Exhibit
4.2


 


THIS WARRANT HAS BEEN, AND THE UNITS WHICH
MAY BE RECEIVED PURSUANT TO THE EXERCISE OF THIS WARRANT WILL BE, ACQUIRED
SOLELY FOR INVESTMENT AND NOT WITH A VIEW TO, OR FOR RESALE IN CONNECTION WITH,
ANY DISTRIBUTION THEREOF. NEITHER THIS WARRANT NOR SUCH UNITS HAVE BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”),
OR QUALIFIED UNDER ANY STATE SECURITIES LAWS. SUCH SECURITIES MAY NOT BE SOLD
OR OFFERED FOR SALE IN THE ABSENCE OF SUCH REGISTRATION OR QUALIFICATION OR AN
OPINION OF COUNSEL IN FORM AND SUBSTANCE REASONABLY SATISFACTORY TO THE COMPANY
THAT SUCH DISPOSITION IS EXEMPT FROM THE REGISTRATION REQUIREMENTS OF THE
SECURITIES ACT AND ANY REGISTRATION OR QUALIFICATION REQUIREMENTS UNDER
APPLICABLE STATE SECURITIES LAWS.


 


	
  No. 1

  	
   

  	
  October 17, 2007

  



 


WARRANT TO PURCHASE UNITS OF ADVANCED
BIOENERGY, LLC


 


This Warrant to Purchase Units (this “Warrant”) certifies
that, for good and valuable consideration, PJC CAPITAL LLC,
a Delaware limited liability company  (along
with its permitted assignees, the “Holder”) is entitled to
purchase from ADVANCED BIOENERGY, LLC, a
Delaware limited liability company (the “Company”), 450,000 fully paid
and nonassessable Units (as defined in the Company’s Third Amended and Restated
Operating Agreement dated February 1, 2006 (the “LLC
Agreement”, the “Units”) of the Company, as adjusted pursuant to Section
3 hereof (the “Warrant
Units”), at an exercise price per Unit equal to $14.00 (as adjusted pursuant to Section 3
hereof) (the “Exercise Price”),
subject to the provisions and upon the terms and conditions hereinafter set
forth. This Warrant is issued in connection with the Secured Term Loan Note
made by the Company in favor of the initial Holder dated as of the date hereof
(the “Note”). Unless otherwise
defined in this Warrant, capitalized terms defined in the Note are used in this
Warrant as defined in the Note.


 


1.                                      Exercise;
Payment.


 


(a)                                  Exercise
Period. This Warrant may be exercised in whole or part by the Holder during
the term (as set forth in Section 11) and in compliance with the
provisions of this Warrant at any time after the date of issuance set forth
above (the “Warrant
Date”), by the surrender of this Warrant (with the notice of
exercise form attached hereto as Exhibit A (the “Notice of Exercise”)
duly executed) at the principal office of the Company. If this Warrant shall
have been exercised in part, the Company shall, at the time of delivery of the
certificate or certificates representing Warrant Units, deliver to the Holder a
new Warrant evidencing the rights of the Holder to purchase the unpurchased
Warrant Units, which new Warrant shall in all other respects be identical with
this Warrant, or at the request of the Holder, appropriate notation may be made
on this Warrant and the same returned to the Holder.


 


(b)                                  Cash
Exercise. Upon exercise of this Warrant, the Holder shall pay the Company
an amount equal to the product of (x) the Exercise Price multiplied by (y) the total number of Warrant Units purchased
pursuant to the Exercise of this Warrant, by wire transfer or check payable to
the order of the Company. The Holder shall be deemed to have become the holder
of 


 

















 


record of, and
shall be treated for all purposes as the record holder of, the Warrant Units
represented by such exercise (and such Warrant Units shall be deemed to have
been issued) immediately prior to the close of business on the date upon which
this Warrant is exercised.


 


(c)                                  Net
Exercise. The Exercise Price also may be paid at the Holder’s election by
surrender of all or a portion of the Warrant for Units to be exercised under
this Warrant (“Net
Exercise”). If the Holder elects the Net Exercise method, the
Company will issue Warrant Units in accordance with the following formula:


 


X = Y(A-B)


A


 


Where:


 


X =                             the number
of Warrant Units to be issued upon exercise of the Warrant


 


Y =                              the
number of Warrant Units requested to be exercised


 


A =                            the
fair market value of 1 Unit on the date of exercise of this Warrant


 


B =                              the
Exercise Price


 


For purposes of the above calculation, the fair market value of a Unit
shall mean:


 


