Exhibit 4.1


 


SECURED TERM LOAN NOTE


 


	
  $10,000,000

  	
   

  	
  October 17, 2007

  
	
   

  	
   

  	
  Minneapolis,
  Minnesota

  
	
   

  	
   

  	
   

  



 


FOR VALUE RECEIVED, the
undersigned, ADVANCED BIOENERGY, LLC,
a Delaware limited liability company (as more fully defined below, “Borrower”),
hereby unconditionally promises to pay to the order of PJC CAPITAL
LLC, a Delaware limited
liability company (including its successors, assigns, pledgees,
transferees and participants, collectively, “Lender”), on or before the
Maturity Date on the dates, in the manner and otherwise in accordance with the
terms and conditions of this Note the principal sum of TEN MILLION DOLLARS
($10,000,000), on the terms and conditions set forth herein, together with all
accrued but unpaid interest thereon computed as set forth below and all unpaid
fees, expenses, indemnities and other advances connected herewith. Capitalized
terms used but not otherwise defined herein shall have the meaning given to
them in Section 13.


 


1.                                       Accrual
and Imposition of Interest. All amounts outstanding hereunder shall bear
interest (computed daily until paid, both prior to and after the Maturity Date
and prior to and after any bankruptcy or insolvency of Borrower) at a per annum
rate equal to 13.0% from the date hereof until July 15, 2008 and 15.0% thereafter.
Upon the occurrence and during the continuation of any Event of Default
hereunder, to the maximum extent not prohibited by applicable law, Lender (at
Lender’s election) may increase the interest rate hereunder by 3.0% per annum
in excess of the rate then otherwise applicable hereunder (provided
that, if the relevant default relates to the insolvency or bankruptcy of
Borrower, then such rate increase (to the maximum extent not prohibited by
applicable law) will occur automatically without any action by Lender). Interest
hereunder will be calculated, accrued, imposed and payable on the basis of a
360-day year for the actual number of days elapsed. Unless prohibited by
applicable law, interest hereunder will be compounded (and added to the
outstanding balance hereunder) quarterly, on the last calendar day of each
calendar quarter.


 


2.                                       Payments
at Maturity. Borrower shall pay Lender the entire outstanding balance
hereunder together with all accrued but unpaid interest hereunder and all fees,
expenses, indemnities and other advances in connection herewith or any other
Loan Document on the date of the earlier to occur of the following (the “Maturity
Date”):  (a) October 16, 2008, and
(b) the occurrence of a Change of Control and (c) the date of
acceleration of the maturity of the Obligations pursuant to Section 14
(whether automatically or at Lender’s election after notice to Borrower)
following the occurrence of an Event of Default.


 


3.                                       Voluntary
Prepayments. At any time, upon advance written notice to Lender of at least
3 Business Days, Borrower may prepay outstanding balances hereunder in whole or
in part without penalty or premium. Any voluntary partial prepayment must be in
an amount of not less than $500,000 (or such lesser amount equal to the then
outstanding principal balance of this Note) or in multiples of $100,000 in
excess thereof. Amounts prepaid pursuant to this Section 3 shall be
applied to the Obligations in accordance with Section 7.


 


4.                                       Mandatory
Prepayments. If Borrower or ABE Fairmont (a) sells, leases, licenses
pursuant to an exclusive license, transfers or otherwise disposes of any assets
(other than (i) inventory sold in the ordinary course of business and (ii)
other dispositions of assets not exceeding an aggregate fair market value of
$1,000,000 during any 12 consecutive calendar month period), (b) issues any
Equity Interests (other than “Excluded Units”, as such term is defined in the
Warrant as in effect on the date hereof)


 

















 


or (c) issues
any debt securities or notes (other than Indebtedness permitted hereunder),
Borrower shall (except for Net Cash Proceeds of dispositions of assets of ABE
Fairmont that are required to be applied pursuant to the applicable mandatory
prepayment provisions relating to dispositions of assets of ABE Fairmont either
under the CoBank Loan Documents or the Wells Fargo Loan Documents, in each case
as in effect on the date funds are first advanced under this Note) immediately
prepay the outstanding Obligations under this Note without penalty or premium
in an amount equal to 100% of the resulting Net Cash Proceeds from such sale or
other disposition of assets or such issuance of equity or debt securities, as
the case may be. Net Cash Proceeds prepaid pursuant to this Section 4
shall be applied to the Obligations in accordance with Section 7.


 


5.                                       Funding
Advances. At the written request and expense of Borrower, Lender will wire
transfer all or any portion of the advances hereunder in accordance with
written instructions therefor. By executing this Note, Borrower hereby requests
Lender to make and fund the initial advances in accordance with the funding
instructions that have been provided to Lender in writing.


 


6.                                       Mechanics
of Payment. All payments and other amounts due hereunder must be received
by Lender by wire transfer in immediately available funds in Dollars (and
without any deduction, offset, netting, counterclaim or reservation of rights)
on or before 2:00 p.m. Central Time on the due date therefor at the principal
office of Lender located at 800 Nicollet Mall, Minneapolis, MN  55402, Attention Tim Carter or Greg Meyer, or
at such other location as Lender at any time or from time to time may designate
to Borrower in writing. Any funds received by Lender after 2:00 p.m. Central
Time on any day will be deemed to be received on the next succeeding Business
Day. Whenever any payment to be made hereunder is due on a day that is not a
Business Day, then such payment may be made on the next succeeding Business
Day, and such extension of time will be included in the computation of interest
due hereunder.


 


7.                                       Application
of Payments. All payments and other funds received by Lender hereunder will
be applied in the following order:  (a)
to the payment of any fees and charges due under the Loan Documents, then
(b) to any obligations for the payment of expenses, costs and indemnities due
under the Loan Documents, then (c) to the payment of interest due and
owing hereunder, then (d) to the principal indebtedness due hereunder, then
(e) to any other interest accrued hereunder, then (f) to any other
indebtedness of Borrower to Lender under the Loan Documents.


 


8.                                       Capital
Adequacy, Taxes and Other Adjustments. If Lender determines that (a) the
adoption, implementation or interpretation after the date hereof of any law,
treaty, governmental (or quasi-governmental) rule, regulation, guideline,
directive, policy or order regarding capital adequacy, reserve requirements,
taxes or similar requirements, or (b) the compliance by Lender or any entity
controlling or funding the operations of Lender with any request or directive
regarding capital adequacy, reserve requirements, taxes or similar requirements
(whether or not having the force of law and whether or not failure to comply
therewith would be unlawful) from any central bank, governmental agency,
controlling entity, funding source or body, in either instance, would have the
effect of increasing the amount of capital, reserves, taxes, funding costs or
other funds required to be maintained or paid by Lender and thereby have the
effect of reducing the rate of return on Lender’s capital as a consequence of
its obligations hereunder, then Borrower must pay to Lender additional amounts
sufficient to compensate Lender for such reduction. Lender will notify Borrower
of any such determination and payment amount within a reasonable period of time
thereafter, and (upon written request) Lender will furnish a statement setting
forth the basis and the method for determining the amount of such payment. Any
such determination or calculation by Lender will be conclusive absent manifest
error.


 


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9.                                       Miscellaneous
Additional Payment Terms, Including Ability to Re-Borrow. Principal amounts
repaid or prepaid hereunder will not be available for re-borrowing under the
terms hereof. To the extent Lender notes the date or amount of any payment
hereunder on a schedule annexed hereto, then such notations shall constitute
prima facie evidence of the information noted on such schedule, but the failure
of Lender to make any such notation will not limit or otherwise affect the
obligations or liabilities of Borrower hereunder.


 


10.                                 Usury
Savings Provision. Notwithstanding any provision of any Loan Document,
Borrower shall not be required to pay interest at a rate or any fee or charge
in an amount prohibited by applicable law. If interest or any fee or charge
payable on any date would be in a prohibited amount, then such interest, fee or
charge will be automatically reduced to the maximum amount that is not
prohibited, and any interest, fee or charge for subsequent periods (to the
extent not prohibited by applicable law) will be increased accordingly until
Lender receives payment of the full amount of each such reduction. To the
extent that any prohibited amount is actually received by Lender, then such
amount will be automatically deemed to constitute a repayment of principal
indebtedness hereunder.


 


11.                                 Affirmative
and Negative Covenants. Borrower hereby covenants and agrees that, until
this Note has been Paid in Full, Borrower will comply with the following
covenants:


 


(a)                                  Delivery
of Periodic Financial Information. Within 30 calendar days after the end of
each month (including the last month of each fiscal quarter and of each fiscal
year), Borrower shall deliver to Lender a set of consolidated financial
statements for such immediately preceding month (in form and substance
reasonably acceptable to Lender) including a balance sheet, income statement
and statement of cash flows for Borrower and its Subsidiaries (with appropriate
exhibits and schedules). Together with the monthly financial statements, Lender
must also receive a certificate executed by the chief financial officer of
Borrower as is acceptable to Lender (1) stating that the financial
statements have been prepared in accordance with GAAP (except for the absence
of footnotes and for customary, nonmaterial year-end adjustments) and fairly
present the consolidated financial condition of Borrower and its Subsidiaries
as of the date thereof and for the periods covered thereby and
(2) certifying that as of the date of such certificate there is not any
existing Default or Event of Default.


