**EXHIBIT 10.3**

 

 

**REGISTRATIONRIGHTS AGREEMENTBETWEENADVANCED BIOENERGY, LLCANDETHANOL INVESTMENT PARTNERS, LLC**

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**June 25,2007**

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TABLE OF CONTENTS
|        | ** ** |                      | ** ** | ** **                                     | ** ** | **Page** | ** ** |
|--------|------------|----------------------|------------|------------------------------------------------|------------|----------|------------|
| 1.     |       | Definitions          |       | 1                                              |       |
|   |       |                 |       |                                           |       |
| 2.     |       | Registration  Rights |       | 4                                              |       |
|   |       |                 |       |                                           |       |
|   |       | 2.1                  |       | Demand Registration                            |       | 4        |       |
|   |       | 2.2                  |       | Company  Registration                          |       | 5        |       |
|   |       | 2.3                  |       | Underwriting Requirements                      |       | 6        |       |
|   |       | 2.4                  |       | Obligations  of the Company                    |       | 7        |       |
|   |       | 2.5                  |       | Furnish Information                            |       | 9        |       |
|   |       | 2.6                  |       | Expenses  of Registration                      |       | 9        |       |
|   |       | 2.7                  |       | Indemnification                                |       | 9        |       |
|   |       | 2.8                  |       | Reports  Under Exchange Act                    |       | 12       |       |
|   |       | 2.9                  |       | Limitations  on Subsequent Registration Rights |       | 12       |       |
|   |       | 2.10                 |       | “Market Stand-off” Agreement         |       | 12       |       |
|   |       | 2.11                 |       | Restrictions  on Transfer                      |       | 13       |       |
|   |       | 2.12                 |       | Termination  of Registration Rights            |       | 14       |       |
|   |       |                 |       |                                           |       |     |       |
| 3.     |       | Miscellaneous        |       | 15                                             |       |
|   |       |                 |       |                                           |       |
|   |       | 3.1                  |       | Successors and Assigns                         |       | 15       |       |
|   |       | 3.2                  |       | Governing  Law                                 |       | 15       |       |
|   |       | 3.3                  |       | Counterparts;  Facsimile                       |       | 15       |       |
|   |       | 3.4                  |       | Titles  and Subtitles                          |       | 15       |       |
|   |       | 3.5                  |       | Notices                                        |       | 15       |       |
|   |       | 3.6                  |       | Amendments  and Waivers                        |       | 16       |       |
|   |       | 3.7                  |       | Severability                                   |       | 17       |       |
|   |       | 3.8                  |       | Aggregation  of Securities                     |       | 17       |       |
|   |       | 3.9                  |       | Entire  Agreement                              |       | 17       |       |
|   |       | 3.10                 |       | Delays or Omissions                            |       | 17       |       |

 

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**ADVANCED BIOENERGY, LLCREGISTRATION RIGHTS AGREEMENT**

This Registration RightsAgreement (this “**Agreement**”)is made as of the 25th day of June, 2007, between Advanced BioEnergy, LLC, aDelaware limited liability company (the “**Company**”),and Ethanol Investment Partners, LLC, a Delaware limited liability company (“**EIP**”).

**Background**

A.            OnApril 20, 2007, the Company and EIP entered into that certain Note PurchaseAgreement (the “**Note Purchase Agreement**”)providing for the issuance and sale of 15% Subordinated Convertible PromissoryNotes to EIP.

B.            Inconnection with the Note Purchase Agreement the Parties desire to provide EIPwith the right, among other rights, to demand the registration of RegistrableSecurities (as defined below) held by EIP in accordance with the terms of thisAgreement.  Capitalized terms used hereinbut not otherwise defined have the meaning given to them in the Note PurchaseAgreement.

**Agreement**

NOW, THEREFORE, in consideration of the foregoing andthe mutual promises contained herein, the Parties agree as follows:

1.             Definitions.** **For purposes of this Agreement:

1.1           “**Additional Financing**”means the sale by the Company of additional Units as contemplated by theregistration statement on Form SB-2 filed by the Company with the SEC on September13, 2006, as amended from time to time thereafter.

1.2           “**Affiliate**”means, with respect to any specified Person, any other Person who or which,directly or indirectly, controls, is controlled by, or is under common controlwith such specified Person, including without limitation any general partner, officer, director, or manager of such Person.

1.3           “**Damages**”means any loss, damage, or liability to which a party hereto may become subjectunder the Securities Act, the Exchange Act, or other federal or state law,insofar as such loss, damage, or liability (or any action in respect thereof)arises out of or is based upon (a) any untrue statement or alleged untruestatement of a material fact contained in any registration statement of theCompany, including any preliminary prospectus or final prospectus containedtherein or any amendments or supplements thereto; (b) an omission oralleged omission to state therein a material fact required to be statedtherein, or necessary to make the statements therein not misleading; or(c) any violation or alleged violation by the  

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indemnifying****party (or any ofits agents or Affiliates)****of theSecurities Act, the Exchange Act, any state securities law, or any rule orregulation promulgated under the Securities Act, the Exchange Act, or any statesecurities law.

1.4          “**Derivative Securities**” means any securitiesor rights convertible into, or exercisable or exchangeable for (in each case, directly or indirectly),Units, including options and warrants.

1.5          “**ExchangeAct**” means the Securities Exchange Act of 1934, as amended, and therules and regulations promulgated thereunder.

1.6          “**ExcludedRegistration**” means (a) aregistration of Units in connection with the Additional Financing so long as such registration is declaredeffective by the SEC no later than June 30, 2007; (b) aregistration relating to the sale of securities to employees of the Company or a subsidiary pursuant to a stockoption, stock purchase, or similar plan;or (c) a registration relating to an SEC Rule 145 transaction.

1.7          “**Form S-1**” means such form under the Securities Act as in effect on the datehereof or any successor registration form under the Securities Act subsequentlyadopted by the SEC.

