Document:

NCEX 10.12

Exhibit 10.12

CONFIDENTIAL TREATMENT REQUESTED FOR PORTIONS OF THIS DOCUMENT.  PORTIONS FOR WHICH CONFIDENTIAL TREATMENT IS REQUESTED HAVE BEEN MARKED WITH THREE ASTERISKS [***] AND A FOOTNOTE INDICATING “CONFIDENTIAL TREATMENT REQUESTED”.  MATERIAL OMITTED HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.

FIRST AMENDMENT TO COTEAU LIGNITE SALES AGREEMENT
THIS FIRST AMENDMENT TO COTEAU LIGNITE SALES AGREEMENT ("Amendment") dated as of June 1, 1994, is by and between THE COTEAU PROPERTIES COMPANY, an Ohio corporation authorized to do business in the State of North Dakota (Coteau) and DAKOTA COAL COMPANY, a North Dakota corporation (Dakota). 
WITNESSETH:
WHEREAS, Coteau and Dakota are parties to the Coteau Lignite Sales Agreement dated as of January 1, 1990 (the Coteau Lignite Sales Agreement); and 
WHEREAS, the Parties desire to amend the Coteau Lignite Sales Agreement in certain respects; 
NOW, THEREFORE, in consideration of the foregoing and the mutual covenants and agreements contained herein, the Parties agree as follows: 
1.All capitalized terms used in this Amendment shall have the meanings ascribed to them in the Coteau Lignite Sales Agreement unless such terms are otherwise defined herein, or unless the context clearly otherwise requires. 
2.Section 1.1 of the Coteau Lignite Sales Agreement hereby is amended by adding the following definition after the definition of the term ANG: 
Antelope Valley shall mean the Antelope Valley Station, consisting of two 450 MW generating units named "Unit 1" and "Unit 2", located at a site adjacent to Great Plains near Beulah, North Dakota, and which is controlled and operated by Basin Electric.

3.Section 1.1 of the Coteau Lignite Sales Agreement hereby is amended by adding the 
following definition after the definition of the term Dakota:

Dakota Option Agreement shall mean the Dakota Option Agreement dated January 1, 1992 by and among Coteau, Dakota and the State of North Dakota doing business as the Bank of North Dakota (as escrow agent). 
4.The definitions of the terms Dakota's Other Plants and Dakota's Primary Plants in
 Section 1.1 of the Coteau Lignite Sales Agreement hereby are amended to read in their entirety as 
follows:

Dakota's Other Plants shall mean all additional generating units installed by Basin Electric that increase the original generating capacity of Antelope Valley and all additional gasifiers as well as the incremental increased capacity achieved by replacing one or more of the existing gasifiers with a replacement gasifier having a capacity greater than that of the gasifier being replaced at or near Great Plains. 
Dakota's Primary Plants shall mean collectively Antelope Valley and Great Plans. 
5.Section 1.1 of the Coteau Lignite Sales Agreement hereby is amended by adding the following definition after the definition of the term Escrowed Stock: 
GAAP shall mean generally accepted accounting principles. 
6.Section 1.1 of the Coteau Lignite Sales Agreement hereby is amended by adding the
 following definition after the definition of the term Glenharold Mine: 

Great Plains shall mean the Great Plains Coal Gasification Plant, the first phase of which consists of a Lurgi lignite gasification facility with the capability of producing approximately 175 MMSCF/D of pipeline quality synthetic natural gas and is located on a site adjacent to Antelope Valley near Beulah, No4th Dakota, which is owned and operated by DGC. 
7.The definition of the term Index in Section 1.1 of the Coteau Lignite Sales Agreement hereby is amended to read in its entirety as follows: 

Index shall mean the average Producer Price Index - All Commodities on the base 1982 = 100, published by the Bureau of Labor Statistics of the U.S.  Department of Labor, for the months of January through November of said calendar year.  The base for calculating changes in the Index in Subsections 5.5(a), 5.5(b) and 5.5(c) hereof shall be the Producer Price Index - All Commodities for July 1988. 

