Document:

exv10w5

 

Confidential information has been omitted from this Exhibit and filed
separately with the Commission pursuant to a confidential treatment request
under Rule 24b-2.

Exhibit 10.5

COAL SUPPLY AGREEMENT

     THIS COAL SUPPLY AGREEMENT (hereinafter the “Agreement”) is made and
entered into this 22nd day of July, 2004 by and between Otter Tail Power
Company, a division of Otter Tail Corporation, a Minnesota corporation, having
an address at 215 South Cascade Street, Fergus Falls, MN 56538-0496 (“Otter
Tail”), Montana-Dakota Utilities Co., a division of MDU Resources Inc., a
Delaware corporation, having an address at 400 North Fourth Street, Bismarck,
ND 58501-4022 (“MDU”), and NorthWestern Corporation, a Delaware corporation,
doing business as NorthWestern Energy, having an address at P.O. Box 1318,
Huron, SD 57350-1318 (“NorthWestern”) (Otter Tail, MDU and NorthWestern are
hereinafter collectively referred to as “Buyer”), and Arch Coal Sales Company,
Inc., a Delaware corporation, individually and as agent for the independent
operating subsidiaries of Arch Coal, Inc., having an address of 1 CityPlace
Drive, Suite 300, St. Louis, Missouri 63141 (hereinafter, collectively,
“Seller”), either of which may be referred to hereinafter individually as
“Party” or together as “Parties”. Otter Tail, MDU and NorthWestern shall be
jointly and severally liable for the performance of Buyer’s obligations
hereunder.

WITNESSETH:

     WHEREAS, Buyer is a public utility engaged in the production of
electricity and the furnishing of electric service to the public in the states
of Minnesota, North Dakota, South Dakota and Montana.

     WHEREAS, Buyer needs to secure an adequate supply of coal of the quality
and quantity specified herein to operate the Big Stone Plant located near
Milbank, South Dakota (the “Plant”);

     WHEREAS, Buyer desires to purchase coal in the quantity and of the quality
hereinafter set forth for supplying a portion of the coal used at the Plant;
and

     WHEREAS, Seller desires to supply such coal to Buyer.

     NOW, THEREFORE, for and in consideration of the mutual covenants and
agreements of the Parties contained herein, Seller agrees to produce and sell
to Buyer, and Buyer agrees to purchase, receive and pay for coal from Seller
upon the following terms and conditions:

SECTION 1 — TERM

     1.1 The term of this Agreement shall be for a period of three (3) years
commencing on January 1, 2005 and continuing through December 31, 2007.
Provided, however, that the term of this Agreement may be extended in
accordance with Section 1.2 hereof. Each twelve (12) consecutive month period
within this Agreement commencing January 1 and ending on the subsequent
December 31 shall be designated as a “Contract Year”.

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     1.2 In the event either party desires to extend the Term, such party shall
give notice thereof to the other party at least six (6) months prior to the
expiration of the Term. The parties shall then confer for the purpose of
reaching mutual agreement concerning the terms and conditions for extension of
the Term. In the event that the parties fail to reach agreement concerning
extension of the Term at least thirty (30) days prior to the expiration of the
Term, this Agreement shall then terminate in accordance with Section 1.1.

SECTION 2 — QUANTITY

     2.1 During the Term of this Agreement, Seller shall sell and deliver and
Buyer shall purchase and accept delivery of the following annual quantities:

	 	 	 
	2005

	 	(*) tons
	2006

	 	(*) tons
	2007

	 	(*) tons

Buyer shall notify Seller at least ninety (90) days prior to the start of any
calendar quarter during the Term hereof, of the estimated coal quantities to be
delivered during that calendar quarter.

     2.2 Buyer shall attempt to schedule shipments from Seller in reasonable
equal quarterly and monthly quantities. Buyer shall, not less than three
months before the beginning of each calendar year during the term of this
Agreement, provide Seller with a non-binding shipment schedule outlining the
anticipated deliveries for each month of the upcoming calendar year.
Thereafter, Buyer shall, not less than thirty (30) days before the beginning of
each calendar quarter during the term of this Agreement, provide Seller with an
update to this schedule. (ie. March 1 for the 2nd quarter, June 1 for the 3rd
quarter, September 1 for the 4th quarter, and December 1 for the 1st quarter).

     2.3 If the annual quantity of coal to be delivered under this Agreement is
not delivered for any reason, excluding those reasons set forth in Section 16,
the undelivered quantity shall be delivered during the first quarter of the
succeeding year. Such tonnage shall not exceed (*) tons and shall be invoiced
at the prior year’s price.

SECTION 3 — BASE PRICE

     3.1 The price per ton (2000 lbs.) F.O.B. railcar for each ton of coal
purchased hereunder from the Seller shall be determined based on the Contract
Year as set forth below (the “Base Price”). The Base Price shall be subject to
adjustment under Section 13 hereof.

	 	 	 
	 	 	FOB Railcar at the Mine
	PERIOD
	 	BASE PRICE ($/TON)

	2005
	 	(*)
	2006
	 	(*)
	2007
	 	(*)

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     3.2 The Base Price includes all royalty fees, mineral severance taxes and
fees, black lung fees, and reclamation fees.

     3.3 The Base Price does not include any costs associated with the use and
application of dust suppressant treatment or side release agents. Buyer shall
reimburse Seller for the actual cost of such materials, including applicable
taxes, royalties, and reasonable application costs for the application of dust
suppressant or side release, or other additives.