1.8          “**Form S-2**”means such form under the Securities Act as in effect on the date hereof or anysuccessor registration form under the Securities Act subsequently adopted bythe SEC.

1.9           “**Form S-3**”means such form under the Securities Act as in effect on the date hereof or anyregistration form under the Securities Act subsequently adopted by the SEC thatpermits incorporation of substantial information by reference to otherdocuments filed by the Company with the SEC.

1.10         “**GAAP**” meansgenerally accepted accounting principles in the United States.

1.11         “**Holder**” meansany holder of Registrable Securities who is a party to this Agreement,including permitted transferees that agree in writing to be bound by andsubject to the terms and conditions of this Agreement.

1.12         “**Initiating Holders**”means, collectively, Holders who properly initiate a registration request underthis Agreement.

1.13         “**InvestorRights Agreement**” means that certain Investor Rights Agreement datedas of November 8, 2006 between the Company and SDWG, as amended.

1.14         “**IPO**” means the Company’s first underwrittenpublic offering of its Units or other equity securities under the SecuritiesAct.

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1.15         “**Operating Agreement**” means that certain Third Amended and RestatedOperating Agreement of the Company dated as of February 1, 2006.

1.16         “**Person**” means any individual, corporation, partnership,trust, limited liability company, association or other entity.

1.17         “**Registrable Securities**”means (a) the Units issued to EIP upon conversion of the promissory notesissued to EIP under the Note Purchase Agreement; and (b) any Units issuedas (or issuable upon the conversion or exercise of any warrant, right, or other security that is issued as) a dividend orother distribution with respect to, or in exchange for or in replacement of,the Units referenced in clause (a) above, including without limitation anyUnits which are issued to EIP subsequent to the conversion resulting from anystock split or merger, and excluding in all cases, however, any RegistrableSecurities sold by a Person in a transaction in which the applicable****rightsunder this Agreement are notassigned pursuant to Section 3.1,and excluding for purposes of Section 2****anyUnits for which registration rights have terminated pursuant to Section 2.12****ofthis Agreement.

1.18         “**Restricted Securities**” means the securitiesof the Company required to bear the legend set forth in Section 2.11(b) hereof.

1.19         “**SDWG**”means South Dakota Wheat Growers Association, a South Dakota cooperative.

1.20         “**SDWG Holder**”means any “Holder” as that term is defined under the Investor Rights Agreement.

1.21         “**SEC**” means the Securities and ExchangeCommission.

1.22          “**SEC Rule 144**” means Rule 144 promulgated bythe SEC under the Securities Act.

1.23         “**SEC Rule 144(k)**” means Rule 144(k)promulgated by the SEC under the Securities Act.

1.24         “**SEC Rule 145**” means Rule 145 promulgated bythe SEC under the Securities Act.

1.25         “**Securities Act**” means the Securities Act of1933, as amended, and the rules and regulations promulgated thereunder.

1.26         “**Selling Expenses**” means all underwritingdiscounts, selling commissions, and stock transfer taxes applicable to the saleof Registrable Securities, and fees and disbursements of counsel for anyHolder, except for the fees anddisbursements of the Selling Holder Counsel borne and paid by the Company asprovided in Section 2.6.

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1.27         “**Units**”means units of membership interests in the Company, or shares or other equityinterests of the Company issued in exchange for or otherwise in connection withany transaction as described in Section 2.1.

2.             Registration Rights. ** **The Company covenantsand agrees as follows:

2.1           Demand Registration.

(a)            FormS-1 Demand.  If at any timeafter the earlier of (i) one year after the date of this Agreement or (ii)ninety (90) days after the effective date of the registration statement for theIPO or such longer period after the IPO if the Holders cannot sell theirsecurities as a result of executing a “market stand-off” agreement contemplatedby Section 2.10 hereof, the Company receives a request from Holders of at leastseventy-five percent (75%) of the Registrable Securities that the Company file a Form S-1 registrationstatement with respect to at least seventy-five percent (75%) of the RegistrableSecurities (or a lesser percentage ifthe anticipated aggregate offering price, net of Selling Expenses, would exceed$15 million), then the Company shall (x) within ten (10) days afterthe date such request is given, give notice thereof (the “**Demand Notice**”) to all Holders other thanthe Initiating Holders; and (y) as soon as practicable, and in any eventwithin forty-five (45) days after the date such request is given by theInitiating Holders, file a Form S-1registration statement under the Securities Act covering all RegistrableSecurities that the Initiating Holders requested****to be registered and any additional Registrable Securitiesrequested to be included in such registration by any other Holders (includingfor purposes of this Section 2.1(a), solely for purposes of being allowed toparticipate in such registration, any SDWG Holder), as specified by noticegiven by each such Holder to the Company within twenty (20) days of the datethe Demand Notice is given, and in each case, subject to the limitations ofSection 2.1(c) and Section 2.3.

(b)           FormS-3 Demand.  If at any time when itis eligible to use a Form S-3 registration statement, the Company receivesa request from Holders of at least seventy-five percent (75%) of theRegistrable Securities that the Company file a Form S-3 registration statementwith respect to at least seventy-five percent (75%) of the Registrable Securities (or a lesser percentage if theanticipated aggregate offering price, net of Selling Expenses, would exceed$15 million), then the Company shall (i) within ten (10) days after thedate such request is given, give a Demand Notice to all Holders other than theInitiating Holders; and (ii) as soon as practicable, and in any event withinforty-five (45) days after the date such request is given by the InitiatingHolders, file a Form S-3 registration statement under the Securities Actcovering all Registrable Securities requested to be included in suchregistration by any other Holders (including for purposes of thisSection 2.1(b), solely for purposes of being allowed to participate in suchregistration, any SDWG Holder), asspecified by notice given by each such Holder to the Company within twenty (20)days of the date the Demand Notice is given, and in each case, subject to thelimitations of Section 2.1(c) and Section 2.3.

