Document:

exv10w12

 

Exhibit 10.12

Employment Agreement

     This Employment Agreement (this “Agreement”) is entered into on April 7, 2006 (the “Effective
Date”) by and between Advanced BioEnergy, LLC, a Delaware limited liability company (the
"Company”), and Revis L. Stephenson III, a resident of Minnesota (“Executive”).

Background

     A. The Company is a development stage company formed for the purpose of raising capital to
develop, construct, own and operate a 100 million gallons per year dry mill corn-based ethanol
plant.

     B. Executive is an experienced business manager.

     C. The Company desires to hire Executive as its employee, and Executive desires to be employed
by the Company, subject to the terms and conditions set forth in this Agreement.

     D. Prior to the date hereof, Executive has been providing services to the Company as an
independent contractor pursuant to that certain Project Development Fee Agreement effective as of
May 19, 2005 (the “Project Development Fee Agreement”).

     E. The Company wishes to engage Executive to serve as the Chairman and Chief Executive Officer
of the Company pursuant to the terms of this Agreement, which will expand Executive’s duties with
the Company beyond those contemplated by the Project Development Fee Agreement.

     F. As partial consideration for entering into this Agreement with Executive, Executive has
agreed to provide the Company with the covenants contained in Sections 5, 6, 7 and 8 of this
Agreement.

     G. In consideration of the foregoing premises and the respective agreements of the Company and
Executive set forth below, the Company and Executive, intending to be legally bound, agree as
follows:

Agreement

	1.	 	Employment. Effective as of the Effective Date, the Company will employ Executive,
and Executive will accept such employment and perform services for the Company, upon the terms
and conditions set forth in this Agreement.

	2.	 	Term of Employment. Unless terminated at an earlier date in accordance with Section
9, the term of Executive’s employment with the Company will be for the period commencing
on the Effective Date and ending on the third anniversary of the Effective 

 

 

	 	 	Date. Thereafter, unless terminated at an earlier date in accordance with Section 9, the term of
Executive’s employment with the Company will be automatically extended for successive one
year periods, unless either party gives written notice to the other party at least 180 days
prior to the expiration of such term that such party elects not to extend the term of
Executive’s employment under this Agreement.

	3.	 	Position and Duties.

	 	(a)	 	Employment with the Company. Commencing on the Effective Date and
continuing for the duration of the term of Executive’s employment with the Company
hereunder, Executive shall be appointed as the Chairman and Chief Executive Officer of
the Company and shall have the authority, duties and responsibilities commensurate and
consistent with such position and title. As Chairman and Chief Executive Officer,
Executive shall be the most senior executive officer of the Company and will, subject
to the supervision of the Board of Directors of the Company (the “Board”), have
discretion and authority to manage and direct the day-to-day affairs and operations of
the Company, to direct the strategic direction of the Company, and to hire and
terminate the employment of employees of the Company. Executive will report to the
Board and perform such other duties and responsibilities as the Board shall assign to
him from time to time consistent with his position. All staff and other functions and
all operations of the Company will report directly or indirectly (through a subordinate
of Executive who reports directly or indirectly to Executive) to Executive, unless the
Board concludes in good faith that a direct reporting relationship to the Board with
respect to any staff or function is required by applicable law or written policies of
the Company, or is reasonably necessary to fulfill its fiduciary obligations to the
Company. If the Chair of the Board is at any time serving as an employee of the
Company then such person will be Executive and no other person. Executive’s employment
hereunder will be based at the Company’s corporate headquarters, to be located within
50 miles of Minneapolis, Minnesota.
	 
	 	(b)	 	Board of Directors. While Executive is employed by the Company
hereunder, the Board will nominate Executive to the Board and upon election by the
Company’s members Executive will serve on the Board, without compensation other than
that specified in this Agreement.
	 
	 	(c)	 	Performance of Duties and Responsibilities. Executive will serve the
Company faithfully and to the best of his ability and will devote his full working
time, attention and efforts to the business of the Company during his employment with
the Company. Executive hereby represents and confirms that he is under no contractual
or legal commitments that would prevent him from fulfilling his duties
and responsibilities as set forth in this Agreement. During his employment

 

 

	 	 	 	with the
Company, Executive may participate in charitable activities and personal investment
activities to a reasonable extent, and he may serve as a director of business and
civic organizations as approved by the Board, so long as such activities and
directorships do not interfere with the performance of his duties and
responsibilities hereunder. Executive may participate in other business activities
that do not otherwise interfere with his duties under this Agreement with the prior
consent of the Board.

	4.	 	Compensation.

	 	(a)	 	Base Salary. While Executive is employed by the Company hereunder, the
Company will pay to Executive an annual base salary of $300,000, which base salary
shall be paid in accordance with the Company’s normal payroll policies and procedures.
During each year after the first year of Executive’s employment hereunder, the Board or
the Compensation Committee of the Board (the “Committee”) will conduct an annual
performance review of Executive and thereafter establish Executive’s base salary in an
amount not less than the base salary in effect for the prior year.
	 
	 	(b)	 	Annual Performance Bonus. For each full or partial fiscal year
Executive is employed by the Company hereunder, Executive shall be eligible for a
performance bonus. Through fiscal year 2007, such bonus shall be in an amount up to
$50,000, and will be based on achievement of certain criteria and milestones
established by, and in the sole discretion of, the Committee. Commencing with fiscal
year 2008, Executive’s annual cash bonus shall be up to 25% of Executive’s annual base
salary for such fiscal year, and will be based upon achievement of certain
profitability and operational efficiencies relative to the industry and such other
criteria that the Committee may, from time to time, determine in its sole discretion.
Achievement by Executive of the objectives for each fiscal year will be determined in
good faith by the Committee in its sole discretion within 60 days after the end of the
fiscal year; and the annual operational performance bonus will be paid in a lump sum
promptly following such determination.
	 
	 	(c)	 	Strategic Bonus. For each additional ethanol production or
co-production facility acquired or built by the Company in addition to the Company’s
currently proposed facility located near Fairmont, Nebraska, the Company will grant to
Executive or, at Executive’s direction, an entity owned or controlled by Executive, the
right to be issued one newly issued Unit (as defined in the Operating Agreement of the
Company) of the Company per 1,000 gallon ethanol production capacity acquired. This
Section 4(c) will expire on the earlier to occur of the third anniversary of the
Effective Date or the addition of 300 million gallons of ethanol production
capacity. Upon such expiration, the Company and Executive agree to negotiate, in
good faith, new terms for a “strategic bonus” for

 

 

	 	 	 	Executive that are commensurate
with the strategic goals of the Company, the industry that the Company is in, value
added by Executive, the financial position of the Company at the time, and such
other terms and considerations that the Board determines are relevant. The complete
terms and conditions of such Units will be as set forth in a restricted unit
agreement to be prepared and entered into between the Company and Executive and
approved by the Board (the “Restricted Unit Agreement”), but will include, among
other things, a requirement that Executive agree to be bound by the terms and
restrictions contained in the Operating Agreement of the Company and that such Units
would only be granted in an amount equal to 50% of the total to be issued upon
certification of operations relating to such additional production capacity, 25% on
the first anniversary of such additional capacity and the balance on the second
anniversary of such additional capacity, with termination of Executive’s employment
resulting in forfeiture of any right to receive such Units which remain unissued.
The terms of the Restricted Unit Agreement governing such Units will control over
this Section 4(c). The parties will cooperate in good faith to finalize and enter
into a Restricted Unit Agreement in an expeditious manner.
	 
	 	(d)	 	Employee Benefits. While Executive is employed by the Company
hereunder, Executive will be entitled to participate in all employee benefit plans and
programs of the Company, including without limitation, a 401(k) plan, and medical,
life, and disability insurance plans, to the extent that Executive meets the
eligibility requirements for each individual plan or program as generally applicable to
other executive officers of the Company; provided, however, that except as herein
otherwise provided the Company provides no assurance as to the adoption or continuance
of any particular employee benefit plan or program and Executive’s participation in any
such plan or program is subject to the provisions, rules and regulations applicable
thereto consistent with the provisions, rules and regulations generally applicable to
other executive officers of the Company. The Executive understands that elective
deferrals made by executives under a 401(k) plan may be limited as necessary to satisfy
certain non-discrimination rules that apply to such plans under the Internal Revenue
Code of 1986, as amended (the “Code”). However, unless the Company determines that it
is not commercially reasonable to do so, the Company will adopt a “safe-harbor”
matching contribution formula under the 401(k) plan that will allow the 401(k) plan to
automatically comply with such non-discrimination rules. If the Company determines
that it is not commercially reasonable to adopt such a matching contribution formula,
the Company will establish a nonqualified deferred compensation plan that will allow
the Executive to approximate on a nonqualified basis the deferrals that cannot be
made under the 401(k) due to non-discrimination rules, in a manner consistent with
Section 409A of the Code.

 

 

	 	(e)	 	Automobile Allowance. While Executive is employed by the Company
hereunder, the Company shall provide to Executive the use of an automobile leased by
the Company and classified as “E85” and will reimburse Executive for all of the costs
he incurs in using that automobile for business or personal purposes, including without
limitation the costs of insuring, maintaining and operating the automobile.
	 
	 	(f)	 	Expenses. While Executive is employed by the Company hereunder, the
Company will reimburse Executive for all reasonable and necessary out-of-pocket
business, travel and entertainment expenses incurred by him in the performance of his
duties and responsibilities hereunder, subject to the Company’s normal policies and
procedures for expense verification and documentation.
	 
	 	(g)	 	Tax Planning. While Executive is employed by the Company hereunder,
the Company will reimburse Executive for reasonable fees and expenses of annual tax
return preparation and planning by an independent public accounting firm, subject to
the Company’s normal policies and procedures for verification and documentation.
	 
	 	(h)	 	Vacation. While Executive is employed by the Company hereunder,
Executive shall be entitled to paid vacation time off in accordance with the normal
policies of the Company, but not less than four weeks vacation per year.

	5.	 	Confidential Information. Except as permitted by the Company’s Board or Company
policies approved by the Board, during the term of Executive’s employment with the Company and
at all times thereafter, Executive will not divulge, furnish or make accessible to anyone or
use in any way other than in the ordinary course of the business of the Company, any
confidential, proprietary or secret knowledge or information of the Company that Executive has
acquired or shall acquire during his employment with the Company, whether developed by himself
or by others, concerning (i) any trade secrets, (ii) any confidential, proprietary or secret
designs, processes, formulae, plans, devices or material (whether or not patented or
patentable) directly or indirectly useful in any aspect of the business of the Company, (iii)
any customer or supplier lists of the Company, (iv) any confidential, proprietary or secret
development or research work of the Company, (v) any strategic or other business, marketing or
sales plans of the Company, (vi) any financial data or plans respecting the Company, or (vii)
any other confidential or proprietary information or secret aspects of the business of the
Company. Executive acknowledges that the above-described knowledge and information
constitutes a unique and valuable asset of the Company and represents a substantial investment
of time and expense by the Company, and that any disclosure or other use of such knowledge or
information other than for the sole benefit of the Company would be wrongful and would cause irreparable harm
to the Company. During the term of Executive’s employment with the Company, Executive shall
refrain from any acts or omissions that would reduce

 

 

	 	 	the value of such knowledge or
information to the Company. The foregoing obligations of confidentiality shall not apply to
any knowledge or information that (i) is now or subsequently becomes generally publicly
known in the form in which it was obtained from the Company, other than as a direct or
indirect result of the breach of this Agreement by Executive, (ii) is independently made
available to Executive in good faith by a third party who has not violated a confidential
relationship with the Company, or (iii) is required to be disclosed by legal process.