SECTION 4 – GOVERNMENTAL IMPOSITIONS AND TAXES

     4.1 Seller represents that the Mine (as defined in Section 5 hereof) is in
substantial compliance with all governmental laws, rules and regulations in
effect as of January 1, 2005, and that the cost of such compliance, including
mine closure and all reclamation costs, is included in the Base Price set forth
in Section 3.1. If the imposition or repeal of any law, regulation or ruling
(including changes in interpretations of existing laws, regulations or rulings)
is adopted or becomes effective on or after January 1, 2004 (hereinafter called
“Governmental Imposition”) and the imposition or repeal was not known as of the
date of execution of this Agreement, Seller shall demonstrate to Buyer, to
Buyer’s reasonable satisfaction, that such Governmental Imposition has
increased or decreased the cost of owning or operating the Mine as it relates
to the production of coal from the Mine for sale to Buyer under this Agreement.
Upon agreement of the parties (Buyer’s agreement not to be unreasonably
withheld) the then effective Base Price shall be adjusted by adding or
subtracting the per ton cost of the Governmental Imposition to determine an
adjusted Base Price. If the Government Imposition will continue for the life
of this Agreement, then the Base Price for subsequent Contract Years, if any,
shall also be adjusted by the per ton amount of the Governmental Imposition.

     4.2 Seller shall submit to Buyer in writing, an analysis identifying the
Governmental Imposition causing the cost impact and the extent of such cost
impact on ownership or operation of the Mine or on the production of coal
purchased hereunder and showing the calculation of the amount of change in the
Base Price. The effective date of any price increase pursuant to this Section
4 shall be the later of the date Seller and Buyer agree to such price increase,
such agreement on Buyer’s part not to be unreasonably withheld, or the
effective date of the Governmental Imposition causing the cost increase but, in
no event prior to the date of actual expenditure or accrual thereof by Seller.

SECTION 5 — SOURCE

     5.1 The source of coal to be sold pursuant to this Agreement shall be
mined and supplied only from the Black Thunder Mine located in Campbell County,
Wyoming (the “Mine”) and owned by Thunder Basin Coal Company, L.L.C., provided
that Seller may, with Buyer’s prior approval, such approval not to

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be unreasonably withheld, supply substitute coal from other mines in the
southern Powder River Basin of Wyoming, provided such substitute coal conforms
to the terms and conditions of this Agreement.

     5.2 Seller represents and warrants that the Mine contains economically
recoverable coal of a quality and in quantities which will be sufficient to
satisfy the requirements of this Agreement. Seller further warrants that the
title to all coal delivered under this Agreement shall be good and that such
coal shall be delivered free from any claim, lien or other encumbrance.

SECTION 6 — DELIVERY AND TRANSPORTATION

     6.1 The coal shall be delivered by Seller F.O.B. into Buyer-provided
railcars at the Seller’s loading facilities at the Mine. Buyer shall provide
unit coal trains to take delivery of the coal. The railcars and unit train
shall be compatible with Seller’s trackage, storage and loading facilities and
shall be properly prepared, doors latched and in mechanically sound condition,
to receive coal upon arrival at the Mine. Seller shall not be required to load
any railcar that is not in compliance with these requirements or that is found
to have any debris, extraneous material, or carryback coal. Seller shall load
each railcar at Seller’s expense and shall complete the loading of all railcars
in each unit train within four (4) hours after the first empty railcar is
actually placed by the railroad under the Seller’s loading chute. Seller shall
be responsible for demurrage or other charges charged to Buyer by Buyer’s
railroad carrier, resulting from Seller’s failure to load Buyer’s trains as
provided above, except in the event of a Force Majeure event under Section 16
hereof.

     6.2 Title to and all risk of loss respecting the coal shall pass to the
Buyer at the point of delivery of coal into the railcar.

     6.3 Buyer shall be responsible for arranging for the transportation of the
coal to be sold and delivered hereunder to the Plant. Except as set forth in
Section 6.1 above, all costs associated with the transportation of the coal
shall be for the Buyer’s sole account.

SECTION 7 — DUST TREATMENT/SIDE RELEASE AGENT

     7.1 At Buyer’s request and expense, Seller shall cause dust suppressant,
and/or side release agents (the “Coal Treatment”) to be applied to the coal.
In the event Buyer elects to have Coal Treatment applied to the coal, all Coal
Treatment costs, including any applicable taxes or royalties, shall be charged
to Buyer and shall be included as a separate item on the billing invoice for
each shipment of coal so treated and purchased hereunder. If the Buyer elects
to have any Coal Treatment applied to the coal, Buyer shall verbally notify
Seller, followed by facsimile or other electronic confirmation, prior to the
commencement of loading coal into a unit train for shipment to Buyer. No coal
hereunder is to be treated with any Coal Treatment without Buyer’s advance
request. The cost of the Coal Treatment shall be equivalent to Seller’s

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cost for the Coal Treatment and any related materials, plus the Seller’s cost of application
and the cost of any applicable taxes or royalties.

SECTION 8 — COAL SPECIFICATIONS

     8.1 Quality. Seller agrees that the coal delivered hereunder shall
substantially conform to the following specifications on an “as received” basis
based on a monthly weighted average period. The Typical Short Proximate
Weighted Average Specifications shall mean the weighted average value of the
appropriate quality component, on an as received basis, for all shipments
during a calendar month. As used herein, the term “shipment” shall mean one
(1) trainload. Additional specifications for the Mine are contained in Exhibit
A of this Agreement.

