EXHIBIT 4.1
NOTE PURCHASE AGREEMENT
This
Note Purchase Agreement (this “ Agreement ”) is
dated April 20, 2007 between Advanced BioEnergy, LLC, a
Delaware limited liability company (the “ Company
”), and Ethanol Investment Partners, LLC, a Delaware limited
liability company (“ Purchaser ”).
WHEREAS, subject to the terms and conditions set
forth in this Agreement and pursuant to Section 4(2) of the
Securities Act, the Company desires to issue and sell to Purchaser,
and Purchaser desires to purchase from the Company, the securities
of the Company pursuant to the terms set forth herein.
NOW,
THEREFORE, in consideration of the mutual covenants contained in
this Agreement, and for other good and valuable consideration, the
receipt and adequacy of which are hereby acknowledged, the Company
and Purchaser hereby agree as follows:
ARTICLE I
PURCHASE AND SALE OF NOTES;
CLOSING
1.1
Authorization of the Notes . The Company has authorized the
issuance and sale to Purchaser of a 15% Subordinated Convertible
Promissory Note, the form of which is attached hereto as
Exhibit A , in the original principal amount of
$10,000,000.00 (the “ Initial Investment ”). In
addition to the Initial Investment, the Company has authorized the
issuance and sale to Purchaser of a 15% Subordinated Convertible
Promissory Note in an amount up to an additional $25,000,000.00
(the “ Follow-on Investment ”) upon the same
terms as the initial investment (i.e., 15% subordinated convertible
subordinated note with a one-year scheduled maturity date from the
date of issuance). Subject to the terms and conditions set forth
herein, Purchaser shall have an option to invest in the Follow-on
Investment at any time on or prior to June 13, 2007 by
delivering written notice to the Company of its exercise of such
option stating the amount it desires to invest. No later than five
business days following delivery of the written notice, Purchaser
shall fund the Follow-on Investment. The note issued in the Initial
Investment and any note issued in the Follow-on Investment are
sometimes referred to individually as a or the “ Note
” and collectively as the “ Notes
”.
1.2
Purchase and Sale of the Notes . At the closing of the
Initial Investment, the Company shall issue and sell to Purchaser,
and Purchaser shall purchase from the Company, the Note. If
Purchaser elects to make the Follow-on Investment, the Company
shall within ten days after written notice of the exercise of such
option issue and sell to Purchaser, and such Purchaser shall
purchase from the Company, a note in the principal amount of the
Follow-on Investment, dated as of the date of the investment, with
agreed upon revisions to the use of proceeds paragraph and
otherwise in the form of Exhibit A .
1.3
The Closing . Subject to the terms and conditions hereof,
the closing of the Initial Investment shall be consummated within
five business days after the date hereof at the offices of Faegre
& Benson LLP, or remotely at such other offices and locations
as appropriate through the use of facsimile or overnight courier.
The closing of any Follow-on Investment shall be consummated on a
date agreed to by the parties (but in any event, no later than ten
days after written notice of exercise) at the offices of Faegre
& Benson LLP, or remotely at such other offices and locations
as appropriate through the use of facsimile or overnight
courier.
ARTICLE II
REPRESENTATIONS AND
WARRANTIES
2.1
Representations and Warranties of the Company . The Company
makes the representations and warranties to Purchaser set forth in
this Section 2.1.
(a) Organization and Authority . The
Company: (i) is a limited liability company duly organized,
validly existing and in good standing under the laws of the State
of Delaware; (ii) has all necessary limited liability company
power and authority to conduct its business as now being conducted;
and (iii) is duly qualified as a foreign limited liability
company and is in good standing in each jurisdiction in which the
nature of its business or the nature or location of its assets
requires such qualification, except where the failure to so qualify
in such other jurisdiction would not have a material adverse effect
on the Company.
(b) Authority Relative to this Agreement and
Related Matters . The Company has full limited liability
company power and authority to enter into and perform this
Agreement and the Notes (collectively, the “ Transaction
Documents ”). The execution and delivery by the Company
of the Transaction Documents, and the performance by the Company of
its obligations thereunder, have been duly authorized and approved
by all requisite limited liability company action. This Agreement
has been and the Notes will, when executed and delivered, be duly
executed and delivered by duly authorized officers of the Company
and constitute valid, legal and binding obligations of the Company,
enforceable against the Company in accordance with their respective
terms (except as such enforceability may be limited by applicable
bankruptcy laws and other laws affecting debtors’ and
creditors’ rights or equitable remedies).