(c)            Notwithstanding the foregoingobligations, if the Company furnishes to Holders requesting a registrationpursuant to Section 2.1(a) or Section 2.1(b) a certificate signed 

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by the Company’schief executive officer stating that in the good faith judgment of the Board itwould be materially detrimental to the Company and its members for suchregistration statement to either become effective or remain effective for aslong as such registration statement otherwise would be required to remaineffective, because such action would (i) materially interfere with asignificant acquisition, corporate reorganization, or other similar transactioninvolving the Company; or (ii) require premature disclosure of materialinformation that the Company has a bona fide business purpose for preserving asconfidential; and it is therefore necessary to defer the filing of suchregistration statement, then the Company shall have the right to defer takingaction with respect to such filing, and any time periods with respect to filingor effectiveness thereof shall be tolled correspondingly, for a period of notmore than thirty (30) days after the request of the Initiating Holders isgiven; provided, however, that the Company may not invoke this right more thanonce in any twelve (12) month period; and provided further that the Companyshall not register any securities for its own account or that of any othermember during such thirty (30) day period other than an Excluded Registration.

(d)           The Company shall not be obligated toeffect, or to take any action to effect, any registration pursuant to Section2.1(a): (i) during theperiod that is thirty (30) days before the Company’s good faith estimate of thedate of filing of, and ending on a date that is ninety (90) days after theeffective date of, a Company-initiated registration, provided, that the Companyis actively employing in good faith commercially reasonable efforts to causesuch registration statement to become effective; (ii) after the Companyhas effected two registrations pursuantto Section 2.1(a); or (iii) if the Initiating Holders propose todispose of shares of Registrable Securities that may be immediately registeredon Form S-3 pursuant to a request made pursuant to Section 2.1(b). The Company shall not be obligated to effect, or to take any action toeffect, any registration pursuant to Section 2.1(b): (x) during the period thatis thirty (30) days before the Company’s good faith estimate of the date offiling of, and ending on a date that is ninety (90) days after the effectivedate of, a Company-initiated registration, provided, that the Company isactively employing in good faith commercially reasonable efforts to cause suchregistration statement to become effective; or (y) if the Company has effectedtwo registrations pursuant to Section 2.1(b) within the twelve (12) monthperiod immediately preceding the date of such request.  A registration shall not be counted as “effected”for purposes of this Section 2.1(d)until such time as the applicable registration statement has been declaredeffective by the SEC, unless the Initiating Holders withdraw their request forsuch registration, elect not to pay the registration expenses therefor, andforfeit their right to one demand registration statement pursuant to Section 2.6, in which case such withdrawnregistration statement shall be counted as “effected” for purposes of thisSection 2.1(d).

2.2           Company Registration.  If the Company proposes to register(including, for this purpose, a registration effected by the Company for equityholders other than the Holders) any of its securities under the Securities Actin connection with the public offering of such securities solely for cash(other than in an Excluded Registration), the Company shall, at such time,promptly give each Holder notice of such registration.  Upon the request of each Holder given withintwenty (20) days after such notice is given by the Company, the Company 

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shall, subject tothe provisions of Section 2.3, cause to be registered all of the RegistrableSecurities that each such Holder has requested to be included in suchregistration.  The Company shall have theright to terminate or withdraw any registration initiated by it under thisSection 2.2 before the effective date of such registration, whether or not anyHolder has elected to include Registrable Securities in such registration.  The expenses (other than Selling Expenses) ofsuch withdrawn registration shall be borne by the Company in accordance withSection 2.6.

2.3           Underwriting Requirements.

(a)            If, pursuant to Section 2.1, theInitiating Holders intend to distribute the Registrable Securities covered bytheir request by means of an underwriting, they shall so advise the Company asa part of their request made pursuant to Section 2.1, and the Company shallinclude such information in the Demand Notice. The underwriter(s) will be selected by the Company and shall bereasonably acceptable to a majority in interest of the Initiating Holders.  In such event, the right of any Holder toinclude such Holder’s Registrable Securities in such registration shall beconditioned upon such Holder’s participation in such underwriting and theinclusion of such Holder’s Registrable Securities in the underwriting to theextent provided herein.  All Holdersproposing to distribute their securities through such underwriting shall(together with the Company as provided in Section 2.4(e)) enter into anunderwriting agreement in customary form with the underwriter(s) selected forsuch underwriting.  Notwithstanding anyother provision of this Section 2.3, if the underwriter(s) advise(s) theInitiating Holders in writing that marketing factors require a limitation onthe number of equity securities to be underwritten, then the Initiating Holdersshall so advise all Holders of Registrable Securities that otherwise would beunderwritten pursuant hereto, and the number of equity securities that may beincluded in the underwriting shall be allocated as follows: (1) as between theHolders of Registrable Securities that are party to this Agreement (the “**EIP Holders**”) and the SDWG Holders in proportion (as nearlyas practicable) to the number of equity securities that each group requested tobe included in the underwriting, and then (2) as between the persons thatcomprise the EIP Holders and the SDWG Holders in proportion (as nearly aspracticable) to the number of equity securities owned by each Holder or in suchother proportion as shall mutually be agreed to by all such Holders; provided,however, that the number of Registrable Securities held by the EIP Holders tobe included in such underwriting shall not be reduced unless all othersecurities, except the equity securities requested to be included in theunderwriting by the SDWG Holders which shall be reduced as contemplated in theprior sentence, are first entirely excluded from the underwriting.