Typical Short Proximate Weighted Average Specifications

(as received basis)

	 	 	 
	Calorific Value (BTU/lb)

	 	(*)
	Ash %

	 	(*)
	Sulfur Dioxide (lb/mmBtu)

	 	(*)
	Moisture %

	 	(*)

     8.2 Size. The coal as received shall be sized to a nominal 3” x 0” size
and shall be run-of-mine coal.

     8.3 BUYER AGREES THAT SELLER MAKES NO EXPRESS WARRANTIES OTHER THAN THOSE
SET FORTH IN THIS AGREEMENT. SELLER MAKES NO WARRANTY CONCERNING THE
SUITABILITY OF COAL DELIVERED HEREUNDER FOR USE IN BUYER’S PLANT, OR OTHER
ELECTRIC GENERATION STATION. ALL WARRANTIES OF MERCHANTABILITY OR OF FITNESS
FOR A PARTICULAR PURPOSE OR ARISING FROM A COURSE OF DEALING OR USAGE OF TRADE
ARE SPECIFICALLY EXCLUDED.

     8.4 Plant Boiler Performance. If the use of coal delivered to Buyer under
this Agreement results in an unacceptable boiler or environmental quality
control performance (including, but not limited to, boiler slagging or boiler
fouling) in its Plant, Buyer shall have the right to give notice to Seller to
immediately suspend further deliveries of coal. If Buyer suspends shipments
under the provisions of this paragraph, promptly thereafter, Buyer and Seller
shall meet to see what reasonable steps may be taken in good faith on the part
of both parties to correct the situation that caused the unacceptable
performance or specifications failure. The parties shall make every reasonable
effort to correct the situation. Should Buyer and Seller fail to reach
agreement within thirty (30) days as to what steps can be taken to correct the
situation, either party may terminate this Agreement after such thirty day
period without further liability to either party on account thereof by giving
notice of termination to the other party; PROVIDED, HOWEVER, that if Seller
notifies Buyer of such termination, Buyer may, within ten (10) days after
receipt

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of the notice, revoke the suspension and obviate such termination whereupon
Seller shall continue to supply coal to Buyer under the terms of this
Agreement. Termination of this Agreement under this paragraph shall release
and discharge Seller and Buyer from their duties and obligations under this
Agreement, the performance of which was not due as of the date of termination.
Buyer may purchase coal from other suppliers and Seller may sell coal to other
purchasers during the time period shipments are suspended under this paragraph.

SECTION 9 —  REJECTION

     9.1 Buyer has the right, but not the obligation, to reject any shipment
which fail(s) to conform to the Trainload Rejection Limits set forth below.

Trainload Rejection Limits

(as received basis)

	 	 	 	 	 
	Calorific Value (BTU/lb)

	 	(*)
	 	Minimum
	Ash %

	 	(*)
	 	Maximum
	Sulfur Dioxide(lb/mmBtu)

	 	(*)
	 	Maximum
	Moisture %

	 	(*)
	 	Maximum

     Buyer must reject such coal within twenty-four (24) hours of receipt of
the short proximate coal analysis provided for in Section 12.2 or such right to
reject is waived. A waiver of this right for any period by Buyer shall not
constitute a waiver for subsequent periods. In the event Buyer rejects such
non-conforming coal, title to and risk of loss of the coal shall be considered
to have never passed to Buyer and Buyer may, at its sole option, stop the
affected shipment in route, prevent the unloading of the affected shipment,
return the coal to Seller or mutually agree with Seller upon a disposition for
such coal shipment, all at Seller’s cost and risk.

     Seller shall replace the rejected coal within twenty (20) working days
from notice of rejection with coal conforming to the Trainload Rejection Limits
set forth above.

     In lieu of rejection, Buyer shall have the option to accept any shipment
that fails to conform to the Trainload Rejection Limits. The price for the
coal in such shipment shall be (*) per ton less than the applicable Base Price
set forth in Section 3, as adjusted by Section 4, provided, however, that such
shipment shall not be included in the Base Price Adjustments set forth in
Section 13.

SECTION 10 — SUSPENSION AND TERMINATION

     10.1 Buyer has the right to suspend future shipments if the coal sold
hereunder fails to meet one or more of the Short Proximate Monthly Weighted
Average Suspension Specifications set forth below for any three (3) consecutive
months.

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Short Proximate Monthly Weighted Average

Suspension Specifications

(As Received Basis)

	 	 	 	 	 
	Calorific Value (BTU/lb)

	 	(*)
	 	Minimum
	Ash %

	 	(*)
	 	Maximum
	Sulfur Dioxide (lb/mmBtu)

	 	(*)
	 	Maximum
	Moisture %

	 	(*)
	 	Maximum

     If Buyer exercises its right to suspend shipments, then Buyer shall so
notify Seller verbally, and confirm such notification in writing, sent to
Seller by certified Mail, facsimile, or other electronic method. Seller shall,
within thirty (30) days of receipt of Buyer’s notice, provide Buyer with
reasonable assurances that subsequent monthly deliveries of coal shall meet or
exceed the Typical Short Proximate Monthly Weighted Averages set forth in
Section 8.1. If Seller fails to provide such assurances within said thirty
(30) day period, Buyer may terminate this Agreement by giving written notice of
such termination at the end of the thirty (30) day period. A waiver of this
right for any one period by Buyer shall not constitute a waiver for subsequent
periods. If Seller provides such assurances to Buyer, shipments hereunder
shall resume and any tonnage deficiencies resulting from suspension may be made
up subject to the mutual agreement of Buyer and Seller. Buyer shall not
unreasonably withhold its acceptance of Seller’s assurances, or delay the
resumption of shipment.

SECTION 11 — WEIGHTS

     11.1 The weight of coal sold and delivered hereunder shall be determined
on a per shipment basis by certified commercial scales at Seller’s train
loading facility at the Mine. The weights thus determined shall be accepted as
the quantity of coal for which invoices are to be rendered and payments made in
accordance with Section 14 hereof. Seller shall furnish the railroad company
transporting the coal with copies of the weights determined hereunder.
Seller’s scales shall be calibrated and tested twice annually with copies of
calibration and testing reports provided to Buyer upon request. If the scales
are found to be over or under the tolerance range allowable for the scale based
on ASTM standards, either party shall pay to the other any amounts owed due to
such inaccuracy for a period not to exceed thirty (30) days before the time any
inaccuracy of scales is determined.