(c) Required Filings, Issuance of New
Securities . No Authorization is required for the execution and
delivery by the Company of the Transaction Documents or the
consummation by the Company of the transactions contemplated
hereby. Except for restrictions on transfer under the
Company’s Operating Agreement and under state and federal
securities laws, upon conversion in accordance with the terms of
the Notes, the New Securities issued pursuant thereto shall be duly
and validly issued and outstanding, fully paid and free and clear
of all liens, claims, security interests, preemptive rights,
judgments or other encumbrances of every kind or nature whatsoever.
Assuming the representations and warranties of Purchaser herein are
true and correct in all material respects, each of the Notes and
the New Securities issuable to Purchaser upon conversion or
exercise thereof will have been issued in compliance with all
applicable U.S. federal and state securities laws.
(d) No Conflicts . Neither the execution
and delivery of this Agreement or the Notes by the Company, nor the
consummation by the Company of the transactions contemplated
hereby, will (i) conflict with or result in a breach of any of
the terms, conditions or provisions of the Certificate of Formation
or Operating Agreement of the Company, or, to the knowledge of the
Company, of any statute or administrative regulation, or of any
order, writ, injunction, judgment or decree of any Governmental
Authority or of any arbitration award to which the Company is a
party or by which the Company is bound, or (ii) conflict with,
breach, constitute a default under (or give rise to an event which,
with notice or lapse of time or both, would constitute a default),
require any consent (which has not been obtained), authorization or
approval under, or result in the termination of any material
written or oral note, bond, mortgage, indenture, deed of trust,
license, lease, agreement or other instrument or written or oral
obligation to which the Company is a party or to which the Company
or any of its properties or assets are subject.
(e) Capitalization . The authorized Units
of the Company immediately prior to the closing of the Initial
Investment will consist of 20,000,000 Units. Except as set forth on
Schedule 2.1(e) , as of the date hereof there
are no securities of the Company authorized, issued or outstanding.
Except as set forth on Schedule 2.1(e) , there
are no subscriptions, options, warrants, rights (including
preemptive rights), calls, convertible securities (other than the
Notes issued hereunder) or other agreements or commitments of any
character relating to the issued or unissued Units or other
securities of the Company obligating the Company to issue, or
register the sale of, any securities of any kind. Except as set
forth on Schedule 2.1(e) , as of the date hereof
there are no agreements or obligations of any kind or character to
which the Company is a party, or as to which the Company has
knowledge, with respect to the voting of Units of the Company or
the election of directors of the Company.
(f) Litigation . There is no action,
suit, proceeding or investigation pending or, to the knowledge of
the Company, threatened against the Company before any Governmental
Authority seeking to enjoin or otherwise involving the transactions
contemplated by this Agreement or the other Transaction
Documents.
2.2
Representations and Warranties of Purchaser . Purchaser
represents and warrants to the Company that:
(a) Authority Relative to this Agreement
. It has full power and authority to enter into and perform this
Agreement. The execution and delivery by Purchaser of this
Agreement and the performance by Purchaser of its obligations
hereunder have been duly authorized by all requisite action. This
Agreement has been duly executed and delivered by an authorized
Person of such Purchaser and constitutes a valid and binding
obligation of such Purchaser enforceable against it in accordance
with its terms (except as such enforceability may be limited by
applicable bankruptcy laws and other laws affecting debtors’
and creditors’ rights or equitable remedies).
(b) Required Filings . No Authorization
is required for the execution and delivery by Purchaser of this
Agreement or the consummation by Purchaser of the transactions
contemplated hereby.