 


(b)                                 Delivery
of Financial Statements. Within 90 calendar days after each fiscal year,
Borrower shall deliver to Lender a complete set of annual consolidated and
consolidating financial statements for Borrower and its Subsidiaries (with
accompanying notes), in reasonable detail and in comparative form. Such
financial statements (1) must be prepared in accordance with GAAP
consistently applied, and (2) must be audited by McGladrey &
Pullen, LLP or another independent certified public accounting firm
satisfactory to Lender. Together with the annual financial statements, Lender
must also receive all related management letters, if any, prepared by such
accountants, and such financial statements shall be accompanied by a report of
such accountants, which report shall be without limitation as to the scope of
the audit and shall state that such financial statements present fairly, in all
material respects, the financial position of Borrower and its Subsidiaries in
conformity with GAAP as of the date thereof and for the periods covered
thereby.


 


(c)                                  Other
Information; Access. From time to time, Borrower shall provide Lender with
any other information (financial or otherwise) about Borrower or any of its
Subsidiaries reasonably requested by Lender. From time to time (upon request by
Lender), Borrower shall provide Lender and its agents with reasonable access to
the management personnel, books and records, property and operations (including
its financial records) of Borrower and its Subsidiaries, whether such property,
books and records are in the possession of Borrower or are in the possession of
a third party.


 


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(d)                                 Compliance
with Laws; Existence and Good Standing. Borrower shall, and shall cause
each of its Subsidiaries to, comply in all material respects with all laws,
rules, regulations and orders (federal, state, local and otherwise) that are
applicable to Borrower, or any Subsidiary of Borrower, including all applicable
Environmental Control Statutes and ERISA. Borrower shall, and shall cause each
of Subsidiaries to, preserve and maintain (1) such Person’s existence as an
organization in good standing under the applicable laws of such Person’s
jurisdiction of organization, and (2) such Person’s qualification in
good standing to conduct business in all jurisdictions where it conducts
business and as to which the failure to be in good standing could reasonably be
expected to have a Material Adverse Effect, and (3) the validity of all
such Person’s authorizations and licenses required or otherwise appropriate in
the conduct of such Person’s businesses and as to which the failure to have
such valid authorization or license could reasonably be expected to have a
Material Adverse Effect.


 


(e)                                  Books
and Records; Maintenance of Properties. Borrower shall, and shall cause
each of Subsidiaries to, keep and maintain accurate books and records of
account in accordance with GAAP. Borrower shall, and shall cause each of
Subsidiaries to, keep, maintain and preserve all of its material assets in good
order and repair (ordinary wear and tear excepted) and fully insured by
reputable and financially sound insurance companies with coverages that are
customary for Borrower’s or such Subsidiary’s industry (and reasonably
acceptable to Lender).


 


(f)                                    Transactions
with Affiliates. Borrower shall not, and shall not permit any of its
Subsidiaries to, engage in any transaction (including employment, management
and/or other compensation arrangements) with any Person who is an Affiliate of
Borrower or any of its Subsidiaries other than (a) reasonable and
customary compensation arrangements in the ordinary course of business with its
officers and directors, to the extent permitted hereunder and
(b) transactions on a basis no more favorable to such Affiliate then would
be obtained in a comparable arm’s length transaction with a Person not an
Affiliate of Borrower or any of its Subsidiaries and disclosed to Lender in
writing prior to entering into any such transaction.


 


(g)                                 Indebtedness
and Guaranties. Borrower shall not, and shall not permit ABE Fairmont to,
(1) create, incur, assume or permit to exist any additional Indebtedness or
liabilities or (2) guarantee, assume or otherwise be or agree to
become directly or indirectly liable in any way for any additional indebtedness
or liability of any other Person, except (i) Indebtedness and guarantees in
favor of Lender; (ii) trade debt and customary operating expenses incurred and
paid by such Person in the normal and ordinary course of business;
(iii) Indebtedness incurred to purchase fixed or capital assets and
Capital Leases, consistent with the restrictions and conditions in Section
11(h)(2), provided that the aggregate amount of such Indebtedness
outstanding under this clause (iii) at any time may not exceed $3,000,000;
(iv) Indebtedness under the CoBank Loan Documents in an amount not to
exceed $103,000,000 in the aggregate outstanding at any time; (v) the
Indebtedness listed on Schedule 11(g) attached to this Note; (vi)
Indebtedness under the Wells Fargo Documents in an amount not to exceed
$7,000,000 in the aggregate outstanding at any time; (vii) Indebtedness under
the ECM Loan Documents in an amount not to exceed $25,929,436;
(viii) extensions, refinancings and renewals of any of the Indebtedness
permitted by the foregoing clauses, provided that the principal amount
of such Indebtedness shall not be increased or the terms of such Indebtedness
modified to impose more burdensome terms upon Borrower or any of its
Subsidiaries; (ix) other unsecured Indebtedness of Borrower in an amount
not to exceed $3,000,000 in the aggregate outstanding at any time; and
(x) other unsecured Indebtedness of ABE Fairmont in an amount not to
exceed $5,000,000 in the aggregate outstanding at any time.


 


(h)                                 Liens.
Borrower shall not, and shall not permit ABE Fairmont to, create, permit or
suffer the creation or existence of any Liens on any of its property or assets
(real or personal, tangible or intangible), except (1) Liens in favor of
Lender; (2) Liens arising in favor of sellers, lessors or other


 


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financial
institutions for indebtedness and obligations incurred to purchase or lease
fixed or capital assets as permitted under Section 11(g)(iii), provided
that such Liens secure only the indebtedness and obligations created thereunder
(but not any related monetary obligations under non-compete and consulting
arrangements) and are limited to the assets purchased or leased pursuant
thereto and the proceeds thereof; (3) Liens for taxes, assessments or other
governmental charges (federal, state or local) that are not yet delinquent or
that are then being currently contested in good faith by appropriate
proceedings diligently prosecuted, provided that (i) adequate
reserves therefor in accordance with GAAP have been established, and
(ii) such Liens could not reasonably be expected to have or cause a Material
Adverse Effect, (4) deposits or pledges made in the ordinary course of business
to secure obligations which are not overdue in respect of under workmen’s
compensation, unemployment insurance or social security laws or similar
legislation; (5) deposits to secure performance or payment bonds, bids,
tenders, contracts, leases, franchises or public and statutory obligations
required in the ordinary course of business; (6) statutory or common law liens
of carriers, warehousemen, mechanics, suppliers, materialmen, repairmen, and landlords
incurred in the ordinary course of business and in existence less than 120 days
from the date of creation thereof in respect of obligations not past due or
sums being currently contested in good faith by appropriate proceedings
diligently prosecuted, provided that (A) adequate reserves therefor
in accordance with GAAP must have been established, and (B) such Liens could
not reasonably be expected to have or cause a Material Adverse Effect; (7)
easements, rights-of-way, restrictions and other similar encumbrances on real
property owned or leased by Borrower and encumbrances evidencing the ownership
interest or title of any owner or lessor with respect to real property leased
by Borrower, provided that such Liens do not in the aggregate materially
interfere with the occupation, use or enjoyment by Borrower of the property or
assets encumbered thereby in the normal course of business or materially impair
the value of the property subject thereto; (8) Liens securing Indebtedness
permitted by Section 11(g)(iv) or Section 11(g)(vi); (9) the
Liens listed on Schedule 11(h) attached to this Note; (10) Liens arising
from judgments, decrees or attachments that do not constitute an Event of
Default; (11) Liens in favor of customs and revenue authorities arising as
a matter of law to secure payment of customs duties in connection with the
importation of goods; (12) Liens arising solely by virtue of any statutory or
common law provision relating to banker’s liens, rights of setoff or similar
rights and remedies as to deposit accounts or other funds maintained with a
creditor depository institution; (13) Liens in favor of a depository bank
or a securities intermediary pursuant to such depository bank’s or securities
intermediary’s customary customer account agreement; provided that any such
Liens shall at no time secure any indebtedness or obligations other than
customary fees and charges payable to such depository bank or securities
intermediary; and (14) Liens incurred in connection with the extension, renewal
or refinancing of indebtedness secured by Liens permitted under the preceding
clauses, provided that any extension, renewal or replacement Lien shall be
limited to the property encumbered by the existing Lien and the principal
amount of the indebtedness being extended, renewed or refinanced does not
increase.