     11.2 If Seller’s scales are not available to determine the valid net
weight of all of the railcars in a unit train but valid weights are obtained
for thirty (30) or more railcars in such train, the arithmetic average of all
of the valid net weights of the thirty (30) or more railcars in such train
shall be used as the net weight for each railcar in such train for which a
valid net weight was not determined by Seller’s scales. If Seller’s scales are
inoperative or fail to determine the valid net weight of at least thirty (30)
railcars in a

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unit train, the weighted arithmetic average of the net railcar weights of the
previous ten (10) unit trainloads of coal shipped to Buyer shall be used as the
net weight for each of the unweighed railcars in such train. The calculation
of the weighted arithmetic average net weight for the previous ten (10) unit
trainloads shall exclude all bad-order railcars which were not loaded and also
exclude any trainload of coal for which the net weights were estimated on
thirty (30) or more railcars.

     11.3 Buyer shall have the right, at its risk and expense, to have a
representative(s) present to witness any and all scale calibrations or
weighings provided that such representative(s) shall comply with all of
Seller’s safety rules and regulations while on the Mine’s premises. Buyer
shall hold Seller harmless from any injury, including death, or damage suffered
by any representative(s) of Seller by reason of such representatives’ presence
on the Mine premises.

SECTION 12 —  SAMPLING AND ANALYSIS

     12.1 Seller shall cause, at its expense, each shipment of coal to be
sampled and analyzed at the Mine in accordance with applicable ASTM standards.
Buyer shall have the right, at its risk and expense, to have a representative
present at any and all times to observe sampling and analysis procedures. All
samples shall be divided into three (3) parts and put in suitable airtight
containers. One part shall be furnished to Buyer for its analysis, one part
shall be retained for analysis by Seller or its designee (which analysis shall
be the basis for payment), and the third part shall be retained by Seller or
its designee in one of the aforesaid containers properly sealed and labeled for
a period forty-five (45) days after the date of sample collection. Buyer’s
samples are to be clearly labeled as to Mine, date of sampling, date of
preparation, and other identification as to shipment (such as train
identification number) and are to be sent within forty-eight (48) hours of
train loading, or prior to arrival of train at destination, whichever comes
first, to Buyer at the address provided in Section 17 hereof.

     12.2 Seller shall perform at Seller’s cost a “short proximate” analysis
(for moisture, ash, sulfur and calorific value) for each trainload sample.

     12.3 If a dispute arises between Buyer and Seller concerning a trainload
sample within forty-five (45) days of the date on which the subject trainload
was loaded due to a difference between Buyer’s and Seller’s analyses that
exceeds ASTM standards for tolerance on at least one parameter, an analysis of
the third part shall be made by an independent commercial testing laboratory,
mutually chosen by Buyer and Seller. The average of the results of the two (2)
closest analyses with respect to the disputed quality characteristic (among
Seller’s, Buyer’s and the independent laboratory’s analyses) shall be
controlling for purposes of the trainload in question. The cost of analysis
made by such independent commercial laboratory shall be borne by the Party
whose analysis is not used in the final determination; provided,

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however, in the event the commercial laboratory’s results are inconclusive and
therefore not used, the cost of the analysis shall be shared equally by the
Parties hereto.

     12.4 Seller shall provide Buyer the results of the short proximate
analysis for each trainload of coal as soon as the results are available, but
in any event prior to the arrival of the subject train at the Plant. Upon
Buyer’s written request and at Buyer’s cost, Seller shall analyze shipments
designated by Buyer for mercury and chlorine content and submit such analysis
to Buyer.

     12.5 The results of the sampling and analysis performed by Seller shall
govern for purposes of determining any adjustments to the Base Price for
variations in calorific value or sulfur content except in the event a dispute
arises under Section 12.3 hereof.

SECTION 13 — BASE PRICE ADJUSTMENTS

     13.1 Calorific Value Adjustment. The Base Price for the coal delivered
during a calendar month hereunder shall be adjusted for variations in calorific
value from the Typical Weighted Average Calorific Value specifications as
expressed in Section 8.1. An adjustment shall be added to or subtracted from,
as the case may be, the Base Price set forth in Section 3 hereof. The
adjustment shall be calculated as follows:

	 	 	 	 	 	 	 	 	 	 	 	 	 
	Adjustment
	 	=
	 	[ Delivered Btu/lb. (as received)
	 	x
	 	Base Price ]
	 	-
	 	Base Price
	
	 	 	 	
 	 	 	 	 	 	 	 	 
	
	 	 	 	(*) BTU/lb.	 	 	 	 	 	 	 	 

     13.2 SO2 Adjustment. If the weighted average pounds of SO2 per million
Btu (lbs.SO2/mmBtu) on an as received basis of all shipments in a calendar
month differs from (*) lbs.SO2/mmBtu, then an SO2 adjustment shall be
calculated using the following formula:

	 	 	 	 	 
	SO2 Adjustment
	 	=
	 	((*) – Actual SO2) x (Actual Btu) x (SO2 Value)
	
	 	 	 	
 
	
	 	 	 	1,000,000

Where:

Actual SO2 = (Monthly weighted average sulfur percent x 20,000) / Monthly
weighted average

Btu.

Actual Btu = Monthly weighted average Btu for all shipments during a
month

SO2 Value = The SO2 Monthly Price for SO2 allowances for the month as
published by Air Daily in the Air Daily Emission Allowance Indices.