(b)           In connection with any offeringinvolving an underwriting of the Company’s securities pursuant to Section 2.2,the Company shall not be required to include any of the Holders’ RegistrableSecurities in such underwriting unless the Holders accept the terms of theunderwriting agreement as agreed upon between the Company and its underwriters(which underwriting agreement shall contain customary terms and conditions),and then only in such quantity as the underwriters in their reasonablediscretion determine will not jeopardize the success of the offering by theCompany.  If the total number ofsecurities, including Registrable Securities, requested by security holders ofthe Company to be included in such offering exceeds 

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the number ofsecurities to be sold (other than by the Company) that the underwriters intheir reasonable discretion determine is compatible with the success of theoffering, then the Company shall be required to include in the offering onlythat number of such securities, including Registrable Securities, which theunderwriters in their reasonable discretion determine will not jeopardize thesuccess of the offering.  If theunderwriters determine that less than all of the Registrable Securitiesrequested to be registered can be included in such offering, then theRegistrable Securities that are included in such offering shall be allocatedamong the selling Holders in proportion (as nearly as practicable to) thenumber of Registrable Securities owned by each selling Holder or in such otherproportions as shall mutually be agreed to by all such selling Holders; provided,however, in no event shall any securities held by any SDWG Holder be eliminatedunless all Registrable Securities held by all EIP Holders are completelyeliminated.  For purposes of theprovision in this Section 2.3(b) concerning apportionment, for any sellingHolder that is a partnership, limited liability company, or corporation, thepartners, members, retired partners, retired members, stockholders, andAffiliates of such Holder, shall be deemed to be a single “selling Holder,” andany pro rata reduction with respect to such “selling Holder” shall be basedupon the aggregate number of Registrable Securities owned by all Personsincluded in such “selling Holder” as defined in this sentence.

(c)            For purposes of Section 2.1, a registration shall not be countedas “effected” if, as a result of an exercise of the underwriter’s cutbackprovisions in Section 2.3, fewerthan fifty percent (50%) of the total number of Registrable Securities thatHolders have requested to be included in such registration statement areactually included.

2.4           Obligations of the Company.  Whenever required under this Section 2 toeffect the registration of any Registrable Securities, the Company shall, asexpeditiously as reasonably possible:

(a)            prepare and file with the SEC aregistration statement with respect to such Registrable Securities and use itscommercially reasonable efforts to cause such registration statement to becomeeffective and, upon the request of the Holders of a majority of the RegistrableSecurities registered thereunder, keep such registration statement effectivefor a period of up to one hundred eighty (180) days or, if earlier, until thedistribution contemplated in the registration statement has been completed;provided, however, that (i) such one hundred eighty (180) day period shallbe extended for a period of time equal to the period the Holder refrains, atthe request of the Company or an underwriter of Units (or other securities) ofthe Company, from selling any securities included in such registration, and(ii) in the case of any registration of Registrable Securities on Form S-3that are intended to be offered on a continuous or delayed basis, subject tocompliance with applicable SEC rules, such one hundred eighty (180) day periodshall be extended for up to two hundred forty (240) days, if necessary, to keepthe registration statement effective until all such Registrable Securities aresold;

(b)           prepare and file with the SEC suchamendments and supplements to such registration statement, and the prospectusused in connection with such registration statement, as 

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may be necessaryto comply with the Securities Act in order to enable the disposition of allsecurities covered by such registration statement;

(c)            furnish to the selling Holders suchnumbers of copies of a prospectus, including a preliminary prospectus, asrequired by the Securities Act, and such other documents as the Holders mayreasonably request in order to facilitate their disposition of theirRegistrable Securities;

(d)           use its commercially reasonableefforts to register and qualify the securities covered by such registrationstatement under such other securities or blue-sky laws of such jurisdictions asshall be reasonably requested by the selling Holders; provided that the Companyshall not be required to qualify to do business or to file a general consent toservice of process in any such states or jurisdictions, unless the Company isalready subject to service in such jurisdiction and except as may be requiredby the Securities Act;

(e)            in the event of any underwrittenpublic offering, enter into and perform its obligations under an underwritingagreement, in usual and customary form, with the underwriter(s) of such offering;

(f)            use its commercially reasonableefforts to cause all such Registrable Securities covered by such registrationstatement to be listed on a national securities exchange or trading system andeach securities exchange and trading system (if any) on which similarsecurities issued by the Company are then listed;

(g)           provide a transfer agent andregistrar for all Registrable Securities registered pursuant to this Agreementand provide a CUSIP number for all such Registrable Securities, in each casenot later than the effective date of such registration;

(h)           promptly make available forinspection by the selling Holders, any underwriter(s) participating in any disposition pursuant to such registrationstatement, and any attorney or accountant or other agent retained by any suchunderwriter or selected by the selling Holders, all financial and otherrecords, pertinent corporate documents, and properties of the Company, andcause the Company’s officers, directors, employees, and independent accountantsto supply all information reasonably requested by any such seller, underwriter,attorney, accountant, or agent, in eachcase, as necessary or advisable to verify the accuracy of the information insuch registration statement and to conduct appropriate due diligence inconnection therewith;

(i)             notify each selling Holder,promptly after the Company receives notice thereof, of the time when suchregistration statement has been declared effective or a supplement to anyprospectus forming a part of such registration statement has been filed; and

(j)             after such registration statementbecomes effective, notify each selling Holder of any request by the SEC thatthe Company amend or supplement such registration statement or prospectus.

 

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2.5           Furnish Information.  It shall be a condition precedent to theobligations of the Company to take any action pursuant to Section 2 withrespect to the Registrable Securities of any selling Holder that such Holdershall furnish to the Company such information regarding itself, the RegistrableSecurities held by it, and the intended method of disposition of suchsecurities as is reasonably required to effect the registration of such Holder’sRegistrable Securities.

2.6           Expenses of Registration.  All expenses (other than Selling Expenses)incurred in connection with registrations, filings, or qualifications pursuantto Section 2, including all registration, filing, and qualification fees;printers’ and accounting fees; fees and disbursements of counsel for theCompany; and the reasonable fees and disbursements of one counsel for theselling Holders****(“**SellingHolder Counsel**”), shall be borne and paid by the Company;provided, however, that the Company shall not be required to pay for anyexpenses of any registration proceeding begun pursuant to Section 2.1(a) or Section 2.1(b) if the registration request issubsequently withdrawn at the request of the Holders of a majority of theRegistrable Securities to be registered (in which case all selling Holders,including the SDWG Holders, shall bear such expenses pro rata based upon thenumber of Registrable Securities that were actually to be included in thewithdrawn registration), unless the Holders of a majority of the RegistrableSecurities agree to forfeit their right to one registration pursuant to Section2.1(a) or Section 2.1(b), as the case may be; providedfurther that if, at the time of such withdrawal, the Holders have learned of amaterial adverse change in the condition, business, or prospects of the Companyfrom that known to the Holders at the time of their request and have withdrawnthe request with reasonable promptness after learning of such information, thenthe Holders shall not be required to pay any of such expenses and shall notforfeit their right to one registration pursuant to Section 2.1(a) or Section 2.1(b). All Selling Expenses relating to Registrable Securities registeredpursuant to Section 2 shall be borne and paid by the Holders pro rata on thebasis of the number of Registrable Securities registered on their behalf.