 


(i)                                     Investments,
Acquisitions and Loans. Borrower shall not, and shall not permit ABE
Fairmont to, purchase or otherwise acquire (including by way of share exchange)
any part or share of the Equity Interests or equity ownership of, or acquire
all or substantially all of the assets or any division or similar operating
unit of, guaranty any Indebtedness of, or make any loan, advance or extension
of credit to, or contribute to the capital of, or make or permit to exist any
contribution, investment in or other interest in, any other Person
(collectively, “Investments”), except for: (1) government
and agency securities backed by the full faith and credit of the U.S. federal
government; (2) commercial paper of a U.S. domestic issuer rated at least A-1+
or A-1 by Standard & Poor’s Ratings Group or at least P-1 by Moody’s
Investor Services, Inc. and maturing not more than 90 calendar days from the
date of acquisition thereof; (3) certificates of deposit (maturing within 12
calendar months after the date of issuance), time deposits, other deposits and
bankers’ acceptances issued by or established with U.S. federally insured
commercial banks rated as “well capitalized” by their primary federal
regulators,


 


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and having
unimpaired capital and unimpaired surplus (collectively) of at least
$250,000,000, and whose commercial paper (or commercial paper that is supported
by such bank’s letter of credit or commitment to lend) is rated at least A-1+
or A-1 by Standard & Poor’s Ratings Group or at least P-1 by Moody’s
Investor Services, Inc.; (4) loans and advances to employees of Borrower or any
of its Subsidiaries in the ordinary course of business not to exceed an
aggregate principal amount of $100,000 at any time outstanding; (5) Investments
set forth on Schedule 11(i) attached to this Note; (6) Investments
in Subsidiaries existing as of the date funds are first advanced under this
Note; (7)  Investment by Borrower of the
net proceeds of this Note in ABE Fairmont, (8) additional Investments in
Subsidiaries in an amount not to exceed $3,000,000 in the aggregate at any
time; and (9) repurchases of Equity Interests from former employees or managers
of Borrower under the terms of applicable repurchase agreements, including
repurchases effected by the cancellation of indebtedness owed to such former
employees of Borrower, in an aggregate amount not to exceed $100,000 during the
term of this Note, provided that no Event of Default has occurred, is
continuing or would exist after giving effect to such repurchases or
cancellation of indebtedness.


 


(j)                                     Transfer
of Assets. Borrower shall not, and shall not permit ABE Fairmont to, sell,
lease, license pursuant to an exclusive license (whether or not fully paid up
front), transfer or otherwise dispose of all or a substantial part of its
assets or any asset the loss of which could reasonably be expected to have or
cause a Material Adverse Effect. In addition, Borrower shall not, and shall not
permit any of its Subsidiaries to, sell, lease, license, transfer or otherwise
dispose of any asset other than (1) pursuant to a transaction with an unrelated
third party in the normal and ordinary course of business for value received
and otherwise in accordance with the terms hereof that (together with all other
transactions during the immediately preceding 12 consecutive calendar months)
has a fair market value aggregating less than $1,000,000, provided that
no Default or Event of Default is then occurring or would otherwise be caused
thereby; (2) with respect to obsolete or replaced equipment no longer useful in
the operation of Borrower’s or any Subsidairy’s business, pursuant to a
reasonable and customary transaction with an unrelated third party and otherwise
in accordance with the terms hereof; or (3) dispositions of inventory, or
used, worn-out or surplus property, all in the ordinary course of business. Borrower
shall not, and shall not permit any of its Subsidiaries to, enter into any
sale-lease back transaction with respect to any of their respective assets.


 


(k)                                  Dividends,
Distributions and Redemptions. Except as permitted by Section 11(i)(9),
Borrower shall not declare or make (directly or indirectly) any payment or
distribution with respect to, or incur any liability for the purchase,
acquisition, redemption or retirement of, any of its equity interests
(including warrants therefor) or as a dividend, return of capital or other
payment or distribution of any kind to any holder of any such equity interest. Notwithstanding
the foregoing, so long as no Default or Event of Default then exists under the
Loan Documents or would otherwise be caused by the payment of such dividend,
Borrower may declare and distribute reasonable and lawful dividends to the
holders of its equity securities for the sole purpose of making Tax
Distributions to such holders of its Equity Interests.


 


(l)                                     New
Ventures; Mergers. Borrower shall not, and shall not permit ABE Fairmont
to, (1) enter into any new business activities or ventures not directly related
to its current business; (2) merge or consolidate with or into any other
corporation, partnership, limited liability company or other organization; or
(3) create or acquire (or cause or permit the creation or acquisition of) any
Subsidiary.


 


(m)                               Modifications
to Organizational Documents. Borrower shall not, and shall not permit ABE
Fairmont to, (1) amend or otherwise modify any of its Organizational Documents,
or (2) change its legal or official name, its operating names or the names under
which it executes contracts and conducts business, in each instance, if such
amendment or change could reasonably be expected to have


 


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or cause an
adverse effect (including any adverse affect on the attachment or perfection of
any pledge or security interest in favor of Lender).


 


(n)                                 General
Insurance Provisions. Borrower shall, and shall cause ABE Fairmont to, keep
all of their respective property and assets fully covered by insurance with
reputable and financially sound insurance companies (reasonably acceptable to
Lender), and also maintain such protection against such hazards and liability
in such amounts and with such deductibles as is customary in the industry of
Borrower or ABE Fairmont and appropriate under the relevant circumstances and,
on the date that is 5 Business Days from the date hereof, and at all times
thereafter, shall name (with appropriate endorsements) Lender as an additional
insured with respect to policies of liability insurance. Upon Lender’s request,
Borrower from time to time will furnish Lender with proof of such insurance, in
form and substance acceptable to Lender, and a copy of the related policy or
policies.


 


(o)                                 Taxes.
Borrower shall, and shall cause ABE Fairmont to, pay and discharge all material
taxes, assessments or other governmental charges or levies imposed on it or any
of its property or assets prior to the date upon which any penalty for
non-payment or late payment is incurred, unless the same are then being contested
in good faith by appropriate proceedings diligently prosecuted, adequate
reserves therefor have been established in accordance with GAAP, and the
consequences of such non-payment could not reasonably be expected to have a
Material Adverse Effect.


 


(p)                                 Management
Changes. Borrower shall notify Lender in writing within 20 days after any
change (including any dismissal or change in title or status) in the senior
management personnel of Borrower or ABE Fairmont.


 


(q)                                 Litigation
and Administrative Proceedings. Borrower shall notify Lender in writing
promptly upon the institution or commencement of any litigation, legal or
administrative proceeding, any arbitration proceeding, or any labor controversy
against or involving Borrower or any of its Subsidiaries (1) with a purported
amount in controversy in excess of $250,000 (in excess of the amount of any
insurance coverage as to which the applicable insurer has accepted tender) or
(2) that could otherwise, if adversely determined, reasonably be expected
to have or cause a Material Adverse Effect.


 


(r)                                    Monitoring
Compliance. Borrower shall notify Lender in writing promptly, but in any
event within 5 calendar days, after obtaining knowledge of the occurrence or
existence of any Default or Event of Default hereunder.


 


(s)                                  Margin
Stock Restrictions; Other Federal Statutes. Borrower shall not, and shall
not permit ABE Fairmont to, use any of the proceeds hereunder, directly or
indirectly, to purchase or carry, or to reduce or retire any indebtedness that
was originally incurred to purchase or carry, any “Margin Stock” or for any
other purpose that might constitute the transactions contemplated hereby as a “Purpose
Credit” within the meaning of the Board of Governors of the Federal Reserve
Systems’ Margin Regulations. Borrower shall not, and shall not permit ABE
Fairmont to, engage as its principal business in the extension of credit for
purchasing or carrying Margin Stock. Borrower shall not, and shall not permit
ABE Fairmont to, cause or permit any Loan Document to violate any other
regulation of the Board of Governors of the Federal Reserve System or the
Securities and Exchange Commission or any provision of the Securities Act of
1933, the Securities Exchange Act of 1934, the Investment Company Act of 1940
or the Small Business Investment Act of 1958, each as amended, or any rules or
regulations promulgated under any of such statutes.


 


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(t)                                    Further
Assurances. From time to time, Borrower shall, and shall cause ABE Fairmont
to, execute and deliver (or will cause to be executed and delivered) such
supplements, amendments, modifications to and/or replacements of the Loan
Documents and such further instruments as may be reasonably required or
reasonably requested by Lender to effectuate the intention of the parties to
(or to otherwise facilitate the performance of) the Loan Documents.


 


(u)                                 Costs
and Expenses. Borrower shall pay or reimburse Lender for all fees and costs
(including all reasonable attorneys’ fees and disbursements) that Lender may
pay or incur in connection with (1) the preparation, negotiation and review of
the Loan Documents, any waivers, consents and amendments in connection herewith
or therewith and all other documentation related hereto or thereto, (2) the initial
and continuing perfection or protection of Lender’s interest in any of the
Collateral, (3) the collection or enforcement of any of the Loan Documents, (4)
the periodic examination of the books, records and operations of Borrower and
its Subsidiaries (including with respect to the Collateral), and (5) Lender’s
release of its interests in the Collateral in accordance with the terms of the
Loan Documents. Borrower shall pay any and all recordation taxes or other fees
due upon the filing of the financing statements or documents of similar effect
required to be filed under the Loan Documents, and shall provide Lender with a
copy of any receipt or other evidence reflecting such payments. All obligations
provided for in this Section 11(u) shall survive the termination of this
Note and the repayment of the Obligations hereunder.