(i)                                    if
at any time the Units are not listed on any securities exchange or traded in
the over-the-counter market, the fair market value of the Units shall be the
highest price per Unit which the Company could obtain from a willing buyer
(other than an employee, director or “Affiliate” of the Company, as such term
is defined in Rule 405 under the Securities Act of 1933, as amended (the “Securities Act”) for
Units sold by the Company, as determined in good faith by its Directors (as
defined in the LLC Agreement);


 


(ii)                                if
the exercise is in connection with the conversion of the Units to common stock
of the Company (“Common Stock”) in order to
facilitate a public offering of such Common Stock, and if the Company’s
Registration Statement relating to such initial public offering has been
declared effective by the SEC, then the fair market value per Unit shall be the
initial “Price to Public” of the Common Stock specified in the final prospectus
with respect to the offering, giving effect to the conversion mechanism with
respect to such conversion of the Units to Common Stock;


 


(iii)                            if
the exercise is not in connection with a public offering, and:


 


(A)                               if
the Units (or the Common Stock, if the Units have been converted to Common
Stock) are traded on a securities exchange, the fair market value shall be
deemed to be the average of the closing prices over a 5 day period ending 3
days before the day the fair market value of the Units or the Common Stock, as
applicable, is being determined; or


 


2

















 


(B)                               if
the Units (or the Common Stock, if the Units have been converted to Common
Stock) are traded over-the-counter, the fair market value shall be deemed to be
the average of the closing bid and asked prices quoted on the principal market
on which or through which the Units or the Common Stock, as applicable, are
traded over the 5 day period ending 3 days before the day the fair market value
of the Units or the Common Stock, as applicable, is being determined;


 


(iv)                               if
property or securities in addition to or in substitution for Units shall be
issuable upon exercise of the Warrant, the fair market value of such property
(to the extent such property does not include a security which is listed on any
securities exchange or traded in the over-the-counter market, in which fair
market value shall be calculated as provided in Section 1(c)(i) - (iii)
above) shall be determined in good faith by the Company’s Directors (as defined
in the LLC Agreement).


 


(d)                                  Exercise
Prior to Expiration. To the extent this Warrant has not been previously
exercised as to any Warrant Units issuable hereunder, and if the fair market
value of one Warrant Unit immediately before expiration of the Warrant is greater
than the Exercise Price then in effect, this Warrant shall be deemed
automatically exercised pursuant to the Net Exercise provisions in Section
1(c) (even if not surrendered) immediately before its expiration. In such
event, the fair market value of one Warrant Unit shall be determined pursuant
to Section 1(c). To the extent this Warrant or any portion thereof is
deemed automatically exercised pursuant to this Section 1(d), the
Company agrees to promptly notify the Holder of the number of Units, if any,
and any other property, which the Holder is entitled to receive by reason of
such automatic exercise.


 


(e)                                  Unit
Certificates. In the event of the exercise of this Warrant, certificates
for the Warrant Units so purchased shall be delivered to the Holder within a
reasonable time after exercise, to the extent that the Units are certificated.


 


2.                                      Units Fully Paid; Reservation of Units. All
of the Units issuable upon the exercise of this Warrant, upon issuance and
receipt by the Company of the Exercise Price therefor (or upon Net Exercise
thereof, as provided in Section 1(c)), shall be fully paid and
nonassessable, and free from all preemptive rights, rights of first refusal or
first offer, taxes, liens and charges with respect to the issuance thereof.
During the period within which the rights represented by this Warrant may be
exercised, the Company shall at all times have authorized and reserved for
issuance a sufficient number of Units to provide for the exercise of this
Warrant.


 


3.                                      Adjustment of Exercise Price and Number of
Units. The number and kind of Warrant Units purchasable upon the
exercise of this Warrant and the Exercise Price payable therefor shall be
subject to adjustment from time to time upon the occurrence of certain events,
as follows:


 


(a)                                  Unit
Distributions, Subdivisions, Combinations. If the Company shall (i) make a
distribution in respect of the Units in additional Units (or securities
convertible into, exchangeable for or otherwise entitling the registered holder
to receive Units), (ii) subdivide the outstanding Units into a greater number
of Units or (iii) combine the outstanding Units into a smaller number of Units,
the number of Units purchasable upon exercise of this Warrant immediately prior
to the record date applicable to such event shall be adjusted so that the
Holder 


 


3

















 


shall
thereafter be entitled to receive that kind and number of Units or other
securities of the Company that the Holder would have owned or have been
entitled to receive after the happening of any of the events described above,
had the Warrant been exercised immediately prior to the happening of such event
or any record date with respect thereto. The Exercise Price per Warrant Unit
purchasable upon exercise of any Warrant shall be subject to adjustment from
time to time such that upon each adjustment of the number of Warrant Units
purchasable pursuant to this Section 3(a), the Exercise Price shall
be reduced or increased, as the case may be, to a price determined by dividing
the aggregate Exercise Price of all Warrant Units in effect prior to such
adjustment by the total maximum number of Warrant Units purchasable upon the
exercise of all Warrants immediately after such adjustment.


