Document:

EXHIBIT 10.4
   
 

 

 

 

 

 

CREDIT
AGREEMENT

 

BY AND
BETWEEN

HGF
ACQUISITION, LLC

AND

 

KRUSE INVESTMENT COMPANY, INC

FEBRUARY
12, 2007

 

 

   
 

TABLE OF CONTENTS

	
  ARTICLE I DEFINITIONS 1

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Section 1.1

  	
   

  	
  Definitions

  	
   

  	
  1

  
	
  Section 1.2

  	
   

  	
  Other Definitional Terms; Rules of Interpretation

  	
   

  	
  4

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE II AMOUNT AND TERMS OF THE CREDIT FACILITY

  	
   

  	
  4

  
	
   

  	
   

  	
   

  
	
  Section 2.1

  	
   

  	
  Advances

  	
   

  	
  4

  
	
  Section 2.2

  	
   

  	
  Procedures for Requesting Advances

  	
   

  	
  5

  
	
  Section 2.3

  	
   

  	
  Interest; Principal; Default Interest Rate; Usury

  	
   

  	
  5

  
	
  Section 2.4

  	
   

  	
  Origination Fee

  	
   

  	
  6

  
	
  Section 2.5

  	
   

  	
  Time for Interest Payments; Computation of Interest
  and Fees

  	
   

  	
  6

  
	
  Section 2.6

  	
   

  	
  Voluntary Prepayment; Termination of the Credit
  Facility by the Borrower

  	
   

  	
  6

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE III CONDITIONS OF LENDING

  	
   

  	
  6

  
	
   

  	
   

  	
   

  
	
  Section 3.1

  	
   

  	
  Conditions Precedent to the Initial Advance

  	
   

  	
  6

  
	
  Section 3.2

  	
   

  	
  Conditions Precedent to All Advances

  	
   

  	
  7

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE IV REPRESENTATIONS AND WARRANTIES

  	
   

  	
  7

  
	
   

  	
   

  	
   

  
	
  Section 4.1

  	
   

  	
  Existence and Power

  	
   

  	
  7

  
	
  Section 4.2

  	
   

  	
  Authorization of Borrowing; No Conflict as to Law or
  Agreements

  	
   

  	
  8

  
	
  Section 4.3

  	
   

  	
  Legal Agreements

  	
   

  	
  8

  
	
  Section 4.4

  	
   

  	
  Litigation

  	
   

  	
  8

  
	
  Section 4.5

  	
   

  	
  Taxes

  	
   

  	
  8

  
	
  Section 4.6

  	
   

  	
  Default

  	
   

  	
  8

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE V COVENANTS

  	
   

  	
  9

  
	
   

  	
   

  	
   

  	
   

  
	
  Section 5.1

  	
   

  	
  Compliance with Laws

  	
   

  	
  9

  
	
  Section 5.2

  	
   

  	
  Payment of Taxes and Other Claims

  	
   

  	
  9

  
	
  Section 5.3

  	
   

  	
  Preservation of Existence

  	
   

  	
  9

  
	
  Section 5.4

  	
   

  	
  Sale or Transfer of Assets; Suspension of Business
  Operations

  	
   

  	
  9

  
	
  Section 5.5

  	
   

  	
  Consolidation and Merger; Asset Acquisitions

  	
   

  	
  9

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE VI EVENTS OF DEFAULT, RIGHTS AND REMEDIES

  	
   

  	
  10

  
	
   

  	
   

  	
   

  
	
  Section 6.1

  	
   

  	
  Events of Default

  	
   

  	
  10

  
	
  Section 6.2

  	
   

  	
  Rights and Remedies

  	
   

  	
  11

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE VII MISCELLANEOUS

  	
   

  	
  12

  
	
   

  	
   

  	
   

  
	
  Section 7.1

  	
   

  	
  No Waiver; Cumulative Remedies; Compliance with Laws

  	
   

  	
  12

  
	
  Section 7.2

  	
   

  	
  Amendments, Etc.

  	
   

  	
  12

  
	
  Section 7.3

  	
   

  	
  Notices; Communication of Confidential Information;
  Requests for Accounting

  	
  12

  
	
  Section 7.4

  	
   

  	
  Further Documents

  	
   

  	
  12

  
	
  Section 7.5

  	
   

  	
  Costs and Expenses

  	
   

  	
  13

  
	
  Section 7.6

  	
   

  	
  Execution in Counterparts; Telefacsimile Execution

  	
   

  	
  13

  
	
  Section 7.7

  	
   

  	
  Binding Effect; Assignment; Complete Agreement;
  Sharing Information

  	
   

  	
  13

  
	
  Section 7.8

  	
   

  	
  Severability of Provisions

  	
   

  	
  13

  
	
  Section 7.9

  	
   

  	
  Headings

  	
   

  	
  13

  
	
  Section 7.10

  	
   

  	
  Governing Law; Jurisdiction, Venue; Waiver of Jury
  Trial

  	
   

  	
  13

  
							

 

	
  EXHIBITS

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Exhibit A

  	
   

  	
  Form of Note

  
	
  Exhibit B

  	
   

  	
  Form of Security Agreement

  
	
  Exhibit C

  	
   

  	
  Form of Consent to Security Agreement

  

 

 i

CREDIT AGREEMENT

Dated as of
February 12, 2007

HGF ACQUISITION,
LLC, a Delaware limited liability company (the “Borrower”), and KRUSE INVESTMENT COMPANY, INC, a
California corporation (the “Lender”), hereby agree as follows:

ARTICLE I

DEFINITIONS

Section 1.1
            Definitions.  For all purposes of this Agreement, except as
otherwise expressly provided, the following terms shall have the meanings
assigned to them in this Section or in the Section referenced after
such term:

“Advance” has the
meaning set forth in Section 2.1.

“Affiliate” or “Affiliates”
means any Person controlled by, controlling or under common control with the
Borrower, including any Subsidiary of the Borrower.  For purposes of this definition, “control,”
when used with respect to any specified Person, means the power to direct the
management and policies of such Person, directly or indirectly, whether through
the ownership of voting securities, by contract or otherwise.

“Agreement” means
this Credit Agreement.

“Availability”
means the amount, if any, by which the Maximum Line Amount exceeds the
outstanding principal balance of the Note.

“Business Day”
means a day on which the Federal Reserve Bank of New York is open for business.

“Commitment” means
the Lender’s commitment to make Advances to the Borrower pursuant to
Article II.

“Consent to
Security Interest” means the Consent to Security Interest executed by Borrower,
Heartland Grain Fuels, L.P., and the other partners of Heartland Grain Fuels,
L.P. substantially in the form of Exhibit C hereto, as the same may be amended
from time to time.

“Constituent
Documents” means with respect to any Person, as applicable, such Person’s
certificate of incorporation, articles of incorporation, by-laws, certificate
of formation, articles of organization, limited liability company agreement,
management agreement, operating agreement, shareholder agreement, partnership
agreement or similar document or agreement governing such Person’s existence,
organization or management or concerning disposition of ownership interests of
such Person or voting rights among such Person’s owners.

“Credit Facility”
means the credit facility under which Advances may be made available to the
Borrower by the Lender under Article II.

“Default” means an
event that, with giving of notice or passage of time or both, would constitute
an Event of Default.

“Default Period”
means any period of time beginning on the date an Event of Default occurs and
ending on the date identified by the Lender in writing as the date that such
Event of Default has been cured or waived.

“Default Rate”
means an annual interest rate in effect during a Default Period or following
the Termination Date, which interest rate shall be equal to 18%.

“Director” means a
director if the Borrower is a corporation, a governor or manager if the
Borrower is a limited liability company, or a general partner if the Borrower
is a partnership.

“Event of Default”
has the meaning set forth in Section 6.1.

“GAAP” means
generally accepted accounting principles, applied on a consistent basis.

“Interest Payment
Date” has the meaning set forth in Section 2.5(a).

“Interest Rate”
means 12% per annum.

“Lien” means any
security interest, mortgage, deed of trust, pledge, lien, charge, encumbrance,
title retention agreement or analogous instrument or device, including the
interest of each lessor under any capitalized lease and the interest of any
bondsman under any payment or performance bond, in, of or on any assets or
properties of a Person, whether now owned or hereafter acquired and whether arising
by agreement or operation of law.

“Loan Documents”
means this Agreement, the Note, the Security Agreement and the Consent to
Security Interest, together with every other agreement, note, document,
contract or instrument to which the Borrower now or hereafter is a party and
that is required by the Lender.

“Material Adverse
Effect” means any of the following:

(i)           A
material adverse effect on the business, operations, results of operations,
prospects, assets, liabilities or financial condition of the Borrower;

(ii)          A
material adverse effect on the ability of the Borrower to perform its
obligations under the Loan Documents;

(iii)         A
material adverse effect on the ability of the Lender to enforce the Obligations
or to realize the intended benefits of the Security Documents, 

 2
 

including a material adverse effect on the validity or enforceability
of any Loan Document, or on the status, existence, perfection, priority or
enforceability of any Lien securing payment or performance of the Obligations;
or

(iv)         Any
claim against the Borrower or overt threat of litigation which if determined
adversely to the Borrower would cause the Borrower to be liable to pay an
amount exceeding $200,000 or would be an event described in clauses (i), (ii)
and (iii) above.

“Maturity Date”
means July 1, 2007.

“Maximum Line
Amount” means $5,000,000.

“Note” means the
Borrower’s promissory note, payable to the order of the Lender in substantially
the form of Exhibit A hereto, as same may be renewed and amended from time
to time, and all replacements thereto.

“Obligations”
means the Note and each and every other debt, liability and obligation of every
type and description which the Borrower may now or at any time hereafter owe to
the Lender, whether such debt, liability or obligation now exists or is
hereafter created or incurred, whether it arises in a transaction involving the
Lender alone or in a transaction involving other creditors of the Borrower, and
whether it is direct or indirect, due or to become due, absolute or contingent,
primary or secondary, liquidated or unliquidated, or sole, joint, several or
joint and several, and including all indebtedness of the Borrower arising under
any Loan Document, whether now in effect or hereafter entered into.

“Officer” means
with respect to the Borrower, an officer if the Borrower is a corporation, a
manager if the Borrower is a limited liability company, or a partner if the
Borrower is a partnership.

“Owner” means with
respect to the Borrower, each Person having legal or beneficial title to an
ownership interest in the Borrower or a right to acquire such an interest.

“Person” means any
individual, corporation, partnership, joint venture, limited liability company,
association, joint-stock company, trust, unincorporated organization or
government or any agency or political subdivision thereof.

“Security
Agreement” means the Security Agreement executed by Borrower and Lender
substantially in the form of Exhibit B hereto, as the same may be amended from
time to time.

“Subsidiary” means
any corporation of which more than 50% of the outstanding shares of capital
stock having general voting power under ordinary circumstances to elect a
majority of the board of Directors of such corporation, irrespective of whether
or not at the time stock of any other class or classes shall have or might have
voting power by reason of 

 3
 

the happening of any
contingency, is at the time directly or indirectly owned by the Borrower, by
the Borrower and one or more other Subsidiaries, or by one or more other
Subsidiaries.

“Termination Date”
means the earliest of (i) the Maturity Date, (ii) the date the
Borrower terminates the Credit Facility, or (iii) the date the Lender
demands payment of the Obligations (or the Obligations are automatically
accelerated), following an Event of Default, pursuant to Section 6.2.

Section 1.2
            Other Definitional Terms;
Rules of Interpretation.  The words “hereof”,
“herein” and “hereunder” and words of similar import when used in this
Agreement shall refer to this Agreement as a whole and not to any particular
provision of this Agreement.  All
accounting terms not otherwise defined herein have the meanings assigned to
them in accordance with GAAP.  References
to Articles, Sections, subsections, Exhibits, Schedules and the like, are to
Articles, Sections and subsections of, or Exhibits or Schedules attached
to, this Agreement unless otherwise expressly provided.  The words “include”, “includes” and “including”
shall be deemed to be followed by the phrase “without limitation”.  Unless the context in which used herein
otherwise clearly requires, “or” has the inclusive meaning represented by the
phrase “and/or”.  Defined terms include
in the singular number the plural and in the plural number the singular.  Reference to any agreement (including the
Loan Documents), document or instrument means such agreement, document or
instrument as amended or modified and in effect from time to time in accordance
with the terms thereof (and, if applicable, in accordance with the terms hereof
and the other Loan Documents), except where otherwise explicitly provided, and
reference to any promissory note includes any promissory note which is an
extension or renewal thereof or a substitute or replacement therefor.  Reference to any law, rule, regulation,
order, decree, requirement, policy, guideline, directive or interpretation
means as amended, modified, codified, replaced or reenacted, in whole or in
part, and in effect on the determination date, including rules and regulations
promulgated thereunder.

