Exhibit 10.9

 

EMPLOYMENT AGREEMENT

 

THIS AGREEMENT, dated this 17th day of October, 2005, between Dakota Ethanol,
L.L.C., a South Dakota limited liability company, hereinafter called “Employer”
and Scott A. Mundt, of Brookings, South Dakota, hereinafter called “Employee.”

 

W I T N E S S E T H:

 

1.                                     Definitions.

 

(a)                                  “Adjusted Earnings” means Employer’s
earnings calculated before deductions for interest expense, income taxes,
depreciation and amortization, and without including any governmental incentive
income as determined by Employer using Generally Accepted Accounting Principles
applied on a consistent basis.

 

(b)                                 “Applicable Guidance” means Treasury
Regulations issued pursuant to Code §409A, or other written Treasury or IRS
guidance regarding Code §409A, which is in addition to Notice 2005-1.

 

(c)                                  “Board” means the Board of Managing Members
of the Employer.

 

(d)                                 “Book Value” means the book value of the
Employer as disclosed by the Employer’s books of account regularly maintained in
accordance with generally accepted accounting principles applied on a consistent
basis.

 

(e)                                  “Change in Control” of the Employer means a
change: (i) in the ownership of the Employer; (ii) in the effective control of
the Employer; or (iii) in the ownership of a substantial portion of the assets
of the Employer, within the meaning of Notice 2005-1, Q/As 11-14 or in
Applicable Guidance.

 

(f)                                    “Code” means the Internal Revenue Code of
1986, as amended.

 

(g)                                 “Net Income” means Operational Revenues
minus Operational Costs as determined by using generally accepted accounting
principles applied on a consistent basis before income taxes.

 

(h)                                 “Operational Costs” means all normal and
reasonable costs and expenses directly and indirectly associated with the daily
operation of the Employer.  These expenses may include, without limitation,
administrative and general overhead expenses, utilities, production inputs,
supplies, transportation, general supplies, raw material acquisitions, insurance
premiums, marketing expenses, repair expenses, maintenance expenses, engineering
expenses, data processing expenses, legal, accounting and audit fees, billing
expenses, expenses of preparing tax returns and reports, taxes, travel,
telephone, salaries of employees (including social security and Medicare,
relief, pensions, and other benefits) interest, and other incidental business
expenses incurred in connection with Employer’s business.

 

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(i)                                     “Operational Revenues” means all
revenues from Employer’s operations, including, but not limited to, sales of
ethanol, byproducts and ancillary operations.

 

(j)                                     “Separation from Service” means an
Employee’s termination of employment  with the Employer or as otherwise defined
in Applicable Guidance.

 

2.                                       Employment.  The Employer hereby
employs the Employee, and the Employee hereby accepts employment upon the terms
and conditions hereinafter set forth.

 

3.                                     Duties of Employee.  Employee shall serve
as the Transition Coordinator of Employer.   Subject to the direction of the
Board, Employee shall have full authority to operate on a day-to-day basis, and
manage the business and affairs of Employer and shall perform such other
executive, managerial and administrative duties as are from time to time
assigned to him by the Board and which are normally associated with the position
of Transition Coordinator.  Employee agrees as follows:

 

(a)                                  Employee shall devote his working time,
knowledge and skill solely and exclusively to the business of Employer. 
Employee shall not be engaged in any other trade, business or enterprise except
as an investor for himself or any other person, business or company while
employed by Employer.

 

(b)                                 Employee shall at all times represent the
interests of Employer to the utmost of Employee’s capacity and ability and
Employee shall serve Employer loyally and faithfully.

 

(c)                                  The Employee’s hours of work shall be as
dictated by the requirements of the duties for which Employee is responsible.

 

(d)                                 Employee agrees to observe and comply with
all applicable rules and regulations established by the Employer.

 

4.                                       Compensation.  As compensation for his
services, the Employer shall pay to the Employee as follows:

 

(a)                                  Base Compensation.  An annual base salary
of Ninety Thousand Dollars (90,000.00), payable in equal bi-monthly installments
during the term of his employment. The Board will review the base salary
annually.

 

(b)                                 Variable Incentive Compensation.  In
addition to the Base Compensation, as an incentive to Employee to achieve high
profitability, to promote collection of those revenues billed and to encourage
quality and efficiency of operation, the Employer shall pay to the Employee
Variable Incentive Compensation equal to three-tenths of one percent (0.3%) of
the monthly Adjusted Earnings in each month of the fiscal

 

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year. Adjusted Earnings are based on the most recent monthly financial
statements produced by the Employer and provided to the Board.  The Employer
will pay the Variable Incentive Compensation to Employee the first regularly
scheduled payroll following Board approval of the previous month’s financial
statements.  Should the Variable Incentive Compensation for the month result in
a negative amount, such amount will be deducted from any future Variable
Incentive Compensation.  For the last month of the fiscal year, this Variable
Incentive Compensation payment will not be paid until following completion of
the Employer’s annual audit, and within ninety (90) days of the end of the
fiscal year, .  This final payment, when added to the previous Variable
Incentive Compensation payments, will adjust the annual Variable Incentive
Compensation to equal three-tenths of one percent (0.3%) of Employer’s audited
annual Adjusted Earnings for the fiscal year.  During any fiscal year Employee
only works a part of the fiscal year, the final payment will adjust the Variable
Incentive Compensation to reflect that the Variable Incentive Compensation
payments equal three-tenths of one percent (0.3%) of the Employer’s audited
Adjusted Earnings for only that portion of the year in which Employee was
employed by Employer.

