNDRED FIFTEEN MILLION DOLLARS ($115,000,000) (or such principal amount as may be set forth in the records
of the Trustee hereinafter referred to in accordance with the Indenture) on October 1, 2012, and to pay interest thereon as hereinafter set forth. 
 Interest Rate: 12 1/2
% 
 Interest Payment Dates: Interest will be payable semi-annually in
cash in arrears on April 1 and October 1 of each year, beginning on April 1, 2008. 
 Record Dates: March 15 and
September 15. 
 Reference is made to the further provisions of this Note contained on the reverse side of this Note,
which will for all purposes have the same effect as if set forth at this place. 
 IN WITNESS WHEREOF, the Company has caused
this Note to be signed manually or by facsimile by its duly authorized officer. 
  

			
	BASELINE OIL & GAS CORP.
		
	By:	 	 
		 	Name: Patrick H. McGarey
		 	Title: Chief Financial Officer

 Dated: January 30, 2008 

 TRUSTEE CERTIFICATE OF AUTHENTICATION 
 This is one of the 12 1/2% Senior Secured Notes due 2012 referred to in the within-mentioned Indenture. 
  

									
		 		 	THE BANK OF NEW YORK, as Trustee
					
	Dated:	 	January 30, 2008	 		 	By:	 	 
		 		 		 		 	Name:
		 		 		 		 	Title:

 12 1/2% SENIOR SECURED NOTES DUE 2012 
 1.
Interest. Baseline Oil & Gas Corp., a Nevada corporation (the “Company”), promises to pay interest on the principal amount of this Note at the rate per annum shown above. Interest on the Note will accrue from the
most recent date on which interest has been paid or, if no interest has been paid, from and including the Issue Date. The Company will pay interest semi-annually in arrears on each Interest Payment Date, commencing April 1, 2008. Interest will
be computed on the basis of a 360-day year comprised of twelve 30-day months. The Company will pay interest on overdue principal at 1% per annum in excess of the above rate and will pay interest on overdue installments of interest at such
higher rate to the extent lawful. Additional Interest may accrue on this Note in certain circumstances pursuant to the Registration Rights Agreement and all references to “interest” in this Note shall include any Additional Interest due on
this Note pursuant to the terms of the Registration Rights Agreement. 
 2. Method of Payment. The Company shall pay interest on the
Notes (except defaulted interest) to the Persons who are the registered Holders at the close of business on the Record Date immediately preceding the Interest Payment Date even if the Notes are cancelled on registration of transfer or registration
of exchange after such Record Date, and on or before such Interest Payment Date. Holders must surrender Notes to a Paying Agent to collect principal payments. The Company shall pay principal and interest in money of the United States that at the
time of payment is legal tender for payment of public and private debts (“U.S. Legal Tender”). However, the Company may pay principal and interest by check payable in such U.S. Legal Tender. The Company may deliver any such interest
payment to the Paying Agent or to a Holder at the Holder’s registered address. 
 3. Paying Agent and Registrar. Initially, The
Bank of New York (the “Trustee”) will act as Paying Agent and Registrar. The Company may change any Paying Agent, Registrar or co-Registrar without notice to the Holders. 
 4. Indenture. The Notes and the Guarantees were issued under an Indenture, dated as of October 1, 2007 (the “Indenture”),
among the Company, the Trustee and the Collateral Agent. Capitalized terms herein are used as defined in the Indenture unless otherwise defined herein. The terms of the Notes include those stated in the Indenture and those made part of the Indenture
by reference to the Trust Indenture Act of 1939 (15 U.S. Code §§ 77aaa-77bbbb) (the “TIA”), as in effect on the date of the Indenture until such time as the Indenture is qualified under the TIA, and thereafter as in
effect on the date on which the Indenture is qualified under the TIA. Notwithstanding anything to the contrary herein, the Notes are subject to all such terms, and Holders of Notes are referred to the Indenture and the TIA for a statement of such
terms. The Notes are senior secured obligations of the Company. Each Holder, by accepting a Note, agrees to be bound by all of the terms and provisions of the Indenture, as the same may be amended from time to time. 