 


(v)                                 Closing
Conditions. The obligation of Lender to make the advance contemplated to be
made under this Note on the date hereof is subject to the satisfaction or
waiver, on or before the date hereof, of the following conditions:


 


(i)                                     Documents.
Borrower and ABE Fairmont shall each have executed and/or delivered to Lender
each Loan Document to which it is a party, and such other certificates,
documents and agreements as Lender may reasonably request.


 


(ii)                                  Representations
and Warranties; No Default. The representations and warranties contained in
Section 12 and in the other Loan Documents shall be true on and as of
the date hereof, both immediately before and immediately after giving effect to
the consummation of the transactions contemplated hereby and there shall exist
on such day no Default or Event of Default, both immediately before and
immediately after giving effect to the consummation of the transactions
contemplated hereby.


 


(iii)                               Opinion.
Lender shall have received from Faegre & Benson, counsel to Borrower and
ABE Fairmont, an opinion letter regarding the Loan Documents and the financing
transaction contemplated thereby, in form and substance satisfactory to Lender.


 


(iv)                              Compliance
with Laws. The advance of the funds as contemplated by this Note on the
terms and conditions herein provided (including the use of the proceeds thereof
by Borrower) and the issuance of the Warrant shall not violate any applicable
law or governmental regulation and shall not subject Lender or the holder of
the Warrant to any tax, penalty or liability under or pursuant to any
applicable law or governmental regulation.


 


(v)                                 Consents.
Lender shall be satisfied that any and all material government, contractual and
other third-party licenses, approvals and consents necessary to the funding of
the advance contemplated by this Note, the issuance of the Warrant and the
granting of the security interest to Lender pursuant to the Collateral Security
Documents have been obtained.


 


8

















 


(vi)                              Warrant.
Borrower have issued the Warrant to Lender in form and substance satisfactory
to Lender.


 


(vii)                           Origination
Fee. Borrower shall have paid to Lender an origination fee in the amount of
$200,000 by wire transfer in immediately available funds, which origination fee
shall be non-refundable and fully earned as of the date hereof.


 


(viii)                        Other
Fees and Expenses. Borrower shall have paid all fees required by Section
11(u) then due and owing.


 


(ix)                                Secretary’s
Certificate with Attachments. Borrower shall have, and shall have caused
ABE Fairmont to have, delivered to Lender certificates of the Secretary or an
Assistant Secretary and one other officer of each of Borrower and ABE Fairmont (with
incumbency), certifying the names and true signatures of the officers of such
Person authorized to sign the Loan Documents (and the Warrant, with respect to
Borrower) to which such Person is a party and the other documents to be
delivered hereunder to which such Person is a party, in form and substance
satisfactory to Lender, attaching (A) copies of the resolutions of the board of
directors or the sole member, as applicable, of each of Borrower and ABE
Fairmont, authorizing its execution and delivery of, and the performance of,
its respective obligations under the Loan Documents to which such Person is a
party (and the Warrant, with respect to Borrower), (B) certified copies of the
certificates of formation and operating agreements of each of Borrower and ABE
Fairmont; and (C) a good standing certificate for each of Borrower and ABE
Fairmont from the Secretary of State of the state of formation of each such
Person, each dated as of a recent date.


 


(x)                                   Officer’s
Certificate. Borrower shall have delivered a certificate of an officer of
Borrower having primary responsibility for financial matters, in form and
substance satisfactory to Lender, certifying as to the amount of outstanding
Indebtedness of each of Borrower and ABE Fairmont on an unconsolidated basis as
of the date hereof.


 


(xi)                                Perfection
of Security Interest. All actions necessary to perfect (and to maintain
perfection of) the Lien of Lender in the Collateral shall have been taken in
accordance with the terms and provisions of the Collateral Security Documents. The
Lien of Lender in the Collateral shall be valid and enforceable and the
Collateral shall be subject to no other Liens.


 


(xii)                             Material
Adverse Effect. No Material Adverse Effect shall have occurred.


 


(w)                               Independence
of Covenants. All covenants and defaults contained in this Note and the
other Loan Documents shall be given independent effect. If a particular action
or condition is not permitted by any covenant in this Note, then the fact that
such action or condition would be permitted by an exception to (or would
otherwise be within the limitations of) another covenant in this Note shall not
avoid the occurrence or existence of a Default or Event of Default if such
action is taken or if such condition exists.


 


12.                                 Representations
and Warranties. Borrower hereby represents and warrants to and for the
benefit of Lender as follows:


 


(a)                                  Organization
and Good Standing. Each of Borrower and each of its Subsidiaries (1) is
duly organized, validly existing and in good standing under the laws of its
jurisdiction of organization, and (2) has all requisite limited
liability company power to own its properties and to


 


9

















 


conduct its
business as now conducted and as currently proposed to be conducted, and
(3) is duly qualified to conduct business as a foreign limited liability
company and is currently in good standing in each state and jurisdiction in
which it conducts business, except where failure to be duly qualified
and in good standing could not reasonably be expected to have a Material
Adverse Effect.


 


(b)                                 Power
and Authority. Borrower has all requisite limited liability company power
and authority under applicable law and under its Organizational Documents to
execute, deliver and perform its obligations under the Loan Documents.


 


(c)                                  Validity
and Legal Effect. This Note constitutes, and the other Loan Documents to
which Borrower is a party constitute (or will constitute when executed and
delivered), the legal, valid and binding obligations of Borrower enforceable
against it in accordance with the terms thereof, except as may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium or other similar
laws and except as limited by general principles of equity.


 


(d)                                 No
Violation of Laws or Agreements. The execution, delivery and performance by
Borrower of the Loan Documents (1) will not violate or contravene any material
provision of any material law, rule, regulation, administrative order or
judicial decree (federal, state or local), (2) will not violate or
contravene any provision of the Organizational Documents of Borrower or any of
its Subsidiaries, (3) will not result in any material breach or violation of
(or constitute a material default under) any material agreement or instrument by
which Borrower or any of its Subsidiaries or any of their respective assets or
property may be bound, and (4) will not result in or require the creation of
any Lien (other than pursuant to the Loan Documents) upon or with respect to
any assets or properties of Borrower or any of its Subsidiaries, whether such
assets or properties are now owned or hereafter acquired.


 


(e)                                  Accuracy
of Financial Information. All financial statements previously furnished to
Lender concerning the financial condition and operations of Borrower and it
Subsidiaries: (1) fairly present in all material respects the financial
condition of the organization covered thereby as of the dates and for the
periods covered thereby, (2) disclose all material liabilities (contingent and
otherwise) of Borrower and its Subsidiaries, and (3) with respect to financial
statements prepared by or on behalf of Borrower and its Subsidiaries, have been
prepared in accordance with GAAP consistently applied.


 


13.                                 Definitions.
For purposes of this Note, the following terms have the following corresponding
meanings:


 


(a)                                  “ABE
Fairmont” means ABE Fairmont, LLC, a Delaware limited liability company and
wholly-owned Subsidiary of Borrower.


 


(b)                                 “Affiliate”
of any Person means any other Person that directly or indirectly controls, is
controlled by or is under direct or indirect common control with such Person. A
Person shall be deemed to “control” another Person if such first Person
directly or indirectly possesses the power to direct (or to cause the direction
of or to materially influence) the management and policies of the second
Person, whether through the ownership of voting securities, by contract or
otherwise. Without limiting the generality of the foregoing, each Person who
owns or controls 5% or more of any class or series of any equity interest of
such Person will be deemed to be an Affiliate of a Person. Notwithstanding the
foregoing, in no event shall Lender or any of its Affiliates be deemed to be an
Affiliate of Borrower or any of its Subsidiaries.


 


10

















 


(c)                                  “Bankruptcy Code” means the
Federal Bankruptcy Reform Act of 1978, as codified under Title 11 of the
United States Code, and the Bankruptcy Rules promulgated thereunder, as
amended.


 


(d)                                 “Borrower”
means Advanced BioEnergy, LLC, a Delaware limited liability company, having its
principal and chief executive office at the address specified in Section 25,
and any successor or authorized assignee of any thereof.


 


(e)                                  “Business
Day” means any day that is not a Saturday, a Sunday or a day on which banks
under the laws of the States of Minnesota or New York are authorized or
required to be closed.


 


(f)                                    “Capital
Leases” means all leases that have been or should be recorded as
capitalized leases in accordance with GAAP.


 


(g)                                 “Change
of Control” means shall mean the occurrence of an event, or series of
events, which shall lead, or has led to (a) any “person” or any syndicate or
group deemed a “person” within the meaning of Sections 13(d) and 14(d) of the
Securities Exchange Act of 1934, as amended (the “Exchange Act”), has
become, directly or indirectly, the “beneficial owner” (as defined in Rules
13d-3 and 13d-5 under the Exchange Act, except that a person shall be deemed to
have “beneficial ownership” of all shares that any such person has the right to
acquire, whether such right is exercisable immediately or only after the
passage of time), of 30% or more of the voting power of the voting stock of
Borrower on a fully-diluted basis, after giving effect to the conversion and
exercise of all outstanding warrants, options and other securities of Borrower
(whether or not such securities are then currently convertible or exercisable),
or (b) during any period of 2 consecutive calendar years, individuals who at
the beginning of such period constituted the board of directors (or similar
governing body) of Borrower cease for any reason (other than death, disability
or expiration of term) to constitute a majority of the board of directors (or
similar governing body) of Borrower then in office unless such new directors
(or similar) were elected by the directors (or similar) of Borrower who
constituted the board of directors (or similar governing body) of Borrower at
the beginning of such period, or (c) the failure of Borrower to own 100% of the
equity interests of each of its Subsidiaries on a fully-diluted basis.