 


(b)                                  Reorganization
or Reclassification. In case of any capital reorganization or
reclassification of the equity interests of the Company, or the conversion of
the Company into a corporation (whether pursuant to a merger, consolidation,
statutory conversion or otherwise), each Warrant shall thereafter be
exercisable from the number of Units or other securities or property receivable
upon such capital reorganization, reclassification or conversion, as the case
may be, by a holder of the number of Units into which the Warrant was
exercisable immediately prior to such capital reorganization, reclassification
or conversion; and, in any such case, appropriate adjustment shall be made in
the application of the provisions herein set forth with respect to the rights
and interests thereafter of the Holder of the Warrant to the end that the
provisions set forth herein shall thereafter be applicable, as nearly as
reasonably may be, in relation to any shares of stock or other securities or
property thereafter deliverable upon the exercise of the Warrant.


 


(c)                                  Issuance
of Securities Under Certain Circumstances.


 


(i)                                    If,
at any time after the date hereof and prior to October 17, 2009, the Company
shall issue or sell (or, in accordance with clause (ii) below, shall be deemed
to have issued or sold) any Units (other than Excluded Units, as defined below)
without consideration or for a consideration per unit that is less than the
Exercise Price, as adjusted for any unit splits, combinations, unit dividends
or similar transactions after the date hereof, then, effective immediately upon
such issuance or sale, this Warrant shall immediately become exercisable for
such additional Warrant Units as are necessary to maintain the percentage
ownership interest in the Company’s Units (calculated on an as-converted, fully
diluted basis assuming the issuance of all outstanding options and warrants)
held by the Holder immediately prior to such issuance. Upon any such adjustment
of the number of Warrant Units purchasable upon the exercise of this Warrant,
the Exercise Price shall be adjusted by multiplying the Exercise Price
immediately prior to such adjustment by a fraction, the numerator of which
shall be the number of Warrant Units purchasable upon the exercise of this
Warrant immediately prior to such adjustment and the denominator of which shall
be the number of Warrant Units so purchasable immediately thereafter.
Adjustments shall be made successively whenever such an issuance or sale is
made.


 


(ii)                                For
the purpose of determining the adjusted Exercise Price under Section 3(c),
the following shall be applicable:


 


(A)                               If
the Company in any manner issues or grants any Option Rights or Convertible
Securities (each as defined below) and the price per unit for which Units are 


 


4

















 


issuable upon
the exercise of such Option Rights or upon conversion or exchange of such
Convertible Securities is less than the Trigger Price, then the total maximum
number of Units issuable upon the exercise of such Option Rights or upon
conversion or exchange of the total maximum amount of such Convertible
Securities (or any Convertible Securities issuable upon the exercise of such
Option Rights) shall be deemed to be outstanding and to have been issued and
sold by the Company for such lesser price per unit. For purposes of this
paragraph, the price per unit for which a Unit is issuable upon exercise of
Option Rights or upon conversion or exchange of Convertible Securities (or any
Convertible Securities issuable upon exercise of Option Rights) shall be determined
by dividing (x) the total amount, if any, received or receivable by the Company
as consideration for the issuing or granting of such Option Rights or
Convertible Securities, plus the minimum aggregate amount of additional
consideration payable to the Company upon the exercise of all such Option
Rights or the exchange or conversion of all such Convertible Securities (plus
in the case of such Option Rights which relate to Convertible Securities, the
minimum aggregate amount of additional consideration, if any, payable to the
Company upon the issuance or sale of such Convertible Securities and the
conversion or exchange thereof) by (y) the total maximum number of Units
issuable upon exercise of such Option Rights or Convertible Securities (or upon
the conversion or exchange of all such Convertible Securities issuable upon the
exercise of such Option Rights).


