Exhibit 10.3

Advanced BioEnergy, LLC

Unit Appreciation Right Agreement

 

Date of Grant:    January 18, 2013 Name of Grantee:    Richard Peterson Grant
Price per Unit:    $1.15, subject to reduction as set forth in Section 4 of this
Award Number of UARs Granted:    200,000

Advanced BioEnergy, LLC (the “Company”) is pleased to inform you that you have
been granted Unit Appreciation Rights (“UARs”) as set forth above (this
“Award”). The terms of this Award are as follows:

1. Vesting.

(a) The UARs shall vest 1/18th per month over an 18 month period, beginning on
December 7, 2012 (the “Qualifying Period”), such that 1/18th of the UARs have
vested as of the Date of Grant, 2/18 of the UARs will vest on February 7, 2013
and thereafter 1/18 of the UARs will vest on the 7th of each month; provided
however, that you have been continuously employed by the Company during the
preceding month for such portion of the UARs to vest.

(b) The vested UARs shall become automatically payable on the date (the “Payment
Date”) which is the earliest of (i) the closing on the sale of all or
substantially all of the assets (the “SD Assets”) of ABE South Dakota, LLC (“ABE
South Dakota”), (ii) the occurrence of a “Change in Control,” as defined in
Appendix A to this Award, of the Company, (iii) your death, or (iv) your
termination of employment due to a “Disability,” as defined in Section 11 of
your Employment Agreement.

(c) If, on any date during the Qualifying Period, you are terminated by the
Company “for cause” (as defined in your Employment Agreement), the UARs shall
automatically and immediately be forfeited and cancelled without payment
therefor on such date.

2. Expiration. Notwithstanding any other provision of this Award to the
contrary, the UARs shall immediately expire and be of no further force and
effect if the Unit holders do not approve of the UAR within twelve (12) months
after the date of this Award in accordance with Section 162(m) of the Internal
Revenue Code and regulations promulgated thereunder, regardless of whether a
Payment Date has been deemed to have occurred.

3. No Right to Continued Employment. Nothing in this Award shall confer any
right on you to continue in the Company’s employ or service or affect any right
which the Company has to terminate such employment or retention.

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4. UAR Payment.

(a) No later than five (5) business days after the Payment Date, the Company
will pay you, with respect to each UAR, an amount equal to the excess, if any,
of (a) the fair market value on the Payment Date of a Unit, on a fully diluted
basis, as if the UARs were outstanding Units on such date, over (b) the grant
price per UAR, which price equals $1.15 per Unit (the “Grant Price”).

(b) The Grant Price will be reduced by any distribution received by the Unit
holders of the Company from (i) the proceeds of the escrow account (the “Escrow
Funds”) established pursuant to that certain Escrow Agreement, dated December 7,
2012, by and among ABE Fairmont, LLC, the Company, Flint Hills Resources
Fairmont, LLC and Wells Fargo Bank, National Association in connection with the
sale of the Company’s Fairmont, Nebraska ethanol plant (the “Asset Sale”) or
(ii) the amount reserved by the Company from the proceeds of the Asset Sale (any
such distribution set forth in clauses (i) and (ii) above, a “Grant Price
Reducing Distribution”). Any Grant Price Reducing Distribution shall reduce the
Grant Price by the amount of such Grant Price Reducing Distribution until the
Grant Price is reduced to $0, at which point, any remaining amount per Unit of
the Grant Price Reducing Distribution shall be payable as a distribution to
Grantee.

(c) Payment with respect to the UAR shall be made in cash, subject to all
applicable tax withholding.

(d) The determination of fair market value of a Unit shall be made in good faith
in the sole discretion of the Compensation Committee of the board of directors
of the Company, which determination shall be final and binding on all parties.
In the event the Grant Price per UAR exceeds the fair market value per Unit on
the Payment Date, then all UARs shall be immediately cancelled without payment
therefor, and thereafter you shall have no right to any further payment under
this Agreement.

(e) For purpose of Internal Revenue Code Section 409A, the Company and you agree
that in establishing the fair market value of $1.15 per Unit, the Company is
including in fair market value the $22.5 Million referred to in Section 4(b)
above. The Company and you also agree that a portion of your overall
compensation, apart from this UAR, is based upon the Company’s receipt of the
Escrow Funds, and it is appropriate to reduce the Grant Price to reflect the
value of the Company without regard to these items. The Company and you also
agree that the board of directors of the Company, or the compensation committee
thereof, will reduce the Grant Price in the event that the Escrow Funds are not
received by the Company and distributed to the Company’s Unit holders. The
Company and you also agree, as set forth in Section 7 of this Award, that the
board of directors of the Company, or the compensation committee thereof, has
power to make any other adjustments it believes appropriate and necessary to
give effect to the intent of the parties to this Award.

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5. Transferability. None of the UARs are transferable (by operation of law or
otherwise) by you, other than by will or the laws of descent and distribution.
If, in the event of your divorce, legal separation or other dissolution of your
marriage, your former spouse is awarded ownership of, or an interest in, all or
part of the UARs covered by this Award, this Award shall automatically and
immediately be forfeited and cancelled in full without payment on such date.

6. Governing Law. This Award shall be governed by, and construed in accordance
with, the laws of the State of Minnesota, without regard to conflicts of laws
principles thereof.

7. Changes in Capitalization. In the event of any reorganization, merger,
consolidation, recapitalization, liquidation, 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 a corporate form, the
Compensation 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 of UARs or the
Grant Price per UAR in order to prevent dilution or enlargement of your rights
hereunder.

8. Unfunded Status. Other than as provided in Sections 4 and 7 above, you shall
not be entitled to any voting rights, to receive any dividends with respect to
your UARs or to have the value of your UARs credited or increased as a result of
any other distribution with respect to the Units of the Company. You will not
have any interest in any particular assets of the Company by reason of your
UARs, and no provision will be made with respect to segregating assets of the
Company for payment of the value of your UARs.

9. General. This Award shall be binding upon and inure to the benefit of any
successor or successors of the Company. The invalidity or unenforceability of
any provision of this Award shall not affect the validity or enforceability of
any other provision of this Award. Except as otherwise expressly set forth in
this Award, any term of this Award may be amended and the observance of any term
of this Award may be waived (either generally or in a particular instance and
either retroactively or prospectively) only upon the written consent of the
parties hereto. No waivers of or exceptions to any term, condition or provision
of this Award, in any one or more instances, shall be deemed to be, or construed
as, a further or continuing waiver of any such term, condition or provision.

[SIGNATURE PAGE FOLLOWS]

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IN WITNESS WHEREOF, the parties have executed this Unit Appreciation Right
Agreement as of the 18th day of January, 2013.

 

 

COMPANY: Advanced BioEnergy, LLC By:  

/s/ Scott A. Brittenham

  Scott A. Brittenham   Chairman of the Board of Directors

 

AGREED TO AND ACCEPTED BY: GRANTEE: /s/ Richard Peterson Richard Peterson

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Appendix A

“Change in Control” for purposes of this Award 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 Grant of this Award (“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 Grantee or any group that includes Grantee; 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 Grantee or a group that includes Grantee
owns, directly or indirectly, 30% or more of the total value or voting power of
all the outstanding equity interests of the surviving or acquiring entity
resulting from such Business Combination; or

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(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
Grantee or a group that includes Grantee.