	6.	 	Ventures. If, during the term of Executive’s employment with the Company, Executive
is engaged in or associated with the planning or implementing of any project, program or
venture involving the Company and a third party or parties, all rights in such project,
program or venture shall belong to the Company. Except as approved in writing by the Board,
Executive shall not be entitled to any interest in any such project, program or venture or to
any commission, finder’s fee or other compensation in connection therewith, other than the
compensation to be paid to Executive by the Company as provided herein, and except for any
entity owned or controlled by Executive, the primary purpose of which is to hold Executive’s
ownership interests in the Company. Executive shall have no interest, direct or indirect, in
any customer or supplier that conducts business with the Company, unless such interest has
been disclosed in writing to and approved by the Board before such customer or supplier seeks
to do business with the Company.

	7.	 	Noncompetition Covenant.

	 	(a)	 	Agreement Not to Compete. During the term of Executive’s employment
with the Company and for the Restrictive Period (as defined below) following the date
of the termination of such employment, whether such termination is with or without
Cause (as defined below), or whether such termination is at the instance of Executive
or the Company, Executive shall not, directly or indirectly, within 60 miles of any
existing Company facility or development site that the Company or any of its affiliates
operates or contemplates operating during the 12 months prior to the last day of
Executive’s employment, own, manage, control, have any interest in, participate in,
lend his name to, act as consultant or advisor to or render services (alone or in
association with any other person, firm, corporation or other business organization)
for:

	 	(1)	 	any other person or entity engaged in an ethanol production or
co-production business; or
	 
	 	(2)	 	any other business in which the Company or any of its
affiliates engages and the gross revenues from which constitute at least 20%
the Company’s or any of its affiliates’ gross revenues.

 

 

	 	 	 	Ownership by Executive, as a passive investment, of less than 1% of the outstanding shares of capital stock of any corporation listed on a national securities exchange
or publicly traded in the over-the-counter market will not constitute a breach of
this Section 7(a). Employment of Executive by a person or entity described in
Sections 7(a)(2) will not constitute a breach of this Section 7(a) if Executive is
employed in a separate and distinct affiliate or business unit (whether or not
separately incorporated) of such business entity, other than the affiliate or
business unit conducting the activities described in this Section 7(a), and
Executive has no direct or indirect management responsibilities for the activities
of the business unit conducting the activities described in this Section 7(a).
“Restrictive Period” will mean: (A) if Executive’s employment hereunder is
terminated for Cause (as defined in Section 10(d)) or by Executive without Good
Reason (as defined in Section 10(f)), 24 consecutive months from the date of
termination of Executive’s employment, and (B) in all other cases, 12 consecutive
months from the date of termination of Executive’s employment hereunder.
	 
	 	(b)	 	Agreement Not to Hire. During the term of Executive’s employment with
the Company and for a period of 12 consecutive months from the date of the termination
of such employment, whether such termination is with or without Cause (as defined
below), or whether such termination is at the instance of Executive or the Company,
Executive shall not, directly or indirectly, hire, engage or solicit any person who is
then an employee of the Company or who was an employee of the Company at the time of
Executive’s termination of employment, in any manner or capacity, including without
limitation as a proprietor, principal, agent, partner, officer, director, employee,
member of any association, consultant or otherwise.
	 
	 	(c)	 	Agreement Not to Solicit. During the term of Executive’s employment
with the Company and for a period of 24 consecutive months from the date of the
termination of such employment, whether such termination is with or without Cause (as
defined below), or whether such termination is at the instance of Executive or the
Company, Executive shall not, directly or indirectly, solicit, request, advise or
induce any current or potential customer, supplier or other business contact of the
Company to cancel, curtail or otherwise change its relationship with the Company, in
any manner or capacity, including without limitation as a proprietor, principal, agent,
partner, officer, director, stockholder, employee, member of any association,
consultant or otherwise. Notwithstanding the foregoing, a solicitation or request by
Executive of any current or potential customer of the Company, for the sale or
marketing of any products or services
competitive with the products and services of the Company, will not alone constitute
a violation of this Section 7(c) unless such solicitation or request is also a
violation of Section 7(a).

 

 

	 	(d)	 	Acknowledgment. Executive hereby acknowledges that the provisions of
this Section 7 are reasonable and necessary to protect the legitimate interests of the
Company and that any violation of this Section 7 by Executive shall cause substantial
and irreparable harm to the Company to such an extent that monetary damages alone would
be an inadequate remedy therefor. Therefore, in the event that Executive violates any
provision of this Section 7, the Company shall be entitled to an injunction, in
addition to all the other remedies it may have, restraining Executive from violating or
continuing to violate such provision.
	 
	 	(e)	 	Blue Pencil Doctrine. If the duration of, the scope of or any business
activity covered by any provision of this Section 7 is in excess of what is valid and
enforceable under applicable law, such provision shall be construed to cover only that
duration, scope or activity that is valid and enforceable. Executive hereby
acknowledges that this Section 7 shall be given the construction which renders its
provisions valid and enforceable to the maximum extent, not exceeding its express
terms, possible under applicable law.

	8.	 	Patents, Copyrights and Related Matters.

	 	(a)	 	Disclosure and Assignment. Executive shall immediately disclose to the
Company any and all improvements and inventions that Executive may conceive and/or
reduce to practice individually or jointly or commonly with others while he is employed
with the Company with respect to (i) any methods, processes or apparatus concerned with
the development, use or production of any type of products, goods or services sold or
used by the Company, and (ii) any type of products, goods or services sold or used by
the Company. Executive also shall immediately assign, transfer and set over to the
Company his entire right, title and interest in and to any and all of such inventions
as are specified in this Section 8(a), and in and to any and all applications for
letters patent that may be filed on such inventions, and in and to any and all letters
patent that may issue, or be issued, upon such applications. In connection therewith
and for no additional compensation therefor, but at no expense to Executive, Executive
shall sign any and all instruments deemed necessary by the Company for:

	 	(1)	 	the filing and prosecution of any applications for letters
patent of the United States or of any foreign country that the Company may
desire to file upon such inventions as are specified in this Section 8(a);
	 
	 	(2)	 	the filing and prosecution of any divisional, continuation,
continuation-in-part or reissue applications that the Company may desire to
file upon such applications for letters patent; and

 

 

	 	(3)	 	the reviving, re-examining or renewing of any of such
applications for letters patent.

	 	 	 	This Section 8(a) shall not apply to any invention for which no equipment, supplies,
facilities, confidential, proprietary or secret knowledge or information, or other
trade secret information of the Company was used and that was developed entirely on
Executive’s own time, and (i) that does not relate (A) directly to the business of
the Company, or (B) to the Company’s actual or demonstrably anticipated research or
development, or (ii) that does not result from any work performed by Executive for
the Company.
	 
	 	(b)	 	Copyrightable Material. All right, title and interest in all
copyrightable material that Executive shall conceive or originate individually or
jointly or commonly with others, and that arise during the term of his employment with
the Company and out of the performance of his duties and responsibilities under this
Agreement, shall be the property of the Company and are hereby assigned by Executive to
the Company, along with ownership of any and all copyrights in the copyrightable
material. Upon request and without further compensation therefor, but at no expense to
Executive, Executive shall execute any and all papers and perform all other acts
necessary to assist the Company to obtain and register copyrights on such materials in
any and all countries. Where applicable, works of authorship created by Executive for
the Company in performing his duties and responsibilities hereunder shall be considered
“works made for hire,” as defined in the U.S. Copyright Act.
	 
	 	(c)	 	Know-How and Trade Secrets. All know-how and trade secret information
conceived or originated by Executive that arises during the term of his employment with
the Company and out of the performance of his duties and responsibilities hereunder or
any related material or information shall be the property of the Company, and all
rights therein are hereby assigned by Executive to the Company.

	9.	 	Termination of Employment.

	 	(a)	 	The Executive’s employment with the Company shall terminate immediately upon:

	 	(1)	 	Executive’s receipt of written notice from the Company of the
termination of his employment, or expiration of the term of this Agreement as
described in Section 2;

 

 

	 	(2)	 	Executive’s abandonment of his employment or his resignation,
other than notice to the Company that he elects not to extend the term of this
Agreement;
	 
	 	(3)	 	Executive’s Disability (as defined below);
	 
	 	(4)	 	Executive’s death; or
	 
	 	(5)	 	the expiration of the term of Executive’s employment with the
Company, following written notice by either party as specified in Section 2
hereof.

	 	(b)	 	At any time prior to the closing of the equity financing being undertaken by
the Company as of the Effective Date, the Company may terminate this Agreement if the
Board determines that the commencement of ethanol sale and manufacturing operations
consistent with the Company’s intentions as set forth in its recently filed
Registration Statement on Form SB-2 has become implausible or is not reasonably likely
to occur on a basis consistent with prior disclosure made by the Company.
	 
	 	(c)	 	The date upon which Executive’s termination of employment with the Company
occurs shall be the “Termination Date.”

	10.	 	Payments upon Termination of Employment.

	 	(a)	 	If Executive’s employment with the Company is terminated by the Company for any
reason other than for Cause (as defined below), by Executive as a result of his
resignation for Good Reason (as defined below), or upon the expiration of the term of
Executive’s employment with the Company following the delivery of written notice by the
Company as specified in Section 2 (except in cases where the Committee determines that
Executive is not entitled to receive any material portion of the maximum annual
performance bonus for which Executive is eligible under Section 4(b) for the final year
of the term hereunder), then Executive shall receive the following severance pay and
benefits, subject to the requirements of Section 10(j) below:

	 	(1)	 	The Company shall pay to Executive as severance pay an amount
equal to (1) two times Executive’s annual base salary at the highest rate of
base salary in effect at any time in the one-year period preceding the
Termination Date, plus (2) (A) if the Termination Date occurs in connection
with or after a Change in Control, two times the target annual operational
performance bonus determined from such annual base salary pursuant to Section
4(b), or (B) if the Termination Date does not occur in
connection with or after a Change in Control, one times the target annual

 

 

	 	 	 	operational performance bonus determined from such annual base salary
pursuant to Section 4(b). Such severance pay shall be paid to Executive by
the Company in a lump sum as soon as reasonably practicable following
expiration of all applicable rescission periods provided by law.

	 	(2)	 	The Company shall continue to provide to Executive and his
dependents (as applicable) for a period of 24 consecutive months after the
Termination Date, health, dental and life insurance benefits to the extent that
such benefits were in effect as of the Termination Date, but not less than the
health, dental and life insurance benefits offered to other actively employed
executive officers of the Company and their dependents. Benefit continuation
under this Section 10(a) shall be concurrent with any coverage under the
Company’s plans pursuant to COBRA or similar laws. In the event that
Executive’s participation in such plans is not possible under any of the
applicable plans and laws as then in effect, the Company will purchase coverage
comparable to the coverage provided under the plans provided by the Company,
and Executive will cooperate with the Company to obtain the most favorable rate
for comparable coverage for Executive.
	 