2.7           Indemnification.  If any Registrable Securities are included ina registration statement under this Section 2:

(a)            To the extent permitted by law, theCompany will indemnify and hold harmless each selling Holder, and the partners,members, officers, directors, and stockholders of each such Holder; legalcounsel and accountants for each such Holder; any underwriter (as defined inthe Securities Act) for each such Holder; and each Person, if any, who controlssuch Holder or underwriter within the meaning of the Securities Act or theExchange Act, against any Damages, and the Company will pay to each suchHolder, underwriter, controlling Person, or other aforementioned Person anylegal or other expenses reasonably incurred thereby in connection withinvestigating or defending any claim orproceeding from which Damages may result, as such expenses are incurred;provided, however, that the indemnity agreement contained in this Section 2.7(a) shall not apply to amounts paidin settlement of any such claimor proceeding if such settlement is effected without the consent of theCompany, which consent shall not be unreasonably withheld, nor shall theCompany be liable for any Damages to the extent that they arise out of or arebased upon actions or omissions made in reliance upon and in 

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conformity withwritten information furnished by or on behalf of any such Holder, underwriter,controlling Person, or other aforementioned Person expressly for use inconnection with such registration.

(b)           To the extent permitted by law, eachselling Holder, severally and not jointly, will indemnify and hold harmless theCompany, and each of its directors, each of its officers who has signed theregistration statement, each Person (if any), who controls the Company withinthe meaning of the Securities Act, legal counsel and accountants for theCompany, any underwriter (as defined in the Securities Act), any other Holderselling securities in such registration statement, and any controlling Personof any such underwriter or other Holder, against any Damages, in each case onlyto the extent that such Damages arise out of or are based upon actions oromissions made in reliance upon and in conformity with written informationfurnished by or on behalf of such selling Holder expressly for use inconnection with such registration; and each such selling Holder will pay,severally and not jointly, to the Company and each other aforementioned Personany legal or other expenses reasonably incurred thereby in connection withinvestigating or defending any claim orproceeding from which Damages may result, as such expenses are incurred;provided, however, that the indemnity agreement contained in this Section 2.7(b) shall not apply to amounts paidin settlement of any such claimor proceeding if such settlement is effected without the consent of the Holder,which consent shall not be unreasonably withheld; and provided further that inno event shall any indemnity under this Section 2.7(b) exceed the proceeds from the offering received by such Holder, except in the case of common law fraud orwillful misconduct by such Holder.

(c)            Promptly after receipt by anindemnified party under this Section 2.7of notice of the commencement of any action (including any governmental action)for which a party may be entitled to indemnification hereunder, suchindemnified party will, if a claim in respect thereof is to be made against anyindemnifying party under this Section 2.7,give the indemnifying party notice of the commencement thereof.  The indemnifying party shall have the rightto participate in such action and, to the extent the indemnifying party sodesires, participate jointly with any other indemnifying party to which noticehas been given, and to assume the defense thereof with counsel mutuallysatisfactory to the parties; provided, however, that an indemnified party(together with all other indemnified parties that may be represented withoutconflict by one counsel) shall have the right to retain one separate counsel, withthe fees and expenses to be paid by the indemnifying party, if representationof such indemnified party by the counsel retained by the indemnifying partywould be inappropriate due to actual or potential conflicting interests betweensuch indemnified party and any other party represented by such counsel in suchaction.  The failure to give notice tothe indemnifying party within a reasonable time of the commencement of any suchaction shall not relieve such indemnifying party of any liability to the indemnifiedparty under this Section 2.7,unless such failure actually and materially prejudices the indemnifying party’sability to defend such action.

(d)           Notwithstandinganything else herein to the contrary, the****foregoingindemnity agreements of the Company and the selling Holders are subject to thecondition that, insofar as they relate to any Damages arising from any untruestatement or alleged untrue 

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statement of amaterial fact contained in, or omission or alleged omission of a material factfrom, a preliminary prospectus (or necessary to make the statements therein notmisleading) that has been corrected in the form of prospectus included in theregistration statement at the time it becomes effective, or any amendment orsupplement thereto filed with the SEC pursuant to Rule 424(b) under theSecurities Act (the “**Final Prospectus**”),such indemnity agreement shall not inure to the benefit of any Person if a copyof the Final Prospectus was furnished to the indemnified party and suchindemnified party failed to deliver, at or before the confirmation of the saleof the shares registered in such offering, a copy of the Final Prospectus tothe Person asserting the loss, liability, claim, or damage in any case in whichsuch delivery was required by the Securities Act.

