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.


 

















 


(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


 


2

















 


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.


 


3

















 


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


 


4

















 


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.


 


5

















 


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.


 


6

















 


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

  
					



 


7