	 	(3)	 	The Company shall pay to Executive a pro rata portion of any
annual incentive bonus that would have been payable to him pursuant to Section
4(b) for the fiscal year in which the Termination Date occurs, as if Executive
had been in the employ of the Company for the full fiscal year based on actual
Company performance for such fiscal year. The pro rata payment shall be equal
to the actual annual incentive bonus as described in the previous sentence
multiplied by a fraction, the numerator of which is the number of days of
Executive’s employment in such fiscal year and the denominator of which is 365.
Such payment shall be made in the same manner and at the same time that annual
incentive bonus payments are made to current executive officers of the Company,
but no earlier than the expiration of all applicable rescission periods
provided by law.
	 
	 	(4)	 	The Company shall provide to Executive all other applicable
post-termination benefits under benefit plans and programs then applicable to
Executive in accordance with the terms of such plans and programs, including
but not limited to any Restricted Unit Agreement.

	 	 	 	In addition, the Company shall be entitled to cease providing health, dental or life
insurance benefits to Executive after the Termination Date if Executive becomes
eligible for group health, dental or life insurance coverage (as applicable) from
any other employer. For purposes of mitigation and reduction of the Company’s
financial obligations to Executive under this Section 10(a), Executive shall

 

 

	 	 	 	promptly and fully disclose to the Company in writing the fact that he has become
eligible for comparable group health, dental or life insurance coverage from any
other employer, and Executive shall be liable to repay any amounts to the Company
that should have been so mitigated or reduced but for Executive’s failure or
unwillingness to make such disclosure.
	 
	 	(b)	 	If Executive’s employment with the Company is terminated by reason of
Executive’s abandonment of his employment or Executive’s resignation for any reason
other than Good Reason (as defined below), termination of Executive’s employment by the
Company pursuant to Section 9(b), termination of Executive’s employment by the Company
for Cause (as defined below), the expiration of the term of Executive’s employment with
the Company following the delivery of written notice by Executive as specified in
Section 2, or the expiration of the term of Executive’s employment with the Company
following delivery of written notice by the Company as specified in Section 2 along
with the written determination of the Committee that Executive is not entitled to
receive any material portion of the maximum annual performance bonus for which
Executive is eligible under Section 4(b) for the final year of the term hereunder, the
Company shall pay to Executive or his beneficiary or his estate, as the case may be,
his base salary through the Termination Date, and the Company shall provide to
Executive all applicable post-termination benefits under benefit plans and programs
then applicable to Executive in accordance with the terms of such plans and programs.
	 
	 	(c)	 	If Executive’s employment with the Company is terminated by reason of
Executive’s death or Disability (as defined below), subject to the requirements of
Section 10(j) below, the Company shall:

	 	(1)	 	pay to Executive a pro rata portion of the target operational
performance bonus that would have been payable to him pursuant to Section 4(b)
for the fiscal year in which the Termination Date occurs. The pro rata payment
shall be equal to such target operational performance bonus multiplied by a
fraction, the numerator of which is the number of days of Executive’s
employment in such fiscal year and the denominator of which is 365. Such
payment shall be paid to Executive by the Company in a lump sum as soon as
reasonably practicable following expiration of all applicable rescission
periods provided by law; and
	 
	 	(2)	 	provide to Executive all other applicable post-termination
benefits under benefit plans and programs then applicable to Executive in
accordance with the terms of such plans and programs.

 

 

	 	(d)	 	"Cause” hereunder shall mean:

	 	(1)	 	an act or acts of dishonesty undertaken by Executive and
intended to result in substantial gain or personal enrichment of Executive at
the expense of the Company;
	 
	 	(2)	 	unlawful conduct or gross misconduct that is willful and
deliberate on Executive’s part and that, in either event, is materially
injurious to the Company;
	 
	 	(3)	 	the conviction of Executive of, or his entry of a no contest or
nolo contendre plea to, a felony;
	 
	 	(4)	 	willful and deliberate breach by Executive of his fiduciary
obligations as an officer or director of the Company;
	 
	 	(5)	 	a persistent failure by the Executive to perform the duties and
responsibilities of his employment hereunder, which failure is willful and
deliberate on the Executive’s part and is not remedied by him within 30 days
after the Executive’s receipt of written notice from the Company of such
failure; or
	 
	 	(6)	 	material breach of any terms and conditions of this Agreement
by Executive, which breach has not been cured by Executive within ten days
after written notice thereof to Executive from the Company.

	 	 	 	For the purposes of this Section 10(d), no act or failure to act on Executive’s part
shall be considered “dishonest,” “willful” or “deliberate” unless done or omitted to
be done by Executive in bad faith and without reasonable belief that Executive’s
action or omission was in the best interests of the Company. Any act, or failure to
act, based upon authority given pursuant to a resolution duly adopted by the Board
of Directors of the Company shall be conclusively presumed to be done, or omitted to
be done, by Executive in good faith and in the best interests of the Company.
	 
	 	(e)	 	Executive’s employment may not be terminated for Cause unless:

	 	(1)	 	no fewer than 30 days prior to the Termination Date, the
Company provides Executive with written notice (the “Notice of Consideration”)
of its intent to consider the termination of Executive’s employment for Cause,
including a reasonably detailed description of the specific reasons which form
the basis for such consideration;

 

 

	 	(2)	 	on a date not less than fourteen days after the date Executive
receives the Notice of Consideration, Executive shall have the opportunity to
appear before the Board, with or without legal representation, at Executive’s
election, to present arguments and evidence on his own behalf; and
	 
	 	(3)	 	following the presentation to the Board, as provided in clause
(ii) above or Executive’s failure to appear before the Board at a date and time
specified in the Notice of Consideration (which date shall not be less than
fourteen days after the date the Notice of Consideration is provided),
Executive may be terminated for Cause if, but only if (A) the Board by the
affirmative vote of a majority of its members (excluding Executive as a member
of the Board) determines that Cause exists and that Executive’s employment
should accordingly be terminated for Cause. The termination for Cause shall
not be based upon any reason or reasons other than one or more reasons set
forth in the Notice of Consideration.

	 	 	 	In the event of any dispute between the Company and Executive as to whether Cause
existed for termination of Executive’s employment, the applicable tribunal in any
arbitration or litigation shall not give any deference to the determination by the
Company of basis for such decision, but will itself determine de novo whether Cause
existed.
	 
	 	(f)	 	"Good Reason” hereunder shall mean the occurrence of any one of the following
events:

	 	(1)	 	any material breach of any material terms and conditions of
this Agreement by the Company not caused by Executive, which breach has not
been cured by the Company within 30 days after receipt of written notice to the
Company from Executive specifying with reasonable detail the reasons that
Executive believes a material breach has occurred, including any of the
following occurrences which shall be deemed to be a material breach by the
Company if not so cured:

	 	(A)	 	failure to pay when due Executive’s base salary
or bonus in accordance with Sections 4(a) or 4(b);
	 
	 	(B)	 	any material adverse change in Executive’s
position, title, or responsibilities; and
	 
	 	(C)	 	any person, other than Executive, serves as
Chair of the Board, while such person is an employee of the Company;

 

 

	 	(2)	 	any failure to nominate or elect Executive to serve as Chief
Executive Officer of the Company and as a member of the Board while employed
hereunder;
	 
	 	(3)	 	the Company becomes a direct or indirect subsidiary of any
other business entity through direct or indirect ownership of more than fifty
percent (50%) of the voting securities of the Company by such business entity
(a “Parent”), and Executive is not Chief Executive Officer, a member of the
Board of Directors, and most senior executive of, the Parent;
	 
	 	(4)	 	the failure of the Company to assign this Agreement to a
successor pursuant to Section 13(k), or failure of such successor to explicitly
assume and agree to be bound by this Agreement;
	 
	 	(5)	 	requiring Executive to be principally based at any office or
location more than 50 miles from Minneapolis, Minnesota (other than for normal
travel in connection with Executive’s performance of responsibilities
hereunder); or
	 
	 	(6)	 	the occurrence of the first Change in Control (as defined
below) to occur during the term of this Agreement, if Executive provides notice
of his intent to terminate his employment hereunder within 180 days after such
Change in Control and, if requested by the Company or its successor, Executive
remains employed with the Company or its successor for a transition period not
to exceed 120 days following the Change in Control.

	 	 	 	Good Reason shall not include any occurrence in this Section 10(f) of which
Executive has consented in writing stating specifically that such occurrence shall
not constitute Good Reason for purposes of this Section 10(f) or of which Executive
had actual knowledge for at least three calendar months.
	 
	 	(g)	 	"Disability” hereunder shall mean the inability of Executive to perform on a
full-time basis the duties and responsibilities of his employment with the Company by
reason of his illness or other physical or mental impairment or condition, as
determined by a physician mutually acceptable to Executive and the Company, if such
inability continues for an uninterrupted period of 180 days or more during any 365-day
period. A period of inability shall be “uninterrupted” unless and until Executive
returns to full-time work for a continuous period of at least 30 days.
	 
	 	(h)	 	"Change in Control” hereunder shall mean (and occur when):

 

 

	 	(1)	 	The acquisition by any individual, entity or group (within the
meaning of Exchange Act Sections 13(d)(3) or 14(d)(2)) of beneficial ownership
(within the meaning of Exchange Act Rule 13d-3) of 30% or more of the
then-outstanding membership interests of the Company (the “Outstanding
Units”); provided, however, that the following acquisitions shall not
constitute a Change in Control:

	 	(A)	 	any acquisition of voting securities of the
Company directly from the Company or by the Company or any of its
wholly owned subsidiaries, unless Executive votes against such action
in his capacity as a member of the Board and terminates his employment
with the Company in connection with consummation of any such
acquisition (including but not limited to a termination pursuant to
Section 10(f)(6) above),
	 
	 	(B)	 	any acquisition of voting securities of the
Company by any employee benefit plan (or related trust) sponsored or
maintained by the Company or any of its subsidiaries, or
	 
	 	(C)	 	any acquisition by any entity with respect to
which, immediately following such acquisition, more than 70% of,
respectively, the then-outstanding shares of voting securities of such
entity is then beneficially owned, directly or indirectly, by all or
substantially all of the individuals and entities who were the
beneficial owners, respectively, of the Outstanding Units immediately
before such acquisition in substantially the same proportions as was
their ownership, immediately before such acquisition, of the
Outstanding Units;

	 	(2)	 	Individuals who, as of the Effective Date, constitute the Board
(the “Incumbent Board”) cease for any reason to constitute at least a majority
of the Board; provided, however, that any individual becoming a director of the
Board after the Effective Date whose election, or nomination for election by
the Company’s shareholders, was approved by a vote of at least a majority of
the directors then comprising the Incumbent Board shall be considered a member
of the Incumbent Board, but excluding, for this purpose, any such individual
whose initial assumption of office occurs as a result of an actual or
threatened election contest
	 
	 	(3)	 	Consummation of a reorganization, merger, consolidation or
statutory exchange of Outstanding Units, unless immediately following such
reorganization, merger, consolidation or exchange, all or substantially all of
the individuals and entities who were the beneficial owners of the

 

 

	 	 	 	outstanding
Units immediately before such reorganization, merger,
consolidation or exchange beneficially own, directly or indirectly, more
than 70% of the then-outstanding voting securities entitled to vote
generally in the election of directors, as the case may be, of the entity
resulting from such reorganization, merger, consolidation or exchange in
substantially the same proportions as was their ownership, immediately
before such reorganization, merger, consolidation or exchange, of the
Outstanding Units;
	 
	 	(4)	 	Consummation of a sale or other disposition of all or
substantially all of the assets of the Company, other than to an entity with
respect to which, immediately following such sale or other disposition, more
than 70% of, respectively, the then-outstanding voting securities of such
entity is then beneficially owned, directly or indirectly, by all or
substantially all of the individuals and entities who were the beneficial
owners of the Outstanding Units immediately before such sale or other
disposition in substantially the same proportion as was their ownership,
immediately before such sale or other disposition; or
	 
	 	(5)	 	Approval by the shareholders of the Company of a complete
liquidation or dissolution of the Company.