(e)            To provide for just and equitablecontribution to joint liability under the Securities Act in any case in whicheither (i) any party otherwise entitled to indemnification hereunder makesa claim for indemnification pursuant to this Section 2.7 but it is judicially determined (by the entry of a finaljudgment or decree by a court of competent jurisdiction and the expiration oftime to appeal or the denial of the last right of appeal) that suchindemnification may not be enforced in such case, notwithstanding the fact thatthis Section 2.7 provides forindemnification in such case, or (ii) contribution under the SecuritiesAct may be required on the part of any party hereto for which indemnificationis provided under this Section 2.7,then, and in each such case, such parties will contribute to the aggregatelosses, claims, damages, liabilities, or expenses to which they may be subject(after contribution from others) in such proportion as is appropriate toreflect the relative fault of each ofthe indemnifying party and the indemnified party in connection with thestatements, omissions, or other actions that resulted in such loss, claim,damage, liability, or expense, as well as to reflect any other relevantequitable considerations.  The relativefault of the indemnifying party and of the indemnified party shall bedetermined by reference to, among other things, whether the untrue or allegedlyuntrue statement of a material fact, or the omission or alleged omission of amaterial fact, relates to information supplied by the indemnifying party or bythe indemnified party and the parties’ relative intent, knowledge, access toinformation, and opportunity to correct or prevent such statement or omission;provided, however, that, in any such case, (x) no Holder will be requiredto contribute any amount in excess of the public offering price of all suchRegistrable Securities offered and sold by such Holder pursuant to suchregistration statement, and (y) no Person guilty of fraudulentmisrepresentation (within the meaning of Section 11(f) of the SecuritiesAct) will be entitled to contribution from any Person who was not guilty ofsuch fraudulent misrepresentation; and provided further that in no event shalla Holder’s liability pursuant to this Section 2.7(e), when combined with the amounts paid or payable by suchHolder pursuant to Section 2.7(b),exceed the proceeds from the offering receivedby such Holder (net of any Selling Expenses) paid by such Holder), except in the case of willful misconduct orcommon law fraud by such Holder.

(f)            Notwithstanding the foregoing, tothe extent that the provisions on indemnification and contribution contained inthe underwriting agreement entered into in connection with the underwrittenpublic offering are in conflict with the foregoing provisions, 

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the provisions inthe underwriting agreement shall control; provided, however, that theprovisions on indemnification and contribution contained in the underwritingagreement shall not contain provisions which expose the Holders to greaterliability than the terms contained herein.

(g)           Unless otherwise superseded by anunderwriting agreement entered into in connection with the underwritten publicoffering, the obligations of the Company and Holders under this Section 2.7 shall survive the completion of anyoffering of Registrable Securities in a registration under Section 2, andotherwise shall survive the termination of this Agreement.

2.8           Reports Under Exchange Act.  With a view to making available to theHolders the benefits of SEC Rule 144 and any other rule or regulation ofthe SEC that may at any time permit a Holder to sell securities of the Companyto the public without registration or pursuant to a registration on Form S-3,the Company shall:

(a)            make and keep available adequate current publicinformation, as those terms are understood and defined in SEC Rule 144, atall times;

(b)           use commercially reasonable effortsto file with the SEC in a timely manner all reports and other documentsrequired of the Company under the Securities Act and the Exchange Act ; and

(c)            furnish to any Holder, so long asthe Holder owns any Registrable Securities, upon request (i) to the extent accurate, a writtenstatement by the Company that it has complied with the reporting requirements ofSEC Rule 144, the Securities Act, and the Exchange Act, or that itqualifies as a registrant whose securities may be resold pursuant to Form S-3(at any time after the Company so qualifies); (ii) a copy of the mostrecent annual or quarterly report of the Company and such other reports anddocuments so filed by the Company; and (iii) such other information as maybe reasonably requested in availing any Holder of any rule or regulation of theSEC that permits the selling of any such securities without registration orpursuant to Form S-3 (at any time after the Company so qualifies to usesuch form).

2.9           Limitations on SubsequentRegistration Rights.  From and afterthe date of this Agreement, the Company shall not, without the prior writtenconsent of the Holders of a majority of the Registrable Securities, enter intoany agreement with any holder or prospective holder of any securities of theCompany that would allow such holder or prospective holder to include suchsecurities in any Company registration or demand registration of any securitiesheld by such holder or prospective holder unless, under the terms of suchagreement, such holder or prospective holder may include such securities in anysuch registration only on a *pari passu*basis to the number of the Registrable Securities of the Holders that areincluded.

2.10         “Market Stand-off” Agreement.  Each Holder hereby agrees that it will not,without the prior written consent of the managing underwriter, during theperiod commencing on the date of the final prospectus relating to the IPO or other registration by the Company for its ownbehalf of Units or any other equity securities under the Securities Act on a****registration statement on Form S-1, Form S-2, or Form S-3, and ending on the date specified by 

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the Company and the managing underwriter (such period not to exceed(a) one hundred eighty (180) days in the case of the IPO, which period maybe extended upon the request of the managing underwriter for an additionalperiod of up to fifteen (15) days if the Company issues or proposes to issue anearnings or other public release within fifteen (15) days of the expiration ofthe 180-day lockup period, or (b) ninety (90) days in the case of anyregistration other than the IPO, which period may be extended upon the requestof the managing underwriter for an additional period of up to fifteen (15) daysif the Company issues or proposes to issue an earnings or other public releasewithin fifteen (15) days of the expiration of the 90-day lockup period), (i) lend;offer; pledge; sell; contract to sell; sell any option or contract to purchase;purchase any option or contract to sell; grant any option, right, or warrant topurchase; or otherwise transfer or dispose of, directly or indirectly, anyUnits or any securities convertible into or exercisable or exchangeable (directly or indirectly) for Unitsheld immediately before the effective date of the registration statement forsuch offering or (ii) enter into any swap or other arrangement thattransfers to another, in whole or in part, any of the economic consequences ofownership of such securities,whether any such transaction described in clause (i) or (ii) above is to besettled by delivery of Units or other securities, in cash, or otherwise.  The foregoing provisions of this Section 2.10 shall not apply to the sale of anyshares to an underwriter pursuant to an underwriting agreement, and shall beapplicable to the Holders only if all officers, directors, and membersindividually owning more than five percent (5%) of the Company’s outstandingUnits (or other voting equity securities) are subject to the samerestrictions.  Each Holder further agreesto execute such agreements as may be reasonably requested by the underwritersin connection with such registrationthat are consistent with this Section 2.10or that are necessary to give further effect thereto.

