EXHIBIT 10.3


Advanced BioEnergy, LLC


Restricted
Unit Agreement


	
  

  Name of
  Holder:                     Peterson
  Holdings, Inc.



  
	
  

  No. of Restricted Units:     15,000



  	
   

  	
  

  Date of Grant:     July 31, 2007

  
	
  

  Restricted Unit Vesting Schedule (Cumulative):



  	
   

  	
   

  
	
  

  Vesting Date(s)

  Scheduled to Vest on Such Date 

   

  	
   

  	
  

  Number of Restricted Units 

  
	
   

  	
   

  	
   

  
	
  October 1, 2007

  	
   

  	
  3,000 

  
	
  October 1, 2008 

  	
   

  	
  3,000 

  
	
  October 1, 2009

  	
   

  	
  3,000 

  
	
  October 1, 2010 

  	
   

  	
  3,000 

  
	
  October 1, 2011 

  	
   

  	
  3,000

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
							



 


This
is a Restricted Unit Award Agreement (“Agreement”)
between Advanced BioEnergy, LLC, a Delaware limited liability company (the “Company”), and the above-named holder of restricted units
(the “Holder”).


RECITALS


A.            The board of directors of the
Company (the “Board”) or a committee of two or
more directors of the Company (the “Committee”) has
the authority to grant and administer equity awards (if the Board has not
appointed a committee to administer the awards, then the Board shall constitute
the Committee).


B.            Richard Peterson, the Company’s Vice
President of Accounting and Finance and Chief Financial Officer (the “Employee”), is the sole stockholder of the Holder.


C.            The Committee has determined that it
would be in the best interest of the Company to provide the Employee, through
his ownership of the Holder, with an ownership interest in the Company to
provide further incentive to the Employee to continue his service with the
Company and advance the interests of the Company, and to more closely align his
interests with those of the Unit holders and members of the Company.


D.            The Committee has determined that
this purpose can best be achieved by granting the Holder restricted units on
the terms and conditions and subject to the restrictions set forth herein.



   
 









The parties
hereto agree as follows:


TERMS AND CONDITIONS


1.             Issuance
and Terms of Restricted Units.


(a)           Grant of Restricted Units.  The
Company hereby grants to the Holder, effective as of the Date of Grant
specified above, the number of restricted units specified at the beginning of
this Agreement.


(b)           Rights as Holder. 
Each restricted unit granted hereunder (a “Restricted
Unit”) represents one Unit of 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”), and is subject
to the terms of the LLC Agreement as well as the restrictions specified in this
Agreement.  Subject to the provisions of
the LLC Agreement, the Holder will have all rights of a member of the Company with
respect to each Restricted Unit (including the right to receive distributions,
if any, and the right to vote such Restricted Unit).


(c)           Unit Certificates.  The Restricted Units will be
evidenced by one or more duly issued unit certificates registered in the name
of the Holder.  Each certificate
evidencing any Restricted Units will contain such legends and transfer
instructions or limitations as may be determined or authorized by the Company
in its sole discretion and as otherwise required under this Agreement and the
LLC Agreement.  The Company may, in its
discretion, retain custody of any certificates representing Restricted Units
until such Restricted Units vest in accordance with this Agreement.


2.             Forfeiture
and Transfer Restrictions.


(a)           Forfeiture.  Except as provided in Sections 3(b) and (c),
any Restricted Units not yet vested will be forfeited by the Holder and deemed
immediately cancelled and the Holder will thereafter have no right, title or
interest whatsoever in such Restricted Units if the Employee’s employment with
the Company and its Affiliates (as defined in Appendix A to this Agreement)
terminates.  Upon forfeiture of any
Restricted Units, the Holder agrees to promptly return to the Company any
certificate(s) representing such Restricted Units, and appoints the Secretary
of the Company as his attorney in fact to transfer any such forfeited
Restricted Units on the books of the Company and to effect their cancellation.


(b)           Limitation on Transfer.  Until such time as the Restricted Units have
vested as provided in this Agreement, the Holder shall not transfer the
Restricted Units and the Restricted Units shall not be subject to pledge,
hypothecation, execution, attachment or similar process.  Any attempt to assign, transfer, pledge,
hypothecate or otherwise dispose of any Restricted Units contrary to the
provisions hereof, and any attempt to levy any attachment or pursue any similar
process with respect to them, shall be null and void.


3.             Vesting of Restricted Units.


(a)           Normal Vesting.  The Restricted Units will vest in the amounts
and on the dates specified in the Schedule at the beginning of this
Agreement.  Once Restricted Units have
vested pursuant to this Section 3, they shall no longer be subject to
forfeiture under Section 2(a) of this 



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Agreement, and will not be subject to any further
restrictions under this Agreement, but will continue to be subject to any
restrictions on transfer set forth in the LLC Agreement or as otherwise agreed
to by the Holder.


(b)           Death or Disability.  If
the Employee’s employment with the Company and its Affiliates terminates
because of the Employee’s death or Disability (as defined in Appendix A to this
Agreement), the Restricted Units will automatically vest in full.