(c) No Conflicts . Neither the execution
and delivery by Purchaser of this Agreement, nor the consummation
by Purchaser of the transactions contemplated hereby, will
(i) conflict with or result in a breach of any of the terms or
provisions of Purchaser’s organizational documents, or, to
the knowledge of Purchaser, of any statute or administrative
regulation, or of any order, writ, injunction, judgment or decree
of any Governmental Authority or of any arbitration award to which
Purchaser is a party or by which Purchaser is bound; or
(ii) conflict with, breach, constitute a default, (or give
rise to an event which, with notice or lapse of time or both, would
constitute a default) or require any consent (which has not been
obtained), authorization or approval under, or result in the
termination of, any material written or oral note, bond, mortgage,
indenture, deed of trust, license, lease, agreement or other
instrument or obligation to which Purchaser is a party or to which
Purchaser or any of its properties or assets are
subject.
(d) Investment Intent . The Notes issued
pursuant hereto, and any New Securities issued upon conversion of
the Notes acquired by Purchaser hereunder are being purchased for
Purchaser’s own account and not with the view to, or for
resale in connection with, any distribution or public offering
thereof within the meaning of the Securities Act. Purchaser
understands that none of the Notes or New Securities have been
registered under the Securities Act or any applicable state laws by
reason of their issuance or contemplated issuance in a transaction
exempt from the registration and prospectus delivery requirements
of the Securities Act and such other laws, and that the reliance of
the Company and others upon this exemption is predicated in part
upon this representation and warranty. Purchaser has made no
agreement with others regarding Notes and any New Securities issued
upon conversion of the Notes and that Purchaser’s financial
condition is such that it is not likely that it will be necessary
to dispose of Notes or any New Securities issued upon conversion of
the Notes in the foreseeable future. Purchaser further understands
that the Notes and the New Securities may not be transferred or
resold without compliance with restrictions on transfer set forth
in the Operating Agreement, and (i) registration under the
Securities Acts and any applicable state securities laws, or
(ii) an exemption from the requirements of the Securities Act
and applicable state securities laws.
(e) Resale . Purchaser understands that
an exemption from such registration is not presently available
pursuant to Rule 144 promulgated under the Securities Act by
the Securities and Exchange Commission, and that, in any event,
Purchaser may not sell any securities pursuant to Rule 144
prior to the expiration of a two-year period (or one year in the
case of non-affiliates) after such Purchaser has acquired the
securities. Purchaser understands that any sales pursuant to
Rule 144 may only be made in full compliance with the
provisions of Rule 144.
(f) Information About Purchaser .
Purchaser represents and warrants to the Company as
follows:
(1) that Purchaser has such knowledge and
experience in financial and business matters that Purchaser is
capable of reading and interpreting financial statements and
evaluating the merits and risks of the prospective investment in
the Notes and any New Securities issued upon conversion of the
Notes and has the net worth to undertake such risks;
(2) Purchaser was formed by affiliates of
ECM, an investment adviser whose business consists primarily of
purchasing and selling securities in ethanol manufacturing
companies, and that Purchaser’s sole business is and will be
the purchase and holding of the Notes and any New Securities issued
upon conversion of the Notes;
(3) that Purchaser is affiliated with a
professional investment adviser and has obtained professional
advice from such adviser with respect to the risks inherent in an
investment in the Notes and any New Securities issued upon
conversion of the Notes, and the suitability of the investment in
the Notes and any New Securities issued upon conversion of the
Notes, in light of Purchaser’s financial condition and
investment needs;
(4) that Purchaser is in a financial
position to hold the Notes and any New Securities issued upon
conversion of the Notes for an indefinite period of time and is
able to bear the economic risk and withstand a complete loss of the
undersigned’s investment in the Notes and any New Securities
issued upon conversion of the Notes;
(5) Purchaser has made its own
investigation of the Company, its business, personnel and
prospects; has had an opportunity to discuss the Company’s
business, management and financial affairs with the directors,
officers and management of the Company; and has had the opportunity
to review the Company’s operations and facilities to its
satisfaction. Based on its investigation, Purchaser believes that
it is fully informed regarding the financial condition of the
Company, the administration of its business affairs and its
prospects for the future. Purchaser confirms that the Company makes
no assurances whatsoever concerning the present or prospective
value of the Notes and any New Securities issued upon conversion of
the Notes, or the ability or likely success of any other
fundraising efforts the Company is presently undertaking or has
indicated that it may undertake.