2.11         Restrictions on Transfer.

(a)            The Registrable Securities shall notbe sold, pledged, or otherwise transferred, and the Company shall not recognizeany such sale, pledge, or transfer, except upon the conditions specified inthis Agreement and Section 9 of the Operating Agreement, which conditionsare intended to ensure compliance with the provisions of the SecuritiesAct.  A transferring Holder will causeany proposed purchaser, pledgee, or transferee of the Registrable Securitiesheld by such Holder to agree to take and hold such securities subject to theprovisions and upon the conditions specified in this Agreement and theOperating Agreement.

(b)           In addition to any legendrequirements set forth in the Operating Agreement, each certificate or instrument representing theRegistrable Securities shall (unless otherwise permitted by the provisions ofSection 2.11(c)) be stamped orotherwise imprinted with a legend substantiallyin the following form:

THE SECURITIES REPRESENTED HEREBY HAVE BEEN ACQUIRED FORINVESTMENT AND HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933.  SUCH SECURITIES MAY NOT BE SOLD, PLEDGED, ORTRANSFERRED IN THE ABSENCE OF SUCH 

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REGISTRATION OR AVALID EXEMPTION FROM THE REGISTRATION AND PROSPECTUS DELIVERY REQUIREMENTS OFSAID ACT.

THE SECURITIES REPRESENTED HEREBY MAY BE TRANSFERRED ONLY INACCORDANCE WITH THE TERMS OF THAT CERTAIN REGISTRATION RIGHTS AGREEMENT BETWEENTHE COMPANY AND CERTAIN HOLDERS OF ITS SECURITIES, A COPY OF WHICH IS ON FILEWITH THE SECRETARY OF THE COMPANY.

The Holders consent tothe Company making a notation in its records and giving instructions to anytransfer agent of the Restricted Securities in order to implement therestrictions on transfer set forth in this Section 2.11

(c)            The holder of each certificaterepresenting Restricted Securities, by acceptance thereof, agrees to comply inall respects with the provisions of this Section 2.  Before any proposed sale, pledge, or transferof any Restricted Securities, unless there is in effect a registrationstatement under the Securities Act covering the proposed transaction, theHolder thereof shall give notice to the Company of such Holder’s intention toeffect such sale, pledge, or transfer. Each such notice shall describe the manner and circumstances of theproposed sale, pledge, or transfer in sufficient detail and, if reasonablyrequested by the Company, shall be accompanied at such Holder’s expense byeither (i) a written opinion of legal counsel who shall, and whose legalopinion shall, be reasonably satisfactory to the Company, addressed to theCompany, to the effect that the proposed transaction may be effected withoutregistration under the Securities Act; (ii) a “no action” letter from theSEC to the effect that the proposed sale, pledge, or transfer of such Restricted Securities withoutregistration will not result in a recommendation by the staff of the SEC thataction be taken with respect thereto; or (iii) any other evidencereasonably satisfactory to counsel to the Company to the effect that theproposed sale, pledge, or transfer of the Restricted Securities may be effectedwithout registration under the Securities Act, whereupon the Holder of such RestrictedSecurities shall be entitled to sell, pledge, or transfer such RestrictedSecurities in accordance with the terms of the notice given by the Holder tothe Company.  The Company will notrequire such a legal opinion or “no action” letter (x) in any transactionin compliance with SEC Rule 144or (y) in any transaction in which such Holder distributes RestrictedSecurities to an Affiliate of such Holder for no consideration; provided thatin the case of a transfer to an Affiliate each transferee agrees in writing tobe subject to the terms of this Section 2.11. Each certificate orinstrument evidencing the Restricted Securities transferred as aboveprovided shall bear, except if such transfer is made pursuant to SEC Rule 144, the appropriaterestrictive legend set forth in Section 2.11(b), except that such certificate shall not bear suchrestrictive legend if, in the opinion of counsel for such Holder and theCompany, such legend is not required in order to establish compliance with anyprovisions of the Securities Act.

2.12         Termination of Registration Rights.** **Theright of any Holder to request registration or inclusion of RegistrableSecurities in any registration pursuant to Section 2.1 or Section 2.2shall terminate upon the earliest tooccur of (a) the closing of a transaction resulting 

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in a “DissolutionEvent” as such term is defined in the Operating Agreement and (b) the dateon which such Holder is entitled to sell all of the Units owned by it incompliance with SEC Rule 144(k).

3.             Miscellaneous.

3.1           Successors and Assigns.  Except as set forth in this Section 3.1, thisAgreement shall not be assignable by EIP without the prior written consent ofthe Company.  Prior written consent willnot be required for any assignment of this Agreement by EIP to an Affiliateassignee, provided that (i) the Company is, within a reasonable period of timeafter such transfer, furnished with written notice of the name and address ofthe Affiliate assignee and (ii) the Affiliate assignee agrees in a writteninstrument satisfactory to the Company, to be bound by and subject to the termsand conditions of this Agreement. Nothing in this Agreement, express or implied, is intended to conferupon any party other than the parties hereto or their respective successors andpermitted assignees any rights, remedies, obligations or liabilities under orby reason of this Agreement, except as expressly provided herein.

3.2           GoverningLaw.  This Agreement shall begoverned by and construed in accordance with the Limited Liability Company Actof the State of Delaware as to matters within the scope thereof, and as to allother matters shall be governed by and construed in accordance with theinternal laws of the State of Minnesota, without regard to its principles ofconflicts of laws.  In any action betweenthe parties arising out of or relating to this Agreement or any of thetransactions contemplated by this Agreement: (a) each of the parties irrevocably waives the right to trial byjury; and (b) each of the parties irrevocably consents to service ofprocess by first class certified mail, return receipt requested, postageprepaid, to the address at which such party is to receive notice in accordancewith Section 3.5.

3.3           Counterparts;Facsimile.  This Agreement may beexecuted in two or more counterparts, each of which shall be deemed anoriginal, but all of which together shall constitute one and the sameinstrument.  This Agreement may also beexecuted and delivered by facsimile signature and in two or more counterparts,each of which shall be deemed an original, but all of which together shallconstitute one and the same instrument.