	 	 	 	Notwithstanding the above, a Change in Control will not be deemed to occur if the
acquisition of the 30% or greater interest referred to in clause (1) is by a group,
acting in concert, that includes Executive or if at least 30% of the
then-outstanding voting securities of the surviving entity or of any entity
acquiring all or substantially all of the assets of the Company shall be
beneficially owned, directly or indirectly, immediately after a reorganization,
merger, consolidation, statutory share exchange or disposition of assets referred to
in paragraphs (3) or (4) by a group, acting in concert, that includes Executive.
	 
	 	(i)	 	In the event of termination of Executive’s employment, the sole obligations of
the Company shall be its obligation to make the payments called for by Section 10(a),
10(b) or 10(c) hereof, as the case may be, and the Company shall have no other
obligation to Executive or to his beneficiary or his estate, except as otherwise
provided, by law, under the terms of this Agreement or any other applicable agreement
between Executive and the Company, under the terms of any employee benefit plans or
programs then maintained by the Company in which Executive participates, or to provide
continued indemnification or advancement of expenses under the Company’s operating
agreement, applicable law, or any indemnification agreement with Executive.

 

 

	 	(j)	 	Notwithstanding the foregoing provisions of this Section 10, the Company shall
not be obligated to make any payments to Executive under Section 10(a), 10(b), or 10(c)
hereof unless Executive shall have signed a release of claims in favor of the Company
substantially in the form attached as Exhibit A (with such modifications or
additional specifics as may be warranted by changes in applicable law), all applicable
consideration periods and rescission periods provided by law shall have expired and
Executive is in strict compliance with the terms of this Agreement as of the dates of
the payments.

	11.	 	Return of Records and Property. Upon termination of his employment with the Company,
Executive shall promptly deliver to the Company any and all Company records and any and all
Company property in his possession or under his control, including without limitation manuals,
books, blank forms, documents, letters, memoranda, notes, notebooks, reports, printouts,
computer disks, computer tapes, source codes, data, tables or calculations and all copies
thereof, documents that in whole or in part contain any trade secrets or confidential,
proprietary or other secret information of the Company and all copies thereof, and keys,
access cards, access codes, passwords, credit cards, personal computers, telephones and other
electronic equipment belonging to the Company.
	 
	12.	 	Remedies. Executive acknowledges that it would be difficult to fully compensate the
Company for monetary damages resulting from any breach by him of the provisions of Sections 5,
7 and 8 hereof. Accordingly, in the event of any actual or threatened breach of any such
provisions, the Company shall, in addition to any other remedies it may have, be entitled to
injunctive and other equitable relief to enforce such provisions, and such relief may be
granted without the necessity of proving actual monetary damages.
	 
	13.	 	Miscellaneous.

	 	(a)	 	Tax Matters. Executive acknowledges that the Company shall deduct from
any compensation payable to Executive or payable on his behalf under this Agreement all
applicable federal, state, and local income and employment taxes and other taxes and
withholdings required by law.
	 
	 	(b)	 	Company Approvals. The Company represents and warrants to Executive
that it (and to the extent required, the Board, and the Committee) has taken all
corporate action necessary to authorize this Agreement.
	 
	 	(c)	 	No Mitigation. In no event shall Executive be obligated to seek other
employment or take any other action to mitigate the amounts payable to Executive under
any of the provisions of this Agreement, nor shall the amount of any payment hereunder
be reduced by any compensation earned as a result of

 

 

	 	 	 	Executive’s employment by
another employer, except that any continued welfare benefits may be reduced as
provided for by Section 10(a).
	 
	 	(d)	 	Beneficiary. If Executive dies before receiving all of the amounts
payable to him in accordance with the terms and conditions of this Agreement, such
amounts shall be paid to the beneficiary (“Beneficiary”) designated by Executive in
writing to the Company during his lifetime, or if no such Beneficiary is designated, to
Executive’s estate. Executive may change his designation of Beneficiary or
Beneficiaries at any time or from time to time without the consent of any prior
Beneficiary, by submitting to the Company in writing a new designation of Beneficiary.
	 
	 	(e)	 	Governing Law. All matters relating to the interpretation,
construction, application, validity and enforcement of this Agreement shall be governed
by the laws of the State of Minnesota without giving effect to any choice or conflict
of law provision or rule, whether of the State of Minnesota or any other jurisdiction,
that would cause the application of laws of any jurisdiction other than the State of
Minnesota.
	 
	 	(f)	 	Arbitration. Executive and Company agree to submit any and all
disputes concerning the terms of this Agreement or any other terms and conditions of
Executive’s employment, with the exception of an action for injunctive relief under
Sections 5, 7 or 8 of this Agreement, to final and binding arbitration. The
arbitration will be conducted in Minneapolis, Minnesota in accordance with the
procedural rules of the American Arbitration Association. The arbitrator may order any
legal and equitable remedies, including backpay and/or reimbursement, but will have no
authority to alter, modify or amend the terms of this Agreement or to award punitive
damages.
	 
	 	(g)	 	Jurisdiction; Venue. Executive and the Company consent to jurisdiction
of the courts of the State of Minnesota and/or the federal district courts, District of
Minnesota, for the purpose of enforcing the decision of an arbitrator in connection
with the resolution of any dispute under this Agreement.. In connection therewith,
each party consents to personal jurisdiction over such party in the state and/or
federal courts of Minnesota and to venue for the purpose of such decisions in Hennepin
County, State of Minnesota, and hereby waives any defense of lack of personal
jurisdiction or forum non conveniens.
	 
	 	(h)	 	Entire Agreement. This Agreement, together with the exhibits, contains
the entire agreement of the parties relating to the subject matter of this Agreement
and supersedes all prior agreements and understandings with respect to such subject
matter (other than the Project Development Fee Agreement), and the parties

 

 

	 	 	 	hereto
have made no agreements, representations or warranties relating to the subject
matter of this Agreement that are not set forth herein (other than the Project
Development Fee Agreement).
	 
	 	(i)	 	Amendments. No amendment or modification of this Agreement shall be
deemed effective unless made in writing and signed by the parties hereto.
	 
	 	(j)	 	No Waiver. No term or condition of this Agreement shall be deemed to
have been waived, except by a statement in writing signed by the party against whom
enforcement of the waiver is sought. Any written waiver shall not be deemed a
continuing waiver unless specifically stated, shall operate only as to the specific
term or condition waived and shall not constitute a waiver of such term or condition
for the future or as to any act other than that specifically waived.
	 
	 	(k)	 	Assignment. This Agreement shall not be assignable, in whole or in
party, by either party without the written consent of the other party, except that the
Company may, without the written consent of Executive, assign its rights and
obligations under this Agreement to any corporation or other business entity (i) with
which the Company may merge or consolidate, (ii) to which the Company may sell or
transfer all or substantially all of its assets or membership interests, or (iii) of
which 50% or more of the voting control is owned, directly or indirectly, by the
Company. No such assignment without the written consent of Executive shall discharge
the Company from liability hereunder, and such assignee jointly and severally with the
Company shall thereafter be deemed to be the “Company” for purposes of all terms and
conditions of this Agreement, including this Section 13.
	 
	 	(l)	 	Separate Representation. Executive hereby acknowledges that he has
sought and received independent advice from counsel of Executive’s own selection in
connection with this Agreement and has not relied to any extent on any director,
officer, or stockholder of, or counsel to, the Company in deciding to enter into this
Agreement. The Company shall promptly reimburse Executive for reasonable attorneys’
fees and costs incurred by Executive in obtaining legal advice in connection with the
negotiation and execution of this Agreement and the restricted unit agreement
contemplated by Section 4(c) hereof, upon receipt by the Company of appropriate
documentation of such fees and costs.
	 
	 	(m)	 	Notices. Any notice hereunder shall be in writing and shall be deemed
to have been duly given if delivered by hand, sent by reliable next-day courier, or
sent by registered or certified mail, return receipt requested, postage prepaid, to the
party to receive such notice addressed as follows:
	 
	 	 	 	If to the Company:

 

 

Advanced BioEnergy, LLC

137 N 8th

PO Box 424

Geneva, NE 68361

Attention: Chair of Compensation Committee

If to Executive:

Revis L. Stephenson III

1850 Fox Ridge Road

Orono, MN 55356

	 	 	 	Or addressed to such other address as may have been furnished to the sender by
notice hereunder. All notices shall be deemed given on the date on which delivered
if delivered by hand or on the date sent if sent by overnight courier or certified
mail, except that notice of change of address will be effective only upon receipt by
the other party.
	 
	 	(n)	 	Counterparts. This Agreement may be executed in any number of
counterparts, and such counterparts executed and delivered, each as an original, shall
constitute but one and the same instrument.
	 
	 	(o)	 	Severability. Subject to Section 7(e) hereof, to the extent that any
portion of any provision of this Agreement shall be invalid or unenforceable, it shall
be considered deleted herefrom and the remainder of such provision and of this
Agreement shall be unaffected and shall continue in full force and effect.
	 
	 	(p)	 	Captions and Headings. The captions and paragraph headings used in
this Agreement are for convenience of reference only and shall not affect the
construction or interpretation of this Agreement or any of the provisions hereof.

          IN WITNESS WHEREOF, Executive and the Company have executed this Agreement as of the date set
forth in the first paragraph.

	 	 	 	 	 
	 	ADVANCED BIOENERGY, LLC

 	 
	 	By        /s/ Robert Holmes
 	 
	 	Its      Director/Treasurer 	 
	 	 	 
	 
	 	 	 
	 	                               /s/ Revis L. Stephenson III
 	 
	 	Revis L. Stephenson IIIexv10w13

 

[Advanced
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Exhibit 10.13

Employment Agreement

     This Employment Agreement (this “Agreement”) is entered into on April 7, 2006 (the “Effective
Date”) by and between Advanced BioEnergy, LLC, a Delaware limited liability company (the
“Company”), and Don Gales, a resident of Kansas (“Executive”).

Background

     A. The Company is a development stage company formed for the purpose of raising capital to
develop, construct, own and operate a 100 million gallons per year dry mill corn-based ethanol
plant.