(6) that this Agreement and the Notes
resulted from direct negotiation between an officer of the Company
and Purchaser;
(7) Purchaser is an Affiliate of ECM, which
is the general partner of certain limited partnerships that are
currently members of the Company and that acquired Units of the
Company on or about January 20, 2006, and as such was familiar
with the business and operations of the Company from and after such
date. In determining to invest in the Notes and any New Securities
issued upon conversion of the Notes, Purchaser carefully reviewed
and is familiar with the Company’s public filings with the
Securities and Exchange Commission and is not relying on any other
written documentation provided by the Company.
(g) Location of Principal Office and
Qualification as Accredited Investor . The state in which
Purchaser’s principal office is located, and from which
Purchaser determined to acquire the Notes, is Arizona and Purchaser
represents and warrants that it is a bona fide resident of, and
domiciled in, such state. Purchaser qualifies as an accredited
investor, within the meaning of Rule 501 under the Securities
Act. Purchaser further represents and warrants that the Notes and
any New Securities issued upon conversion of the Notes are being
purchased by Purchaser in the name of Purchaser solely for its own
beneficial interest and not as nominee for, or on behalf of, or for
the beneficial interest of, or with the intention to transfer to,
any other person, trust or organization.
(h) Operating Agreement . Purchaser has
received a copy of the Company’s Operating Agreement and
understands that the Company’s securities are subject to
substantial restrictions on transferability, including those
restrictions set forth in the Operating Agreement.
ARTICLE III
CLOSING DELIVERIES
3.1
Purchaser’s Deliveries . Purchaser will deliver to the
Company at the closing of the Initial Investment and any Follow-on
Investment a wire transfer of immediately available Federal funds
in the amount of the Notes to be issued hereunder.
3.2
Company’s Deliveries . The Company will deliver to
Purchaser at the closing of the Initial Investment and any
Follow-on Investment, all of the following: (a) a duly
executed Note in the amount of Purchaser’s investment;
(b) certified copies of the Company’s Certificate of
Formation and Operating Agreement, as in effect at the closing; and
(c) certificate of good standing of the Company issued by the
State of Delaware.
ARTICLE IV
BOARD RIGHTS
4.1
Board Rights . Provided that a Note is outstanding or has
been converted into New Securities, the board of directors of the
Company (the “ Board ”) will at the
Company’s next annual meeting and thereafter for so long as
Purchaser owns the Notes or all of the New Securities to which
Purchaser is entitled upon conversion of the Notes (or other voting
equity securities) of the Company on a fully diluted basis, the
Company will require each of its Board members and executive
officers to (a) recommend to the members (or other security
holders) of the Company at any meeting of the members (or other
security holders) at which directors are elected the election of
one nominee of ECM (the “ ECM Board Member ”) to
the Board (for such class of directors as the Board shall
reasonably determine), (b) vote the Units (or other voting
equity securities of the Company) they own or control at any time
to elect the ECM Board Member to the Board, and (c) not take
any action, including actions otherwise required under
Section 5.3(a) of the Operating Agreement, that would result
in (and take any action necessary to prevent) the removal of the
ECM Board Member from the Board (collectively “
ECM’s Board Rights ”). Within ten business days
of the execution of this Agreement, the Company agrees to cause
each Board member and executive officer to execute and deliver to
ECM a voting agreement evidencing ECM’s Board Rights. Nothing
herein shall limit the ability of the Board to limit the
participation of the ECM Board Member in circumstances where the
Board determines in good faith that the ECM Board Member has a
potential conflict of interest.
4.2
Confidentiality . Purchase agrees that Purchaser will keep
confidential and will not disclose, divulge, or use for any purpose
or permit the ECM Board Member or Board monitor designated pursuant
to Section 4.3 to disclose, divulge, or use for any purpose
(other than to monitor its investment in the Company) any
confidential information obtained from the Company (including
notice of the Company’s intention to file a registration
statement), unless such confidential information (a) is known
or becomes known to the public in general (other than as a result
of a breach of this Section 4.2 by Purchaser), (b) is or
has been independently developed or conceived by Purchaser without
use of the Company’s confidential information, or (c) is
or has been made known or disclosed to Purchaser by a third party
without knowledge by Purchaser of a breach of any obligation of
confidentiality such third party may have to the Company; provided,
however, that Purchaser may disclose confidential information
(i) to its attorneys, accountants, consultants, and other
professionals to the extent necessary to obtain their services in
connection with monitoring its investment in the Company;
(ii) to any existing Affiliate, partner, member, stockholder,
or wholly owned subsidiary of Purchaser in the ordinary course of
business, provided that Purchaser informs such Person that such
information is confidential and directs such Person to maintain the
confidentiality of such information; or (iii) as may otherwise
be required by law, provided that Purchaser promptly notifies the
Company of such disclosure and takes reasonable steps to minimize
the extent of any such required disclosure.