 


(B)                               If
the purchase price provided for in any Option Rights, the additional
consideration, if any, payable upon the issuance, conversion or exchange of any
Convertible Securities or the rate at which any Convertible Securities are
convertible into or exchangeable for Units decreases at any time, then the
number of Warrant Units issuable upon the exercise of this Warrant and the
Exercise Price (each as in effect at the time of such decrease) shall be
readjusted to number of Warrant Units and the Exercise Price which would have
been in effect at such time had such Option Rights or Convertible Securities
still outstanding provided for such decreased purchase price, additional
consideration or changed conversion rate, as the case may be, at the time
initially granted, issued or sold.


 


(C)                               If
any Units, Option Rights or Convertible Securities are issued or sold or deemed
to have been issued or sold for cash, then the consideration received therefor
shall be deemed to be the gross amount received by the Company therefor. If any
Units, Option Rights or Convertible Securities are issued or sold for
consideration other than cash, then the amount of consideration received by the
Company shall be the fair value of such consideration determined in good faith
by the Directors of the Company.


 


(iii)                            For
purposes of this Section 3(c):


 


(A)                               “Convertible Securities” means any securities or other
obligations issued or issuable by the Company or any other Person that are
exchangeable for, or convertible into, (i) any Units or (ii) any securities
exchangeable for, or convertible into, any Units.


 


(B)                               “Excluded Units”  means,
collectively, (i) Units or Option Rights issued in any of the transactions
described in Sections 3(a) or 3(b), (ii) Units issued or issuable to
officers, directors or employees of, or consultants to, the Company pursuant to
equity incentive plans or agreements on terms approved by the Directors of the
Company (including Units issuable upon exercise of the options outstanding on
the date hereof), (iii) Units issued after the 


 


5

















 


date hereof
upon the exercise of other Option Rights or the exchange or conversion of
Convertible Securities outstanding on the date hereof and (iv) the issuance of
this Warrant or any Warrant Units pursuant to this Warrant.


 


(C)                               “Option Rights” means any warrants, options or other
rights to subscribe for or purchase, or obligations to issue, any Units, or any
Convertible Securities, including, without limitation, any options or similar
rights issued or issuable under any employee equity incentive plan, pension
plan or other employee benefit plan of the Company.


 


(d)                                  Notice
of Certain Transactions. In the event that the Company shall propose at any
time to effect any action of the type described in Sections 3(a), (b) or (c),
or any right to subscribe for or purchase any evidences of its indebtedness,
any units or capital stock of any class or any other securities or property, or
to receive any other right, or take any similar extraordinary action affecting
the Company’s Units or equity capital (including but not limited to the
transfer of substantially all of the Company’s assets), then, in connection
with each such event, the Company shall send notice thereof to all Holders no
later than 10 days after the earlier to occur of (i) the date on which such
event became effective or (ii) the record date for such event, in each case
specifying in reasonable detail what the transaction or event consists of and,
if applicable, the aggregate amount or value of any cash or property
distributed, paid, purchased or received by the Company in connection
therewith.


 


(e)                                  Adjustment
to Exercise Price. Until the first anniversary of the issuance of this
Warrant, if the Company, Heartland Grain Fuels, LP (“HGF”)  or ABE Fairmont shall borrow, request any
advance, receive any proceeds from or otherwise draw under the HGF Debt Service
Reserve or the HGF Contingency Reserve (as such terms are defined below) (a “Draw”), to the extent that the
proceeds from such Draw(s) are not applied to a Permitted Use (as defined
below), then the Exercise Price shall be reduced by an amount equal to
(x) the aggregate amount of such Draw(s) to the extent the same is not
applied to a Permitted Use, divided  by (y) 11,926,848. The
Company will promptly notify Holder in writing upon the occurrence of any Draw,
stating the date on which such Draw occurred as well as the amount thereof, and
will provide such other written documentation supporting the determination of
whether the application of any amounts obtained from such Draw constitutes a
Permitted Use as Holder shall reasonably request.


 


For purposes
of this Warrant, “Permitted Use” means any of
the following:  (i) a dollar-for-dollar
reduction in outstanding Indebtedness of the Company or HGF; (ii) a
dollar-for-dollar increase in the debt service reserve, initially set at
$2,782,669 (the “HGF Debt Service Reserve”),
as described in and established under the Credit Agreement dated as of October
1, 2007 (the “HGF Credit Agreement”) by and
between HGF, as the borrower, and WestLB, New York branch as the lead arranger,
which reserves shall be deposited in an account as approved by the Holder,
which approval shall not be unreasonably withheld or delayed; (iii) use of up
to an aggregate of $2,000,000 from the contingency reserve, initially set at
$10,000,000 (the “HGF Contingency Reserve”), as described in and established
under the HGF Credit Agreement, for construction-related expenses prior to
conversion of the “construction loan” under the HGF Credit Agreement; and (iv)
creation of a separate contingency reserve in the amount of up to $2,500,000,
which reserve shall be used to support the potential of ICM’s failure to meet
its 


 


6

















 


obligations to
the Company under the License Agreement between the Company and ICM, Inc.,
dated as of March 13, 2006.