     B. Executive is an experienced business manager.

     C. The Company desires to hire Executive as its employee, and Executive desires to be employed
by the Company, subject to the terms and conditions set forth in this Agreement.

     D. In consideration of the foregoing premises and the respective agreements of the Company and
Executive set forth below, the Company and Executive, intending to be legally bound, agree as
follows:

Agreement

	1.	 	Employment. Effective as of the Effective Date, the Company will employ Executive,
and Executive will accept such employment and perform services for the Company, upon the terms
and conditions set forth in this Agreement.
	 
	2.	 	Term of Employment. Unless terminated at an earlier date in accordance with Section
9, the term of Executive’s employment with the Company will be for the period commencing on
the Effective Date and ending on the third anniversary of the Effective Date. Thereafter,
unless terminated at an earlier date in accordance with Section 9, the term of Executive’s
employment with the Company will be automatically extended for successive one year periods,
unless either party gives written notice to the other party at least 180 days prior to the
expiration of such term that such party elects not to extend the term of Executive’s
employment under this Agreement.
	 
	3.	 	Position and Duties.

	 	(a)	 	Employment with the Company. Commencing on the Effective Date and
continuing for the duration of the term of Executive’s employment with the Company
hereunder, Executive shall be appointed as the President and Chief Operating Officer of
the Company and shall have the authority, duties and responsibilities commensurate and
consistent with such position and title. As

	137 N. 8th Street	P.O. Box 424	Geneva, NE 68361	P: 402.759.3773	TF: 877.651.1166	F: 402.759.3774

 

 

[Advanced
BioEnergy, LLC Logo]

	 	 	 	President and Chief Operating Officer, Executive will be subject to the supervision
of the Chief Executive Officer of the Company, will report to the Chief Executive
Officer of the Company and perform such other duties and responsibilities as the
Chief Executive Officer or the Board of Directors of the Company (the “Board”) shall
assign to him from time to time consistent with his position. Executive’s
employment hereunder will be based at the Company’s corporate headquarters, to be
located within 50 miles of Minneapolis, Minnesota.
	 
	 	(b)	 	Performance of Duties and Responsibilities. Executive will serve the
Company faithfully and to the best of his ability and will devote his full working
time, attention and efforts to the business of the Company during his employment with
the Company. Executive hereby represents and confirms that he is under no contractual
or legal commitments that would prevent him from fulfilling his duties and
responsibilities as set forth in this Agreement. During his employment with the
Company, Executive may participate in charitable activities and personal investment
activities to a reasonable extent, and he may serve as a director of business and civic
organizations as approved by the Board, so long as such activities and directorships do
not interfere with the performance of his duties and responsibilities hereunder.
Executive may participate in other business activities that do not otherwise interfere
with his duties under this Agreement with the prior consent of the Board.

	4.	 	Compensation.

	 	(a)	 	Base Salary. While Executive is employed by the Company hereunder, the
Company will pay to Executive an annual base salary of $250,000, which base salary
shall be paid in accordance with the Company’s normal payroll policies and procedures.
During each year after the first year of Executive’s employment hereunder, the Board or
the Compensation Committee of the Board (the “Committee”) will conduct an annual
performance review of Executive and thereafter establish Executive’s base salary in an
amount not less than the base salary in effect for the prior year.
	 
	 	(b)	 	Annual Performance Bonus. For each full or partial fiscal year
Executive is employed by the Company hereunder, Executive shall be eligible for a
performance bonus. Through fiscal year 2007, such bonus shall be in an amount up to
$50,000, and will be based on achievement of certain criteria and milestones
established by, and in the sole discretion of, the Committee. Commencing with fiscal
year 2008, Executive’s annual cash bonus shall be up to 25% of Executive’s annual base
salary for such fiscal year, and will be based upon achievement of certain
profitability and operational efficiencies relative to the industry and such other
criteria that the Committee may, from time to time, determine in its sole discretion.
Achievement by Executive of the objectives for each fiscal year will

	137 N. 8th Street	P.O. Box 424	Geneva, NE 68361	P: 402.759.3773	TF: 877.651.1166	F: 402.759.3774

 

 

[Advanced
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	 	 	 	be determined in good faith by the Committee in its sole discretion within 60 days
after the end of the fiscal year; and the annual operational performance bonus will
be paid in a lump sum promptly following such determination.
	 
	 	(c)	 	Strategic Bonus. For each additional ethanol production or
co-production facility acquired or built by the Company in addition to the Company’s
currently proposed facility located near Fairmont, Nebraska, the Company will grant to
Executive or, at Executive’s direction, an entity owned or controlled by Executive, the
right to receive 0.15 newly issued Units (as defined in the Operating Agreement of the
Company) of the Company per 1,000 gallon ethanol production capacity acquired. This
Section 4(c) will expire on the earlier to occur of the third anniversary of the
Effective Date or the addition of 300 million gallons of ethanol production capacity.
Upon such expiration, the Company and Executive agree to negotiate, in good faith, new
terms for a “strategic bonus” for Executive that are commensurate with the strategic
goals of the Company, the industry that the Company is in, value added by Executive,
the financial position of the Company at the time, and such other terms and
considerations that the Board determines are relevant. The complete terms and
conditions of such Units will be as set forth in a restricted unit agreement to be
separately prepared and entered into between the Company and Executive and approved by
the Board (the “Restricted Unit Agreement”), but will include, among other things, a
requirement that Executive agree to be bound by the terms and restrictions contained in
the Operating Agreement of the Company and that such Units would only be granted in an
amount equal to 50% of the total to be issued upon certification of operations relating
to such additional production capacity, 25% on the first anniversary of such additional
capacity and the balance on the second anniversary of such additional capacity, with
termination of Executive’s employment resulting in forfeiture of any right to receive
such Units which remain unissued. The terms of the Restricted Unit Agreement governing
such Units will control over this Section 4(c). The parties will cooperate in good
faith to finalize and enter into a Restricted Unit Agreement in an expeditious manner.
	 
	 	(d)	 	Employee Benefits. While Executive is employed by the Company
hereunder, Executive will be entitled to participate in all employee benefit plans and
programs of the Company, including without limitation, a 401(k) plan, and medical,
life, and disability insurance plans, to the extent that Executive meets the
eligibility requirements for each individual plan or program as generally applicable to
other executive officers of the Company; provided, however, that except as herein
otherwise provided the Company provides no assurance as to the adoption or continuance
of any particular employee benefit plan or program and Executive’s participation in any
such plan or program is subject to the provisions, rules and regulations applicable
thereto consistent with the provisions, rules and regulations generally applicable to
other executive officers of the Company. The

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[Advanced
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	 	 	 	Executive understands that elective deferrals made by executives under a 401(k) plan
may be limited as necessary to satisfy certain non-discrimination rules that apply
to such plans under the Internal Revenue Code of 1986, as amended (the “Code”).
However, unless the Company determines that it is not commercially reasonable to do
so, the Company will adopt a “safe-harbor” matching contribution formula under the
401(k) plan that will allow the 401(k) plan to automatically comply with such
non-discrimination rules. If the Company determines that it is not commercially
reasonable to adopt such a matching contribution formula, the Company will establish
a nonqualified deferred compensation plan that will allow the Executive to
approximate on a nonqualified basis the deferrals that cannot be made under the
401(k) due to non-discrimination rules, in a manner consistent with Section 409A of
the Code.
	 
	 	(e)	 	Automobile Allowance. While Executive is employed by the Company
hereunder, the Company shall provide to Executive the use of an automobile leased by
the Company and classified as “E85” and will reimburse Executive for all of the costs
he incurs in using that automobile for business or personal purposes, including without
limitation the costs of insuring, maintaining and operating the automobile.
	 
	 	(f)	 	Relocation. Executive must relocate his principal residence to the
Minneapolis, Minnesota metropolitan area within 180 days following the Effective Date.
The Company will reimburse Executive for up to a maximum of $70,000 for costs incurred
in connection with Executive’s search for a residence in and his move to the
Minneapolis, Minnesota metropolitan area, subject to the following individual
limitations:

	 	(1)	 	costs incurred by Executive in hiring third parties to assist
Executive in physically relocating to the Minneapolis metropolitan area.
	 
	 	(2)	 	costs of incidental expenses incurred by Executive and his
family in connection with relocating to the Minneapolis metropolitan area, up
to $10,000;
	 
	 	(3)	 	closing costs in connection with the sale of Executive’s
primary residence immediately prior to Executive’s relocation to the
Minneapolis metropolitan area, up to $35,000; and
	 
	 	(4)	 	closing costs in connection with the purchase of Executive’s
primary residence in Minnesota in connection with Executive’s relocation to the
Minneapolis metropolitan area, up to $10,000.

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[Advanced
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	 	(g)	 	Signing Bonus. As soon as reasonably practicable after the Effective
Date, the Company will issue to Executive or, at Executive’s direction, an entity owned
or controlled by Executive, as a signing bonus the right to receive 30,000 Units (the
“Signing Bonus Units”). The terms and conditions will be as set forth in a Restricted
Unit Agreement to be separately prepared and entered into between the Company and
Executive and approved by the Board, but will include, among other things, a
requirement that Executive agree to be bound by the terms and restrictions contained in
the Operating Agreement of the Company and that such Units would only be issued in an
amount equal to 6,000 Units on each anniversary of the Effective Date, with termination
of Executive’s employment resulting in forfeiture of the right to receive any such
Units which remain unissued. The terms of the Restricted Unit Agreement governing such
Signing Bonus Units will control over this Section 4(g).
	 
	 	(h)	 	Expenses. While Executive is employed by the Company hereunder, the
Company will reimburse Executive for all reasonable and necessary out-of-pocket
business, travel and entertainment expenses incurred by him in the performance of his
duties and responsibilities hereunder, subject to the Company’s normal policies and
procedures for expense verification and documentation.
	 
	 	(i)	 	Vacation. While Executive is employed by the Company hereunder,
Executive shall be entitled to paid vacation time off in accordance with the normal
policies of the Company, but not less than three weeks vacation per year.

	5.	 	Confidential Information. Except as permitted by the Company’s Board or Company
policies approved by the Board, during the term of Executive’s employment with the Company and
at all times thereafter, Executive will not divulge, furnish or make accessible to anyone or
use in any way other than in the ordinary course of the business of the Company, any
confidential, proprietary or secret knowledge or information of the Company that Executive has
acquired or shall acquire during his employment with the Company, whether developed by himself
or by others, concerning (i) any trade secrets, (ii) any confidential, proprietary or secret
designs, processes, formulae, plans, devices or material (whether or not patented or
patentable) directly or indirectly useful in any aspect of the business of the Company, (iii)
any customer or supplier lists of the Company, (iv) any confidential, proprietary or secret
development or research work of the Company, (v) any strategic or other business, marketing or
sales plans of the Company, (vi) any financial data or plans respecting the Company, or (vii)
any other confidential or proprietary information or secret aspects of the business of the
Company. Executive acknowledges that the above-described knowledge and information
constitutes a unique and valuable asset of the Company and represents a substantial investment
of time and expense by the Company, and that any disclosure or other use of such knowledge or
information other than for the sole benefit of the Company would be wrongful and would cause
irreparable harm to the Company. During the term of Executive’s employment

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	 	 	with the Company, Executive shall refrain from any acts or omissions that would reduce the
value of such knowledge or information to the Company. The foregoing obligations of
confidentiality shall not apply to any knowledge or information that (i) is now or
subsequently becomes generally publicly known in the form in which it was obtained from the
Company, other than as a direct or indirect result of the breach of this Agreement by
Executive, (ii) is independently made available to Executive in good faith by a third party
who has not violated a confidential relationship with the Company, or (iii) is required to
be disclosed by legal process.
	 