 


(h)                                 “CoBank
Loan Documents” means, collectively, (i) that Master Loan Agreement dated
as of November 20, 2006 between Farm Credit Services of America, FLCA (“Farm
Credit”) and ABE Fairmont as amended by an Amendment dated on or about October
5, 2007 (the “11/20/06 MLA”), as further amended and supplemented by that (1)
Construction and Term Loan Supplement to the MLA dated as of November 20, 2006
between Farm Credit and ABE Fairmont with respect to a construction and term
loan in an amount not to exceed $6,500,000, as amended by the Amendment to such
Supplement dated on or about October 5, 2007 between Farm Credit and ABE
Fairmont, (2) Construction and Revolving Term Loan Supplement to the MLA dated
as of November 20, 2006 and effective as of June 1, 2007 between Farm Credit
and ABE Fairmont with respect to a construction and revolving term loan
commitment in an amount not to exceed $4,000,000, as amended by the Amendment to
such Supplement entered into on or about October 5, 2007 between Farm Credit
and ABE Fairmont, (3) Disbursing Agreement dated as of November 1, 2006 among
ABE Fairmont, Farm Credit, CoBank, ACB (“CoBank”) and Homestead Escrow and
Exchange Co., (4) Administrative Agency Agreement dated as of November 20, 2006
among Farm Credit, CoBank and ABE Fairmont, and (5) Statused Revolving Credit
Supplement dated on or about October 5, 2007 between ABE Fairmont and Farm
Credit; and (ii) that Master Loan Agreement dated as of February 17, 2006
between Farm Credit and Borrower (the “2/17/06 MLA”), as amended and
supplemented by that (1) Construction and Term Loan Supplement dated as of
February 17, 2006 between Farm Credit and ABE Fairmont with respect to a
construction and


 


11

















 


term loan in an
amount not to exceed $58,500,000, (2) Construction and Revolving Loan
Supplement dated as of February 17, 2006 between Farm Credit and ABE Fairmont
with respect to a construction and revolving term loan in an amount not to
exceed at any one time outstanding 
$21,000,000, (3) Statused Revolving Credit Supplement dated as of
February 17, 2006 between Farm Credit and ABE Fairmont with respect to a revolving
credit facility in an available amount not to exceed at any one time
outstanding $5,000,000 as amended by the Amendment dated on or about October 5,
2007, (4) Administrative Agency Agreement dated as of February 17, 2006 among
Farm Credit, CoBank and Borrower, ABE Fairmont, (5) Amendment to Master Loan
Agreement dated as of April 11, 2006 between Farm Credit and Borrower, (6) that
Security Agreement dated February 17, 2006 between Borrower and Farm Credit,
and (7) that Deed of Trust and Assignment of Rents dated February 17, 2006 by Borrower
in favor of Farm Credit, all of Borrower’s obligations and liabilities under
the 2/17/06 MLA, as amended, having been assumed by ABE Fairmont pursuant to
Section 25 of the 11/20/06 MLA and Borrower having been discharged from its
obligations under the 2/17/06 MLA, as amended, pursuant to that letter
agreement dated November 10, 2006 between Farm Credit and Borrower, as the
2/17/06 MLA has been further amended by that (x) Amendments to the Construction
and Term Loan Supplement dated as of November 20, 2006 and on or about October
5, 2007 between Farm Credit and ABE Fairmont and (y) Amendments to the
Construction and Revolving Term Loan Supplement dated as of November 20, 2006
and on or about October 5, 2007 between Farm Credit and ABE Fairmont, together
with all amendments, supplements, agreements, documents, exhibits, schedules
and certificates contemplated thereby or entered into in connection with any of
the foregoing.


 


(i)                                     “Collateral”
means the collateral security committed to Lender under the Collateral Security
Documents executed by Borrower in favor of Lender pursuant to this Note from
time to time and/or pursuant to all similar or related documents and agreements
from time to time, all as amended, modified, supplemented or restated and in
effect from time to time.


 


(j)                                     “Collateral
Security Documents” means, individually and collectively, (1) the
Membership Interest Pledge Agreement, all financing statements filed pursuant
thereto, and all other instruments (including membership interest certificates)
and other executed and/or delivered pursuant thereto and (2) any additional
documents granting security to Lender pursuant to this Note or required or
delivered in connection with any other Loan Document, all as amended modified,
supplemented or restated and in effect from time to time.


 


(k)                                  “Default”
means any event or circumstance that with the giving of notice or the passage
of time (or both) would constitute an Event of Default.


 


(l)                                     “Dollar”
or “$” means U.S. dollars.


 


(m)                               “ECM
Loan Documents” means, collectively, that (i) Note Purchase Agreement dated
as of April 20, 2007 between Borrower and Ethanol Investment Partners, LLC (“EIP”),
(ii) the 15% Subordinated Convertible Promissory Note issued by Borrower to EIP
on April 27, 2007 in the original principal amount of $10,000,000, and (iii)
the 15% Subordinated Convertible Promissory Note issued by Borrower to EIP on
June 20, 2007 in the original principal amount of $15,929,436, together with
all amendments, supplements, agreements, documents, exhibits, schedules and
certificates contemplated thereby or entered into in connection with any of the
foregoing.


 


(n)                                 “Environmental
Control Statutes” means all federal, state and local laws, statutes, rules,
ordinances, regulations (as implemented and as interpreted), judgments,
decrees, orders, licenses, permits and rules governing the control, removal,
storage, transportation, spill, release or


 


12

















 


discharge of
hazardous or toxic wastes, substances and petroleum products or otherwise
pertaining to the protection of human health, safety or the environment or
natural resources.


 


(o)                                 “Equity
Interests” means shares of capital stock, partnership interests, membership
interests or units in a limited liability company, beneficial interests in a
trust or other equity ownership interests in a Person, and any warrants,
options or other rights entitling the holder thereof to purchase or acquire any
such equity interest.


 


(p)                                 “ERISA”
means the Employee Retirement Income Security Act of 1974, as amended.


 


(q)                                 “Event of Default”
means the occurrence of any one or more of the following events:  (1) if any payment of principal, interest,
fees, expenses, indemnities or other sums payable to Lender under any Loan
Document is not received by Lender in immediately available funds on the date
such payment is due and payable and, except with respect to principal
payments, such failure to receive such payment in immediately available funds
continues for 3 Business Days after the due date therefor; (2) if any
representation, warranty or other statement made in any Loan Document or in any
financial statement or written report provided to Lender by or on behalf of
Borrower or ABE Fairmont (or otherwise furnished in connection herewith) when made
was misleading or incorrect in any material respect; (3) if Borrower or ABE
Fairmont defaults in the full and timely performance when due of any other
covenant or agreement contained in any Loan Document, and such default remains
uncured for 15 Business Days after the earlier of the date that Lender notifies
Borrower thereof or the date that Borrower or ABE Fairmont otherwise acquires
knowledge or should have acquired knowledge thereof; (4) if Borrower or ABE
Fairmont fails or refuses to make any required payment (whether as principal,
interest or otherwise) with respect to any indebtedness for borrowed money in
excess of $1,000,000 (or with respect to any guaranty or reimbursement
obligation of any such indebtedness) prior to the expiration of any applicable
grace period with respect to such payment, or if any such indebtedness for
borrowed money is accelerated prior to its express maturity as a result of any
default thereunder; (5) if Borrower or any of its Subsidiaries (i) becomes
insolvent, bankrupt or generally fails to pay its debts as such debts become
due; or (ii) is adjudicated insolvent or bankrupt in any Insolvency Proceeding;
or (iii) admits in writing an inability to pay its debts; or (iv) comes
under the authority of a custodian, receiver or trustee (or one is appointed
for substantially all of its property); or (v) makes an assignment for the
benefit of creditors; or (vi) has commenced against it any proceeding
(including any Insolvency Proceeding) under any law related to bankruptcy, insolvency,
liquidation, dissolution or the reorganization, readjustment or release of
debtors that is either not contested or if contested is not dismissed or stayed
within 60 calendar days after the commencement thereof; or (vii) commences or
institutes any proceeding (including any Insolvency Proceeding) under any law
related to bankruptcy, insolvency, liquidation, dissolution or the
reorganization, readjustment or release of debtors; or (viii) calls a meeting
of creditors with a view to arranging a composition or adjustment of debt; or
(ix) by any act or failure to act that indicates consent to, approval of or
acquiescence in any of the foregoing; (6) if (i) any judgment, writ,
warrant, attachment or execution or similar process that calls for payment or
presents liability in excess of $250,000 is rendered, issued or levied against
Borrower or ABE Fairmont or any of their respective properties or assets or (ii) any final, non-appealable
arbitration award that calls for payment or presents liability in excess of
$250,000 is rendered, issued or levied against Borrower or ABE Fairmont or any
of their respective properties or assets, and in either case such liability is
not paid, waived, stayed, vacated, discharged, settled, satisfied or fully
bonded within 60 calendar days after it is rendered, issued or levied; (7) (i)
if the security interest or lien in any of the Collateral with a fair market
value exceeding collectively $250,000 at any time does not constitute a legal,
valid and enforceable security interest or lien in favor of Lender or shall
cease to have the priority contemplated by the Collateral Security Documents
otherwise than in accordance with the terms thereof or with the express prior
written