 


4.                                      Investment Representations of Holder; Transfer
of Warrant and Warrant Units.


 


(a)                                  Holder
represents and warrants to the Company that: (i) it is an “Accredited Investor”
as that term is defined in Rule 501 of Regulation D promulgated under the
Securities Act; and (ii) it has the ability to bear the economic risks of such
Holder’s prospective investment, including a complete loss of Holder’s
investment in the Warrants and the Warrant Units; and (iii) the Warrants
and the Warrant Units are purchased for the Holder’s own account, and not with
view to distribution of either the Warrants or any securities purchasable upon
exercise thereof; provided however that the Holder may transfer the Warrant and
any Warrant Units to any Affiliate of the Holder.


 


(b)                                  This
Warrant and the Warrant Units may only be Transferred (as defined in the LLC
Agreement) in compliance with federal and state securities laws. At the time of
the surrender of this Warrant in connection with any Transfer of this Warrant
or the Transfer of the Warrant Units (except to an Affiliate), the Company may
require, as a condition of allowing such Transfer (i) that the Holder or
transferee of this Warrant or the Warrant Units, as the case may be, furnish to
the Company a written opinion of counsel that is reasonably acceptable to the
Company to the effect that such Transfer may be made without registration under
the Securities Act or qualification under any state securities laws and/or
(ii) that the Holder or transferee execute and deliver to the Company an
investment representation letter in form and substance acceptable to the
Company and substantially in the form of Exhibit B hereto and the
transfer application used by the Company, a form of which has previously been
provided to the Holder. Transfer of this Warrant and all rights hereunder, in
whole or in part, in accordance with the foregoing provisions, shall be
registered on the books of the Company to be maintained for such purpose, upon
surrender of this Warrant at the principal office of the Company or the office
or agency designated by the Company, together with a written assignment of this
Warrant substantially in the form of Exhibit C hereto duly executed by
the Holder or its attorney-in-fact. Upon such surrender and, if required, such
payment, the Company shall execute and deliver a new Warrant or Warrants in the
name of the assignee or assignees and in the denomination specified in such
instrument of assignment, and shall issue to the Holder a new warrant
evidencing the portion of this Warrant not so assigned, and this Warrant shall
be deemed cancelled.


 


(c)                                  Subject
to the requirements of Section 4(b) of this Warrant and Section 9.2 of
the LLC Agreement, the Holder shall be entitled to Transfer all or any portion
of the Warrant Units to any Person, whether or not such Person is an Affiliate
of the Holder, provided that notwithstanding the provisions of Section
9.2(b)(i) of the LLC Agreement, a Transfer to any Person that would otherwise
require the consent of the Directors in writing under such section, shall be
subject to the consent of a majority of the Directors (as defined in the LLC
Agreement), such consent not to be unreasonably withheld, delayed or
conditioned.


 


7

















 


5.                                      Legend.


 


(a)                                  Each
certificate evidencing the Warrant Units issued upon exercise of this Warrant
shall be stamped or imprinted with a legend substantially in the following
form:


 


THE TRANSFERABILITY OF THE
MEMBERSHIP UNITS REPRESENTED BY THIS CERTIFICATE IS RESTRICTED. SUCH UNITS MAY
NOT BE SOLD, ASSIGNED, OR TRANSFERRED, NOR WILL ANY ASSIGNEE, VENDEE,
TRANSFEREE OR ENDORSEE THEREOF BE RECOGNIZED AS HAVING ACQUIRED ANY SUCH UNITS
FOR ANY PURPOSES, UNLESS AND TO THE EXTENT SUCH SALE, TRANSFER, HYPOTHECATION,
OR ASSIGNMENT IS PERMITTED BY, AND IS COMPLETED IN STRICT ACCORDANCE WITH, THE
TERMS AND CONDITIONS SET FORTH IN THE OPERATING AGREEMENT OF THE COMPANY.


 


THE UNITS REPRESENTED BY
THIS CERTIFICATE MAY NOT BE SOLD, OFFERED FOR SALE, OR TRANSFERRED IN ABSENCE
OF AN EFFECTIVE REGISTRATION OR EXEMPTION UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, AND UNDER APPLICABLE STATE SECURITIES LAW.