(c)           Change in Control.  If a Change in Control (as defined in
Appendix A to this Agreement) occurs, the Restricted Units will automatically
vest in full.


4.                                       Tax
Withholding.


(a)           Withholding.  The parties hereto recognize that the Company
may be obligated to withhold federal and state taxes or other taxes upon the
issuance of the Restricted Units.  The
Holder agrees that, at such time, if the Company is required to withhold such
taxes, the Holder will promptly pay, in cash upon demand to the Company such
amounts as shall be necessary to satisfy such obligation.


(b)          Put Right to Satisfy
Withholding Taxes.  Within 5
days after any of the Restricted Units vest in accordance with the terms of
this Agreement, the Company shall send written notice (the “Valuation Notice”)
to the Holder specifying the Company’s determination of the fair market value
of the Restricted Units that vested as of such vesting date.  Within 10 days after the receipt of the
Valuation Notice, the Holder shall have the right to require that the Company
purchase up to 40% of the Restricted Units that vested as of such vesting date
by giving written notice to the Company specifying the number of Restricted
Units that the Holder desires to sell to the Company pursuant to this Section
4(b).  The closing with respect to such
transfer shall occur with 5 days following the receipt by the Company of the
Holder’s notice specifying the number of Restricted Units that the Holder
desires to sell to the Company.  The
purchase price for any Restricted Units purchased by the Company hereunder
shall be paid by the Company to the Holder in cash or, at the election of the
Holder, retained by the Company and used to satisfy all or a portion of the
Holder’s obligation to remit withholding taxes to the Company pursuant to
Section 4(a) hereof.


5.             Restrictive Legends and
Stop-Transfer Orders.


(a)           Legends.  The certificate or certificates representing
the Restricted Units shall bear the following legend (as well as any legends
required by applicable state and federal limited liability company and
securities laws) noting the existence of the restrictions and the Company’s
rights set forth in this Agreement:


“THE UNITS REPRESENTED BY
THIS CERTIFICATE MAY BE TRANSFERRED ONLY IN ACCORDANCE WITH THE TERMS OF A
RESTRICTED UNIT AGREEMENT BETWEEN THE COMPANY AND THE HOLDER, A COPY OF WHICH
IS ON FILE WITH THE SECRETARY OF THE COMPANY.”



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(b)           Stop-Transfer
Notices.   The Holder agrees that, in order to ensure
compliance with the restrictions referred to herein, the Company may issue
appropriate “stop transfer” instructions to its transfer agent, if any, and
that, if the Company transfers its own securities, it may make appropriate
notations to the same effect in its own records.


(c)           Refusal to Transfer.  The Company shall not be required (i) to
transfer on its books any Restricted Units that have been sold or otherwise
transferred in violation of any of the provisions of this Agreement or
(ii) to treat as owner of the Restricted Units or to accord the right to
vote or pay distributions to any purchaser or other transferee to whom the
Restricted Units shall have been so transferred.


6.             Interpretation of this
Agreement.  All decisions
and interpretations made by the Committee with regard to any question arising
hereunder shall be binding and conclusive upon the Company and the Holder.


7.             Discontinuance of
Employment.  This
Agreement shall not give the Employee a right to continued employment with the
Company or any Affiliate, and the Company or any Affiliate employing the
Employee may terminate his employment at any time and otherwise deal with the
Employee without regard to the effect it may have upon him under this
Agreement.


8.             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 the consent of the Holder, make such
adjustments as it determines in its discretion to be appropriate as to the
number and kind of securities subject to this Agreement in order to prevent
dilution or enlargement of the rights of the Holder.


9.             Binding Effect.  This Agreement shall be binding in all respects
on the heirs, representatives, successors and assigns of the Holder.


10.           Choice of Law.  This Agreement is entered into under the laws of
the State of Delaware and shall be construed and interpreted thereunder
(without regard to its conflict of law principles).


11.           Entire Agreement.  This Agreement sets forth the entire
agreement and understanding of the parties hereto with respect to the issuance
of the Restricted Units and supersedes all prior agreements, arrangements,
plans, and understandings relating to the issuance of these Restricted
Units.  The Holder acknowledges that the
Company has directed the Holder to seek independent advice regarding the
applicable provisions of the Internal Revenue Code of 1986, and the income tax
laws of any municipality, state or foreign country in which the Holder may
reside or in which the Company does business.


12.           Amendment and Waiver.  This Agreement may be amended, waived,
modified, or canceled only by a written instrument executed by the parties or,
in the case of a waiver, by the party waiving compliance.



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13.           Restricted Units Subject to Articles of
Organization and LLC Agreement. 
The Holder acknowledges that the Restricted Units granted under this
Agreement are subject to the Company’s Articles of Organization, as amended
from time to time, and the Company’s LLC Agreement and any applicable federal
or state laws, rules or regulations.  The
Holder acknowledges and agrees that the Holder will become a party to the
Company’s LLC Agreement, as currently in effect, if such Holder is not already
a party to that agreement.


