10-Q

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

Form 10-Q

(Mark One)

þ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2011

or

o TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from                      to                     

Commission file number: 000-52421

ADVANCED BIOENERGY, LLC

(Exact name of Registrant as Specified in its Charter)

Delaware
(State or Other Jurisdiction of
Incorporation or Organization) 20-2281511
(I.R.S. Employer
Identification No.)

8000 Norman Center Drive, Suite 610
Bloomington, Minnesota 55437
(763) 226-2701
(Address, including zip code, and telephone number,
including area code, of Registrant’s Principal Executive Offices)

     Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes þ No o

     Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files.) Yes o No o

     Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer o Accelerated filer o Non-accelerated filer þ (Do not check if a smaller reporting company) Smaller reporting company o

     Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No þ

     As of May 12, 2011, the number of outstanding units was 24,714,180.

ADVANCED BIOENERGY, LLC
FORM 10-Q
Index

	Page
Part I. Financial Information		3
Item 1. Financial Statements		3
Consolidated Balance Sheets		3
Consolidated Statements of Operations and Comprehensive Loss		4
Consolidated Statement of Changes in Members’ Equity		5
Consolidated Statements of Cash Flows		6
Notes to Consolidated Financial Statements		7
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations		15
Item 3. Quantitative and Qualitative Disclosures About Market Risk		27
Item 4. Controls and Procedures		28
Part II. Other Information		28
Item 1. Legal Proceedings		28
Item 1A. Risk Factors		30
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds		30
Item 3. Defaults Upon Senior Securities		30
Item 4. [Removed and Reserved.]		30
Item 5. Other Information		30
Item 6. Exhibits		31
Signatures		32
Exhibit Index		32
EX-10.1
EX-10.2
EX-10.3
EX-10.4
EX-10.5
EX-10.6
EX-31
EX-32

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PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

ADVANCED BIOENERGY, LLC & SUBSIDIARIES

Consolidated Balance Sheets

(Dollars in thousands)

	March 31,			September 30,
	2011			2010
	(unaudited)
ASSETS
Current assets:
Cash and cash equivalents	$	29,265		$	22,772
Accounts receivable:
Trade accounts receivable, net of allowance for doubtful accounts of $255 at March 31, 2011 and September 30, 2010, respectively		16,581			13,519
Other receivables		1,233			1,543
Due from broker		—			252
Derivative financial instruments		—			314
Inventories		12,408			14,102
Prepaid expenses		2,327			2,666
Current portion of restricted cash		3,437			4,169
Total current assets		65,251			59,337
Property and equipment, net		172,432			181,701
Other assets:
Restricted cash		2,127			3,145
Other assets		1,956			2,014
Total assets	$	241,766		$	246,197
LIABILITIES AND MEMBERS’ EQUITY
Current liabilities:
Accounts payable	$	7,832		$	4,337
Accrued expenses		8,748			5,818
Current portion of long-term debt (stated principal amount of $14,215 and $19,199 at March 31, 2011 and September 30, 2010, respectively)		15,052			20,045
Total current liabilities		31,632			30,200
Other liabilities		410			628
Deferred income		4,544			4,881
Long-term debt (stated principal amount of $128,388 and $137,203 at March 31, 2011 and September 30, 2010, respectively)
		137,436			146,670
Total liabilities	$	174,022		$	182,379
Members’ equity
Members’ capital, no par value, 24,714,180 units issued and outstanding		171,223			171,200
Accumulated deficit		(103,479	)		(107,382	)
Total members’ equity		67,744			63,818
Total liabilities and members’ equity	$	241,766		$	246,197

See notes to consolidated financial statements.

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ADVANCED BIOENERGY, LLC & SUBSIDIARIES

Consolidated Statements of Operations
(Dollars in thousands, except per unit data)
(Unaudited)

	Three Months Ended						Six Months Ended
	March 31,			March 31,			March 31,			March 31,
	2011			2010			2011			2010
Net sales
Ethanol and related products	$	152,704		$	98,574		$	268,970		$	194,580
Other		108			167			358			416
Total net sales		152,812			98,741			269,328			194,996
Cost of goods sold		148,000			88,199			258,414			172,329
Gross profit		4,812			10,542			10,914			22,667
Selling, general and administrative		3,667			2,217			5,730			4,314
Operating income		1,145			8,325			5,184			18,353
Other income		510			275			610			266
Interest income		13			17			37			60
Interest expense		(932	)		(3,511	)		(1,928	)		(7,419	)
Net income	$	736		$	5,106		$	3,903		$	11,260
Weighed average units outstanding — basic		24,705,180			17,800,180			24,705,180			17,729,311
Weighed average units outstanding — diluted		24,705,180			17,800,180			24,705,180			17,729,311
Income per unit — basic	$	0.03		$	0.29		$	0.16		$	0.64
Income per unit — diluted	$	0.03		$	0.28		$	0.16		$	0.63

See notes to consolidated financial statements.

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ADVANCED BIOENERGY, LLC & SUBSIDIARIES

Consolidated Statements of Changes in Members’ Equity
For the Six Months Ended March 31, 2011
(Dollars in thousands)
(Unaudited)

	Member		Member		Accumulated
	Units		Capital		Deficit			Total
MEMBERS’ EQUITY — September 30, 2010		24,714,180	$	171,200	$	(107,382	)	$	63,818
Unit compensation expense		—		23		—			23
Net income		—		—		3,903			3,903
MEMBERS’ EQUITY — March 31, 2011		24,714,180	$	171,223	$	(103,479	)	$	67,744

See notes to consolidated financial statements

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ADVANCED BIOENERGY, LLC & SUBSIDIARIES

Consolidated Statements of Cash Flows
(Dollars in thousands)
(Unaudited)

	Six Months Ended
	March 31,			March 31,
	2011			2010
Cash flows from operating activities:
Net income	$	3,903		$	11,260
Adjustments to reconcile net income to operating activities cash flows:
Depreciation		11,226			10,886
Amortization of deferred financing costs		66			66
Amortization of deferred revenue		(337	)		(337	)
Idle lease liability reduction		(154	)		(191	)
Amortization of debt discount		—			308
Amortization of additional carrying value		(428	)		—
Unit compensation expense		23			23
Gain on disposal of assets		(8	)		—
Unrealized gain on derivative financial instruments		(64	)		(35	)
Change in risk management activities		314			(425	)
Change in working capital components:
Accounts receivable		(2,500	)		(2,062	)
Inventories		1,694			(5,274	)
Prepaid expenses		339			(1,029	)
Accounts payable		3,495			1,288
Accrued expenses		2,930			5,488
Net cash provided by operating activities		20,499			19,966
Cash flows from investing activities:
Purchase of property and equipment		(1,949	)		(672	)
Change in other assets		(8	)		—
Decrease in restricted cash		1,750			5,450
Net cash provided by (used in) investing activities		(207	)		4,778
Cash flows from financing activities:
Payments on debt		(13,799	)		(14,305	)
Proceeds from issuance of membership units and subscribed units		—			1,254
Repurchase of units		—			(3	)
Payment of deferred financing costs		—			(102	)
Net cash used in financing activities		(13,799	)		(13,156	)
Net increase in cash and cash equivalents		6,493			11,588
Beginning cash and cash equivalents		22,772			26,367
Ending cash and cash equivalents	$	29,265		$	37,955
Supplemental disclosure of non cash transactions
Accrued interest at HGF transferred to debt	$	—		$	4,987
Other receivable offset against equipment		—			1,100
Warrant obligation recognized as a liability		—			489
Supplemental disclosure of cash flow information:
Cash paid for interest	$	2,393		$	2,429

See notes to consolidated financial statements.

6

ADVANCED BIOENERGY, LLC & SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2011 and 2010
(Unaudited)

1. Organization and Significant Accounting Policies

     The consolidated financial statements include the accounts of Advanced BioEnergy, LLC (the “Company”) and its wholly owned subsidiaries, ABE Fairmont, LLC (“ABE Fairmont”) and ABE South Dakota, LLC (“ABE South Dakota”). All intercompany balances and transactions have been eliminated in consolidation. The interim financial statements should be read in conjunction with the audited financial statements and notes thereto, contained in the Company’s Annual Report on Form 10-K for the year ended September 30, 2010. The financial information as of March 31, 2011 and the results of operations for the six months ended March 31, 2011 are not necessarily indicative of the results for the fiscal year ending September 30, 2011.

     The Company currently operates three ethanol production facilities in the U.S. with a combined production capacity of 195 million gallons per year. The Company commenced operations at the 110 million gallon facility in Fairmont, Nebraska in October 2007. The Company acquired existing facilities in Aberdeen and Huron, South Dakota in November 2006 and commenced operations at the 44 million gallon Aberdeen expansion facility in January 2008.

Cash, Cash Equivalents and Restricted Cash

     The Company considers all highly liquid investments with original maturities of three months or less to be cash equivalents. The Company’s cash balances are maintained in bank depositories and periodically exceed federally insured limits. The Company has not experienced losses in these accounts. The Company’s restricted cash includes cash held for debt service under the terms of its debt agreements.

Fair Value Measurements

     In determining fair value of its derivative financial instruments and warrant liabilities, the Company uses various methods including market, income and cost approaches. Based on these approaches, the Company often uses certain assumptions that market participants would use in pricing the asset or liability, including assumptions about risk and the risks inherent in the inputs to the valuation technique. These inputs can be readily observable, market-corroborated, or generally unobservable inputs. Financial assets and liabilities carried at fair value will be classified and disclosed in one of the following three fair value hierarchy categories.

Level 1: Valuations for assets and liabilities traded in active markets from readily available pricing sources for market transactions involving identical assets or liabilities.

Level 2: Valuations for assets and liabilities traded in less active dealer or broker markets. Valuations are obtained from third-party pricing services for identical or similar assets or liabilities.

Level 3: Valuations incorporate certain assumptions and projections in determining the fair value assigned to such assets or liabilities.

     Commodity futures and exchange-traded commodity options contracts are reported at fair value using Level 1 inputs. For these contracts, the Company obtains fair value measurements from an independent pricing service. The fair value measurements consider observable data that may include dealer quotes and live trading levels from the CBOT and NYMEX markets.

     The following table summarizes financial assets and financial liabilities measured at the approximate fair value used to measure fair value (amounts in thousands):

	Total		Level 1		Level 2		Level 3
At March 31, 2011
Liabilities — Warrant Derivative	$	410	$	—	$	—	$	410
At September 30, 2010
Assets — Derivative Financial Instruments	$	314	$	314	$	—	$	—
Liabilities — Warrant Derivative		474		—		—		474

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     The unit warrants issued contain a strike price adjustment feature. The Company calculated the fair value of the warrants using the Black-Scholes valuation model. During the six months ended March 31, 2011 and 2010, the Company recognized an unrealized gain of $64,000 and $35,000, respectively, related to the change in the fair value of the warrant derivative liability.

     The assumptions used in the Black-Scholes valuation model were as follows:

	March 31,			September 30,
	2011			2010
Market value(1)	$	1.50		$	1.50
Exercise price	$	1.50		$	1.50
Expected volatility		104.39	%		117.08	%
Expected life (years)		1.75			2.00
Risk-free interest rate		0.750	%		0.375	%
Forfeiture rate		—			—
Dividend rate		—			—

(1) Market value based on recent unit transactions.

     The following table reflects the activity for the unit warrant, the only liability measured at fair value using Level 3 inputs for the six months ended March 31, 2011 and 2010 (amounts in thousands):

	2011			2010
Beginning balance of warrant derivative	$	474		$	489
Unrealized gain related to the change in fair value		(64	)		(35	)
Ending balance	$	410		$	454

Receivables

     Credit sales are made to a few customers with no collateral required. Trade receivables are carried at original invoice amount less an estimate made for doubtful receivables based on a review of all outstanding amounts on a monthly basis. Management determines the allowance for doubtful accounts by regularly evaluating individual receivables and considering a customer’s financial condition, credit history and current economic conditions. Receivables are written off if deemed uncollectible. Recoveries of receivables previously written off are recorded when received.

Derivative Instruments/Due From Broker

     On occasion, the Company has entered into derivative contracts to hedge the Company’s exposure to price risk related to forecasted corn purchases and forecasted ethanol sales. Accounting for derivative contracts requires that an entity recognize all derivatives as either assets or liabilities on the balance sheet and measure those instruments at fair value. If certain conditions are met, a derivative may be specifically designated as (a) a hedge of the exposure to changes in the fair value of a recognized asset or liability or an unrecognized firm commitment, (b) a hedge of the exposure to variable cash flows of a forecasted transaction, or (c) a hedge of the foreign currency exposure of a net investment in a foreign operation, an unrecognized firm commitment, an available-for-sale security, or a foreign-currency-denominated forecasted transaction.

     Although the Company believes its derivative positions are economic hedges, it has not designated any derivative position as a hedge for accounting purposes and it records derivative positions on the balance sheet at their fair market value, with changes in fair value recognized in current period earnings.

Inventories

     Corn, chemicals, supplies, work in process, ethanol and distillers grains inventories are stated at the lower of weighted cost or market.

Revenue Recognition

     Ethanol revenue is recognized when product title and all risk of ownership is transferred to the customer as specified in the contractual agreements with the marketers. At all of the Company’s plants, revenue is recognized upon the release of the product for shipment. Revenue from the sale of co-products is recorded when title and all risk of ownership transfers to

8

customers, which generally occurs at the time of shipment. Co-products and related products are generally shipped free on board (“FOB”) shipping point. Interest income is recognized as earned. In accordance with the Company’s agreements for the marketing and sale of ethanol and related products, commissions due to the marketers are deducted from the gross sale price at the time of payment.

Income Per Unit

     Basic and diluted income per unit is computed using the weighted-average number of vested units outstanding during the period. Unvested units are considered unit equivalents and are considered in the diluted income per unit computation, but have not been included in the computations of diluted income per unit for the current periods because their effect would be anti-dilutive. Basic earnings and diluted per unit data were computed as follows (in thousands except per unit data):

	Three Months Ended						Six Months Ended
	March 31,						March 31,
	2011			2010			2011			2010
Numerator:
Net income for basic earnings per share	$	736		$	5,106		$	3,903		$	11,260
Gain in fair value of warrant derivative liability		(30	)		(34	)		(64	)		(35	)
Net income for diluted earnings per share		706			5,072			3,839			11,225
Denominator:
Basic and diluted common shares outstanding		24,705			17,800			24,705			17,729
Earnings per share basic	$	0.03		$	0.29		$	0.16		$	0.64
Earnings per share diluted	$	0.03		$	0.28		$	0.16		$	0.63

Accounting Estimates

     Management uses estimates and assumptions in preparing these financial statements in accordance with generally accepted accounting principles. Those estimates and assumptions affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities, and the reported revenues and expenses. Actual results could differ from those estimates.

Risks and Uncertainties

     The ethanol industry is currently receiving an indirect benefit of the Volumetric Ethanol Excise Tax Credit (“VEETC”) provided to gasoline blenders, which is set to expire on December 31, 2011, after a one-year extension was signed into law on December 17, 2010. This credit provides for a 45-cent a gallon tax credit for gasoline blenders and a 54-cent a gallon tariff on ethanol imports. Although the Renewable Fuels Standard still exists to maintain the demand for ethanol in the United States, the Company is uncertain of the potential impact that the elimination or reduction in the VEETC credit would have on the Company and the overall ethanol industry.

Contingencies

     On February 23, 2011, the arbitrator in a proceeding brought by the Company’s former chief executive officer issued an interim award, finding that the Company’s January 2009 termination of the former officer did not meet the standard for termination for “cause” in his employment agreement, and the Company would be required to pay the former chief executive officer compensatory damages and defamation damages. Although the interim award is not final, it is likely the arbitrator will issue a final award with the same findings in the interim award, plus any attorney’s fees that the arbitrator may or may not award to the former officer. The damages, costs and interest awarded as a result of the interim award total approximately $2.1 million plus attorney’s fees which could range from zero to $1.5 million. See Item 1, Legal Proceedings, in Part II of this Form 10-Q. The Company has taken a charge of approximately $2.1 million in the second quarter with respect to this matter.

9

2. Inventories

     A summary of inventories is as follows (in thousands):

	March 31,		September 30,
	2011		2010
Corn	$	2,140	$	3,127
Chemicals		1,088		1,107
Work in process		3,203		2,104
Ethanol		3,079		5,427
Distillers grain		600		419
Supplies and parts		2,298		1,918
Total	$	12,408	$	14,102

3. Property and Equipment

     A summary of property and equipment is as follows (in thousands):

	March 31,			September 30,
	2011			2010
Land	$	3,999		$	3,962
Buildings		21,341			21,341
Process equipment		216,643			215,962
Office equipment		1,373			1,356
Construction in process		1,393			234
		244,749			242,855
Accumulated depreciation	$	(72,317	)	$	(61,154	)
Property and equipment, net	$	172,432		$	181,701

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4. Debt and subsequent event

     A summary of debt is as follows (in thousands, except percentages):

	March 31,
	2011			March 31,			September 30,
	Interest Rate			2011			2010
ABE Fairmont:
Senior credit facility — variable		3.65	%	$	34,866		$	45,050
Senior credit facility — fixed		7.53	%		20,000			20,000
Seasonal line		3.35	%		—			—
Subordinate exempt facilities bonds — fixed		6.75	%		6,185			7,000
					61,051			72,050
ABE South Dakota:
Senior debt principal — variable		1.80	%		78,552			81,352
Restructuring fee		N/A			3,000			3,000
Additional carrying value of restructured debt		N/A			9,885			10,313
					91,437			94,665
Total outstanding				$	152,488		$	166,715
Additional carrying value of restructured debt		N/A			(9,885	)		(10,313	)
Stated principal				$	142,603		$	156,402

     The estimated maturities of debt at March 31, is as follows (in thousands):

			Amortization of
			Additional Carrying
	Stated		Value of
	Principal		Restructured Debt		Total
2012	$	14,215	$	837	$	15,052
2013		14,215		1,693		15,908
2014		12,881		2,439		15,320
2015		13,815		2,505		16,320
2016		80,367		2,411		82,778
Thereafter		7,110		—		7,110
Total debt	$	142,603	$	9,885	$	152,488

Senior Credit Facility for the Fairmont Plant

     ABE Fairmont has a senior credit facility with Farm Credit consisting of a term loan (“term loan A”), and a revolving term loan, known as term loan B. At March 31, 2011, the Company also had a $6.0 million revolving credit facility through Farm Credit for financing eligible grain inventory and equity in Chicago Board of Trade (“CBOT”) futures positions. In April 2011, the Company extended the revolving credit facility to April 1, 2012, and reduced the available amount from $6.0 million to $4.0 million. ABE Fairmont also has a revolving credit facility with Farm Credit for financing third-party letters of credit. ABE Fairmont has issued a letter of credit in connection with a rail car lease, thereby reducing the financing available under the $2.0 million revolving credit facility by $911,000 as of March 31, 2011. In April 2011, the Company and Farm Credit formally reduced the revolving credit facility to $911,000 to equal the outstanding letter of credit. This revolving credit facility expires in February 2012.

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     At March 31, 2011, ABE Fairmont had $29.9 million outstanding on term loan A. Under the term loan A agreement, Advanced BioEnergy Fairmont was required make quarterly principal installments of $2.6 million through November 2013, followed by a final installment in an amount equal to the remaining unpaid term loan A principal balance in February 2014. In April 2011, ABE Fairmont and Farm Credit amended the term loan A agreement to allow Advanced BioEnergy Fairmont to defer the May 2011 payment in order to finance a capital project. The final $2.6 million principal installment is now due in February 2014, with the final installment of the remaining unpaid term loan A principal balance due in May 2014. In addition, under the term loan A agreement, for each fiscal year ending through September 30, 2013, ABE Fairmont is required to pay an additional amount equal to the lesser of $8.0 million or 75% of its free cash flow as defined in the agreement. The outstanding loan balance at March 31, 2011 reflects a $5.0 million cash sweep payment made to Farm Credit in December 2010.

     At March 31, 2011, ABE Fairmont had $25.0 million outstanding on the revolving term loan B (“term loan B”). On the earlier of December 1, 2014 or six months following complete repayment of term loan A, ABE Fairmont is required to begin repayment of revolving term loan B in $5.0 million semi-annual principal payments.

     ABE Fairmont pays interest monthly at an annualized interest rate of 7.53% on $20.0 million and a variable rate comprised of the 30-day LIBOR plus a fixed rate of 3.40% on the remaining outstanding senior credit facility.

     ABE Fairmont’s senior credit facility is secured by a first mortgage on all of ABE Fairmont’s real estate and a lien on all of ABE Fairmont’s personal property. The agreement contains financial and restrictive covenants, including limitations on additional indebtedness, restricted payments, and the incurrence of liens and transactions with affiliates and sales of assets. In addition, the senior secured credit facility requires ABE Fairmont to comply with certain financial covenants, including maintaining monthly minimum working capital, monthly minimum net worth, annual debt service coverage ratios and capital expenditure limitations.

Fillmore County Subordinate Exempt Facilities Revenue Bonds for the Fairmont plant

     ABE Fairmont has $6.2 million of subordinate exempt facilities revenue bonds outstanding under a subordinated loan and trust agreement with the County of Fillmore, Nebraska and Wells Fargo, N.A. The loan agreement is collateralized by the Fairmont plant assets. ABE Fairmont’s repayment of the loan and the security for the loan are subordinate to its senior credit facility. The loan requires semi-annual interest payments. The Company made its first principal payment of $815,000 in December 2010, and will continue to make this payment annually through December 2016, with the remainder due in December 2017.

Senior Credit Agreement for the South Dakota Plants

     ABE South Dakota entered into an Amended and Restated Senior Credit Agreement (the “Senior Credit Agreement”) effective as of June 18, 2010, which was accounted for under troubled debt restructuring rules. The Senior Credit Agreement was executed among ABE South Dakota, the lenders from time to time party thereto, and WestLB AG, New York Branch, as Administrative Agent and Collateral Agent. The Senior Credit Agreement converted the outstanding principal amount of the loans and certain other amounts under interest rate protection agreements to a senior term loan in an aggregate principal amount equal to $84.4 million. The interest accrued on outstanding term and working capital loans under the existing credit agreement was reduced to zero. ABE South Dakota has agreed to pay a $3.0 million restructuring fee to the lenders due at the earlier of March 31, 2016 or the date on which the loans are repaid in full. ABE South Dakota recorded the restructuring fee as a long-term, non-interest bearing debt on its consolidated balance sheets.

     The principal amount of the term loan facility is payable in equal quarterly payments of $750,000, with the remaining principal amount fully due and payable on March 31, 2016.

     ABE South Dakota has the option to select the interest rate on the senior term loan between base rate and euro-dollar loans. Base rate loans bear interest at the administrative agent’s base rate, plus an applicable margin of 0.50% increasing to 3.0% on June 16, 2013. Euro-dollar loans bear interest at LIBOR plus the applicable margin of 1.5% increasing to 3.0% on June 16, 2012, and 4.0% beginning on June 16, 2013 and thereafter. Each loan can be entered for one, two, three or six month maturities.

     Since the future maximum undiscounted cash payments on the Senior Credit Agreement (including principal, interest and the restructuring fee) exceed the adjusted carrying value, no gain for the forgiven interest was recorded, the carrying value was not adjusted and the modification of terms will be accounted for on a prospective basis, via a new effective interest calculation, amortized over the life of the note, offsetting interest expense. Based on the treatment of the troubled debt restructuring which will result in the additional carrying value being amortized as a reduction in interest expense over the term of the loan, the Company’s effective interest rate over the term of the restructuring note agreement is approximately 0.33% over the Three-Month LIBOR (0.64% at March 31, 2011).

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     ABE South Dakota’s obligations under the Senior Credit Agreement are secured by a first-priority security interest in all of the equity of and assets of ABE South Dakota.

     ABE South Dakota is allowed to make equity distributions (other than certain tax distributions) to ABE only upon ABE South Dakota meeting certain financial conditions and if there is no more than $25 million of principal outstanding on the senior term loan. Loans outstanding under the Senior Credit Agreement are subject to mandatory prepayment in certain circumstances, including, but not limited to, mandatory prepayments based upon receipt of certain proceeds of asset sales, casualty proceeds, termination payments, and cash flows.

     The Senior Credit Agreement and the related loan documentation include, among other terms and conditions, limitations (subject to specified exclusions) on ABE South Dakota’s ability to make asset dispositions; merge or consolidate with or into another person or entity; create, incur, assume or be liable for indebtedness; create, incur or allow liens on any property or assets; make investments; declare or make specified restricted payments or dividends; enter into new material agreements; modify or terminate material agreements; enter into transactions with affiliates; change its line of business; and establish bank accounts. Substantially all cash of ABE South Dakota is required to be deposited into special, segregated project accounts subject to security interests to secure obligations in connection with the Senior Credit Agreement. The Senior Credit Agreement contains customary events of default and also includes an event of default for defaults on other indebtedness by ABE South Dakota and certain changes of control.

5. Major Customers

     The Company has entered into Exclusive Ethanol Marketing Agreements with Hawkeye Gold, LLC to sell substantially all of its ethanol. Prior to January 2011, Hawkeye Gold was an affiliate of Hawkeye Energy Holdings, LLC, a 34% owner of the Company’s membership units. ABE Fairmont executed an Exclusive Ethanol Marketing Agreement dated as of August 28, 2009 with Hawkeye Gold (the “ABE Fairmont Ethanol Agreement”), which became effective on January 1, 2010. Prior to that time, ABE Fairmont’s ethanol was marketed by Gavilon. ABE South Dakota executed Exclusive Ethanol Marketing Agreements dated as of April 7, 2010 with Hawkeye Gold (the “ABE South Dakota Ethanol Agreements”, and together with the ABE Fairmont Ethanol Agreement, the “Ethanol Agreements”), which became effective October 1, 2010. Prior to October 1, 2010, ABE South Dakota’s ethanol was marketed by Gavilon. The Ethanol Agreements require, among other things, that:

(1)	Hawkeye Gold must use commercially reasonable efforts to submit purchase orders for, and ABE Fairmont and ABE South Dakota must sell, substantially all of the denatured fuel grade ethanol produced by ABE Fairmont and ABE South Dakota,
(2)	a purchase and sale of ethanol under the Ethanol Agreements must be in the form of either a direct fixed price purchase order, a direct index price purchase order, a terminal storage purchase order, a transportation swap or similar transaction that is mutually acceptable to the parties,
(3)	ABE Fairmont or ABE South Dakota will pay any replacement or other costs incurred by Hawkeye Gold as a result of any failure to deliver by ABE Fairmont or ABE South Dakota, respectively, and
(4)	with certain exceptions, ABE Fairmont and ABE South Dakota will sell substantially all of the ethanol they produce to Hawkeye Gold. The initial term of the ABE Fairmont Agreement is for two years, and provides for automatic renewal for successive 18 month terms unless either party provides written notice of nonrenewal at least 180 days prior to the end of any term. The initial terms of the ABE South Dakota Ethanol Agreements are for three years and provide for automatic renewal for successive one-year terms unless either party provides written notice of nonrenewal at least 180 days prior to the end of any term.