 5. Redemption. 
 (a) Optional Redemption 
 (1) Optional Redemption Prior to October 1, 2010.
At any time prior to October 1, 2010, the Company may redeem all or a part of the Notes, upon not less than 30 nor more than 60 days’ prior notice mailed by first-class mail to each Holder’s registered address, at a redemption
price equal to 100% of the principal amount of Notes redeemed plus the Applicable Premium as of, and accrued and unpaid interest and Additional Interest, if any, to the date of redemption (the “Redemption Date”), subject to the rights of
Holders of Notes on the relevant record date to receive interest due on the relevant interest payment date. 
 (2) Optional
Redemption On or After October 1, 2010. The Notes are not redeemable before October 1, 2010. Thereafter, the Company may redeem the Notes, at its option, in whole or in part, upon not less than 30 nor more than 60 days’ notice, at
a redemption price at the redemption prices (expressed as percentages of principal amount) set forth below plus accrued and unpaid interest to (but not including) the redemption date, if redeemed during the twelve-month period beginning on
October 1 of the years set forth below: 
  

				
	 Year
	  	Percentage	 
	 2010
	  	106.750	%
	 2011 and thereafter
	  	100.000	%

 In addition, the Company must pay accrued and unpaid interest and Additional Interest, if any, on
the Notes redeemed to the Redemption Date. 
 (3) Optional Redemption Upon Equity Offerings. At any time, or from time
to time, prior to October 1, 2010, the Company may, at its option, use an amount not to exceed the net cash proceeds of one or more Equity Offerings to redeem up to 35% of the aggregate principal amount of the Notes originally issued under this
Indenture at a redemption price of 113.500% of the aggregate principal amount thereof, plus accrued and unpaid interest thereon, to the Redemption Date; provided that: 
 (i) at least 65% of the principal amount of Notes originally issued under this Indenture remains outstanding immediately after any such
redemption; and 
 (ii) the Company makes such redemption not more than 120 days after the consummation of any such Equity
Offering. 
 (b) Mandatory Redemption. The Company is not required to make any mandatory redemption or sinking fund payments with
respect to the Notes. 

 6. Notice of Redemption. Notice of redemption will be mailed by first-class mail at least 30 days
but not more than 60 days before the Redemption Date to each Holder of Notes to be redeemed at such Holder’s registered address with a copy to the Trustee and Paying Agent. If fewer than all of the Notes are to be redeemed, at any time,
selection of Notes for redemption will be made by the Trustee in compliance with the requirements of the principal national securities exchange, if any, on which the Notes are listed, or, if the Notes are not so listed, on a pro rata
basis, by lot or by such method as the Trustee deems to be fair and appropriate; provided, that if any such partial redemption is made with the proceeds of an Equity Offering, the Trustee will select the Notes only on a pro rata
basis or on as nearly a pro rata basis as is practicable (subject to DTC procedures), unless such method is otherwise prohibited. Notes in denominations of $1,000 may be redeemed only in whole. The Trustee may select for redemption
portions (equal to $1,000 or any integral multiple thereof) of the principal amount of Notes that have denominations larger than $1,000. 
 Except as set forth in the Indenture, if monies for the redemption of the Notes called for redemption shall have been deposited with the Paying Agent for redemption on such Redemption Date sufficient to pay such Redemption Price plus
accrued and unpaid interest and Additional Interest, if any, the Notes called for redemption will cease to bear interest from and after such Redemption Date, and the only remaining right of the Holders of such Notes will be to receive payment of the
Redemption Price plus accrued and unpaid interest and Additional Interest, if any, as of the Redemption Date upon surrender to the Paying Agent of the Notes redeemed. 
 7. Offers to Purchase. Sections 4.15, 4.16 and 4.27 of the Indenture provide that upon the occurrence of a Change of Control, after certain Asset Sales and in the event of an Excess Cash
Flow Offer, respectively, and subject to further limitations contained therein, the Company will make an offer to purchase certain amounts of the Notes in accordance with the procedures set forth in the Indenture. 
 8. Denominations; Transfer; Exchange. The Notes are in registered form, without coupons, in denominations of $1,000 and integral multiples
thereof. A Holder shall register the transfer of or exchange of Notes in accordance with the Indenture. The Registrar may require a Holder, among other things, to furnish appropriate endorsements and transfer documents and to pay any taxes, fees or
similar governmental charges payable in connection therewith as permitted by the Indenture. The Registrar need not register the transfer of or exchange of any Notes or portions thereof selected for redemption. 
 9. Persons Deemed Owners. The registered Holder of a Note shall be treated as the owner of it for all purposes. 
 10. Unclaimed Money. If money for the payment of principal or interest remains unclaimed for two years, the Trustee and the Paying Agent may pay
the money without interest thereon back to the Company. After that, all liability of the Trustee and such Paying Agent with respect to such money shall cease. 
 11. Discharge Prior to Redemption or Maturity. If the Company at any time deposits with the Trustee U.S. Legal Tender or U.S. Government Obligations sufficient to pay the principal of and interest on the Notes
to redemption or stated maturity and complies with the other provisions of the Indenture relating thereto, the Company will be discharged from certain provisions of the Indenture and the Notes (including certain covenants, but excluding its
obligation to pay the principal of and interest and Additional Interest, if any, on the Notes). 