4.3
Board Monitor . So long as the Notes or New Securities are
outstanding, the Company shall permit Purchaser to visit and
inspect the Company’s properties, to examine its books of
account and records and to discuss the Company’s affairs,
finances and accounts with its officers, all at such times as
reasonably may be requested by Purchaser. The Company shall invite
a representative of Purchaser to attend all meetings of the Board
at all times prior to the Company’s next annual meeting or if
an ECM nominee is not elected to the Board at a time when
ECM’s Board Rights are in effect, at Purchaser’s
expense in a non-voting observer capacity and, in this respect,
shall give such representative copies of all notices, minutes,
consents and other materials that the Board provides to its
directors; provided, however, that the Company reserves the right
to withhold any information and to exclude such representative from
any Board meeting or portion thereof, if the Board determines in
good faith that such exclusion is reasonably necessary to preserve
the attorney-client privilege, to avoid breaching a confidentiality
agreement with a third party, or to prevent a disclosure of trade
secrets or a release of confidential information of the Company to
a competitor or that the representative has a potential conflict of
interest.
ARTICLE V
INDEMNIFICATION
5.1
Certain Definitions . As used in this Agreement, “
Damages ” shall mean all assessments, levies, losses,
fines, penalties, liabilities, damages, costs and expenses,
including reasonable attorneys’ fees and expenses, all of
which are material, individually or in the aggregate, to a
Purchaser Indemnitee or a Company Indemnitee (as defined
below).
5.2
Company’s Indemnification Obligations . The Company
shall save and keep harmless Purchaser and its officers, directors,
employees, agents, managers, shareholders, members, partners,
successors and permitted assigns (each a “ Purchaser
Indemnitee ”) against and from all Damages sustained or
incurred by any Purchaser Indemnitee as a result of or arising out
of or by virtue of:
(a) any inaccuracy in or breach of any
representation and warranty made by the Company to Purchaser herein
or in any closing document delivered to Purchaser in connection
herewith; or
(b) the breach by the Company of, or the
failure of the Company to comply with, any of the covenants or
obligations to be performed by the Company under this Agreement or
any of the other Transaction Documents (including the
Company’s obligations under this Article V).
5.3
Purchaser’s Indemnification Obligations . Purchaser
shall indemnify, save and keep harmless the Company, its officers,
directors, employees and agents and their successors and permitted
assigns (each a “ Company Indemnitee ”), against
and from all Damages sustained or incurred by any Company
Indemnitee, as a result of or arising out of or by virtue
of:
(a) any inaccuracy in or breach of any
representation and warranty made by Purchaser to the Company herein
or in any closing document delivered to the Company in connection
herewith; or
(b) any breach by Purchaser of, or failure
by Purchaser to comply with, any of the covenants or obligations
under this Agreement to be performed by Purchaser under this
Agreement (including its obligations under this
Article V).
ARTICLE VI
MISCELLANEOUS
6.1
Survival . Except as otherwise provided herein, all
covenants, agreements, representations and warranties made herein
or in the other Transaction Documents or pursuant to any
certificate or instrument delivered pursuant to this Agreement or
any of the other Transaction Documents shall survive the Closing
until such time as the Notes have been paid or converted in full
(and none shall merge into any instrument of
conveyance).
6.2
Amendment; Waiver . Neither this Agreement nor the Notes may
be amended nor its provisions waived except by an instrument in
writing signed on behalf of the Company and Purchaser.
6.3
Notices . All notices required or permitted to be given
hereunder shall be in writing and may be delivered by hand, by
facsimile, by nationally recognized private courier, or by United
States mail. Notices delivered by mail shall be deemed given three
(3) business days after being deposited in the United States
mail, postage prepai