     ABE Fairmont is currently self-marketing the distillers grains it produces. ABE South Dakota is party to a co-product marketing agreement with Dakotaland Feeds, LLC (“Dakotaland Feeds”), under which Dakotaland Feeds markets the local sale of distillers grains produced at the ABE South Dakota Huron plant to third parties for an agreed upon commission. The Company currently has an agreement with Hawkeye Gold to market the distillers grains produced at the ABE South Dakota Aberdeen plants. The initial term of this agreement is for three years and provides for automatic renewal for successive one- year terms unless either party provides written notice of nonrenewal at least 180 days prior to the end of any term.

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     Sales and receivables from the Company’s major customers were as follows (in thousands):

	March 31,		March 31,
	2011		2010
Hawkeye Gold — Ethanol and Distiller Grains
Six months revenues (Since January 1, 2010 for prior year)	$	237,667	$	49,173
Receivable balance at period end		13,719		6,150
Gavilon — Ethanol
Six months revenues	$	—	$	118,059
Receivable balance at period end		—		4,378
Dakotaland — ABE South Dakota Distillers Grains
Six months revenues	$	6,614	$	7,229
Receivable balance at period end		588		399

6. Risk Management

     The Company is exposed to a variety of market risks, including the effects of changes in commodity prices and interest rates. These financial exposures are monitored and managed by the Company as an integral part of its overall risk management program. The Company’s risk management program seeks to reduce the potentially adverse effects that the volatility of these markets may have on its current and future operating results. To reduce these effects, the Company generally attempts to fix corn purchase prices and related sale prices of ethanol and distillers grains with forward purchase and sales contracts to reduce volatility in future operating margins. In addition to entering into contracts to purchase 12.1 million bushels of corn and sell 11.5 million gallons of ethanol in which the futures price was not locked, the Company had entered into the following fixed price forward contracts at March 31, 2011 (in thousands):

		Quantity (000s)	Amount		Period Covered
Corn	Purchase Contracts	3,168 bushels	$	21,036	July 2011
Ethanol	Sale Contracts	17,852 gallons		45,163	May 2011
Distillers grains	Sale Contracts	56 tons		10,278	June 2011

     Unrealized gains and losses on forward contracts, in which delivery has not occurred, are deemed “normal purchases and normal sales,” and, therefore are not marked to market in the financial statements.

     When forward contracts are not available at competitive rates, the Company may engage in hedging activities using exchange traded futures contracts, OTC futures options or OTC swap agreements. Changes in market price of ethanol-related hedging activities are reflected in revenues and changes in market price of corn related items are reflected in cost of goods sold. The following table represents the approximate amount of realized and unrealized gains and changes in fair value recognized in earnings on commodity contracts for the three and six months ended March 31, 2011 and 2010, and the fair value of futures contracts as of March 31, 2011 and September 30, 2010 (in thousands):

	Income Statement	Realized		Unrealized			Total
	Classification	Gain		Loss			Gain (Loss)
Three months ending March 31, 2011	Cost of Goods Sold	$	—	$	—		$	—
Three months ending March 31, 2010	Cost of Goods Sold		419		(1,334	)		(915	)
Six months ending March 31, 2011	Cost of Goods Sold	$	90	$	—		$	90
Six months ending March 31, 2010	Cost of Goods Sold		766		(1,012	)		(246	)

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	Balance Sheet	March 31,		September 30,
	Classification	2011		2010
Derivative financial instrument — futures contract	Current Assets	$	—	$	314

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Information Regarding Forward-Looking Statements

     This Quarterly Report on Form 10-Q contains forward-looking statements regarding our business, financial condition, results of operations, performance and prospects. All statements that are not historical or current facts are forward-looking statements and are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Forward-looking statements involve known and unknown risks, uncertainties and other factors, many of which may be beyond our control, that may cause our actual results, performance or achievements to be materially different from any future results, performances or achievements expressed or implied by the forward-looking statements. Certain of these risks and uncertainties are described in the “Risk Factors” section of our Annual Report on Form 10-K for the year ended September 30, 2010 and in this Form 10-Q. These risks and uncertainties include, but are not limited to, the following:

• our operational results are subject to fluctuations in the prices of grain, utilities and ethanol, which are affected by various factors including weather, production levels, supply, demand, changes in technology and government support and regulations;

• margins can be volatile and can evaporate, which may affect our liability to meet current obligations and debt service requirements at our operating entities;

• our hedging transactions and mitigation strategies could materially harm our results;

• cash distributions depend upon our future financial and operational performance and will be affected by debt covenants, reserves and operating expenditures;

• current governmental mandated tariffs, credits and standards may be reduced or eliminated and legislative acts taken by state governments such as California related to low carbon fuels that include the effects caused by indirect land use, may have an adverse effect on our business;

• alternative fuel additives may be developed that are superior to or cheaper than ethanol;

• transportation, storage and blending infrastructure may become impaired, preventing ethanol from reaching markets;

• our operation facilities may experience technical difficulties and not produce the gallons of ethanol we expect and insurance proceeds may not be adequate to cover these production disruptions;

• our units are subject to a number of transfer restrictions and no public market exists for our units, and we do not is expect a public market to develop; and

• our ability to resolve all issues related to an arbitration involving us and our former chief executive officer, and pending litigation brought by that officer against one of our current directors.

     You can identify forward-looking statements by terms such as “anticipates,” “believes,” “could,” “estimates,” “expects,” “intends,” “may,” “plans,” “potential,” “predicts,” “projects,” “should,” “will,” “would,” and similar expressions intended to identify forward-looking statements. Forward-looking statements reflect our current views with respect to future events, are based on assumptions, and are subject to risks and uncertainties. Given these uncertainties, you should not place undue reliance on these forward-looking statements. Also, forward-looking statements represent our estimates and assumptions only as of the date of this report. Except as required by law, we assume no obligation to update any forward-looking statements publicly, or to update the reasons actual results could differ materially from those anticipated in any forward-looking statements, even if new information becomes available in the future. Readers are urged to carefully review and consider the various disclosures made by us in this report and in our other reports filed from time to time with the Securities and Exchange Commission that advise interested parties of the risks and factors that may affect our business.

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General

     The following discussion and analysis provides information that management believes is relevant to an assessment and understanding of our consolidated financial condition and results of operations. This discussion should be read in conjunction with the consolidated financial statements included herewith and notes to the consolidated financial statements thereto.

Overview

     Advanced BioEnergy, LLC (“Company,” “we,” “our,” “Advanced BioEnergy” or “ABE”) was formed in 2005 as a Delaware limited liability company. Our business consists of producing ethanol and co-products, including wet, modified and dried distillers grains. Ethanol is a renewable, environmentally clean fuel source that is produced at numerous facilities in the United States, mostly in the Midwest. In the U.S., ethanol is produced primarily from corn and then blended with unleaded gasoline in varying percentages. Ethanol is most commonly sold as E10. Increasingly, ethanol is also available as E85, which is a higher percentage ethanol blend for use in flexible-fuel vehicles.

     To execute our business plan, we entered into financial arrangements to build and operate an ethanol production facility in Fairmont, Nebraska. Separately, we acquired ABE South Dakota in November 2006, which owned existing ethanol production facilities in Aberdeen and Huron, South Dakota. Construction of our Fairmont, Nebraska plant began in June 2006, and operations commenced at the plant in October 2007. Construction of our new facility in Aberdeen, South Dakota began in April 2007, and operations commenced in January 2008. Our production operations are carried out primarily through our operating subsidiaries, ABE Fairmont, which owns and operates the Fairmont, Nebraska plant and ABE South Dakota, which owns and operates plants in Aberdeen and Huron, South Dakota.

     Operating segments are defined as components of an enterprise for which separate financial information is available that is evaluated regularly by the chief operating decision maker in deciding how to allocate resources in assessing performance. Based on the related business nature and expected financial results, the Company’s plants are aggregated into one operating segment.

DRY MILL PROCESS

     Dry mill ethanol plants produce ethanol by predominantly processing corn. Other possible feeds are grain sorghum, or other cellulosic materials. The corn is received by truck, then weighed and unloaded in a receiving building. It is then conveyed to storage silos. Thereafter, it is transferred to a scalper to remove rocks, cobs, and other debris before it is fed to a hammer mill where it is ground into flour and conveyed into a slurry tank. Water, heat and enzymes are added to the flour in the slurry tank to start the process of converting starch from the corn into sugar. The slurry is pumped to a liquefaction tank where additional enzymes are added. These enzymes continue the starch-to-sugar conversion. The grain slurry is pumped into fermenters, where yeast is added, to begin the batch-fermentation process. Fermentation is the process of the yeast converting the sugar into alcohol and carbon dioxide. After the fermentation is complete, a vacuum distillation system removes the alcohol from the grain mash. The 95% (190-proof) alcohol from the distillation process is then transported to a molecular sieve system, where it is dehydrated to 100% alcohol (200 proof). The 200-proof alcohol is then pumped to storage tanks and blended with a denaturant, usually gasoline. The 200-proof alcohol and 2.0-2.5% denaturant constitute denatured fuel ethanol.

     Corn mash left over from distillation is pumped into a centrifuge for dewatering. The liquid from the centrifuge, known as thin stillage, is then pumped from the centrifuges to an evaporator, where it is concentrated to a syrup. The solids that exit the centrifuge, known as the wet cake, are conveyed to the dryer system. Syrup is added to the wet cake as it enters the dryer, where moisture is removed. The process produces distillers grains with solubles, which is used as a high-protein/fat animal-feed supplement. Dry-mill ethanol processing creates three forms of distillers grains: wet distillers grains with solubles, known as wet distillers grains; modified wet distillers grains with solubles, known as modified distillers grains; and dry distillers grains with solubles, known as dry distillers grains. Wet and modified distillers grains have been dried to approximately 67% and 50% moisture levels, respectively, and are predominately sold to nearby markets. Dried distillers grains have been dried to 11% moisture, have an almost indefinite shelf life and may be sold and shipped to any market regardless of its proximity to an ethanol plant.

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FACILITIES

     The table below provides a summary of our ethanol plants in operation as of March 31, 2011:

			Estimated
	Estimated		Annual		Estimated
	Annual		Distillers		Annual
	Ethanol		Grains		Corn		Primary
Location	Production		Production(1)		Processed		Energy Source	Builder
	(Million gallons)		(Tons)		(Million bushels)
Fairmont, NE		110		334,000		39.3	Natural Gas	Fagen
Aberdeen, SD(2)		9		27,000		3.2	Natural Gas	Broin
Aberdeen, SD(2)		44		134,000		15.7	Natural Gas	ICM
Huron, SD		32		97,000		11.4	Natural Gas	ICM
Consolidated		195		592,000		69.6

(1)	Our plants produce and sell wet, modified wet and dried distillers grains. The stated quantities are on a fully dried basis operating at full production capacity.
(2)	Our plant at Aberdeen consists of two separate production facilities, which operate on a separate basis. Accordingly, we report and track production from these Aberdeen facilities separately.

     We believe that each of the operating facilities is in adequate condition to meet our current and future production goals. We also believe that these plants are adequately insured for replacement cost plus related disruption expenditures.

     The senior credit facility of the ABE Fairmont plant is secured by a first mortgage on the plant real estate and a security interest lien on the site’s personal property. We also granted a subordinate lien and security interest to the trustee of the subordinated exempt facilities revenue bonds used to finance the ABE Fairmont plant. We pledged a first-priority security interest in and first lien on substantially all of the assets of the ABE South Dakota plants to the collateral agent for the senior creditor of these plants.

     ABE Fairmont entered into a new marketing agreement with Hawkeye Gold, which became effective on January 1, 2010. Prior to January 2011, Hawkeye Gold was an affiliate of Hawkeye Energy Holdings, LLC, a 34% owner of the Company’s membership units. The marketing agreement with Hawkeye Gold requires, among other things, that Hawkeye Gold must use commercially reasonable efforts to submit purchase orders for, and ABE Fairmont must sell, substantially all of the denatured fuel-grade ethanol produced by ABE Fairmont. The initial term of the agreement is for two years and provides for automatic renewal for successive 18-month terms unless either party provides written notice of nonrenewal at least 180 days prior to the end of any term.

     ABE South Dakota executed new marketing agreements with Hawkeye Gold which became effective October 1, 2010. The agreements provide that Hawkeye Gold will use commercially reasonable efforts to submit purchase orders for, and ABE South Dakota will sell to Hawkeye Gold, substantially all of the denatured fuel-grade ethanol produced at the South Dakota plants. The initial term of the agreement is for three years and provides for automatic renewal for successive one-year terms unless either party provides written notice of nonrenewal at least 180 days prior to the end of any term. Prior to October 1, 2010, ABE South Dakota’s ethanol was marketed by Gavilon, LLC (“Gavilon”).

     Sales of distillers grains have represented 15.8% and 14.4% of our revenues for the quarters ended March 31, 2011 and 2010, respectively. When the plants are operating at capacity they produce approximately 592,000 tons of dried distillers grains equivalents per year, approximately 17 pounds per bushel of corn. Distillers grains are a high-protein, high-energy animal feed supplement primarily marketed to the dairy and beef industry, as well as the poultry and swine markets.

Plan of Operations Through March 31, 2012

     Over the next year we will continue our focus on operational improvements at each of our operating facilities. These operational improvements include exploring methods to improve ethanol yield per bushel and maximizing production output at each of our plants. We will also have a continued emphasis on safety and environmental regulation, reducing our operating costs, and optimizing our margin opportunities through prudent risk-management policies. We are also improving the rail facilities at the Huron plant location, and adding corn oil extraction technology to our Fairmont facility.

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RESULTS OF OPERATIONS

Quarter Ended March 31, 2011 Compared to Quarter Ended March 31, 2010

     The following table reflects quantities of our products sold at average net prices as well as bushels of corn ground and therms of gas burned at average costs for the three months ended March 31, 2011 and 2010:

	Three Months Ended				Three Months Ended
	March 31, 2011				March 31, 2010
	Sold/Consumed		Average		Sold/Consumed		Average
	(In thousands)		Net Price/Cost		(In thousands)		Net Price/Cost
Ethanol (gallons)		54,612	$	2.35		48,889	$	1.73
Dried distillers grains (tons)		116		159.47		108		102.43
Wet/modified distillers grains (tons)		86		65.26		95		33.66
Corn (bushels)		19,469	$	5.96		17,594	$	3.42
Gas (mmbtus)		1,391		4.34		1,356		5.67

Net Sales

     Net sales for quarter ended March 31, 2011 were $152.8 million compared to $98.7 million for the quarter ended March 31, 2010, an increase of $54.1 million or 54.8%. The increase in revenues was due to an increase in average prices of ethanol and distillers grains of 35.8% and 70.0%, respectively. Ethanol prices rose due to increased demand, general overall motor fuel price increases and commodity inflation. During the fiscal quarters ending March 31, 2011 and 2010, 84.2% and 85.4%, respectively, of our net sales were derived from the sale of ethanol and our remaining net sales were derived from the sale of distillers grains.

Cost of Goods Sold

     Costs of goods sold for the quarter ending March 31, 2011 were $148.0 million, compared to $88.2 million for the quarter ending March 31, 2010, an increase of $59.8 million or 67.8%. Costs of goods sold included no hedging gains or losses in the quarter ended March 31, 2011 and a hedging loss of $0.9 million in the quarter ended March 31, 2010. Corn costs represented 78.4% and 68.3% of cost of sales for the fiscal quarters ending March 31, 2011 and 2010. Corn costs increased 74.3% to $5.96 per bushel in the quarter ending March 31, 2011 from $3.42 per bushel for the quarter ending March 31, 2010. The increase in corn cost per bushel was due primarily to the corn crop not being as favorable as the prior year, world-wide commodity inflation, and generally less corn available. Natural gas costs represented 4.1% and 8.7% of cost of sales for the fiscal quarters ending March 31, 2011 and 2010. Our average gas prices decreased to $4.34 per mmbtu in the quarter ending March 31, 2011 from $5.67 per mmbtu in the quarter ending March 31, 2010.

Gross Profit

     Our gross profit for the quarter ending March 31, 2011 was $4.8 million, compared to gross profit of $10.5 million for the quarter ending March 31, 2010. The decrease in gross profit was primarily due to a reduction in the crush margin. We define the crush margin as the price of ethanol per gallon less the costs of corn and natural gas on a per gallon basis. Compared to the quarter ending March 31, 2010, crush margins for the quarter ending March 31, 2011 decreased, as corn prices increased more than ethanol prices on a per gallon basis.

Selling, General, and Administrative Expenses

     As a percentage of sales, selling, general and administrative expenses have increased to 2.4% for the quarter ended March 31, 2011 compared to 2.2% for the quarter ended March 31, 2010. Selling, general, and administrative expenses are comprised of recurring administrative personnel compensation, legal, technology, consulting, insurance and accounting fees as well as certain non-recurring charges. For the quarter ending March 31, 2011, selling, general and administrative expenses were $3.67 million, of which $0.11 million was non-recurring legal expense and approximately $2.1 million was a charge related to the arbitration proceedings as discussed below. Selling, general and administrative expenses were $2.22 million for the quarter ending March 31, 2010, of which $0.68 million was non-recurring expense related to the South Dakota debt restructuring. Excluding non-recurring items, selling, general, and administrative expenses were $1.46 million, or 1.0% of sales, for the quarter ending March 31, 2011, and $1.54 million, or 1.6% of sales, for the quarter ending March 31, 2010.

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     On February 23, 2011, the arbitrator in a proceeding brought by our former chief executive officer issued an interim award, finding that the Company’s January 2009 termination of the former officer did not meet the standard for termination for “cause” in his employment agreement, and the Company would be required to pay the former chief executive officer compensatory damages and defamation damages. Although the interim award is not final, it is likely the arbitrator will issue a final award with the same findings in the interim award, plus any attorney’s fees that the arbitrator may or may not award to the former officer. See Item 1, Legal Proceedings, in Part II of this Form 10-Q. The Company has taken a charge of approximately $2.1 million in the second quarter with respect to this matter.

Other Income

     Other income for the quarter ended March 31, 2011 was $0.5 million, compared to $0.3 million for the quarter ended March 31, 2010. The increase was due to a non-recurring refund of certain restructuring fees of $0.1 million and Nebraska Advantage Act refunds of $0.1 million.

Interest Expense

     Interest expense for the quarter ending March 31, 2011 was $0.9 million, compared to $3.5 million for the quarter ended March 31, 2010, a decrease of $2.6 million. The decrease in interest expense is a result of the overall reduction in principal and a reduction in interest rates on ABE South Dakota’s debt. As of March 31, 2010, the total principal outstanding was $214.1 million, decreasing to $142.6 million of stated principal at March 31, 2011. The reduction in principal was a result of the debt restructuring that occurred in June 2010, repayment of a note issued to PJC Capital, LLC, and scheduled principal payments. The interest rates on the senior credit facility for ABE South Dakota decreased from a default rate of 8.50% at March 31, 2010 to a variable rate of 1.80% at March 31, 2011. The interest expense at March 31, 2011 also reflects a reduction in interest expense resulting from the amortization of deferred gain that resulted from the debt restructuring.

RESULTS OF OPERATIONS

Six Months Ended March 31, 2011 Compared to Six Months Ended March 31, 2010

     The following table reflects quantities of our products sold at average net prices as well as bushels of corn ground and therms of gas burned at average costs for the six months ended March 31, 2011 and 2010:

	Six Months Ended				Six Months Ended
	March 31, 2011				March 31, 2010
	Sold/Consumed		Average		Sold/Consumed		Average
	(In thousands)		Net Price/Cost		(In thousands)		Net Price/Cost
Ethanol (gallons)		103,745	$	2.18		98,912	$	1.68
Dried distillers grains (tons)		236		140.53		223		97.42
Wet/modified distillers grains (tons)		165		57.56		183		34.63
Corn (bushels)		37,047	$	5.32		35,492	$	3.46
Gas (mmbtus)		2,797		4.23		2,732		5.07

Net Sales

     Net sales for the six months ended March 31, 2011 were $269.3 million compared to $195.0 million for the quarter ended March 31, 2010, an increase of $74.3 million or 38.1%. The increase in revenues was due to an increase in average prices of ethanol and distillers grains of 29.8% and 54.0%, respectively. Ethanol prices rose due to increased demand, general overall motor fuel price increases and commodity inflation. For the six months ended March 31, 2011 and 2010, 84.0% and 85.4%, respectively, of our net sales were derived from the sale of ethanol and our remaining net sales were derived from the sale of distillers grains.

Cost of Goods Sold

     Costs of goods sold for the six months ended March 31, 2011 were $258.4 million, compared to $172.3 million for the six months ended March 31, 2010, an increase of $86.1 million or 50.0%. Costs of goods sold included a corn related hedging gain of $0.1 million for the six months ended March 31, 2011 and a hedging loss of $0.2 million for the six months ended March 31, 2010. Corn costs represented 76.3% and 71.2% of cost of sales for the six months ended March 31, 2011 and 2010, respectively. Corn costs increased 53.8% to $5.32 per bushel for the six months ended March 31, 2011 from $3.46 per bushel for the six months ended March 31, 2010. The increase in corn cost per bushel was due primarily to the corn crop not being as favorable as the prior year, commodity inflation world-wide, and generally less corn available. Natural gas costs represented 4.6% and 8.0% of cost of sales for the six months ended March 31, 2011 and 2010. Our average gas prices decreased to $4.23 per mmbtu for the six months ended March 31, 2011 from $5.07 per mmbtu for the six months ended March 31, 2010.

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Gross Profit

     Our gross profit for the six months ended March 31, 2011 was $10.9 million, compared to gross profit of $22.7 million for the six months ended March 31, 2010. The decrease in gross profit was primarily due to a reduction in the crush margin. We define the crush margin as the price of ethanol per gallon less the costs of corn and natural gas on a per gallon basis. Compared to the six months ended March 31, 2010, crush margins for the six months ended March 31, 2011 decreased, as corn prices increased more than ethanol prices on a per gallon basis.

Selling, General, and Administrative Expenses

     As a percentage of sales, selling, general and administrative expenses have declined to 2.1% for the six months ended March 31, 2011 compared to 2.2% for the six months ended March 31, 2010. Selling, general, and administrative expenses are comprised of recurring administrative personnel compensation, legal, technology, consulting, insurance and accounting fees as well as certain non-recurring charges. For the six months ended March 31, 2011, selling, general and administrative expenses were $5.73 million, of which $0.41 million was non-recurring legal expense and approximately $2.1 million was a charge related to the arbitration proceedings as discussed below. Selling, general and administrative expenses were $4.31 million for the six months ended March 31, 2010, of which $1.13 million was non-recurring expense related to the South Dakota debt restructuring and $0.02 million was non-recurring legal expense related to the arbitration proceedings. Excluding non-recurring items, selling, general, and administrative expenses were $3.22 million, or 1.2% of sales, for the six months ended March 31, 2011, and $3.16 million, or 1.6% of sales, for the six months ended March 31, 2010.

     As discussed above, under the “Quarter Ended March 31, 2011 Compared to Quarter Ended March 31, 2010,” the Company has taken a charge of approximately $2.1 million in the second quarter related to arbitration brought by a former officer.

Other Income

     Other income for the six months ended March 31, 2011 was $0.6 million, compared to $0.3 million for the six months ended March 31, 2010. The increase was due to a non-recurring refund of certain restructuring fees of $0.1 million, and Nebraska Advantage Act refunds of $0.2 million.

Interest Expense

     Interest expense for the six months ended March 31, 2011 was $1.9 million, compared to $7.4 million for the six months ended March 31, 2010, a decrease of $5.5 million. The decrease in interest expense is a result of the overall reduction in principal and a reduction in interest rates on ABE South Dakota’s debt. As of March 31, 2010, the total principal outstanding was $214.1 million, decreasing to $142.6 million of stated principal at March 31, 2011. The reduction in principal was a result of the debt restructuring that occurred in June 2010, repayment of a note issued to PJC Capital, LLC, and scheduled principal payments. The interest rates on the senior credit facility for ABE South Dakota decreased from a default rate of 8.50% at March 31,2010 to a variable rate of 1.80% at March 31, 2011. The interest expense at March 31, 2011 also reflects a reduction in interest expense resulting from the amortization of deferred gain that resulted from the debt restructuring.

TRENDS AND UNCERTAINTIES AFFECTING THE ETHANOL INDUSTRY AND OUR FUTURE OPERATIONS

Overview

     Ethanol is currently blended with gasoline to meet regulatory standards, as a clean air additive, an octane enhancer, a fuel extender and a gasoline alternative. According to the Renewable Fuels Association, as of April 2011, the estimated ethanol production capacity in the United States is 13.8 billion gallons per year with an additional 0.6 billion gallons under construction or expansion. The demand for ethanol is affected by what is commonly referred to as the “blending wall”, which is a regulatory cap on the amount of ethanol that can be blended into gasoline. The blend wall affects the demand for ethanol, and as industry production capacity reaches the blend wall, the supply of ethanol in the market may surpass the demand. Assuming current gasoline usage in the U.S. at 140 billion gallons per year and a blend rate of 10% ethanol and 90% gasoline, the current blend wall can be assumed at approximately 14 billion gallons of ethanol per year.

     In an attempt to increase the blend wall, Growth Energy, an ethanol industry trade organization, requested a waiver from the U.S. Environmental Protection Agency (EPA) to allow blending of ethanol at a 15 percent blend rate. In October of 2010, the EPA made a decision to allow the use of E15 blends in 2007 and newer vehicles. On January 21, 2011, the EPA announced E15 blends to be safe for use in all cars and pickups built in 2001 and later. However, we do not yet know what the impact of this decision will be on ethanol demand, as there are still labeling issues, additional testing, and some regulatory issues that must be addressed prior to widespread market use of the E15 blend.

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     Our operations are highly dependent on commodity prices, especially prices for corn, ethanol, distillers grains and natural gas. As a result of price volatility for these commodities, our operating results may fluctuate substantially. The price and availability of corn are subject to significant fluctuations depending upon a number of factors that affect commodity prices in general, including crop conditions, weather, federal policy and foreign trade. Because the market price of ethanol is not always directly related to corn prices, at times ethanol prices may lag movements in corn prices and compress the overall margin structure at the plants. As a result, operating margins may become negative and we may be forced to shut down the plants.

     We focus on locking in margins based on the cash flows model that continually monitors market prices of corn, natural gas and other input costs against prices for ethanol and distillers grains at each of our production facilities. We create offsetting positions by using a combination of derivative instruments, fixed-price purchases and sales, or a combination of strategies in order to manage risk associated with commodity price fluctuations. Our primary focus is not to manage general price movements, for example minimize the cost of corn consumed, but rather to lock in favorable margins whenever possible. In the quarter ended March 31, 2011, the average Chicago Opis Spot Ethanol Assessment was $2.425 per gallon and the average NYMEX RBOB was $2.682 per gallon, or approximately $0.26 per gallon above ethanol prices.