ARTICLE II

AMOUNT
AND TERMS OF THE CREDIT FACILITY

Section 2.1
            Advances.  The Lender agrees, subject to the terms and
conditions of this Agreement, to make advances (“Advances”) to the Borrower
from time to time after the later of (a) the date that all of the conditions
set forth in Section 3.1 are satisfied and (b) February 19, 2007 to and until
(but not including) the Termination Date in an amount not in excess of the
Maximum Line Amount.  Notwithstanding the
foregoing, the Lender shall make an Advance on the date hereof in the amount of
$100,000 to permit Borrower to pay the fee required by Section 2.4.  The Lender shall have no obligation to make
an Advance to the extent that the amount of the requested Advance exceeds
Availability.  The proceeds of each
Advance under this Section 2.1 shall be used to make loans to Heartland
Grain Fuels, L.P., pay the fee required by Section 2.4, and to pay transaction
costs and expenses.  Each Advance under
this Section 2.1 shall be in an amount equal to an integral multiple of
$100,000..  Borrower may only request one
Advance in any period of 30 days.  The 

 4
 

Borrower’s obligation to
pay the Advances shall be evidenced by the Note and shall be secured by the
Security Agreement.  The Note shall bear
interest on the unpaid principal amount thereof from the date thereof until
paid as set forth in Section 2.3.

Section 2.2
            Procedures for Requesting
Advances.  The Borrower shall request
each Advance (other than the Advance on the date hereof to pay the fee required
by Section 2.4) at least 18 days prior to the day on which the Advance is to be
made.  Each request that conforms to the
terms of this Agreement shall be effective upon receipt by the Lender.  Such request shall specify the principal
amount of the requested Advance, shall be in writing or by telephone or
telecopy transmission, and shall be confirmed in writing by the Borrower by
(i) an Officer of the Borrower; or (ii) a Person designated as the
Borrower’s agent by an Officer of the Borrower in a writing delivered to the
Lender; or (iii) a Person whom the Lender reasonably believes to be an
Officer of the Borrower or such a designated agent.  Any request for an Advance, whether written
or telephonic, shall be deemed to be a representation by the Borrower that the
conditions set forth in Section 3.2 have been satisfied as of the time of the
request.  Upon fulfillment of the
applicable conditions set forth in Article III, the Lender shall disburse
the proceeds of the requested Advance by crediting the same to the Borrower’s
demand deposit account specified in writing by Borrower from time to time
unless the Lender and the Borrower shall agree in writing to another manner of
disbursement.

Section 2.3
            Interest; Principal;
Default Interest Rate; Usury.

(a)          Interest.  Except as provided in Section 2.3(c),
the principal amount of each Advance shall bear interest at the Interest Rate.

(b)          Principal.
The principal balance of the Note shall be due and payable in full on the
Termination Date, or if such day is not a Business Day, on the next succeeding
Business Day.

(c)          Default
Interest Rate.  At any time during
any Default Period or following the Termination Date, in the Lender’s sole
discretion and without waiving any of its other rights or remedies, the
principal of the Note shall bear interest at the Default Rate or such lesser
rate as the Lender may determine, effective as of the first day of any Default
Period through the last day of such Default Period, or any shorter time period
that the Lender may determine.  The
decision of the Lender to impose a rate that is less than the Default Rate or
to not impose the Default Rate for the entire duration of the Default Period
shall be made by the Lender in its sole discretion and shall not be a waiver of
any of its other rights and remedies, including its right to retroactively
impose the full Default Rate for the entirety of any such Default Period or
following the Termination Date.

(d)          Usury.  In any event no rate change shall be put into
effect which would result in a rate greater than the highest rate permitted by
law.  Notwithstanding anything to the
contrary contained in any Loan Document, all agreements which either now are or
which shall become agreements between the Borrower and the 

 5
 

Lender are hereby limited so that in no contingency or event whatsoever
shall the total liability for payments in the nature of interest, additional
interest and other charges exceed the applicable limits imposed by any
applicable usury laws.  If any payments
in the nature of interest, additional interest and other charges made under any
Loan Document are held to be in excess of the limits imposed by any applicable
usury laws, it is agreed that any such amount held to be in excess shall be
considered payment of principal hereunder, and the indebtedness evidenced
hereby shall be reduced by such amount so that the total liability for payments
in the nature of interest, additional interest and other charges shall not
exceed the applicable limits imposed by any applicable usury laws, in
compliance with the desires of the Borrower and the Lender.  This provision shall never be superseded or
waived and shall control every other provision of the Loan Documents and all
agreements between the Borrower and the Lender, or their successors and
assigns.

Section 2.4
            Origination Fee.  The Borrower shall pay the Lender a fully
earned and non-refundable origination fee of $100,000, due and payable upon the
execution of this Agreement.

Section 2.5
            Time for Interest Payments;
Computation of Interest and Fees.

(a)     Time For Interest Payments.  Accrued and unpaid interest shall be due and
payable on the Termination Date or if such day is not a Business Day, on the
next succeeding Business Day (the “Interest Payment Date”).  Interest will accrue from the date of each
Advance to the Interest Payment Date.

(b)     Computation of Interest and Fees.  Interest accruing on the outstanding
principal balance of the Advances and fees hereunder outstanding from time to
time shall be computed on the basis of actual number of days elapsed in a year
of 360 days.

Section 2.6
            Voluntary Prepayment;
Termination of the Credit Facility by the Borrower.  The Borrower may prepay the Advances in whole
(but not in part) at any time.  The
Borrower may terminate the Credit Facility at any time.  If the Borrower terminates the Credit
Facility, all Obligations shall be immediately due and payable.

ARTICLE III

CONDITIONS
OF LENDING

Section 3.1
            Conditions Precedent to the
Initial Advance.  The Lender’s
obligation to make the initial Advance shall be subject to the condition
precedent that the Lender shall have received all of the following, each
properly executed by the appropriate party and in form and substance
satisfactory to the Lender:

(a)     This Agreement.

(b)     The Note.

 6
 

(c)     The Security Agreement.

(d)     The Consent to Security
Interest.

(e)     A certificate of the Borrower’s Secretary
or Assistant Secretary certifying that attached to such certificate are
(i) the resolutions of the Borrower’s Directors and, if required, Owners,
authorizing the execution, delivery and performance of the Loan Documents,
(ii) true, correct and complete copies of the Borrower’s Constituent
Documents, and (iii) examples of the signatures of the Borrower’s Officers
or agents authorized to execute and deliver the Loan Documents and other
instruments, agreements and certificates, including Advance requests, on the
Borrower’s behalf.

(f)      A current certificate issued by the
Secretary of State of Delaware, certifying that the Borrower is in good
standing in the State of Delaware.

(g)     Payment of the fees due under Section 2.4
and expenses incurred by the Lender through such date and required to be paid
by the Borrower under Section 7.5, including all legal expenses incurred
through the date of this Agreement.

(h)     Such other documents as the Lender in its
reasonable discretion may require.

Section 3.2
            Conditions Precedent to All
Advances.  The Lender’s obligation to
make each Advance shall be subject to the further conditions precedent that:

(a)     the representations and warranties
contained in Article IV are correct on and as of the date of such Advance as
though made on and as of such date, except to the extent that such
representations and warranties relate solely to an earlier date; and

(b)     no event has occurred and is continuing, or
would result from such Advance which constitutes a Default or an Event of
Default.

ARTICLE IV

REPRESENTATIONS
AND WARRANTIES

The Borrower
represents and warrants to the Lender as follows:

Section 4.1             Existence and Power.  The Borrower is a limited liability company,
duly organized, validly existing and in good standing under the laws of the
State of Delaware and is duly licensed or qualified to transact business in all
jurisdictions where the character of the property owned or leased or the nature
of the business transacted by it makes such licensing or qualification
necessary.  The Borrower has all
requisite power and authority to conduct its business, to own its properties
and to execute and deliver, and to perform all of its obligations under, the
Loan Documents. 

 7

Section 4.2
            Authorization of Borrowing;
No Conflict as to Law or Agreements. 
The execution, delivery and performance by the Borrower of the Loan
Documents and the borrowings from time to time hereunder have been duly
authorized by all necessary limited liability company action and do not and
will not (i) require any consent or approval of the Borrower’s Owners;
(ii) require any authorization, consent or approval by, or registration,
declaration or filing with, or notice to, any governmental department, commission,
board, bureau, agency or instrumentality, domestic or foreign, or any third
party, except such authorization, consent, approval, registration, declaration,
filing or notice as has been obtained, accomplished or given prior to the date
hereof; (iii) violate any provision of any law, rule or regulation or of
any order, writ, injunction or decree presently in effect having applicability
to the Borrower or of the Borrower’s Constituent Documents; (iv) result in
a breach of or constitute a default under any indenture or loan or credit
agreement or any other material agreement, lease or instrument to which the
Borrower is a party or by which it or its properties may be bound or affected;
or (v) result in, or require, the creation or imposition of any Lien
(other than the Lien of the Security Agreement) upon or with respect to any of
the properties now owned or hereafter acquired by the Borrower.

Section 4.3
            Legal Agreements.  This Agreement constitutes and, upon due
execution by the Borrower, the other Loan Documents will constitute the legal,
valid and binding obligations of the Borrower, enforceable against the Borrower
in accordance with their respective terms, subject to applicable bankruptcy,
reorganization, insolvency, moratorium, and other similar laws affecting
creditors rights generally from time to time in effect and to general
principles of equity.

Section 4.4
            Litigation.  There are no actions, suits or proceedings
pending or, to the Borrower’s knowledge, threatened against or affecting the
Borrower or any of its Affiliates or the properties of the Borrower or any of
its Affiliates before any court or governmental department, commission, board,
bureau, agency or instrumentality, domestic or foreign, which, if determined
adversely to the Borrower or any of its Affiliates, would have a Material
Adverse Effect on the financial condition, properties or operations of the
Borrower or any of its Affiliates.

Section 4.5
            Taxes.  The Borrower and its Affiliates have paid or
caused to be paid to the proper authorities when due all federal, state and
local taxes required to be withheld by each of them.  The Borrower and its Affiliates have filed
all federal, state and local tax returns which to the knowledge of the Officers
of the Borrower or any Affiliate, as the case may be, are required to be filed,
and the Borrower and its Affiliates have paid or caused to be paid to the
respective taxing authorities all taxes as shown on said returns or on any
assessment received by any of them to the extent such taxes have become due.

Section 4.6
            Default.  The Borrower is in compliance with all
provisions of all agreements, instruments, decrees and orders to which it is a
party or by which it or its property is bound or affected, the breach or
default of which could have a Material Adverse Effect.

 8
 

 

ARTICLE V

COVENANTS

So long as the
Obligations shall remain unpaid, or the Credit Facility shall remain
outstanding, the Borrower will comply with the following requirements, unless
the Lender shall otherwise consent in writing:

Section 5.1
            Compliance with Laws.  The Borrower shall (a) comply with the
requirements of applicable laws and regulations, the non-compliance with which
would materially and adversely affect its business or its financial condition
and (b) use and keep its assets, only for lawful purposes, without
violation of any federal, state or local law, statute or ordinance.

Section 5.2
            Payment of Taxes and Other
Claims.  The Borrower will pay or
discharge, when due, (a) all taxes, assessments and governmental charges
levied or imposed upon it or upon its income or profits, upon any properties
belonging to it (including the Collateral, as defined in the Security
Agreement) or upon or against the creation, perfection or continuance of the
Security Interest (as defined in the Security Agreement), prior to the date on
which penalties attach thereto, (b) all federal, state and local taxes
required to be withheld by it, and (c) all lawful claims for labor,
materials and supplies which, if unpaid, might by law become a Lien upon any
properties of the Borrower; provided, that the Borrower shall not be required
to pay any such tax, assessment, charge or claim whose amount, applicability or
validity is being contested in good faith by appropriate proceedings and for
which proper reserves have been made.

Section 5.3
            Preservation of Existence.  The Borrower will preserve and maintain its
existence and all of its rights, privileges and franchises necessary or
desirable in the normal conduct of its business and shall conduct its business
in an orderly, efficient and regular manner.

Section 5.4
            Sale or Transfer of Assets;
Suspension of Business Operations. 
The Borrower will not sell, lease, assign, transfer or otherwise dispose
of (a) the stock of any Subsidiary, the limited partnership interest in
Heartland Grain Fuels, L.P., or the common stock of Dakota Fuels, Inc. or
(b) all or a substantial part of its assets, (whether in one transaction
or in a series of transactions) to any other Person, and will not liquidate,
dissolve or suspend business operations.

Section 5.5             Consolidation and Merger; Asset
Acquisitions.  The Borrower will not
consolidate with or merge into any Person, or permit any other Person to merge
into it, or acquire (in a transaction analogous in purpose or effect to a
consolidation or merger) all or substantially all the assets of any other
Person; provided that Borrower may acquire additional limited partnership
interests in Heartland Grain Fuels, L.P. and additional common stock in Dakota
Fuels, Inc.