 12. Amendment; Supplement; Waiver. Subject to certain exceptions, the Indenture, the Notes, the
Guarantees and the Collateral Agreements may be amended or supplemented with the written consent of the Holders of a majority in aggregate principal amount of the Notes then outstanding, and any existing Default or Event of Default or noncompliance
with any provision may be waived with the written consent of the Holders of a majority in aggregate principal amount of the Notes then outstanding. Without consent of any Holder, the parties thereto may amend or supplement the Indenture, the Notes,
the Guarantees, or the Collateral Agreements to, among other things, cure any ambiguity, defect or inconsistency, provide for uncertificated Notes in addition to or in place of certificated Notes, provide for the assumption of the Company’s or
any Guarantor’s obligations in accordance with Section 5.01 and Section 10.04 of the Indenture, make any other change that would provide any additional rights or benefits to the Holders that does not adversely affect the
legal rights of any Holder of a Note, to comply with the TIA, to allow for additional guarantees, if necessary, in connection with any addition or release of Collateral permitted under the Indenture or the Collateral Agreements, to release a
Guarantor from its Guarantee as permitted by the Indenture and to conform the text of the Indenture, the Collateral Agreements, the Notes and the Guarantees to the Offering Circular if necessary. 
 13. Restrictive Covenants. The Indenture imposes certain limitations on the ability of the Company and its Restricted Subsidiaries to, among other
things, incur additional Indebtedness or grant Liens, make payments in respect of their Capital Stock or certain Indebtedness, enter into transactions with Affiliates, create dividend or other payment restrictions affecting Subsidiaries, merge or
consolidate with any other Person, sell, assign, transfer, lease, convey or otherwise dispose of all or substantially all of its assets or adopt a plan of liquidation. Such limitations are subject to a number of important qualifications and
exceptions. The Company must annually report to the Trustee on compliance with such limitations. 
 14. Successors. When a successor
assumes, in accordance with the Indenture, all the obligations of its predecessor under the Notes, the Guarantees and the Indenture, the predecessor will be released from those obligations. 
 15. Defaults and Remedies. If an Event of Default occurs and is continuing (other than certain events of bankruptcy involving the Company), the
Trustee or the Holders of at least 25% in aggregate principal amount of outstanding Notes may declare all the Notes to be due and payable in the manner, at the time and with the effect provided in the Indenture. Holders of Notes may not enforce the
Indenture except as provided in the Indenture. The Trustee is not obligated to enforce the Indenture or the Notes unless it has received indemnity satisfactory to it. The Indenture permits, subject to certain limitations therein provided, Holders of
a majority in aggregate principal amount of the Notes then outstanding to direct the Trustee in its exercise of any trust or power. The Trustee may withhold from Holders of Notes notice of any continuing Default or Event of Default (except a Default
in payment of principal or interest) if it determines that withholding notice is in their interest. 