     Federal policy has a significant impact on ethanol market demand. Ethanol blenders benefit from incentives that encourage usage and a tariff on imported ethanol that supports the domestic industry. Additionally, the renewable fuels standard (“RFS”) mandates increased level of usage of both corn-based and cellulosic ethanol. Any adverse ruling on, or legislation affecting, RFS mandates in the future could have an adverse impact on short-term ethanol prices and our financial performance in the future.

     The ethanol industry and our business depend upon continuation of the federal and state ethanol supports such as the RFS, the Volumetric Ethanol Excise Tax Credit (“VEETC”) and import tariffs. We believe the ethanol industry expanded due to these federal mandates, policies, and incentives. These government mandates and incentives have supported a market for ethanol that might disappear without these programs. Alternatively, the government mandates and incentives may be continued at lower levels than those at which they currently exist. The elimination or reduction of the federal ethanol supports would make it more costly for us to sell our ethanol and would likely reduce our net income. In addition, state regulatory activity may also negatively affect the consumption of corn-based ethanol in certain domestic markets such as California, due to low carbon fuel standards that take into consideration the effects caused by indirect land use.

The Renewable Fuels Standard

     The RFS is a national program that imposes requirements with respect to the amount of renewable fuel produced and used. The RFS was revised by the EPA in July 2010 (“RFS2”) and applies to refineries, blenders, distributors and importers. In 2011, the RFS2 requires that refiners and importers blend renewable fuels totaling at least 8.01% of total fuel volume, or approximately 13.95 billion gallons, of which 12.60 million gallons can be derived from corn-based ethanol. The RFS2 requirement will increase incrementally over the next several years to a renewable fuel requirement of 36.0 billion gallons, or approximately 11% of the anticipated gasoline and diesel consumption, by 2022. The following chart illustrates the potential United States ethanol demand based on the schedule of minimum usage established by the program through the year 2022 (in billions of gallons).

			Cellulosic						RFS Requirement
	Total Renewable		Ethanol		Biodiesel				That Can Be Met
	Fuel		Minimum		Minimum		Advanced		With Corn-Based
Year	Requirement		Requirement		Requirement		Biofuel		Ethanol
2011		13.95		0.25		0.80		1.35		12.60
2012		15.20		0.50		1.00		2.00		13.20
2013		16.55		1.00		—		2.75		13.80
2014		18.15		1.75		—		3.75		14.40
2015		20.50		3.00		—		5.50		15.00
2016		22.25		4.25		—		7.25		15.00
2017		24.00		5.50		—		9.00		15.00
2018		26.00		7.00		—		11.00		15.00
2019		28.00		8.50		—		13.00		15.00
2020		30.00		10.50		—		15.00		15.00
2021		33.00		13.50		—		18.00		15.00
2022		36.00		16.00		—		21.00		15.00

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     The RFS2 went into effect on July 1, 2010 and requires certain gas emission reductions for the entire lifecycle, including production of fuels. The greenhouse gas reduction requirement generally does not apply to facilities that commenced construction prior to December 2007. If this changes and our plants must meet the standard for emissions reduction, it may affect the way we procure feed stock and modify the way we market and transport our products.

Blending Incentives

     The VEETC, often commonly referred to as the “blender’s credit,” was created by the American Jobs Creation Act of 2004. This credit allows gasoline distributors who blend ethanol with gasoline to receive a federal excise tax credit of $0.45 per gallon of pure ethanol used, or $0.045 per gallon for E10 and $0.3825 per gallon for E85. To ensure the blender’s credit spurs growth in domestic production, federal policy has insulated the domestic ethanol industry from foreign competition by levying a $0.54 per gallon tariff on all imported ethanol. Both the VEETC and the tariff were set to expire on December 31, 2010, but were extended for one year as part of the “Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010” signed into law by President Obama on December 17, 2010.

California Low Carbon Fuel Standard

     In April 2009, the California air regulators approved the Low-Carbon Fuel Standard aimed at achieving a 10% reduction in motor vehicle emissions of greenhouse gases by 2020. Other states may adopt similar legislation, which may lead to a national standard. The regulation requires that providers, refiners, importers and blenders ensure that the fuels they provide in the California market meet a declining standard of carbon intensity. This rule calls for a reduction of greenhouse gas emissions associated with the production, transportation and consumption of a fuel. The emissions score also includes indirect land-use change created from converting a forest to cultivated land for row crops. The final regulation contains a provision to review the measurement of the indirect land-use effects and further analysis of the land use values and modeling inputs.

     This standard and others to follow may affect the way ethanol producers procure feedstocks, produce dry distillers grains and market and transport ethanol and distillers grains. Ethanol produced through low carbon methods, including imported ethanol made from sugarcane, may be redirected to certain markets and U.S. producers may be required to market their ethanol in other regions.

Imported Ethanol Tariffs

     There is a $0.54 per gallon tariff on imported ethanol, which expires on December 31, 2011, after a one year extension was signed into law on December 17, 2010. Ethanol imports from 24 countries in Central America and the Caribbean region are exempted from the tariff under the Caribbean Basin Initiative or CBI, which provides that specified nations may export an aggregate of 7% of the prior year’s U.S. ethanol production into the U.S., with additional exemptions from ethanol produced from feedstock in the Caribbean region over the 7% limit. Ethanol imported from Caribbean basin countries may be a less expensive alternative to domestically produced ethanol. Expiration of this tariff could lead to the importation of ethanol from other countries, which may be a less expensive alternative to ethanol produced domestically. This could affect our ability to sell our ethanol at the price we need to operate profitably.

Chinese Anti-Dumping Investigation

     On December 28, 2010, the Chinese government announced a one-year investigation into the potential violation of anti-dumping laws regarding imported dried distillers grains originating in the United States. The allegation is that the recent surge in imports of U.S. dried distillers grains is undercutting sales of domestically produced dried distillers grains and that U.S. dried distillers grains are being sold at a price lower than the fair market value. If the Chinese Government finds evidence of dumping upon conclusion of the investigation on December 28, 2011, a final determination will include the imposition of punitive tariffs on U.S. imports of DDGS to China. Punitive tariffs, if applied, will be significantly higher, as much as 50 percent, for non-cooperating parties. Although the Company does not sell distillers grains directly into China, some of our distillers grains are sold into China through third parties. The Company has chosen to cooperate with the Chinese government’s investigation, but at this time we are uncertain as to the impact this may have on our business.

COMPETITION

Ethanol

     The ethanol we produce is similar to ethanol produced by other plants. The RFA reports that as of April 2011, current U.S. ethanol production capacity is approximately 13.8 billion gallons per year. On a national level there are numerous other production facilities with which we are in direct competition, many of whom have greater resources than we do. As of April 2011, Nebraska had 25 ethanol plants producing an aggregate of 1.8 billion gallons of ethanol per year, and South Dakota had 15 ethanol plants producing an aggregate of 1.0 billion gallons of ethanol per year, including our plants.

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     The largest ethanol producers include: Abengoa Bioenergy Corp., Archer Daniels Midland Company, Cargill, Inc., Green Plains Renewable Energy, Inc., POET, LLC and Valero Renewable Fuels. Producers of this size may have an advantage over us from economies of scale and negotiating position with purchasers. We market our ethanol primarily on a regional and national basis. We believe that we are able to reach the best available markets through the use of experienced ethanol marketers and by the rail delivery methods we use. Our plants compete with other ethanol producers on the basis of price, and, to a lesser extent, delivery service. We believe that we can compete favorably with other ethanol producers due to our proximity to ample grain, natural gas, electricity and water supplies at favorable prices.

Distillers Grains

     We compete with other ethanol producers in the sales of distillers grains, as well as a number of large and smaller suppliers of competing animal feed. We believe the principal competitive factors are price, proximity to purchasers and product quality. Currently 77.8% of our distillers grain revenues are derived from the sale of dried distillers grains, which has an indefinite shelf life and can be transported by truck or rail, 22.2% as modified and wet, which have a shorter shelf life and are typically sold in local markets.

LIQUIDITY AND CAPITAL RESOURCES

Financing and Existing Debt Obligations

     We conduct our business activities and plant operations through Advanced BioEnergy, ABE Fairmont and ABE South Dakota. The liquidity and capital resources for each entity are based on the entity’s existing financing arrangements and capital structure. ABE Fairmont has traditional project financing in place, including senior secured financing, working capital facilities and subordinate exempt-facilities revenue bonds. In June 2010, ABE South Dakota entered into the Senior Credit Agreement (as defined below), which eliminated its subordinated debt. There are provisions contained in the various financing agreements at each operating entity preventing cross-default or collateralization between operating entities. Advanced BioEnergy is highly restricted in its ability to use the cash and other financial resources of each subsidiary for the benefit of Advanced BioEnergy, with the exception of allowable distributions as defined in the separate financing agreements.

Advanced BioEnergy, LLC

     ABE had cash and cash equivalents of $5.5 million on hand at March 31, 2011. ABE does not have any debt outstanding as of March 31, 2011. ABE does not expect to make any distributions to its unit holders in the next 12 months. ABE’s primary source of operating cash comes from charging a monthly management fee to ABE Fairmont and ABE South Dakota for services provided in connection with operating the ethanol plants. The primary management services provided include risk management, accounting and finance, human resources and other general management related responsibilities. From time to time ABE may also receive certain allowable distributions from ABE Fairmont and ABE South Dakota based on the terms and conditions in their respective senior credit agreements. In January 2011, ABE received a distribution from ABE Fairmont of $4.7 million based on the fiscal 2010 financial results of ABE Fairmont. This distribution was subject to ABE Fairmont remaining in compliance with all loan covenants and terms and conditions of its senior secured credit agreement. ABE is not expecting any distribution from ABE South Dakota in 2011.

     We believe ABE has sufficient financial resources available to fund current operations and capital expenditure requirements for at least the next 12 months.

ABE Fairmont

     ABE Fairmont had cash and cash equivalents of $15.9 million and restricted cash of $1.5 million on hand at March 31, 2011. The restricted cash is held in escrow for future debt service payments. As of March 31, 2011, ABE Fairmont had total debt outstanding of $61.1 million consisting of $54.9 million in senior secured credit and $6.2 million of subordinate exempt-facilities revenue bonds. ABE Fairmont is required to make monthly interest payments on its senior secured credit and semi-annual interest payments on its outstanding subordinate exempt revenue bonds. ABE Fairmont is required to make quarterly principal payments of $2.6 million on its senior secured credit. Total principal payments of $0.8 million on the subordinate exempt facilities revenue bonds have been made through March 31, 2011. In April 2011, ABE Fairmont amended the senior secured credit agreement to defer the May 2011 principal payment of $2.6 million in order to finance a capital project. This amendment has the effect of extending the final principal payment on term loan A in 2014 by one quarter.

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     ABE Fairmont is allowed to make cash distributions to ABE if ABE Fairmont meets all conditions required in its senior secured credit agreement at the end of a fiscal year. This annual distribution is limited to 40% of net income calculated in accordance with generally accepted accounting principles and other terms contained in its senior secured credit agreement. The distribution is subject to the completion of ABE Fairmont’s annual financial statement audit and ABE Fairmont remaining in compliance with all loan covenants and terms and conditions of the senior secured credit agreement. The annual distribution based on ABE Fairmont fiscal 2010 financial results is $4.7 million. The distribution was made at the end of January 2011.

     ABE Fairmont’s senior secured credit agreement also requires an annual cash sweep subject to a free cash flow calculation, as defined in its senior secured credit agreement. The cash sweep requires that, for each fiscal year ending in 2010 through 2013, ABE Fairmont must make a payment equal to the lesser of $8.0 million or 75% of its free cash flow after distributions, not to exceed $16.0 million in the aggregate for all of the free cash flow payments. Based on fiscal 2010 financial results, ABE Fairmont made a cash sweep payment of $5.0 million in December 2010. Cash sweep payments are subject to compliance with all loan covenants and terms and conditions of the senior secured credit agreement.

     We believe ABE Fairmont has sufficient financial resources available to fund current operations and capital expenditure requirements for at least the next 12 months. In addition to the cash on hand, ABE Fairmont has a $4.0 million revolving credit facility for financing eligible grain inventory and equity in Chicago Board of Trade futures positions. In April 2011, the Company extended the revolving credit facility to April 1, 2012, and reduced the available amount from $6.0 million to $4.0 million. ABE Fairmont had $6.0 million available on the revolving credit facility as of March 31, 2011. ABE Fairmont also has a revolving credit facility for financing third-party letters of credit, which expires in February 2012. ABE Fairmont issued a letter of credit in connection with a rail car lease, reducing the financing available from the $2.0 million revolving credit facility by $911,000 as of March 31, 2011. In April 2011, ABE Fairmont reduced the amount of this revolving credit facility to $911,000, equal to the outstanding letter of credit.

     ABE Fairmont’s senior secured credit facility agreement contains financial and restrictive covenants, including limitations on additional indebtedness, restricted payments, and the incurrence of liens and transactions with affiliates and sales of assets. In addition, the senior secured credit facility requires ABE Fairmont to comply with certain financial covenants, including maintaining monthly minimum working capital, monthly minimum net worth, annual debt service coverage ratios and capital expenditure limitations. ABE Fairmont was in compliance with all covenants at March 31, 2011.

ABE South Dakota

     ABE South Dakota had cash and cash equivalents of $7.9 million and $4.0 million of restricted cash on hand at March 31, 2011. The restricted cash consists of $3.0 million for a debt service payment reserve, and $1.0 million for the construction of certain rail infrastructure at its Huron, South Dakota ethanol facility. As of March 31, 2011, ABE South Dakota had interest bearing term debt outstanding of $78.6 million.

     In June 2010, ABE South Dakota entered into an Amended and Restated Senior Credit Agreement dated as of June 16, 2010 (the “Senior Credit Agreement”) among ABE South Dakota, the lenders from time to time party thereto, and WestLB AG, New York Branch, as administrative agent and collateral agent. The Senior Credit Agreement converted the outstanding principal amount of the loans and certain other amounts under interest rate protection agreements under the existing senior credit agreement to a senior term loan in an aggregate principal amount equal to $84.3 million. Interest accrued on outstanding term and working capital loans under the existing credit agreement was reduced to zero on June 18, 2010. The principal amount of the term loan facility is payable in equal quarterly payments of $750,000, with the remaining principal amount fully due and payable on March 31, 2016. ABE South Dakota has agreed to pay a $3.0 million restructuring fee to the lender due at the earlier of March 31, 2016 and the date on which the loans are repaid in full. The Company recorded the restructuring fee as long-term, non-interest bearing debt.

     ABE South Dakota’s obligations under the Senior Credit Agreement are secured by a first-priority security interest in all of the equity in and assets of ABE South Dakota.

     ABE South Dakota is allowed to make equity distributions (other than certain tax distributions) to ABE only upon ABE South Dakota meeting certain financial conditions and if there is no more than $25 million of principal outstanding on the senior term loan. Loans outstanding under the Senior Credit Agreement are subject to mandatory prepayment in certain circumstances, including, but not limited to, mandatory receipt of certain proceeds of asset sales, casualty proceeds, termination payments, and cash flows.

     The Senior Credit Agreement and the related loan documentation include, among other terms and conditions, limitations (subject to specified exclusions) on ABE South Dakota’s ability to make asset dispositions; merge or consolidate with or into another person or entity; create, incur, assume or be liable for indebtedness; create, incur or allow liens on any property or assets; make investments; declare or make specified restricted payments or dividends; enter into new material agreements;

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modify or terminate material agreements; enter into transactions with affiliates; change its line of business; and establish bank accounts. Substantially all cash of ABE South Dakota is required to be deposited into special, segregated project accounts subject to security interests to secure obligations in connection with the Senior Credit Agreement. The Senior Credit Agreement contains customary events of default and also includes an event of default for defaults on other indebtedness by ABE South Dakota and certain changes of control. ABE South Dakota was in compliance with all covenants at March 31, 2011.

        We believe ABE South Dakota has sufficient financial resources available to fund current operations, make debt service payments and fund capital expenditure requirements, including the $1.0 million remaining for the rail infrastructure project at Huron, over the next 12 months.

CREDIT ARRANGEMENTS

     Long-term debt consists of the following (in thousands, except percentages):

	March 31,
	2011			March 31,			September 30,
	Interest Rate			2011			2010
ABE Fairmont:
Senior credit facility — variable		3.65	%	$	34,866		$	45,050
Senior credit facility — fixed		7.53	%		20,000			20,000
Seasonal line		3.35	%		—			—
Subordinate exempt facilities bonds — fixed		6.75	%		6,185			7,000
					61,051			72,050
ABE South Dakota:
Senior debt principal — variable		1.80	%		78,552			81,352
Restructuring fee		N/A			3,000			3,000
Additional carrying value of restructured debt		N/A			9,885			10,313
					91,437			94,665
Total outstanding				$	152,488		$	166,715
Additional carrying value of restructured debt		N/A			(9,885	)		(10,313	)
Stated principal				$	142,603		$	156,402

The estimated maturities of debt at March 31, is as follows (in thousands):

			Amortization of
			Additional Carrying
	Stated		Value of
	Principal		Restructured Debt		Total
2012	$	14,215	$	837	$	15,052
2013		14,215		1,693		15,908
2014		12,881		2,439		15,320
2015		13,815		2,505		16,320
2016		80,367		2,411		82,778
Thereafter		7,110		—		7,110
Total debt	$	142,603	$	9,885	$	152,488

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SUMMARY OF CRITICAL ACCOUNTING POLICIES AND ESTIMATES

     Note 1 to our consolidated financial statements contains a summary of our significant accounting policies, many of which require the use of estimates and assumptions. Accounting estimates are an integral part of the preparation of financial statements and are based upon management’s current judgment. We used our knowledge and experience about past events and certain future assumptions to make estimates and judgments involving matters that are inherently uncertain and that affect the carrying value of our assets and liabilities. We believe that of our significant accounting policies, the following are noteworthy because changes in these estimates or assumptions could materially affect our financial position and results of operations:

Fair Value of Financial Instruments

     Financial instruments include cash, cash equivalents and restricted cash, interest rate swaps, derivative financial instruments, accounts receivable, accounts payable, accrued expenses and long-term debt. The fair value of the long-term debt is estimated based on anticipated interest rates which management believes would currently be available to the Company for similar issues of debt, taking into account the current credit risk of the Company and other market factors. The Company believes the carrying value of the debt instruments at ABE Fairmont and ABE South Dakota approximate fair value. The fair value of all other financial instruments is estimated to approximate carrying value due to the short-term nature of these instruments.

Inventories

     Corn, chemicals, supplies, work in process, ethanol and distillers grains inventories are stated at the lower of weighted cost or market.

Property and Equipment

     Property and equipment is carried at cost less accumulated depreciation computed using the straight-line method over the estimated useful lives:

Office equipment	5-7 Years
Process equipment	10 Years
Buildings	40 Years

     Maintenance and repairs are charged to expense as incurred; major improvements and betterments are capitalized. Long-lived assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount on the asset may not be recoverable. An impairment loss is recognized when estimated undiscounted future cash flows from operations are less than the carrying value of the asset group. An impairment loss is measured by the amount by which the carrying value of the asset exceeds the estimated fair value on that date.

Revenue Recognition

     Ethanol revenue is recognized when product title and all risk of ownership is transferred to the customer as specified in the contractual agreements with the marketers. At all of the Company’s plants, revenue is recognized upon the release of the product for shipment. Revenue from the sale of co-products is recorded when title and all risk of ownership transfers to customers, which generally occurs at the time of shipment. Co-products and related products are generally shipped free on board (“FOB”) shipping point. Interest income is recognized as earned. In accordance with the Company’s agreements for the marketing and sale of ethanol and related products, commissions due to the marketers are deducted from the gross sale price at the time of payment.

OFF-BALANCE SHEET ARRANGEMENTS

     We have no off-balance sheet arrangements.

GOVERNMENT PROGRAMS, TAX CREDITS AND TAX INCREMENT FINANCING

     We have applied for income and sales tax incentives available under a Nebraska Advantage Act Project Agreement. As of March 31, 2011, we have received approximately $3.2 million in refunds under the Nebraska Advantage Act. We anticipate earning investment credits for certain sales taxes paid on construction costs, up to 10% of the cost of the Fairmont plant construction, and up to 10% of new asset additions. These investment credits can be used to offset Nebraska sales, use, and income tax. Under the Nebraska Advantage Act, we also anticipate earning employment credits for 5% of the annual costs of the newly created employment positions, which can be used to offset future payroll taxes. We will continue to earn additional investment and employment credits under the Nebraska Advantage Act through the tax year ended September 30, 2014. These

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credits can be carried over until used, but will expire on September 30, 2020. Although we may apply under several programs simultaneously and may be awarded grants or other benefits from more than one program, some combinations of programs are mutually exclusive. Under some state and federal programs, awards are not made to applicants in cases where construction on the project has started prior to the award date. There is no guarantee that applications will result in awards of grants or credits or deductions.

     In December 2006, we received net proceeds of $6.7 million from tax incremental financing from the Village of Fairmont, Nebraska. We anticipate paying off the outstanding obligation with future property tax payments assessed on the Fairmont plant.

     The State of South Dakota pays an incentive to operators of ethanol plants to encourage the growth of the ethanol industry. The Huron plant is eligible to receive an aggregate of $9.7 million, payable up to $1 million per year. The amounts are dependent on annual allocations by the State of South Dakota and the number of eligible plants. ABE South Dakota has historically received a payment between $700,000 and $800,000 for the Huron plant per year. The State of South Dakota has reduced the annual allocation for the remainder of the fiscal year so the annual payment is expected to be approximately $600,000 for this fiscal year.

Item 3. Quantitative and Qualitative Disclosures about Market Risk

COMMODITY PRICE RISK

     We consider commodity price risk to be the impact of adverse changes in commodity prices on our results of operations. We are subject to significant market risk with respect to the price of ethanol and corn. For the quarter ended March 31, 2011, sales of ethanol represented 84.2% of our total revenues and corn costs represented 78.4% of total cost of goods sold. In general, ethanol prices are affected by the supply and demand for ethanol, the cost of ethanol production, the availability of other fuel oxygenates, the regulatory climate and the cost of alternative fuels such as gasoline. The price of corn is affected by weather conditions and other factors affecting crop yields, farmer planting decisions and general economic, market and regulatory factors. At March 31, 2011, the price per gallon of ethanol and the cost per bushel of corn on the Chicago Board of Trade, or CBOT, were $2.66 and $6.93, respectively.

     We are also subject to market risk on the selling prices of our distillers grains, which represent 16.0% of our total revenues. These prices fluctuate seasonally when the price of corn or other cattle feed alternatives fluctuate in price. The dried distiller grains spot price for Nebraska and South Dakota local customers were $192 and $185 per ton, respectively, at March 31, 2011.

     We are also subject to market risk with respect to our supply of natural gas that is consumed in the ethanol production process. Natural gas costs represented 4.1% of total cost of goods sold for the quarter ended March 31, 2011. The price of natural gas is affected by weather conditions and general economic, market and regulatory factors. At March 31, 2011, the price of natural gas on the NYMEX was $4.39 per mmbtu.

     To reduce price risk caused by market fluctuations in the cost and selling prices of related commodities, we have entered into forward purchase/sale contracts and derivative transactions. At March 31, 2011 we guaranteed prices for our ethanol representing 36.6% of our ethanol gallons sold through May 2011 by entering into flat-priced contracts. At March 31, 2011 we had entered into forward sale contracts representing 38.1% of our expected distillers grains production and we had entered into forward purchase contracts representing 18.2% of our current corn requirements through June 2011. At March 31, 2011, our April gas usage prices were fixed with our natural gas providers.

     The following represents a sensitivity analysis that estimates our annual exposure to market risk with respect to our current corn and natural gas requirements and ethanol sales. Market risk is estimated as the potential impact on operating income resulting from a hypothetical 10% change in the current ethanol, distiller grains, corn, and natural gas prices. The results of this analysis, which may differ from actual results, are as follows:

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									Change in
	Estimated at			Hypothetical					Annual
	Risk			Change in			Spot		Operating
	Volume (1)		Units	Price			Price(2)		Income
	(In millions)								(In millions)
Ethanol		123.6	gallons		10.0	%	$	2.66	$	32.9
Distillers grains		0.37	tons		10.0	%		189.00		6.9
Corn		56.9	bushels		10.0	%		6.93		39.5
Natural gas		4.1	mmbtus		10.0	%		4.39		1.8

(1)

The volume of ethanol at risk is based on the assumption that we will enter into contracts for 36.6% of our expected annual gallons capacity of 195 million gallons. The volume of distillers grains at risk is based on the assumption that we will enter into contracts for 38.1% of our expected annual distillers grains production of 592,000 tons. The volume of corn is based on the assumption that we will enter into forward contracts for 18.2% of our estimated current 69.6 million bushel annual requirement. The volume of natural gas at risk is based on the assumption that we will continue to lock in 22.4% gas usage.

(2)

Current spot prices include the CBOT price per gallon of ethanol and the price per bushel of corn, the NYMEX price per mmbtu of natural gas and our listed local advertised dried distillers grains price per ton as of March 31, 2011.

INTEREST RATE/FOREIGN EXCHANGE RISK

     Our future earnings may be affected by changes in interest rates due to the impact those changes have on our interest expense on borrowings under our credit facilities. As of March 31, 2011, we had $113.4 million of outstanding borrowings with variable interest rates. With each 1% change in interest rates our annual interest would change by $1.13 million.

     We have no direct international sales. Historically all of our purchases have been denominated in U.S. dollars. Therefore we do not consider future earnings subject to foreign exchange risk.

Item 4. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

     As of the end of the period covered by this report, we conducted an evaluation, under the supervision and with the participation of our chief executive officer, who is also our chief financial officer, of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934). Based on this evaluation, our chief executive officer, who is also our chief financial officer, concluded that our disclosure controls and procedures are effective to ensure that information required to be disclosed by us in reports that we file or submit under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified in Securities and Exchange Commission rules and forms and to ensure that information required to be disclosed by the Company in the reports the Company files or submits under the Exchange Act is accumulated and communicated to the Company’s management, including its principal executive and principal financial officer, to allow timely decisions regarding required disclosures.

Changes in Internal Controls

     There were no changes in our internal controls over financial reporting during our most recently completed fiscal quarter that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

PART II. OTHER INFORMATION

Item 1. Legal Proceedings

Stephenson v. Advanced BioEnergy, LLC. (Arbitration Matter)

     As previously disclosed, in June 2009, Revis L. Stephenson III, the Company’s former director, Chairman of the Board and Chief Executive Officer, filed a demand for arbitration with the American Arbitration Association (“Stephenson Arbitration”), alleging that the Company breached its employment agreement, violated a covenant of good faith and fair dealing, and defamed him when it terminated his employment agreement in January 2009.

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     On February 23, 2011, the arbitrator in the proceeding issued an Interim Award. The arbitrator found that the Company’s January 2009 termination of Stephenson did not meet the standard for termination for “cause” in Stephenson’s employment agreement.