 

5.                                       Employee Benefits.  This Agreement is
not intended to and shall not be deemed to be in lieu of any rights, benefits
and privileges to which Employee may be entitled as an employee of Employer
under any plan of employee benefits or any other arrangement providing employee
benefits to Employer’s employees, including, but not limited to, vacation,
medical and health insurance, life insurance, and any qualified retirement plan
which may now be in effect or hereafter adopted by Employer as amended from time
to time in the Employer’s sole discretion. To the extent the following benefits
are offered to all of Employer’s employees, Employer shall provide the following
enhanced benefits to Employee:

 

1.   Medical Insurance. Employer agrees to pay the full premium for family
coverage for any medical insurance plan Employer offers to all of its
employees.  To the extent Employer offers more than one option to employees for
medical insurance, Employer agrees to pay the full premium for family coverage
for the option chosen by Employee.

 

2.  Dental Insurance. Employer agrees to pay the full premium for family
coverage for dental insurance.

 

3.  Short Term Disability. Employer agrees to pay the full premium for Short
Term Disability insurance.

 

4.  Paid Time Off.  Employee will receive 20 days of PTO during the first year,
25 days during the second year, and 30 days per year thereafter. Employee will
provide advance notice to the Board for vacation time exceeding 5 consecutive
business days.

 

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6.                                       Expenses.  Employer will reimburse
Employee for all reasonable business related expenses upon the presentment by
Employee, from time to time, of an itemized account of such expenditures and
receipts therefor.

 

7.                                       Change in Control.  Upon a Change in
Control, Employer shall pay Employee the following, payable in cash in a lump
sum on the first day of the month following the Change in Control:

 

(a)                                  If the total financial consideration paid
for Employer constituting the Change of Control equals or exceeds one and one
half the Book Value of the Employer calculated as of the last day of the month
preceding the final event constituting the Change of Control, Employer shall pay
Employee a lump sum payment equal to three (3) times Employee’s annual Base
Compensation in effect on the date of the Change of Control; or

 

(b)                                 If the total financial consideration paid
for Employer constituting the Change of Control is less than one and one-half
times the Book Value of the Employer calculated as of the last day of the month
preceding the final event constituting the Change of Control, Employer will pay
Employee an amount equal to his annual Base Compensation in effect on the date
of the Change of Control.

 

8.                                       Withholding. The Employer will withhold
from any payment to Employee made pursuant to this Agreement and from any amount
taxable under Code §409A, all applicable taxes, and any and all other amounts
required to be withheld under federal, state or local law, including Notice
2005-1 and Applicable Guidance, and any voluntary reductions elected by
Employee.

 

9.                                       Excess Parachute Payment. 
Notwithstanding any provision of this Agreement to the contrary, Employer shall
not pay any benefit to the extent the benefit would be a nondeductible parachute
payment under Section 280G of the Internal Revenue Code.

 

10.                                 Termination With or Without Cause.  Employee
is an Employee at will.  It is understood and agreed that either Employee or
Employer may terminate this Agreement at any time with or without cause and
without formal notice.  If terminated, with cause (cause defined as theft,
embezzlement, sexual harassment, conviction of a felony or misdemeanor involving
moral turpitude),Employee shall not be entitled to any advance notice, severance
pay or any other compensation other than compensation earned to date of the
termination.  If terminated without cause following completion of a six month
probationary period, the employee will receive a severance payment in the amount
of 3 months base compensation

 

11.                                 Trade Secrets.  Employee acknowledges that
in the course of employment, Employee will acquire confidential information of a
special and unique nature and value relating to Employer’s business and relating
to any subsidiaries and affiliates of Employer.  Such information shall be
considered a trade secret owned by the Employer, which information shall
include, but is not limited to, specifications, samples, tools, technical
information, data, market information, customers, relationship with experts,
consultants and governmental agencies, information concerning

 

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Employer’s systems, policies, methods of operation, procedures, manuals,
financial reports, and pricing and all other non-public information acquired by
Employee as a result of or during the course of employment.  Employer shall
retain ownership of all rights to all materials, except materials which are
readily available to anyone in the ethanol industry.  Reuse of the materials or
concepts is prohibited without the prior written consent of Employer.  Employee
agrees that all such information acquired during the course of employment,
whether such information is communicated in written or verbal form, and whether
such information is in recorded or unrecorded form and whether it is maintained
solely at Employer’s offices or also maintained elsewhere or combined or
maintained by Employee solely or in combination with other information,
constitute trade secrets of Employer.