 


13

















 


agreement, consent
or approval of Lender, or (ii) if any of the Loan Documents shall be
cancelled, terminated, revoked or rescinded otherwise than in accordance with
the terms thereof or with the express prior written agreement, consent or
approval of Lender, or any action at law, suit or in equity or other legal
proceeding to cancel, revoke or rescind any of the Loan Documents shall be
commenced by or on behalf of Borrower or any of its Subsidiaries or any of
their respective equity holders, or any Governmental Authority shall make a
determination that, or issue a judgment, order, decree or ruling to the effect
that, any one or more of the Loan Documents is illegal, invalid or
unenforceable in accordance with the terms thereof; (8) Borrower or any of its
Subsidiaries fails to observe or perform any agreement or condition under the
CoBank Loan Documents beyond the expiration of any applicable grace period, or
any default or other event occurs (unless such default or event is waived in
writing in accordance with the terms thereof), the effect of which default or
other event is to cause, or to permit the holder or holders of the Indebtedness
under the CoBank Loan Documents to cause, with the giving of notice if
required, such Indebtedness to be demanded or to become due or to be
repurchased, prepaid, defeased or redeemed (automatically or otherwise), or an
offer to repurchase, prepay, defease or redeem such Indebtedness to be made,
prior to its stated maturity; (9) Borrower or any of its Subsidiaries fails to
observe or perform any agreement or condition under the Wells Fargo Documents
beyond the expiration of any applicable grace period, or any other default or
other event occurs (unless such default or event is waived in writing in
accordance with the terms thereof), the effect of which default or other event
is to cause, or to permit the holder or holders of the Indebtedness under the
Wells Fargo Documents to cause, with the giving of notice if required, such
Indebtedness to be demanded or to become due or to be repurchased, prepaid,
defeased or redeemed (automatically or otherwise), or an offer to repurchase,
prepay, defease or redeem such Indebtedness to be made, prior to its stated
maturity; (10) Borrower or any of its Subsidiaries fails to observe or
perform any agreement or condition under the ECM Loan Documents beyond the
expiration of any applicable grace period, or any other default or other event
occurs (unless such default or event is waived in writing in accordance with
the terms thereof), the effect of which default or other event is to cause, or
to permit the holder or holders of the Indebtedness under the ECM Loan
Documents to cause, with the giving of notice if required, such Indebtedness to
be demanded or to become due or to be repurchased, prepaid, defeased or
redeemed (automatically or otherwise), or an offer to repurchase, prepay,
defease or redeem such Indebtedness to be made, prior to its stated maturity;
(11) so long as the Warrant is held by Lender or any of its Affiliates,
(i) any representation, warranty or other statement made in the Warrant
when made shall be misleading or incorrect in any material respect; or (ii)
Borrower defaults in the full and timely performance when due of any covenant
or agreement contained in the Warrant, and such default remains uncured for 15
Business Days after the earlier of the date that Lender notifies Borrower
thereof or the date that Borrower otherwise acquires knowledge or should have
acquired knowledge thereof; and/or (12) if a Material Adverse Effect has occurred.


 


(r)                                    “GAAP”
means generally accepted accounting principles from time to time in effect,
including the statements and interpretations of the United States Financial
Accounting Standards Board, applied on a consistent basis.


 


(s)                                  “Governmental
Authority” means the government of the United States of America, any other
nation or any political subdivision thereof, whether state or local, and any
agency, authority, instrumentality, regulatory body, court, central bank or
other entity exercising executive, legislative, judicial, taxing, regulatory or
administrative powers or functions of or pertaining to government.


 


(t)                                    “Hazardous
Materials” includes (a) any “hazardous waste” as defined by the Resource
Conservation and Recovery Act of 1976 (42 U.S.C. § 6901 et  seq.),
as amended from time to time, and regulations promulgated thereunder; or
(b) any “hazardous substance” as defined by the Comprehensive Environmental
Response, Compensation and Liability Act of 1980 (42 U.S.C. § 9601 et seq.),


 


14

















 


as amended from
time to time, and regulations promulgated thereunder; or (c) any
pollutant or contaminant as defined by 42 U.S.C. §9601(33); or (d) any
toxic substance, oil or hazardous material or other chemical or substance (including,
without limitation, asbestos in any form, urea formaldehyde or polychlorinated
biphenyls) the use or presence of which is similarly regulated or prohibited by
any Environmental Control Statute.


 


(u)                                 “Indebtedness”
of any Person means, without duplication, (1) all indebtedness of such Person
for borrowed money, and (2) all obligations of such Person for the
deferred purchase price of property or services (other than trade indebtedness,
if and to the extent such indebtedness is incurred in the ordinary course of
business for value received which would be shown as a liability on a balance
sheet or are required to be set forth in the footnotes to a year-end balance
sheet, each prepared in accordance with GAAP, and (3) all obligations of
such Person evidenced by notes, bonds, debentures or other similar instruments,
and (4) all obligations of such Person created or arising under any
conditional sale or other title retention agreement with respect to property
acquired by such Person (even though the rights and remedies of the seller or
lender under such agreement in the event of default are limited to repossession
or sale of such property), and (5) all obligations of such Person
as lessee under Capital Leases to the extent classified as a liability on a balance
sheet in accordance with GAAP, and (6) all obligations, contingent or
otherwise, of such Person under acceptance, letter of credit or similar
facilities, and (7) all obligations of such Person in respect of any
interest rate or currency swap, cap or other agreement or arrangement designed
to provide protection against fluctuations in interest or currency exchange
rates, and (8) all Indebtedness of others referred to in clauses (1)
through (7) above or clause (9) below guaranteed directly or indirectly in any
manner by such Person, or in effect guaranteed directly or indirectly by such
Person to assure a creditor against loss, and (9) all Indebtedness
referred to in clauses (1) through (8) above of another Person secured by (or
for which the holder of such debt has an existing right, contingent or
otherwise, to be secured by) any Lien on property (including, without
limitation, accounts, contract rights or inventory) owned by such Person, even
though such Person has not assumed or become liable for the payment of such
debt; provided that Indebtedness of any Subsidiary of Borrower other
than ABE Fairmont shall not be deemed to be Indebtedness of Borrower solely as
a result of a non-recourse pledge by Borrower of its Equity Interest in such
Subsidiary and/or its intercompany receivables from such Subsidiary in order to
secure such Indebtedness, and (10) the principal balance outstanding
under any synthetic lease, tax retention operating lease, off-balance sheet
loan or similar off-balance sheet financing product to which such Person is a
party, where such transaction is considered borrowed money indebtedness for tax
purposes but is classified as an operating lease in accordance with GAAP, and
(11) all payment obligations of such Person to former owners of businesses
which were acquired by such Person which are in the nature of deferred purchase
price or earn-out. For the purposes of the Agreement, the term “Indebtedness”
shall exclude any effects of the application of FASB 150.


 


(v)                                 “Insolvency Proceeding” means (1) any case, action or
proceeding before any court or other Governmental Authority relating to
bankruptcy, reorganization, insolvency, liquidation, receivership, dissolution,
winding-up or relief of debtors, or (2) any general assignment for
the benefit of creditors, composition, marshalling of assets for creditors or
other, similar arrangement in respect of its creditors generally or any
substantial portion of its creditors, in each of case (1) and (2) undertaken
under federal, state or foreign law, including the Bankruptcy Code.


 


(w)                               “Lien”
means any security interest, mortgage, pledge, hypothecation, assignment,
deposit arrangement, encumbrance, lien (statutory or otherwise), reversionary
or reclamation interest, charge against or interest in property to secure
payment of a debt or performance of an obligation or other priority or
preferential arrangement of any kind or nature whatsoever.


 


15

















 


(x)                                   “Loan
Documents” means this Note, the Collateral Security Documents and all other
documents, agreements and certificates (inclusive of all schedules and exhibits
thereto) from time to time entered into or delivered in connection herewith or
therewith or pursuant hereto or thereto, all as may be amended, modified and
supplemented from time to time.


 


(y)                                 “Material
Adverse Effect” means, relative to any occurrence of whatever nature, a
change that has, causes or could reasonably be expect to have or cause a
material adverse change to or a materially adverse effect on:  (1) the business, assets, revenues, financial
condition, operations or prospects of Borrower, or of Borrower and its
Subsidiaries, taken as a whole, (2) the ability of Borrower or any of its
Subsidiaries to perform any of its payment obligations when due or to perform
any other material obligations under any Loan Document or (3) any right,
remedy, benefit or collateral in favor of Lender under any Loan Document.