     Under the Interim Award, the Company would be required to pay Stephenson amounts that otherwise would be due under his employment agreement for termination without cause, which are equal to two times his base salary, an annual target bonus, and other benefits. The total principal amount of the compensation was $777,832, (“Compensation Award”) minus several offsets specified in the Interim Award, plus interest from the date of termination.

     In addition, the arbitrator found that the Company’s statement in its Current Report on Form 8-K dated January 20, 2009, filed with the Commission on January 26, 2009, that Stephenson was “terminated for cause” was defamatory and awarded damages in the amount of $1,000,000 (“Defamation Award”), plus interest from the date of termination. The arbitrator found the Company was not liable for breach of any duty of good faith and fair dealing.

     In the Interim Award, the arbitrator asked the parties to meet and confer to see if they could reach an agreement on reasonable attorney’s fees and costs to be awarded to Stephenson, plus computations of damages and appropriate interest. The arbitrator stated that if the parties were unable to reach agreements on these matters, then each party would be required to submit briefs with its position to the arbitrator.

     Stephenson and the Company were able to reach an agreement and entered into a stipulation (“Stipulation”) with respect to costs and disbursements to be awarded Stephenson, the amount of the offsets against the Compensation Award, and the calculation of interest on both the Compensation Award and the Defamation Award. Nothing in the Stipulation waives or limits any right the Company has to challenge or seek modification of either the Compensation Award or the Defamation Award. The total amount the Company would be required to pay Stephenson under the Interim Award and the Stipulation including interest through the date of the Interim Award is $2,098,082. Interest has accrued since February 23, 2011, at the rate of $485.89 per day.

     The parties were not able to reach an agreement regarding any legal fees to be awarded Stephenson and so this issue has been briefed and submitted to the arbitrator. Stephenson argues that approximately $1.5 million in attorney’s fees should be added to the amounts set forth above and paid to him by the Company. The Company argues that no attorney’s fees should be awarded.

     Although the Interim Award is not final, it is likely the arbitrator will issue a final award with the same findings in the Interim Award, plus any attorney’s fees that the arbitrator may award to Stephenson. The parties have agreed to submit to mediation in an attempt to resolve the open issues related to the matter. The Company currently expects the mediation to occur in late May 2011. If mediation is unsuccessful, the Company expects the arbitrator would issue a final award in June 2011. The Company would then have the opportunity to ask a court to vacate the arbitration award, although such motions are not often granted by the courts.

     There can be no assurance that the Company will be able to successfully resolve the matters in dispute before the arbitrator or that the arbitrator will not award attorney’s fees to Stephenson. Further, there can be no assurance that if the Company challenges or seeks modification of any final award, that it would be successful.

Stephenson v Clean Energy Capital, LLC and Scott Brittenham (Federal Court)

     In August 2009, Revis L. Stephenson III, the Company’s former director, Chairman of the Board and Chief Executive Officer, also filed a lawsuit, now in the United States District Court of the District of Minnesota, against Clean Energy Capital, LLC (“CEC”) and Scott Brittenham, one of the Company’s directors. This lawsuit seeks damages against CEC and Brittenham and includes claims for defamation, breach of fiduciary duty (based on the theory of the “fiduciary duty” one director owes to another director), and tortious interference with contract based on statements allegedly made by Brittenham and other representatives of CEC and its predecessor entities. The lawsuit is in the pre-trial stage.

     CEC and its affiliates own approximately 17.9 percent of the Company, and Brittenham is a designee of CEC on the Board of the Company. The Company has entered into indemnification agreements with all of its directors, including Brittenham. Brittenham has advised the Company that it is required to indemnify him in the Stephenson lawsuit under Delaware law and the indemnification agreement between the Company and him. The Company has not made any final determination with respect to the scope or extent of its obligation to indemnify Brittenham in the Stephenson lawsuit. Although the Company carries insurance, including directors and officers insurance, and believes that it will have some coverage for any amount it may be required to indemnify Brittenham, there can be no assurance that insurance will cover all or any part of any amount it may be required to pay to Brittenham under its indemnification obligation.

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Item 1A. Risk Factors

     There are no material changes from risk factors as previously discussed in our September 30, 2010 Annual Report on Form 10-K except as disclosed below.

     We are involved in arbitration with our former chief executive officer and an interim award against us has been issued. We may be required to indemnify a current director for claims made against him in a matter brought by that former officer.

     On February 23, 2011, the arbitrator in the arbitration proceeding brought by our former chief executive officer issued an interim award against us. In addition, the former chief executive has filed a lawsuit, now pending in the United States District Court of the District of Minnesota, against Clean Energy Capital, LLC and Scott Brittenham, a director of the Company, seeking damages. Brittenham has requested that we indemnify him with respect to any costs or expenses in that proceeding. Each of these matters is described in Item 1, Legal Proceedings, in Part II of this Form 10-Q. As discussed in Management’s Discussion and Analysis, we have taken a second quarter charge of approximately $2.1 million in connection with the arbitration. There can be no assurance that our ultimate liability in the arbitration will not exceed the amount we have accrued. In addition, we may be required to indemnify Brittenham in the lawsuit in an amount that exceeds any insurance we have.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

     None.

Item 3. Defaults Upon Senior Securities

     None.

Item 4. [Removed and Reserved]

     Not applicable.

Item 5. Other Information

Employment Agreement with Richard Peterson

     On May 11, 2011, the Company entered into a Second Amended and Restated Employment Agreement (“2011 Employment Agreement”) with Richard Peterson, Chief Executive Officer and Chief Financial Officer. The 2011 Employment Agreement replaces the Amended and Restated Employment Agreement dated December 11, 2007, as subsequently amended (the “Prior Agreement”) between the Company and Peterson.

     Under the 2011 Employment Agreement, Peterson will receive (i) an annual base salary of $285,000 effective as of October 1, 2010, the first day of the Company’s current fiscal year; (ii) the right to participate in all employee benefit plans and programs of the Company; (iii) use of an automobile while employed by the Company; (iv) three weeks annually of paid vacation time off in accordance with the Company’s normal policies; (v) reimbursement for all reasonable and necessary out-of-pocket business, travel and entertainment expenses; and (vi) an annual cash performance bonus of up to 37.5% of his base salary based on achievement of certain criteria established by the Company’s compensation committee.

     All other provisions of the 2011 Employment Agreement, including payments to be made to Peterson for termination, including (i) termination without cause by the Company after a change in control or prior to June 18, 2012, or (ii) termination by Peterson for Good Reason after a change in control or prior to June 18, 2012, are substantially identical to the provisions in effect under the Prior Agreement as described in the Company’s Proxy Statement for the 2011 Regular Meeting of Members held on March 18, 2011 (“2011 Proxy Statement”), with payments adjusted for the increase in Peterson’s compensation under the 2011 Employment Agreement.

Nonqualified Option and Unit Appreciation Rights for Peterson

     The Compensation Committee of the Company’s Board has also granted to Peterson an option to purchase up to 150,000 Units of the Company’s Member Units at various prices, along with a right, under certain circumstances, to exchange the option for a cash payment equal to the appreciation on the value of the Units over the exercise price.

     Peterson has the right to purchase up to:

50,000 Units at $1.50 per Unit (Tranche 1);
50,000 Units at $3.00 per Unit (Tranche 2); and
50,000 Units at $4.50 per Unit (Tranche 3).

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     Each Tranche will vest at a rate of 10,000 Units (30,000 Units total) each year if Peterson remains employed on May 11 of each year between 2012 through 2016. If Peterson dies or becomes disabled during his employment with the Company, those Units that would have vested on the next May 11, would immediately vest.

     If the Company experiences a change in control, all options immediately become fully vested if the Company is not the surviving entity, or become fully vested if (i) the Company is the surviving entity and (ii) within two years after the change in control, Peterson is terminated by the Company without Cause (as defined below) or he resigns for Good Reason (defined in the Agreement as a material reduction in his duties or his compensation, or a relocation of the Company’s offices greater than 50 miles). Under the option agreement, change in control has the same definition as described in the 2011 Proxy Statement and as provided in the 2011 Employment Agreement.

     Prior to a change in control of the Company and prior to the Units becoming tradable on a national securities exchange, Peterson (or his heirs in the event of death) may only exercise the option as to any vested Units during the 12-month period following his termination of employment as a result of death or disability, or during the 3-month period following termination of employment for any other reason other than Cause.

     Peterson may exercise the options, to the extent vested, by giving notice to the Company and paying the aggregate exercise price for the options exercised. Peterson may turn back Units necessary to pay his tax withholding obligations resulting from the exercise. All options immediately forfeit if Peterson is terminated for Cause, which includes his unlawful conduct, failure to perform his duties after notice from the Board or breach of his fiduciary duties as an officer of the Company.

     In the event of a change in control of the Company, Peterson may, for 30 days beginning on the date of the change in control, exercise the unit appreciation right granted to him in connection with the option and receive cash equal to the appreciation on the number of Units then vested under the option in excess of the exercise price, less required tax withholding, except that the Company may substitute property received by the Unit holders for cash, and may delay payment of a portion of the appreciation until such time as the Unit holders are paid any deferred purchase price for their Units.

     In the event the Units of the Company become tradable on a national securities exchange, Peterson may thereafter, at any time during his employment and for the period following his employment described above, exercise the unit appreciation right and receive a cash payment equal to the appreciation on the number of Units then vested over the exercise price, less required tax withholding. Any Units exercised under the unit appreciation right or the option reduce the number of Units remaining available under the option.

     To the extent not exercised, the option and unit appreciation rights expire on May 10, 2021, (the tenth anniversary of the date of grant) or on the earliest of (i) the 90th day following termination of employment other than for Cause, (ii) the first anniversary of termination of employment as a result of death or disability, or (iii) 30 days following a change in control if the Company is not the surviving entity.

Item 6. Exhibits

     The exhibits filed herewith are set forth on the Exhibit Index filed as a part of this report beginning immediately following the signatures.

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SIGNATURES

     Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

	ADVANCED BIOENERGY, LLC
Date: May 16, 2011	By:	/s/ Richard R. Peterson
		Richard R. Peterson
		Chief Executive Officer and President, Chief Financial Officer (Duly authorized signatory and Principal Financial Officer)

EXHIBIT INDEX

Exhibit
No.	Description	Method of Filing
10.1	Master Loan Agreement between Farm Credit Services of America, FLCA and ABE Fairmont, LLC dated as of April 7, 2011.	Filed electronically
10.2	Multiple Advance Term Loan Supplement between Farm Credit Services of America, FLCA and ABE Fairmont, LLC dated as of April 7, 2011.	Filed electronically
10.3	Monitored Revolving Credit Supplement between Farm Credit Services of America, FLCA and ABE Fairmont, LLC dated as of April 7, 2011.	Filed electronically
10.4	Revolving Credit Supplement between Farm Credit Services of America, FLCA and ABE Fairmont, LLC dated as of April 7, 2011.	Filed electronically
10.5	Second Amended and Restated Employment Agreement dated as of May 11, 2011 between the Company and Richard Peterson.	Filed electronically
10.6	Company Agreement with Richard Peterson Unit Appreciation Right with Tandem Nonqualified Unit Option dated May 15, 2011.	Filed electronically
31	Rule 13a-14(a)/15d-14(a) Certification by Principal Executive Officer, Financial and Accounting Officer.	Filed Electronically
32	Section 1350 Certifications.	Filed Electronically

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EX-10.1

Exhibit 10.1

MLA No. RI0475D

MASTER LOAN AGREEMENT

     THIS MASTER LOAN AGREEMENT is entered into as of April 7, 2011, between FARM CREDIT SERVICES OF AMERICA. FLCA (“FLCA”). FARM CREDIT SERVICES OF AMERICA. PCA (“PCA”) and ABE FAIRMONT, LLC, Fairmont, Nebraska (the “Company”).

BACKGROUND

     FLCA and the Company are parties to a Master Loan Agreement dated November 20, 2006, as amended (the “Existing Agreement”). Hereinafter, the term “Farm Credit” shall mean FLCA. PCA or both, as applicable in the context. Pursuant to the terms of the Existing Agreement, the parties entered into one or more Supplements thereto. Farm Credit and the Company now desire to amend and restate the Existing Agreement and to apply such new agreement to the existing Supplements, as well as any new Supplements that may be issued thereunder. For that reason and for valuable consideration (the receipt and sufficiency of which are hereby acknowledged). Farm Credit and the Company hereby agree that the Existing Agreement shall be amended and restated to read as follows:

     SECTION 1. Supplements. In the event the Company desires to borrow from Farm Credit and Farm Credit is willing to lend to the Company, or in the event Farm Credit and the Company desire to consolidate any existing loans hereunder, the parties will enter into a Supplement to this agreement (a “Supplement”). Each Supplement will set forth the amount of the loan, the purpose of the loan, the interest rate or rate options applicable to that, loan, the repayment terms of the loan, and any other terms and conditions applicable to that particular loan. Each loan will be governed by the terms and conditions contained in this agreement and in the Supplement relating to the loan. As of the date hereof, the following Supplements are outstanding hereunder and shall be governed by the terms and conditions hereof: (A) the Monitored Revolving Credit Supplement dated April 7, 2011 and numbered RI0475S02; (B) the Multiple Advance Term Loan Supplement dated April 7, 2011 and numbered RI0340T01E: (C) the Construction and Revolving Term Loan Supplement dated December 24, 2008 and numbered RI0340T02C; and (D) the Revolving Credit Supplement (Letters of Credit) dated April 7, 2011 and numbered RI0340T04.

     SECTION 2. Sale of Participation Interests and Appointment of Administrative Agent. The Company acknowledges that concurrent with the execution of this MLA and related Supplements, Farm Credit is selling a participation interest in this MLA and Supplements executed concurrently herewith to CoBank, ACB (“CoBank”) (up to a 100% interest). Pursuant to an Administrative Agency Agreement dated November 20, 2006. as amended. (“Agency Agreement”), Farm Credit and CoBank appointed CoBank to act as Administrative Agent (“Agent”) to act in place of Farm Credit hereunder and under the Supplements and any security documents to be executed thereunder. All funds to be advanced hereunder shall be made by Agent, all repayments by the Company hereunder shall be made to Agent, and all notices to be made to Farm Credit hereunder shall be made to Agent. Agent shall be solely responsible for the administration of this agreement, the Supplements and the security documents to be executed by the Company thereunder and the enforcement of all rights and remedies of Farm Credit hereunder and thereunder. Company acknowledges the appointment of the Agent and consents to such appointment.

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Master Loan Agreement RI0475D
ABE FAIRMONT, LLC
Fairmont, Nebraska

     SECTION 3. Availability. Loans will be made available on any day on which Agent and the Federal Reserve Banks are open for business upon the telephonic or written request of the Company. Requests for loans must be received no later than 12:00 Noon Company’s local time on the date the loan is desired. Loans will be made available by wire transfer of immediately available funds to such account or accounts as may be authorized by the Company. The Company shall furnish to Agent a duly completed and executed copy of a CoBank Delegation and Wire and Electronic Transfer Authorization Form, and Agent shall be entitled to rely on (and shall incur no liability to the Company in acting on) any request or direction furnished in accordance with the terms thereof.

     SECTION 4. Repayment. The Company’s obligation to repay each loan shall be evidenced by the promissory note set forth in the Supplement relating to that loan or by such replacement note as Agent shall require. Agent shall maintain a record of all loans, the interest accrued thereon, and all payments made with respect thereto, and such record shall, absent proof of manifest error, be conclusive evidence of the outstanding principal and interest on the loans. All payments shall be made by wire transfer of immediately available funds, by check, or by automated clearing house or other similar cash handling processes as specified by separate agreement between the Company and Agent. Wire transfers shall be made to ABA No. 307088754 for advice to and credit of CoBank (or to such other account as Agent may direct by notice). The Company shall give Agent telephonic notice no later than 12:00 Noon Company’s local time of its intent to pay by wire and funds received after 3:00 p.m. Company’s local time shall be credited on the next business day. Checks shall be mailed to CoBank, Department 167, Denver, Colorado 80291-0167 (or to such other place as Agent may direct by notice). Credit for payment by check will not be given until the later of: (A) the day on which Agent receives immediately available funds; or (B) the next business day after receipt of the check.

     SECTION 5. Capitalization. The Company agrees to purchase voting (Class D) or non-voting (Class E) stock in Farm Credit Services of America, ACA ($1,000.00 worth of stock consisting of at least 200 shares of $5.00 par value stock) as required under the policy of Farm Credit at the time of acquisition. Farm Credit policy may change from time to time. Farm Credit shall have a first lien on the stock for payment of any liability of the Company to Farm Credit. Said stock shall be owned as follows:

Owner Name: ABE Fairmont. LLC SSN/TIN: 20-5736411

The Company authorizes and appoints the following to act on behalf of the Company, to vote the Class D stock, and to accept, receive and receipt for any dividends declared on the stock:

Richard Peterson, voter

     SECTION 6. Security. The Company’s obligations under this agreement, all Supplements (whenever executed), and all instruments and documents contemplated hereby or thereby, shall be secured by a statutory first lien on all equity which the Company may now own or hereafter acquire in Farm Credit. In addition, the Company’s obligations under each Supplement (whenever executed) and this agreement shall be secured by a first lien (subject only to exceptions approved in writing by Agent) pursuant to all security agreements, mortgages, and deeds of trust executed by the Company in favor of

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Master Loan Agreement RI0475D
ABE FAIRMONT, LLC
Fairmont, Nebraska

Farm Credit, whether now existing or hereafter entered into. As additional security for those obligations: (A) the Company agrees to grant to Farm Credit, by means of such instruments and documents as Agent shall require a first priority lien on such of its other assets, whether now existing or hereafter acquired, as Agent may from time to time require; and (B) the Company agrees to grant to Farm Credit, by means of such instruments and documents as Agent shall require, a first priority lien on all realty which the Company may from time to time acquire after the date hereof. Farm Credit may at its discretion assign collateral to the Agent under the Agency Agreement.

     SECTION 7. Conditions Precedent.

          (A) Conditions to Initial Supplement. Farm Credit’s obligation to extend credit under the initial Supplement hereto is subject to the conditions precedent that Agent receive, in form and content satisfactory to Agent, each of the following:

                 This Agreement, Etc, A duly executed copy of this agreement and all instruments and documents contemplated hereby.

          (B) Conditions to Each Supplement. Farm Credit’s obligation to extend credit under each Supplement, including the initial Supplement, is subject to the conditions precedent that Agent receive, in form and content satisfactory to Agent, each of the following:

               (1) Supplement. A duly executed copy of the Supplement and all instruments and documents contemplated thereby.

               (2) Evidence of Authority. Such certified board resolutions, certificates of incumbency, and other evidence that Agent may require that the Supplement, all instruments and documents executed in connection therewith, and, in the case of initial Supplement hereto, this agreement and all instruments and documents executed in connection herewith, have been duly authorized and executed.

               (3) Fees and Other Charges. All fees and other charges provided for herein or in the Supplement.

               (4) Evidence of Perfection, Etc. Such evidence as Agent may require that Farm Credit has a duly perfected first priority lien on all security for the Company’s obligations, and that the Company is in compliance with Section 9(D) hereof.

          (C) Conditions to Each Loan. Farm Credit’s obligation under each Supplement to make any loan to the Company thereunder is subject to the condition that no “Event of Default” (as defined in Section 12 hereof) or event which with the giving of notice and/or the passage of time would become an Event of Default hereunder (a “Potential Default”), shall have occurred and be continuing.

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Master Loan Agreement RI0475D
ABE FAIRMONT, LLC
Fairmont, Nebraska

     SECTION 8. Representations and Warranties.

          (A) This Agreement. The Company represents and warrants to Farm Credit and Agent that as of the date of this agreement:

               (1) Compliance. The Company and, to the extent contemplated hereunder, each “Subsidiary” (as defined below), is in compliance with all of the terms of this agreement, and no Event of Default or Potential Default exists hereunder.

               (2) Subsidiaries. The Company has no “Subsidiary(ies)” (as defined below). For purposes hereof, a “Subsidiary” shall mean a corporation of which shares of stock having ordinary voting power to elect a majority of the board of directors or other managers of such corporation are owned, directly or indirectly, by the Company.

          (B) Each Supplement. The execution by the Company of each Supplement hereto shall constitute a representation and warranty to Agent that:

               (1) Applications. Each representation and warranty and all information set forth in any application or other documents submitted in connection with, or to induce Farm Credit to enter into, such Supplement, is correct in all material respects as of the date of the Supplement.

               (2) Conflicting Agreements, Etc. This agreement, the Supplements, and all security and other instruments and documents relating hereto and thereto (collectively, at any time, the “Loan Documents”), do not conflict with, or require the consent of any party to, any other agreement to which the Company is a party or by which it or its property may be bound or affected, and do not conflict with any provision of the Company’s operating agreement, articles of organization, or other organizational documents.

               (3) Compliance. The Company and, to the extent contemplated hereunder, each Subsidiary, is in compliance with all of the terms of the Loan Documents (including, without limitation. Section 9(A) of this agreement on eligibility to borrow from Farm Credit).

               (4) Binding Agreement. The Loan Documents create legal, valid, and binding obligations of the Company which are enforceable in accordance with their terms, except to the extent that enforcement may be limited by applicable bankruptcy, insolvency, or similar laws affecting creditors’ rights generally.

     SECTION 9. Affirmative Covenants. Unless otherwise agreed to in writing by Agent while this agreement is in effect, the Company agrees to and with respect to Subsections 9(B) through 9(G) hereof, agrees to cause each Subsidiary to:

          (A) Eligibility. Maintain its status as an entity eligible to borrow from Farm Credit pursuant to the terms of the Farm Credit Act of 1971, as amended. 12 USC 2001, et seq.

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Master Loan Agreement RI0475D
ABE FAIRMONT, LLC
Fairmont, Nebraska

          (B) Corporate Existence, Licenses, Etc. (1) Preserve and keep in full force and effect its existence and good standing in the jurisdiction of its incorporation or formation; (2) qualify and remain qualified to transact business in all jurisdictions where such qualification is required: and (3) obtain and maintain all licenses, certificates, permits, authorizations, approvals, and the like which are material to the conduct of its business or required by law, rule, regulation, ordinance, code, order, and the like (collectively, “Laws”).

          (C) Compliance with Laws. Comply in all material respects with all applicable Laws, including, without limitation, all Laws relating to environmental protection and any patron or member investment program that it may have. In addition, the Company agrees to cause all persons occupying or present on any of its properties, and to cause each Subsidiary to cause all persons occupying or present on any of its properties, to comply in all material respects with all environmental protection Laws.

          (D) Insurance. Maintain insurance with insurance companies or associations reasonably acceptable to Agent in such amounts and covering such risks as are usually carried by companies engaged in the same or similar business and similarly situated, and make such increases in the type or amount of coverage as Agent may reasonably request. All such policies insuring any collateral for the Company’s obligations to Farm Credit shall have mortgagee or lender loss payable clauses or endorsements in form and content acceptable to Agent. At Agent’s request, all policies (or such other proof of compliance with this Subsection as may be satisfactory to Agent) shall be delivered to Agent.

          (E) Property Maintenance. Maintain all of its property that is necessary to or useful in the proper conduct of its business in good working condition, ordinary wear and tear excepted.

          (F) Books and Records. Keep adequate records and books of account in which complete entries will be made in accordance with generally accepted accounting principles (“GAAP”) consistently applied.

          (G) Inspection. Permit Agent or its agents, upon reasonable notice and during normal business hours or at such other times as the parties may agree, to examine its properties, books, and records, and to discuss its affairs, finances, and accounts, with its respective officers, directors, employees, and independent certified public accountants.

          (H) Reports and Notices. Furnish to Agent:

               (1) Annual Financial Statements. As soon as available, but in no event more than 90 days after the end of each fiscal year of the Company and Advanced BioEnergy. LLC (“Advanced”) occurring during the term hereof, annual consolidated and consolidating financial statements of the Company and Advanced, and their consolidated Subsidiaries, if any, prepared in accordance with GAAP consistently applied. Furthermore, as soon as available, but in no event more than 120 days after the end of each fiscal year of Advanced occurring during the term hereof, annual unconsolidated financial statements of Advanced, prepared in accordance with GAAP consistently applied. Such financial statements shall: (a) be audited by independent certified public accountants selected by the Company and Advanced and acceptable to Agent; (b) be accompanied by a report of such accountants containing

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Master Loan Agreement RI0475D
ABE FAIRMONT, LLC
Fairmont, Nebraska

an opinion thereon acceptable to Agent; (c) be prepared in reasonable detail and in comparative form; and (d) include a balance sheet, a statement of income, a statement of retained earnings, a statement of cash flows, and all notes and schedules relating thereto.

               (2) Interim Financial Statements. As soon as available, but in no event more than 30 days after the end of each month, a consolidated balance sheet of the Company and its consolidated Subsidiaries, if any, as of the end of such month, a consolidated statement of income for the Company and its consolidated Subsidiaries, if any, for such period and for the period year to date, and such other interim statements as Agent may reasonably request, all prepared in reasonable detail and in comparative form in accordance with GAAP consistently applied and, if required by written notice from Agent, certified by an authorized officer or employee of the Company acceptable to Agent.

               (3) Notice of Default. Promptly after becoming aware thereof, notice of the occurrence of an Event of Default or a Potential Default.

               (4) Notice of Non-Environmental Litigation. Promptly after the commencement thereof, notice of the commencement of all actions, suits, or proceedings before any court, arbitrator, or governmental department, commission, board, bureau, agency, or instrumentality affecting the Company or any Subsidiary which, if determined adversely to the Company or any such Subsidiary, could have a material adverse effect on the financial condition, properties, profits, or operations of the Company or any such Subsidiary.

               (5) Notice of Environmental Litigation, Etc. Promptly after receipt thereof, notice of the receipt of all pleadings, orders, complaints, indictments, or any other communication alleging a condition that may require the Company or any Subsidiary to undertake or to contribute to a cleanup or other response under environmental Laws, or which seek penalties, damages, injunctive relief, or criminal sanctions related to alleged violations of such Laws, or which claim personal injury or property damage to any person as a result of environmental factors or conditions.

               (6) Bylaws and Articles. Promptly after any change in the Company’s bylaws or articles of incorporation (or like documents), copies of all such changes, certified by the Company’s Secretary.

               (7) Compliance Certificates. Together with each set of financial statements furnished to Agent pursuant to Subsection H(2) hereof and, if applicable, Subsection (2) hereof, a certificate of an officer or employee of the Company acceptable to Agent, in the form attached as Exhibit “A” hereto: (a) certifying that no Event of Default or Potential Default occurred during the period covered by such statement(s) or, if an Event of Default or Potential Default occurred, a description thereof and of all actions taken or to be taken to remedy same; and (b) setting forth calculations showing compliance with the financial covenants set forth in Section 11 hereof.

               (8) Formation Documents. Promptly after any change in the Company’s operating agreement or articles of organization (or like documents), copies of all such changes, certified by the Company’s Secretary.