3.4           Titlesand Subtitles.  The titles andsubtitles used in this Agreement are for convenience only and are not to beconsidered in construing or interpreting this Agreement.

3.5           Notices.

(a)All notices and other communications hereunder shall be in writing and shall bedeemed given if delivered personally, telecopied (which is confirmed), onebusiness day after being deposited with a nationally recognized overnightcourier, or two business days after being mailed by registered or certifiedmail (return receipt requested) to the parties at the following addresses (orat such other address for a party as shall be specified by like notice):

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| If to EIP:          | with a copy to:                                                                                                                                                                                      |
|---------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|                |                                                                                                                                                                                                 |
|                | Ethanol  Investment Partners, LLC  c/o Ethanol Capital Management, LLC  4400 East Broadway Blvd.  Tucson, Arizona 85711  Attention: Scott Brittenham  Telephone: (520) 628-2000  Fax: (520) 323-9177 |   | Baker, Donelson, Bearman, Caldwell & Berkowitz  211 Commerce Street, Suite 1000  Nashville, Tennessee 37201  Attn: Tonya Mitchem Grindon  Telephone: (615) 726-5607  Fax: (615) 744-5607 |
|                |                                                                                                                                                                                                 |
| If to the  Company: | with a copy to:                                                                                                                                                                                      |
|                |                                                                                                                                                                                                 |
|                | Advanced  BioEnergy, LLC  10201 Wayzata Boulevard, Suite 250  Minneapolis, Minnesota 55305  Attention: President Donald Gales  Fax: (763) 226-2725                                                   |   | Faegre & Benson LLP  2200 Wells Fargo Center  90 South Seventh Street  Minneapolis, Minnesota 55402  Attention: Peter J. Ekberg  Fax: (612) 766-1600 |

 

(b)           If, during the period of time fromand after any permissible assignment under Section 3.1 until the time theCompany receives written notice of the name and address of the Affiliateassignee, the Company provides notice to EIP under this Agreement and inaccordance with this Section 3.5, the notice given to EIP will be deemed tohave been given to the Affiliate assignee.

3.6           Amendments and Waivers.  Any term of this Agreement may be amended andthe observance of any term of this Agreement may be waived (either generally orin a particular instance, and either retroactively or prospectively) only withthe written consent of the Company and the Holders of a majority of theRegistrable Securities; provided, that the Company may in its solediscretion waive compliance with Section 2.11(c) (and the Company’s failure to object promptly inwriting after notification of aproposed assignment allegedly in violation of Section 2.11(c) shall be deemed to be awaiver); and provided further,that any provision hereof may be waived by any waiving party on such party’sown behalf, without the consent of any other party; provided further,however, this Agreement may not be amended or terminated and theobservance of any term hereof may not be waived with respect to any Holderwithout the written consent of such Holder, unless such amendment, termination,or waiver applies to all Holders in the same fashion.  The Company shall give prompt notice of anyamendment or termination hereof or waiver hereunder to any party hereto thatdid not consent in writing to such amendment, termination, or waiver.  Any amendment, termination, or waivereffected in accordance with this Section 3.6 shall be binding on all parties hereto, regardless ofwhether any such party has consented thereto. No waivers of or exceptions to any term, condition, or provision of thisAgreement, in any one or more instances, shall be deemed to be or construed asa further or continuing waiver of any such term, condition, or provision.

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3.7           Severability.  If any provision of this Agreement is held tobe illegal, invalid or unenforceable under any present or future law orregulation, and if the rights or obligations of any party hereto under thisAgreement will not be materially and adversely affected thereby, (a) suchprovision will be fully severable, (b) this Agreement will be construedand enforced as if such illegal, invalid or unenforceable provision had nevercomprised a part hereof, (c) the remaining provisions of this Agreementwill remain in full force and effect and will not be affected by the illegal,invalid or unenforceable provision or by its severance from this Agreement and(d) in lieu of such illegal, invalid or unenforceable provision, therewill be added automatically as a part of this Agreement a legal, valid and enforceableprovision as similar in terms to such illegal, invalid or unenforceableprovision as may be possible.

3.8           Aggregation of Securities.  All shares of Registrable Securities held oracquired by Affiliates of a Holder shall be aggregated together for the purposeof determining the availability of any rights under this Agreement of suchHolder.

3.9           Entire Agreement.  This Agreement, together with the NotePurchase Agreement (including any Schedules and Exhibits hereto and thereto),constitutes the full and entire understanding and agreement among the partieswith respect to the subject matter hereof, and any other written or oralagreement relating to the subject matter hereof existing between the parties isexpressly canceled.

3.10         Delays or Omissions.  No delay or omission to exercise any right,power, or remedy accruing to any party under this Agreement, upon any breach ordefault of any other party under this Agreement, shall impair any such right,power, or remedy of such nonbreaching or nondefaulting party, nor shall it beconstrued to be a waiver of or acquiescence to any such breach or default, orto any similar breach or default thereafter occurring, nor shall any waiver ofany single breach or default be deemed a waiver of any other breach or defaulttheretofore or thereafter occurring.  Allremedies, whether under this Agreement or by law or otherwise afforded to anyparty, shall be cumulative and not alternative.

*****

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TheParties hereto have executed this Agreement on the date first above written.
|            | **ADVANCED BIOENERGY, LLC**          |
|------------|--------------------------------------|
| ** ** | ** **                           |
| ** ** | ** **                           |
|       | /s/ Revis L. Stephenson III          |
|       | Revis L. Stephenson, III             |
|       | Chief Executive Officer              |
|       |                                 |
|       |                                 |
| ** ** | **ETHANOL INVESTMENT PARTNERS, LLC** |
| ** ** | ** **                           |
| ** ** | ** **                           |
|       | /s/ Scott Brittenham                 |
|       | Scott Brittenham                     |
|       | President                            |

 

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