 


(b)                                  Removal of Legend and Transfer Restrictions. Any
legend endorsed on a certificate pursuant to this Section 5 shall be
removed, and the Company shall issue a certificate without such legend to the
holder of such Warrant Units if (i) such Warrant Units are resold pursuant to
an effective registration statement under the Securities Act, (ii) if such
holder satisfies the requirements of Rule 144(k) under the Securities Act
or (iii) if such holder provides the Company with an opinion of counsel for
such holder of the Warrant Units, in form and substance reasonably satisfactory
to the Company, to the effect that a sale, transfer or assignment of such
Warrant Units may be made without registration and that upon such sale,
transfer or assignment such Warrant Units will not be deemed “restricted
securities,” as such term is defined in Rule 144 under the Securities Act.


 


6.                                      Fractional Units. No fractional
Warrant Units will be issued in connection with any exercise of this Warrant,
but in lieu of such fractional Units the Company shall make a cash payment
therefor upon the basis of the Exercise Price then in effect.


 


7.                                      Rights as a Member. Except as set
forth in Section 3, the Holder shall not be entitled to vote, or receive
dividends or distributions, or be deemed a holder of Units or a member of the
Company, nor shall anything contained herein be construed to confer upon the
Holder any of the rights of a member of the Company or any right to vote for
the election of directors or upon any matter submitted to members at any
meeting thereof, or to give or withhold consent to any action with respect to
the Warrant Units, until this Warrant shall have been exercised and the Warrant
Units purchasable upon the exercise of this Warrant shall have become
deliverable, as provided in Section 1(b). Upon exercise of this Warrant,
the Holder shall automatically be deemed to be a Member (as defined in the LLC
Agreement) of the Company with all rights of a Member, including the Membership
Voting Interest (as defined in the LLC Agreement), without any further approval
of the members, directors, officers or managers of the Company required;


 


8

















 


provided
that the Holder shall execute such documents as are reasonably requested by the
Company to document the Holder’s agreement to be bound by the terms and
provisions of the LLC Agreement and evidence of the authority of the Holder to
execute and deliver such agreement to be so bound.


 


8.                                      Information Rights. At all times
when Holder is holding this Warrant (whether or not exercised in part) or any Warrant Units, and if not
already delivered pursuant to another agreement, the Company will deliver to
the Holder the financial statements delivered to the Members of the Company
pursuant to the LLC Agreement, including, without limitation, Section 7.3
thereof.


 


9.                                      Registration
Rights; Resales Under Rule 144.


 


(a)                                  Registration
Rights. If the Company at any time converts into a corporation, and the
Company, as converted, proposes to register any Common Stock solely for cash
pursuant to a registration statement under the Securities Act, other than a
registration solely for the sale of securities to participants in a Company
stock or other incentive plan or in connection with a transaction under Rule
145 promulgated under the Securities Act, the Company shall use its best
efforts to cause to be registered for resale under the Securities Act all of
the Common Stock that the Holder has requested to be registered on such
registration statement.


 


(b)                                  Compliance
with Rule 144(c). If the Holder proposes to sell Common Stock, the Warrant
or any Warrant Units in compliance with Rule 144 under the Securities Act,
then, upon Holder’s written request the Company shall furnish to the Holder,
within 3 days after receipt of such request, a written statement confirming the
Company’s compliance with the “Current Public Information” requirements of Rule
144(c), as such Rule may be amended from time to time.


 


10.                               Parallel Rights; No Impairment.
The Holder shall be entitled, but not required, to become a signatory to and
entitled to the benefits of, any investor rights agreement to the extent any
such agreement is entered into on or after the Warrant Date until the consummation
of a Change of Control (as defined in the Note), including any such agreement
entered into in connection with a Change of Control. The Company shall not, by
amendment of its certificate of formation or the LLC Agreement or through a
reorganization, transfer of assets, consolidation, merger, dissolution, issue,
or sale of securities or any other voluntary action, avoid or seek to avoid the
observance or performance of any of the terms to be observed or performed under
this Warrant by the Company, but shall at all times in good faith assist in
carrying out of all the provisions of this Warrant and in taking all such
action as may be necessary or appropriate to protect Holder’s rights under this
Warrant against impairment.


 


11.                               Term of Warrant; Early Termination.


 


(a)                                  This
Warrant shall become exercisable on the Warrant Date and shall no longer be
exercisable as of 5:00 p.m., Central Time, on the date that is the 5 year anniversary of the Warrant Date
(the “Exercise Period”).