 9
 

ARTICLE VI

EVENTS OF
DEFAULT, RIGHTS AND REMEDIES

Section 6.1
            Events of Default.  “Event of Default”, wherever used herein,
means any one of the following events:

(a)             Default
in the payment of any principal or interest on the loan when it becomes due and
payable;

(b)            Default
in the payment of any fees, costs or expenses to be paid by Borrower under this
Agreement or any other Loan Document and the continuation of such default for
more than 5 Business Days after written notice thereof has been given to the
Borrower by Lender;

(c)             Default
in the performance, or breach, of any covenant or agreement of the Borrower
contained in this Agreement (other than a covenant or agreement a default in
whose performance or whose breach is elsewhere in this Section 6.1 specifically
dealt with) or in any other Loan Document and the continuation of such default
or breach for a period of 30 calendar days after written notice thereof has
been given to the Borrower by Lender;

(d)            The
Borrower shall be or become insolvent, or admit in writing its inability to pay
its debts as they mature, or make an assignment for the benefit of creditors;
or the Borrower shall apply for or consent to the appointment of any receiver,
trustee, or similar officer for it or for all or any substantial part of its
property; or such receiver, trustee or similar officer shall be appointed
without the application or consent of the Borrower; or the Borrower shall
institute (by petition, application, answer, consent or otherwise) any
bankruptcy, insolvency, reorganization, arrangement, readjustment of debt,
dissolution, liquidation or similar proceeding relating to it under the laws of
any jurisdiction; or any such proceeding shall be instituted (by petition,
application or otherwise) against the Borrower; or any judgment, writ, warrant
of attachment or execution or similar process shall be issued or levied against
a substantial part of the property of the Borrower;

(e)             A
petition shall be filed by or against the Borrower under the United States
Bankruptcy Code naming the Borrower as debtor, and, if such petition is an
involuntary petition filed against the Borrower, such involuntary petition is
not dismissed within 60 days after its filing;

(f)             Any
representation or warranty made by the Borrower in this Agreement, or by the
Borrower (or any of its Officers) in any Loan Document, agreement, certificate,
instrument or financial statement or other statement contemplated by or made or
delivered pursuant to or in connection with this Agreement shall prove to have
been incorrect in any material respect when deemed to be effective;

 10
 

(g)            The
rendering against the Borrower of an arbitration award, final judgment, decree
or order for the payment of money in excess of $500,000 and the continuance of
such arbitration award, judgment, decree or order unsatisfied and in effect for
any period of 30 consecutive days without a stay of execution;

(h)            A
default under any bond, debenture, note or other evidence of indebtedness of
the Borrower for borrowed money exceeding $500,000 in principal amount owed to
any Person other than the Lender, or under any indenture or other instrument
under which any such evidence of indebtedness has been issued or by which it is
governed, and the expiration of the applicable period of grace, if any, specified
in such evidence of indebtedness, indenture or other instrument; or

(i)              The
Borrower shall liquidate, dissolve, terminate or suspend its business
operations or otherwise fail to operate its business in the ordinary course,
merge with another Person unless the Borrower is the surviving entity; or sell
or attempt to sell all or substantially all of its assets, without the Lender’s
prior written consent.

Section 6.2
            Rights and Remedies.  During any Default Period, the Lender may
exercise any or all of the following rights and remedies:

(a)             The
Lender may, by notice to the Borrower, declare the Commitment to be terminated,
whereupon the same shall forthwith terminate;

(b)            The
Lender may, by notice to the Borrower, declare the Obligations to be forthwith
due and payable, whereupon all Obligations shall become and be forthwith due
and payable, without presentment, notice of dishonor, protest or further notice
of any kind, all of which the Borrower hereby expressly waives;

(c)             The
Lender may, without notice to the Borrower and without further action, apply
any and all money owing by the Lender to the Borrower to the payment of the
Obligations;

(d)            The
Lender may exercise and enforce its rights and remedies under the Loan
Documents; and

(e)             The
Lender may exercise any other rights and remedies available to it by law or
agreement.

Notwithstanding
the foregoing, upon the occurrence of an Event of Default described in Section
6.1(d) or (e), the Obligations shall be immediately due and payable
automatically without presentment, demand, protest or notice of any kind.

 11
 

ARTICLE VII

MISCELLANEOUS

Section 7.1
            No Waiver; Cumulative
Remedies; Compliance with Laws.  No
failure or delay by the Lender in exercising any right, power or remedy under
the Loan Documents shall operate as a waiver thereof; nor shall any single or
partial exercise of any such right, power or remedy preclude any other or
further exercise thereof or the exercise of any other right, power or remedy
under the Loan Documents.  The remedies
provided in the Loan Documents are cumulative and not exclusive of any remedies
provided by law.

Section 7.2
            Amendments, Etc.  No amendment, modification, termination or
waiver of any provision of any Loan Document or consent to any departure by the
Borrower therefrom shall be effective unless the same shall be in writing and
signed by the Lender, and then such waiver or consent shall be effective only
in the specific instance and for the specific purpose for which given.  No notice to or demand on the Borrower in any
case shall entitle the Borrower to any other or further notice or demand in
similar or other circumstances.

Section 7.3
            Notices; Communication of
Confidential Information; Requests for Accounting.  Except as otherwise expressly provided
herein, all notices, requests, demands and other communications provided for
under the Loan Documents shall be in writing and shall be (a) personally
delivered, (b) sent by first class United States mail, (c) sent by
overnight courier of national reputation, (d) transmitted by telecopy, or
(e) sent as electronic mail, in each case delivered or sent to the party
to whom notice is being given to the business address, telecopier number, or e
mail address set forth below next to its signature or, as to each party, at
such other business address, telecopier number, or e mail address as it may
hereafter designate in writing to the other party pursuant to the terms of this
Section.  All such notices, requests,
demands and other communications shall be deemed to be an authenticated record
communicated or given on (a) the date received if personally delivered,
(b) when deposited in the mail if delivered by mail, (c) the date
delivered to the courier if delivered by overnight courier, or (d) the
date of transmission if sent by telecopy or by e mail, except that notices or
requests delivered to the Lender pursuant to any of the provisions of
Article II of this Agreement shall not be effective until received by the
Lender.  All notices, financial information,
or other business records sent by either party to this Agreement may be
transmitted, sent, or otherwise communicated via such medium as the sending
party may deem appropriate and commercially reasonable; provided, however,
that the risk that the confidentiality or privacy of such notices, financial
information, or other business records sent by the Borrower may be compromised
shall be borne exclusively by the Borrower.

Section 7.4
            Further Documents.  The Borrower will from time to time execute,
deliver, endorse and authorize the filing of any and all instruments,
documents, conveyances, assignments, security agreements, financing statements,
control agreements and other agreements and writings that the Lender may
reasonably request in order to secure, protect, perfect or enforce the Lender’s
rights under the Loan Documents (but any failure to request 

 12
 

or assure that the Borrower executes,
delivers, endorses or authorizes the filing of any such item shall not affect
or impair the validity, sufficiency or enforceability of the Loan Documents, regardless
of whether any such item was or was not executed, delivered or endorsed in a
similar context or on a prior occasion).

Section 7.5
            Costs and Expenses.  The Borrower shall pay on demand all costs
and expenses, including reasonable attorneys’ fees, incurred by the Lender in
connection with the Obligations, this Agreement, the Loan Documents, and the
transactions contemplated hereby, including all such costs, expenses and fees
incurred in connection with the negotiation, preparation, execution, amendment,
administration, performance, collection and enforcement of the Obligations and
all such documents and agreements.

Section 7.6
            Execution in Counterparts;
Telefacsimile Execution.  This
Agreement and other Loan Documents may be executed in any number of
counterparts, each of which when so executed and delivered shall be deemed to
be an original and all of which counterparts, taken together, shall constitute
but one and the same instrument. 
Delivery of an executed counterpart of this Agreement by telefacsimile
shall be equally as effective as delivery of an original executed counterpart
of this Agreement.  Any party delivering
an executed counterpart of this Agreement by telefacsimile also shall deliver
an original executed counterpart of this Agreement but the failure to deliver
an original executed counterpart shall not affect the validity, enforceability,
and binding effect of this Agreement.

Section 7.7
            Binding Effect; Assignment;
Complete Agreement; Sharing Information. 
The Loan Documents shall be binding upon and inure to the benefit of the
Borrower and the Lender and their respective successors and assigns, except
that the Borrower shall not have the right to assign its rights thereunder or
any interest therein without the Lender’s prior written consent.  To the extent permitted by law, the Borrower
waives and will not assert against any assignee any claims, defenses or
set-offs which the Borrower could assert against the Lender.  This Agreement shall also bind all Persons
who become a party to this Agreement as a borrower.  This Agreement, together with the Loan
Documents, comprises the complete and integrated agreement of the parties on
the subject matter hereof and supersedes all prior agreements, written or oral,
on the subject matter hereof.  To the
extent that any provision of this Agreement contradicts other provisions of the
Loan Documents, this Agreement shall control.

Section 7.8
            Severability of Provisions.  Any provision of this Agreement which is
prohibited or unenforceable shall be ineffective to the extent of such
prohibition or unenforceability without invalidating the remaining provisions
hereof.

Section 7.9
            Headings.  Article, Section and subsection headings
in this Agreement are included herein for convenience of reference only and
shall not constitute a part of this Agreement for any other purpose.

Section 7.10
          Governing Law; Jurisdiction,
Venue; Waiver of Jury Trial.  The
Loan Documents shall be governed by and construed in accordance with the
substantive laws (other than conflict laws) of the State of Minnesota.  The parties hereto hereby (i) consent to

 13
 

the personal jurisdiction of the state and
federal courts located in the State of Minnesota in connection with any
controversy related to this Agreement or the other Loan Documents;
(ii) waive any argument that venue in any such forum is not convenient;
(iii) agree that any litigation initiated by the Lender or the Borrower in
connection with this Agreement or the other Loan Documents may be venued in
either the state or federal courts located in the City of Minneapolis,
Minnesota, County of Hennepin, Minnesota; and (iv) agree  that a final judgment in any such suit,
action or proceeding shall be conclusive and may be enforced in other jurisdictions
by suit on the judgment or in any other manner provided by law.  THE BORROWER
AND THE LENDER HEREBY WAIVE TRIAL BY JURY IN ANY JUDICIAL PROCEEDING INVOLVING,
DIRECTLY OR INDIRECTLY, ANY MATTER (WHETHER SOUNDING IN TORT, CONTRACT OR
OTHERWISE) IN ANY WAY ARISING OUT OF, RELATED TO, OR CONNECTED WITH THIS
AGREEMENT AND THE NOTE OR THE RELATIONSHIPS ESTABLISHED HEREUNDER.

(Signature
Page Follows)

 

 14

IN
WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed
by their respective officers thereunto duly authorized as of the date first
above written.

	
  Kruse Investment Company, Inc. 

  	
   

  	
  KRUSE INVESTMENT
  COMPANY, INC.  

  	
   

  
	
  P.O. Box 1029 

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  31120 West Street 

  	
   

  	
  By:

  	
  /s/ Ejnar Knudsen

  	
   

  
	
  Goshen, CA 93227 

  	
   

  	
   

  	
  Name: 

  	
  Ejnar Kudsen 

  	
   

  
	
  Telecopier: 559-380-2800

  	
   

  	
   

  	
  Title: 

  	
  EVP

  	
   

  
	
  Attention: Mark Labounty

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  e-mail: 

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
    

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  HGF Acquisition  

  	
   

  	
  HGF ACQUISITION, LLC 

  	
   

  
	
  10201 Wayzata Blvd, Suite 250 

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Minneapolis, MN 55305 

  	
   

  	
  By:

  	
  /s/ Revis L. Stephenson III

  	
   

  
	
  Telecopier: 763-226-2725 

  	
   

  	
   

  	
  Name:

  	
   

  	
   

  
	
  Attention: Revis L. Stephenson III

  	
   

  	
   

  	
  Title:

  	
   

  	
   

  
	
  e-mail:rstephenson@advancedbioenergy.com

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
									

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(Signature
Page to Credit Agreement)

 

Exhibit A
to Credit Agreement

PROMISSORY
NOTE

 

$5,000,000                                                                                                                                                               February
12, 2007

 

                For value received, the undersigned, HGF ACQUISITION,
LLC, a Delaware limited liability company (the “Borrower”), hereby promises to
pay on the Termination Date under the Credit Agreement (defined below), to the
order of KRUSE INVESTMENT COMPANY, INC., a California Corporation (the “Lender”),
at its office in Goshen, California, or at any other place designated at any
time by the holder hereof, in lawful money of the United States of America and
in immediately available funds, the principal sum of Five Million Dollars
($5,000,000) or, if less, the aggregate unpaid principal amount of all Advances
(as defined in the Credit Agreement) made by the Lender to the Borrower under
the Credit Agreement (defined below) together with interest on the outstanding
principal amount hereunder remaining unpaid from time to time, computed on the
basis of the actual number of days elapsed and a 360-day year, from the date
hereof until this Note is fully paid at the rate from time to time in effect
under the Credit Agreement dated the same date as this Note (the “Credit
Agreement”) by and between the Lender and the Borrower.  The outstanding principal hereof and interest
accruing thereon shall be due and payable as provided in the Credit
Agreement.  This Note may be prepaid only
in accordance with the Credit Agreement.

                This Note is issued pursuant,
and is subject, to the Credit Agreement, which provides, among other things,
for acceleration hereof.  This Note is
the Note referred to in the Credit Agreement. 
This Note is secured pursuant to the Security Agreement as therein
defined, and may now or hereafter be secured by one or more other security
agreements, mortgages, deeds of trust, assignments or other instruments or
agreements.