     13.3 Any adjustments to Base Price under this Section 13 shall be
subsequently paid or credited in accordance with the payment schedule provided
in Section 14.

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SECTION 14 — INVOICES, BILLING AND PAYMENT

     14.1 Seller shall submit invoices to Buyer for coal delivered during each
month based on the weights determined in accordance with Section 11. Invoices
shall be sent by U.S. Mail to the following: Otter Tail Power Company, Big
Stone Plant, P.O. Box 218, 48450 144th Street, Big Stone City, SD 57216.
Telephone – (605) 862-6300; Facsimile – (605) 862-6344.

     14.2 Payment by Buyer. Buyer shall pay invoices within fifteen (15) days
from its receipt, subject to verification. Payments will be made by wire
transfer to Seller at: PNC Bank NA, Account No. (*), Transit/ABA (*); or to
such other bank account as Seller shall from time to time designate in writing
at least thirty (30) days in advance.

     14.3 Adjustments to Base Price based on variations in calorific value and
sulfur dioxide as provided in Section 13 hereof shall be by separate invoice to
be submitted to Buyer within thirty (30) days following the end of each month.
Buyer agrees to pay the invoiced amount no later than fifteen (15) calendar
days after date of receipt of invoice.

     14.4 Seller may suspend coal deliveries for Buyer’s failure to make
payments as provided herein and may elect to terminate this Agreement if
payments remain unpaid. In the event of termination, any amount due Buyer or
Seller shall be paid in fifteen (15) calendar days after notice of termination.

SECTION 15 — TERMINATION

     15.1 The Parties reserve the right to terminate this Agreement in its
entirety in the event of failure of either party to comply with any of the
provisions or obligations under this Agreement provided that notice of such
failure has been given and not less than thirty (30) days have elapsed with no
curative action having been taken.

SECTION 16 — FORCE MAJEURE

     16.1 The term “Force Majeure” as used herein shall mean causes beyond the
control and without the fault or negligence of the party failing to perform,
including but not limited to: acts of God, acts of public enemy, insurrection,
riots, labor disputes, boycotts, fires and explosions, floods, breakdowns of or
damage to major components of plant, equipment, transmission systems or
transportation, embargoes, acts of judicial or military authorities, acts of
governmental authorities, inability to obtain necessary permits, licenses and
governmental approvals after applying for same with reasonable diligence or
other causes of a similar nature which wholly or partly prevent the producing,
processing, loading, and/or delivery of coal by Seller, or the accepting,
receiving, transporting and/or utilizing of coal by Buyer.

     16.2 Neither party shall be under any obligation nor subject to any
liability (except payment of
invoices for coal already delivered) for failure to perform any of its
obligations under this Agreement as the

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result of a Force Majeure event, and
the obligations of the party claiming Force Majeure shall be suspended to the
extent made necessary by such Force Majeure and during its continuance.

     16.3 The party claiming Force Majeure shall give prompt notice to the
other party as soon as possible after the occurrence of the Force Majeure event
describing the nature of the occurrence and its probable duration. The
suspension of performance shall be of no greater scope and of no longer
duration than is required by the Force Majeure event. The party declaring
Force Majeure shall exercise due diligence to avoid and shorten the Force
Majeure event and will keep the other party advised as to the continuance of
the Force Majeure event. The non-performing party shall use its best efforts to
eliminate such Force Majeure insofar as possible with a minimum of delay and
will keep the other party advised as to the continuance of the Force Majeure
event. Deficiencies in coal deliveries resulting from a Force Majeure event
shall be made up subject to the mutual agreement of the Parties.

SECTION 17 — NOTICES

     17.1 Any notice, request or approval or other document required or
permitted to be given under this Agreement shall be deemed to have been
properly given if in writing and delivered in person, by facsimile
transmission, overnight courier, or U.S. certified mail, return receipt
requested addressed as follows:

	 	 	 
	If to Buyer:

	 	Otter Tail Power Company
	

	 	215 South Cascade Street
	

	 	Fergus Falls, MN 56538-0496
	

	 	ATTN: Production Services
	

	 	Tel. (218) 739-8200
	

	 	Fax. (218) 739-8629
	 
	 	 
	If to Seller:

	 	Arch Coal Sales Company, Inc.
	

	 	1 CityPlace Drive, Suite 300
	

	 	St. Louis, Missouri 63141
	

	 	ATTN: Vice President Contract and Marketing Administration
	

	 	Tel. (314) 994-2751
	

	 	Fax. (314) 994-2719

Each party may designate in writing a different mailing address or fax number
for notices hereunder. Notice by mail is deemed given as of the time of the
postmark on the envelope. Notice by fax is deemed given as of the confirmation
time recorded on the sender’s facsimile transmission.

SECTION 18 — LAWS AND REGULATIONS

     18.1 The Seller shall comply with all applicable federal, state and local
laws, ordinances, statutes, codes, rules, and regulations in the performance of
its obligations under this Agreement.

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SECTION 19 — EQUAL OPPORTUNITY

     19.1 Seller and Buyer are Equal Opportunity Employers, and in the
performance of this Agreement, shall not engage in any conduct or practice
which violates any applicable law, order or regulation prohibiting
discrimination against any person by reason of his or her race, color,
religion, national origin, sex or age.

SECTION 20 — DOCUMENTATION AND RIGHT OF AUDIT

     20.1 Seller shall maintain all records and accounts pertaining to
payments, quantities, quality analyses and source of all coal supplied under
this Agreement for a period lasting through the term of this Agreement and for
two (2) years thereafter. Buyer shall have the right, at no additional
expenses to Seller, to audit, copy and inspect such records and accounts at any
reasonable time upon reasonable notice during the term of this Agreement and
for two (2) years thereafter. The costs associated with any audits which may
be performed at the request of Buyer shall be borne by Buyer.