 


(z)                                   “Maturity
Date” has the meaning set forth in Section 2.


 


(aa)                            “Net
Cash Proceeds” means the cash proceeds or, with respect to non-cash
transactions, the cash equivalent of the fair market value of any equity or
debt issuance, asset disposition or asset condemned or subject to insurance
proceeds in each case net of (as applicable) (1) reasonable commissions and
expenses actually paid to unrelated third parties in connection with such
transaction, (2) taxes actually due from Borrower as a direct result of
such transaction and (3) in the case of asset dispositions, commercially
reasonable reserves established in respect of post-closing purchase price
adjustments and indemnification and other contingent liabilities arising in
connection with such asset dispositions.


 


(bb)                          “Note”
means this Secured Term Loan Note as amended, modified, renewed, extended
and/or restated from time to time in accordance with the terms hereof.


 


(cc)                            “Obligations”
means all loans, advances, debts, liabilities and obligations (including
reimbursement obligations), for monetary amounts owing by Borrower to Lender,
whether due or to become due, matured or unmatured, liquidated or unliquidated,
contingent or non-contingent, of any kind or nature, present or future, arising
under or in respect of this Note or any of the other Loan Documents. This term
includes all principal, interest (including all interest that accrues after the
commencement against Borrower of any Insolvency Proceeding under the Bankruptcy
Code), reasonable fees, including any and all arrangement fees, delivery fees,
loan fees, commitment fees, agent fees and any and all other reasonable fees,
expenses, costs or other sums (including reasonable attorneys fees) chargeable
to Borrower under any of the Loan Documents.


 


(dd)                          “Organizational
Documents” means, relative to any entity, its certificate or articles of incorporation
or organization or formation, its by-laws or operating agreements, and all
equityholder agreements, voting agreements and similar arrangements applicable
to any of its authorized shares of capital stock, its partnership interests or
its member interests, and any other arrangements relating to the control or
management of any such entity.


 


(ee)                            “Paid
in Full” and “Payment in Full” mean, with respect to the
Obligations, all amounts owing with respect thereto (including any interest
accruing thereon after the commencement of any Insolvency Proceeding against
Borrower, whether or not allowed as a claim against Borrower in such Insolvency
Proceeding, but excluding as yet unasserted contingent obligations), have been
fully, finally and completely paid in cash.


 


16

















 


(ff)                                “Person”
means any natural person, corporation, limited liability company, partnership,
firm, association, trust, government, governmental agency or any other entity,
whether acting in an individual, fiduciary or other capacity.


 


(gg)                          “Subsidiary”
of any Person or entity means any Person as to which such other Person or
entity (a) directly or indirectly owns, controls or holds 50% or more of the
outstanding beneficial interest or (b) is otherwise required in accordance with
GAAP to be considered as part of a consolidated organization.


 


(hh)                          “Tax
Distributions” means any dividend or distribution paid in accordance with Section
11(k) to any holder of membership interests of Borrower to the extent that
such funds are distributed to provide cash or other assets to such holder in
order to pay such holder’s federal, state and local income tax liabilities for
such year (determined based upon a combined marginal rate of 40%) that is
directly attributable to such holder as a direct result of the amount of income
and gain (net of allowable deductions, losses and credits) of Borrower.


 


(ii)                                  “Warrant”
means the Warrant to Purchase Units issued by Borrower on the date hereof to
Lender.


 


(jj)                                  “Wells
Fargo Loan Documents” means, collectively, (i) that Loan and Trust
Agreement dated as of April 1, 2006 (the “4/1/06 Loan Agreement”) among
Borrower, County of Fillmore, State of Nebraska, as issuer (“Issuer”), and
Wells Fargo Bank, N.A., as trustee (“Trustee”), as Borrowers obligations and
liabilities under the 4/1/06 Loan Agreement have been assigned to and assumed
by ABE Fairmont pursuant to that Assignment and Assumption Agreement dated as
of November 14, 2006 among Borrower, ABE Fairmont, Issuer and Trustee, (ii)
that  Promissory Note dated April 27,
2007 among Borrower, issuer and Trustee, (iii) that Subordinate Deed of Trust
and Construction Security Agreement by Borrower in favor of Trustee, (iv) that
Tax Regulatory Agreement dated as of April 27, 2006 from Borrower and Issuer to
Trustee and (v) that Continuing Disclosure Agreement as of dated April 1, 2006
between Borrower and Trustee, together with all amendments, supplements,
agreements, documents, exhibits, schedules and certificates contemplated
thereby or entered into in connection with any of the foregoing.


 


14.                                 Selected
Rights and Remedies Upon Event of Default. Upon the occurrence and during
the continuation of any Event of Default, with notice thereof to Borrower (unless
an Event of Default described in clause (5) of the definition of “Event of
Default” has occurred, in which case acceleration will occur automatically with
respect to the entire indebtedness and without any notice), Lender may declare
all or any portion of the indebtedness under any Loan Document to be
immediately due and payable. Upon the occurrence and during the continuation of
any Event of Default, Lender shall have the immediate right to enforce and
realize upon any collateral security (including all or any portion of the
Collateral) for the Obligations hereunder in any manner or order that Lender
deems expedient without regard to any equitable principles of marshalling or
otherwise. Lender shall have and be entitled to all of the rights, remedies,
benefits and powers of enforcement with respect hereto that are available to a
holder of a negotiable instrument under Article 3 of the Uniform Commercial
Code, and any subsequent transferee of Lender shall have and be entitled to all
of the rights, remedies, benefits and powers of enforcement with respect hereto
that are available to a holder in due course of a negotiable instrument under
Article 3 of the Uniform Commercial Code (provided that such transferee
acquired this Note in good faith, for value and without actual notice of a
claim or defense hereunder by Borrower). In addition to any rights granted
hereunder or in any other Loan Document, Lender shall also have all other
rights and remedies permissible under any applicable law (including creditor
rights and the rights of a secured


 


17

















 


party under the
Uniform Commercial Code), and all such rights and remedies shall be cumulative
in nature.


 


15.                                 Indemnification,
Reliance and Assumption of Risk. Without limiting any other indemnification
in any Loan Document, Borrower hereby agrees to defend Lender (and its
directors, officers, employees, agents, representatives, counsels and
Affiliates) (each an “Indemnitee”) from, and hold each of them harmless
against, any and all losses, liabilities, claims, damages, interests,
judgments, or costs (including reasonable fees and disbursements of counsel)
incurred by any of them arising out of or in any way connected with any Loan
Document, except for losses resulting directly from such Person’s own gross negligence
or willful misconduct. Expenses (including, without limitation, reasonable
attorneys’ fees and expenses) incurred by an Indemnitee shall be paid in
advance of the final disposition of such action, suit or proceeding upon
receipt of an undertaking from such Indemnitee to repay such amount if it shall
ultimately be determined that such Indemnitee is not entitled to
indemnification. Borrower’s obligations provided for in this Section 15
will survive any termination of this Agreement, and the repayment of the
outstanding balances hereunder. Without limiting the generality of the
foregoing, Borrower hereby agrees to indemnify, defend and hold harmless each
Indemnitee from and against, any and all losses, liabilities, claims, damages
(including, without limitation, natural resource damages), interests,
judgments, fines, penalties, liens or costs (including reasonable fees and
disbursements of counsel and consultants) resulting from or relating to any of
the following:  (1) the storage, holding,
existence, migration, release (as defined by CERCLA), threat of release,
disposal, treatment, generation, processing, abatement, handling or
transportation of any Hazardous Materials (collectively “Environmental Activity”)
at, on, under, from or in the vicinity of any property presently or formerly
owned, leased or operated by Borrower; and (2) any violation or alleged
violation of Environmental Control Statutes by Borrower at any property
presently or formerly owned, leased or operated by Borrower; and (3) any
investigation, inquiry, notice, order (including consent orders, agreements and
decrees), hearing, action, proceeding, demand, directive, fine, penalty, lien
or claim instituted, asserted or threatened by any Person in connection with
any Environmental Activity or Environmental Control Statute relating to
Borrower or any portion of any property presently or formerly owned, leased or
operated by Borrower; and (4) any off-site transportation, treatment,
storage or disposal or Hazardous Materials generated at or transported from any
property presently or formerly owned, leased or operated by Borrower.


 


16.                                 Selected
Waivers and Consents by Borrower. Borrower hereby waives diligence,
presentment, protest, demand for payment, notice of protest and non-payment,
notice of dishonor, and any and all other notices or demands in connection with
the delivery, acceptance, payment, performance, default, acceleration or
enforcement of this Note. Borrower, in addition, hereby consents (without the
necessity of prior notice) to any extensions of time, renewals, releases of any
party hereto or guarantor hereof, waivers and/or modifications in connection
herewith that may be granted or consented to by Lender from time to time. Borrower
also waives any defenses (other than the defense of full unconditional payment)
and rights of discharge to its obligations hereunder that it may have or may
hereafter acquire based upon suretyship or impairment of collateral (including
lack of attachment or perfection with respect thereto).