                The Borrower shall pay all costs
of collection, including reasonable attorneys’ fees and legal expenses if this
Note is not paid when due, whether or not legal proceedings are commenced.

                Presentment or other demand for
payment, notice of dishonor and protest are expressly waived.

	
  

  	
  HGF ACQUISITION, LLC

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
  Name:

  	
   

  
	
   

  	
  Its:

  	
   

  
	
   

  	
   

  	
   

  
				

 

 

AMENDMENT NO. 1

Dated as of July 1, 2007

to

CREDIT AGREEMENT

Dated as of February 12, 2007

THIS AMENDMENT NO. 1 (“Amendment”)
is made as of July 1, 2007 by and among HGF ACQUISITION, LLC (the “Borrower”),
and KRUSE INVESTMENT COMPANY, INC. (the “Lender”), under that certain Credit
Agreement dated as of February 12, 2007 between the Borrower and the Lender
(the “Credit Agreement”).  Defined terms
used herein and not otherwise defined herein shall have the respective meanings
given to them in the Credit Agreement.

WHEREAS, the Borrower and
the Lender have agreed to amend the Credit Agreement on the terms and
conditions set forth herein;

NOW, THEREFORE, in
consideration of the premises set forth above, the terms and conditions
contained herein, and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the Borrower and the Lender have
agreed to the following amendments to the Credit Agreement.

1.             Amendments to Credit Agreement.  The Credit Agreement is hereby amended as
follows:

(a)           The
definition of “Maturity Date” is amended and restated in its entirety to read
as follows:

“Maturity Date” means the
earlier of (i) September 30, 2007 or (ii) the closing by Heartland Grain Fuels,
L.P. (or its successor) of a credit facility in the amount of approximately
$135 Million with WestLB AG, New York Branch.

(b)          The definition of “Interest Rate” is
amended and restated in its entirety to read as follows:

“Interest Rate”
means (i) from February 12, 2007 through July 1, 2007, 12% per annum, and (ii)
after July 1, 2007, 15% per annum.

2.             Representations and Warranties
of the Borrower.  The Borrower hereby
represents and warrants that this Amendment and the Credit Agreement as amended
hereby constitute legal, valid and binding obligations of the Borrower and are
enforceable against the Borrower in accordance with their terms.

   
 

3.             Reference to and Effect on the
Credit Agreement.

(a)           Upon
the effectiveness of Section 1 hereof, each reference to the Credit Agreement
in the Credit Agreement or any other Loan Document shall mean and be a
reference to the Credit Agreement as amended hereby.

(b)           Except
as specifically amended above, the Credit Agreement and all other documents,
instruments and agreements executed and/or delivered in connection therewith
shall remain in full force and effect and are hereby ratified and confirmed.

(c)           The
execution, delivery and effectiveness of this Amendment shall not operate as a
waiver of any right, power or remedy of the Lender, nor constitute a waiver of
any provision of the Credit Agreement or any other documents, instruments and
agreements executed and/or delivered in connection therewith (including the
Loan Documents).

4.             Governing Law.  This Amendment shall be governed by and
construed in accordance with the laws of the State of Minnesota.

5.             Headings.  Section headings in this Amendment are
included herein for convenience of reference only and shall not constitute a
part of this Amendment for any other purpose.

6.             Counterparts. 
This Amendment may be executed by one or more of the parties hereto on
any number of separate counterparts, and all of said counterparts taken
together shall be deemed to constitute one and the same instrument.

[Signature Page
Follows]

 2
 

IN WITNESS
WHEREOF, this Amendment has been duly executed as of the day and year first
above written.

	
   

  	
  HGF ACQUISITION, LLC

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
    /s/ Revis L. Stephenson III

  	
   

  
	
   

  	
  Name:

  	
    Revis L. Stephenson III

  	
   

  
	
   

  	
  Title:

  	
    Chairman

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  KRUSE INVESTMENT COMPANY, INC.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
    /s/ Ejnar Knudsen

  	
   

  
	
   

  	
  Name:

  	
    Ejnar Knudsen

  	
   

  
	
   

  	
  Title:

  	
    EVP

  	
   

  
							

 

(Signature Page to Amendment No. 1 to Credit
Agreement)

 3EXHIBIT
10.5

ADVANCED BIOENERGY, LLC

INVESTOR RIGHTS AGREEMENT

(SDWG)

 

TABLE OF CONTENTS

	
  

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  Page

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  1.

  	
   

  	
  Definitions

  	
   

  	
  1

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  2.

  	
   

  	
  Registration Rights

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  2.1

  	
   

  	
  Demand
  Registration

  	
   

  	
  4

  	
   

  
	
   

  	
   

  	
  2.2

  	
   

  	
  Company Registration

  	
   

  	
  5

  	
   

  
	
   

  	
   

  	
  2.3

  	
   

  	
  Underwriting
  Requirements

  	
   

  	
  6

  	
   

  
	
   

  	
   

  	
  2.4

  	
   

  	
  Obligations of the
  Company

  	
   

  	
  7

  	
   

  
	
   

  	
   

  	
  2.5

  	
   

  	
  Furnish
  Information

  	
   

  	
  9

  	
   

  
	
   

  	
   

  	
  2.6

  	
   

  	
  Expenses of
  Registration

  	
   

  	
  9

  	
   

  
	
   

  	
   

  	
  2.7

  	
   

  	
  Indemnification

  	
   

  	
  9

  	
   

  
	
   

  	
   

  	
  2.8

  	
   

  	
  Reports Under Exchange
  Act

  	
   

  	
  12

  	
   

  
	
   

  	
   

  	
  2.9

  	
   

  	
  Limitations on
  Subsequent Registration Rights

  	
   

  	
  12

  	
   

  
	
   

  	
   

  	
  2.10

  	
   

  	
  “Market
  Stand-off” Agreement

  	
   

  	
  13

  	
   

  
	
   

  	
   

  	
  2.11

  	
   

  	
  Restrictions on
  Transfer

  	
   

  	
  13

  	
   

  
	
   

  	
   

  	
  2.12

  	
   

  	
  Termination of
  Registration Rights

  	
   

  	
  16

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  3.

  	
   

  	
  Board Rights

  	
   

  	
  16

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  3.1

  	
   

  	
  Board Rights

  	
   

  	
  16

  	
   

  
	
   

  	
   

  	
  3.2

  	
   

  	
  Observer Rights

  	
   

  	
  16

  	
   

  
	
   

  	
   

  	
  3.3

  	
   

  	
  Termination
  of Board Rights

  	
   

  	
  16

  	
   

  
	
   

  	
   

  	
  3.4

  	
   

  	
  Termination of Observer
  Rights

  	
   

  	
  16

  	
   

  
	
   

  	
   

  	
  3.5

  	
   

  	
  Confidentiality

  	
   

  	
  17

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  4.

  	
   

  	
  Additional
  Covenants

  	
   

  	
  17

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  4.1

  	
   

  	
  Extraordinary
  Transactions

  	
   

  	
  17

  	
   

  
	
   

  	
   

  	
  4.2

  	
   

  	
  Meetings
  of the Board

  	
   

  	
  17

  	
   

  
	
   

  	
   

  	
  4.3

  	
   

  	
  Successor
  Liability

  	
   

  	
  17

  	
   

  
	
   

  	
   

  	
  4.4

  	
   

  	
  Board
  Expenses

  	
   

  	
  18

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  5.

  	
   

  	
  Miscellaneous

  	
   

  	
  18

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  5.1

  	
   

  	
  Successors
  and Assigns

  	
   

  	
  18

  	
   

  
	
   

  	
   

  	
  5.2

  	
   

  	
  Governing Law

  	
   

  	
  18

  	
   

  
	
   

  	
   

  	
  5.3

  	
   

  	
  Counterparts; Facsimile

  	
   

  	
  19

  	
   

  
	
   

  	
   

  	
  5.4

  	
   

  	
  Titles and Subtitles

  	
   

  	
  19

  	
   

  
	
   

  	
   

  	
  5.5

  	
   

  	
  Notices

  	
   

  	
  19

  	
   

  
	
   

  	
   

  	
  5.6

  	
   

  	
  Amendments and Waivers

  	
   

  	
  19

  	
   

  
	
   

  	
   

  	
  5.7

  	
   

  	
  Severability

  	
   

  	
  20

  	
   

  
	
   

  	
   

  	
  5.8

  	
   

  	
  Aggregation of
  Securities

  	
   

  	
  20

  	
   

  
	
   

  	
   

  	
  5.9

  	
   

  	
  Entire Agreement

  	
   

  	
  20

  	
   

  
	
   

  	
   

  	
  5.10

  	
   

  	
  Delays or Omissions

  	
   

  	
  20

  	
   

  

 

Schedule A - Schedule of Holders

 i

 

ADVANCED
BIOENERGY, LLC

INVESTOR RIGHTS AGREEMENT

This
Investor Rights Agreement (this “Agreement”) is made as of the    
day of November, 2006, by and between
Advanced BioEnergy, LLC, a Delaware limited liability company (the “Company”),
and South Dakota Wheat Growers Association, a South Dakota cooperative (“SDWG”).

Background

A.            The Company, HGF Acquisition, LLC, a
wholly owned subsidiary of the Company (“Acquisition Sub”),
Heartland Grain Fuels, L.P., a Delaware limited partnership (“HGF”), Heartland Producers, LLC, a South Dakota limited
liability company (“HP”), SDWG and
Dakota Fuels, Inc., a Delaware corporation (“DF”),
have entered into a Partnership Interest and Stock Purchase Agreement dated
November 7, 2006 (the “Purchase Agreement”),
which provides for the acquisition by Acquisition Sub of the limited
partnership interests of HGF and the common shares of DF owned by SDWG and HP,
in a two-step transaction described therein.

B.            In order to induce
SDWG to exchange its limited partnership interests in HGF and common shares of
DF for Units (as defined below) and cash pursuant to the Purchase Agreement,
SDWG and the Company hereby agree that this Agreement shall govern the rights
of SDWG to cause the Company to register Units, to receive certain information
from the Company, and shall govern certain other matters as set forth in this
Agreement.

C.            The parties hereby
agree as follows.

Agreement

1.             Definitions.  For purposes of this Agreement:

1.1           “Additional Financing”
means the sale by the Company of additional Units as contemplated by the
registration statement on Form SB-2 filed by the Company with the SEC on
September 13, 2006, as amended from time to time thereafter.

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

1.3           “Damages” means any loss, damage,
or liability to which a party hereto may become subject under the Securities
Act, the Exchange Act, or other federal or state law, insofar as such loss,
damage, or liability (or any action in respect thereof) arises out of or is
based upon (a) any untrue statement or alleged untrue statement of a
material fact contained in any registration statement of the Company, including
any preliminary prospectus or final prospectus contained therein or any
amendments or supplements thereto; (b) an omission or 

 1
 

 

alleged omission to state
therein a material fact required to be stated therein, or necessary to make the
statements therein not misleading; or (c) any violation or alleged
violation by the indemnifying  party (or any
of its agents or Affiliates)  of the
Securities Act, the Exchange Act, any state securities law, or any rule or
regulation promulgated under the Securities Act, the Exchange Act, or any state
securities law.

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

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

1.6          “Excluded Registration” means (a) a registration of Units
in connection with the Additional Financing
so long as such registration is declared effective by the SEC no later than
February 28, 2007; (b) a
registration relatingto the sale of securities to employees of the Company or
a subsidiary pursuant to a stock
option, stock purchase, or similar plan; or (c) a registration
relating to an SEC Rule 145
transaction.

1.7          “Form S-1” means such form
under the Securities Act as in effect on the date hereof or any successor
registration form under the Securities Act subsequently adopted by the SEC.

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

1.9           “Form S-3”
means such form under the Securities Act as in effect on the date hereof or any
registration form under the Securities Act subsequently adopted by the SEC that
permits incorporation of substantial information by reference to other
documents filed by the Company with the SEC.

1.10         “GAAP” means
generally accepted accounting principles in the United States.

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

1.12         “Immediate Family Member”
means a child, stepchild,
grandchild, parent, stepparent, grandparent, spouse, sibling, mother-in-law, father-in-law, son-in-law,
daughter-in-law, brother-in-law, or sister-in-law,
including adoptive relationships, of a natural person referred to herein.

 2
 

 

1.13         “Initiating Holders” means, collectively,
Holders who properly initiate a registration request under this Agreement.

1.14         “IPO” means the Company’s first underwritten public
offering of its Units or other equity securities under the Securities Act.

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

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

1.17         “Registrable Securities” means (a) the
Units issued to SDWG, and any Units acquired by SDWG after the date hereof; and
(b) any Units issued as (or issuable upon the conversion or exercise of any warrant, right, or other security that is
issued as) a dividend or other distribution with respect to, or in exchange for
or in replacement of, the Units referenced in clause (a) above; excluding in
all cases, however, any Registrable Securities sold by a Person in a
transaction in which the applicable rights under this Agreement are not
assigned pursuant to Section 5.1, and excluding for purposes of Section 2  any Units for which registration rights
have terminated pursuant to Section 2.12 of this Agreement.