SECTION 21 — WAIVER

     21.1 The failure of either party hereto to enforce any provision of this
Agreement shall not be construed as a waiver of such provision or the right
thereafter to enforce the same. No waiver by either party of any breach by the
other party of any of the provisions of this Agreement will be construed as a
waiver of any subsequent breach, whether of the same or of a different
provision in this Agreement. Any remedy provided for herein is optional and
shall not preclude either party from asserting any other remedy at law or in
equity. The assertion or non-assertion of any remedy shall not operate to the
exclusion of any other remedy.

SECTION 22 — MISCELLANEOUS

     22.1 Governing Law. This Agreement shall be subject to and governed by
the laws of the State of Wyoming.

     22.2 Limitation of Liability. In no event shall either party have any
liability to the other party for any special, incidental or consequential
damages, including lost profits, for any reason arising out of, or in
connection with this Agreement.

     22.3 Binding Effect. This Agreement shall inure to the benefit of and be
binding on the parties hereto, their successors and assigns.

     22.4 Assignment. Neither party hereto may assign this Agreement or any
rights or obligations hereunder, in whole or in part, without the prior written
consent of the other party, which consent shall not
be unreasonably withheld or denied. Notwithstanding the foregoing,
either Party may, without the need

12

 

for consent from the other Party transfer,
sell, pledge, encumber or assign this Agreement and/or the accounts, revenues
or proceeds hereof or thereof in connection with any financing or other
financial arrangements (without relieving itself from liability hereunder).
Further, consent shall not be required for merger, consolidation or sale of all
or substantially all of the assets of a Party or upon the merger or
consolidation or liquidation of one operating subsidiary with or into another
party hereto.

22.5 Severability. If any provision of this Agreement is found to be
contrary to law or unenforceable by a court of competent jurisdiction, the
remaining provisions shall be severable and enforceable in accordance with
their terms, unless such unlawful or unenforceable provision is material to the
transactions contemplated hereby, in which case the parties shall negotiate in
good faith a substitute provision.

22.6 Amendments. Except as otherwise provided herein, this Agreement may
not be amended, supplemented or otherwise modified except by written instrument
signed by duly authorized representatives of the parties hereto.

22.7 Headings. The descriptive headings contained in this Agreement are
for convenience only and do not constitute a part of this Agreement.

22.8 Entire Agreement. This Agreement contains the entire agreement and
understanding between the parties hereto with respect to the subject matter
hereof and there are no representations, understandings or agreements, oral or
written, expressed or implied, that are not included herein.

22.9 Survival. At the time of termination of this Agreement or any
cancellation hereof, the appropriate provisions hereof shall survive as
necessary to complete any payment or credit provided for hereunder with respect
to coal sold and delivered prior to the date of such termination or
cancellation.

13

 

     IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their duly authorized representatives as of the day and year first
above written.

	 	 	 	 	 	 	 
	BUYER:	 	SELLER:
	 
	 	 	 	 	 	 
	Otter Tail Power Company	 	Arch Coal Sales Company, Inc.,
	a division of Otter Tail Corporation	 	individually and as agent for the
independent operating subsidiaries of
Arch Coal, Inc.
	 
	 	 	 	 	 	 
	By:

	 	/s/ Ward Uggerud

	 	By:
	 	/s/ Dave Warnecke

	Title:

	 	Sr. Vice President, Supply
	 	Title:
	 	Sr. V.P.
	 
	 	 	 	 	 	 
	NorthWestern Corporation doing	 	 	 	 
	business as NorthWestern Energy	 	 	 	 
	 
	 	 	 	 	 	 
	By:

	 	/s/ Michael J. Hanson

	 	 	 	 
	Title:

	 	Chief Operating Officer	 	 	 	 
	 
	 	 	 	 	 	 
	Montana-Dakota Utilities Co.,	 	 	 	 
	a division of MDU Resources, Inc.	 	 	 	 
	 
	 	 	 	 	 	 
	By:

	 	/s/ Andrea Stomberg

	 	 	 	 
	Title:

	 	V.P. Electric Supply	 	 	 	 

14

 

Exhibit A

Page 1 of 2

Typical Quality Specifications

Black Thunder

Compliance - Low Ash

4th Quarter 2003 - 1st Quarter 2004 Average

(*)

 

 

Exhibit A

Page 2 of 2

Typical Quality Specifications - Trace Elements

Black Thunder

All Values in Parts per Million (PPM)

4th Quarter 2003 - 1st Quarter 2004 Average

(*)

(*)  Confidential
information has been omitted and filed separately with the
Commission pursuant to Rule 24b-2.exv10w1

 

EXHIBIT 10.1

DEAN FOODS COMPANY

NONQUALIFIED STOCK OPTION AGREEMENT

     THIS AGREEMENT (the “Agreement”), effective as of the date indicated on
the attached Notice of Grant, is made and entered into by and between Dean
Foods Company, a Delaware corporation (the “Company”), and the individual named
on the cover page of this Agreement (the “Participant”).

WITNESSETH:

     WHEREAS, the Board of Directors of the Company has adopted and approved
the Dean Foods Company Sixth Amended and Restated 1997 Stock Option and
Restricted Stock Plan (the “Plan”), which was approved as required by the
Company’s stockholders and provides for the grant of Options and Restricted
Stock to certain Employees and Non-Employee Directors of the Company and its
Subsidiaries. Capitalized terms used and not otherwise defined in this
Agreement shall have the meanings set forth in the Plan; and

     WHEREAS, the Options and Restricted Stock provided for under the Plan are
intended to comply with the requirements of Rule 16b-3 under the Exchange Act;
and

     WHEREAS, the Committee has selected the Participant to participate in the
Plan and has awarded the Nonqualified Option described in this Agreement (the
“Option”) to the Participant; and

     WHEREAS, the parties hereto desire to evidence in writing the terms and
conditions of the Option.