8.The fifth paragraph of Section 4.10 of the Coteau Lignite Sales Agreement hereby is 
amended to read in its entirety as follows: 

Coteau shall develop formal written policies with respect to donations to charitable and civic organizations and corporate sponsorships, which policies shall be subject to approval by Dakota.  All expenditures by Coteau for donations and sponsorships that are included in the cost of Production shall be subject to approval by Dakota. 
9.Section 5.2(a) of the Coteau Lignite Sales Agreement hereby is amended by deleting
clauses (xiv) and (xv) in their entirety and adding the following in lieu thereof: 
		
	xiv)
	Acquisition costs and carrying charges payable to Cocteau for surface and coal interests which are within the areas of Dedicated Lignite, 

		
	xv)
	Amounts payable to WCDC pursuant to paragraph 7 of the Coal Reserve Agreement, and 

		
	xvi)
	Amounts payable to WCDC pursuant to paragraph 8 of the Coal Reserve Agreement. 

10.Subsection 5.4(a) of the Coteau Lignite Sales Agreement hereby is amended to read in
its entirety as follows: 
		
	a)
	i)  For lignite sold and delivered hereunder in any calendar year before January 1, 1994 and after December 31, 2006 for use at Dakota's Primary Plants, the Agreed Profit, expressed in July 1, 1988 dollars, shall be [* * *] per Ton for all Tons of lignite up to and including [* * *] Tons for such year and shall be [* * *] per Ton for all Tons of lignite which exceed [* * *] Tons for such year, which such amounts of Agreed Profit shall be adjusted as provided in Subsection 5.5(a) hereof.. 

ii)  For lignite sold and delivered hereunder in any calendar year between January 1, 1994 and December 31, 2006 for use at Antelope Valley, the Agreed Profit, expressed in July 1, 1988 dollars, shall be [* * *] per Ton for all Tons of lignite until the total quantity of lignite delivered to all of Dakota's Primary Plants equals [* * *] Tons for such year and thereafter shall be [* * *] per Ton for all Tons in excess of [* * *] Tons sold and delivered to Dakota's Primary Plants in such year, which such amounts of Agreed Profit shall be subject to adjustment as provided in Subsection 5.5(a) hereof. Notwithstanding the foregoing sentence, if Great Plains permanently and completely ceases production of 
* * * Confidential Treatment Requested

synthetic natural gas on or before December 31, 1997, then for a period of two (2) years following the date on which Great Plains so ceases such production, the Agreed Profit
 for lignite sold and delivered hereunder for use at Antelope Valley, after adjustment pursuant to Subsection 5.5 (a) hereof, shall be reduced by [* * *] per Ton, which amount of reduction shall not be subject to any adjustment. If Great Plains permanently and completely ceases production of synthetic natural gas after December 31, 1997, then the Agreed Profit for Lignite sold and delivered hereunder for use at Antelope Valley, after adjustment pursuant to Subsection 5.5(a) hereof, shall not be reduced thereafter by the [* * *].

iii)  For lignite sold and delivered hereunder in any calendar year between January 1, 1994 and December 31, 2006 for use at Great Plains, the Agreed Profit, expressed in July 1, 1988 dollars, shall be [* * *] per Ton, which such amount of Agreed Profit shall be subject to adjustment as provided in Subsection 5.5(a) hereof and after such adjustment shall be reduced by [* * *] per Ton, which amount of reduction shall not be subject to any adjustment. 

iv)  For the first [* * *] Tons of lignite sold and delivered from the Dedicated Lignite for use at Dakota's Primary Plants following December 31, 1989, the Agreed Profit per Ton, after adjustment pursuant to Subsection 5.5(a) hereof, shall be reduced by an amount equal to [* * *] adjusted in the manner as provided in paragraph 7 of the Coal Reserve Agreement.  An example of the aforesaid calculation is attached hereto as Exhibit c and made a part hereof. 
11.The references to Subsection 5.4 (a) that are contained in Subsections 5.4(b) and 5.4(c) hereby are amended to mean and refer to Subsection 5.4(a) (i).  In addition, the second reference to Subsection 5.4(a) that is contained in clause (i) of Subsection 5.7(a) hereby is amended to mean and refer to Subsection 5.4(a) (i). 
12.Section 5.6 of the Coteau Lignite Sales Agreement hereby is amended to read in its entirety 
as follows: 
Section 5.6    Further Modifications. 