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

1.19         “SEC” means the
Securities and Exchange Commission.

1.20         “SEC Rule 144” means Rule 144 promulgated by the SEC under the Securities Act.

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

1.22         “SEC Rule 145” means Rule 145 promulgated by the SEC under the Securities Act.

1.23         “Securities Act” means the Securities Act of 1933, as amended, and the rules and
regulations promulgated thereunder.

1.24         “Selling Expenses” means all underwriting discounts, selling commissions, and stock transfer
taxes applicable to the sale of Registrable Securities, and fees and
disbursements of counsel for any Holder, except for the fees and disbursements
of the Selling Holder Counsel borne and paid by the Company  as provided in Section 2.6.

 3
 

 

1.25         “Units” means units of membership interests in
the Company, or shares or other equity interests of the Company issued in
exchange for or otherwise in connection with any transaction as described in Section 4.1.

2.             Registration Rights.  The Company covenants
and agrees as follows:

2.1           Demand Registration.

(a)           Form S-1 Demand.  If
at any time after the earlier of (i) one year after the date of this
Agreement or (ii) ninety (90) days after the effective date of the registration
statement for the IPO or such longer period after the IPO if the Holders cannot
sell their securities as a result of executing a “market stand-off” agreement
contemplated by Section 2.10 hereof, the Company receives a request
from Holders of at least twenty-five percent (25%) of the Registrable
Securities that the Company file a Form S-1 registration statement with respect
to at least twenty percent (20%) of the Registrable Securities (or a lesser
percentage if the anticipated aggregate offering price, net of Selling
Expenses, would exceed $15 million), then the Company shall (x) within ten
(10) days after the date such request is given, give notice thereof (the “Demand Notice”) to all Holders other than
the Initiating Holders; and (y) as soon as practicable, and in any event
within forty-five (45) days after the date such request is given by the
Initiating Holders, file a  Form
S-1 registration statement under the Securities Act covering all Registrable
Securities that the Initiating  Holders requested  to be registered and
any
additional Registrable Securities requested to be included in such registration
by any other Holders, as specified by notice given by each such Holder to the
Company within twenty (20) days of the date the Demand Notice is given, and in
each case,  subject to the limitations of Section 2.1(c) and Section
2.3.

(b)           Form S-3 Demand.  If at any time when it is eligible to use a
Form S-3 registration statement, the Company receives a request from
Holders of at least twenty-five percent (25%) of the Registrable Securities
that the Company file a Form S-3 registration statement with respect to at least
twenty percent (20%) of the Registrable Securities (or a lesser percentage if
the anticipated aggregate offering price, net of Selling Expenses, would exceed
$15 million), then the Company shall (i) within ten (10) days after the
date such request is given, give a Demand Notice to all Holders other than the
Initiating Holders; and (ii) as soon as practicable, and in any event within
forty-five (45) days after the date such request is given by the Initiating
Holders, file a Form S-3 registration statement under the Securities Act
covering all Registrable Securities requested to be included in such
registration by any other Holders, as specified by notice given by each such
Holder to the Company within twenty (20) days of the date the Demand Notice is
given, and in each case, subject to the limitations of Section 2.1(c)
and Section 2.3.

(c)           Notwithstanding the foregoing obligations, if the
Company furnishes to Holders requesting a registration pursuant to Section
2.1(a) or Section 2.1(b) a certificate signed by the Company’s chief
executive officer stating that in the good faith judgment of the Board it would
be materially detrimental to the Company and its members for 

 4
 

 

such registration statement to either become effective or remain
effective for as long as such registration statement otherwise would be
required to remain effective, because such action would (i) materially
interfere with a significant acquisition, corporate reorganization, or other
similar transaction involving the Company; or (ii) require premature
disclosure of material information that the Company has a bona fide business
purpose for preserving as confidential; and it is therefore necessary to defer
the filing of such registration statement, then the Company shall have the
right to defer taking action with respect to such filing, and any time periods
with respect to filing or effectiveness thereof shall be tolled
correspondingly, for a period of not more than thirty (30) days after the
request of the Initiating Holders is given; provided, however, that the
Company may not invoke this right more than once in any twelve (12) month
period; and provided further that the Company shall not register any
securities for its own account or that of any other member during such thirty
(30) day period other than an Excluded Registration.

(d)           The
Company shall not be obligated to effect, or to take any action to effect, any
registration pursuant to Section 2.1(a)(i) during the period that is thirty
(30) days before the Company’s good faith estimate of the date of filing of,
and ending on a date that is ninety (90) days after the effective date of, a
Company-initiated registration, provided, that the Company is actively
employing in good faith commercially reasonable efforts to cause such
registration statement to become effective; (ii) after the Company has effected two
registrations pursuant to Section 2.1(a); or (iii) if the Initiating Holders
propose to dispose of shares of Registrable Securities that may be immediately
registered on Form S-3 pursuant to a request made pursuant to Section 2.1(b).  The Company shall not be obligated to effect,
or to take  any action to effect,
any registration pursuant to Section 2.1(b) (x) during the period that
is thirty (30) days before the Company’s good faith estimate of the date of
filing of, and ending on a date that is ninety (90) days after the effective
date of, a Company-initiated registration, provided, that the Company is
actively employing in good faith commercially reasonable efforts to cause such
registration statement to become effective; or (y) if the Company has effected
two registrations pursuant to Section 2.1(b) within the twelve (12)
month period immediately preceding the date of such request.  A
registration shall not be counted as “effected” for purposes of this Section
2.1(d) until such time as the applicable registration statement has been
declared effective by the SEC, unless the Initiating Holders withdraw their
request for such registration, elect not to pay the registration expenses
therefor, and forfeit their right to one demand registration statement  pursuant to Section
2.6, in
which case such withdrawn registration statement shall be counted as “effected”
for purposes of this Section 2.1(d).

2.2           Company Registration.  If the Company proposes to
register (including, for this purpose, a registration effected by the Company
for equity holders other than the Holders) any of its securities under the
Securities Act in connection with the public offering of such securities solely
for cash (other than in an Excluded Registration), the Company shall, at such
time, promptly give each Holder notice of such registration.  Upon the request of each Holder given within
twenty (20) days after such notice is given by the Company, the Company shall,
subject to the provisions of Section 2.3, cause to be registered all of
the Registrable Securities that each such Holder has requested to be included
in such registration.  The Company 

 5
 

 

shall have the right to terminate or withdraw
any registration initiated by it under this Section 2.2 before the
effective date of such registration, whether or not any Holder has elected to
include Registrable Securities in such registration.  The expenses (other than Selling Expenses) of
such withdrawn registration shall be borne by the Company in accordance with Section 2.6.

2.3           Underwriting Requirements.

(a)           If, pursuant to Section 2.1, the
Initiating Holders  intend to distribute the Registrable Securities
covered by their request by means of an underwriting, they shall so advise the
Company as a part of their request made pursuant to Section 2.1, and the
Company shall include such information in the Demand Notice.  The underwriter(s) will be selected by the Company and shall be reasonably
acceptable to a majority in interest of the Initiating Holders.  In such event, the right of any Holder to
include such Holder’s Registrable Securities in such registration shall be
conditioned upon such Holder’s participation in such underwriting and the
inclusion of such Holder’s Registrable Securities in the underwriting to the
extent provided herein.  All Holders
proposing to distribute their securities through such underwriting shall
(together with the Company as provided in Section 2.4(e)) enter
into an underwriting agreement in customary form with the underwriter(s)
selected for such underwriting. 
Notwithstanding any other provision of this Section 2.3, if
the underwriter(s) advise(s) the Initiating Holders in writing that marketing
factors require a limitation on the number of shares to be underwritten, then
the Initiating Holders shall so advise all Holders of Registrable Securities
that otherwise would be underwritten pursuant hereto, and the number of
Registrable Securities that may be included in the underwriting shall be
allocated among such Holders of Registrable Securities, including the
Initiating Holders, in proportion (as nearly as practicable) to the number of
Registrable Securities owned by each Holder or in such other proportion as
shall mutually  be agreed to by all
such selling Holders; provided, however, that the number of Registrable
Securities held by the Holders to be included in such underwriting shall not be
reduced unless all other securities are first entirely excluded from the
underwriting.

(b)           In connection with any offering
involving an underwriting of the Company’s securities pursuant to Section 2.2,
the Company shall not be required to include any of the Holders’ Registrable
Securities in such underwriting unless the Holders accept the terms of the
underwriting agreement as agreed upon between the Company and its underwriters
(which underwriting agreement shall contain customary terms and conditions),
and then only in such quantity as the underwriters in their reasonable
discretion determine will not jeopardize the success of the offering by the
Company.  If the total number of
securities, including Registrable Securities, requested by security holders of
the Company to be included in such offering exceeds the number of securities to
be sold (other than by the Company) that the underwriters in their reasonable
discretion determine is compatible with the success of the offering, then the
Company shall be required to include in the offering only that number of such
securities, including Registrable Securities, which the underwriters in their
reasonable discretion determine will not jeopardize the success of the
offering.  If the underwriters determine
that less than all of the Registrable Securities requested to be registered can
be included in such offering, then the 

 6
 

 

Registrable Securities that are included in such offering shall be allocated
among the selling Holders in proportion (as nearly as practicable to) the
number of Registrable Securities owned by each selling Holder or in such other
proportions as shall mutually be agreed to by all such selling Holders.  Notwithstanding the foregoing, in no event
shall (i) the number of
Registrable Securities included in the offering be reduced unless all other
securities (other than securities to be sold by the Company) are first entirely
excluded from the offering, or (ii) the number of Registrable Securities
included in the offering be reduced below thirty percent (30%) of the total
number of securities included in such offering, unless such offering is the
IPO, in which case the selling Holders may be excluded further if the
underwriters make the determination described above and no other member’s
securities are included in such offering. 
For purposes of the provision in this Section 2.3(b)
concerning apportionment, for any selling Holder that is a partnership, limited
liability company, or corporation, the partners, members, retired partners,
retired members, stockholders, and Affiliates of such Holder, or the estates
and Immediate Family Members of any such partners, retired partners, members,
and retired members and any trusts for the benefit of any of the foregoing
Persons, shall be deemed to be a single “selling Holder,” and any pro rata
reduction with respect to such “selling Holder” shall be based upon the
aggregate number of Registrable Securities owned by all Persons included in
such “selling Holder” as defined in this sentence.

(c)           For purposes of Section 2.1,
a registration shall not be counted as “effected” if, as a result of an
exercise of the underwriter’s cutback provisions in Section 2.3, fewer than fifty percent (50%) of the total number of
Registrable Securities that Holders have requested to be included in such
registration statement are actually included.

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

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

(b)           prepare and file with the SEC such
amendments and supplements to such registration statement, and the prospectus
used in connection with such registration 

 7
 

 

statement, as may be necessary to
comply with the Securities Act in order to enable the disposition of all
securities covered by such registration statement;

(c)           furnish to the selling Holders such
numbers of copies of a prospectus, including a preliminary prospectus, as
required by the Securities Act, and such other documents as the Holders may
reasonably request in order to facilitate their disposition of their
Registrable Securities;

(d)           use its commercially reasonable
efforts to register and qualify the securities covered by such registration
statement under such other securities or blue-sky laws of such jurisdictions as
shall be reasonably requested by the selling Holders; provided that the
Company shall not be required to qualify to do business or to file a general
consent to service of process in any such states or jurisdictions, unless the
Company is already subject to service in such jurisdiction and except as may be
required by the Securities Act;

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

(f)            use its commercially reasonable
efforts to cause all such Registrable Securities covered by such registration
statement to be listed on a national securities exchange or trading system and
each securities exchange and trading system (if any) on which similar
securities issued by the Company are then listed;

(g)           provide a transfer agent and
registrar for all Registrable Securities registered pursuant to this Agreement
and provide a CUSIP number for all such Registrable Securities, in each case
not later than the effective date of such registration;

(h)           promptly make available for
inspection by the selling Holders, any underwriter(s) participating in any disposition pursuant to such
registration statement, and any attorney or accountant or other agent retained
by any such underwriter or selected by the selling Holders, all financial and
other records, pertinent corporate documents, and properties of the Company,
and cause the Company’s officers, directors, employees, and independent
accountants to supply all information reasonably requested by any such seller,
underwriter, attorney, accountant, or agent, in each case, as necessary or
advisable to verify the accuracy of the information in such registration
statement and to conduct appropriate due diligence in connection therewith;

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

 8
 

 

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

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

2.6           Expenses of Registration.  All expenses (other than Selling Expenses)
incurred in connection with registrations,
filings, or qualifications pursuant to Section 2, including all
registration, filing, and qualification fees; printers’ and accounting fees;
fees and disbursements of counsel for the Company; and the reasonable fees and
disbursements of one counsel for the selling Holders (“Selling Holder Counsel”), shall be borne and paid by the
Company; provided, however, that the Company shall not be required to
pay for any expenses of any registration proceeding begun pursuant to Section 2.1(a)
or Section 2.1(b) if the registration request is subsequently
withdrawn at the request of the Holders of a majority of the Registrable
Securities to be registered (in which case all selling Holders shall bear such
expenses pro rata based upon the number of Registrable Securities that were to
be included in the withdrawn registration), unless the Holders of a majority of
the Registrable Securities agree to forfeit their right to one registration
pursuant to Section 2.1(a) or Section 2.1(b), as the
case may be; provided further that if, at the time of such withdrawal,
the Holders have learned of a material adverse change in the condition,
business, or prospects of the Company from that known to the Holders at the
time of their request and have withdrawn the request with reasonable promptness
after learning of such information, then the Holders shall not be required to
pay any of such expenses and shall not forfeit their right to one registration
pursuant to Section 2.1(a) or Section 2.1(b).  All Selling Expenses relating to Registrable
Securities registered pursuant to Section 2 shall be borne and paid
by the Holders pro rata on the basis of the number of Registrable Securities
registered on their behalf.