	6.	 	Ventures. If, during the term of Executive’s employment with the Company, Executive
is engaged in or associated with the planning or implementing of any project, program or
venture involving the Company and a third party or parties, all rights in such project,
program or venture shall belong to the Company. Except as approved in writing by the Board,
Executive shall not be entitled to any interest in any such project, program or venture or to
any commission, finder’s fee or other compensation in connection therewith, other than the
compensation to be paid to Executive by the Company as provided herein and except for any
entity owned or controlled by Executive the primary purpose of which is to hold Executive’s
ownership interests in the Company. Executive shall have no interest, direct or indirect, in
any customer or supplier that conducts business with the Company, unless such interest has
been disclosed in writing to and approved by the Board before such customer or supplier seeks
to do business with the Company.
	 
	7.	 	Noncompetition Covenant.

	 	(a)	 	Agreement Not to Compete. During the term of Executive’s employment
with the Company and for the Restrictive Period (as defined below) following the date
of the termination of such employment, whether such termination is with or without
Cause (as defined below), or whether such termination is at the instance of Executive
or the Company, Executive shall not, directly or indirectly, within 60 miles of any
existing Company facility or development site that the Company or any of its affiliates
operates or contemplates operating during the 12 months prior to the last day of
Executive’s employment, own, manage, control, have any interest in, participate in,
lend his name to, act as consultant or advisor to or render services (alone or in
association with any other person, firm, corporation or other business organization)
for:

	 	(1)	 	any other person or entity engaged in an ethanol production or
co-production business; or
	 
	 	(2)	 	any other business in which the Company or any of its
affiliates engages and the gross revenues from which constitute at least 20%
the Company’s or any of its affiliates’ gross revenues.

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	 	 	 	Ownership by Executive, as a passive investment, of less than 1% of the outstanding shares of capital stock of any corporation listed on a national securities exchange
or publicly traded in the over-the-counter market will not constitute a breach of
this Section 7(a). Employment of Executive by a person or entity described in
Sections 7(a)(2) will not constitute a breach of this Section 7(a) if Executive is
employed in a separate and distinct affiliate or business unit (whether or not
separately incorporated) of such business entity, other than the affiliate or
business unit conducting the activities described in this Section 7(a), and
Executive has no direct or indirect management responsibilities for the activities
of the business unit conducting the activities described in this Section 7(a).
“Restrictive Period” will mean: (A) if Executive’s employment hereunder is
terminated for Cause (as defined in Section 10(d)) or by Executive without Good
Reason (as defined in Section 10(f)), 24 consecutive months from the date of
termination of Executive’s employment, and (B) in all other cases, 12 consecutive
months from the date of termination of Executive’s employment hereunder.
	 
	 	(b)	 	Agreement Not to Hire. During the term of Executive’s employment with
the Company and for a period of 12 consecutive months from the date of the termination
of such employment, whether such termination is with or without Cause (as defined
below), or whether such termination is at the instance of Executive or the Company,
Executive shall not, directly or indirectly, hire, engage or solicit any person who is
then an employee of the Company or who was an employee of the Company at the time of
Executive’s termination of employment, in any manner or capacity, including without
limitation as a proprietor, principal, agent, partner, officer, director, employee,
member of any association, consultant or otherwise.
	 
	 	(c)	 	Agreement Not to Solicit. During the term of Executive’s employment
with the Company and for a period of 24 consecutive months from the date of the
termination of such employment, whether such termination is with or without Cause (as
defined below), or whether such termination is at the instance of Executive or the
Company, Executive shall not, directly or indirectly, solicit, request, advise or
induce any current or potential customer, supplier or other business contact of the
Company to cancel, curtail or otherwise change its relationship with the Company, in
any manner or capacity, including without limitation as a proprietor, principal, agent,
partner, officer, director, stockholder, employee, member of any association,
consultant or otherwise. Notwithstanding the foregoing, a solicitation or request by
Executive of any current or potential customer of the Company, for the sale or
marketing of any products or services competitive with the products and services of the
Company, will not alone constitute a violation of this Section 7(c) unless such
solicitation or request is also a violation of Section 7(a).

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	 	(d)	 	Acknowledgment. Executive hereby acknowledges that the provisions of
this Section 7 are reasonable and necessary to protect the legitimate interests of the
Company and that any violation of this Section 7 by Executive shall cause substantial
and irreparable harm to the Company to such an extent that monetary damages alone would
be an inadequate remedy therefor. Therefore, in the event that Executive violates any
provision of this Section 7, the Company shall be entitled to an injunction, in
addition to all the other remedies it may have, restraining Executive from violating or
continuing to violate such provision.
	 
	 	(e)	 	Blue Pencil Doctrine. If the duration of, the scope of or any business
activity covered by any provision of this Section 7 is in excess of what is valid and
enforceable under applicable law, such provision shall be construed to cover only that
duration, scope or activity that is valid and enforceable. Executive hereby
acknowledges that this Section 7 shall be given the construction which renders its
provisions valid and enforceable to the maximum extent, not exceeding its express
terms, possible under applicable law.

	8.	 	Patents, Copyrights and Related Matters.

	 	(a)	 	Disclosure and Assignment. Executive shall immediately disclose to the
Company any and all improvements and inventions that Executive may conceive and/or
reduce to practice individually or jointly or commonly with others while he is employed
with the Company with respect to (i) any methods, processes or apparatus concerned with
the development, use or production of any type of products, goods or services sold or
used by the Company, and (ii) any type of products, goods or services sold or used by
the Company. Executive also shall immediately assign, transfer and set over to the
Company his entire right, title and interest in and to any and all of such inventions
as are specified in this Section 8(a), and in and to any and all applications for
letters patent that may be filed on such inventions, and in and to any and all letters
patent that may issue, or be issued, upon such applications. In connection therewith
and for no additional compensation therefor, but at no expense to Executive, Executive
shall sign any and all instruments deemed necessary by the Company for:

	 	(1)	 	the filing and prosecution of any applications for letters
patent of the United States or of any foreign country that the Company may
desire to file upon such inventions as are specified in this Section 8(a);
	 
	 	(2)	 	the filing and prosecution of any divisional, continuation,
continuation-in-part or reissue applications that the Company may desire to
file upon such applications for letters patent; and

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	 	(3)	 	the reviving, re-examining or renewing of any of such
applications for letters patent.

	 	 	 	This Section 8(a) shall not apply to any invention for which no equipment, supplies,
facilities, confidential, proprietary or secret knowledge or information, or other
trade secret information of the Company was used and that was developed entirely on
Executive’s own time, and (i) that does not relate (A) directly to the business of
the Company, or (B) to the Company’s actual or demonstrably anticipated research or
development, or (ii) that does not result from any work performed by Executive for
the Company.
	 
	 	(b)	 	Copyrightable Material. All right, title and interest in all
copyrightable material that Executive shall conceive or originate individually or
jointly or commonly with others, and that arise during the term of his employment with
the Company and out of the performance of his duties and responsibilities under this
Agreement, shall be the property of the Company and are hereby assigned by Executive to
the Company, along with ownership of any and all copyrights in the copyrightable
material. Upon request and without further compensation therefor, but at no expense to
Executive, Executive shall execute any and all papers and perform all other acts
necessary to assist the Company to obtain and register copyrights on such materials in
any and all countries. Where applicable, works of authorship created by Executive for
the Company in performing his duties and responsibilities hereunder shall be considered
“works made for hire,” as defined in the U.S. Copyright Act.
	 
	 	(c)	 	Know-How and Trade Secrets. All know-how and trade secret information
conceived or originated by Executive that arises during the term of his employment with
the Company and out of the performance of his duties and responsibilities hereunder or
any related material or information shall be the property of the Company, and all
rights therein are hereby assigned by Executive to the Company.

	9.	 	Termination of Employment.

	 	(a)	 	The Executive’s employment with the Company shall terminate immediately upon:

	 	(1)	 	Executive’s receipt of written notice from the Company of the
termination of his employment, or expiration of the term of this Agreement as
described in Section 2;

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	 	(2)	 	Executive’s abandonment of his employment or his resignation,
other than notice to the Company that he elects not to extend the term of this
Agreement;
	 
	 	(3)	 	Executive’s Disability (as defined below);
	 
	 	(4)	 	Executive’s death; or
	 
	 	(5)	 	the expiration of the term of Executive’s employment with the
Company, following written notice by either party as specified in Section 2
hereof.

	 	(b)	 	At any time prior to the closing of the equity financing being undertaken by
the Company as of the Effective Date, the Company may terminate this Agreement if the
Board determines that the commencement of ethanol sale and manufacturing operations
consistent with the Company’s intentions as set forth in its recently filed
Registration Statement on Form SB-2 has become implausible or is not reasonably likely
to occur on a basis consistent with prior disclosure made by the Company.
	 
	 	(c)	 	The date upon which Executive’s termination of employment with the Company
occurs shall be the “Termination Date.”

	10.	 	Payments upon Termination of Employment.

	 	(a)	 	If Executive’s employment with the Company is terminated by the Company for any
reason other than for Cause (as defined below), by Executive as a result of his
resignation for Good Reason (as defined below), or upon the expiration of the term of
Executive’s employment with the Company following the delivery of written notice by the
Company as specified in Section 2 (except in cases where the Committee determines that
Executive is not entitled to receive any material portion of the maximum annual
performance bonus for which Executive is eligible under Section 4(b) for the final year
of the term hereunder), then Executive shall receive the following severance pay and
benefits, subject to the requirements of Section 10(j) below:

	 	(1)	 	The Company shall pay to Executive as severance pay an amount
equal to (1) Executive’s annual base salary at the highest rate of base salary
in effect at any time in the one-year period preceding the Termination Date,
plus (2) (A) if the Termination Date occurs in connection with or after a
Change in Control, two times the target annual operational performance bonus
determined from such annual base salary pursuant to Section 4(b), or (B) if the
Termination Date does not occur in connection with or after a Change in
Control, one times the target annual operational performance

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	 	 	 	bonus determined from such annual base salary pursuant to Section 4(b).
Such severance pay shall be paid to Executive by the Company in a lump sum
as soon as reasonably practicable following expiration of all applicable
rescission periods provided by law.
	 
	 	(2)	 	The Company shall continue to provide to Executive and his
dependents (as applicable) for a period of 24 consecutive months after the
Termination Date, health, dental and life insurance benefits to the extent that
such benefits were in effect as of the Termination Date, but not less than the
health, dental and life insurance benefits offered to other actively employed
executive officers of the Company and their dependents. Benefit continuation
under this Section 10(a) shall be concurrent with any coverage under the
Company’s plans pursuant to COBRA or similar laws. In the event that
Executive’s participation in such plans is not possible under any of the
applicable plans and laws as then in effect, the Company will purchase coverage
comparable to the coverage provided under the plans provided by the Company,
and Executive will cooperate with the Company to obtain the most favorable rate
for comparable coverage for Executive.
	 
