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 p