If at any time during the term of this Agreement it is reasonably believed by either Party that the [* * *] or any index substituted therefor in accordance with the following provisions no longer reflects the true change in purchasing power of the United States dollar, then upon the written request of either Party a substituted index or method whereby such change in purchasing power of the United States dollar can be determined shall be substituted by mutual agreement.  In the event that the [* * *] * * * Confidential Treatment Requested

or any substituted index is changed in the future to use some base other than the base of 1982 = 100, then, for the purposes hereof, the [* * *] or any substitute index, as the case may be, shall be adjusted so as to be in correct relationship to the base of 1982 = 100, or some other alternative base which is mutually agreeable to Coteau and Dakota.  In the event publication of the [* * *]

or any substituted index is no longer made by any federal agency, the index to be used as aforesaid shall be that index agreed to by the Parties which, after necessary adjustment, if any, provides the most reasonable substitute for said index. 

13.Exhibits C, D, E and F hereto hereby are substituted for Exhibits C, D, E and F to the Coteau Lignite Sales Agreement, respectively, each of which shall be of no further force or effect. 
14.Section 13.2 of the Coteau Lignite Sales Agreement hereby is amended to read in its
entirety as follows:
Section 13.2    Other Activities. 
Notwithstanding the provisions of Section 13.1 hereof, it is contemplated that Coteau may provide other services to Dakota or its Affiliates such as solid waste disposal, disposal of excess lignite fines, snow removal as well as such other services, in each instance as may be mutually agreed upon by Coteau and Dakota.  It is further contemplated that Coteau shall provide such services to Dakota or its Affiliates at a price agreed to by the Parties. 

15.Section 14.1 of the Coteau Lignite Sales Agreement hereby is amended to read in its
entirety as follows: Section 14.1 Term.

		
	a)
	The original term of this Agreement shall commence on January 1, 1990 and shall expire on April 22, 2007, provided that Coteau shall have the option to extend this Agreement for up to six (6) successive five (5) year periods by giving written notification to Dakota not less than three (3) years before the expiration of the original term, or in the case of renewal terms, eighteen (18) months before the expiration of the renewal term then in effect. 

		
	b)
	If Coteau elects to extend this Agreement for all six (6) such periods, then Dakota shall have· the option to extend this Agreement for up to four (4) additional successive five (5) year periods by giving written notification to Coteau not less than eighteen (18) months before the expiration of the renewal term then in effect.  

* * * Confidential Treatment Requested

		
	c)
	If Coteau does not elect to extend this Agreement for all six (6) such periods, then Dakota shall have no right to extend this Agreement for any additional periods. 

		
	d)
	Notwithstanding the foregoing, this Agreement shall terminate upon the exhaustion of the Dedicated Lignite.  The lignite covered by any particular lease shall be deemed to be exhausted upon the expiration of such lease without further right of renewal. 

16.Section 14.4 of the Coteau Lignite Sales Agreement hereby is amended to read in its entirety as follows: 

Section 14.4    Exercise of Option of Escrowed Stock. 

		
	a)
	Upon the expiration of the original term of this Agreement, Dakota may exercise its right pursuant to the option Agreement to cause the transfer of the Escrowed Stock to Dakota, provided that Coteau has not exercised its right to extend the original term of this Agreement pursuant to Section 14.1 hereof and provided, further, that Dakota has not exercised any of its rights under Section 14.2 hereof.  To exercise said right, Dakota shall give written notice to Coteau with a copy to the escrow agent under the Option Agreement not less than twenty-four (24) months and not more than thirty-five (35) months before the expiration of the original term and shall otherwise comply with the terms and conditions of the Option Agreement.  

		
	b)
	Upon the expiration of any renewal term of this Agreement that occurs on or before April 22, 2032, Dakota may exercise its right pursuant to the Option Agreement to cause the transfer of the Escrowed Stock to Dakota, provided that Coteau has not exercised its right to further extend such renewal term of this Agreement pursuant to Section 14.1 hereof and provided, further, that Dakota has not exercised any of its rights under Section 14.2 hereof.  To exercise said right, Dakota shall give written notice to Coteau with a copy to the escrow agent under the Option Agreement not less than twelve (12) months and not more than seventeen (17) months before the expiration of such renewal term and shall otherwise comply with the terms and conditions of the Option Agreement. 

		
	c)
	Upon the expiration of any renewal term of this Agreement that occurs on or after April 22, 2037, Dakota may exercise its right pursuant to the Option Agreement to cause the transfer of the Escrowed Stock to Dakota, provided that Dakota has not exercised any of its rights under Section 14.2 hereof.  To exercise said right, Dakota shall give written notice to Coteau with a copy to the escrow agent under the Option Agreement not less than seventeen (17) months before the expiration of such renewal term and shall otherwise comply with the terms and conditions of the Option Agreement. 