     NOW, THEREFORE, in consideration of the foregoing and of the mutual
covenants and agreements herein contained, and as an inducement to the
Participant to continue as an employee of the Company (or its Subsidiaries) and
to promote the success of the business of the Company and its Subsidiaries, the
parties hereby agree as follows:

     1. Grant of Option. The Company hereby grants to the Participant,
effective as of the date shown on the attached Notice of Grant (the “Date of
Grant”), and on the terms and subject to the conditions, limitations and
restrictions set forth in the Plan and in this Agreement, an Option to purchase
all or any portion of the number of shares shown on the attached Notice of
Grant for the per share price shown on the attached Notice of Grant (the
“Exercise Price”). The Participant hereby accepts the Option from the Company.

     2. Vesting. The shares of Common Stock subject to the Option shall vest
ratably in three equal annual increments commencing on the first anniversary of
the Date of Grant. In addition to the vesting provisions contained in the
foregoing sentence, the shares of Common Stock subject to the Options shall
also be subject to the following vesting provisions:

2004 Grant

 

 

          (a) If the Company shall sell or otherwise divest all of its ownership
interest in any Subsidiary or any business unit or operation (a “Divested
Business Unit”) owned by the Company or any Subsidiary, then the outstanding
unvested shares subject to the Options then held by the Participant, if the
Participant is an employee of such Divested Business Unit, shall automatically
vest in full as of the date of consummation of such sale or divestiture;

          (b) Each unvested share of Common Stock subject to the Option shall
immediately vest in full upon the death of the Participant;

          (c) Each share of Common Stock subject to the Option shall immediately
vest in full upon any Change in Control;

          (d) Each unvested share subject to this Option shall immediately vest in
full upon the permanent and total disability (as defined within the meaning of
Section 22(e)(3) of the Code of the Participant; and

          (e) In the event of the Qualifying Retirement of the Participant, all
unvested shares subject to this Option shall automatically vest in full as of
the effective date of the Participant’s Qualifying Retirement.

     3. Exercise. In order to exercise the Option with respect to any vested
portion, the Participant shall notify the Company in writing, either sent to
the Corporate Secretary’s attention at the Company’s principal office or via
the internet through E*Trade (the Company’s plan broker) at
www.optionslink.com. At the time of exercise, the Participant shall pay to the
Company the Exercise Price set forth on the cover page of this Agreement times
the number of vested shares as to which the Option is being exercised. The
Option will not be deemed to be exercised and shares will not be issued until
the applicable Exercise Price is received by the Company. The Participant
shall make such payment in cash, check or wire transfer.

     If the shares to be purchased are covered by an effective registration
statement under the Securities Act of 1933, as amended (the “Act”), the Option
may be exercised by a broker-dealer acting on behalf of the Participant if (a)
the broker-dealer has received from the Company confirmation of the existence
and validity of the Option to be exercised, and the Company has received
instructions from the Participant requesting the Company to deliver the shares
of Common Stock subject to such option to the broker-dealer on behalf of the
Participant and specifying the account into which such shares should be
deposited, (b) adequate provision has been made with respect to the payment of
any withholding taxes due upon such exercise, and (c) the broker-dealer and the
Participant have otherwise complied with Section 220.3(e)(4) of Regulation T,
12 CFR Part 220, or any successor provision, and any other applicable
regulations.

     4. Expiration of Option. The Option shall expire, and shall not be
exercisable with respect to any vested portion as to which the Option has not
been exercised, on the first to occur of: (a) the tenth anniversary of the Date
of Grant; (b) 60 days after any termination of the Participant’s employment
with the Company or any Subsidiary for any reason (including because the
Participant is an employee of a Divested Business Unit) other than death,
Qualifying Retirement, or permanent and total disability, or (c) 12 months
following the date the Participant ceases to be an employee of the Company or a
Subsidiary, if such cessation of service is due to the death or permanent and
total disability (as defined above) of the Participant. Options held by

2004 Grant

2

 

Participant after his or her Qualifying Retirement will remain exercisable
until the earlier of (i) the tenth anniversary of the date the Option was
granted, and (ii) the first anniversary of the Participant’s death. Upon the
death of Participant, any vested Option exercisable on the date of death may be
exercised by the Participant’s estate or by a person who acquires the right to
exercise such Option by bequest or inheritance or by reason of the death of
Participant, provided that such exercise occurs within the shorter of the
remaining option term of the Option and twelve months after the date of the
Participant’s death. Notwithstanding any provision of the Plan or this
Agreement to the contrary, Participant may not, under any circumstances,
exercise a vested Option following termination of employment if Participant is
discharged due to Participant’s willful or intentional fraud, embezzlement or
other conduct seriously detrimental to the Company or any Subsidiary. The
determination of whether or not Participant has been discharged for any of the
reasons specified in the preceding sentence will be made by the Committee.

     5. Tax Withholding. Any provision of this Agreement to the contrary
notwithstanding, the Company may take such steps as it deems necessary or
desirable for the withholding of any taxes that it is required by law or
regulation of any governmental authority, federal, state or local, domestic or
foreign, to withhold in connection with any of the shares of Common Stock
subject hereto.