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Master Loan Agreement RI0475D
ABE FAIRMONT, LLC
Fairmont, Nebraska

               (9) Budgets. As soon as available, but in no event more than 90 days after the end of any fiscal year of the Company occurring during the term hereof, copies of the Company’s board-approved annual budgets and forecasts of operations and capital expenditures.

               (10) Other Information. Such other information regarding the condition or operations, financial or otherwise, of the Company or any Subsidiary as Agent may from time to time reasonably request, including but not limited to copies of all pleadings, notices, and communications referred to in Subsections 9(H)(4) and (5) above.

     SECTION 10. Negative Covenants. Unless otherwise agreed to in writing by Agent, while this agreement is in effect the Company will not:

          (A) Borrowings. Create, incur, assume, or allow to exist, directly or indirectly, any indebtedness or liability for borrowed money (including trade or bankers’ acceptances), letters of credit, or the deferred purchase price of property or services, except for: (1) debt to Farm Credit; (2) accounts payable to trade creditors incurred in the ordinary course of business; (3) current operating liabilities (other than for borrowed money) incurred in the ordinary course of business; (4) Industrial Revenue Bond financing from Fillmore County, Nebraska, in an amount not to exceed $7,000,000.00 (exclusive of any related insurance costs and reserve requirements), subject to a debt subordination agreement acceptable to Agent; (5) debt of the Company to miscellaneous creditors, in an aggregate amount not to exceed $1,500,000.00 on terms and conditions satisfactory to Agent: and (6) Tax Increment Financing in an amount not to exceed $7,000,000.00.

          (B) Liens. Create, incur, assume, or allow to exist any mortgage, deed of trust, pledge, lien (including the lien of an attachment, judgment, or execution), security interest, or other encumbrance of any kind upon any of its property, real or personal (collectively, “Liens”). The forgoing restrictions shall not apply to: (1) Liens in favor of Farm Credit; (2) Liens for taxes, assessments, or governmental charges that are not past due; (3) Liens and deposits under workers’ compensation, unemployment insurance, and social security Laws: (4) Liens and deposits to secure the performance of bids, tenders, contracts (other than contracts for the payment of money), and like obligations arising in the ordinary course of business as conducted on the date hereof; (5) Liens imposed by Law in favor of mechanics, materialmen, warehousemen, and like persons that secure obligations that are not past due; (6) easements, rights-of-way, restrictions, and other similar encumbrances which, in the aggregate, do not materially interfere with the occupation, use, and enjoyment of the property or assets encumbered thereby in the normal course of its business or materially impair the value of the property subject thereto: and (7) Liens securing permitted borrowings in Section 10(A)(4), 10(A)(5) and 10(A)(6) above.

          (C) Mergers, Acquisitions, Etc. Merge or consolidate with any other entity or acquire all or a material part of the assets of any person or entity, or form or create any new Subsidiary or affiliate, or commence operations under any other name, organization, or entity, including any joint venture.

          (D) Transfer of Assets. Sell, transfer, lease, or otherwise dispose of any of its assets, except in the ordinary course of business.

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Master Loan Agreement RI0475D
ABE FAIRMONT, LLC
Fairmont, Nebraska

          (E) Loans and Investments. Make any loan or advance to any person or entity, or purchase any capital stock, obligations or other securities of, make any capital contribution to, or otherwise invest in any person or entity, or form or create any partnerships or joint ventures except trade credit extended in the ordinary course of business.

          (F) Contingent Liabilities. Assume, guarantee, become liable as a surety, endorse, contingently agree to purchase, or otherwise be or become liable, directly or indirectly (including, but not limited to, by means of a maintenance agreement, an asset or stock purchase agreement, or any other agreement designed to ensure any creditor against loss), for or on account of the obligation of any person or entity, except by the endorsement of negotiable instruments for deposit or collection or similar transactions in the ordinary course of the Company’s business.

          (G) Change in Business. Engage in any business activities or operations substantially different from or unrelated to the Company’s present business activities or operations.

          (H) Capital Expenditures. During fiscal year 2011 of the Company, expend, in the aggregate, no more than $3,600,000.00 and in subsequent fiscal years expend no more than $600,000.00 for the acquisition of fixed or capital assets (including all obligations under capitalized leases authorized under the terms of this agreement, but excluding obligations under operating leases).

          (I) Leases. Create, incur, assume, or permit to exist any obligation as lessee under operating leases or leases which should be capitalized in accordance with GAAP for the rental or hire of any real or personal property, except for: (1) leases which do not in the aggregate require the Company to make scheduled payments to the lessors in any fiscal year of the Company in excess of $100,000.00; and (2) leases of railroad cars, provided, however, the Company will lease no more that 454 cars, and further provided that all railroad car leases expire on or before December 1, 2013, and with any subsequent extension or renewal of any railroad car lease not to exceed a term of three years, all under terms and conditions acceptable to Agent.

          (J) Changes to Operating Agreements, Etc. Amend or otherwise make any material changes to the Company’s Articles of Organization, Operating Agreement, management contracts and ethanol and/or distillers grain marketing contracts.

          (K) Dividends, Etc. Declare or pay any dividends, or make any distribution of assets to the member/owners, or purchase, redeem, retire or otherwise acquire for value any of its equity, or allocate or otherwise set apart any sum for any of the foregoing, except that for each fiscal year commencing with the fiscal year ending 2011, a distribution may be made to the Company’s members/owners of up to 40% of the net profit (according to GAAP) for such fiscal year after receipt of the audited financial statements for the pertinent fiscal year, provided that the Company has been and will remain in compliance with all loan covenants, terms and conditions. Furthermore, with respect to the fiscal year ending 2011 and each subsequent fiscal year, a distribution may be made to its members/owners up to 75% of the net profit for such fiscal year if the Company has made the required “Free Cash Flow” payment to Agent for such fiscal year as provided in Multiple Advance Term Loan

-9-

Master Loan Agreement RI0475D
ABE FAIRMONT, LLC
Fairmont, Nebraska

Supplement dated April 7, 2011, and numbered RI0340T01E and any renewals, restatements and amendments thereof, and will remain in compliance with all other loan covenant, terms and conditions.

          (L) Payments on Subordinate Debt. In accordance with, and as permitted by, the terms of the Debt Subordination agreement dated as of April 15, 2006, as the same has been amended from time to time, among the Agent, and the Company (as successor to Advanced BioEnergy, LLC). Wells Fargo Bank, National Association, as trustee, and Farm Credit, make any payments on the subordinated debt that would cause the Company to be in violation of the terms of the Debt Subordination Agreement.

     SECTION 11. Financial Covenants. Unless otherwise agreed to in writing, while this agreement is in effect:

          (A) Working Capital. The Company will have at the end of each period for which financial statements are required to be furnished pursuant to Section 9(H) hereof an excess of current assets over current liabilities (both as determined in accordance with GAAP consistently applied) of not less than $10,000,000.00, except that in determining current assets, any amount available under the Construction and Revolving Term Loan Supplement hereto (less the amount that would be considered a current liability under GAAP if fully advanced) hereto may be included.

          (B) Net Worth. The Company will have at the end of each period for which financial statements are required to be furnished pursuant to Section 9(H) hereof an excess of total assets over total liabilities (both as determined in accordance with GAAP consistently applied) of not less than $50,000,000.00, except that in determining total liabilities, the amount of Tax Increment Financing shall be excluded.

          (C) Debt Service Coverage Ratio. The Company will have at the end of each fiscal year of the Company a “Debt Service Coverage Ratio” (as defined below) of not less than 1.10 to 1.00. For purposes hereof, the term “Debt Service Coverage Ratio” shall mean the following (all as calculated for the most current year end in accordance with GAAP consistently applied): (1) net income (after taxes), plus depreciation and amortization; divided by (2) all current portion of regularly scheduled long term debt for the prior period (previous year-end).

SECTION 12. Events of Default. Each of the following shall constitute an “Event of Default” under this agreement:

          (A) Payment Default. The Company should fail to make any payment to Agent, or to purchase any equity in, Farm Credit when due.

          (B) Representations and Warranties. Any representation or warranty made or deemed made by the Company herein or in any Supplement, application, agreement, certificate, or other document related to or furnished in connection with this agreement or any Supplement, shall prove to have been false or misleading in any material respect on or as of the date made or deemed made.

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Master Loan Agreement RI0475D
ABE FAIRMONT, LLC
Fairmont, Nebraska

          (C) Certain Affirmative Covenants. The Company or to the extent required hereunder, any Subsidiary should fail to perform or comply with Sections 9(A) through 9(H)(2), 9(H)(6) or any reporting covenant set forth in any Supplement hereto, and such failure continues for 15 days after written notice thereof shall have been delivered by Agent to the Company.

          (D) Other Covenants and Agreements. The Company or to the extent required hereunder, any Subsidiary should fail to perform or comply with any other covenant or agreement contained herein or in any other Loan Document or shall use the proceeds of any loan for an unauthorized purpose.

          (E) Cross-Default. The Company should, after any applicable grace period, breach or be in default under the terms of any other agreement between the Company and Farm Credit or between the Company and any affiliate of CoBank, including without limitation Farm Credit Leasing Services Corporation.

          (F) Other Indebtedness. The Company or any Subsidiary should fail to pay when due any indebtedness to any other person or entity for borrowed money or any long-term obligation for the deferred purchase price of property (including any capitalized lease), or any other event occurs which, under any agreement or instrument relating to such indebtedness or obligation, has the effect of accelerating or permitting the acceleration of such indebtedness or obligation, whether or not such indebtedness or obligation is actually accelerated or the right to accelerate is conditioned on the giving of notice, the passage of time, or otherwise.

          (G) Judgments. A judgment, decree, or order for the payment of money shall be rendered against the Company or any Subsidiary in an amount exceeding $100,000.00 and either: (1) enforcement proceedings shall have been commenced; (2) a Lien prohibited under Section 9(B) hereof shall have been obtained; or (3) such judgment, decree, or order shall continue unsatisfied and in effect for a period of 20 consecutive days without being vacated, discharged, satisfied, or stayed pending appeal.

          (H) Insolvency, Etc. The Company or any Subsidiary shall: (1) become insolvent or shall generally not, or shall be unable to, or shall admit in writing its inability to, pay its debts as they come due; or (2) suspend its business operations or a material part thereof or make an assignment for the benefit of creditors; or (3) apply for, consent to, or acquiesce in the appointment of a trustee, receiver, or other custodian for it or any of its property or, in the absence of such application, consent, or acquiescence, a trustee, receiver, or other custodian is so appointed; or (4) commence or have commenced against it any proceeding under any bankruptcy, reorganization, arrangement, readjustment of debt, dissolution, or liquidation Law of any jurisdiction.

          (I) Material Adverse Change. Any material adverse change occurs, as reasonably determined by Agent, in the Company’s financial condition, results of operation, or ability to perform its obligations hereunder or under any instrument or document contemplated hereby.

          (J) Revocation of Guaranty. Any guaranty, suretyship, subordination agreement, maintenance agreement, or other agreement furnished in connection with the Company’s obligations

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Master Loan Agreement RI0475D
ABE FAIRMONT, LLC
Fairmont, Nebraska

hereunder and under any Supplement shall, at any time, cease to be in full force and effect, or shall be revoked or declared null and void, or the validity or enforceability thereof shall be contested by the guarantor, surety or other maker thereof (the “Guarantor”), or the Guarantor shall deny any further liability or obligation thereunder, or shall fail to perform its obligations thereunder, or any representation or warranty set forth therein shall be breached, or the Guarantor shall breach or be in default under the terms of any other agreement with Agent (including any loan agreement or security agreement), or a default set forth in Subsections (F) through (H) hereof shall occur with respect to the Guarantor.

     SECTION 13. Remedies. Upon the occurrence and during the continuance of an Event of Default or any Potential Default, Farm Credit shall have no obligation to continue to extend credit to the Company and may discontinue doing so at any time without prior notice. For all purposes hereof, the term “Potential Default” means the occurrence of any event which, with the passage of time or the giving of notice or both would become an Event of Default. In addition, upon the occurrence and during the continuance of any Event of Default, Farm Credit or Agent may, upon notice to the Company, terminate any commitment and declare the entire unpaid principal balance of the loans, all accrued interest thereon, and all other amounts payable under this agreement, all Supplements, and the other Loan Documents to be immediately due and payable. Upon such a declaration, the unpaid principal balance of the loans and all such other amounts shall become immediately due and payable, without protest, presentment, demand, or further notice of any kind, all of which are hereby expressly waived by the Company. In addition, upon such an acceleration:

          (A) Enforcement. Farm Credit or Agent may proceed to protect, exercise, and enforce such rights and remedies as may be provided by this agreement, any other Loan Document or under Law. Each and every one of such rights and remedies shall be cumulative and may be exercised from time to time, and no failure on the part of Farm Credit or Agent to exercise, and no delay in exercising, any right or remedy shall operate as a waiver thereof, and no single or partial exercise of any right or remedy shall preclude any other or future exercise thereof, or the exercise of any other right. Without limiting the foregoing, Agent may hold and/or set off and apply against the Company’s obligation to Farm Credit the proceeds of any equity in Farm Credit or Agent, any cash collateral held by Farm Credit or Agent, or any balances held by Farm Credit or Agent for the Company’s account (whether or not such balances are then due).

          (B) Application of Funds. Agent may apply all payments received by it to the Company’s obligations to Farm Credit in such order and manner as Agent may elect in its sole discretion.

In addition to the rights and remedies set forth above: (1) upon the occurrence and during the continuance of an Event of Default, then at Agent’s option in each instance, the entire indebtedness outstanding hereunder and under all Supplements shall bear interest from the date of such Event of Default until such Event of Default shall have been waived or cured in a manner satisfactory to Agent at 4.00% per annum in excess of the rate(s) of interest that would otherwise be in effect on that loan; and (2) after the maturity of any loan (whether as a result of acceleration or otherwise), the unpaid principal balance of such loan (including without limitation, principal, interest, fees and expenses) shall automatically bear interest at 4.00% per annum in excess of the rate(s) of interest that would otherwise

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Master Loan Agreement RI0475D
ABE FAIRMONT, LLC
Fairmont, Nebraska

be in effect on that loan. All interest provided for herein shall be payable on demand and shall be calculated on the basis of a year consisting of 360 days.

     SECTION 14. Broken Funding Surcharge. Notwithstanding any provision contained in any Supplement giving the Company the right to repay any loan prior to the date it would otherwise be due and payable, the Company agrees to provide three Business Days’ prior written notice for any prepayment of a fixed rate balance and that in the event it repays any fixed rate balance prior to its scheduled due date or prior to the last day of the fixed rate period applicable thereto (whether such payment is made voluntarily, as a result of an acceleration, or otherwise), the Company will pay to Agent a surcharge in an amount equal to the greater of: (A) an amount which would result in Farm Credit. Agent, and all subparticipants being made whole (on a present value basis) for the actual or imputed funding losses incurred by Farm Credit. Agent, and all subparticipants as a result thereof; or (B) $300.00. Notwithstanding the foregoing, in the event any fixed rate balance is repaid as a result of the Company refinancing the loan with another lender or by other means, then in lieu of the foregoing, the Company shall pay to CoBank a surcharge in an amount sufficient (on a present value basis) to enable Farm Credit. Agent, and all subparticipants to maintain the yield they would have earned during the fixed rate period on the amount repaid. Such surcharges will be calculated in accordance with methodology established by Farm Credit. Agent, and all subparticipants (copies of which will made available to the Company upon request).

     SECTION 15. Complete Agreement, Amendments. This agreement, all Supplements, and all other instruments and documents contemplated hereby and thereby, are intended by the parties to be a complete and final expression of their agreement. No amendment or modification of this Agreement shall be effective unless in writing signed by both parties hereto. No waiver of any provision hereof, and no consent to any departure by either Company herefrom. shall be effective unless approved in writing by the other party, and then such waiver or consent shall be effective only in the specific instance and for the specific purpose for which given. In the event this agreement is amended or restated, each such amendment or restatement shall be applicable to all Supplements hereto.

     SECTION 16. Other Types of Credit. From time to time, Farm Credit may extend other types of credit to or for the account of the Company to expedite or facilitate the loans extended hereunder. In the event the parties desire to do so under the terms of this agreement, such extensions of credit may be set forth in any Supplement hereto and this agreement shall be applicable thereto.

     SECTION 17. Applicable Law. Without giving effect to the principles of conflict of laws and except to the extent governed by federal law, the Laws of the State of Colorado, without reference to choice of law doctrine, shall govern this agreement, each Supplement and any other Loan Documents for which Colorado is specified as the applicable law, and all disputes and matters between the parties to this agreement, including all disputes and matters whatsoever arising under, in connection with or incident to the lending and/or leasing or other business relationship between the parties, and the rights and obligations of the parties to this agreement or any other Loan Documents by and between the parties for which Colorado is specified as the applicable law.

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Master Loan Agreement RI0475D
ABE FAIRMONT, LLC
Fairmont, Nebraska

     SECTION 18. Notices. All notices hereunder shall be in writing and shall be deemed to be duly given upon delivery if personally delivered or sent by telegram or facsimile transmission, or three days after mailing if sent by express, certified or registered mail, to the parries at the following addresses (or such other address for a party as shall be specified by like notice):

If to Agent, as follows:	If to the Company, as follows:
For general correspondence purposes:	ABE FAIRMONT, LLC
CoBank. ACB	10201 Wayzata Boulevard
P.O. Box 5110	Minneapolis, Minnesota 55305
Denver. Colorado 80217-5110
For direct delivery purposes, when desired:	Attention: CEO
CoBank, ACB	Fax No.: 763-226-2725
5500 South Quebec Street
Greenwood Village, Colorado 80111-1914
Attention: Credit Information Services
Fax No.: (303) 224-6101

     SECTION 19. Taxes and Expenses. To the extent allowed by law, the Company agrees to pay all reasonable out-of-pocket costs and expenses (including the fees and expenses of counsel retained or employed by Agent, including expenses of in-house counsel of Agent) incurred by Agent and any participants from Farm Credit in connection with the origination, administration, collection, and enforcement of this agreement and the other Loan Documents, including, without limitation, all costs and expenses incurred in perfecting, maintaining, determining the priority of, and releasing any security for the Company’s obligations to Farm Credit, and any stamp, intangible, transfer, or like tax payable in connection with this agreement or any other Loan Document.

     SECTION 20. Effectiveness and Severability. This agreement shall continue in effect until: (A) all indebtedness and obligations of the Company under this agreement, all Supplements, and all other Loan Documents shall have been paid or satisfied: (B) Agent has no commitment to extend credit to or for the account of the Company under any Supplement: and (C) either party sends written notice to the other terminating this agreement. Any provision of this agreement or any other Loan Document which is prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions hereof or thereof.

     SECTION 21. Successors and Assigns. This agreement, each Supplement, and the other Loan Documents shall be binding upon and inure to the benefit of the Company and Farm Credit and their respective successors and assigns, except that the Company may not assign or transfer its rights or obligations under this agreement, any Supplement or any other Loan Document without the prior written consent of Agent.

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Master Loan Agreement RI0475D
ABE FAIRMONT, LLC
Fairmont, Nebraska

     SECTION 22. Participations, Etc. From time to time, Farm Credit may sell to one or more banks, financial institutions, or other lenders a participation in one or more of the loans or other extensions of credit made pursuant to this agreement. However, no such participation shall relieve Farm Credit of any commitment made to the Company hereunder. In connection with the foregoing, Farm Credit may disclose information concerning the Company and its Subsidiaries, if any, to any participant or prospective participant, provided that such participant or prospective participant agrees to keep such information confidential. Farm Credit agrees that all Loans that are made by Farm Credit and that are retained for its own account and are not included in a sale of participation interest shall be entitled to Patronage distributions in accordance with the bylaws of Farm Credit and its practices and procedures related to patronage distribution. Accordingly, all Loans that are included in a sale of participation interest shall not be entitled to patronage distributions from Farm Credit. A sale of a participation interest may include certain voting rights of the participants regarding the loans hereunder (including without limitation the administration, servicing, and enforcement thereof). Farm Credit agrees to give written notification to the Company of any sale of a participation interest.

     SECTION 23. Counterparts. This agreement, each Supplement and any other Loan Document may be executed in any number of counterparts and by different parties hereto in separate counterparts, each of which, when so executed, shall be deemed to be an original and shall be binding upon all parties and their respective permitted successors and assigns, and all of which taken together shall constitute one and the same agreement.

     SECTION 24. Administrative Fee. The Company agrees to pay to Agent on November 1, 2011 and each November 1 thereafter, for as long as the Company has commitments from Farm Credit, an administrative fee in the amount of $35,000.00.

     IN WITNESS WHEREOF, the parties have caused this agreement to be executed by their duly authorized officers as of the date shown above.

FARM CREDIT SERVICES OF AMERICA, FLCA		ABE FAIRMONT, LLC
			By ADVANCED BIOENERGY, LLC,
			its sole member
By:	/s/ Kathryn Frahm	By:	/s/ Richard Peterson
Title:	VP Credit	Title:	CEO/CFO NT 4-28-11
FARM CREDIT SERVICES OF AMERICA, PCA
By:	/s/ Kathryn Frahm
Title:	VP Credit

EX-10.2

Exhibit 10.2

Loan No. RI0340T01E

MULTIPLE ADVANCE TERM LOAN SUPPLEMENT

     THIS SUPPLEMENT to the Master Loan Agreement dated April 7, 2011 (the “MLA”), is entered into as of April 7, 2011 between FARM CREDIT SERVICES OF AMERICA, FLCA (“Farm Credit”) and ABE FAIRMONT, LLC, Fairmont, Nebraska (the “Company”), and amends and restates the Supplement dated December 24, 2008 and numbered RI0340T01C, as amended.

     SECTION 1. The Term Loan Commitment. As of the date hereof. Farm Credit’s obligation to extend credit to the Company has expired and the unpaid principal balance of the loans is $29,866,000.00 (the “Commitment”).

     SECTION 2. Purpose. The purpose of the Commitment was and remains to partially finance the Company’s construction of a 100 million gallon (annual) ethanol plant.

     SECTION 3. Term. Intentionally Omitted.

     SECTION 4. Interest. The Company agrees to pay interest on the unpaid balance of the loan(s) in accordance with one or more of the following interest rate options, as selected by the Company:

          (A) One-Month LIBOR Index Rate. At a rate (rounded upward to the nearest 1/100th and adjusted for reserves required on “Eurocurrency Liabilities” [as hereinafter defined] for banks subject to “FRB Regulation D” [as hereinafter defined] or required by any other federal law or regulation) per annum equal at all times to 3.40% above the rate quoted by the British Bankers Association (the “BBA”) at 11:00 a.m. London time for the offering of one (l)-month U.S. dollars deposits, as published by Bloomberg or another major information vendor listed on BBA’s official website on the first “U.S. Banking Day” (as hereinafter defined) in each week, with such rate to change weekly on such day. The rate shall be reset automatically, without the necessity of notice being provided to the Company or any other party, on the first “U.S. Banking Day” of each succeeding week, and each change in the rate shall be applicable to all balances subject to this option. Information about the then- current rate shall be made available upon telephonic request. For purposes hereof: (1) “U.S. Banking Day” shall mean a day on which Agent (as that term is defined in the MLA) is open for business and banks are open for business in New York. New York; (2) “Eurocurrency Liabilities” shall have the meaning as set forth in “FRB Regulation D”; and (3) “FRB Regulation D” shall mean Regulation D as promulgated by the Board of Governors of the Federal Reserve System, 12 CFR Part 204, as amended.

          (B) Quoted Rate. At a fixed rate per annum to be quoted by Agent in its sole discretion in each instance. Under this option, rates may be fixed on such balances and for such periods, as may be agreeable to Agent in its sole discretion in each instance, provided that: (1) the minimum fixed period shall be 180 days; (2) amounts may be fixed in increments of $500,000.00 or multiples thereof; and (3) the maximum number of fixes in place at any one time shall be ten.

          (C) LIBOR. At a fixed rate per annum equal to “LIBOR” (as hereinafter defined) plus 3.40%. Under this option: (1) rates may be fixed for “Interest Periods” (as hereinafter defined) of 1, 2, 3, 6, 9, or 12 months as selected by the Company: (2) amounts may be fixed in increments of $500,000.00 or multiples thereof: (3) the maximum number of fixes in place at any one time shall be ten;

Multiple Advance Term Loan Supplement RI0340T01E -2-

ABE FAIRMONT, LLC
Fairmont, Nebraska

and (4) rates may only be fixed on a “Banking Day” (as hereinafter defined) on three Banking Days’ prior written notice. For purposes hereof: (a) “LIBOR” shall mean the rate (rounded upward to the nearest sixteenth and adjusted for reserves required on “Eurocurrency Liabilities” [as hereinafter defined] for banks subject to “FRB Regulation D” [as herein defined] or required by any other federal law or regulation) quoted by the British Bankers Association (the “BBA”) at 11:00 a.m. London time two Banking Days before the commencement of the Interest Period for the offering of U.S. dollar deposits in the London interbank market for the Interest Period designated by the Company; as published by Bloomberg or another major information vendor listed on BBA’s official website; (b) “Banking Day” shall mean a day on which Agent is open for business, dealings in U.S. dollar deposits are being carried out in the London interbank market and banks are open for business in New York City and London, England; (c) “Interest Period” shall mean a period commencing on the date this option is to take effect and ending on the numerically corresponding day in the next calendar month or the month that is 2, 3, 6, 9, or 12 months thereafter, as the case may be; provided, however, that: (i) in the event such ending day is not a Banking Day, such period shall be extended to the next Banking Day unless such next Banking Day falls in the next calendar month, in which case it shall end on the preceding Banking Day; and (ii) if there is no numerically corresponding day in the month, then such period shall end on the last Banking Day in the relevant month; (d) “Eurocurrency Liabilities” shall have meaning as set forth in “FRB Regulation D”; and (e) “FRB Regulation D” shall mean Regulation D as promulgated by the Board of Governors of the Federal Reserve System, 12 CFR Part 204, as amended.

The Company shall select the applicable rate option at the time it requests a loan hereunder and may, subject to the limitations set forth above, elect to convert balances bearing interest at the variable rate option to one of the fixed rate options. Upon the expiration of any fixed rate period, interest shall automatically accrue at the variable rate option unless the amount fixed is repaid or fixed for an additional period in accordance with the terms hereof. Notwithstanding the foregoing, rates may not be fixed for periods expiring after the maturity date of the loans and rates may not be fixed in such a manner as to cause the Company to have to break any fixed rate balance in order to pay any installment of principal. All elections provided for herein shall be made electronically (if applicable), telephonically or in writing and must be received by Agent not later than 12:00 Noon Company’s local time in order to be considered to have been received on that day; provided, however, that in the case of LIBOR rate loans, all such elections must be confirmed in writing upon Agent’s request. Interest shall be calculated on the actual number of days each loan is outstanding on the basis of a year consisting of 360 days and shall be payable monthly in arrears by the 20th day of the following month or on such other day in such month as Agent shall require in a written notice to the Company; provided, however, in the event the Company elects to fix all or a portion of the indebtedness outstanding under the LIBOR interest rate option above, at Agent’s option upon written notice to the Company, interest shall be payable at the maturity of the Interest Period and if the LIBOR interest rate fix is for a period longer than three months, interest on that portion of the indebtedness outstanding shall be payable quarterly in arrears on each three-month anniversary of the commencement date of such Interest Period, and at maturity.