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

(a)           To the extent permitted by law, the
Company will indemnify and hold harmless each selling Holder, and the partners,
members, officers, directors, and stockholders of each such Holder; legal
counsel and accountants for each such Holder; any underwriter (as defined in
the Securities Act) for each such Holder; and each Person, if any, who controls
such Holder or underwriter within the meaning of the Securities Act or the
Exchange Act, against any Damages, and the Company will pay to each such
Holder, underwriter, controlling Person, or other aforementioned Person any
legal or other expenses reasonably incurred thereby in connection with
investigating or defending any claim or proceeding from which Damages may
result, as such expenses are incurred; provided, however, that the
indemnity 

 9
 

 

agreement contained in this Section 2.7(a)
shall not apply to amounts paid in settlement of any such claim or proceeding
if such settlement is effected without the consent of the Company, which
consent shall not be unreasonably withheld, nor shall the Company be liable for
any Damages to the extent that they arise out of or are based upon actions or
omissions made in reliance upon and in conformity with written information
furnished by or on behalf of any such Holder, underwriter, controlling Person,
or other aforementioned Person expressly for use in connection with such
registration.

(b)           To the extent permitted by law, each
selling Holder, severally and not jointly, will indemnify and hold harmless the
Company, and each of its directors, each of its officers who has signed the
registration statement, each Person (if any), who controls the Company within
the meaning of the Securities Act, legal counsel and accountants for the
Company, any underwriter (as defined in the Securities Act), any other Holder
selling securities in such registration statement, and any controlling Person
of any such underwriter or other Holder, against any Damages, in each case only
to the extent that such Damages arise out of or are based upon actions or
omissions made in reliance upon and in conformity with written information
furnished by or on behalf of such selling Holder expressly for use in
connection with such registration; and each such selling Holder will pay,
severally and not jointly, to the Company and each other aforementioned Person
any legal or other expenses reasonably incurred thereby in connection with
investigating or defending any  claim
or proceeding from which Damages may result, as such expenses are incurred; provided,
however, that the indemnity agreement contained in this Section 2.7(b)
shall not apply to amounts paid in settlement of any such claim or proceeding
if such settlement is effected without the consent of the Holder, which consent
shall not be unreasonably withheld; and provided further that in no
event shall any indemnity under this Section 2.7(b) exceed the
proceeds from the offering received by such Holder, except in the case of
common law fraud or willful misconduct by such Holder.

(c)           Promptly after receipt by an
indemnified party under this Section 2.7 of notice of the
commencement of any action (including any governmental action) for which a
party may be entitled to indemnification hereunder, such indemnified party
will, if a claim in respect thereof is to be made against any indemnifying
party under this Section 2.7, give the indemnifying party notice of
the commencement thereof.  The
indemnifying party shall have the right to participate in such action and, to
the extent the indemnifying party so desires, participate jointly with any
other indemnifying party to which notice has been given, and to assume the
defense thereof with counsel mutually satisfactory to the parties; provided,
however, that an indemnified party (together with all other indemnified
parties that may be represented without conflict by one counsel) shall have the
right to retain one separate counsel, with the fees and expenses to be paid by
the indemnifying party, if representation of such indemnified party by the
counsel retained by the indemnifying party would be inappropriate due to actual
or potential conflicting interests between such indemnified party and any other
party represented by such counsel in such action.  The failure to give notice to the
indemnifying party within a reasonable time of the commencement of any such
action shall not relieve such indemnifying party of any 

 10
 

 

liability to the indemnified party
under this Section 2.7, unless such failure actually and materially
prejudices the indemnifying party’s ability to defend such action.

(d)           Notwithstanding
anything else herein to the contrary, the foregoing indemnity agreements of the
Company and the selling Holders are subject to the condition that, insofar as
they relate to any Damages arising from any untrue statement or alleged untrue
statement of a material fact contained in, or omission or alleged omission of a
material fact from, a preliminary prospectus (or necessary to make the
statements therein not misleading) that has been corrected in the form of
prospectus included in the registration statement at the time it becomes
effective, or any amendment or supplement thereto filed with the SEC pursuant
to Rule 424(b) under the Securities Act (the “Final
Prospectus”), such indemnity agreement shall not inure to the
benefit of any Person if a copy of the Final Prospectus was furnished to the
indemnified party and such indemnified party failed to deliver, at or before
the confirmation of the sale of the shares registered in such offering, a copy
of the Final Prospectus to the Person asserting the loss, liability, claim, or
damage in any case in which such delivery was required by the Securities Act.

(e)           To
provide for just and equitable contribution to joint liability under the
Securities Act in any case in which either (i) any party otherwise
entitled to indemnification hereunder makes a claim for indemnification
pursuant to this Section 2.7 but it is judicially determined (by
the entry of a final judgment or decree by a court of competent jurisdiction
and the expiration of time to appeal or the denial of the last right of appeal)
that such indemnification may not be enforced in such case, notwithstanding the
fact that this Section 2.7 provides for indemnification in such
case, or (ii) contribution under the Securities Act may be required on the
part of any party hereto for which indemnification is provided under this Section 2.7,
then, and in each such case, such parties will contribute to the aggregate
losses, claims, damages, liabilities, or expenses to which they may be subject
(after contribution from others) in such proportion as is appropriate to
reflect the relative fault of each of the indemnifying party and the
indemnified party in connection with the statements, omissions, or other
actions that resulted in such loss, claim, damage, liability, or expense, as
well as to reflect any other relevant equitable considerations.  The relative fault of the indemnifying party
and of the indemnified party shall be determined by reference to, among other
things, whether the untrue or allegedly untrue statement of a material fact, or
the omission or alleged omission of a material fact, relates to information
supplied by the indemnifying party or by the indemnified party and the parties’
relative intent, knowledge, access to information, and opportunity to correct
or prevent such statement or omission; provided, however, that, in any
such case, (x) no Holder will be required to contribute any amount in
excess of the public offering price of all such Registrable Securities offered
and sold by such Holder pursuant to such registration statement, and
(y) no Person guilty of fraudulent misrepresentation (within the meaning
of Section 11(f) of the Securities Act) will be entitled to contribution
from any Person who was not guilty of such fraudulent misrepresentation; and provided
further that in no event shall a Holder’s liability pursuant to this Section 2.7(e),
when combined with the amounts paid or payable by such Holder pursuant to Section 2.7(b),
exceed the proceeds from the offering received by such Holder  (net of 

 11
 

 

any Selling Expenses) paid by such Holder),
except in the case of willful misconduct or common law fraud by such Holder.

(f)            Notwithstanding
the foregoing, to the extent that the provisions on indemnification and
contribution contained in the underwriting agreement entered into in connection
with the underwritten public offering are in conflict with the foregoing
provisions, the provisions in the underwriting agreement shall control;
provided, however, that the provisions on indemnification and contribution
contained in the underwriting agreement shall not contain provisions which
expose the Holders to greater liability than the terms contained herein.

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

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

(a)           make
and keep available adequate current  public
information, as those terms are understood and defined in SEC Rule 144, at
all times;

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

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

2.9           Limitations
on Subsequent Registration Rights. 
From and after the date of this
Agreement, the Company shall not, without the prior written consent of the
Holders of a majority of the Registrable Securities, enter into any agreement
with any holder or prospective holder of any securities of the Company that
would allow such holder or prospective holder (a) to include such
securities in any Company registration unless, under the terms of such
agreement, such holder or prospective holder may include such securities in any
such registration 

 12
 

 

only to the extent that the inclusion of such
securities will not reduce the number of the Registrable Securities of the
Holders that are included or (b) to demand registration of any securities
held by such holder or prospective holder.

2.10         “Market Stand-off” Agreement.  Each Holder hereby agrees that it will not,
without the prior written consent of the managing underwriter, during the
period commencing on the date of the final prospectus relating to the IPO or other
registration by the Company for its own behalf of Units or any other equity
securities under the Securities Act on a registration statement on Form S-1,
Form S-2, or Form S-3, and ending on the date specified by the Company and the
managing underwriter (such period not to exceed (a) one hundred eighty
(180) days in the case of the IPO, which period may be extended upon the
request of the managing underwriter for an additional period of up to fifteen
(15) days if the Company issues or proposes to issue an earnings or other
public release within fifteen (15) days of the expiration of the 180-day lockup
period, or (b) ninety (90) days in the case of any registration other than
the IPO, which period may be extended upon the request of the managing
underwriter for an additional period of up to fifteen (15) days if the Company
issues or proposes to issue an earnings or other public release within fifteen
(15) days of the expiration of the 90-day lockup period),  (i) lend; offer; pledge; sell;
contract to sell; sell any option or contract to purchase; purchase any option
or contract to sell; grant any option, right, or warrant to purchase; or
otherwise transfer or dispose of, directly or indirectly, any Units or any
securities convertible into or exercisable or exchangeable (directly or
indirectly) for Units held immediately before the effective date of the
registration statement for such offering or (ii) enter into any swap or
other arrangement that transfers to another, in whole or in part, any of the
economic consequences of ownership of such securities, whether any such
transaction described in clause (i) or (ii) above is to be settled by delivery
of Units or other securities, in cash, or otherwise.  The foregoing provisions of this Section 2.10
shall apply only to the IPO, shall not apply to the sale of any shares to
an underwriter pursuant to an underwriting agreement, and shall be applicable
to the Holders only if all officers, directors, and members individually owning
more than five percent (5%) of the Company’s outstanding Units (or other voting
equity securities) are subject to the same restrictions.  Each Holder further agrees to execute such agreements
as may be reasonably requested by the underwriters in connection with such
registration that are consistent with this Section 2.10 or that are
necessary to give further effect thereto.

2.11         Restrictions on Transfer.

(a)           The
Registrable Securities shall not be sold, pledged, or otherwise transferred,
and the Company shall not recognize any such sale, pledge, or transfer, except
upon the conditions specified in this Agreement and Section 9 of the
Operating Agreement, which conditions are intended to ensure compliance with
the provisions of the Securities Act.  A
transferring Holder will cause any proposed purchaser, pledgee, or transferee
of the Registrable Securities held by such Holder to agree to take and hold
such securities subject to the provisions and upon the conditions specified in
this Agreement and the Operating Agreement.

 

 13

 

(b)           In
addition to any legend requirements set forth in the Operating Agreement, each
certificate or instrument representing the Registrable Securities shall (unless
otherwise permitted by the provisions of Section 2.11(c)) be
stamped or otherwise imprinted with a legend substantially in the following
form:

THE SECURITIES
REPRESENTED HEREBY HAVE BEEN ACQUIRED FOR INVESTMENT AND HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933. 
SUCH SECURITIES MAY NOT BE SOLD, PLEDGED, OR TRANSFERRED IN THE ABSENCE
OF SUCH REGISTRATION OR A VALID EXEMPTION FROM THE REGISTRATION AND PROSPECTUS
DELIVERY REQUIREMENTS OF SAID ACT.

THE SECURITIES
REPRESENTED HEREBY MAY BE TRANSFERRED ONLY IN ACCORDANCE WITH THE TERMS OF THAT
CERTAIN INVESTOR RIGHTS AGREEMENT BETWEEN THE COMPANY AND CERTAIN HOLDERS OF
ITS SECURITIES, A COPY OF WHICH IS ON FILE WITH THE SECRETARY OF THE COMPANY.

