EXHIBIT 4.2
CONVERTIBLE NOTE
THE SECURITIES REPRESENTED BY
THIS INSTRUMENT AND THE SECURITIES ISSUABLE UPON CONVERSION HEREOF
HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, OR THE SECURITIES LAWS OF ANY STATE OF THE UNITED STATES.
THE SECURITIES REPRESENTED HEREBY MAY NOT BE SOLD, OFFERED FOR SALE
OR OTHERWISE TRANSFERRED IN THE ABSENCE OF AN EFFECTIVE
REGISTRATION STATEMENT FOR SUCH SECURITIES UNDER APPLICABLE
SECURITIES LAWS, OR UNLESS SOLD, OFFERED FOR SALE OR TRANSFERRED
PURSUANT TO AN AVAILABLE EXEMPTION FROM THE REGISTRATION
REQUIREMENTS OF APPLICABLE SECURITIES LAWS WITH, IF REQUESTED BY
THE ISSUER OF THIS NOTE, AN OPINION OF COUNSEL REASONABLY
ACCEPTABLE TO SUCH ISSUER THAT SUCH REGISTRATION IS NOT
REQUIRED.
ADVANCED BIOENERGY, LLC
15% SUBORDINATED CONVERTIBLE PROMISSORY
NOTE
April 27, 2007
$10,000,000.00
FOR
VALUE RECEIVED , ADVANCED BIOENERGY, LLC, a Delaware limited
liability company (the “ Company ”), hereby
promises to pay to the order of ETHANOL INVESTMENT PARTNERS, LLC, a
Delaware limited liability company (the “ Holder
” ) the aggregate sum of ten million dollars ($10,000,000.00)
together with any accrued and unpaid interest hereon, each as set
forth below. This 15% Subordinated Convertible Note (the “
Convertible Note ”) is one of the “ Notes
” referred to in the Note Purchase Agreement of even date
herewith between the Company and the initial Holder of this
Convertible Note (the “ Purchase Agreement ”).
The Purchase Agreement contains certain additional agreements among
the parties thereto with respect to the terms of the Convertible
Notes. All such provisions are an integral part of this Convertible
Note and are incorporated herein by reference. All terms defined in
the Purchase Agreement and not otherwise defined herein shall have
for purposes hereof the meanings provided for therein.
ARTICLE I
PAYMENT OF PRINCIPAL
1.1 Payment of Principal . The unpaid (or unconverted) principal amount
of this Convertible Note shall be due and payable to the Holder on
the first anniversary date of the Follow-on Investment (as defined
in the Purchase Agreement), if any, or if there is no Follow-on
Investment, the first anniversary date of this Note (the “
Scheduled Maturity Date ”) and shall automatically and
without further action by the Company or the Holder be converted
into the right to receive solely Conversion Securities on the
Scheduled Maturity Date (a “ Mandatory Conversion
”) unless the Company has exercised its right of prepayment
prior to the Scheduled Maturity Date or the Holder has exercised
rights arising from a Default prior to the Scheduled Maturity
Date.
1.2 Right of Prepayment . The Company may, at any time, prepay all or a
portion of the unpaid principal and unpaid accrued interest of this
Convertible Note without penalty. Any prepayment of this
Convertible Note will be credited first against unpaid accrued
interest, then principal. The Company shall give notice to the
Holder of its intent to prepay all or any portion of the principal
of this Convertible Note at least ten (10) days preceding the
date of such prepayment. During that ten (10) day period, the
Holder may elect to convert the portion of principal to be prepaid
into Conversion Securities (as defined herein) in accordance with
the provisions of Article IV.
ARTICLE II
PAYMENT OF INTEREST
2.1 Interest Rate . The unpaid (or unconverted) principal balance
of this Convertible Note shall bear interest (calculated on the
basis of a year consisting of 365 days) at a per annum rate
equal to fifteen percent (15%). Interest shall be compounded
quarterly on the last day of July, October, January and April into
the principal amount of this Convertible Note.
2.2 Payment of Interest . Interest accruing under this Convertible Note
shall be due and payable on the date the principal amount of this
Convertible Note shall be declared to be or shall automatically
become due and payable or converted as provided herein. Interest
due and payable hereunder shall be paid in cash (whether or not any
portion of the principal amount of this Convertible Note then due
and payable is then actually paid in cash) unless such interest is
converted into Conversion Securities in accordance with the
provisions of Article III hereof.
ARTICLE III
CONVERSION
3.1 Definitions . In addition to the terms defined in
Sections 3.2 and 3.3 below, the following terms shall have the
following meanings:
(a) “ Conversion Amount
” means (i) the entire principal amount of this
Convertible Note, plus (ii) all accrued and unpaid interest on
the Conversion Date (as herein defined), provided that in the event
the Conversion Date is delayed by reason of the Holder’s
failure to timely deliver the required Membership Signature Page
upon a Mandatory Conversion, interest shall stop accruing on the
fifth (5 th ) business day following the Scheduled
Maturity Date.
(b) “ Conversion Date ”
means (i) the date of the receipt of the Membership Signature
Page upon a Mandatory Conversion or (ii) the date which is ten
(10) business days following the date the Notice of Conversion
is delivered to the Company upon an Optional Conversion.