 


17.                                 Waivers
by Lender and Severability. To be effective, any waiver by Lender must be
expressed in a writing executed by Lender. If Lender waives any term, right or
remedy arising hereunder or under any applicable law, then such waiver will not
be deemed to be a waiver (1) upon any later occurrence or recurrence of any
events giving rise to the earlier waiver or (2) as to any other Person. No
failure or delay by Lender to insist upon the strict performance of any Loan
Document, or to exercise any right or remedy, will constitute a waiver of
compliance with any term, condition, covenant or agreement, or preclude Lender
from exercising any right, power, or remedy at any later time or times. By
accepting


 


18

















 


payment after the
due date of any amount payable under any Loan Document, Lender will not be
deemed to waive the right either to require prompt payment when due of all
other amounts payable under any Loan Document or to declare an Event of Default
for failure to effect such prompt payment of any such other amount. If
fulfillment of any provision hereof at the time performance is due involves
transcending the limit of validity prescribed by applicable law, then (ipso facto) the obligation to be fulfilled
shall be reduced to the limit of such validity. If any clause or provision
hereof operates or would prospectively operate to invalidate this Note in whole
or in part, then such clause or provision only shall be void (as though not
contained herein), and the remainder of this Note shall remain operative and in
full force and effect; provided, however, if any such clause or
provision pertains to the repayment of any indebtedness hereunder, then the
occurrence of any such invalidity shall constitute an immediate Event of Default
hereunder.


 


18.                                 Reinstatement.
To the maximum extent not prohibited by applicable law, this Note (and the
Obligations hereunder and Collateral therefor) will be automatically reinstated
and the indebtedness correspondingly increased (as though such payments had not
been made) if at any time any amount received by Lender in respect hereof is
rescinded or must otherwise be restored, refunded or returned by Lender to
Borrower or other Person for any reason, including (a) as a result of the
insolvency, bankruptcy, dissolution, liquidation or reorganization of any
Person, or (b) as a result of the appointment of any receiver, intervenor,
conservator, trustee or similar official for any Person or for any part of the
assets of any Person.


 


19.                                 Assignability.
Borrower shall not assign or delegate any of its obligations, duties, rights or
benefits hereunder or under any other Loan Document without the prior written
consent of Lender. Lender (and its successors or assigns), at any time and from
time to time, may assign, transfer, participate, syndicate, delegate and/or
pledge all or any part of its obligations, duties, rights and benefits under
this Note and the other Loan Documents without the consent of Borrower.


 


20.                                 Conflicts
Among Loan Documents. In the event of any irreconcilable conflict between
the terms and conditions of this Note and the terms and conditions of any other
Loan Document, then the terms and conditions of this Note shall govern.


 


21.                                 Relationship
with Prior Agreements. This Note, together with the other Loan Documents
and the Warrant, completely and fully supersedes all oral agreements and all
other and prior written agreements by and among Borrower and Lender concerning
the terms and conditions of this credit arrangement.


 


22.                                 Severability.
If fulfillment of any provision of or any transaction related to any Loan
Document at the time performance is due involves transcending the limit of
validity prescribed by applicable law, then ipso
facto, the obligation to be fulfilled shall be reduced to the limit
of such validity.  If any clause or provision of this Agreement operates
or would prospectively operate to invalidate this Agreement or any other Loan
Document in whole or in part, then such clause or provision only shall be void
(as though not contained herein or therein), and the remainder of this
Agreement or such other Loan Document shall remain operative and in full force
and effect; provided, however, if any such clause or provision
pertains to the repayment of any indebtedness hereunder, then the occurrence of
any such invalidity shall constitute an immediate Event of Default hereunder.


 


23.                                 No
Fiduciary Relationship. No provision in the Loan Documents and no course of
dealing between the parties shall be deemed to create any fiduciary duty owing
to Borrower or any of its Affiliates by Lender and Lender shall not be deemed
to be a partner, joint venturer or co-venturer with Borrower by reason of this
Agreement or the transaction contemplated hereunder.


 


19

















 


24.                                 Secured Note. The full amount of
this Note is secured by the Collateral identified and described as security
therefor in the Collateral Security Documents and the other Loan Documents.


 


25.                                 Notices.
Any notice or other communication required or permitted in connection with the
Loan Documents will be deemed satisfactorily given if it is in writing and is
delivered either personally to the addressee thereof, or by prepaid registered
or certified U.S. mail (return receipt requested), or by a nationally
recognized commercial courier service with next-day delivery charges prepaid,
or by facsimile (voice confirmed), or by any other reasonable means of personal
delivery to the party entitled thereto at its respective address set forth
below:


 


	
  If to Borrower:

  	
   

  	
  Advanced BioEnergy, LLC

  
	
   

  	
   

  	
  10201 Wayzata Blvd.,
  Suite 250

  
	
   

  	
   

  	
  Minneapolis, MN 55305

  
	
   

  	
   

  	
  Attn:    Revis
  L. Stephenson III, Chief Executive Officer

  
	
   

  	
   

  	
  Facsimile No.:    (763)
  226-2728

  
	
   

  	
   

  	
   

  
	
  If to Lender:

  	
   

  	
  PJC Capital LLC

  
	
   

  	
   

  	
  c/o Piper, Jaffray
  & Co.

  
	
   

  	
   

  	
  1950 University Avenue,
  Suite 200

  
	
   

  	
   

  	
  Menlo Park, CA 94303

  
	
   

  	
   

  	
  Attention:    Scott
  R. La Rue, Managing Director

  
	
   

  	
   

  	
  Facsimile:    (650)
  838-1419

  



 


Any party to a Loan
Document may change its address or other contact information for notice
purposes by giving notice thereof to the other parties to such Loan Document in
accordance with this Section 25, provided that such change shall
not be effective until 2 calendar days after notice of such change. All such
notices and other communications will be deemed given and effective (a) if by
mail, then upon actual receipt or 5 calendar days after mailing as
provided above (whichever is earlier), or (b) if by facsimile, then
upon successful transmittal to such party’s designated number, or (c) if
by nationally recognized commercial courier service, then upon actual
receipt or 2 Business Days after delivery to the courier service (whichever is
earlier), or (d) if otherwise delivered, then upon actual
receipt.


 


26.                                 Jurisdictional and Related Consents. Any
litigation in any way related to this Note, or any course of conduct, course of
dealing, statements (whether verbal or written), actions or inactions of Lender
or Borrower shall be brought and maintained exclusively in the courts of the
State of New York or in the United States District Court for the Southern
District of New York; provided, however, that any suit seeking enforcement
hereof against Borrower or any property may also be brought (at Lender’s
option) in the courts of any other jurisdiction where such property may be
found or where Borrower may be subject to personal jurisdiction. Borrower
hereby expressly and irrevocably submits to the jurisdiction of the courts of
the State of New York and of the United States District Court for the Southern
District of New York for the purpose of any such litigation as set forth above
and irrevocably agrees to be bound by any final and non-appealable judgment
rendered thereby in connection with such litigation. Borrower further
irrevocably consents to the service of process by registered or certified mail,
postage prepaid, or by personal service within or outside the State of New York.
Borrower hereby expressly and irrevocably waives (to the fullest extent
permitted by law) any objection that it at any time may have to the laying of
venue of any such litigation brought in any such court referred to above and
any claim that any such litigation has been brought in an inconvenient forum.


 


20

















 


27.                                 Jury Trial Waiver. Lender and Borrower each
hereby knowingly, voluntarily and intentionally waives any rights it may have
to a trial by jury in respect of any litigation (whether as claim,
counter-claim, affirmative defense or otherwise) in any way related to this
Note or any of the Loan Documents or any course of conduct, course of dealing,
statements (whether verbal or written), actions or inactions of Lender or
Borrower.


 


28.                                 Governing
Law and Binding Effect. This Note and the other Loan Documents are binding
upon and inure to the benefit of the parties hereto and their respective
successors and assigns. This Note and the other Loan Documents are governed as
to their validity, interpretation, construction and effect by the laws of the
State of New York (without giving effect to the conflicts of law rules of such
state).


 


[Balance of Page Intentionally Blank...Signatures
on Next Page]


 


21

















 


IN WITNESS WHEREOF,
Borrower has executed this Secured Term Loan Note  on the day and year first written above.


 


	
   

  	
  BORROWER:

  
	
   

  	
   

  
	
   

  	
  ADVANCED
  BIOENERGY, LLC

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   /s/ Revis L.
  Stephenson III

  	
   

  
	
   

  	
   

  	
  Name:

  	
    Revis L.
  Stephenson III

  	
   

  
	
   

  	
   

  	
  Title:

  	
    Chairman
  & CEO

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  ACCEPTED:

  	
   

  
	
   

  	
   

  
	
  PJC
  CAPITAL LLC

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  By:

  	
   /s/ Scott LaRue

  	
   

  	
   

  
	
   

  	
  Name:

  	
    Scott LaRue

  	
   

  	
   

  
	
   

  	
  Title:

  	
      MD