17.Article XIV of the Coteau Lignite Sales Agreement hereby is amended by adding a new Section 14.5 thereto, which shall read in its entirety as follows: 

		
	Section 14.5 
	Reimbursement for Certain Additional Deferred Tax Liabilities and Assets. 

On January 1, 1990, the effective date of this Agreement, GAAP required Coteau to follow Accounting Principles Board Opinion No. 11, entitled "Accounting for Income Taxes” ("APB 11"), or Statement of Financial Accounting Standard No.  96, entitled "Accounting for Income Taxes" ("SFAS 96").  Coteau did not adopt SFAS 96, and no further reference to SFAS 96 is either intended or implied herein.  For fiscal years commencing after December 15, 1992, GAAP have required Coteau to adopt Statement of Financial Accounting Standard No.  109, entitled "Accounting for Income Taxes" ("SFAS 109"), which supersedes APB 11.  Under SFAS 109, because of the difference between the financial statement and income tax basis of its assets and its liabilities, Coteau is required to record additional net deferred tax liabilities (“ADTL") on its financial statements for certain years that it was not required to record under APB 11. The amount of the ADTL will decrease with time.  If Coteau continues in operation for a sufficient period of time, Coteau will not have to pay any portion of the ADTL and may be required to record additional net deferred tax assets ("ADTA") on its financial statements for certain years that it would not be required to record under APB 11. 

So long as GAAP requires that ADTL continue to be recorded on Coteau's financial statements, the amount of dividends Coteau is able to pay under Section 4.8 hereof will be reduced, because the amount of the ADTL will reduce the earned surplus from which such dividends may be paid. Accordingly, the Parties agree that if this Agreement terminates and/or if the Escrowed Stock is transferred to Dakota for any reason, then in addition to any other payments by Dakota to North American Coal provided for in this Agreement, the Option Agreement and/or the Dakota Option Agreement, Dakota shall pay to North American Coal an amount equal to the difference between (x) the amount of net deferred tax liabilities recorded on Coteau's financial statements on the date the Escrowed stock is transferred to Dakota and (y) the amount of net deferred tax liabilities that Coteau would have recorded on such date if Coteau had determined such liabilities by the method it used prior to its required adoption of SFAS 109.  Under no circumstances shall the amount of the payment by Dakota under this Subsection 14.5 exceed the total Agreed Profit paid to Coteau since its adoption of SFAS 109 less the sum of (i) the dividends paid by Coteau since its adoption of SFAS 109, (ii) the income tax payments made by Coteau with respect to years for which SFAS 109 was adopted, and (iii) the net deferred tax liabilities that would be payable by Coteau following the transfer of the Escrowed Stock in respect of its prior mining operations, if such deferred taxes were determined by the method Coteau used prior to its required adoption of SFAS 109, so long as GAAP requires that ADTA continue to be recorded on Coteau's financial statements, the amount of dividends Coteau is able to pay under Section 4 hereof will be increased by the amount of the ADTA.  Accordingly, the Parties agree that if this Agreement terminates and/or if the Escrowed Stock is transferred to Dakota for any reason, then Coteau shall retain as an asset, and North American Coal shall not cause or permit Coteau to distribute to it as a dividend, an amount equal to the difference between (X) the amount of net deferred tax assets recorded on Coteau's financial statements 

on the date the Escrowed Stock is transferred to Dakota and (y) the amount of net deferred tax assets that Coteau would have recorded on such date if Coteau had determined such assets in accordance with SFAS 109. Article XV of the Coteau Lignite Sales Agreement and all references thereto in the Coteau Lignite Sales Agreement hereby are deleted in their entirety effective as of June 1, 1994. Section 16.15 of the Coteau Lignite Sales Agreement hereby is deleted in its entirety effective as of January 1, 1990. All of the other terms and provisions of the Coteau Lignite Sales Agreement not expressly amended hereby shall continue and remain in full force and effect. 21.  This Amendment may be executed in any number of counterparts, each of which, when executed and delivered, shall be an original, but all of which shall collectively constitute one and the same instrument.

IN WITNESS WHEREOF, the Parties have caused this Amendment to be executed on their behalf by their respective authorized representatives as of the day first written above.  