     6. Transfer of Option. The Option is not transferable except in
accordance with the provisions of the Plan.

     7. Certain Legal Restrictions. The Company shall not be obligated to sell
or issue any shares of Common Stock upon the exercise of the Option or
otherwise unless the issuance and delivery of such shares shall comply with all
relevant provisions of law and other legal requirements including, without
limitation, any applicable federal or state securities laws and the
requirements of any stock exchange upon which shares of the Common Stock may
then be listed. As a condition to the exercise of the Option or the sale by
the Company of any additional shares of Common Stock to the Participant, the
Company may require the Participant to make such representations and warranties
as may be necessary to assure the availability of an exemption from the
registration requirements of applicable federal or state securities laws. The
Company shall not be liable for refusing to sell or issue any shares if the
Company cannot obtain authority from the appropriate regulatory bodies deemed
by the Company to be necessary to lawfully sell or issue such shares. In
addition, the Company shall have no obligation to the Participant, express or
implied, to list, register or otherwise qualify any of the Participant’s shares
of Common Stock.

     8. Plan Incorporated. The Participant accepts the Option subject to all
the provisions of the Plan, which are incorporated into this Agreement,
including the provisions that authorize the Committee to administer and
interpret the Plan and which provide that the Committee’s decisions,
determinations and interpretations with respect to the Plan are final and
conclusive on all persons affected thereby. Except as otherwise set forth in
this Agreement, terms defined in the Plan have the same meanings herein.

     9. Assignment of Intellectual Property Rights. In consideration of the
granting of the Option the Participant hereby agrees that all right, title and
interest to any and all products, improvements or processes (“Intellectual
Property”) whatsoever, discovered, invented or

2004 Grant

3

 

conceived during the course of employment with the Company or any of its
Subsidiaries, relating to the subject matter of the business of the Company or
any of its Subsidiaries or which may be directly or indirectly utilized in
connection therewith, are vested in the Company, and the Participant hereby
forever waives any and all interest he or she may have in such Intellectual
Property and agrees to assign such Intellectual Property to the Company. In
addition, all writings produced in the course of work or employment for the
Company or any Subsidiary are works produced for hire and the property of the
Company and its Subsidiaries, including any copyrights for those writings.

     10. Miscellaneous.

          (a) No ISO Treatment. The Option is intended to be a non-qualified stock
option under applicable tax laws, and it is not to be characterized or treated
as an incentive stock option under such laws.

          (b) No Guaranteed Employment. The granting of the Option shall impose no
obligation upon the Participant to exercise the Option or any part thereof.
Nothing contained in this Agreement shall affect the right of the Company to
terminate the Participant at any time, with or without cause, or shall be
deemed to create any rights to employment on the part of the Participant. The
rights and obligations arising under this Agreement are not intended to and do
not affect the employment relationship that otherwise exists between the
Company and the Participant, whether such employment relationship is at will or
defined by an employment contract. Moreover, this Agreement is not intended to
and does not amend any existing employment contract between the Company and the
Participant; to the extent there is a conflict between this Agreement and such
an employment contract, the employment contract shall govern and take priority.

          (c) No Stockholder Rights. Neither the Participant nor any person
claiming under or through the Participant shall be or shall have any of the
rights or privileges of a stockholder of the Company in respect of any of the
shares issuable upon the exercise of the Option herein unless and until
certificates representing such shares shall have been issued and delivered to
the Participant or such Participant’s agent.

          (d) Notices. Any notice to be given to the Company under the terms of
this Agreement or any delivery of the Option to the Company shall be addressed
to the Company at its principal executive offices, and any notice to be given
to the Participant shall be addressed to the Participant at the address set
forth on the attached Notice of Grant, or at such other address for a party as
such party may hereafter designate in writing to the other. Any such notice
shall be deemed to have been duly given if mailed, postage prepaid, addressed
as aforesaid.

          (e) Binding Agreement. Subject to the limitations in this Agreement on
the transferability by the Participant of the Option and any shares of Common
Stock, this Agreement shall be binding upon and inure to the benefit of the
representatives, executors, successors or beneficiaries of the parties hereto.

          (f) Governing Law. The interpretation, performance and enforcement of
this Agreement shall be governed by the laws of the State of Delaware and the
United States, as applicable, without reference to the conflict of laws
provisions thereof.

2004 Grant

4

 

          (g) Severability. If any provision of this Agreement is declared or found
to be illegal, unenforceable or void, in whole or in part, then the parties
shall be relieved of all obligations arising under such provision, but only to
the extent that it is illegal, unenforceable or void, it being the intent and
agreement of the parties that this Agreement shall be deemed amended by
modifying such provision to the extent necessary to make it legal and
enforceable while preserving its intent or, if that is not possible, by
substituting therefor another provision that is legal and enforceable and
achieves the same objectives.

          (h) Interpretation. All section titles and captions in this Agreement are
for convenience only, shall not be deemed part of this Agreement, and in no way
shall define, limit, extend or describe the scope or intent of any provisions
of this Agreement.

          (i) Entire Agreement. This Agreement constitutes the entire agreement
among the parties hereto pertaining to the subject matter hereof and supersedes
all prior agreements and understandings pertaining thereto.

          (j) No Waiver. No failure by any party to insist upon the strict
performance of any covenant, duty, agreement or condition of this Agreement or
to exercise any right or remedy consequent upon a breach thereof shall
constitute waiver of any such breach or any other covenant, duty, agreement or
condition.

          (k) Counterparts. This Agreement may be executed in counterparts, all of
which together shall constitute one agreement binding on all the parties
hereto, notwithstanding that all such parties are not signatories to the
original or the same counterpart.

          (l) Relief. In addition to all other rights or remedies available at law
or in equity, the Company shall be entitled to injunctive and other equitable
relief to prevent or enjoin any violation of the provisions of this Agreement.

2004 Grant

5

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