(c) “ Conversion Price ”
means (i) at the lesser of (A) $16.00 per Unit or
(B) the price per Unit which is equal to the lowest price per
Unit at which the Company sells Units in any public or private
offering during the period that this Note is outstanding. The
Conversion Price shall be subject to adjustment pursuant to
Article IV hereof.
(d) “ Optional Conversion
” means any optional conversion upon a call for prepayment
under Section 2.2.
3.2 “ Conversion Securities ”
means Units of the Company as defined in the Third Amended and
Restated Operating Agreement of the Company, dated as of
February 1, 2006 (the “Operating Agreement”),
subject to adjustment pursuant to Article IV
hereof.
3.3 Mechanics of Conversion . If the Holder elects to effect an Optional
Conversion, the Holder shall: (a) deliver a copy of the fully
executed notice of conversion in the form attached hereto (a
“ Notice of Conversion ”) to the Company,
together with the Member Signature Page attached thereto and
(b) surrender or cause to be surrendered this Convertible
Note, duly endorsed, as soon as practicable thereafter. Upon a
Mandatory Conversion, the Holder shall (a) deliver to the
Company the Member Signature Page attached to the Notice of
Conversion and (b) surrender or cause to be surrendered this
Convertible Note, duly endorsed, as soon as practicable thereafter.
Upon receipt by the Company of a Notice of Conversion and/or the
Membership Signature Page, as the case may be, from the Holder, the
Company shall promptly send a written confirmation to the Holder
stating that the Notice of Conversion and/or Membership Signature
Page has been received and stating the number of Conversion
Securities issuable upon conversion.
3.4 Delivery of Conversion Securities Upon
Conversion . On the
Conversion Date, the Company shall issue and deliver to the Holder
confirmation of the number of Conversion Securities that have been
issued to the Holder upon conversion of this Convertible Note. The
person or persons entitled to receive Conversion Securities
issuable upon such conversion shall be treated for all purposes as
the record holder of such Conversion Securities at the close of
business on the Conversion Date and such Conversion Securities
shall be issued and outstanding as of such date.
3.5 Taxes . The Company shall pay any and all taxes (other
than transfer taxes) which may be imposed upon the Company with
respect to the issuance and delivery of the Units or other
securities upon the conversion of this Convertible Note.
3.6 No
Fractional Units . No
fractional Units or other securities are to be issued upon the
conversion of this Convertible Note, but instead of any fraction of
a Unit which would otherwise be issuable, the Company shall pay to
the Holder in cash an amount equal to the fair market value of the
fractional Unit which would otherwise be issuable. For the purpose
of this Section 3.6, fair market value shall be agreed between
the Company and the Holder or, if no such agreement is reached
within fourteen (14) days, by a mutually agreed
appraiser.
ARTICLE IV
ADJUSTMENTS
4.1 Adjustments upon Issuance of Units, Dividends
and Other Events . The
number of Conversion Securities issuable upon conversion of this
Convertible Note shall be equitably and proportionately increased,
and the Conversion Price thereof shall accordingly be equitably and
proportionately reduced: (a) if and whenever the Company at
any time prior to the Scheduled Maturity Date subdivides its Units
by split or otherwise, or combines its outstanding Units and
(b) if the Company shall at any time or from time to time
declare, order, pay or make a dividend or other distribution of
Units or other securities or property or rights or warrants to
subscribe for securities of the Company or any of its subsidiaries
by way of dividend or spin-off. When any adjustment is required to
be made in the number or kind of Conversion Securities issuable
upon conversion of the Convertible Note, or in the Conversion
Price, the Company shall promptly notify the Holder of such event,
and the Company and the Holder shall in good faith agree upon the
number of Conversion Securities or other securities or property
thereafter issuable upon conversion of the Convertible Note and the
Conversion Price therefor. If the Company and the Holder is unable
to agree upon any decision to be made pursuant to this
Section 4.1, the Company shall hire and pay the expenses of a
nationally or regionally recognized certified public accounting
firm which has not provided services for the Company or the Holder
within the previous two (2) years to settle such dispute as
soon as practicable (but in any event within the sixty
(60) day period following such dispute).
4.2 Reclassification, Reorganization and
Conversion . In case of
any reclassification, conversion or capital reorganization of the
Units of the Company, then, as a condition of such
reclassification, conversion or reorganization, lawful provision
shall be made, and duly executed documents evidencing the same from
the Company or its successor shall be delivered to the Holder, so
that such Holder shall have the right subject to the terms of this
Convertible Note to convert, at the Conversion Price, the kind and
amount of units, capital stock and other securities and property
receivable in connection with such reclassification, conversion or
reorganization by a holder of the same number of Conversion
Securities as were issuable by the Company immediately prior to
such reclassification, conversion or reorganization. In any such
case appropriate provisions shall be made with respect to the
rights and interest of the Holder so that the provisions hereof
shall thereafter be applicable with respect to any shares of stock
or other securities and property deliverable upon conversion
hereof, and appropriate adjustments shall be made to the Conversion
Price payable hereunder, provided the aggregate Conversion Price
shall remain the same.
4.3 Mergers and Consolidations
. If there shall occur any
consolidation or merger of the Company with another entity, then
lawful and adequate p