 16. Trustee Dealings with Company. Subject to the terms of the TIA and the Indenture, the Trustee
under the Indenture, in its individual or any other capacity, may become the owner or pledgee of Notes and may otherwise deal with the Company, its Subsidiaries or their respective Affiliates as if it were not the Trustee. 
 17. No Recourse Against Others. No past, present or future affiliate, director, officer, employee, incorporator or holder of any equity interests
in the Company or a Guarantor or any direct or indirect parent corporation of the Company or a Guarantor, as such, will have any liability for any obligations of the Company or a Guarantor under the Notes, the Guarantees or the Indenture, or for any
claim based on, in respect of, or by reason of, such obligations or their creation. Each Holder of Notes by accepting a Note waives and releases all such liability. The waiver and release are part of the consideration for issuance of the Notes. Each
of the parties hereto acknowledges that such waiver may not be effective to waive liabilities under the federal securities laws. 
 18.
Guarantees. Payment of principal and interest (including interest on overdue principal and overdue interest, if lawful), is unconditionally and irrevocably guaranteed, jointly and severally, by each of the Guarantors. 
 19. Authentication. This Note shall not be valid until the Trustee or Authenticating Agent manually signs the certificate of authentication on
this Note. 
 20. Governing Law. THIS NOTE, THE INDENTURE, THE GUARANTEES AND THE COLLATERAL AGREEMENTS (OTHER THAN THE MORTGAGES)
SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, AS APPLIED TO CONTRACTS MADE AND PERFORMED WITHIN THE STATE OF NEW YORK, WITHOUT REGARD TO PRINCIPLES OF CONFLICT OF LAWS. EACH OF THE PARTIES HERETO AGREES TO
SUBMIT TO THE JURISDICTION OF THE COURTS OF THE STATE OF NEW YORK IN ANY ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS NOTE, THE INDENTURE, THE GUARANTEES AND THE COLLATERAL AGREEMENTS (OTHER THAN THE MORTGAGES) OR THE TRANSACTIONS
CONTEMPLATED BY THIS NOTE. 
 21. Abbreviations and Defined Terms. Customary abbreviations may be used in the name of a Holder of a
Note or an assignee, such as: TEN COM (= tenants in common), TEN ENT (= tenants by the entireties), JT TEN (= joint tenants with right of survivorship and not as tenants in common), CUST (= Custodian), and U/G/M/A (= Uniform Gifts to Minors Act).

 22. Security. The Company’s and Guarantors’ obligations under the Notes are secured by liens on the Collateral pursuant
to the terms of the Collateral Agreements. The actions of the Trustee and the Holders of the Notes secured by such liens and the application of proceeds from the enforcement of any remedies with respect to such Collateral are limited pursuant to the
terms of the Collateral Agreements. 

 23. CUSIP Numbers. Pursuant to a recommendation promulgated by the Committee on Uniform Security
Identification Procedures, the Company has caused CUSIP numbers to be printed on the Notes as a convenience to the Holders of the Notes. No representation is made as to the accuracy of such numbers as printed on the Notes and reliance may be placed
only on the other identification numbers printed thereon. 
 The Company will furnish to any Holder of a Note upon written request and
without charge a copy of the Indenture. Requests may be made to: Baseline Oil & Gas Corp., 411 North Sam Houston Parkway East, Suite 300, Houston, Texas 77060. 

 ASSIGNMENT FORM 
 If you the Holder want to assign this Note, fill in the form below and have your signature guaranteed: 
 I or we assign and
transfer this Note to: 
  
  
  
  
  
 (Print or type name, address and zip code and 
 social security or tax ID number of assignee) 
 and irrevocably appoint____________________________________________________________________________

 agent to transfer this Note on the books of the Company. The agent may substitute another to act for him. 
  

