Exhibit 10.1

 

EMPLOYMENT AGREEMENT

 

THIS AGREEMENT, effective this first day of January, 2009, 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 in the United States
applied on a consistent basis.

 

(b)           “Applicable Guidance” means as the context requires Code §§83,
409A, Treas. Reg. § 1.83, Treas. Reg. §§ 1.409A-1 through -6, or other written
Treasury or IRS guidance regarding or affecting Code §§ 83 or 409A.

 

(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 in the United States applied on a
consistent basis as determined by certified public accountants regularly
auditing Employer’s financial statements.

 

(e)           “Change of Control” means a change in (i) the ownership of
Employer (acquisition by any one person or more than one person acting as a
group of more than 50% of the total voting power or fair market value of the
stock of the Employer), (ii) in the effective control of Employer (acquisition
or acquisition during a 12 month period ending on the date of the latest
acquisition, by one or more persons acting as a group of 30% or more of the
total voting power of Employer or replacement of a majority of the members of
the Board of Employer [described below, but including only the entity for which
no other corporation is a majority shareholder] during any 12 month period by
members not endorsed by a majority of the Board before the appointment or
election); or (iii) in the ownership of a substantial portion of the assets of
Employer (acquisition or acquisition during a 12 month period ending on the date
of the latest acquisition, by one or more persons [other than related persons
described in Treas. Reg. § 1.409A-3(i)(5)(VII)(B)] acting as a group of assets
with total gross fair market value of 40% or more of the total gross fair market
value of all assets of Employer immediately before such acquisition or
acquisitions).  For this purpose, “Employer” includes any corporation which is
liable for the payment of the benefits hereunder, a majority shareholder (more
than 50% of total fair market

 

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value and voting power) of the foregoing or a corporation in a chain of
corporations in which each is a majority owner of another corporation in the
chain, ending in Employer or in the corporation that is liable for payment of
the benefits hereunder, all in accordance with Treas. Reg. §
1.409A-3(i)(5)(ii).  An event constituting a Change in Control must be
objectively determinable and any certification thereof by Employer or its agents
may not be subject to the discretion of such person.  For purposes of applying
this Section, stock ownership is determined in accordance with Code § 318(a) as
modified under Treas. Reg. § 1.409A-3(i)(5)(iii).  Pending the issuance of
Applicable Guidance as to the application of change in control provisions to
non-corporate entities, Employer will apply this definition by analogy in
accordance with Treas. Reg. § 1.409A, Preamble, II.G.

 

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

 

(g)           “Separation from Service” means Employee’s termination of
employment with Employer whether on account of death, retirement, or otherwise. 
Employer will determine whether Employee has terminated employment based on the
facts and circumstances as described in Treas. Reg. § 1.409A-1(h).  Employee’s
employment terminates if Employer and Employee reasonably anticipate, based on
the facts and circumstances, Employee will not perform any additional services
after a certain date or that the level of bona fide services (whether performed
as an employee or as an independent contractor) will permanently decrease to no
more than twenty percent (20%) of the average level of bona fide services
performed over the immediately preceding thirty-six (36) month period.  Employer
for purposes of determining Separation from Service includes all persons with
whom Employer would be considered a single employer under Code §§ 414(b) and
(c), but applying 50% in lieu of 80% in applying Code §§ 414(b) and (c).

 

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 General
Manager/CEO 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 General Manager/CEO. 
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.

 

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(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 One Hundred Fifty Thousand Dollars
($150,000.00), 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
five-tenths of one percent (0.5%) of the Adjusted Earnings in each `six-month
period of the fiscal year ending June 30 and December 31. Adjusted Earnings are
based on the most recent cumulative financial statements produced by the
Employer and provided to the Board. The Employer will pay the Variable Incentive
Compensation to Employee the on first regularly scheduled payroll following
Board approval of the financial statements for the operations during January 1
through June 30 and from July 1 through December 31 but no later than March 15
of year following the year earned. In no event shall the total Variable
Incentive Compensation paid to Employee for any single fiscal year exceed
Seventy-Five Thousand Dollars ($75,000.00)

 

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.

 

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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 thirty (30) days of PTO per year.
Employee will provide advance notice to the Board for PTO exceeding 5
consecutive business days.

 

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 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,
illegal harassment, conviction of a felony or misdemeanor involving moral
turpitude), Employee shall not be entitled to any advance notice, severance pay
or any

 

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other compensation other than compensation earned to date of the termination. 
If terminated without cause, the employee will receive a severance payment in
the amount of six (6) months Base Compensation payable in one lump sum on the
first regularly scheduled pay date immediately following termination of
employment.

 

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 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 one (1) year 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”).

 

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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 one-year 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.

 

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.

 

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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.

 

IN WITNESS WHEREOF, this Employment Agreement has been signed the 1 day of
April, 2009.

 

 

EMPLOYER:

 

 

 

DAKOTA ETHANOL, L.L.C.

 

 

 

 

 

By

 /s/ Rick Kasperson

 

  Its

 Secretary

 

 

 

 

 

EMPLOYEE:

 

 

 

 

 

/s/ Scott A. Mundt

 

Scott A. Mundt

 

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