	
		
	Attest:
	THE COTEAU PROPERTIES COMPANY

	/s/ Thomas A. Koza
	By /s/ Robert L. Benson

	Secretary
	Robert L. Benson, its President

	 
	 

	
		
	Attest:
	DAKOTA COAL COMPANY

	/s/ Signature Illegible
	By /s/ Kent E. Jenssen

	Secretary
	Title: Vice President & Chief Operating Officer

	 
	 

Exhibits C, D, E and F
[* * *] 

* * * Confidential Treatment RequestedNCEX 10.13

Exhibit 10.13
CONFIDENTIAL TREATMENT REQUESTED FOR PORTIONS OF THIS DOCUMENT.  PORTIONS FOR WHICH CONFIDENTIAL TREATMENT IS REQUESTED HAVE BEEN MARKED WITH THREE ASTERISKS [***] AND A FOOTNOTE INDICATING “CONFIDENTIAL TREATMENT REQUESTED”.  MATERIAL OMITTED HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
SECOND AMENDMENT
TO
COTEAU LIGNITE SALES AGREEMENT
THIS SECOND AMENDMENT TO THE COTEAU LIGNITE SALES AGREEMENT ("Amendment") dated as of January 1, 1997, is by and between THE COTEAU PROPERTIES COMPANY, an Ohio corporation authorized to do business in the State of North Dakota ("Coteau"), and DAKOTA COAL COMPANY, a North Dakota corporation (“Dakota”).
WITNESSETH:
WHEREAS, Dakota and Coteau are parties to the Coteau Lignite Sales Agreement dated as of January 1, 1990, as amended by the First Amendment dated as of June 1, 1994 (hereinafter referred to as the "Coteau Lignite Sales Agreement"); and 
WHEREAS, the Parties desire to further amend the Coteau Lignite Sales Agreement as hereinafter provided. 
NOW, THEREFORE, in consideration of the foregoing and the mutual covenants and agreements contained herein, the Parties agree as follows: 
		
	1.
	All capitalized terms used in this Amendment shall have the meanings ascribed to them in the Coteau Lignite Sales Agreement unless such terms are otherwise defined herein, or unless the context otherwise clearly requires. 

		
	2.
	Subsection 4.2(a) of the Coteau Lignite Sales Agreement is hereby amended to read in its entirety as follows: 

1

		
	“a)
	An annual capital budget containing estimates of all commitments in excess of $25,000. Within forty-five (45) days after Dakota's receipt of the foregoing annual capital budget, Dakota shall give Coteau written notice of Dakota's approval or disapproval of such capital budget. If Dakota shall fail to give such notice within such forty-five (45) day period, Dakota shall be deemed to have approved such budget. Coteau may submit proposed capital budgets for previously unforeseen capital expenditures at any time, and Dakota shall give due consideration to such requests and shall respond to such requests within thirty (30) days.  Upon the approval of any capital budget or portion thereof by Dakota, such budget or portion thereof shall be deemed part of the Mining Plan."  

		
	3.
	The first paragraph of Section 4.3 of the Coteau Lignite Sales Agreement is hereby amended to read in its entirety as follows:

“Coteau shall not make any expenditures unless they are generally reflected in a  budget, or portion thereof, approved by Dakota as aforesaid; nor shall Coteau make ) any single expenditure (except for expenditures made to maintain inventory levels as  approved by Dakota from time to time) for materials, supplies, equipment, facilities or services  in excess of $25,000,  or enter  into any  contracts, agreements  or commitments involving more than $25,000, unless such item has been specifically identified in a budget, or portion thereof, approved by Dakota or unless Dakota has otherwise approved thereof.”   
		
	4.
	Section 4.6 of the Coteau Lignite Sales Agreement is hereby amended to read in its entirety as follows: 

“Coteau and Dakota shall cooperate to maintain and use a cost and physical progress data reporting system which (a) provides actual cost and expenditure scheduling status· reports to Dakota for the immediately preceding calendar month by the fifteenth (15th) Business Day of every month, (b) reports actual cost and operational statistics relative to the Mining Plan and (c) provides adequate audit trail information.  Such cost control system may include the preparation by Coteau, as requested by Dakota, or various budget, expenditure and operational 

2

statistical reports in a format acceptable to Dakota, or such other documents as requested by Dakota.”    
		