									
					
	Dated:	 	 	 		 	Signed:	 	 
		 		 		 		 	 (Sign exactly as your name appears on
 the other side
of this Note)

 Signature Guarantee:_______________________________ 
 In connection with any transfer of this Note occurring prior to the date which is the earlier of (i) the date of the declaration by the SEC of the
effectiveness of a registration statement under the Securities Act of 1933, as amended (the “Securities Act”), covering resales of this Note (which effectiveness shall not have been suspended or terminated at the date of the
transfer) and (ii) October 1, 2008, the undersigned confirms that it has not utilized any general solicitation or general advertising in connection with the transfer and that this Note is being transferred: 
 [Check One] 
  

					
			
	(1)	 	 ̈	  	to the Company or a subsidiary thereof; or
			
	(2)	 	 ̈	  	pursuant to and in compliance with Rule 144A under the Securities Act; or
			
	(3)	 	 ̈	  	to an institutional “accredited investor” (as defined in Rule 501(a)(1), (2), (3) or (7) under the Securities Act) that has furnished to the Trustee a signed letter
containing certain representations and agreements (the form of which letter can be obtained from the Trustee); or
			
	(4)	 	 ̈	  	outside the United States to a person other than a “U.S. person” in compliance with Rule 904 of Regulation S under the Securities Act; or
			
	(5)	 	 ̈	  	pursuant to the exemption from registration provided by Rule 144 under the Securities Act; or

 (6)   ̈    pursuant to an effective registration
statement under the Securities Act. 
 Unless one of the boxes is checked, the Trustee will refuse to register any of the Notes evidenced by this certificate
in the name of any person other than the registered Holder thereof; provided that if box (3), (4) or (5) is checked, the Company or the Trustee may require, prior to registering any such transfer of the Notes, in its sole
discretion, such legal opinions, certifications (including an investment letter in the case of box (3) or (4)) and other information as the Trustee or the Company has reasonably requested to confirm that such transfer is being made
pursuant to an exemption from, or in a transaction not subject to, the registration requirements of the Securities Act. 
 If none of the
foregoing boxes is checked, the Trustee or Registrar shall not be obligated to register this Note in the name of any person other than the Holder hereof unless and until the conditions to any such transfer of registration set forth herein and in
Section 2.15 of the Indenture shall have been satisfied. 
  

									
					
	Dated:	 	 	 		 	Signed:	 	 
		 		 		 		 	 (Sign exactly as your name appears on
 the other side
of this Note)

 Signature Guarantee:_______________________________ 
 TO BE COMPLETED BY PURCHASER IF (2) ABOVE IS CHECKED 
 The undersigned represents
and warrants that it is purchasing this Note for its own account or an account with respect to which it exercises sole investment discretion and that it and any such account is a “qualified institutional buyer” within the meaning of Rule
144A under the Securities Act and is aware that the sale to it is being made in reliance on Rule 144A and acknowledges that it has received such information regarding the Company as the undersigned has requested pursuant to Rule 144A or has
determined not to request such information and that it is aware that the transferor is relying upon the undersigned’s foregoing representations in order to claim the exemption from registration provided by Rule 144A. 
  

									
					
	Dated:	 	 	 		 		 	 
		 		 		 		 	NOTICE: To be executed by an executive officer

 OPTION OF HOLDER TO ELECT PURCHASE 
 If you want to elect to have this Note purchased by the Company pursuant to Section 4.15 or Section 4.16 of the Indenture, check the
appropriate box: 
 Section 4.15   ̈ 
 Section 4.16   ̈ 
 Section 4.27   ̈ 
 If you want to elect to have only part
of this Note purchased by the Company pursuant to Section 4.15, Section 4.16 or Section 4.27 of the Indenture, state the amount you elect to have purchased: 
 $_________________________________ 
  

									
				
	Dated:	 	 	 		 	 
		 		 		 	NOTICE:	 	The signature on this assignment must correspond with the name as it appears upon the face of the within Note in every particular without alteration or enlargement or any change whatsoever
and be guaranteed by the endorser’s bank or broker.
				
		 		 		 	    Signature Guarantee:________________________________

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