 

Employee shall not at any time or in any manner, either directly or indirectly,
divulge or disclose Employer’s trade secrets to any other person or entity, and
Employee shall not use such trade secrets in competition with Employer or for
the gain or benefit of Employee or any other person or company.  The obligations
of Employee under this paragraph 11 shall survive the termination of this
Agreement.

 

Following termination of employment, Employee shall not remove or retain any
document, copy of document, client or prospect files, or any other recording, in
any type or form, relating to said trade secrets.  Employee shall not utilize or
divulge said trade secrets to any other person or company, regardless of whether
such knowledge or information is in recorded form or otherwise.

 

12.                                 Agreement Not to Compete.  In consideration
of the Employer’s hiring and continued employment of Employee, and Employer
making Employer’s trade secrets available to Employee, the sufficiency of which
consideration is conclusively acknowledged, Employee agrees not to engage
directly or indirectly, either personally or as an employee, associate, partner,
or otherwise, or by means of any corporation or other legal entity, or
otherwise, in any business in competition with Employer or its subsidiaries,
divisions, or affiliates, during the course of employment and for a period of
six months from the date of the termination of employment, within South Dakota,
Minnesota, Nebraska, Iowa, or any other state in which Employer operates an
ethanol plant so long as Employer (or related entity) continues to carry on a
like business in the described territory (the “Restricted Territory”).

 

The parties have attempted to limit Employee’s rights to compete only to the
extent necessary to protect Employer from unfair competition.  The parties
recognize, however, that reasonable people may differ in making such a
determination.  Employee acknowledges that he will be able to earn a livelihood
without violating the foregoing restrictions and that his ability to earn a
livelihood without violating such restrictions is a material condition to his
execution of this Agreement with Employer.

 

Employee agrees that if Employee obtains or commences employment (whether
full-time or part-time) with any other employer during the six-month period
referred to in this section, Employee shall provide such new employer with a
copy of this Agreement, and Employee agrees that Employer may provide copies of
this Agreement to such new employer.  Employee agrees that Employer shall have
the right to inform such new employer of Employee’s obligations hereunder.

 

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For purposes of this section, the Employer shall include, in addition to the
Employer specifically identified herein, any successor to Employer and any
purchaser of Employer’s business.

 

13.                                 Remedies for Breach of Trade Secrets and
Non-Competition Agreement.  Employee expressly agrees that Employee’s violation
of this Agreement relating to trade secrets and/or non-competition shall entitle
Employer to injunctive relief.  Employer shall be entitled to any and all
further or other rights and remedies available at law or in equity.  If a legal
action is instituted to enforce the provisions of this Agreement, or any part of
it, the prevailing party shall be entitled to recovery of reasonable attorneys’
fees and costs, including discovery costs, as determined by the Court.

 

14.                               Assignment.  This Agreement is a personal
services contract and neither party may assign his or its duties or obligations
hereunder without first obtaining the written consent of the other parties
hereto.

 

15.                               Notices.  Any notice required or permitted to
be given under this Agreement shall be sufficient if in writing and if sent by
certified mail to the Employee’s residence in the case of the Employee or to the
Employer’s principal office in the case of the Employer.

 

16.                               Waiver of Breach.  The waiver by the Employer
of a breach of any provisions of this Agreement by the Employee shall not
operate or be construed as a waiver of any subsequent breach by Employee.

 

17.                                 Counterparts.  This Agreement may be
executed in multiple counterparts all of which shall constitute but one
Agreement.

 

18.                               Entire Agreement.  This instrument contains
the entire agreement of the parties.  It may not be changed orally but only by
an agreement in writing signed by the party against whom the enforcement of any
waiver, change, modification, extension or discharge is sought.

 

19.                               Binding Effect.  This Agreement shall be
binding upon and inure to the benefit of the parties, their heirs, legal
representatives, successors and assigns.

 

20.                               Governing Law.  This Agreement shall be
construed in accordance with and governed by the laws of the State of South
Dakota.

 

21.                               Severability.  The parties agree that if any
part, term, paragraph or provision of this Agreement is in any manner held to be
invalid, illegal, void or in any manner unenforceable, or to be in conflict with
any law of the State of South Dakota, then the validity of the remaining
portions or provisions of this Agreement shall not be affected, and such part,
term, paragraph or provision shall be construed and enforced in an manner
designed to effectuate the intent expressed in this Agreement to the maximum
extent permitted by law.

 

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IN WITNESS WHEREOF, this Employment Agreement has been signed on the date  and
year first above written.

 

 

EMPLOYER:

 

 

 

DAKOTA ETHANOL, L.L.C.

 

 

 

 

 

By

/s/ Brian Woldt

 

 

  Its

Chairman

 

 

 

 

 

 

EMPLOYEE:

 

 

 

 

 

/s/ Scott A. Mundt

 

 

Scott A. Mundt

 

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