     SECTION 5. Promissory Note. The Company promises to repay the loans as follows: (1) in 11 equal, consecutive quarterly installments of $2,600,000.00, with the first such installment due on August 20, 2011, and the last such installment due on February 20, 2014; and (2) followed by a final installment in an amount equal to the remaining unpaid principal balance of the loans on May 20, 2014. If any installment due date is not a day on which Agent is open for business, then such installment shall be due and payable on the next day on which Agent is open for business. In addition to the above, the

Multiple Advance Term Loan Supplement RI0340T01E -3-

ABE FAIRMONT, LLC
Fairmont, Nebraska

Company promises to pay interest on the unpaid principal balance hereof at the times and in accordance with the provisions set forth in Section 5 hereof. This note replaces and supersedes, but does not constitute payment of the indebtedness evidenced by, the promissory note set forth in the Supplement being amended and restated hereby.

In addition, for each fiscal year end, beginning with the fiscal year ending in 2010, and ending with the fiscal year ending in 2013, the Company shall also, within ninety (90) days after the end of such fiscal year, make a special payment of an amount equal to 75% of the “Free Cash Flow” (as defined below) of the Company, however, such payment shall not to exceed $8,000,000.00 in any fiscal year; provided, however, that: (i) if such payment would result in a covenant default under this Supplement or the MLA, the amount of the payment shall be reduced to an amount which would not result in a covenant default; (ii) if such payment would result in a breakage of a fixed interest rate, the applicable broken funding surcharges would still apply; and (iii) the aggregate of such payments shall not exceed $16,000.000.00. The term “Free Cash Flow” is defined as the Company’s annual profit net of taxes, plus the respective fiscal year’s depreciation and amortization expense, minus allowable capitalized expenditures of no more than $600,000.00 for fixed assets, allowed distributions to members/owners, and scheduled term loan payments to Agent. This special payment shall be applied to the principal installments in the inverse order of their maturity.

     SECTION 6. Prepayment. Subject to the broken funding surcharge provision of the MLA, the Company may on one Business Day’s prior written notice prepay all or any portion of the loan(s). Unless otherwise agreed by CoBank, all prepayments will be applied to principal installments in the inverse order of their maturity and to such balances, fixed or variable, as CoBank shall specify.

     SECTION 7. Security. The Company’s obligations hereunder and, to the extent related hereto, the MLA, including without limitation any future advances under any existing mortgage or deed of trust, shall be secured as provided in the Security Section of the MLA.

     SECTION 8. Amendment Fee. In consideration of the amendment, the Company agrees to pay to Agent on the execution hereof a fee in the amount of $11,500.00.

     IN WITNESS WHEREOF, the parties have caused this Supplement to be executed by their duly authorized officers as of the date shown above.

FARM CREDIT SERVICES OF AMERICA, FLCA		ABE FAIRMONT, LLC
			By ADVANCED BIOENERGY, LLC,
			its sole member
By:	/s/ Kathryn Frahm	By:	/s/ Richard Peterson
Title:	VP Credit	Title:	CEO/CFO NT 4-28-11

EX-10.3

Exhibit 10.3

Loan No. RI0475S02

MONITORED REVOLVING CREDIT SUPPLEMENT

     THIS SUPPLEMENT to the Master Loan Agreement dated April 7, 2011 (the “MLA”), is entered into as of April 7, 2011 between FARM CREDIT SERVICES OF AMERICA, PCA (“Farm Credit”) and ABE FAIRMONT, LLC, Fairmont, Nebraska (the “Company”).

     SECTION 1. The Revolving Credit Facility. On the terms and conditions set forth in the MLA and this Supplement, Farm Credit agrees to make loans to the Company during the period set forth below in an aggregate principal amount not to exceed, at any one time outstanding, $4,000,000.00 (the Commitment”); provided, however that the amount available under the Commitment shall not exceed the “Borrowing Base” (as calculated pursuant to the Borrowing Base Report attached hereto as Exhibit A) on the date for which Borrowing Base Reports are required pursuant to Section 6 below. Within the limits of the Commitment, the Company may borrow, repay, and reborrow.

     SECTION 2. Purpose. The purpose of the Commitment is to finance the inventory and receivables referred to in the Borrowing Base Report . The purpose of the commitment is also to refinance loan number RI0475S01B, dated March 29, 2010, by Farm Credit Services of America. FLCA. which loans and commitments are hereby canceled.

     SECTION 3. Term. The term of the Commitment shall be from the date hereof, up to and including April 1, 2012, or such later date as Agent (as that term is defined in the MLA) may, in its sole discretion, authorize in writing.

     SECTION 4. Interest. The Company agrees to pay interest on the unpaid balance of the loan(s) in accordance with one or more of the following interest rate options, as selected by the Company:

          (A) One-Month LIBOR Index Rate. At a rate (rounded upward to the nearest 1/100th and adjusted for reserves required on “Eurocurrency Liabilities” [as hereinafter defined] for banks subject to “FRB Regulation D” [as hereinafter defined] or required by any other federal law or regulation) per annum equal at all times to 3.10% above the rate quoted by the British Bankers Association (the “BBA”) at 11:00 a.m. London time for the offering of one (l)-month U.S. dollars deposits, as published by Bloomberg or another major information vendor listed on BBA’s official website on the first “U.S. Banking Day” (as hereinafter defined) in each week, with such rate to change weekly on such day. The rate shall be reset automatically, without the necessity of notice being provided to the Company or any other party, on the first “U.S. Banking Day” of each succeeding week, and each change in the rate shall be applicable to all balances subject to this option. Information about the then-current rate shall be made available upon telephonic request. For purposes hereof: (1) “U.S. Banking Day” shall mean a day on which Agent is open for business and banks are open for business in New York. New York: (2) “Eurocurrency Liabilities” shall have the meaning as set forth in “FRB Regulation D”; and (3) “FRB Regulation D” shall mean Regulation D as promulgated by the Board of Governors of the Federal Reserve System, 12 CFR Part 204, as amended.

Monitored Revolving Credit Supplement R10475S02
ABE FAIRMONT, LLC
Fairmont, Nebraska - 2 -

          (B) Quoted Rate. At a fixed rate per annum to be quoted by Agent in its sole discretion in each instance. Under this option, rates may be fixed on such balances and for such periods, as may be agreeable to Agent in its sole discretion in each instance, provided that: (1) the minimum fixed period shall be 30 days; (2) amounts may be fixed in increments of $100,000.00 or multiples thereof; and (3) the maximum number of fixes in place at any one time shall be five.

          (C) LIBOR. At a fixed rate per annum equal to “LIBOR” (as hereinafter defined) plus 3.10%. Under this option: (1) rates may be fixed for “Interest Periods” (as hereinafter defined) of one month, as selected by the Company; (2) amounts may be fixed in increments of $100,000,00 or multiples thereof; (3) the maximum number of fixes in place at any one time shall be five: and (4) rates may only be fixed on a “Banking Day” (as hereinafter defined) on three Banking Days’ prior written notice. For purposes hereof; (a) “LIBOR” shall mean the rate (rounded upward to the nearest sixteenth and adjusted for reserves required on “Eurocurrency Liabilities” [as hereinafter defined] for banks subject to “FRB Regulation D” [as herein defined] or required by any other federal law or regulation) quoted by the British Bankers Association (the “BBA”) at 11:00 a.m. London time two Banking Days before the commencement of the Interest Period for the offering of U.S. dollar deposits in the London interbank market for the Interest Period designated by the Company, as published by Bloomberg or another major information vendor listed on BBA’s official website; (b) “Banking Day” shall mean a day on which Agent is open for business, dealings in U.S. dollar deposits are being carried out in the London interbank market, and banks are open for business in New York City and London, England; (c) “Interest Period” shall mean a period commencing on the date this option is to take effect and ending on the numerically corresponding day in the next calendar month; provided, however, that; (i) in the event such ending day is not a Banking Day, such period shall be extended to the next Banking Day unless such next Banking Day falls in the next calendar month, in which case it shall end on the preceding Banking Day; and (ii) if there is no numerically corresponding day in the month, then such period shall end on the last Banking Day in the relevant month: (d) “Eurocurrency Liabilities” shall have meaning as set forth in “FRB Regulation D’’: and (e) “FRB Regulation D” shall mean Regulation D as promulgated by the Board of Governors of the Federal Reserve System, 12 CFR Part 204, as amended.

The Company shall select the applicable rate option at the time it requests a loan hereunder and may subject to the limitations set forth above, elect to convert balances bearing interest at the variable rate option to one of the fixed rate options. Upon the expiration of any fixed rate period, interest shall automatically accrue at the variable rate option unless the amount fixed is repaid or fixed for an additional period in accordance with the terms hereof. Notwithstanding the foregoing, rates may not be fixed for periods expiring after the maturity date of the loans and rates may not be fixed in such a manner as to cause the Company to have to break any fixed rate balance in order to pay any installment of principal. All elections provided for herein shall be made electronically (if applicable), telephonically or in writing and must be received by Agent not later than 12:00 Noon Company’s local lime in order to be considered to have been received on that day; provided, however, that in the case of LIBOR rate loans, all such elections must be confirmed in writing upon Agent’s request. Interest shall be calculated on the actual number of days each loan is outstanding on the basis of a year consisting of 360 days and shall be payable monthly in arrears by the 20th day of the following month or on such other day in such month as Agent shall require in a written notice to the Company; provided, however, in the event the Company elects to fix all or a portion of the indebtedness outstanding under the LIBOR interest rate option above,

Monitored Revolving Credit Supplement RI0475S02
ABE FAIRMONT, LLC
Fairmont, Nebraska - 3 -

at Agent’s option upon written notice to the Company, interest shall be payable at the maturity of the Interest Period and if the LIBOR interest rate fix is for a period longer than three months, interest on that portion of the indebtedness outstanding shall be payable quarterly in arrears on each three-month anniversary of the commencement date of such Interest Period, and at maturity.

     SECTION 5. Promissory Note. The Company promises to repay the unpaid principal balance of the loans on the last day of the term of the Commitment. In addition to the above, the Company promises to pay interest on the unpaid principal balance of the loans at the times and in accordance with the provisions set forth in Section 4 hereof.

     SECTION 6. Borrowing Base Reports, Etc. The Company agrees to furnish a Borrowing Base Report to Agent at such times or intervals as Agent may from time to time request. Until receipt of such a request, the Company agrees to furnish a Borrowing Base Report to Agent within 30 days after each month end calculating the Borrowing Base as of the last day of the month for which the report is being furnished. However, if no balance is outstanding hereunder on the last day of such month, then no Report need be furnished. If on the date for which a Borrowing Base Report is required the amount outstanding under the Commitment exceeds the Borrowing Base, the Company shall immediately notify Agent and repay so much of the loans as is necessary to reduce the amount outstanding under the Commitment to the limits of the Borrowing Base.

     SECTION 7. Letters of Credit. If agreeable to Agent in its sole discretion in each instance, in addition to loans, the Company may utilize the Commitment to open irrevocable letters of credit for its account. Each letter of credit will be issued within a reasonable period of time after Agent’s receipt of a duly completed and executed copy of Agent’s then current form of Application and Reimbursement Agreement or, if applicable, in accordance with the terms of any CoTrade Agreement between the parties, and shall reduce the amount available under the Commitment by the maximum amount capable of being drawn thereunder. Any draw under any letter of credit issued hereunder shall be deemed a loan under the Commitment and shall be repaid in accordance with this Supplement. Each letter of credit must be in form and content acceptable to Agent and must expire no later than the maturity date of the Commitment. Notwithstanding the forgoing or any other provision hereof, the maximum amount capable of being drawn under each letter of credit must be statused against the Borrowing Base in the same manner as if it were a loan, and in the event that (after repaying all loans) the maximum amount capable of being drawn under the letters of credit exceeds the Borrowing Base, then the Company shall immediately notify Agent and pay to Agent (to be held as cash collateral) an amount equal to such excess.

     SECTION 8. Security. The Company’s obligations hereunder and to the extent related hereto, the MLA, including without limitation any future advances under any existing mortgage or deed of trust, shall be secured as provided in the Security Section of the MLA.

Monitored Revolving Credit Supplement RI0475S02
ABE FAIRMONT, LLC
Fairmont, Nebraska - 4 -

     SECTION 9. Commitment Fee. In consideration of the Commitment, the Company agrees to pay to Agent a commitment fee on the average daily unused portion of the Commitment at the rate of 0.375% per annum (calculated on a 360-day basis), payable monthly in arrears by the 20th day following each month. Such fee shall be payable for each month (or portion thereof) occurring during the original or any extended term of the Commitment. For purposes of calculating the commitment fee only, the “Commitment” shall mean the dollar amount specified in Section 1 hereof, irrespective of the Borrowing Base.

     IN WITNESS WHEREOF, the parties have caused this Supplement to be executed by their duly authorized officers as of the date shown above.

FARM CREDIT SERVICES OF AMERICA, PCA		ABE FAIRMONT, LLC
			By ADVANCED BIOENERGY, LLC its sole member
By:	/s/ Kathryn Frahm	By:	/s/ Richard Peterson
Title:	VP Credit	Title:	CEO/CFO NT 4-28-11

EXHIBIT A

Seasonal Borrowing Base Report

ABE Fairmont, LLC (00042404) Fairmont, Nebraska ← For Period ending

For purposes hereof, ELIGIBLE INVENTORY shall mean Inventory which: (a) is of a type shown below; (b) is owned by the borrower and not held by the borrower on consignment or similar basis; (c) is not subject to a lien except in favor of Farm Credit Services of America; (d) is in commercially marketable condition; and (e) is not deemed ineligible by Farm Credit Services of America. Furthermore, market price shall mean the commodity FOB at the plant. For purposes hereof, ELIGIBLE RECEIVABLES shall mean rights to payment for goods sold and delivered or for services rendered which: (a) are not subject to any dispute, set-off, or counterclaim; (b) are not owing by an account debtor that is subject to a bankruptcy, reorganization, receivership or like proceeding; (c) are not subject to a lien in favor of any third party, other than liens authorized by Farm Credit Services of American in writing; (d) are not owing by an account debtor that is owned or controlled by the borrower, and (e) are not deemed ineligible by Farm Credit Services of America

Line	Type of Eligible Asset		Amount/Price/Value	Advanced Rate			Collateral Value
1	Owned Corn Inventory (bushels)
2	Corn Price (lower of cost or market - $/bu)		$
3	Corn Value (Line 1 x Line 2)		$		85	%	$
4	Less All Grain Payables (if applicable to above corn)		$		100	%	$
5	Owned DDGS Inventory (tons)
6	DDGS Price (market - $/ton)		$
7	DDGS Value (Line 5 x Line 6)		$		65	%	$
8	Owned WDGS Inventory (tons)
9	WDGS Price (market - $/ton)		$
10	WDGS Value (Line 8 x Line 9)		$		65	%	$
11	Owned Ethanol Inventory (gallon)
12	Ethanol Price (market - $/gallon)		$
13	Ethanol Value (Line 11 x Line 12)		$		80	%	$
14	Ethanol Receivables less than 10 days Past Due		$		85	%	$
15	DDGS & WDGS Receivables less than 10 days Past Due		$		85	%	$
16		Total Borrowing Base →					$
17	Less: Book Overdraft(s)		$		100	%	$
18	Less: Demand Patron Notes/Deposits		$		100	%	$
19	Less: Outstanding Balance of Seasonal Loan(s)		$		100	%	$
20	Less: Issued Letters of Credit		$		100	%	$
21		Total Deducts (Line 17+18+19+20) →					$
22		EXCESS OR DEFICIT* (Line 16 - Line 21) →					$

* NOTE: If a deficit exists, please contact Agent (CoBank) immediately with: 1) and updated borrowing base report, and 2) specifics of all payments remitted since end of period (check numbers, wire routing numbers, etc.)

I HEREBY CERTIFY THAT TO THE BEST OF MY KNOWLEDGE THIS INFORMATION IS TRUE AND CORRECT.

Authorized Signature	Title	Date
Printed name:

EX-10.4

Exhibit 10.4

Loan No. RI0340T04

REVOLVING CREDIT SUPPLEMENT
Letters of Credit

     THIS SUPPLEMENT to the Master Loan Agreement dated April 7, 2011 (the “MLA”), is entered into as of April 7, 2011 between FARM CREDIT SERVICES OF AMERICA, PCA (“Farm Credit”) and ABE FAIRMONT, LLC, Fairmont, Nebraska (the “Company”).

     SECTION 1. The Revolving Credit Facility. On the terms and conditions set forth in the MLA and this Supplement. Farm Credit agrees to make loans to the Company during the period set forth below in an aggregate principal amount not to exceed $910,800.00 at any one time outstanding (the “Commitment”). Within the limits of the Commitment, the Company may borrow, repay and reborrow.

     SECTION 2. Purpose. The purpose of the Commitment, if agreeable to Agent (as that term is defined in the MLA) in its sole discretion in each instance, is to allow the Company to open irrevocable letters of credit for its account. Each letter of credit will be issued within a reasonable period of time after Agent’s receipt of a duly completed and executed copy of Agent’s then current form of Application and Reimbursement Agreement or, if applicable, in accordance with the terms of any CoTrade Agreement between the parties, and shall reduce the amount available under the Commitment by the maximum amount capable of being drawn thereunder. Any draw under a letter of credit issued hereunder shall be deemed a loan under the Commitment and shall be repaid in accordance with this Supplement. Each letter of credit must be in form and content acceptable to Agent and must expire no later than the maturity date of the Commitment. The purpose of the commitment is also to refinance loan number RI0340T03, dated December 24, 2008, made by Farm Credit Services of America, FLCA, which loans and commitments are hereby canceled.

     SECTION 3. Term. The term of the Commitment shall be from the date hereof, up to and including February 1, 2012, or such later date as Agent may, in its sole discretion, authorize in writing.

     SECTION 4. Interest. The Company agrees to pay interest on the unpaid balance of the loan(s) in accordance with one or more of the following interest rate options, as selected by the Company:

          (A) One-Month LIBOR Index Rate. At a rate (rounded upward to the nearest l/100th and adjusted for reserves required on “Eurocurrency Liabilities” [as hereinafter defined] for banks subject to “FRB Regulation D” [as hereinafter defined] or required by any other federal law or regulation) per annum equal at all times to 3.10% above the rate quoted by the British Bankers Association (the “BBA”) at 11:00 a.m. London time for the offering of one (l)-month U.S. dollars deposits, as published by Bloomberg or another major information vendor listed on BBA’s official website on the first “U.S. Banking Day” (as hereinafter defined) in each week, with such rate to change weekly on such day. The rate shall be reset automatically, without the necessity of notice being provided to the Company or any other party, on the first “U.S. Banking Day” of each succeeding week, and each change in the rate shall be applicable to all balances subject to this option. Information about the then-current rate shall be made available upon telephonic request. For purposes hereof: (1) “U.S. Banking Day” shall mean a day on which Agent is open for business and banks are open for business in New

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Revolving Credit Supplement Letters of Credit RI0340T04
ABE FAIRMONT, LLC
Fairmont, Nebraska

York. New York; (2) “Eurocurrency Liabilities” shall have the meaning as set forth in “FRB Regulation D”; and (3) “FRB Regulation D” shall mean Regulation D as promulgated by the Board of Governors of the Federal Reserve System, 12 CFR Part 204, as amended.

          (B) Quoted Rate. At a fixed rate per annum to be quoted by Agent in its sole discretion in each instance. Under this option, rates may be fixed on such balances and for such periods, as may be agreeable to Agent in its sole discretion in each instance, provided that: (1) the minimum fixed period shall be 30 days; (2) amounts may be fixed in increments of $100,000.00 or multiples thereof: and (3) the maximum number of fixes in place at any one time shall be five.

          (C) LIBOR. At a fixed rate per annum equal to “LIBOR” (as hereinafter defined) plus 3.10%. Under this option: (1) rates may be fixed for “Interest Periods” (as hereinafter defined) of one month, as selected by the Company: (2) amounts may be fixed in increments of $100,000.00 or multiples thereof; (3) the maximum number of fixes in place at any one time shall be five; and (4) rates may only be fixed on a “Banking Day” (as hereinafter defined) on three Banking Days’ prior written notice. For purposes hereof: (a) “LIBOR” shall mean the rate (rounded upward to the nearest sixteenth and adjusted for reserves required on “Eurocurrency Liabilities” [as hereinafter defined] for banks subject to “FRB Regulation D” [as herein defined] or required by any other federal law or regulation) quoted by the British Bankers Association (the “BBA”) at 11:00 a.m. London time two Banking Days before the commencement of the Interest Period for the offering of U.S. dollar deposits in the London interbank market for the Interest Period designated by the Company, as published by Bloomberg or another major information vendor listed on BBA’s official website: (b) “Banking Day” shall mean a day on which Agent is open for business, dealings in U.S. dollar deposits are being carried out in the London interbank market, and banks are open for business in New York City and London, England; (c) “Interest Period” shall mean a period commencing on the date this option is to take effect and ending on the numerically corresponding day in the next calendar month: provided, however, that: (i) in the event such ending day is not a Banking Day, such period shall be extended to the next Banking Day unless such next Banking Day falls in the next calendar month, in which case it shall end on the preceding Banking Day: and (ii) if there is no numerically corresponding day in the month, then such period shall end on the last Banking Day in the relevant month; (d) “Eurocurrency Liabilities” shall have meaning as set forth in “FRB Regulation D”; and (e) “FRB Regulation D” shall mean Regulation D as promulgated by the Board of Governors of the Federal Reserve System, 12 CFR Part 204, as amended.

The Company shall select the applicable rate option at the time it requests a loan hereunder and may, subject to the limitations set forth above, elect to convert balances bearing interest at the variable rate option to one of the fixed rate options. Upon the expiration of any fixed rate period, interest shall automatically accrue at the variable rate option unless the amount fixed is repaid or fixed for an additional period in accordance with the terms hereof. Notwithstanding the foregoing, rates may not be fixed for periods expiring after the maturity date of the loans and rates may not be fixed in such a manner as to cause the Company to have to break any fixed rate balance in order to pay any installment of principal. All elections provided for herein shall be made electronically (if applicable), telephonically or in writing and must be received by Agent not later than 12:00 Noon Company’s local time in order to be considered to have been received on that day; provided, however, that in the case of LIBOR rate loans, all such elections must be confirmed in writing upon Agent’s request. Interest, shall be calculated on the

-3-

Revolving Credit Supplement Letters of Credit RI0340T04
ABE FAIRMONT, LLC
Fairmont, Nebraska

actual number of days each loan is outstanding on the basis of a year consisting of 360 days and shall be payable monthly in arrears by the 20th day of the following month or on such other day in such month as Agent shall require in a written notice to the Company: provided, however, in the event the Company elects to fix all or a portion of the indebtedness outstanding under the LIBOR interest rate option above, at Agent’s option upon written notice to the Company, interest shall be payable at the maturity of the Interest Period and if the LIBOR interest rate fix is for a period longer than three months, interest on that portion of the indebtedness outstanding shall be payable quarterly in arrears on each three-month anniversary of the commencement date of such Interest Period, and at maturity.

     SECTION 5. Promissory Note. The Company promises to repay the unpaid principal balance of the loans on the last day of the term of the Commitment. In addition to the above, the Company promises to pay interest on the unpaid principal balance of the loans at the times and in accordance with the provisions set forth in Section 4 hereof.

     SECTION 6. Security. The Company’s obligations hereunder and, to the extent related hereto, the MLA, including without limitation any future advances under any existing mortgage or deed of trust, shall be secured as provided in the Security Section of the MLA.

     SECTION 7. Commitment Fee. In consideration of the Commitment, the Company agrees to pay to Agent a commitment fee on the average daily unused portion of the Commitment at the rate of 0.375% per annum (calculated on a 360-day basis), payable monthly in arrears by the 20th day following each month. Such fee shall be payable for each month (or portion thereof) occurring during the original or any extended term of the Commitment.

     IN WITNESS WHEREOF, the parties have caused this Supplement to be executed by their duly authorized officers as of the date shown above.

FARM CREDIT SERVICES OF AMERICA, PCA		ABE FAIRMONT, LLC
			By: ADVANCED BIOENERGY, LLC
			its sole member
By:	/s/ Kathryn Frahm	By:	/s/ Richard Peterson
Title:	VP Credit	Title:	CEO/CFO
			NT 4-28-11

EX-10.5

Exhibit 10.5

ADVANCED BIOENERGY

Richard Peterson

SECOND AMENDED AND RESTATED EMPLOYMENT AGREEMENT

          This Second Amended and Restated Employment Agreement (this “Agreement”) is entered into on May 11, 2011 by and between Advanced BioEnergy, LLC, a Delaware limited liability company (the “Company”), and Richard Peterson, a resident of Minnesota (“Employee”).

Background

          A. The Company, which was formed in early 2005, currently owns and operates dry mill corn-based ethanol plants throughout the Midwest.

          B. Employee’s employment with the Company commenced on November 13, 2006. Employee was previously employed by the Company as its Vice President of Accounting and Finance, and Chief Financial Officer, and is currently employed by the Company as its Chief Executive Officer.

          C. The Company and Employee are parties to an Amended and Restated Employment Agreement dated December 11, 2007 (the “Prior Amended Agreement”), which the parties desire to amend and restate in its entirely as set forth in this Agreement.

          D. It is desirable and in the best interests of the Company to provide inducement for Employee (1) to remain in the service of the Company in the event of any proposed or anticipated change in control of the Company and (2) to remain in the service of the Company in order to facilitate an orderly transition in the event of a change in control of the Company.

          E. The parties agree that it is in their mutual best interests to modify, amend and clarify the terms and conditions of the Prior Amended Agreement, as set forth in this Agreement.

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

AGREEMENT

1. Employment. Subject to all terms and conditions hereof, the Company will employ Employee, and Employee will continue to serve the Company and perform services for the Company, until Employee’s employment terminates under Section 11.

2. Position and Duties.

(a) Position with the Company. (“Position”) Employee will continue to serve as Chief Executive Officer, and will continue to perform such duties and

	responsibilities as the Company’s Board of Directors (“Board”) may assign to Employee from time to time.
(b)	Performance of Duties and Responsibilities. Employee will serve the Company faithfully and to the best of Employee’s ability and will devote Employee’s full time, attention and efforts to the business of the Company during Employee’s employment. Employee will report to the Board. During Employee’s employment hereunder, Employee will not accept other employment or engage in other material business activity, except as approved in writing by the Board.
(c)	Prior Commitments. Employee hereby represents and warrants that Employee is under no contractual or legal commitments that would prevent Employee from fulfilling the duties and responsibilities as set forth in this Agreement. Employee has previously provided copies to the Company of any employment agreements, non-competition agreements or other agreements that Employee previously signed that might arguably restrict Employee’s right to work for the Company, the services that Employee may provide to the Company, or the information that Employee may disclose to the Company or use in the course and scope of his employment with the Company.