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

(c)           The
holder of each certificate representing Restricted Securities, by acceptance
thereof, agrees to comply in all respects with the provisions of this Section 2.  Before any proposed sale, pledge, or transfer
of any Restricted Securities, unless there is in effect a registration
statement under the Securities Act covering the proposed transaction, the
Holder thereof shall give notice to the Company of such Holder’s intention to
effect such sale, pledge, or transfer. 
Each such notice shall describe the manner and circumstances of the
proposed sale, pledge, or transfer in sufficient detail and, if reasonably
requested by the Company, shall be accompanied at such Holder’s expense by
either (i) a written opinion of legal counsel who shall, and whose legal
opinion shall, be reasonably satisfactory to the Company, addressed to the
Company, to the effect that the proposed transaction may be effected without
registration under the Securities Act; (ii) a “no action” letter from the
SEC to the effect that the proposed 
sale, pledge, or transfer of such Restricted Securities without
registration will not result in a recommendation by the staff of the SEC that
action be taken with respect thereto; or (iii) any other evidence
reasonably satisfactory to counsel to the Company to the effect that the
proposed sale, pledge, or transfer of the Restricted Securities may be effected
without registration under the Securities Act, whereupon the Holder of such
Restricted Securities shall be entitled to sell, pledge, or transfer such
Restricted Securities in accordance with the terms of the notice given by the
Holder to the Company.  The Company will
not require such a legal opinion or “no action” letter (x) in any
transaction in compliance with SEC Rule 144 or (y) in any transaction in
which such Holder distributes Restricted Securities to an Affiliate of such
Holder for no consideration; provided that in the case of a transfer to an
Affiliate each transferee agrees in writing to be subject to the terms of this Section 2.11.
Each certificate or instrument evidencing the Restricted 

 14
 

 

Securities transferred as above
provided shall bear, except if such transfer is made pursuant to SEC Rule 144,
the appropriate restrictive legend set forth in Section 2.11(b),
except that such certificate shall not bear such restrictive legend if, in the
opinion of counsel for such Holder and the Company, such legend is not required
in order to establish compliance with any provisions of the Securities Act.

(d)           In
the event that SDWG intends to sell the Units it received pursuant to the
Purchase Agreement prior to being able to dispose of them in accordance with
SEC Rule 144 in a transaction not covered by a registration statement
under the Securities Act, it shall give the Company written notice of such
sale, including the terms of such sale (the “Sale
Notice”).  The Company may
elect to purchase all of the Units intended to be sold by SDWG on the same
terms and conditions as set forth in the Sale Notice by delivering written
notice to SDWG (the “Purchase Notice”)
within ten (10) business days of receiving the Sale Notice.  The Company shall consummate the purchase of
the Units subject to the Sale Notice within thirty (30) days of its election to
purchase.  Notwithstanding the terms and
conditions of Section 9 of the Operating Agreement, to the extent the
Company fails to deliver SDWG a Purchase Notice within ten (10) business days
of receiving the Sale Notice or fails to consummate the purchase of the Units
within thirty (30) days of its election to purchase such Units, SDWG shall be
permitted to sell the Units covered by the Sale Notice without restriction
under this Section 2.11(d) and the Operating Agreement; provided,
that the following conditions have been satisfied:

(1)                                SDWG
shall furnish the Company with its taxpayer identification number and SDWG’s
initial tax basis in the Units transferred; and

(2)                                SDWG
shall provide to the Company an opinion of counsel reasonably satisfactory to
the Company from a regional or national law firm to the effect that:

(A)                            the
sale is either registered under the Securities Act or is exempt from such
registration requirements;

(B)                              the
sale will not cause the Company to be deemed to be an “investment company”
under the Investment Company Act of 1940, as amended; and

(C)                              the
sale will not (i) result in the termination of the Company within the meaning
of Section 708 of the Internal Revenue Code of 1986, as amended (the “Code”), (ii) cause the application of
Sections 168(g)(1)(B) and 168(h) of the Code or similar rules to apply to
the Company, and (iii) cause the Company to be treated as a “publicly traded
partnership” within the meaning of Section 7704(b) of the Code.

 15
 

 

2.12         Termination
of Registration Rights.  The
right of any Holder to request registration or inclusion of Registrable
Securities in any registration pursuant to Section 2.1 or Section 2.2
shall terminate upon the earliest to occur of (a) the closing of a
transaction resulting in a “Dissolution Event” as such term is defined in the
Operating Agreement and (b) the date on which such Holder is entitled to
sell all of the Units owned by it in compliance with SEC Rule 144(k).

3.             Board Rights.

3.1           Board
Rights.  On the date hereof the board
of directors of the Company (the “Board”)
will appoint Dale Locken to the Board. 
So long as SDWG owns at least 50% of the Units issued to it under the
Purchase Agreement, the Company will require each of its Board members and
executive officers to (a) recommend to the members (or other security
holders) of the Company at any meeting of the members (or other security
holders) at which directors are elected the election of one nominee of SDWG
(the “SDWG Board Member”) to the
Board (for such class of directors as the Board shall reasonably determine),
(b) vote the Units (or other voting equity securities of the Company) they
own or control at any time to elect the SDWG Board Member to the Board, and (c)
not take any action, including actions otherwise required under Section 5.3(a)
of the Operating Agreement, that would result in (and take any action necessary
to prevent) the removal of the SDWG Board Member from the Board.

3.2           Observer
Rights.  The Company will invite a representative of the members of HP (the “HP Observer”) and, to the extent the SDWG
Board Member does not occupy a seat on the Board, a representative of SDWG, to
attend all meetings of the Board in a nonvoting observer capacity and, in this
respect, will give each such representative copies of all notices, minutes,
consents, and other materials that it provides to its directors; provided,
however, that each such representative shall agree to hold in confidence
and trust and to act in a fiduciary manner with respect to all information so
provided, including maintaining such information in confidence; and provided
further, that the Company reserves the right to withhold any information
and to exclude each such representative from any meeting or portion thereof if
access to such information or attendance at such meeting could adversely affect
the attorney-client privilege between the Company and its counsel.  The initial HP Observer shall be Craig Schaunaman.  If Mr.
Schaunaman is unable or unwilling to serve as the HP Observer, SDWG shall, in
its sole discretion and for the benefit of the members of HP, designate another
individual to serve as the HP Observer.

3.3           Termination of Board
Rights.  Unless
terminated earlier by reason of failure to maintain the ownership percentage
set forth in Section 3.1, the covenants set forth in Section 3.1
shall terminate and be of no further force or effect on the earlier to occur of
(a) the third anniversary of the date of this Agreement or
(b) immediately before the consummation of the IPO.

3.4           Termination of Observer
Rights.  The covenants
set forth in Section 3.2 shall terminate and be of no further force or
effect on the earlier to occur of (a) the third 

 16
 

 

anniversary of the date of this
Agreement, (b) immediately before the consummation of the IPO, or (c) the termination
of any obligations to effect the Second Closing (as defined in the
Purchase Agreement) pursuant to Section 10.4 of the Purchase Agreement.

3.5           Confidentiality.  Each Holder
agrees that such Holder will keep
confidential and will not disclose, divulge, or use for any purpose (other than to monitor its investment in the Company)
any confidential information obtained from the Company pursuant to the terms of
this Agreement (including notice of the Company’s intention to file a
registration statement), unless such confidential information (a) is known
or becomes known to the public in general (other than as a result of a breach
of this Section 3.5 by such Holder), (b) is or has been
independently developed or conceived by the Holder without use of the Company’s
confidential information, or (c) is or has been made known or disclosed to
the Holder by a third party without knowledge by the Holder of a breach of any
obligation of confidentiality such third party may have to the Company; provided,
however, that an Holder may disclose confidential information (i) to
its attorneys, accountants, consultants, and other professionals to the extent
necessary to obtain their services in connection with monitoring its investment
in the Company; (ii) to any prospective purchaser of any Registrable
Securities from such Holder, if such prospective purchaser agrees to be bound
by the provisions of this Section 3.5; (iii) to any existing
Affiliate, partner, member, stockholder, or wholly owned subsidiary of such
Holder in the ordinary course of business, provided that such Holder  informs such Person that
such information is confidential and directs such Person to maintain the
confidentiality of such information; or
(iv) as may otherwise be required by law, provided that the Holder
promptly notifies the Company of such disclosure and takes reasonable steps to
minimize the extent of any such required disclosure.

4.             Additional Covenants.

4.1           Extraordinary
Transactions.  In the event of any reorganization, merger,
consolidation, recapitalization, liquidation, reclassification, unit dividend,
unit split, combination of Units, rights offering, or extraordinary dividend or
divestiture (including a spin-off), or any other change in the capital
structure or Units of the Company, the Board may, with the prior written
consent of Holders of a majority of the Registrable Securities, make such
adjustment as it determines in its reasonable discretion to be appropriate as
to the number and kind of securities subject to and reserved under this
Agreement and, in order to prevent dilution or enlargement of rights of the
Holders, the number and kind of securities issuable upon any exchange or
conversion of the Units.

4.2           Meetings of the Board.  Unless
otherwise determined by the vote of a majority of the directors then in office,
the Board shall meet at least quarterly in accordance with an agreed-upon
schedule.

4.3           Successor
Liability. 
If the Company or any of its successors or assignees consolidates with
or merges into any other Person and is not the continuing or surviving
corporation or entity of such consolidation or merger, then to the extent
necessary, proper provision shall be made so that the successors and assignees
of the Company assume the 

 17
 

 

obligations of the Company
hereunder, including but not limited to obligations with respect to
registration of Registrable Securities, nomination of board members and
indemnification of members of the Board, as in effect immediately before such
transaction, whether such obligations are contained in the Operating Agreement
or elsewhere, as the case may be.

4.4          Board Expenses.  The Company shall reimburse the SDWG Board
Member and board observers for all reasonable out-of-pocket travel expenses
incurred (consistent with the Company’s travel policy) in connection with
attending meetings of the Board.

5.             Miscellaneous.

5.1           Successors and Assigns.  The rights
under this Agreement may be assigned (but only with all related obligations) by
a Holder to a transferee of Registrable Securities that (a) is an Affiliate,
partner, member, limited partner, retired partner, retired member, or
stockholder of a Holder; (b) is a Holder’s Immediate Family Member or
trust for the benefit of an individual Holder or one or more of such Holder’s
Immediate Family Members; or (c) after such transfer, holds at least
50,000 Registrable Securities (subject to appropriate adjustment for splits,
dividends, combinations, and other recapitalizations); or (d)  is a
transferee of SDWG pursuant to a transaction contemplated by Section 2.11(d)
hereof provided that (i) the Company is, within a reasonable time after
such transfer, furnished with written notice of the name and address of such
transferee and the Registrable Securities with respect to which such rights are
being transferred; and (ii) such transferee agrees in a written instrument
delivered to the Company to be bound by and subject to the terms and conditions
of this Agreement, including the provisions of Section 2.10.  For the purposes of determining the number of
Registrable Securities held by a transferee pursuant to clause (c) above, the
holdings of a transferee (1) that is an Affiliate, limited partner,
retired partner, member, retired member, or stockholder of a Holder;
(2) who is a Holder’s Immediate Family Member; or (3) that is a trust
for the benefit of an individual Holder or such Holder’s Immediate Family
Member shall be aggregated together and with those of the transferring Holder.  The terms and conditions of this Agreement
inure to the benefit of and are binding upon the respective successors and
permitted assignees of the parties. 
Nothing in this Agreement, express or implied, is intended to confer
upon any party other than the parties hereto or their respective successors and
permitted assignees any rights, remedies, obligations or liabilities under or
by reason of this Agreement, except as expressly provided herein.

5.2           Governing
Law.  This Agreement shall be
governed and construed in accordance with the laws of the State of Minnesota
without regard to any applicable conflicts of law.  In any action between the parties arising out
of or relating to this Agreement or any of the transactions contemplated by
this Agreement:  (a) each of the
parties irrevocably waives the right to trial by jury; and (b) each of the
parties irrevocably consents to service of process by first class certified
mail, return receipt requested, postage prepaid, to the address at which such
party is to receive notice in accordance with Section 5.5.

 18
 

 

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

5.4           Titles
and Subtitles.  The titles and subtitles used in this
Agreement are for convenience only and are not to be considered in construing
or interpreting this Agreement.

5.5           Notices.  All notices and other communications
hereunder shall be in writing and shall be deemed given if delivered
personally, telecopied (which is confirmed), one business day after being
deposited with a nationally recognized overnight courier, or two business days
after being mailed by registered or certified mail (return receipt requested)
to the parties at the following addresses (or at such other address for a party
as shall be specified by like notice):

	
  (a) if to the Company:

  	
   

  	
  with a copy to (that will not constitute notice:

  
	
   

  	
   

  	
   

  
	
  Advanced
  BioEnergy

  10251 Wayzata Boulevard

  Suite 240

  Minneapolis, MN 55305

  Attention: CEO

  Facsimile No: (763) 226-2725

  	
   

  	
  Faegre & Benson LLP

  2200 Wells Fargo Center

  90 South Seventh Street

  Minneapolis, MN 55402-3901

  Attention: Peter J. Ekberg

  Facsimile No: (612) 766-1600

  
	
   

  	
   

  	
   

  
	
  (b) If to a
  Holder:

  	
   

  	
  with a copy to (that will not constitute notice):

  
	
   

  	
   

  	
   

  
	
  at the address set forth on Schedule
  A

  	
   

  	
  Blackwell Sanders Peper Martin LLP

  4801 Main Street

  Suite 1000

  Kansas City, MO 64112

  Attention: Jason A. Reschly

  Facsimile No: (816) 983-8080

  

 

5.6           Amendments
and Waivers.  Any term of this
Agreement may be amended and the observance of any term of this Agreement may
be waived (either generally or in a particular instance, and either
retroactively or prospectively) only with the written consent of the Company
and the Holders of a majority of the Registrable Securities; provided,
that the Company may in its sole discretion waive compliance with Section
2.11(c) (and the Company’s failure to object promptly in writing after
notification of a proposed assignment allegedly in 

 19
 

 

violation of Section 2.11(c)
shall be deemed to be a waiver); and provided further, that any
provision hereof may be waived by any waiving party on such party’s own behalf,
without the consent of any other party; provided further, however, this
Agreement may not be amended or terminated and the observance of any term
hereof may not be waived with respect to any Holder without the written consent
of such Holder, unless such amendment, termination, or waiver applies to all
Holders in the same fashion (it being agreed that a waiver of the provisions of
Section 4 with respect to a particular transaction shall be deemed
to apply to all Holders in the same fashion. 
The Company shall give prompt notice of any amendment or termination
hereof or waiver hereunder to any party hereto that did not consent in writing
to such amendment, termination, or waiver. 
Any amendment, termination, or waiver effected in accordance with this Section 5.6
shall be binding on all parties hereto, regardless of whether any such party
has consented thereto.  No waivers of or
exceptions to any term, condition, or provision of this Agreement, in any one
or more instances, shall be deemed to be or construed as a further or
continuing waiver of any such term, condition, or provision.