	5.
	Section 4.7 of the Coteau Lignite Sales Agreement is hereby deleted in its entirety.    

		
	6.
	The second paragraph of Section 4.9 of the Coteau Lignite Sales Agreement is hereby amended to read in its entirety as follows:   

“Coteau's accounting system and practices shall conform to Dakota's specifications, which shall be in accordance with generally accepted accounting principles, and shall be subject to Dakota's approval.  Coteau shall notify Dakota in writing of any proposed material changes to Coteau's accounting system and practices previously approved by Dakota.  Coteau's accounting system shall provide for cost classifications (chart of accounts) as requested by Dakota which shall include the maintenance of separate cash accounts to the extent requested by Dakota.”  
		
	7.
	Section 4.10 of the Coteau Lignite Sales Agreement is hereby amended to read in its entirety as follows:   

“Expenditures by Coteau for memberships in trade associations which are included in the Cost of Production shall be limited to the expenditures for one such membership, unless expenditures for additional memberships are approved by Dakota.   Coteau shall keep Dakota apprised of the activities of the trade associations of which Coteau is a member and shall use its influence as a member to support the causes of Dakota. Further, Coteau shall consider the advice and counsel of Dakota with regard to national issues concerning coal and the affairs of Dakota's customers.   
Coteau's policies and practices with respect to matters such as materials, supplies, facilities, services and equipment procurement, executive compensation plans, travel and entertainment, overtime, labor reporting, attendance at seminars, meetings and schools, use of company vehicles, mine-related cost allocation methods, equipment replacement, employee insurance, relocation expense, donations to charitable and civic organizations, corporate sponsorships and vacation and retirement benefits shall be generally consistent with those of North American 

3

Coal or the surface coal mining industry.  Such policies and practices shall be subject to approval by Dakota, and any material changes to the aforementioned policies and practices shall be subject to approval by Dakota.   Such approval shall not be unreasonably withheld if such policies and practices are consistent with those of North American Coal or the surface coal mining industry.” 
		
	8.
	Subsection 5.2(a)(i) of the Coteau Lignite Sales Agreement is hereby amended to read in its entirety as follows:   

		
	“(i)
	Labor costs, which include wages and the costs of all related payroll taxes, benefits and fringes, including welfare plans, health benefits, vacations and other comparable benefits of employees and corporate officers of Coteau located at Coteau's Mine, and employees of Coteau and Affiliates of Coteau located elsewhere in North Dakota, whose labor costs are properly charged to Coteau's Mine,”

		
	9.
	Subsection 5.2(a)(ix) of the Coteau Lignite Sales Agreement is hereby amended to  read in its entirety as follows:    

		
	"(ix)
	Worker's compensation insurance, either in the state fund or self-insurance, whichever in the best judgment of Coteau is more advantageous,"

		
	10.
	Subsection 5.2(a) of the Coteau Lignite Sales Agreement is hereby amended by adding the following provision at the end thereof:  

“If any of the foregoing items in Subsection 5.2(a) hereof includes costs incurred by an Affiliate of Coteau and charged to Coteau, they shall be included only at the cost to such Affiliate without addition for loading, inter-company profit or service charge and shall be allocated to Coteau on the basis of time spend or (in the case of buildings) space used.”
		
	11.
	Subsection 5.2(b) of the Coteau Lignite Sales Agreement is hereby amended to read in its entirety as follows:    

4

		
	“b)
	The sum of [* * *] per Ton of lignite sold and delivered hereunder (subject to adjustment as set forth herein) shall be added to the Cost of Production for general and administrative costs.  General and administrative costs which are to be

covered by such amount of [* * *] (and are not to be otherwise included in the Cost of Production) are: (i) general accounting and billing expense for those functions performed at locations other than Coteau's Mine, (ii) salaries and  related  expenses, such as payroll taxes, pensions and worker's compensation, of corporate officers and employees of Coteau and corporate officers  and  employees of  Affiliates of  Coteau not  included  in  Subsection 5.2(a)(i) hereof, unless such expenses are specifically approved by Dakota to be charged to the Cost of Production, (iii) travel, telephone, postage and general office expense for persons or services included in general and administrative  costs, (iv) computer hardware and software operated at locations other than Coteau's Mine and other North Dakota facilities, (v) national memberships and contributions of Affiliates of Coteau (vi) audit expense of Coteau and Affiliates of Coteau pursuant to Subsection 6.1(a) hereof and (vii) legal expense of Coteau and Affiliates of Coteau except (A) such legal expense incurred through the use of attorneys who are not employees of Coteau and Affiliates of Coteau (i.e., outside legal counsel) provided that such use of outside legal counsel is approved by the President of Coteau, and (B) such other legal expenses, as are specifically approved by Dakota, in writing, to be charged to the Cost of Production. Such $0.0686 per Ton shall exclude amounts for general insurance expenses. 
Beginning on December 31, 1997, for the year 1997, and by each December 31 thereafter for the preceding calendar year, the amount of [* * *] per Ton of lignite sold and delivered hereunder for general and administrative costs shall be adjusted utilizing the [* * *] published by the U.S. Department of Labor, Bureau of Labor Statistics [* * *] for December, 1996 ([* * *]) as the base, and using the average of the [* * *] for the first eleven months of each calendar year, by:
		