14.           Representations,
Warranties and Covenants of Holder.  Holder represents, warrants and covenants to
the Company as follows:


(a)           Charter Documents.  Holder is a corporation duly organized, validly existing and in corporate good
standing under the laws of the state of Minnesota.


(b)           Sole Stockholder.  Richard Peterson is the sole stockholder,
director and executive officer of Holder. 
Without the Company’s prior written consent, Holder will not change its
ownership or management structure so that any person or entity other than
Richard Peterson will be a stockholder, director or officer of Holder.


(c)           Corporate Authority.  Holder has all corporate power and authority
to enter into and to perform its obligations under this Agreement.  This Agreement constitutes the legal, valid
and binding obligation of Holder, enforceable against Holder in accordance with
its terms, subject to (a) laws of general application relating to bankruptcy,
insolvency and the relief of debtors, and (b) rules of law governing
specific performance, injunctive relief and other equitable remedies.


IN WITNESS WHEREOF, the Holder and the Company have
executed this Agreement as of the 31st day of July, 2007.


	
  

  	
  PETERSON HOLDINGS, INC.,

  	
   

  
	
   

  	
  a Minnesota corporation

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  /s/ Richard Peterson

  	
   

  
	
   

  	
  Richard Peterson

  	
   

  
	
   

  	
  Chief Executive Officer

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  ADVANCED BIOENERGY, LLC

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By /s/ Troy Otte

  	
   

  
	
   

  	
  Name: Troy Otte

  	
   

  
	
   

  	
  Its: Chairman of the Compensation Committee

  



 



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Appendix A


“Affiliates”
for purposes of the Restricted Unit Agreement shall mean 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).


“Change in Control” for
purposes of the Restricted Unit Agreement shall mean (and occur when):


(1)           The acquisition by any individual, entity or
group (within the meaning of Sections 13(d)(3) or 14(d)(2) of the Securities
Exchange Act of 1934 (the “Exchange Act”)) of beneficial ownership (within the
meaning of Exchange Act Rule 13d-3) of 30% or more of the then-outstanding
membership interests of the Company (the “Outstanding
Units”); provided, however, that the following acquisitions shall
not constitute a Change in Control:


(A)         any acquisition of voting securities of the Company directly
from the Company or by the Company or any of its wholly-owned subsidiaries,


(B)          any acquisition of voting securities of the Company by any
employee benefit plan (or related trust) sponsored or maintained by the Company
or any of its subsidiaries, or


(C)          any acquisition by any entity with respect to which,
immediately following such acquisition, more than 70% of, respectively, the
then-outstanding shares of voting securities of such entity is then
beneficially owned, directly or indirectly, by all or substantially all of the
individuals and entities who were the beneficial owners, respectively, of the
Outstanding Units immediately before such acquisition in substantially the same
proportions as was their ownership, immediately before such acquisition, of the
Outstanding Units;


(2)           Individuals who, as
of the Date of Grant, constitute the Board (the “Incumbent Board”) cease for any reason to constitute at least
a majority of the Board; provided, however, that any individual becoming a
director of the Board after the Date of Grant whose election, or nomination for
election by the Company’s Unit holders, was approved by a vote of at least a
majority of the directors then comprising the Incumbent Board shall be
considered a member of the Incumbent Board, but excluding, for this purpose,
any such individual whose initial assumption of office occurs as a result of an
actual or threatened election contest;


(3)           Consummation of a
reorganization, merger, consolidation or statutory exchange of Outstanding
Units, unless immediately following such reorganization, merger, consolidation
or exchange, all or substantially all of the individuals and entities who were
the beneficial owners of the Outstanding Units immediately before such
reorganization, merger, consolidation or exchange beneficially own, directly or
indirectly, more than 70% of the then-outstanding voting 



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securities entitled to vote generally in the election of directors, as
the case may be, of the entity resulting from such reorganization, merger,
consolidation or exchange in substantially the same proportions as was their
ownership, immediately before such reorganization, merger, consolidation or
exchange, of the Outstanding Units;


(4)           Consummation of a
sale or other disposition of all or substantially all of the assets of the
Company, other than to an entity with respect to which, immediately following such
sale or other disposition, more than 70% of, respectively, the then-outstanding
voting securities of such entity is then beneficially owned, directly or
indirectly, by all or substantially all of the individuals and entities who
were the beneficial owners of the Outstanding Units immediately before such
sale or other disposition in substantially the same proportion as was their
ownership, immediately before such sale or other disposition; or


(5)           Approval by the Unit
holders of the Company of a complete liquidation or dissolution of the Company.


Notwithstanding the above, a Change in Control will
not be deemed to occur if the acquisition of the 30% or greater interest
referred to in clause (1) is by a group, acting in concert, that includes
the Employee or the Holder or if at least 30% of the then-outstanding voting
securities of the surviving entity or of any entity acquiring all or
substantially all of the assets of the Company shall be beneficially owned,
directly or indirectly, immediately after a reorganization, merger,
consolidation, statutory share exchange or disposition of assets referred to in
paragraphs (3) or (4) by a group, acting in concert, that includes
the Employee or the Holder.


“Disability”  for purposes of the Restricted Unit Agreement
shall mean 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.


 



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