3. Compensation.

(a)	Base Salary. The Company will pay to Employee an annual base salary of $285,000 effective as of October 1, 2010, less deductions and withholdings, which base salary will be paid in accordance with the Company’s normal payroll policies and procedures. During each year after the first year of Employee’s employment hereunder, the Board may review and may adjust Employee’s base salary in its sole discretion.
(b)	Employee Benefits. While Employee is employed by the Company hereunder, Employee will be entitled to participate in all employee benefit plans and programs of the Company to the extent that Employee meets the eligibility requirements for each individual plan or program. These benefit plans and programs currently include a 401 (k) plan and medical, life and disability insurance programs. The Company provides no assurance as to the adoption or continuance of any particular employee benefit plan or program.
(c)	Expenses. The Company will reimburse Employee for all reasonable and necessary out-of-pocket business, travel and entertainment expenses incurred by Employee in the performance of the duties and responsibilities hereunder, subject to Employee’s providing receipts and complying with the Company’s normal policies and procedures for expense verification and documentation; provided, however, that Employee shall submit

2

	verification of expenses within 30 days after the date the expense was incurred; and the Company shall reimburse Employee for such expenses eligible for reimbursement within 30 days thereafter. The right to reimbursement hereunder is not subject to liquidation or exchange for any other benefit, and the amount of expenses eligible for reimbursement in a calendar year shall not affect the expenses eligible for reimbursement in any other calendar year.
(d)	Vacation. Employee will receive fifteen business days paid vacation time off, such time to be taken with the approval of the Board at such times so as not to disrupt the operations of the Company.
(e)	Automobile Allowance. While employed by the Company hereunder, the Company shall provide employee with a vehicle classified as E-85 and will reimburse all cost incurred in the use of that automobile for business or personal purposes, including without limitation the costs of insuring, maintaining and operating the automobile; provided, however, that Employee shall submit verification of expenses within 30 days after the date the expense was incurred, and the Company shall reimburse Employee for such expenses eligible for reimbursement within 30 days thereafter. The right to reimbursement hereunder is not subject to liquidation or exchange for any other benefit, and the amount of expenses eligible for reimbursement in a calendar year shall not affect the expenses eligible for reimbursement in any other calendar year. Such automobile plan will be structured within IRS requirements for personal use of a Company vehicle. In addition to complying with the Company’s Substance Abuse Policy and Testing Program, Employee shall never drive the vehicle while impaired by or under the influence of alcohol or illegal drugs.
(f)	Annual Performance Bonus. For each complete fiscal year that Employee is employed by the Company, Employee shall be eligible for an annual bonus in an amount up to 37% of Employee’s base salary during such fiscal year. Employee’s eligibility for any such bonus, and the amount of any such bonus that is paid, shall be based upon and subject to reasonable criteria established by the Board or a committee of the Board. Any bonus earned by Employee for a fiscal year shall be payable to Employee no later than 60 days following the fiscal year for which the bonus was earned.

4. Affiliated Entities. As used in this Agreement, “Affiliates” includes the Company and each corporation, partnership, LLC or other entity that controls the Company, is controlled by the Company, or is under common control with the Company (in each case “control” meaning the direct or indirect ownership of 50% or more of all outstanding equity interests).

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5.	Confidential Information. Except as permitted by the Company, Employee will not at any time divulge, furnish or make accessible to anyone or use in any way other than in the ordinary course of the business of the Company or its Affiliates, any confidential, proprietary or secret knowledge or information of the Company or its Affiliates that Employee has acquired or will acquire about the Company or its Affiliates, whether developed by Employee or by others, concerning (i) any trade secrets, (ii) any confidential, proprietary or secret designs, programs, processes, formulae, plans, devices or material (whether or not patented or patentable) directly or indirectly useful in any aspect of the business of the Company or of its Affiliates, (iii) any customer or supplier lists, (iv) any confidential, proprietary or secret development or research work, (v) any strategic or other business, marketing or sales plans, (vi) any financial data or plans, or (viii) any other confidential or proprietary information or secret aspects of the business of the Company or of its Affiliates. Employee acknowledges that the above-described knowledge and information constitutes a unique and valuable asset of the Company and represents a substantial investment of time and expense by the Company, and that any disclosure or other use of such knowledge or information other than for the sole benefit of the Company or its Affiliates would be wrongful and would cause irreparable harm to the Company. The foregoing obligations of confidentiality will not apply to any knowledge or information that (i) is now or subsequently becomes generally publicly known, other than as a direct or indirect result of the breach of this Agreement, (ii) is independently made available to Employee in good faith by a third party who has not violated a confidential relationship with the Company or its Affiliates, or (iii) is required to be disclosed by law or legal process.
6.	Ventures. If, during Employee’s employment with the Company, Employee is engaged in or provides input into the planning or implementing of any project, program or venture involving the Company, all rights in such project, program or venture belong to the Company. Except as approved in writing by the Board, Employee will not be entitled to any interest in any such project, program or venture or to any commission, finder’s fee or other compensation in connection therewith. Employee may have no interest, direct or indirect, in any customer or supplier that conducts business with the Company.
7.	Non-Competition and Non-Solicitation Agreements.

(a) Agreement Not to Compete. During Employee’s employment with the Company or any Affiliates and for a period of twenty-four (24) consecutive months from and after the termination of Employee’s employment, whether such termination is with or without cause, or whether such termination is at the instance of Employee or the Company, Employee will not, directly or indirectly, engage in any business, in the area within a 100-mile radius of the Company’s headquarters or any of the Company’s ethanol plants or prospective ethanol plants, relating to the design, development, construction or operation of an ethanol plant. For purposes of this Section, Employee agrees not to engage in any such activity as a proprietor, principal, agent, partner, officer, director, stockholder, employee, member of any association, consultant, agent or otherwise. Ownership by Employee, as a passive investment, of less than

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	1.0% of the outstanding shares of capital stock of any corporation listed on a national securities exchange or publicly traded in the over-the-counter market will not constitute a breach of this Section 7(a).
(b)	Agreement Not to Solicit or Hire Away Employees. During Employee’s employment with the Company or any Affiliates and for a period of twenty-four (24) consecutive months from and after the termination of Employee’s employment, whether such termination is with or without Cause, or whether such termination is at the instance of Employee or the Company, Employee will not, directly or indirectly, hire, engage or solicit any person who is then an employee of the Company or who was an employee of the Company at any time during the twelve-month period immediately preceding Employee’s termination of employment, in any manner or capacity, including without limitation as a proprietor, principal, agent, partner, officer, director, stockholder, employee, member of any association, consultant or otherwise.
(c)	Agreement Not to Solicit Customers and Other Business Relations. During Employee’s employment with the Company or any Affiliates and for a period of twenty-four (24) consecutive months from and after the termination of Employee’s employment, whether such termination is with or without Cause, or whether such termination is at the instance of Employee or the Company, Employee will not, directly or indirectly, solicit, request, advise or induce any current or potential customer, supplier or other business contact of the Company to cancel, curtail or otherwise adversely change its relationship with the Company, in any manner or capacity, including without limitation as a proprietor, principal, agent, partner, officer, director, stockholder, employee, member of any association, consultant or otherwise.
(d)	Acknowledgment. Employee hereby acknowledges that the provisions of this Section 7 are reasonable and necessary to protect the legitimate interests of the Company and that any violation of this Section 7 by Employee will cause substantial and irreparable harm to the Company to such an extent that monetary damages alone would be an inadequate remedy therefore.
(e)	Blue Pencil Doctrine. If the duration of, the scope of, or any business activity covered by any provision of this Section 7 is in excess of what is determined to be valid and enforceable under applicable law, such provision will be construed to cover only that duration, scope or activity that is determined to be valid and enforceable. Employee hereby acknowledges that this Section 7 will be given the construction which renders its provisions valid and enforceable to the maximum extent, not exceeding its express terms, possible under applicable law.

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8. Patents, Copyrights and Related Matters.

(a)

Disclosure and Assignment. Employee agrees to immediately disclose to the Company any and all improvements and inventions that Employee has conceived or reduced to practice individually or jointly with others since Employee began his employment with the Company or that Employee may conceive or reduce to practice individually or jointly with others while Employee is employed with the Company or any of its Affiliates. Any such improvements and inventions will be the sole and exclusive property of the Company and Employee shall immediately assign, transfer and set over to the Company Employee’s entire right, title and interest in and to any and all of such improvement and inventions as are specified in this Section 8(a), and in and to any and all applications for letters patent that may be filed on such inventions, and in and to any and all letters patent that may issue, or be issued, upon such applications. In connection therewith and for no additional compensation therefor, but at no expense to Employee, Employee will sign any and all instruments deemed necessary by the Company for patent protection of such inventions. Employee acknowledges that the assignment provisions of this Section 8(a) are written to be in accordance with and shall be interpreted consistent with Minnesota Statute Section 181.78, and therefore Employee’s assignment of inventions under this Section 8(a) does not apply to any invention for which no equipment, supplies, facility, or trade secret information of the Company was used and which was developed entirely on the Employee’s own time, and (1) which does not relate (A) directly to the business of the Company or (B) to the Company’s actual or demonstrably anticipated research or development, or (2) which does not result from any work performed by the Employee for the Company.

(b)

Copyrightable Material. All right, title and interest in all copyrightable material that Employee shall conceives or originates individually or jointly with others, and that arises in connection with Employee’s services hereunder or knowledge of confidential and proprietary information of the Company, will be the property of the Company and are hereby assigned by Employee to the Company or its Affiliates, along with ownership of any and all copyrights in the copyrightable material. Where applicable, works of authorship created by Employee relating to the Company or its Affiliates and arising out of Employee’s knowledge of confidential and proprietary information of the Company shall be considered “works made for hire,” as defined in the U.S. Copyright Act, as amended.

9. Return of Records and Property. Upon termination of Employee’s employment or at any time upon the Company’s request, Employee will promptly deliver to the Company any and all Company and Affiliate records and any and all Company and Affiliate property in Employee’s possession or under Employee’s control, including without limitation manuals, books, blank forms, documents, letters, memoranda, notes, notebooks, reports, printouts, computer disks, computer tapes, source codes, data, tables

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	or calculations and all copies thereof, documents that in whole or in part contain any trade secrets or confidential, proprietary or other secret information of the Company or its Affiliates and all copies thereof, and keys, access cards, access codes, passwords, credit cards, personal computers, telephones and other electronic equipment belonging to the Company or its Affiliates.
10.	Remedies. Employee acknowledges that it would be difficult to fully compensate the Company for monetary damages resulting from any breach by him of the provisions hereof. Accordingly, in the event of any actual or threatened breach of any such provisions, the Company will, in addition to any other remedies it may have, be entitled to injunctive and other equitable relief to enforce such provisions, and such relief may be granted without the necessity of proving actual monetary damages. In the event that a court of competent jurisdiction concludes that Employee has violated Employee’s obligations under paragraphs 5, 6, 7, 8 or 9 of this Agreement, Employee shall also be liable to the Company for the reasonable costs and attorneys’ fees that it incurs in any legal action in which it enforces its legal rights under those paragraphs.
11.	Termination of Employment. The Employee’s employment with the Company will terminate immediately upon:

(a)	Employee’s receipt of written notice from the Company of the termination of Employee’s employment, effective as of the date indicated in such notice;
(b)	The Company’s receipt of Employee’s written resignation from the Company, effective as of the date indicated in such resignation or Employee’s abandonment of his employment;
(c)	Employee’s Disability (as defined below); or
(d)	Employee’s death.

The date upon which Employee’s termination of employment with the Company occurs is the “Termination Date.” For purposes of Section 12 of this Agreement only, with respect to timing of any payments thereunder, the “Termination Date” shall mean the date on which a “separation from service” has occurred for purposes of section 409A of the Internal Revenue Code, and the regulations and guidance thereunder (the “Code”).

“Disability” means the inability of Employee to perform on a full-time basis the duties and responsibilities of Employee’s employment with the Company by reason of illness or other physical or mental impairment or condition, if such inability continues for an uninterrupted period of 90 days or for more than 90 complete days during any 12-month period. Notwithstanding any other provision of this Agreement, the termination of Employee’s employment does not terminate Employee’s other obligations under this Agreement.

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12. Payments upon Termination of Employment.

(a) Payments Upon Termination Without Cause Or Resignation For Good Reason. If Employee’s employment with the Company is terminated by the Company for any reason other than for “Cause” (as defined below), including without limitation termination of Employee’s employment in connection with a Change in Control (as defined in Appendix A hereof), or by Employee as a result of his resignation for “Good Reason” (as defined below) such that Employee’s Termination Date occurs within twenty-four (24) months after the occurrence of the condition which is the basis for the termination of the Employee without Cause, the Good Reason resignation by Employee or the termination of Employee’s employment in connection with a Change in Control, then, in addition to the Company paying Employee his base salary through the Termination Date, Employee shall in such case receive from Company the following severance pay and benefits.

(1)	The Company will pay Employee severance pay in an aggregate amount equal to fifty two weeks of Employee’s weekly base salary amount immediately prior to the Termination Date, payable over one year in equal installments in accordance with the Company’s regular payroll practices, with the first payment beginning no earlier than the expiration of all applicable rescission periods provided by law and no later than forty-five (45) calendar days following the Termination Date; provided that if the 45 day period begins in one taxable year and ends in a second taxable year, the Company will begin payment in the second taxable year.
(2)	The Company will pay Employee a pro rata portion (based on the portion of the fiscal year Employee provided services to the Company) of any annual performance bonus pursuant to Section 3(e) that would have been payable to Employee if he had remained employed by the Company for the fiscal year in which the Termination Date occurs, based on actual Company performance for such fiscal year. Such payment shall be made in the same manner and at the same time that annual incentive bonus payments are made to current executive officers of the Company, but no earlier than the expiration of all applicable rescission periods provided by law and no later than the date 2-1/2 months following the end of the fiscal year.
(3)	Provided Employee is eligible for and takes all steps necessary to continue his and his family’s then-applicable health, dental, disability and life insurance coverage with the Company following the Termination Date, the Company will continue to provide such coverage under the same terms and conditions as then made available to other Company employees and their families (the

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employer- and employee-portions being the same as for then-current Company employees) for up to one year following the Termination Date. The Company shall be entitled to cease providing any health, dental, disability, or life insurance benefits prior to one year after the Termination Date if Employee becomes eligible for group health, dental, disability or life insurance coverage (as applicable) from any other employer. Once Employee has become eligible for comparable group health, dental, disability or life insurance coverage from any other such employer, Employee shall promptly and fully disclose this fact to the Company in writing and shall be liable to repay any amounts to the Company that should have been so mitigated or reduced but for Employee’s failure or unwillingness to make such disclosure.

(b)	If the Employee is terminated by the Company or its successor without Cause or the Employee resigns for Good Reason prior to June 18, 2012, then in addition to the severance pay and benefits payable to Employee pursuant to Section 12(a)(l), (2) and (3), Employee shall receive severance pay in an aggregate amount equal to fifty two weeks of Employee’s weekly base salary amount immediately prior to the Termination Date payable in equal installments in accordance with the Company’s or its successor’s regular payroll practices, beginning on the first payroll date following the last severance payment made pursuant to Section 12(a)(l) above.
(c)	If a Change in Control occurs and Employee’s employment is terminated by the Company without Cause, then in addition to the severance pay and benefits payable to Employee pursuant to Section 12(a)(1), (2) and (3), and provided that the Termination Date occurs during a period beginning the earlier of (1) the date the Company signs a letter of intent regarding the Change in Control transaction or (2) 120 days prior to the consummation of the Change in Control, and ending on the day immediately prior to the date of the Change of Control, Employee shall receive severance pay in an aggregate amount equal to fifty two weeks of Employee’s weekly base salary amount immediately prior to the Termination Date payable in equal installments in accordance with the Company’s regular payroll practices, beginning on the first payroll date following the last severance payment made pursuant to Section 12(a)(1) above.
(d)	If a Change in Control occurs and Employee’s employment with the Company or its successor is terminated by the Company or its successor without Cause or by Employee for Good Reason then, in addition to the severance pay and benefits payable to Employee pursuant to Section 12(a)(l), (2) and (3), and provided that the Termination Date occurs (1) during the period starting on the date of consummation of the Change in Control transaction and ending two years after consummation of the Change in Control transaction in respect of termination by Company or its

9

	successor, or (2) by Employee as a result of Employee’s resignation for Good Reason during the period beginning 90 days after the closing of the Change in Control transaction and ending on the date two years after consummation of the Change in Control transaction, then Employee shall receive severance pay in an aggregate amount equal to fifty two weeks of Employee’s weekly base salary amount immediately prior to the Termination Date, payable in equal installments in accordance with the Company’s regular payroll practices, beginning on the first payroll date following the last severance payment made pursuant to Section 12(a)(l) above.
(e)	Wages Due. If Employee’s employment with the Company is terminated by reason of (1) Employee’s abandonment of Employee’s employment or Employee’s resignation for any reason other than for Good Reason; (2) termination of Employee’s employment by the Company for Cause; or (3) Employee’s Disability or death, then the Company will pay to Employee, Employee’s beneficiary or Employee’s estate, as the case may be, Employee’s base salary through the Termination Date and shall have no obligation to provide any severance pay or benefits under this Agreement to Employee.
(f)	Limitations on Severance Pay.

(1)

The Company will not be obligated to make any payments or provide any benefits under this Section 12 if Employee’s employment with the Company is terminated by the Company in connection with a Change in Control and the Employee rejects an offer of employment in the Minneapolis, Minnesota metropolitan area from any successor in interest of the Company in respect of the Change in Control on terms that are comparable to those provided for by this Agreement.

(2)

Notwithstanding anything to the contrary herein provided, if Employee becomes eligible to receive severance payments pursuant to Section 12(a)(1) above and also becomes eligible to receive severance payments pursuant to either Section 12(b), 12(c) or 12(d) above, then the total amount of severance payable under Section 12(a)(1) combined with severance payable under Section 12(b), 12(c) or 12(d) may not exceed the lesser of two times (A) the limit of compensation set forth in section 401(a)(17) of the Code as in effect for the year in which the Termination Date occurs, or (B) Employee’s annualized compensation based upon the annual rate of pay for services to the Company for the calendar year prior to the calendar year in which the Termination Date occurs (adjusted for any increase during that year that was expected to continue indefinitely if Employee had not separated from service).

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(3)	In the event that any severance payable under Section 12(a)(1) combined with severance payable under Section 12(b), 12(c) or 12(d) is limited by Section 12(f)(2) above, then the Company will also pay Employee a lump sum payment equal to the difference between the severance that would otherwise be payable under Section 12(a)(1) combined with severance payable under Section 12(b), 12(c) or 12(d) and the amount payable as a result of the limitation imposed under Section 12(f)(2) above. Such payment shall be paid to Employee in a lump sum on the Company’s first regular payroll date after expiration of all applicable rescission periods provided by law but in no event no later than forty-five (45) calendar days following the Termination Date; provided that if the 45 day period begins in one taxable year and ends in a second taxable year, the Company will make payment only in the second taxable year.
(4)	Notwithstanding the foregoing provisions of this Section 12, the obligation of the Company to make any of the termination payments to Employee under Sections 12(a), 12(b), 12(c), 12(d), 12(f)(2) or 12(f)(3) of this Agreement is contingent upon Employee’s execution of a full and valid release of claims arising out of his employment or the termination of that employment in favor of the Company, its officers, directors, agents, employees, successors, assigns and affiliates. Execution of such a release and the expiration of any applicable rescission period, following such execution, is a condition precedent to the Company’s obligation to make any of the termination payments set forth in this Agreement.
(5)	If the payment of the employee’s portion of premiums under Section 12(a)(3) would be discriminatory under the Patriot Protection and Affordable Care Act, then in lieu of such payment, the Company shall pay, in addition to the amount in Section 12(f)(3) an after-tax amount equal to the present value of the full amount of premium payments otherwise due.

(g) If, as of the Termination Date, Employee is a “specified employee” under Section 409A(a)(2)(B)(i) of the Code, and if any payments that Employee is entitled to receive hereunder may not be made at the time contemplated by the terms of this Agreement without causing Employee to be subject to the additional tax imposed by Section 409A of the Code, then any such payments under this Agreement that would have been paid during the period six months after Termination Date shall be held and paid in a lump sum on the first day of the seventh month following the Termination Date (without interest or earnings). Such deferral, if any, shall have no effect on any payments scheduled following the period six months after the Termination Date.

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(h) For purposes of this Agreement, “Cause” shall mean:

(1)	an act of dishonesty undertaken by Employee and intended to result in personal gain or enrichment of Employee or another at the expense of the Company or its Affiliates;
(2)	unlawful conduct or gross misconduct by Employee, whether on the job or off the job, that, in either event, is publicly detrimental to the reputation or goodwill of the Company;
(3)	the conviction of Employee of a felony, or Employee’s entry of a no contest or nolo contendre plea to a felony;
(4)	persistent failure of Employee to perform Employee’s material duties and responsibilities hereunder or to meet reasonable performance objectives set by the Board, as applicable, from time to time, which failure is willful and deliberate on Employee’s part and has not been cured by Employee within fifteen (15) days after written notice thereof to Employee from the Company;
(5)	willful and deliberate breach by Employee of his fiduciary obligations as an officer or director of the Company; or
(6)	material breach of any terms or conditions of this Agreement by Employee which breach has not been cured by Employee within fifteen (15) days after written notice thereof to Employee from the Company.

For the purposes of this Section 12(h), no act or failure to act on Employee’s part shall be considered “dishonest,” “willful” or “deliberate” unless done or omitted to be done by Employee in bad faith and without reasonable belief that Employee’s action or omission was in the best interests of the Company. Any act, or failure to act, based upon authority given pursuant to a resolution duly adopted by the Board shall be conclusively presumed to be done, or omitted to be done, by Employee in good faith and in the best interests of the Company.

(i) For purposes of this Agreement, “Good Reason” shall mean the occurrence of any of the following conditions without Employee’s consent, provided that Employee has first given written notice to the Company of the existence of the condition within 90 days of the occurrence of such condition which is the basis for Good Reason termination by Employee, and the Company has failed to remedy the condition within 30 days thereafter:

(1) a material reduction in the duties, responsibilities, or authority of Employee, whether such reduction is initiated by Company or any

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	successor in interest (except in connection with the termination of Employee’s employment for Cause);
(2)	A material reduction in the duties, responsibilities, or authority of the Board;
(3)	any reduction in Employee’s base salary or failure to pay Employee any base salary or bonus to which he is entitled under this Agreement;
(4)	any material breach by the Company of its obligations under this Agreement;
(5)	requiring Employee to be principally based at any office or location more than 50 miles from Minneapolis, Minnesota (other than for normal travel in connection with Employee’s performance of responsibilities hereunder); or
(6)	the failure of the Company to assign this Agreement to a successor pursuant to Section 13(g), or failure of such successor to explicitly assume and agree to be bound by this Agreement.

13. Miscellaneous.

(a)	Tax Matters. Employee acknowledges that the Company shall deduct from any compensation payable to Employee or payable on his behalf under this Agreement all applicable federal, state, and local income and employment taxes and other taxes and withholdings required by law. This Agreement is intended to be exempt from, or to satisfy, the requirements of Code Sections 409A(a)(2), (3) and (4), and regulations interpreting such provisions, and it should be interpreted accordingly.
(b)	Governing Law. All matters relating to the interpretation, construction, application, validity and enforcement of this Agreement will be governed by the laws of the State of Minnesota without giving effect to any choice or conflict of law provision or rule, whether of the State of Minnesota or any other jurisdiction, that would cause the application of laws of any jurisdiction other than the State of Minnesota,
(c)	Jurisdiction and Venue. Employee and the Company consent to the jurisdiction of the federal and state courts located in the State of Minnesota for the purpose of resolving all issues of law, equity, or fact, arising out of or in connection with this Agreement.
(d)	Entire Agreement. This Agreement contains the entire agreement of the parties relating to Employee’s employment with the Company and supersedes all prior agreements and understandings with respect to such subject matter, including without limitation the Prior Amended

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	Agreement, and the parties hereto have made no agreements, representations or warranties relating to the subject matter of this Agreement that are not set forth herein.
(e)	Amendments. No amendment or modification of this Agreement will be deemed effective unless made in writing and executed by the Employee and the Chairman of the Board.
(f)	No Waiver. No term or condition of this Agreement will be deemed to have been waived, except by a statement in writing signed by the party against whom enforcement of the waiver is sought. Any written waiver will not be deemed a continuing waiver unless specifically stated, will operate only as to the specific term or condition waived and will not constitute a waiver of such term or condition for the future or as to any act other than that specifically waived.
(g)	Assignment. This Agreement is not assignable, in whole or in part, by Employee. The Company’s rights and obligations under this Agreement may be assigned by the Company (1) to an Affiliate or (2) to any corporation or other person or business entity to which the Company may sell or transfer all or substantially all of its interest in the Company or any operating facility or facilities. After any such assignment by the Company, the Company will be discharged from all further liability hereunder and such assignee will thereafter be deemed to be “the Company” for purposes of all terms and conditions of this Agreement, including this Section 13.
(h)	Counterparts. This Agreement may be executed by facsimile signature and in any number of counterparts, and such counterparts executed and delivered, each as an original, will constitute but one and the same instrument
(i)	Severability. Subject to Section 7(e) hereof, to the extent that any portion of any provision of this Agreement is held invalid or unenforceable, it will be considered deleted herefrom and the remainder of such provision and of this Agreement will be unaffected and will continue in full force and effect.
(j)	Captions and Headings. The captions and paragraph headings used in this Agreement are for convenience of reference only and will not affect the construction or interpretation of this Agreement or any of the provisions hereof.

(remainder of page intentionally left blank)

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SIGNATURES

Employee and the Company have executed this Agreement as of the date set forth in the first paragraph.