	i)
	One hundred percent (100%) of that portion of the percentage increase or decrease in the average [* * *] relative to the previous year's average [* * *] which is less than or equal to four percent (4%), and

* * * Confidential Treatment Requested

5

		
	i)
	Eighty percent (80%) of that portion of the percentage increase or decrease in the average [* * *] relative to the previous year's average [* * *] which is greater than four percent (4%) and less than eight percent (8%) and

		
	(iii)
	sixty percent (60%) of that portion of the percentage increase or decrease in the average [* * *] relative to the previous year's average [* * *] which is equal to or greater than eight percent (8%).   

Subsequent to each such adjustment, the amount for general and administrative costs shall never be less than [* * *] per Ton of lignite sold and delivered hereunder.  Examples of the aforesaid calculation are attached hereto as Exhibit I and made a part hereof. 
In addition to the amount of [* * *] per Ton of lignite sold and delivered hereunder for general and administrative costs, actual general insurance expenses incurred by Coteau or Affiliates of Coteau applicable to Coteau's Mine shall be included in the general and administrative costs category.  Actual general insurance expenses shall include property, liability and executive risk (directors' and officers', fiduciary, fidelity) insurance.  The types of insurance included in the definition of general insurance may be modified by mutual agreement of Coteau and Dakota.''   
		
	12.
	Section 6.1 of the Coteau Lignite Sales Agreement is hereby amended to read in its entirety as follows:   

		
	“a)
	Coteau shall have an audit of its accounts performed annually by a firm of independent certified public accountants and shall provide Dakota with a copy of such audit.  Coteau or Affiliates of Coteau further shall have the right at any time to have an audit of Coteau's accounts performed by such other parties as Coteau or Affiliates of Coteau deem necessary. 

* * * Confidential Treatment Requested

6

		
	b)
	Dakota shall have the right at any time on reasonable notice in writing to Coteau to examine by its certified public accountants (which may include representatives of Basin Electric or its Affiliate) the records and books of account of Coteau and any Affiliate of Coteau, relating to the items and allocations of cost and production entering into the computation of the Cost of Production.  Payment or payments under Article VII of this Agreement shall not be deemed a waiver of any rights of Dakota to have the price hereunder corrected.”   

		
	13.
	Section 12.3 of the Coteau Lignite Sales Agreement is hereby amended to read in its entirety as follows:   

“Coteau agrees to make all payments due under those leases acquired by or assigned or transferred to Coteau in the Dedicated Lignite in a timely manner, not to permit any default under said leases to occur, not to surrender said leases in whole or in part without the written consent of Dakota and not to encumber, assign or sublease said leases, except in connection with financing pursuant to Section 10.1 hereof.” 
		
	14.
	All of the other terms and provisions of the Coteau Lignite Sales Agreement not expressly amended hereby shall continue and remain in full force and effect.

		
	15.
	This Amendment may be executed in any number of counterparts, each of which, when executed and delivered, shall be an original, but all of which shall collectively constitute one and the same instrument.

IN WITNESS WHEREOF, the Parties have caused this Amendment to be duly executed on their behalf by their authorized representatives as of the day first written above.

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	THE COTEAU PROPERTIES COMPANY

	By /s/ Marc M. Schultz

	Marc M. Schultz

	Its President

	 

	Attest

	/s/ Thomas A. Koza

	    Secretary

	 

	DAKOTA COAL COMPANY

	By /s/ Kent E. Janssen

	Kent E. Janssen

	Its Vice President & Chief Operating Officer

	 

	Attest

	/s/ Mark D. Foss

8

Exhibit I

[* * *]

* * * Confidential Treatment Requested

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