	 	(3)	 	The Company shall pay to Executive a pro rata portion of any
annual incentive bonus that would have been payable to him pursuant to Section
4(b) for the fiscal year in which the Termination Date occurs, as if Executive
had been in the employ of the Company for the full fiscal year based on actual
Company performance for such fiscal year. The pro rata payment shall be equal
to the actual annual incentive bonus as described in the previous sentence
multiplied by a fraction, the numerator of which is the number of days of
Executive’s employment in such fiscal year and the denominator of which is 365.
Such payment shall be made in the same manner and at the same time that annual
incentive bonus payments are made to current executive officers of the Company,
but no earlier than the expiration of all applicable rescission periods
provided by law.
	 
	 	(4)	 	The Company shall provide to Executive all other applicable
post-termination benefits under benefit plans and programs then applicable to
Executive in accordance with the terms of such plans and programs, including
but not limited to any Restricted Unit Agreement.

	 	 	 	In addition, the Company shall be entitled to cease providing health, dental or life
insurance benefits to Executive after the Termination Date if Executive becomes
eligible for group health, dental or life insurance coverage (as applicable) from
any other employer. For purposes of mitigation and reduction of the Company’s
financial obligations to Executive under this Section 10(a), Executive shall

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	 	 	 	promptly and fully disclose to the Company in writing the fact that he has become
eligible for comparable group health, dental or life insurance coverage from any
other employer, and Executive shall be liable to repay any amounts to the Company
that should have been so mitigated or reduced but for Executive’s failure or
unwillingness to make such disclosure.
	 
	 	(b)	 	If Executive’s employment with the Company is terminated by reason of
Executive’s abandonment of his employment or Executive’s resignation for any reason
other than Good Reason (as defined below), termination of Executive’s employment by the
Company pursuant to Section 9(b), termination of Executive’s employment by the Company
for Cause (as defined below), the expiration of the term of Executive’s employment with
the Company following the delivery of written notice by Executive as specified in
Section 2, or the expiration of the term of Executive’s employment with the Company
following delivery of written notice by the Company as specified in Section 2 along
with the written determination of the Committee that Executive is not entitled to
receive any material portion of the maximum annual performance bonus for which
Executive is eligible under Section 4(b) for the final year of the term hereunder, the
Company shall pay to Executive or his beneficiary or his estate, as the case may be,
his base salary through the Termination Date, and the Company shall provide to
Executive all applicable post-termination benefits under benefit plans and programs
then applicable to Executive in accordance with the terms of such plans and programs.
	 
	 	(c)	 	If Executive’s employment with the Company is terminated by reason of
Executive’s death or Disability (as defined below), subject to the requirements of
Section 10(j) below, the Company shall:

	 	(1)	 	pay to Executive a pro rata portion of the target operational
performance bonus that would have been payable to him pursuant to Section 4(b)
for the fiscal year in which the Termination Date occurs. The pro rata payment
shall be equal to such target operational performance bonus multiplied by a
fraction, the numerator of which is the number of days of Executive’s
employment in such fiscal year and the denominator of which is 365. Such
payment shall be paid to Executive by the Company in a lump sum as soon as
reasonably practicable following expiration of all applicable rescission
periods provided by law; and
	 
	 	(2)	 	provide to Executive all other applicable post-termination
benefits under benefit plans and programs then applicable to Executive in
accordance with the terms of such plans and programs.

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	 	(d)	 	“Cause” hereunder shall mean:

	 	(1)	 	an act or acts of dishonesty undertaken by Executive and
intended to result in substantial gain or personal enrichment of Executive at
the expense of the Company;
	 
	 	(2)	 	unlawful conduct or gross misconduct that is willful and
deliberate on Executive’s part and that, in either event, is materially
injurious to the Company;
	 
	 	(3)	 	the conviction of Executive of, or his entry of a no contest or
nolo contendre plea to, a felony;
	 
	 	(4)	 	willful and deliberate breach by Executive of his fiduciary
obligations as an officer or director of the Company;
	 
	 	(5)	 	a persistent failure by the Executive to perform the duties and
responsibilities of his employment hereunder, which failure is willful and
deliberate on the Executive’s part and is not remedied by him within 30 days
after the Executive’s receipt of written notice from the Company of such
failure; or
	 
	 	(6)	 	material breach of any terms and conditions of this Agreement
by Executive, which breach has not been cured by Executive within ten days
after written notice thereof to Executive from the Company.

	 	 	 	For the purposes of this Section 10(d), no act or failure to act on Executive’s part
shall be considered “dishonest,” “willful” or “deliberate” unless done or omitted to
be done by Executive in bad faith and without reasonable belief that Executive’s
action or omission was in the best interests of the Company. Any act, or failure to
act, based upon authority given pursuant to a resolution duly adopted by the Board
of Directors of the Company shall be conclusively presumed to be done, or omitted to
be done, by Executive in good faith and in the best interests of the Company.
	 
	 	(e)	 	Executive’s employment may not be terminated for Cause unless:

	 	(1)	 	no fewer than 30 days prior to the Termination Date, the
Company provides Executive with written notice (the “Notice of Consideration”)
of its intent to consider the termination of Executive’s employment for Cause,
including a reasonably detailed description of the specific reasons which form
the basis for such consideration;

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	 	(2)	 	on a date not less than fourteen days after the date Executive
receives the Notice of Consideration, Executive shall have the opportunity to
appear before the Board, with or without legal representation, at Executive’s
election, to present arguments and evidence on his own behalf; and
	 
	 	(3)	 	following the presentation to the Board, as provided in clause
(ii) above or Executive’s failure to appear before the Board at a date and time
specified in the Notice of Consideration (which date shall not be less than
fourteen days after the date the Notice of Consideration is provided),
Executive may be terminated for Cause if, but only if (A) the Board by the
affirmative vote of a majority of its members (excluding Executive as a member
of the Board) determines that Cause exists and that Executive’s employment
should accordingly be terminated for Cause. The termination for Cause shall
not be based upon any reason or reasons other than one or more reasons set
forth in the Notice of Consideration.

	 	 	 	In the event of any dispute between the Company and Executive as to whether Cause
existed for termination of Executive’s employment, the applicable tribunal in any
arbitration or litigation shall not give any deference to the determination by the
Company of basis for such decision, but will itself determine de novo whether Cause
existed.
	 
	 	(f)	 	“Good Reason” hereunder shall mean the occurrence of any one of the following
events:

	 	(1)	 	any material breach of any material terms and conditions of
this Agreement by the Company not caused by Executive, which breach has not
been cured by the Company within 30 days after receipt of written notice to the
Company from Executive specifying with reasonable detail the reasons that
Executive believes a material breach has occurred, including any of the
following occurrences which shall be deemed to be a material breach by the
Company if not so cured:

	 	(A)	 	failure to pay when due Executive’s base salary
or bonus in accordance with Sections 4(a) or 4(b); and
	 
	 	(B)	 	any material adverse change in Executive’s
position, title, or responsibilities;

	 	(2)	 	any failure to nominate or elect Executive to serve as
President and Chief Operating Officer of the Company while employed hereunder;

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	 	(3)	 	the Company becomes a direct or indirect subsidiary of any
other business entity through direct or indirect ownership of more than fifty
percent (50%) of the voting securities of the Company by such business entity
(a “Parent”), and Executive is not President, Chief Operating Officer or
otherwise does not continue to hold an executive position of similar seniority
of the Parent;
	 
	 	(4)	 	the failure of the Company to assign this Agreement to a
successor pursuant to Section 13(k), or failure of such successor to explicitly
assume and agree to be bound by this Agreement;
	 
	 	(5)	 	requiring Executive to be principally based at any office or
location more than 50 miles from Minneapolis, Minnesota (other than for normal
travel in connection with Executive’s performance of responsibilities
hereunder); or
	 
	 	(6)	 	the occurrence of the first Change in Control (as defined
below) to occur during the term of this Agreement, if Executive provides notice
of his intent to terminate his employment hereunder within 180 days after such
Change in Control and, if requested by the Company or its successor, Executive
remains employed with the Company or its successor for a transition period not
to exceed 120 days following the Change in Control.

	 	 	 	Good Reason shall not include any occurrence in this Section 10(f) of which
Executive has consented in writing stating specifically that such occurrence shall
not constitute Good Reason for purposes of this Section 10(f) or of which Executive
had actual knowledge for at least three calendar months.
	 
	 	(g)	 	“Disability” hereunder shall mean the inability of Executive to perform on a
full-time basis the duties and responsibilities of his employment with the Company by
reason of his illness or other physical or mental impairment or condition, as
determined by a physician mutually acceptable to Executive and the Company, if such
inability continues for an uninterrupted period of 180 days or more during any 365-day
period. A period of inability shall be “uninterrupted” unless and until Executive
returns to full-time work for a continuous period of at least 30 days.
	 
	 	(h)	 	“Change in Control” hereunder shall mean (and occur when):

	 	(1)	 	The acquisition by any individual, entity or group (within the
meaning of Exchange Act Sections 13(d)(3) or 14(d)(2)) of beneficial ownership
(within the meaning of Exchange Act Rule 13d-3) of 30% or more of the
then-outstanding membership interests of the Company (the

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	 	 	 	“Outstanding Units”); provided, however, that the following acquisitions
shall not constitute a Change in Control:

	 	(A)	 	any acquisition of voting securities of the
Company directly from the Company or by the Company or any of its
wholly owned subsidiaries, unless Executive votes against such action
in his capacity as a member of the Board and terminates his employment
with the Company in connection with consummation of any such
acquisition (including but not limited to a termination pursuant to
Section 10(f)(6) above),
	 
	 	(B)	 	any acquisition of voting securities of the
Company by any employee benefit plan (or related trust) sponsored or
maintained by the Company or any of its subsidiaries, or
	 
	 	(C)	 	any acquisition by any entity with respect to
which, immediately following such acquisition, more than 70% of,
respectively, the then-outstanding shares of voting securities of such
entity is then beneficially owned, directly or indirectly, by all or
substantially all of the individuals and entities who were the
beneficial owners, respectively, of the Outstanding Units immediately
before such acquisition in substantially the same proportions as was
their ownership, immediately before such acquisition, of the
Outstanding Units;

	 	(2)	 	Individuals who, as of the Effective Date, constitute the Board
(the “Incumbent Board”) cease for any reason to constitute at least a majority
of the Board; provided, however, that any individual becoming a director of the
Board after the Effective Date whose election, or nomination for election by
the Company’s shareholders, was approved by a vote of at least a majority of
the directors then comprising the Incumbent Board shall be considered a member
of the Incumbent Board, but excluding, for this purpose, any such individual
whose initial assumption of office occurs as a result of an actual or
threatened election contest
	 
	 	(3)	 	Consummation of a reorganization, merger, consolidation or
statutory exchange of Outstanding Units, unless immediately following such
reorganization, merger, consolidation or exchange, all or substantially all of
the individuals and entities who were the beneficial owners of the Outstanding
Units immediately before such reorganization, merger, consolidation or exchange
beneficially own, directly or indirectly, more than 70% of the then-outstanding
voting securities entitled to vote generally in the election of directors, as
the case may be, of the entity

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	 	 	 	resulting from such reorganization, merger, consolidation or exchange in
substantially the same proportions as was their ownership, immediately
before such reorganization, merger, consolidation or exchange, of the
Outstanding Units;
	 
	 	(4)	 	Consummation of a sale or other disposition of all or
substantially all of the assets of the Company, other than to an entity with
respect to which, immediately following such sale or other disposition, more
than 70% of, respectively, the then-outstanding voting securities of such
entity is then beneficially owned, directly or indirectly, by all or
substantially all of the individuals and entities who were the beneficial
owners of the Outstanding Units immediately before such sale or other
disposition in substantially the same proportion as was their ownership,
immediately before such sale or other disposition; or
	 
	 	(5)	 	Approval by the shareholders of the Company of a complete
liquidation or dissolution of the Company.