5.7          Severability.  If any provision of this Agreement is held to
be illegal, invalid or unenforceable under any present or future law or
regulation, and if the rights or obligations of any party hereto under this
Agreement will not be materially and adversely affected thereby, (a) such
provision will be fully severable, (b) this Agreement will be construed
and enforced as if such illegal, invalid or unenforceable provision had never
comprised a part hereof, (c) the remaining provisions of this Agreement
will remain in full force and effect and will not be affected by the illegal,
invalid or unenforceable provision or by its severance from this Agreement and
(d) in lieu of such illegal, invalid or unenforceable provision, there
will be added automatically as a part of this Agreement a legal, valid and
enforceable provision as similar in terms to such illegal, invalid or
unenforceable provision as may be possible.

5.8          Aggregation of Securities.  All shares of Registrable Securities held or
acquired by Affiliates of a Holder shall be aggregated together for the purpose
of determining the availability of any rights under this Agreement of such
Holder.

5.9          Entire Agreement.  This Agreement (including any Schedules and
Exhibits hereto) constitutes the full and entire understanding and agreement among the parties with respect to the
subject matter hereof, and any other written or oral agreement relating to the
subject matter hereof existing between the parties is expressly canceled.

5.10        Delays or Omissions.  No delay or omission to exercise any right,
power, or remedy accruing to any party under
this Agreement, upon any breach or default of any other party under this
Agreement, shall impair any such right, power, or remedy of such nonbreaching
or nondefaulting party, nor shall it be construed to be a waiver of or
acquiescence to any such breach or default, or to any similar breach or default
thereafter occurring, nor shall any waiver of any single breach or default be
deemed a waiver of any other breach or default theretofore or thereafter
occurring.  All remedies, whether under
this Agreement or by law or otherwise afforded to any party, shall be
cumulative and not alternative.

 20
 

 

IN WITNESS WHEREOF, the parties
have executed this Agreement as of the date first written above.

	
  

  	
   

  	
  ADVANCED BIOENERGY, LLC

  
	
   

  	
   

  	
   

  
	
  By:

  	
   

  	
  /s/ Revis L. Stephenson III

  
	
  Name:

  	
   

  	
  Revis L. Stephenson III

  
	
  Title:

  	
   

  	
  Chief Executive Officer

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  SOUTH DAKOTA WHEAT GROWERS ASSOCIATION

  
	
   

  	
   

  	
   

  
	
  By:

  	
   

  	
  /s/ Rory Troske

  
	
  Name:

  	
   

  	
  Rory Troske

  
	
  Title:

  	
   

  	
  Vice President

  

 

 21
 

 

SCHEDULE A

Holders

South
Dakota Wheat Growers Association

110 6th Avenue SE

Aberdeen, South Dakota  57402

Attention:  CEO

Facsimile No.:  (605) 225-0859

 

 22

 

FIRST
AMENDMENT TO INVESTOR RIGHTS AGREEMENT

This
First Amendment (the “Amendment”) is entered into as of June 25, 2007,
by and among Advanced BioEnergy, LLC, a Delaware limited liability company (the
“Company”), and South Dakota Wheat
Growers Association, a South Dakota cooperative (“SDWG”).

RECITALS

A.            On November 7, 2006, the Company and
SDWG entered into an investor rights agreement in connection with the purchase
by the Company of SDWG’s limited partnership interest in Heartland Grain Fuels,
L.P. (“HGF”) (the “Investor Rights Agreement”).

B.            On April 20, 2007 the Company
entered into a purchase agreement with Ethanol Investment Partners (“EIP”)
whereby the Company agreed to enter into a registration rights agreement with
EIP (the “Registration Rights Agreement”), provided the Company first
obtained SDWG’s consent to grant such rights.

C.            In connection with the execution of
the Registration Rights Agreement between ABE and EIP, ABE and SDWG desire to
amend the Investor Rights Agreement as follows:

AGREEMENT

1.             Amendment
to Article 1.    Article
1 of the Investor Rights Agreement is hereby amended and restated in its
entirety as set forth in the attached Exhibit A.

2.             Amendment
to Section 2.3(a). 
Section 2.3(a) of the Investor Rights Agreement is hereby amended and
restated in its entirety as set forth in the attached Exhibit B.

3.             Governing Law.  The parties to this Amendment intend for the laws of the State of Minnesota to
govern the validity of this Amendment, the construction of its terms and the
interpretation of the rights and duties of the parties, without regard to the
conflict of law provisions of such state.

4.             Counterparts.  This Amendment may
be executed in any number of counterparts, each of which shall be deemed an
original and enforceable against the parties actually executing such
counterpart, and all of which together shall constitute one and the same
instrument.

6.             Miscellaneous.  Except as specifically amended herein, the
Investor Rights Agreement shall remain in full force and effect, as so amended.  Any reference to this “Amendment,” shall
include the Recitals set forth in the beginning of this Amendment.

[Remainder
of the page intentionally left blank.]

This Amendment has
been executed by the parties hereto as of the date first set forth above.

	
  

  	
  ADVANCED BIOENERGY LLC

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Revis L. Stephenson III

  
	
   

  	
   

  	
  Name: Revis L. Stephenson III

  
	
   

  	
   

  	
  Its: President and Chief Executive Officer

  
	
   

  	
   

  	
   

  
	
   

  	
  SOUTH DAKOTA WHEAT GROWERS ASSOCIATION

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Dale Locken

  
	
   

  	
   

  	
  Name: Dale Locken

  
	
   

  	
   

  	
  Its: Chief Executive Officer and Treasurer

  

 

EXHIBIT A

AMENDED
AND RESTATED ARTICLE 1

1.             Definitions.   For
purposes of this Agreement:

1.1           “Additional Financing” means the sale by the Company of
additional Units as contemplated by the registration statement on Form SB-2
filed by the Company with the SEC on September 13, 2006, as amended from time
to time thereafter.

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

1.3           “Damages” means any loss, damage, or
liability to which a party hereto may become subject under the Securities Act,
the Exchange Act, or other federal or state law, insofar as such loss, damage,
or liability (or any action in respect thereof) arises out of or is based upon
(a) any untrue statement or alleged untrue statement of a material fact
contained in any registration statement of the Company, including any
preliminary prospectus or final prospectus contained therein or any amendments
or supplements thereto; (b) an omission or alleged omission to state
therein a material fact required to be stated therein, or necessary to make the
statements therein not misleading; or (c) any violation or alleged violation
by the indemnifying party (or any of its agents or Affiliates) of the
Securities Act, the Exchange Act, any state securities law, or any rule or
regulation promulgated under the Securities Act, the Exchange Act, or any state
securities law.

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

1.5          “EIP”
means Ethanol Investment Partners, LLC, a Delaware limited liability company.

1.6          “EIP Holder”
means any “Holder” as that term is defined under the Registration Rights
Agreement.

1.7          “Exchange Act” means the Securities Exchange
Act of 1934, as amended, and the rules and regulations promulgated thereunder.

1.8          “Excluded Registration” means (a) a registration of Units in
connection with the Additional Financing
so long as such registration is declared effective by the SEC no later than
September 1, 2007; (b) a
registration relating  to
the sale of securities to employees of the Company or a subsidiary pursuant to a stock option, stock purchase,
or similar plan; or (c) a registration relating to an SEC Rule 145 transaction.

1.9          “Form S-1”
means such form under the Securities Act as in effect on the date hereof or any
successor registration form under the Securities Act subsequently adopted by
the SEC.

1.10        “Form S-2” means such form under the
Securities Act as in effect on the date hereof or any successor registration
form under the Securities Act subsequently adopted by the SEC.

1.11         “Form S-3”
means such form under the Securities Act as in effect on the date hereof or any
registration form under the Securities Act subsequently adopted by the SEC that
permits incorporation of substantial information by reference to other
documents filed by the Company with the SEC.

1.12         “GAAP”
means generally accepted accounting principles in the United States.

1.13         “Holder”
means any holder of Registrable Securities who is a party to this Agreement,
including permitted transferees that agree in writing to be bound by and
subject to the terms and conditions of this Agreement.

1.14         “Immediate Family Member”  means a child, stepchild, grandchild, parent, stepparent, grandparent, spouse,
sibling, mother-in-law, father-in-law,
son-in-law, daughter-in-law, brother-in-law, or sister-in-law, including adoptive relationships, of a natural person
referred to herein.

1.15         “Initiating Holders” means, collectively,
Holders who properly initiate a registration request under this Agreement.

1.16         “IPO” means the Company’s
first underwritten public offering of its Units or other equity securities
under the Securities Act.

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

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

1.19         “Registrable Securities” means (a) the
Units issued to SDWG, and any Units acquired by SDWG after the date hereof; and
(b) any Units issued as (or issuable upon the conversion or exercise of any warrant, right, or other security that is
issued as) a dividend or other distribution with respect to, or in exchange for
or in replacement of, the Units referenced in clause (a) above; excluding in
all cases, however, any Registrable Securities sold by a Person in a
transaction in which the applicable rights under this Agreement are not
assigned pursuant to Section 5.1, and excluding for purposes of Section 2
any Units for which registration rights have terminated pursuant to Section 2.12
of this Agreement.

1.20         “Registration
Rights Agreement” means that certain Registration Rights Agreement
dated as of June 20, 2007 between the Company and EIP.

1.21         “Restricted Securities” means the securities of the Company required to
bear the legend set forth in Section 2.11(b) hereof.

1.22         “SEC” means the Securities and Exchange Commission.

1.23        
“SEC Rule
144” means Rule 144 promulgated by
the SEC under the Securities Act.

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

1.25         “SEC Rule 145” means Rule 145 promulgated by the SEC under the
Securities Act.

1.26         “Securities Act” means the Securities Act of 1933, as amended, and
the rules and regulations promulgated thereunder.

1.27         “Selling Expenses” means all underwriting discounts, selling
commissions, and stock transfer taxes applicable to the sale of Registrable
Securities, and fees and disbursements of counsel for any Holder, except for
the fees and disbursements of the Selling Holder Counsel borne and paid by the
Company as provided in Section 2.6.

1.28         “Units” means units of membership interests in the Company,
or shares or other equity interests of the Company issued in exchange for or
otherwise in connection with any transaction as described in Section 4.1.

EXHIBIT B

AMENDED
AND RESTATED SECTION 2.3(a)

2.3           Underwriting Requirements.

(a)           If, pursuant to Section 2.1, the Initiating Holders intend to
distribute the Registrable Securities covered by their request by means of an
underwriting, they shall so advise the Company as a part of their request made
pursuant to Section 2.1, and the Company shall include such information in the
Demand Notice.  The underwriter(s) will
be selected by the Company and shall be reasonably acceptable to a majority in
interest of the Initiating Holders.  In
such event, the right of any Holder to include such Holder’s Registrable
Securities in such registration shall be conditioned upon such Holder’s
participation in such underwriting and the inclusion of such Holder’s
Registrable Securities in the underwriting to the extent provided herein.  All Holders proposing to distribute their
securities through such underwriting shall (together with the Company as
provided in Section 2.4(e)) enter into an underwriting agreement in customary
form with the underwriter(s) selected for such underwriting.  Notwithstanding any other provision of this
Section 2.3, if the underwriter(s) advise(s) the Initiating Holders in writing
that marketing factors require a limitation on the number of equity securities
to be underwritten, then the Initiating Holders shall so advise all Holders of
Registrable Securities that otherwise would be underwritten pursuant hereto,
and the number of equity securities that may be included in the underwriting
shall be allocated as follows: (1) as between Holders and the EIP Holders, in
proportion (as nearly as practicable) to the number of equity securities that
each group requested to be included in the underwriting, and then (2) as
between the persons that comprise the Holders and the EIP Holders in proportion
(as nearly as practicable) to the number of equity securities owned by each
Holder or in such other proportion as shall mutually be agreed to by all such
Holders; provided, however, the number of Registrable Securities held by the
Holders, to be included in such underwriting shall not be reduced unless all
other securities, except the equity securities requested to be included in the
underwriting by the EIP Holders which shall be reduced as contemplated in the
prior sentence, are first entirely excluded from the underwriting.

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