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 


 

















 


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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