CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

Transactions with Revis L. Stephenson, III and Robert W. Holmes

        Revis L. Stephenson, III is currently serving as our chairman and Robert W. Holmes is currently serving as our Treasurer. We entered into a project development fee agreement with Revis L. Stephenson, III and Robert W. Holmes for the payment of a development fee equal to one percent of the total project cost which is currently estimated at $1,325,000 or 132,500 units. Following completion of our seed capital private placement, we paid these two directors a development fee equal to 125,000 restricted membership units in exchange for their efforts to organize and develop our company. These units are restricted pursuant to the Project Development Fee Agreement between us and Mr. Stephenson and Mr. Holmes and pursuant to the Lock-Up Agreement. We may be obligated to pay additional units to Mr. Stephenson upon substantial completion of the project if the actual total cost of the project exceeds $125,000,000. Likewise, Mr. Stephenson may be required to forfeit units back to Advanced BioEnergy if the actual total project cost is less than $125,000,000. The terms of our agreement with Mr. Stephenson and Mr. Holmes may or may not be as favorable to us as those generally available from unaffiliated third parties. However, a majority of our independent directors approved this agreement with Mr. Stephenson and Mr. Holmes abstaining. This included at least two directors who have no interest in the transaction and had access to our legal counsel. We believe that all future transactions with Mr. Stephenson and Mr. Holmes will be no less favorable to us as those generally available from unaffiliated third parties and will also be approved by the majority of independent directors.

        Robert W. Holmes is currently the president of our primary bank depository, Timberwood Bank of Tomah, Wisconsin. The terms of our arrangements with Timberwood Bank may or may not be as favorable to us as those generally available from unaffiliated third parties. However, a majority of our independent directors ratified this agreement including at least two directors who have no interest in the transaction and had access to our legal counsel. We believe that all future transactions will be no less favorable to us as those generally available from unaffiliated third parties and will also be approved by the majority of independent directors.

Transaction with BioEnergy Capital Consultants, LLC

        We entered into a consulting agreement with BioEnergy Capital Consultants, LLC, Lake Preston, South Dakota, as a project development and equity consultant. BioEnergy Capital Consultants is owned and operated by one of our directors, John T. Porter, along with Paul Casper of Lake Preston, South Dakota. Upon execution of the agreement and in anticipation of the receipt of consulting services we transferred 2,500 unrestricted membership units to BioEnergy Capital Consultants, LLC. Following our

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previous seed capital private placement, we performed a unit distribution to all of our unit holders, including BioEnergy Capital Consultants equal to two membership units for every one membership unit issued and outstanding. Subsequent to the distribution of two units for every one unit issued and outstanding, BioEnergy Capital Consultants, LLC received an additional 42,500 membership units for a total of 50,000 membership units. In exchange, BioEnergy Capital Consultants, LLC provided, and is continuing to provide to us, assistance with negotiation of various contracts, assistance in the planning of our equity marketing effort, and assistance in securing debt financing services up until the date of the closing of a loan transaction to finance construction of the project. The additional 42,500 membership units are restricted and will be returned to us without payment of consideration if construction of the ethanol plant has not commenced on or before December 31, 2007, and if we are no longer actively pursuing the ethanol plant project, or if we file Articles of Dissolution prior to beginning construction of the Project. The entire 50,000 units are subject to a Lock-Up Agreement that restricts transfer of the units until May 10, 2005. In addition, we agreed to pay to BioEnergy Capital Consultants, LLC, $1,500.00 weekly up until the equity drive has been completed and, thereafter, $375.00 daily for certain identified services.

        The terms of our agreement with BioEnergy Capital Consultants may or may not be as favorable to us as those generally available from unaffiliated third parties. However, a majority of our independent directors approved this agreement with BioEnergy Capital Consultants. This included at least two directors who have no interest in the transaction and had access to our legal counsel. We believe that all future transactions with BioEnergy Capital Consultants will be no less favorable to us as those generally available from unaffiliated third parties and will also be approved by the majority of independent directors.

Transactions with WDB, Inc. and Bettger Brothers Partnership

        We acquired an option to purchase real estate from WDB, Inc., which is owned in part by one of our directors, Robert Bettger. We paid $10,000 for the option which allows us to purchase between 75 and 112 acres for $6,000 per acre. The real estate makes up a portion of our anticipated plant site. In connection with this real estate option, we entered into a planting agreement with Bettger Brothers Partnership, which is also owned in part by Robert Bettger, wherein Bettger Brothers Partnership. In that agreement, Bettger Brothers Partnership agreed to change its planned crop rotation and plant soybeans for the crop year 2006 instead of hybrid seed corn in exchange for our agreement to compensate them for associated lost profits. We would not have had the ability to access the site if it was planted with hybrid seed corn due to the nature of the crop. By this agreement, we gained the access to the property that we will require in order to prepare the site for construction.

        These agreements may or may not be as favorable to us as those generally available from unaffiliated third parties. However, a majority of our independent directors ratified these agreement including at least two directors who have no interest in the transaction and had access to our legal counsel. We believe that all future transactions will be no less favorable to us as those generally available from unaffiliated third parties and will also be approved by the majority of independent directors.

Transactions with Directors in Seed Capital Offering

        During our seed capital offering we issued membership units to certain investors, some of who were directors and some who later became directors. These membership units were issued in exchange

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for payment of the purchase price of $10.00 per membership unit. The number of units purchased by each of our current initial directors and the purchase price paid is detailed in the chart below.

*

Does not include any units issued to our directors as a part of the subsequent distribution of two units for every one unit issued and outstanding. Also does not include any units issued to Revis L. Stephenson, III, the Holmes Residuary Trust, or BioEnergy Capital Consultants, LLC in exchange for services provided to the Company.

        The per unit price paid by our initial directors in the seed capital offering is the same price that the units were offered to other investors in our seed capital offering. A majority of our directors approved the subscription agreements executed by each of our initial directors for the purchase of these membership units.

Lock-Up Agreement with Revis Stephenson III, Holmes Residuary Trust and BioEnergy Capital Consultants, LLC.

         We have entered into a Lock-Up Agreement with Revis Stephenson, III, the Holmes Residuary Trust and BioEnergy Capital Consultants as a condition of registering units in the state of Nebraska. The Lock-Up Agreement restricts certain transfers of certain units owned by these parties prior to May 10, 2008. The agreement restricts transfers of 170,000 units owned by Revis Stephenson, III, 85,000 units owned by the Holmes Residuary Trust and 50,000 units owned by BioEnergy Capital Consultants. Under the Lock-Up Agreement, these parties agreed to put a restrictive legend in the unit certificates and file the agreement with the Company. The Lock-Up Agreement does not impair the unit holders voting rights or rights to receive distributions associated with these units.