 


(b)                                  Notwithstanding
Section 11(a), in the case of any consolidation of the Company with, or
merger of the Company into, any other Person, any merger of another Person into
the Company (other than a merger which does not result in any reclassification,
conversion,


 


9

















 


exchange or
cancellation of outstanding securities as to which Warrants may then be
exercised and other than a merger solely to change the jurisdiction of
organization of the Company) or any sale, transfer or lease of all or
substantially all of the assets of the Company to any Person, in each case
during the Exercise Period, the Company shall provide the Holder with written
notice of such proposed transaction, in reasonable detail, no less than 10 days
prior to the consummation thereof, and this Warrant shall terminate upon the
consummation of such transaction unless exercised prior to such consummation.


 


12.                               Registry of Warrants.


 


The Company shall maintain a registry showing the name and address of
the registered holder of this Warrant. Holder’s initial address, for purposes
of such registry, is set forth below Holder’s signature on this Warrant. Holder
may change such address by giving written notice of such changed address to the
Company.


 


13.                               Miscellaneous.


 


(a)                                  This
Warrant shall be construed and enforced in accordance with and governed by the
laws of the State of Delaware, without giving effect to principles of conflicts
of laws.


 


(b)                                  The
Company shall pay all expenses (including attorneys fees and expenses) in
connection with, and all taxes and other governmental charges that may be
imposed in respect of, the issue or delivery of any Warrant Units issuable upon
the exercise of any Warrant (excluding any applicable income taxes payable by
the Holder); provided that the Company shall not be required to pay any
tax or other charge imposed in connection with any transfer involved in the
issue of Warrant Units in any name other than that of the Holder.


 


(c)                                  The
headings in this Warrant are for purposes of reference only, and shall not
limit or otherwise affect any of the terms hereof.


 


(d)                                  The
terms of this Warrant shall be binding upon and shall inure to the benefit of
any successors or assigns of the Company and of the Holder and of the Warrant
Units issued or issuable upon the exercise hereof.


 


(e)                                  Any
notice provided for or permitted under this Warrant shall be treated as having
been given (i) upon receipt, when delivered personally, (ii) one day
after sending, when sent by commercial overnight courier with written verification
of receipt, (iii) upon confirmed transmission when sent via facsimile on a
business day prior to 5:00 pm (Central Time) or, if sent after 5:00 pm (Central
Time), the next business day after confirmed transmission, or (iv) three
business days after deposit with the United States Postal Service, when mailed
postage prepaid by certified or registered mail, return receipt requested,
addressed at such address or facsimile number as set forth on the signature
page below, or at such other place of which the other party has been notified
in accordance with the provisions of this Section 13(e).


 


(f)                                    This
Warrant constitutes the full and entire understanding and agreement between the
parties with regard to the matters contained herein.


 


10

















 


(g)                                 Upon
receipt of evidence reasonably satisfactory to the Company of the loss, theft,
destruction or mutilation of this Warrant and, in the case of any such loss,
theft or destruction, upon delivery of an indemnity agreement reasonably
satisfactory in form and amount to the Company or, in the case of any such
mutilation, upon surrender and cancellation of such Warrant, the Company at the
Holder’s expense will execute and deliver to the holder of record, in lieu
thereof, a new Warrant of like date and tenor.


 


(h)                                 This
Warrant and any provision hereof may be amended, waived or terminated only by
an instrument in writing signed by the Company and the Holder.


 


11

















 


IN WITNESS WHEREOF, the Company has caused
this Warrant to be signed by its duly authorized officer, all as of the day and
year first above written.


 


	
  COMPANY:

  	
   

  
	
   

  	
   

  
	
   

  	
  ADVANCED BIOENERGY, LLC

  
	
   

  	
  a Delaware limited liability company

  
	
   

  	
   

  
	
   

  	
  By:  

  	
   /s/ Revis L. Stephenson III

  	
   

  
	
   

  	
  Name: 

  	
     Revis L. Stephenson III

  	
   

  
	
   

  	
  Title:  

  	
   Chairman & CEO

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  Notice Address:

  	
   

  	
  10201 Wayzata Blvd., Suite 250

  
	
   

  	
  Minneapolis, MN 55305

  
	
   

  	
  Attn: Revis L. Stephenson III

  
	
   

  	
  Facsimile: (763) 226-2728

  
	
   

  	
   

  
	
   

  	
   

  
	
  WARRANTHOLDER:

  	
  PJC CAPITAL LLC,

  
	
   

  	
  a Delaware limited liability company

  
	
   

  	
   

  
	
   

  	
  By:

  	
   /s/ Scott LaRue

  	
   

  
	
   

  	
  Name:

  	
     Scott LaRue

  	
   

  
	
   

  	
  Title:

  	
   MD

  	
   

  
	
   

  	
   

  
	
  Notice Address:

  	
   

  	
  c/o Piper, Jaffray & Co.