	 	 	 	Notwithstanding the above, a Change in Control will not be deemed to occur if the
acquisition of the 30% or greater interest referred to in clause (1) is by a group,
acting in concert, that includes Executive or if at least 30% of the
then-outstanding voting securities of the surviving entity or of any entity
acquiring all or substantially all of the assets of the Company shall be
beneficially owned, directly or indirectly, immediately after a reorganization,
merger, consolidation, statutory share exchange or disposition of assets referred to
in paragraphs (3) or (4) by a group, acting in concert, that includes Executive.
	 
	 	(i)	 	In the event of termination of Executive’s employment, the sole obligations of
the Company shall be its obligation to make the payments called for by Section 10(a),
10(b) or 10(c) hereof, as the case may be, and the Company shall have no other
obligation to Executive or to his beneficiary or his estate, except as otherwise
provided, by law, under the terms of this Agreement or any other applicable agreement
between Executive and the Company, under the terms of any employee benefit plans or
programs then maintained by the Company in which Executive participates, or to provide
continued indemnification or advancement of expenses under the Company’s operating
agreement, applicable law, or any indemnification agreement with Executive.
	 
	 	(j)	 	Notwithstanding the foregoing provisions of this Section 10, the Company shall
not be obligated to make any payments to Executive under Section 10(a), 10(b), or 10(c)
hereof unless Executive shall have signed a release of claims in favor of the Company
substantially in the form attached as Exhibit A (with such modifications or
additional specifics as may be warranted by changes in

	137 N. 8th Street	P.O. Box 424	Geneva, NE 68361	P: 402.759.3773	TF: 877.651.1166	F: 402.759.3774

 

 

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	 	 	 	applicable law), all applicable consideration periods and rescission periods
provided by law shall have expired and Executive is in strict compliance with the
terms of this Agreement as of the dates of the payments.

	11.	 	Return of Records and Property. Upon termination of his employment with the Company,
Executive shall promptly deliver to the Company any and all Company records and any and all
Company property in his possession or under his control, including without limitation manuals,
books, blank forms, documents, letters, memoranda, notes, notebooks, reports, printouts,
computer disks, computer tapes, source codes, data, tables or calculations and all copies
thereof, documents that in whole or in part contain any trade secrets or confidential,
proprietary or other secret information of the Company and all copies thereof, and keys,
access cards, access codes, passwords, credit cards, personal computers, telephones and other
electronic equipment belonging to the Company.
	 
	12.	 	Remedies. Executive acknowledges that it would be difficult to fully compensate the
Company for monetary damages resulting from any breach by him of the provisions of Sections 5,
7 and 8 hereof. Accordingly, in the event of any actual or threatened breach of any such
provisions, the Company shall, in addition to any other remedies it may have, be entitled to
injunctive and other equitable relief to enforce such provisions, and such relief may be
granted without the necessity of proving actual monetary damages.
	 
	13.	 	Miscellaneous.

	 	(a)	 	Tax Matters. Executive acknowledges that the Company shall deduct from
any compensation payable to Executive or payable on his behalf under this Agreement all
applicable federal, state, and local income and employment taxes and other taxes and
withholdings required by law.
	 
	 	(b)	 	Company Approvals. The Company represents and warrants to Executive
that it (and to the extent required, the Board, and the Committee) has taken all
corporate action necessary to authorize this Agreement.
	 
	 	(c)	 	No Mitigation. In no event shall Executive be obligated to seek other
employment or take any other action to mitigate the amounts payable to Executive under
any of the provisions of this Agreement, nor shall the amount of any payment hereunder
be reduced by any compensation earned as a result of Executive’s employment by another
employer, except that any continued welfare benefits may be reduced as provided for by
Section 10(a).
	 
	 	(d)	 	Beneficiary. If Executive dies before receiving all of the amounts
payable to him in accordance with the terms and conditions of this Agreement, such
amounts shall be paid to the beneficiary (“Beneficiary”) designated by Executive in

	137 N. 8th Street	P.O. Box 424	Geneva, NE 68361	P: 402.759.3773	TF: 877.651.1166	F: 402.759.3774

 

 

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	 	 	 	writing to the Company during his lifetime, or if no such Beneficiary is designated,
to Executive’s estate. Executive may change his designation of Beneficiary or
Beneficiaries at any time or from time to time without the consent of any prior
Beneficiary, by submitting to the Company in writing a new designation of
Beneficiary.
	 
	 	(e)	 	Governing Law. All matters relating to the interpretation,
construction, application, validity and enforcement of this Agreement shall be governed
by the laws of the State of Minnesota without giving effect to any choice or conflict
of law provision or rule, whether of the State of Minnesota or any other jurisdiction,
that would cause the application of laws of any jurisdiction other than the State of
Minnesota.
	 
	 	(f)	 	Arbitration. Executive and Company agree to submit any and all
disputes concerning the terms of this Agreement or any other terms and conditions of
Executive’s employment, with the exception of an action for injunctive relief under
Sections 5, 7 or 8 of this Agreement, to final and binding arbitration. The
arbitration will be conducted in Minneapolis, Minnesota in accordance with the
procedural rules of the American Arbitration Association. The arbitrator may order any
legal and equitable remedies, including backpay and/or reimbursement, but will have no
authority to alter, modify or amend the terms of this Agreement or to award punitive
damages.
	 
	 	(g)	 	Jurisdiction; Venue. Executive and the Company consent to jurisdiction
of the courts of the State of Minnesota and/or the federal district courts, District of
Minnesota, for the purpose of enforcing the decision of an arbitrator in connection
with the resolution of any dispute under this Agreement.. In connection therewith,
each party consents to personal jurisdiction over such party in the state and/or
federal courts of Minnesota and to venue for the purpose of such decisions in Hennepin
County, State of Minnesota, and hereby waives any defense of lack of personal
jurisdiction or forum non conveniens.
	 
	 	(h)	 	Entire Agreement. This Agreement, together with the exhibits, contains
the entire agreement of the parties relating to the subject matter of this Agreement
and supersedes all prior agreements and understandings with respect to such subject
matter, and the parties hereto have made no agreements, representations or warranties
relating to the subject matter of this Agreement that are not set forth herein.
	 
	 	(i)	 	Amendments. No amendment or modification of this Agreement shall be
deemed effective unless made in writing and signed by the parties hereto.

	137 N. 8th Street	P.O. Box 424	Geneva, NE 68361	P: 402.759.3773	TF: 877.651.1166	F: 402.759.3774

 

 

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	 	(j)	 	No Waiver. No term or condition of this Agreement shall be deemed to
have been waived, except by a statement in writing signed by the party against whom
enforcement of the waiver is sought. Any written waiver shall not be deemed a
continuing waiver unless specifically stated, shall operate only as to the specific
term or condition waived and shall not constitute a waiver of such term or condition
for the future or as to any act other than that specifically waived.
	 
	 	(k)	 	Assignment. This Agreement shall not be assignable, in whole or in
party, by either party without the written consent of the other party, except that the
Company may, without the written consent of Executive, assign its rights and
obligations under this Agreement to any corporation or other business entity (i) with
which the Company may merge or consolidate, (ii) to which the Company may sell or
transfer all or substantially all of its assets or membership interests, or (iii) of
which 50% or more of the voting control is owned, directly or indirectly, by the
Company. No such assignment without the written consent of Executive shall discharge
the Company from liability hereunder, and such assignee jointly and severally with the
Company shall thereafter be deemed to be the “Company” for purposes of all terms and
conditions of this Agreement, including this Section 13.
	 
	 	(l)	 	Separate Representation. Executive hereby acknowledges that he has
sought and received independent advice from counsel of Executive’s own selection in
connection with this Agreement and has not relied to any extent on any director,
officer, or stockholder of, or counsel to, the Company in deciding to enter into this
Agreement. The Company shall promptly reimburse Executive for reasonable attorneys’
fees and costs incurred by Executive in obtaining legal advice in connection with the
negotiation and execution of this Agreement and the restricted unit agreement
contemplated by Section 4(c) hereof, upon receipt by the Company of appropriate
documentation of such fees and costs.
	 
	 	(m)	 	Notices. Any notice hereunder shall be in writing and shall be deemed
to have been duly given if delivered by hand, sent by reliable next-day courier, or
sent by registered or certified mail, return receipt requested, postage prepaid, to the
party to receive such notice addressed as follows:
	 
	 	 	 	If to the Company:

Advanced BioEnergy, LLC

137 N 8th

PO Box 424

Geneva, NE 68361

Attention: Chair of Compensation Committee

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If to Executive:

Don Gales

14417 Perry Street

Overland Park, KS 66221

	 	 	 	Or addressed to such other address as may have been furnished to the sender by
notice hereunder. All notices shall be deemed given on the date on which delivered
if delivered by hand or on the date sent if sent by overnight courier or certified
mail, except that notice of change of address will be effective only upon receipt by
the other party.
	 
	 	(n)	 	Counterparts. This Agreement may be executed in any number of
counterparts, and such counterparts executed and delivered, each as an original, shall
constitute but one and the same instrument.
	 
	 	(o)	 	Severability. Subject to Section 7(e) hereof, to the extent that any
portion of any provision of this Agreement shall be invalid or unenforceable, it shall
be considered deleted herefrom and the remainder of such provision and of this
Agreement shall be unaffected and shall continue in full force and effect.
	 
	 	(p)	 	Captions and Headings. The captions and paragraph headings used in
this Agreement are for convenience of reference only and shall not affect the
construction or interpretation of this Agreement or any of the provisions hereof.

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          IN WITNESS WHEREOF, Executive and the Company have executed this Agreement as of the date set
forth in the first paragraph.

	 	 	 	 	 
	 	ADVANCED BIOENERGY, LLC

 	 
	 	By:  	       /s/ Robert Holmes
 	 
	 	 	 	 
	 	 	Its             Director/Treasurer 	 
	 	 	 	 
	 
	 	 	 
	 	        /s/ Donald Gales
 	 
	 	Don Gales 	 
	 	 	 
	 

	137 N. 8th Street	P.O. Box 424	Geneva, NE 68361	P: 402.759.3773	TF: 877.651.1166	F: 402.759.3774

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