	Advanced BioEnergy LLC
Date: May 9, 2011	By: /s/ John Lovegrove
	Its: Chairman of the Board
	EMPLOYEE
Date: May 11, 2011	By: /s/ Richard Peterson
	Richard Peterson

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Appendix A

“Change in Control” for purposes of this Second Amended and Restated Employment Agreement shall mean the occurrence of any one or more of the following:

     (1) the acquisition, during any 12 consecutive month period that ends subsequent to the date of this Agreement (“Effective Date”), by any “person” (within the meaning of section 13(d)(3) or 14(d)(2) of the Exchange Act) (an “Acquirer”) of ownership (determined taking into account the ownership attribution rules of Section 318(a) of the Code) of membership interests of the Company possessing 30% or more of the total voting power of the then outstanding membership interests of the Company; provided that for purposes of this paragraph (1):

          (a) any membership interests of the Company owned by the Acquirer prior to the start of the applicable 12 consecutive month period shall not be counted toward the 30% threshold specified above; and

          (b) an acquisition shall not constitute a Change in Control pursuant to this paragraph (1) if: (i) prior to the acquisition, the Acquirer owns membership interests of the Company possessing more than 50% of the total fair market value or total voting power of the then outstanding membership interests of the Company; (ii) the acquisition is by the Company or a subsidiary of the Company; (iii) the acquisition is by an employee benefit plan (or related trust) sponsored or maintained by the Company or one or more of its subsidiaries; (iv) the acquisition is by the Employee or any group that includes the Employee; or (v) the acquisition is by a surviving or acquiring entity in connection with a Business Combination described in clause (4)(a) below;

     (2) the acquisition by an Acquirer of membership interests of the Company that, together with membership interests already held by such Acquirer, constitutes more than 50% of the total fair market value or total voting power of the membership interests of the Company, other than an acquisition by an Acquirer who, prior to the acquisition, owned more than 50% of the total fair market value or total voting power of the membership interests of the Company;

     (3) the replacement, during any 12 consecutive month period that ends subsequent to the Effective Date, of a majority of the members of the Board with members whose appointment or election is not endorsed by a majority of the members of the Board before the date of the appointment or election;

     (4) the consummation of a merger or consolidation of the Company with or into another entity, a statutory share exchange or a similar business combination involving the Company (each, a “Business Combination”) which, subsequent to the Effective Date, has been approved by the unit holders of the Company, other than (a) a Business Combination where the holders of membership interests of the Company immediately before the Business Combination own, directly or indirectly, 65% or more of the total voting power of all the outstanding equity securities of the surviving or acquiring entity resulting from such Business Combination, or (b) a Business Combination where the Employee or a group that includes the Employee owns, directly or indirectly, 30% or more of the total value or voting power of all the outstanding

A-1

equity interests of the surviving or acquiring entity resulting from such Business Combination; or

     (5) the acquisition, during any 12 consecutive month period that ends subsequent to the Effective Date, by an Acquirer of assets of the Company with a total gross fair market value (determined without regard to any liabilities associated with such assets) equal to more than 40% of the total gross fair market value of all assets of the Company immediately prior to the acquisition, other than an acquisition (a) by a holder of membership interests in the Company immediately prior to such acquisition in exchange for its Company membership interests, (b) by an entity 65% or more of the total voting power of which is owned, directly or indirectly, by the Company, (c) by a person or group (within the meaning of 26 CFR § 1.409A-3(i)(5)(vii)(C)) that owns, directly or indirectly, 65% or more of the total voting power of all outstanding membership interests of the Company, (d) by an entity 65% or more of the total voting power of which is owned, directly or indirectly, by a person or group described in the immediately preceding clause (c), or (e) by a corporation or other entity 30% or more of the total value or voting power of which is owned, directly or indirectly, by the Employee or a group that includes the Employee.

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EX-10.6

Exhibit 10.6

ADVANCED BIOENERGY, LLC

Award Agreement for Unit Appreciation Right
With Tandem Nonqualified Unit Option

     Advanced BioEnergy, LLC (the “Company”) hereby grants to you, the Grantee named below, a Unit Appreciation Right (the “UAR”) with a tandem option (the “Option”) to acquire Units (ownership interests in the Company as defined in the Company’s Third Amended and Restated Operating Agreement, as it may be amended from time to time (the “LLC Agreement”)). The tandem award of the UAR and the Option is referred to as the “Award,” and covers the number of Units set forth below. The terms and conditions of the Award are set forth in this Agreement, consisting of this cover page and the Award Terms and Conditions on the following pages.

Name of Grantee: Richard Peterson

No. of Units Subject to Award:     150,000 Date of Grant:     May 11, 2011

Expiration Date: May 10, 2021

Exercise Price Schedule:

	Number of Units in Tranche		Exercise Price Per Unit in Tranche
Tranche A		50,000	$	1.50
Tranche B		50,000	$	3.00
Tranche C		50,000	$	4.50

Vesting Schedule

	Number of Units as to Which
Dates	Award Becomes Vested
May 11, 2012		30,000
May 11, 2013		30,000
May 11, 2014		30,000
May 11, 2015		30,000
May 11, 2016		30,000

Of the 30,000 Units as to which the Award vests on each Scheduled Vesting Date, 10,000 Units come from each Exercise Price Tranche.

     By signing below, you agree to all of the terms and conditions contained in this Agreement. You acknowledge that you have reviewed this document and that it sets forth the entire agreement between you and the Company regarding your rights with respect to the Award.

GRANTEE:	ADVANCED BIOENERGY, LLC
/s/ Richard Peterson	By:  /s/ John Lovegrove
	Title: Chairman of the Board

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Advanced BioEnergy, LLC
Award Agreement for Unit Appreciation Right
With Tandem Nonqualified Unit Option ment

Award Terms and Conditions¹

1.	Nature of Award. Exercise of the UAR in accordance with this Agreement entitles you to receive the difference between the Exercise Value (as defined in Section 19(f)) of each Unit as to which the Award is then being exercised and the applicable Exercise Price of such Unit as set forth in the Exercise Price Schedule. This difference is referred to in this Agreement as the “Appreciation Amount.” Exercise of the Option entitles you to purchase the number of Units as to which the Option is being exercised at the applicable Exercise Price per Unit specified in the Exercise Price Schedule. This Option is not intended to be an “incentive stock option” within the meaning of Section 422 of the Internal Revenue Code (the “Code”). You may exercise some or all of the vested portion of this Award as either a UAR or Option under the circumstances specified below, but not as both. Exercising any portion of the Award as a UAR automatically cancels the corresponding Option as to the same number of Units, and exercising any portion of the Award as an Option automatically cancels the corresponding UAR as to the same number of Units.
2.	Vesting of Award. This Award will vest as to the number of Units and on the dates specified in the Vesting Schedule, so long as your employment with the Company and its Affiliates does not end. The Vesting Schedule is cumulative. If, however, your employment terminates due to your death or Disability during the term of the Award, the next installment of the Award that is scheduled to vest after the date of such termination of employment will immediately vest upon such termination of employment. Accelerated vesting of the Award may also occur under the circumstances described in Section 12 below. After giving effect to any accelerated vesting as provided in this Section 2 or in Section 12, the unvested portion of this Award will be immediately forfeited upon your termination of employment.
3.	Exercisability of Award as a UAR. To the extent the Award has vested and has not yet expired or been terminated, you may exercise the Award as a UAR only under the following circumstances and at the following times:

(a)	During the 30 day period immediately following a Change in Control (but a notice of exercise as contemplated by Section 7 may be provided prior to such Change in Control, to be effective upon such Change in Control);
(b)	At any time during the term of the Award when the Units are Publicly Traded; or
(c)	If the Units are then Publicly Traded, during the following periods of time following the termination of your employment with the Company and its Affiliates other than for Cause:

(1) For one year after termination of your employment due to death or Disability; or

¹ Each capitalized term used in this Agreement that is not defined when first used shall have the meaning specified in Section 19 or in the Second Amended and Restated Employment Agreement, as applicable.

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(2) For three months following your termination of employment for any reason other than death, Disability or Cause.

4. Exercisability of Award as an Option. To the extent the Award has vested and has not yet expired or been terminated, and if the Units are not then Publicly Traded, you may exercise the Award as an Option only during the following periods of time following the termination of your employment with the Company and its Affiliates other than for Cause:

(a)	For one year after termination of your employment due to death or Disability; or
(b)	For three months following your termination of employment for any reason other than death, Disability or Cause.

5.	Continued Employment Requirement. Except as otherwise provided in Sections 3(c), 4 or 12, this Award may be exercised only while you continue to be employed by the Company or any of its Affiliates, and only if you have been continuously so employed since the Date of Grant.
6.	Expiration. This Award will expire and will no longer be exercisable at 5:00 p.m. Central Time on the earliest of:

(a)	The Expiration Date;
(b)	Upon your termination of employment with the Company for Cause;
(c)	Upon the expiration of any applicable period specified in Section 3(c), 4 or 12(c) during which this Award may be exercised after termination of your employment; or
(d)	The date of termination of this Award pursuant to Section 12(b).

7.	Exercise of Award as UAR. The vested portion of this Award may be exercised as a UAR at the times and under the circumstances set forth in Section 3 by delivering a written notice of exercise, in the form attached to this Agreement as Attachment 1, to the Company at its principal executive office (or to the Company’s designated agent for such purpose), and by providing for payment of any related withholding taxes. The notice shall state the number of Units as to which the UAR is being exercised, and shall be signed by the person exercising the UAR. If you are not the person exercising the UAR, the person submitting the notice also must submit appropriate proof of his/her right to exercise the UAR.
8.	Settlement of UAR Following Exercise. The per Unit Appreciation Amount payable in connection with an exercise of the UAR under this Agreement is calculated by subtracting the Exercise Price for each Unit as to which the UAR is being exercised from the Exercise Value of that Unit as of the applicable exercise date. The aggregate Appreciation Amount payable in connection with such an exercise (the “Aggregate Appreciation Amount”) is the sum of all the applicable per Unit Appreciation Amounts. With respect to a UAR exercise pursuant to Section 3(b) or 3(c), payment of the Aggregate Appreciation Amount (net of applicable withholding taxes) shall be made as soon as reasonably practicable after the Company receives the notice of exercise as provided in Section 7, and shall be made in cash, Units or some combination of the two in the Committee’s discretion. With respect to a UAR exercise pursuant to Section 3(a), payment of the Aggregate Appreciation Amount shall be made as provided in Section 12(d).
9.	Exercise of Award as Option. The vested portion of this Award may be exercised as an Option under the circumstance and during the periods specified in Section 4 by delivering a

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	written notice of exercise, in the form attached to this Agreement as Attachment 2, to the Company at its principal executive office (or to the Company’s designated agent for such purpose), and by providing for payment of the exercise price of the Units being acquired and any related withholding taxes in accordance with Section 11. The notice shall state the number of Units to be purchased, and shall be signed by the person exercising the Option. If you are not the person exercising the Option, the person submitting the notice also must submit appropriate proof of his/her right to exercise the Option. When you submit your notice of exercise, you must include payment in cash (including personal check, cashier’s check or money order) of the exercise price of the Units being purchased.
10.	Delivery of Units Upon Exercise of Option. As soon as practicable after the Company receives the notice and exercise price as provided in Section 9, and has determined that all conditions to exercise, including Sections 11 and 14 of this Agreement, have been satisfied, it shall deliver to the person exercising the Option, in the name of such person, the Units being purchased, as evidenced by issuance of a Unit certificate. The Company shall pay any original issue or transfer taxes with respect to the issue or transfer of the Units and all fees and expenses incurred by it in connection therewith.
11.	Withholding Taxes. You may not exercise this Award in whole or in part unless you make arrangements acceptable to the Company for payment of any federal, state or local withholding taxes that may be due as a result of the exercise of this Award. The Company shall have the right, and you hereby authorize the Company, to (i) withhold from any cash payment under this Award or from any other compensation or other amount owed to you an amount sufficient to cover any required withholding taxes related to the exercise of this Award, and (ii) require you or any other person receiving Units as a result of the exercise of this Award to pay a cash amount sufficient to cover any required withholding taxes before actual receipt of those Units. You may satisfy some or all of such withholding tax obligations (up to your minimum required tax withholding rate) by surrendering to the Company Units you already own or by having the Company retain a portion of the Units being acquired upon exercise of the Award. Any Units surrendered to or retained by the Company in satisfaction of tax withholding obligations shall be valued in the same manner as used in computing the withholding taxes under applicable laws.
12.	Effect of Change in Control. In the event of a Change in Control during the term of this Award:

(a) If the Company is not the surviving or successor entity, then the surviving or successor entity (or its parent entity) may assume or replace the Award (with such adjustments as may be required or permitted by Section 18), subject to Section 12(c) below. If the Company is the surviving entity, this Award shall continue in accordance with its terms, subject to Section 12(c). For purposes of this Section 12(a), the Award shall be considered assumed or replaced if, in connection with the Change in Control and in a manner consistent with Code Section 409A, either (i) the contractual obligations represented by this Agreement are expressly assumed by the surviving or successor entity (or its parent entity) with appropriate adjustments to the number and type of securities subject to the Award and the Exercise Price thereof that preserve the intrinsic value of the Award existing at the time of the Change in Control, or (ii) you have received a comparable equity-

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	based award that preserves the intrinsic value of the Award existing at the time of the Change in Control and is subject to terms and conditions, including those applicable to vesting and exercisability, that are substantially equivalent to those to which this Award is subject. To the extent the Award was vested prior to the Change in Control, it shall be exercisable as a UAR as provided in Section 3(a) notwithstanding the continuation, assumption or replacement of the Award.
(b)	If the Company is not the surviving or successor entity, and if this Award is not assumed or replaced in connection with a Change in Control, then the Award shall become fully vested and fully exercisable as a UAR for the period of time provided in Section 3(a), and shall terminate at the end of such period of exercisability.
(c)	If the Company is the surviving entity in a Change in Control, or if the Award is assumed or replaced under the circumstances described in Section 12(a), and if within two years after the Change in Control you experience an involuntary termination of employment for reasons other than Cause or you terminate your employment for Good Reason, then the Award shall immediately become fully vested and fully exercisable in accordance with its terms and shall remain exercisable for three months following your termination of employment.
(d)	If and to the extent this Award is exercised as a UAR in accordance with Section 3(a) under the circumstances specified in either Section 12(a) or Section 12(b), payment of the Aggregate Appreciation Amount shall be made to you using the same form(s) of consideration provided to Unit holders generally in connection with the Change in Control transaction, provided that (i) the Committee may, to the extent that the consideration provided to Unit holders generally is other than cash, provide for the payment of some or all of the corresponding portion of the Aggregate Appreciation Amount in cash, and (ii) to the extent the consideration provided to Unit holders generally is other than cash or readily tradable securities, payment shall be made in cash of a portion of the Aggregate Appreciation Amount equal to your required withholding taxes in connection with the UAR exercise. Payment of any amount under this Section 12(d) shall be made on the same schedule and subject to the same terms, including subjecting such payment to escrow or holdback terms, as are applicable to payments of the Change in Control consideration to the Company’s Unit holders generally.
(e)	If and to the extent this Award is exercised pursuant to Section 12(c), it shall be exercisable as a UAR consistent with Section 3(c)(2) if the Units or other underlying securities are then Publicly Traded, and exercisable as an Option consistent with Section 4(b) if the Units or other underlying securities are not then Publicly Traded.

13. Forfeiture Conditions. If your employment with the Company and its Affiliates is terminated for Cause, or if you breach any non-competition, non-solicitation or confidentiality restrictions applicable to you, then (i) any unexercised portion of this Award shall be forfeited, and (ii) any Units issued upon exercise of the Option or UAR or

5

other payments made upon exercise of the UAR within a period of [12] months prior to such termination or breach or at any time thereafter shall be forfeited and returned to the Company.

14.	Compliance with Laws. This Award may be exercised only if the issuance of Units upon such exercise complies with all applicable legal requirements, including compliance with the provisions of applicable federal and state securities laws.
15.	Transfer of Award. During your lifetime, only you (or your guardian or legal representative in the event of legal incapacity) may exercise this Award except in the case of a transfer described below. You may not assign or transfer this Award except (i) for a transfer upon your death in accordance with your will, by the laws of descent and distribution or pursuant to a beneficiary designation submitted in accordance with such procedures as the Committee may specify, or (ii) with the prior written approval of the Company, by gift to a permitted transferee as specified in Section 9.2(a)(ii) of the LLC Agreement. The Award as held by any such transferee will continue to be subject to the same terms and conditions that were applicable to the Award immediately prior to its transfer and may be exercised by such transferee only as and to the extent that the Award becomes exercisable under this Agreement and has not terminated in accordance with the provisions of this Agreement.
16.	No Unit Holder Rights Before Exercise. Neither you nor any permitted transferee of this Award will have any of the rights of a Unit holder of the Company with respect to any Units subject to this Award until the issuance of the Units has been effected in accordance with the LLC Agreement and a certificate evidencing such Units have been issued. No adjustments shall be made for distributions or other rights if the applicable record or effective date occurs before your Units and the resulting certificate have been issued.
17.	Subject to LLC Agreement. You acknowledge that any Units issued to you pursuant to this Agreement and Award are subject to the Company’s Articles of Organization, as amended from time to time, and the Company’s LLC Agreement. You acknowledge and agree that you will become a party to the Company’s LLC Agreement, as currently in effect, if you are not already a party to that agreement. Subject to the provisions of the LLC Agreement, you will have all the rights of a member of the Company with respect to each Unit issued to you hereunder.
18.	Adjustment for Changes in Capitalization. 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 structure or Units of the Company, including any conversion by the Company into to a corporate form, the Committee (or if the Company does not survive any such transaction, the board of directors or an authorized committee of the board of directors of the surviving company) shall, without your consent, make such adjustments as it determines in its discretion to be appropriate as to the number and kind of securities subject to this Agreement and to the Award in order to prevent dilution or enlargement of your rights hereunder. Following any such adjustments, references in this Agreement to “Units” or “membership interests” shall, to the extent necessary, be deemed to refer to such other kind of securities.

19. Definitions. In this Agreement, the following definitions will apply:

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(a)	“Affiliate” means each corporation, partnership, LLC or other entity that controls the Company, is controlled by the Company, or is under common control with the Company (in each case, “control” meaning the direct or indirect ownership of 50% or more of all outstanding equity interests).
(b)	“Cause” means (i) an act of dishonesty undertaken by you and intended to result in personal gain or enrichment of you or another at the expense of the Company or its Affiliates; (ii) unlawful conduct or gross misconduct by you, whether on the job or off the job, that, in either event, is publicly detrimental to the reputation or goodwill of the Company; (iii) your conviction of a felony, or your entry of a no contest or nolo contendre plea to a felony; (iv) your persistent failure to perform the material duties and responsibilities of your position with the Company or to meet reasonable performance objectives set by the Board from time to time, which failure is willful and deliberate on your part and has not been cured by you within fifteen (15) days after written notice thereof to you from the Company; (v) your willful and deliberate breach of your fiduciary obligations as an officer or director of the Company; or (vi) your material breach of any terms or conditions of this Agreement or any other agreement between you and Company which breach has not been cured by you within fifteen (15) days after written notice thereof to you from the Company.
	For the purposes of this Section 19(b), no act or failure to act on your part shall be considered “dishonest,” “willful” or “deliberate” unless done or omitted to be done by you in bad faith and without reasonable belief that your action or omission was in the best interests of the Company. Any act, or failure to act, based upon authority given pursuant to a resolution duly adopted by the Board shall be conclusively presumed to be done, or omitted to be done, by you in good faith and in the best interests of the Company.
(c)	“Change in Control” means a change in control as defined in Appendix A to your Second Amended and Restated Employment Agreement dated as of May 11, 2011.
(d)	“Committee” means the Compensation Committee of the Board of Directors of the Company, or two or more non-employee directors of the Company designated by the Board to administer this Agreement.
(e)	“Disability” means the your inability to perform on a full-time basis the duties and responsibilities of your employment with the Company by reason of illness or other physical or mental impairment or condition, if such inability continues for an uninterrupted period of 90 days or for more than 90 complete days during any 12-month period.
(f)	“Exercise Value” of a Unit means the value of the Unit as of the date of exercise of the UAR determined as follows:

(1) If the UAR is being exercised pursuant to Section 3(a), the value of the Unit as of the date of exercise shall be equal to the fair market value per Unit, as determined by the Committee in good faith, of the consideration to be received by the Company or its Unit holders, as the case may be, in the applicable Change in Control transaction.

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(2) If the UAR is being exercised pursuant to Section 3(b) or 3(c), the value of the Unit as of the date of exercise will be the closing or last sale price of a Unit on the principal securities market on which the Units trade on the date of exercise, or if no sale of Units occurred on that date, on the next preceding date on which a sale of Units occurred, as reported by such source as the Committee deems reliable.

(g)

“Good Reason” means the occurrence of any of the following conditions without your consent, provided that you have first given written notice to the Company of the existence of the condition within 90 days of its first occurrence, and the Company has failed to remedy the condition within 30 days thereafter: (i) a material reduction in the your duties, responsibilities, or authority (except in connection with the termination of your employment for Cause); (ii) a material reduction in the duties, responsibilities, or authority of the person to whom you report; (iii) any reduction in your base salary or failure to pay you any base pay or bonus to which you are entitled; (iv) any material breach by the Company of its obligations under this Agreement or any other agreement with you; (v) requiring you to be principally based at any office or location more than 50 miles from Minneapolis, Minnesota (other than for normal travel in connection with your performance of the duties and responsibilities of your position with the Company); or (vi) the failure of the Company to assign this Agreement to a successor pursuant to Section 20(e), or failure of such successor to explicitly assume and agree to be bound by this Agreement.

(h)

“Publicly Traded” means at any time with respect to Units or other securities that the Units or other securities are then readily tradable on an established securities market for purposes of Treasury Regulation §1.409A-1(b)(5)(iv)(A).

20. Miscellaneous.

(a)	Governing Law. This Agreement will be interpreted and enforced under the laws of the state of Minnesota (without regard to its conflicts or choice of law principles).
(b)	Jurisdiction and Venue. The parties consent to jurisdiction of the courts of the State of Minnesota and/or the federal district courts, District of Minnesota, for the purpose of resolving all issues of law, equity, or fact, arising out of or in connection with this Agreement.
(c)	Entire Agreement. This Agreement contains the entire agreement of the parties relating to the Award and supersedes all prior agreements and understandings with respect to such subject matter, and the parties hereto have made no agreements, representations or warranties relating to the subject matter of this Agreement that are not set forth herein.
(d)	Amendments. The Committee may unilaterally amend the terms of this Agreement, except that no such amendment may materially impair the your rights with respect to the Award without your prior written consent, unless such amendment is necessary to comply with applicable law.

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(e)	Successors and Assigns. This Agreement will be binding in all respects on your heirs, representatives, successors and assigns , and on the successors and assigns of the Company.
(f)	Counterparts. This Agreement may be executed by facsimile signature and in any number of counterparts, and such counterparts executed and delivered, each as an original, will constitute but one and the same instrument.
(g)	Severability. To the extent that any portion of any provision of this Agreement is held invalid or unenforceable, it will be considered deleted herefrom and the remainder of such provision and of this Agreement will be unaffected and will continue in full force and effect.
(h)	Notices. Every notice or other communication relating to this Agreement shall be in writing and shall be mailed to or delivered to the party for whom it is intended at such address as may from time to time be designated by it in a notice mailed or delivered to the other party as herein provided. Unless and until some other address is so designated, all notices or communications by you to the Company shall be mailed or delivered to the Company at its office at 10201 Wayzata Boulevard, Suite 250, Minneapolis, Minnesota, 55305, and all notices or communications by the Company to you may be given to you personally or may be mailed to you at the address indicated in the Company’s records as your most recent mailing address.
(i)	Captions and Headings. The captions and paragraph headings used in this Agreement are for convenience of reference only and will not affect the construction or interpretation of this Agreement or any of the provisions hereof.

By signing the cover page of this Agreement, you agree to all the terms and conditions described above and in the Plan document.

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Attachment 1

NOTICE OF EXERCISE
Unit Appreciation Right

Subject to the terms and conditions of the Award Agreement for Unit Appreciation Rights dated May 11, 2011, I hereby elect to exercise the following Unit Appreciation Rights (“UAR”) and shall be entitled to receive the total Aggregate Appreciation Amount set forth below:

Employee to Complete				Company to Complete
			No. of	Exercise		Aggregate
	Exercise Price		UAR	Value Per	Appreciation	Appreciation
	Per Unit		Exercised	Unit	Amount Per Unit	Amount
Tranche A	$	1.50		$	$	$
Tranche B	$	3.00		$	$	$
Tranche C	$	4.50		$	$	$
			Total Aggregate Appreciation Amount			$

If the Company is required to withhold any taxes in connection with the exercise of the option, I understand it is a condition to the exercise that I pay the applicable tax or make provisions that are reasonably satisfactory to the Company for the payment thereof. I hereby direct the Company to withhold any taxes required to be withheld as a result of the exercise of the Unit Appreciation Right from the Total Aggregate Appreciation Amount due me.

     IN WITNESS WHEREOF, Richard Peterson executed this Notice of Exercise as of the date set forth below.

Richard Peterson

Date

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Attachment 2

NOTICE OF EXERCISE
Unit Option

Subject to the terms and conditions of the Award Agreement for Unit Appreciation Rights with Tandem Nonqualified Unit Option dated May 11, 2011, I hereby elect to exercise the following option to purchase Units of the Company:

	Exercise Price Per		Number of Units	Aggregate Exercise
	Unit		Exercised	Price
Tranche A	$	1.50
Tranche B	$	3.00
Tranche C	$	4.50
	Totals

I enclose payment of the Aggregate Exercise Price for the Units shown above in the amount of $                    . I am enclosing payment in the form of:                                         .

In purchasing the Units, I certify that:

     a. I am purchasing the Units for my own account and not for or on behalf of any other person.

     b. I am purchasing the Units for investment purposes and do not presently intend to resell or distribute the Units. I understand that I must bear the economic risk of investing in the Units for an indefinite period of time, even if my circumstances should change.

     c. I understand that there is currently no market for the Units and that the Units have not been registered under federal or state securities laws and may not be issued, sold or otherwise transferred unless they are registered or an exemption from registration is available.

     d. I understand that the Company is relying on the truth and accuracy of these statements in issuing and selling the Units to me.

     e. I have consulted with my tax advisor as to the consequences of exercise of the option on my taxable income.

     f. If the Company is required to withhold any taxes in connection with the exercise of the option, I understand it is a condition to the exercise that I pay the applicable tax or make provisions that are reasonably satisfactory to the Company for the payment thereof.

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Tax Withholding

o I hereby direct the Company to pay any required withholding on my behalf and to withhold from the number of Units to be delivered to me pursuant to my exercise of the option, the number of whole Units the fair market value of which is equal to my minimum withholding obligation, and I will pay the difference in cash.

o I hereby deliver to the Company $                     to satisfy my minimum tax withholding obligation. I am enclosing payment in the form of                                                  .

IN WITNESS WHEREOF, Richard Peterson executed this Notice of Exercise as of the date set forth below.

Richard Peterson

Date

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EX-31

EXHIBIT 31

CERTIFICATION

I, Richard R. Peterson, certify that:

     1. I have reviewed this Form 10-Q of Advanced BioEnergy, LLC;

     2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

     3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

     4. I am responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

          (a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

          (b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

          (c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

          (d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

     5. I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

          (a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

          (b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: May 16, 2011	/s/ Richard R. Peterson
	Richard R. Peterson
	Chief Executive Officer and Chief Financial Officer

EX-32

EXHIBIT 32

CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT
TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

     In connection with the Quarterly Report of Advanced BioEnergy, LLC (the “Company”) on Form 10-Q for the period ended March 31, 2011 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Richard R. Peterson, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to the best of our knowledge:

          (1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

          (2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

/s/ Richard R. Peterson  

Richard R. Peterson 

Chief Executive Officer and
Chief Financial Officer
May 16, 2011