  
	
   

  	
   

  	
  1950 University Avenue, Suite 200

  
	
   

  	
   

  	
  Menlo Park, CA 94303

  
	
   

  	
   

  	
  Attn: Scott La Rue, Managing Director

  
	
   

  	
   

  	
  Facsimile: (650) 838-1419

  
											



 

















 


EXHIBIT
A


 


NOTICE
OF EXERCISE


 


TO:


 


 


1. Cash Exercise.        The undersigned hereby elects to purchase                      
Units (“Units”),
of ADVANCED BIOENERGY, LLC, a Delaware limited liability company (the “Company”) pursuant
to the terms of Section 1(b) of the Warrant to Purchase Units dated
October 17, 2007, (the “Warrant”),
and tenders herewith payment of the Exercise Price (as such term is defined in
the Warrant) therefor.


 


2. Net Exercise. The undersigned hereby elects to effect a Net
Exercise for                      
Units pursuant to Section 1(c) of the Warrant.


 


Please issue a certificate or certificates representing said                      
Units in the name of the undersigned or in such other name as is specified
below:


 


Name:


 


Address:


 


 


The undersigned hereby represents and
warrants that the aforesaid Units are being acquired for the account of the
undersigned for investment and not with a view to, or for resale, in connection
with the distribution thereof, and that the undersigned has no present
intention of distributing or reselling such shares.


 


 


	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Name:

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Title: 

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Date:

  	
   

  	
   

  
									



 

















 


EXHIBIT
B


 


FORM
OF INVESTMENT REPRESENTATION LETTER


 


In connection
with the acquisition of [warrants (the “Warrants”) to purchase                      
Units of ADVANCED BIOENERGY, LLC (the “Company”)] [Units of ADVANCED
BIOENERGY, LLC (the “Company”)] (the “Units”), by                                 
(the “Holder”) from                      ,
the Holder hereby represents and warrants to the Company as follows:


 


The Holder has
such knowledge and experience in financial and business matters that the Holder
is capable of evaluating the merits and risks of an investment in the Warrants
and the Units issuable upon the exercise thereof (collectively, the “Securities”);
and, has the ability to bear the economic risks of such Holder’s investment,
including a complete loss of the Holder’s investment in Securities.


 


The Holder, by
acceptance of the [Warrants/Units], represents to the Company that the Warrants
and all securities acquired upon any and all exercises of the Warrants are
purchased for the Holder’s own account, and not with view to distribution of
either the Warrants or any securities purchasable upon exercise thereof in
violation of applicable securities laws.


 


The Holder
acknowledges that (i) the Securities have not been registered under the Act,
(ii) the certificate(s) representing the Securities shall bear a legend as set
forth in the Warrant Agreement until such Securities shall have been registered
for resale by the Holder under the Act that has been declared effective by the
SEC; or (ii) in the opinion of counsel in form and substance reasonably
satisfactory to the Company, such Securities may be sold without registration
under the Act.


 


IN WITNESS
WHEREOF, the Holder has caused this Investment Representation Letter to be
executed in its corporate name by its duly authorized officer this [        ]
day of [                     ],
20[   ].


 


[Name]


 


	
  By:

  	
   

  	
   

  
	
   

  	
  Name:

  
	
   

  	
  Title:

  



 

















 


EXHIBIT
C


 


ASSIGNMENT
FORM


 


FOR VALUE
RECEIVED, the undersigned owner of this Warrant for the purchase of Units of
ADVANCED BIOENERGY, LLC, a Delaware limited liability company (the “Company”) hereby
sells, assigns and transfers unto the assignee named below all of the rights of
the undersigned under this Warrant, with respect to the number of Units set
forth below:


 


	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  (Name and
  Address of Assignee)

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  (Number of
  Units)

  	
   

  



 


and does
hereby irrevocably constitute and appoint                       
attorney-in-fact to register such transfer on the books of the Company,
maintained for the purpose, with full power of substitution in the premises.


 


	
  Dated:

  	
   

  	
   

  
	
   

  	
   

  
	
  [Name]

  	
   

  
	
   

  	
   

  
	
  By:

  	
   

  	
   

  
	
   

  	
  Name:

  
	
   

  	
  Title: