United States
                       Securities and Exchange Commission
                             Washington, D.C. 20549

                                    Form 10-Q

X    QUARTERLY  REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES  EXCHANGE ACT
     OF 1934

     For the quarterly period ended September 30, 2002.

OR

___  TRANSITION  REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES ACT OF
     1934

     For the transition period from _______________ to _______________.

     Commission File Number 001-31303

                             Black Hills Corporation
        Incorporated in South Dakota IRS Identification Number 46-0458824

                                625 Ninth Street
                         Rapid City, South Dakota 57701

                  Registrant's telephone number (605)-721-1700

Former name, former address, and former fiscal year if changed since last report

                                      NONE

Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.

                 Yes     X                                   No
                    ----------                                 ----------

Indicate the number of shares outstanding of each of the issuer's classes of
common stock as of the last practicable date.

         Class                                 Outstanding at October 31, 2002

Common stock, $1.00 par value                            26,903,626 shares

                                       1

                             BLACK HILLS CORPORATION

                                    I N D E X

                                                                         Page
                                                                        Number

PART I.           FINANCIAL INFORMATION

Item 1.           Financial Statements

                  Condensed Consolidated Statements of Income-            3
                    Three and Nine Months
                    Ended September 30, 2002 and 2001

                  Condensed Consolidated Balance Sheets-                  4
                    September 30, 2002, December 31, 2001
                    and September 30, 2001

                  Condensed Consolidated Statements of Cash Flows-        5
                   Nine Months Ended
                    September 30, 2002 and 2001

                  Notes to Condensed Consolidated Financial Statements    6-23

Item 2.           Management's Discussion and Analysis of                 24-44
                    Financial Condition and Results of Operations

Item 3.           Quantitative and Qualitative Disclosures about          44
                    Market Risk

Item 4.           Controls and Procedures                                 44

PART II.          OTHER INFORMATION

Item 1.           Legal Proceedings                                       45

Item 6.           Exhibits and Reports on Form 8-K                        45

Signatures                                                                47

                                       2

                             BLACK HILLS CORPORATION
                   CONDENSED CONSOLIDATED STATEMENTS OF INCOME
                                   (unaudited)

                                                                     Three Months Ended                      Nine Months Ended
                                                                        September 30                            September 30
                                                                  2002                2001                2002                2001
                                                                  ----                ----                ----                ----
                                                                              (in thousands, except per share amounts)

Operating revenues                                             $  112,572         $   94,813         $   312,215        $   365,800
                                                               ----------         ----------         -----------        -----------

Operating expenses:
    Fuel and purchased power                                       22,426             18,680              52,695             64,994
    Operations and maintenance                                     16,670             15,252              47,296             43,051
    Administrative and general                                     15,264             12,165              46,118             58,262
    Depreciation, depletion and amortization                       17,691             14,201              52,027             38,605
    Taxes, other than income taxes                                  5,983              5,656              17,889             16,637
                                                               ----------         ----------         -----------        -----------
                                                                   78,034             65,954             216,025            221,549
                                                               ----------         ----------         -----------        -----------

Equity in earnings of unconsolidated affiliates                       907              1,958               4,187             11,066
                                                               ----------         ----------         -----------        -----------

Operating income                                                   35,445             30,817             100,377            155,317
                                                               ----------         ----------         -----------        -----------
Other income (expense):
    Interest expense                                              (10,020)            (9,213)            (30,171)           (29,181)
    Interest income                                                   428                725               1,748              1,804
    Other expense                                                    (864)              (713)               (206)            (1,024)
    Other income                                                      385              5,807               2,654             10,133
                                                               ----------         ----------         ------------        ----------
                                                                  (10,071)            (3,394)            (25,975)           (18,268)
                                                               ----------         ----------         -----------         ----------
Income from continuing operations before minority
 interest, income taxes and change in accounting principle         25,374             27,423              74,402            137,049
Minority interest                                                   1,488                163              (2,614)            (4,408)
Income taxes                                                       (9,413)           (10,582)            (24,725)           (49,672)
                                                               ----------         ----------         -----------         ----------

Income from continuing operations before change in
  accounting principle                                             17,449             17,004              47,063             82,969
Income (Loss) from discontinued operations, net of taxes                -               (638)             (2,637)               342
Change in accounting principle, net of taxes                            -                  -                 896                  -
                                                               ----------         ----------         -----------         ----------

          Net income                                               17,449             16,366              45,322             83,311
Preferred stock dividends                                             (56)              (131)               (168)              (473)
                                                               ----------         ----------         -----------         ----------
Net income available for common stock                          $   17,393         $   16,235         $    45,154         $   82,838
                                                               ==========         ==========         ===========         ==========
Weighted average common shares outstanding:
    Basic                                                          26,835             26,425              26,778             24,988
                                                               ==========         ==========         ===========         ==========
    Diluted                                                        27,078             26,802              27,052             25,404
                                                               ==========         ==========         ===========         ==========
Earnings per share:
Basic-
      Continuing operations                                    $    0.65          $    0.64          $     1.75          $     3.30
      Discontinued operations                                          -              (0.03)              (0.09)                .02
      Change in accounting principle                                   -                  -                0.03                   -
                                                               ---------          ---------          ----------         -----------
      Total                                                    $    0.65          $    0.61          $     1.69         $      3.32
                                                               =========          =========          ==========         ===========
Diluted-
      Continuing operations                                    $    0.64          $    0.63          $     1.74         $      3.27
      Discontinued operations                                          -              (0.02)              (0.09)               0.01
      Change in accounting principle                                   -                  -                0.03                   -
                                                               ---------          ---------          ----------         -----------
      Total                                                    $    0.64          $    0.61          $     1.68         $      3.28
                                                               =========          =========          ==========         ===========

Dividends paid per share of common stock                       $    0.29          $    0.28          $     0.87         $      0.84
                                                               =========          =========          ==========         ===========

The accompanying notes to condensed consolidated financial statements are an
integral part of these condensed consolidated financial statements.

                                       3

                             BLACK HILLS CORPORATION
                      CONDENSED CONSOLIDATED BALANCE SHEETS
                                   (unaudited)

                                                                        September 30       December 31       September 30
                                                                            2002              2001               2001
                                                                            ----              ----               ----
                                                                               (in thousands, except share amounts)
                               ASSETS
Current assets:
                                                                                                      
    Cash and cash equivalents                                           $    74,778       $    29,956        $    52,057
    Securities available-for-sale                                                 -             3,550              3,770
    Receivables (net of allowance for doubtful accounts of $3,361,
      $5,913 and $5,226, respectively) -                                    157,754           110,831            116,898
    Derivative assets                                                        44,244            38,144             62,383
    Other assets                                                             40,571            29,992             36,455
    Assets of discontinued operations                                             -            10,090             12,971
                                                                        -----------       -----------        -----------
                                                                            317,347           222,563            284,534
                                                                        -----------       -----------        -----------
Investments                                                                  19,920            59,895             61,284
                                                                        -----------       -----------        -----------

Property, plant and equipment                                             1,829,247         1,564,664          1,499,231
    Less accumulated depreciation and depletion                            (398,137)         (328,325)          (312,109)
                                                                        -----------       -----------       ------------
                                                                          1,431,110         1,236,339          1,187,122
                                                                        -----------       -----------       ------------
Other assets:
    Derivatives assets                                                        2,244             6,407              1,752
    Goodwill                                                                 30,182            28,693             30,169
    Intangible assets                                                        79,369            86,528             65,083
    Other                                                                    23,750            18,342             16,824
                                                                        -----------       -----------      -------------
                                                                            135,545           139,970            113,828
                                                                        -----------       -----------       ------------
                                                                        $ 1,903,922       $ 1,658,767         $1,646,768
                                                                        ===========       ===========         ==========
                LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
    Accounts payable                                                    $   142,464       $    96,218        $   103,627
    Accrued liabilities                                                      41,912            39,085             54,835
    Current maturities of long-term debt                                     17,306            35,904             20,513
    Notes payable                                                           383,521           360,450            319,000
    Derivative liabilities                                                   47,831            42,681             64,121
    Liabilities of discontinued operations                                        -             8,820             11,777
                                                                        -----------       -----------       ------------
                                                                            633,034           583,158            573,873
                                                                        -----------       -----------       ------------
Long-term debt, net of current maturities                                   561,399           415,798            434,993
                                                                        -----------       -----------       ------------
Deferred credits and other liabilities:
    Federal income taxes                                                    104,855            75,302             64,629
    Derivative liabilities                                                   10,897             7,119              1,636
    Other                                                                    42,294            42,693             39,690
                                                                        -----------       -----------       ------------
                                                                            158,046           125,114            105,955
                                                                        -----------       -----------       ------------

Minority interest in subsidiaries                                            16,616            19,533             25,940
                                                                        -----------       -----------       ------------
Stockholders' equity:
   Preferred stock - no par Series 2000-A; 21,500 shares
    authorized; Issued and Outstanding: 5,177 shares                          5,549             5,549              5,549
                                                                        -----------       -----------       ------------
   Common stock equity-
    Common stock $1 par value; 100,000,000 shares authorized;
      Issued: 27,056,390; 26,890,943 and 26,830,267 shares,
       respectively                                                          27,056            26,891             26,830
    Additional paid-in capital                                              243,599           240,454            238,506
    Retained earnings                                                       272,339           250,515            253,240
    Treasury stock, at cost                                                  (1,756)           (4,503)            (8,841)
    Accumulated other comprehensive loss                                    (11,960)           (3,742)            (9,277)
                                                                        -----------       -----------       ------------
                                                                            529,278           509,615            500,458
                                                                        -----------       -----------       ------------
    Total stockholders' equity                                              534,827           515,164            506,007
                                                                        -----------       -----------       ------------
                                                                         $1,903,922       $ 1,658,767       $  1,646,768
                                                                        ===========       ===========       ============

The accompanying notes to condensed consolidated financial statements are an
integral part of these condensed consolidated financial statements.

                                       4

                             BLACK HILLS CORPORATION
                 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                                   (unaudited)

                                                                                        Nine Months Ended
                                                                                          September 30
                                                                                   2002                  2001
                                                                                   ----                  ----
                                                                                         (in thousands)
Operating activities:
                                                                                               
     Net income available for common                                            $  45,154            $   82,838
     Adjustments to reconcile net income available for common to net cash
       provided by operating activities:
        (Income) loss from discontinued operations                                  2,637                  (342)
        Depreciation, depletion and amortization                                   52,027                38,605
        Net change in derivative assets and liabilities                            (5,286)              (10,978)
        Deferred income taxes                                                      34,237                 1,950
        Undistributed earnings in associated companies                             (4,328)               (8,580)
        Minority interest                                                           2,614                 4,408
        Accounting change                                                            (896)                    -
     Change in operating assets and liabilities-
        Accounts receivable and other current assets                              (53,085)              166,045
        Accounts payable and other current liabilities                             48,012              (132,854)
        Other, net                                                                 (6,361)                  873
                                                                                ---------            ----------
                                                                                  114,725               141,965
                                                                                ---------            ----------

Investing activities:
     Property, plant and equipment additions                                     (174,946)             (441,778)
     Payment for acquisition of net assets, net of cash acquired                  (23,229)              (10,410)
     Payment for intangible assets, including goodwill                                  -               (50,413)
     Payment for acquisition of minority interest                                  (3,617)                    -
                                                                                ---------            ----------
                                                                                 (201,792)             (502,601)
                                                                                ---------            ----------

Financing activities:
     Dividends paid on common stock                                               (23,326)              (20,752)
     Treasury stock sold, net                                                       2,747                   226
     Common stock issued                                                            3,310               167,980
     Increase in short-term borrowings, net                                        23,071               108,000
     Long-term debt - issuance                                                    156,133               145,649
     Long-term debt - repayments                                                  (29,130)              (11,195)
     Subsidiary distributions to minority interests                                  (916)               (1,505)
                                                                                ---------            ----------
                                                                                  131,889               388,403
                                                                                ---------            ----------

        Increase in cash and cash equivalents                                      44,822                27,767

Cash and cash equivalents:
     Beginning of period                                                           29,956                24,290
                                                                                ---------            ----------
     End of period                                                              $  74,778            $   52,057
                                                                                =========            ==========

Supplemental disclosure of cash flow information:

     Cash paid during the period for-
        Interest                                                                $  31,240            $   28,776
        Income taxes                                                            $     754            $   34,800

Non-cash net assets acquired through issuance of common and preferred           $       -            $    3,628
stock

The accompanying notes to condensed consolidated financial statements are an
integral part of these condensed consolidated financial statements.

                                       5

                             BLACK HILLS CORPORATION

              Notes to Condensed Consolidated Financial Statements
                                   (unaudited)
              (Reference is made to Notes to Consolidated Financial
                   Statements included in the Company's Annual
                              Report on Form 10-K)

(1)      MANAGEMENT'S STATEMENT

         The financial statements included herein have been prepared by Black
         Hills Corporation (the Company) without audit, pursuant to the rules
         and regulations of the Securities and Exchange Commission. Certain
         information and footnote disclosures normally included in financial
         statements prepared in accordance with accounting principles generally
         accepted in the United States have been condensed or omitted pursuant
         to such rules and regulations; however, the Company believes that the
         footnotes adequately disclose the information presented. These
         financial statements should be read in conjunction with the financial
         statements and the notes thereto, included in the Company's 2001 Annual
         Report on Form 10-K filed with the Securities and Exchange Commission.

         Accounting methods historically employed require certain estimates as
         of interim dates. The information furnished in the accompanying
         financial statements reflects all adjustments which are, in the opinion
         of management, necessary for a fair presentation of the September 30,
         2002, December 31, 2001 and September 30, 2001, financial information
         and are of a normal recurring nature. The results of operations for the
         three and nine months ended September 30, 2002, are not necessarily
         indicative of the results to be expected for the full year. All
         earnings per share amounts discussed refer to diluted earnings per
         share unless otherwise noted.

(2)      RECLASSIFICATIONS

         Realized and unrealized gains and losses under energy trading contracts
         in the energy marketing segment have been reclassified to be presented
         on a net basis in Operating revenues on the accompanying Condensed
         Consolidated Statements of Income in accordance with Emerging Issues
         Task Force (EITF) Issue No. 98-10, "Accounting for Contracts Involved
         in Energy Trading and Risk Management Activities. If the company had
         reported these items on a gross basis, both operating revenues and fuel
         and purchased power costs would have been $264.4 million and $195.0
         million higher for the three months ended September 30, 2002 and 2001,
         respectively, and $752.7 million and $879.3 million more for the nine
         months ended September 30, 2002 and 2001, respectively. The net
         presentation of these items rather than a gross presentation has no
         impact on operating income or net income.

         In addition, certain other 2001 amounts in the financial statements
         have been reclassified to conform to the 2002 presentation. These
         reclassifications did not have an effect on the Company's total
         stockholders' equity or net income available for common stock as
         previously reported.

                                       6

(3)      RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS

         In June 2001, the Financial Accounting Standards Board (FASB) issued
         Statement of Financial Accounting Standards No. 143, "Accounting for
         Asset Retirement Obligations" (SFAS 143). SFAS 143 requires that the
         fair value of a liability for an asset retirement obligation be
         recognized in the period in which it is incurred with the associated
         asset retirement costs being capitalized as part of the carrying amount
         of the long-lived asset. Over time, the liability is accreted to its
         present value each period and the capitalized cost is depreciated over
         the useful life of the related asset. Management will adopt SFAS 143
         effective January 1, 2003 and is currently evaluating the effects
         adoption will have on the Company's consolidated financial statements.

         During June 2002, the Emerging Issues Task Force (EITF) reached a
         consensus on Issues 1 and 3 of EITF Issue No. 02-3, "Recognition and
         Reporting of Gains and Losses on Energy Trading Contracts under EITF
         Issue No. 98-10, "Accounting for Contracts Involved in Energy Trading
         and Risk Management Activities," and No. 00-17, "Measuring the Fair
         Value of Energy-Related Contracts in Applying Issue No. 98-10."

         At a meeting on October 25, 2002, the EITF reached new consensuses that
         effectively supersede the consensus on EITF 02-3, reached at its June
         2002 meeting. At its October 2002 meeting, the EITF reached a consensus
         to rescind EITF 98-10, the impact of which is to preclude
         mark-to-market accounting for all energy trading contracts not within
         the scope of FASB Statement No. 133, "Accounting for Derivative
         Instruments and Hedging Activities." The EITF also reached a consensus
         that gains and losses on derivative instruments within the scope of
         Statement 133 should be shown net in the income statement if the
         derivative instruments are held for trading purposes. The consensus
         regarding the rescission of Issue 98-10 is applicable for fiscal
         periods beginning after December 15, 2002. Energy trading contracts not
         within the scope of Statement 133 entered into after October 25, 2002,
         but prior to the implementation of the consensus are not permitted to
         apply mark-to-market accounting. The Company has not yet quantified the
         financial statement effect of this EITF action. The Company currently
         reports its energy trading activities on a net basis.

(4)      RECENTLY ADOPTED ACCOUNTING PRONOUNCEMENTS

         In June 2001, the FASB issued Statement of Financial Accounting
         Standards No. 141, "Business Combinations," (SFAS 141) and No. 142,
         "Goodwill and Other Intangible Assets" (SFAS 142). The Company has
         adopted SFAS 141, which requires all business combinations initiated
         after June 30, 2001 to be accounted for using the purchase method of
         accounting. Under SFAS 142, goodwill and intangible assets with
         indefinite lives are no longer amortized but the carrying values are
         reviewed annually (or more frequently if impairment indicators arise)
         for impairment. If the carrying value exceeds the fair value, an
         impairment loss shall be recognized. A discounted cash flow approach
         was used to determine fair value of the Company's businesses for the
         purposes of testing for impairment. Intangible assets with a defined
         life will continue to be amortized over their useful lives (but with no
         maximum life). The Company adopted SFAS 142 on January 1, 2002.

                                       7

         The pro forma effects of adopting SFAS No. 142 for the three and nine
         month periods ended September 30, 2002 and 2001 are as follows (in
         thousands):

                                                         Three Months Ended               Nine Months Ended
                                                            September 30                    September 30
                                                        2002            2001            2002            2001
                                                        ----            ----            ----            ----
                                                                                           
        Net income as reported                         $17,393         $16,235         $45,154         $82,838
        Cumulative effect of change in
          accounting principle, net of tax                   -               -            (896)              -
        Cumulative effect of change in
          accounting principle included in
          "Discontinued operations," net
          of tax                                             -               -             755               -
                                                       -------         -------         -------         -------
        Income excluding cumulative
          effect of change in accounting
          principle                                     17,393          16,235          45,013          82,838
        Add: goodwill amortization                           -             384               -           1,179
                                                       -------         -------         -------         -------
        Adjusted net income                            $17,393         $16,619         $45,013         $84,017
                                                       =======         =======         =======         =======

         The cumulative effect adjustment recognized upon adoption of SFAS 142
         was $0.1 million (after tax), which had only a nominal impact on
         earnings per share. The adjustment consisted of income from the
         after-tax write-off of negative goodwill from prior acquisitions in our
         power generation segment of $0.9 million, offset by a $0.8 million
         after-tax write-off for the impairment of goodwill related to our
         discontinued coal marketing operations (Note 5). The goodwill
         impairment was a result of changes in the criteria for the measurement
         of impairments from an undiscounted to a discounted cash flow method.
         If SFAS 142 had been adopted on January 1, 2001, net income would have
         been lower for the nine-month period ended September 30, 2002 by $0.1
         million, or $0.01 per share. The three and nine-month periods ended
         September 30, 2001 would have been higher by $0.4 million, or $0.01 per
         share and $1.2 million, or $0.05 per share.

         The substantial majority of the Company's goodwill and intangible
         assets are contained within the Power Generation segment. Changes to
         goodwill and intangible assets during the nine-month period ended
         September 30, 2002, including the effects of adopting SFAS No. 142, but
         excluding amounts from discontinued operations, are as follows (in
         thousands):

                                              Goodwill   Other Intangible Assets
        Balance at December 31, 2001, net of
          accumulated amortization             $28,693          $86,528
        Change in accounting principle           1,492                -
        Additions                                    -           10,080
        Adjustments                                 (3)         (14,108)
        Amortization expense                         -           (3,131)
                                               -------          -------
        Balance at September 30, 2002, net of
          accumulated amortization             $30,182          $79,369
                                               =======          =======

                                       8

         On September 30, 2002, intangible assets totaled $79.4 million, net of
         accumulated amortization of $7.6 million. Intangible assets are
         primarily related to site development fees and above-market long-term
         contracts, and all have definite lives ranging from 5 to 40 years, over
         which they continue to be amortized. Amortization expense for existing
         intangible assets for the next five years is expected to be
         approximately $4.2 million a year.

         Intangible asset additions during the nine month period ended September
         30, 2002 were primarily the result of a $9.3 million addition related
         to preliminary purchase allocations in the acquisition of additional
         ownership interest in the Harbor Cogeneration Facility (See Note 13).
         This intangible asset primarily relates to an acquired ownership of
         additional interest in a contract termination payment stream at the
         facility.

         Adjustments of intangible assets during the nine-month period ended
         September 30, 2002 primarily relate to final adjustments to the
         preliminary purchase price allocation of the Company's third quarter
         2001 Las Vegas Cogeneration acquisition.

         In addition, during the first quarter of 2002, the Company had a $0.4
         million (pre-tax) impairment loss of certain intangibles at the
         Company's discontinued coal marketing business as a result of a weak
         coal market. The intangible assets are included in "Assets of
         discontinued operations" on the accompanying Condensed Consolidated
         Balance Sheets and the related impairment loss is included in "(Loss)
         Income from discontinued operations" on the accompanying Condensed
         Consolidated Statements of Income.

         In August 2001, the FASB issued SFAS 144, "Accounting for the
         Impairment or Disposal of Long-Lived Assets". SFAS 144 supersedes FASB
         Statement 121, "Accounting for the Impairment of Long-Lived Assets and
         for Long-Lived Assets to Be Disposed Of" (SFAS 121) and the accounting
         and reporting provisions of Accounting Principles Board Opinion No. 30,
         "Reporting the Results of Operations - Reporting the Effects of
         Disposal of a Segment of a Business, and Extraordinary, Unusual and
         Infrequently Occurring Events and Transactions" (APB 30). SFAS 144
         establishes a single accounting model for long-lived assets to be
         disposed of by sale and resolves implementation issues related to SFAS
         121. The Company adopted SFAS 144 effective January 1, 2002. Adoption
         did not have a material impact on the Company's consolidated financial
         position, results of operations or cash flows.

(5)      DISCONTINUED OPERATION

         During the second quarter of 2002, the Company adopted a plan to
         dispose of its coal marketing subsidiary, Black Hills Coal Network. The
         sale and disposal was finalized in July 2002. In connection with the
         plan of disposal, the Company determined that the carrying values of
         some of the underlying assets exceeded their fair values and a charge
         to operations was required.

         Consequently, in the second quarter of 2002 the Company recorded an
         after-tax charge of approximately $1.0 million, which represents the
         difference between the carrying values of the assets and liabilities of
         the subsidiary versus their fair values, less cost to sell. The
         disposition has been accounted for under the provisions of Statement of
         Financial Accounting Standards No. 144, "Accounting for the Impairment
         or Disposal of Long-Lived Assets." Accordingly, results of operations
         and the related charge have been classified as "Discontinued

                                       9

         operations" in the accompanying Condensed Consolidated Statements of
         Income, and prior periods have been restated. For business segment
         reporting purposes, the coal marketing business results were previously
         included in the segment "Energy marketing."

         Gross margins on energy trading contracts and net income from the
         discontinued operation are as follows (in thousands):

                                                             Three Months                      Nine Months
                                                             September 30                     September 30
                                                         2002            2001            2002            2001
                                                         ----            ----            ----            ----
                                                                                            
       Gross margins on energy
         trading contracts                              $  190         $   54          $  (235)         $2,873
                                                        ------         ------          -------          ------
        Pre-tax income (loss) from
          discontinued operation                            65         (1,061)          (2,679)            648
        Pre-tax loss on disposal                           (65)             -           (1,588)              -
        Income tax benefit (expense)                         -            423            1,630            (306)
                                                        ------         ------          -------          ------
        Net (loss) income from
          discontinued operations                       $    -         $ (638)         $(2,637)         $  342
                                                        ======         ======          =======          ======

         Assets and liabilities of the discontinued operation are as follows (in
         thousands):

                                             December 31         September 30
                                                2001                 2001
                                                ----                 ----

        Current assets                          $7,878             $11,429
        Non-current assets                       2,212               1,542
        Current liabilities                     (8,724)            (11,777)
        Non-current liabilities                    (96)                  -
                                                ------             -------
        Net assets of discontinued
          operations                            $1,270             $ 1,194
                                                ======             =======

                                       10

EARNINGS PER SHARE

         Basic earnings per share is computed by dividing net income by the
         weighted average number of common shares outstanding during the period.
         Diluted earnings per share gives effect to all dilutive potential
         common shares outstanding during a period. A reconciliation of "Income
         from continuing operations" and basic and diluted share amounts is as
         follows:

        Periods ended September 30, 2002                     Three Months                      Nine Months
                                                             ------------                      -----------
        (in thousands)                                                  Average                          Average
                                                        Income          Shares           Income          Shares

        Income from continuing operations               $17,449                          $47,063
        Less: preferred stock dividends                     (56)                            (168)
                                                        -------                          -------

        Basic - available for common
          shareholders                                   17,393          26,835           46,895          26,778
        Dilutive effect of:
             Stock options                                    -              69                -             100
             Convertible preferred stock                     56             148              168             148
             Others                                           -              26                -              26
                                                        -------          ------          -------          ------
        Diluted - available for common
          shareholders                                  $17,449          27,078          $47,063          27,052
                                                        =======          ======          =======          ======

        Periods ended September 30, 2001                     Three Months                      Nine Months
                                                             ------------                      -----------
        (in thousands)                                                  Average                          Average
                                                        Income          Shares           Income          Shares

        Income from continuing operations               $17,004                          $82,969
        Less: preferred stock dividends                    (131)                            (473)
                                                        -------                          -------

        Basic - available for common
          shareholders                                   16,873          26,425           82,496          24,988
        Dilutive effect of:
             Stock options                                    -             204                -             243
             Convertible preferred stock                    131             148              473             148
             Others                                           -              25                -              25
                                                        -------          ------          -------          ------
        Diluted - available for common
          shareholders                                  $17,004          26,802          $82,969          25,404
                                                        =======          ======          =======          ======

                                       11

(7)      COMPREHENSIVE INCOME

         The following table presents the components of the Company's
         comprehensive income:

                                                          Three Months Ended                Nine Months Ended
                                                             September 30                     September 30
                                                         2002            2001             2002            2001
                                                         ----            ----             ----            ----
                                                                             (in thousands)

        Net income                                      $17,449         $16,366          $45,322         $83,311
        Other comprehensive income:
           Unrealized gain (loss) on
             available-for-sale securities                    -             507             (219)          1,657
           Reclassification adjustment
             for unrealized gain on
             available-for-sale securities
             included in net income                           -               -             (406)              -
           Initial impact of adoption of
             SFAS 133, net of minority
             interest                                         -               -                -          (7,518)
           Fair value adjustment on
             derivatives designated as
             cash flow hedges                            (4,875)         (5,173)          (7,593)         (2,603)
                                                        -------         -------          -------         -------

        Comprehensive income                            $12,574         $11,700          $37,104         $74,847
                                                        =======         =======          =======         =======

(8)      CHANGES IN COMMON STOCK

         Other than the following transactions, the Company had no other changes
         in its common stock, as reported in Note 4 of the Company's 2001 Annual
         Report on Form 10-K.

          o    The Company granted  111,985 stock options at a weighted  average
               exercise price of $34.42 per share.

          o    110,864  stock  options  were  exercised  at a  weighted  average
               exercise price of $20.84 per share.

          o    The Company  issued 26,047  restricted  shares of common stock to
               certain officers. Compensation cost related to the award was $0.9
               million,  which is being expensed over the vesting period ranging
               from two to three years.

          o    The  Company  issued  41,840  shares  of common  stock  under its
               dividend reinvestment plan.

          o    The  Company  issued  12,743  shares  of common  stock  under its
               employee stock purchase plan at a price of $27.08 per share.

          o    The  Company  issued  45,043  shares  of common  stock  under the
               short-term incentive compensation plan. Compensation cost related
               to the award was $1.3 million which was accrued for in 2001.

                                       12

(9)      CHANGES IN LONG-TERM DEBT AND NOTES PAYABLE

         On January 4, 2002, the Company closed on a $50.0 million bridge credit
         agreement. The credit agreement supplemented our revolving credit
         facilities and had the same terms as those facilities. The bridge
         credit agreement had an original expiration date of June 30, 2002,
         which was subsequently extended to September 27, 2002. On September 27,
         2002, this $50 million facility was replaced by a $50 million secured
         financing for the expansion at our Las Vegas II project, a 224-megawatt
         gas-fired generation facility located in North Las Vegas, Nevada which
         expires on November 26, 2002.  This financing is guaranteed by the
         Company.

         On March 14, 2002, the Company closed on $135 million five-year senior
         secured project-level financing for the Arapahoe and Valmont
         Facilities.  These projects have a total of 210 megawatts in service
         and are located in the Denver, Colorado area. Proceeds from this
         financing were used to refinance $53.8 million of an existing
         seven-year, senior-secured term project-level facility, pay down
         approximately $50.0 million of short-term credit facility borrowings
         and approximately $31.2 million was used for project construction. At
         September 30, 2002, all of the $135 million financing had been
         utilized.

         On June 18, 2002, the Company closed on a $75 million bridge credit
         agreement. This credit agreement bridged the issuance of $75 million of
         Black Hills Power First Mortgage Bonds, which were issued on August 13,
         2002. The termination date of the bridge credit agreement was August
         13, 2002, the date on which the First Mortgage Bonds were issued.

         On June 28, 2002, Enserco Energy closed on a $135 million uncommitted,
         discretionary credit facility, which became effective July 1, 2002 and
         expires June 27, 2003. This facility replaced the $75 million Enserco
         Energy facility.

         On August 13, 2002, the Company's electric utility subsidiary, Black
         Hills Power, Inc., issued $75 million of First Mortgage Bonds, Series
         AE, due 2032. The First Mortgage Bonds have a 7.23 percent coupon with
         interest payable semiannually, commencing February 15, 2003. Net
         proceeds from the offering were and will be used to fund the Company's
         portion of construction and installation costs for an AC-DC-AC
         Converter Station; for general capital expenditures for the remainder
         of 2002 and 2003; to repay a portion of current bank indebtedness; to
         satisfy bond maturities for certain outstanding first mortgage bonds
         due in 2003; and for general corporate purposes.

         In August 2002, the Company closed on a $195 million unsecured
         revolving credit facility that expires August 26, 2003. The credit
         facility extended the Company's previous $200 million 364-day credit
         facility that expired on August 27, 2002. Interest rates under the
         facility vary and are based, at the option of the Company at the time
         of loan origination, on either (i) a prime based borrowing rate varying
         from prime rate to prime rate plus 0.40 percent, or (ii) on a London
         Interbank Offered Rate (LIBOR) based borrowing rate varying from LIBOR
         plus 0.420 percent to LIBOR plus 1.40 percent.

         On September 25, 2002, the Company closed on a $35 million two-year
         unsecured credit agreement. Proceeds were used to fund the Company's
         working capital needs and for general corporate purposes. Interest
         rates under the facility vary and are based, at the option of the
         Company at the time of loan origination, on either (i) a prime based
         borrowing rate varying from prime rate to prime rate plus 0.875
         percent, or (ii) on a London Interbank Offered Rate (LIBOR) based
         borrowing rate varying from LIBOR plus 1.0 percent to LIBOR plus 1.875
         percent.

                                       13

         The Company's credit facilities include certain restrictive covenants
         that are common in such arrangements. Such covenants include a
         consolidated net worth in an amount of not less than the sum of $375
         million and 50 percent of the aggregate consolidated net income
         beginning June 30, 2001; a recourse leverage ratio not to exceed 0.65
         to 1.00; an interest coverage ratio of not less than 3.00 to 1.00; and
         restrictions on the ability to dividend cash to the parent company at
         certain subsidiaries with project level financing or subsidiary credit
         facilities. Approximately $46 million of the cash balance at September
         30, 2002 was restricted by subsidiary debt agreements for such
         purposes. If these covenants are violated, it would be considered an
         event of default entitling the lender to terminate the remaining
         commitment and accelerate all principal and interest outstanding. In
         addition, certain of the Company's interest rate swap agreements
         include cross-default provisions. These provisions would allow the
         counterparty the right to terminate the swap agreement and liquidate at
         a prevailing market rate, in the event of default. The Company complied
         with all the covenants at September 30, 2002.

         The $195 million 364-day credit facility, the $200 million three-year
         credit facility, and the $35 million two-year credit facility contain a
         liquidity covenant that requires the Company to have $30 million in
         liquid assets as of the last day of each fiscal quarter beginning with
         December 31, 2002. Liquid assets are defined as unrestricted cash and
         available unused capacity under the Company's credit facilities.

         Some of the facilities previously had a covenant whereby we were
         required to maintain a credit rating of at least "BBB-" from Standard &
         Poor's or "Baa3" from Moody's Investor Service. The facilities that
         contained the rating triggers were amended during the second quarter of
         2002 to remove default provisions pertaining to our credit rating
         status.

         Other than the above transactions, the Company had no other material
         changes in its consolidated indebtedness, as reported in Notes 6 and 7
         of the Company's 2001 Annual Report on Form 10-K.

(10)     SUMMARY OF INFORMATION RELATING TO SEGMENTS OF THE COMPANY'S BUSINESS

         The Company's reportable segments are those that are based on the
         Company's method of internal reporting, which generally segregates the
         strategic business groups due to differences in products, services and
         regulation. As of September 30, 2002, substantially all of the
         Company's operations and assets are located within the United States.
         The Company's operations are conducted through six reporting segments
         that include: Integrated Energy group consisting of the following
         segments: Mining, which engages in the mining and sale of coal from its
         mine near Gillette, Wyoming; Oil and Gas, which produces, explores and
         operates oil and gas interests located in the Rocky Mountain region,
         Texas, California and other states; Energy Marketing, which markets
         natural gas, oil and related services to customers in the Midwest,
         Southwest, Rocky Mountain, West Coast and Northwest regions and
         transports crude oil in Texas; Power Generation, which produces and
         sells power to wholesale customers; Electric group and segment, which
         supplies electric utility service to western South Dakota, northeastern
         Wyoming and southeastern Montana; and Communications group and segment,
         which primarily markets communications and software development
         services.

                                       14

         Segment information follows the same accounting policies as described
         in Note 1 of the Company's 2001 Annual Report on Form 10-K. In
         accordance with the provisions of SFAS No. 71, intercompany fuel sales
         to the electric utility are not eliminated. Segment information
         included in the accompanying Condensed Consolidated Balance Sheets and
         Condensed Consolidated Statements of Income is as follows (in
         thousands):

                                               External                  Inter-segment             Income (loss) from
                                           Operating Revenues          Operating Revenues          Continuing Operations

Quarter to Date
September 30, 2002
                                                                                             
Energy marketing                               $    9,388*               $          -                 $    3,130
Power generation                                   34,700                           -                      4,822
Oil and gas                                         6,561                           -                      1,066
Mining                                              5,531                       2,778                      2,103
Electric                                           45,220                          71                      8,304
Communications                                      8,392                           -                     (1,453)
Corporate                                               -                           -                       (518)
Intersegment eliminations                               -                         (69)                        (5)
                                               ----------                ------------                 ----------

Total                                          $  109,792                $      2,780                 $   17,449
                                               ==========                ============                 ==========

*Operating revenues presented for Energy marketing represent trading margins.
 See Note 2.

                                                External                  Inter-segment             Income (loss) from
                                           Operating Revenues          Operating Revenues          Continuing Operations

Quarter to Date
September 30, 2001
                                                                                               
Energy marketing                               $    9,692*                  $       -                   $  4,536
Power generation                                   21,544                           -                      1,246
Oil and gas                                         8,496                           -                      2,804
Mining                                              4,023                       2,847                      3,876
Electric                                           43,057                         461                      7,929
Communications                                      5,154                       1,090                     (2,661)
Corporate                                               -                           -                       (614)
Intersegment eliminations                               -                      (1,551)                      (112)
                                                ---------                    --------                   --------

Total                                           $  91,966                    $  2,847                   $ 17,004
                                                =========                    ========                   ========

*Operating revenues presented for Energy marketing represent trading margins.
See Note 2.

                                       15

                                                External                  Inter-segment             Income (loss) from
                                           Operating Revenues          Operating Revenues          Continuing Operations

Year to Date
September 30, 2002
                                                                                            
Energy marketing                                 $ 21,722*                  $       -                $   7,033
Power generation                                  102,849                           -                   13,775
Oil and gas                                        19,515                           -                    3,227
Mining                                             15,241                       8,150                    6,932
Electric                                          120,583                         203                   22,918
Communications                                     24,155                           -                   (5,729)
Corporate                                               -                           -                   (1,081)
Intersegment eliminations                               -                     (   203)                     (12)
                                                 --------                    --------                ---------

Total                                            $304,065                    $  8,150                $  47,063
                                                 ========                    ========                =========

*Operating revenues presented for Energy marketing represent trading margins.
 See Note 2.

                                                External                  Inter-segment             Income (loss) from
                                           Operating Revenues          Operating Revenues          Continuing Operations

Year to Date
September 30, 2001
                                                                                                
Energy marketing                                 $ 71,795*                $       -                    $30,910
Power generation                                   56,061                         -                      3,827
Oil and gas                                        26,353                         -                      8,723
Mining                                             14,681                     8,333                      8,499
Electric                                          174,915                       783                     42,053
Communications                                     13,662                     3,307                     (9,343)
Corporate                                               -                         -                     (1,081)
Intersegment eliminations                               -                    (4,090)                      (619)
                                                 --------                 ---------                    -------

Total                                            $357,467                 $   8,333                    $82,969
                                                 ========                 =========                    =======

*Operating revenues presented for Energy marketing represent trading margins.
See Note 2.

         Other than the following transactions, the Company had no other
         material changes in total assets of its reporting segments, as reported
         in Note 14 of the Company's 2001 Annual Report on Form 10-K, beyond
         discontinuing the coal marketing operations (Note 5) previously
         included in the "Energy Marketing" segment and changes resulting from
         normal operating activities.

         The Power Generation segment had a net addition to non working capital
         assets of approximately $106 million primarily related to ongoing
         construction of the expansions at the Las Vegas Cogeneration II and
         Arapahoe facilities and the acquisition of additional ownership
         interest at the Harbor Cogeneration facility (Note 13).

                                       16

         The Energy Marketing segment acquired additional ownership interests in
         pipelines for $17.7 million (Note 13).

(11)     RISK MANAGEMENT ACTIVITIES

         The Company actively manages its exposure to certain market risks as
         described in Note 2 of the Company's Annual Report on Form 10-K.
         Details of derivative and hedging activities included in the
         accompanying Condensed Consolidated Balance Sheets and Condensed
         Consolidated Statements of Income are as follows:

         Energy Marketing Activities

         The Company's energy marketing operations fall under the purview of
         Statement of Financial Accounting Standard No. 133 (SFAS 133),
         "Accounting for Derivative Instruments and Hedging Activities" and
         Emerging Issues Task Force Issue No. 98-10, "Accounting for Energy
         Trading and Risk Management Activities" (EITF 98-10). As such, these
         activities are accounted for under mark-to-market accounting. The
         Company records the fair values of its trading derivatives as either
         Derivative assets and/or Derivative liabilities on the accompanying
         Condensed Consolidated Balance Sheet. The net gains or losses on all
         energy trading contracts are recorded as Revenues in the accompanying
         Condensed Consolidated Statements of Income. During the second quarter
         2002, the Company's gas marketing subsidiary revised its estimates of
         fair values for certain derivatives valued using market based prices
         which include a "bid/offer" spread. The change in estimate resulted in
         a $0.8 million reduction in net income versus amounts that would have
         been reported if the change in estimate had not occurred.

         The contract or notional amounts and terms of the Company's derivative
         commodity instruments held for trading purposes are set forth below:

                                                     September 30, 2002             December 31, 2001          September 30, 2001
                                                                   Maximum                     Maximum                      Maximum
                                                     Notional      Term in        Notional     Term in           Notional   Term in
(thousands of MMBtu's)                               Amounts        Years         Amounts       Years             Amounts    Years
                                                     -------        -----         -------       -----             -------   -------
                                                                                                            
Natural gas basis swaps purchased                    46,354         1               9,882          1              17,449       2
Natural gas basis swaps sold                         54,686         1              10,696          1              18,940       2
Natural gas fixed-for float swaps purchased          15,295         1              10,646          2              13,102       1
Natural gas fixed-for-float swaps sold               21,054         1              11,815          2              13,279       1
Natural gas swing swaps purchased                         -         -                 465          1               2,635       1
Natural gas swing swaps sold                              -         -                 930          1               3,410       1
Natural gas physical purchases                       48,273         2              13,159          1              12,925       1
Natural gas physical sales                           43,296         1              19,339          1              19,896       1
Transport purchase                                   81,759         5              41,136          6              43,780       6

(thousands of barrels)
Crude oil purchased                                   4,173         1               3,139          1               2,335       1
Crude oil sold                                        4,172         1               3,142          1               2,312       1

(megawatt-hours)
Power purchased                                      30,475         1                   -          -                   -       -
Power sold                                           84,800         1                   -          -                   -       -

                                       17

         As required under SFAS 133 and EITF 98-10, derivatives and energy
         trading activities were marked to fair value and the gains and/or
         losses recognized in earnings. The amounts related to the accompanying
         Condensed Consolidated Balance Sheets and Statements of Income as of
         September 30, 2002, December 31, 2001, and September 30, 2001, are as
         follows (in thousands):

                               Current           Non-current           Current            Non-current
                              Derivative         Derivative          Derivative           Derivative         Unrealized
September 30, 2002             Assets              Assets           Liabilities          Liabilities            Gain
                               ------              ------           -----------          -----------            ----
                                                                                                 
Natural gas                   $37,009              $2,232             $30,443                 $1,441            $7,357
Crude oil                       6,624                   -               5,849                      -               775
Power generation                  326                   -                  55                      -               271
                              -------              ------             -------                 ------            ------
                              $43,959              $2,232             $36,347                 $1,441            $8,403
                              =======              ======             =======                 ======            ======

December 31, 2001

Natural gas                   $29,755             $   661             $25,437                $   953            $4,026
Crude oil                       6,267                   -               5,497                      -               770
                              -------             -------             -------                -------            ------
                              $36,022             $   661             $30,934                $   953            $4,796
                              =======             =======             =======                =======            ======

September 30, 2001

Natural gas                   $44,998              $1,752             $41,869                 $1,636            $5,650
Crude oil                       6,148                   -               5,393                      -               755
                              -------              ------             -------                 ------            ------
                              $51,146              $1,752             $47,262                 $1,636            $6,405
                              =======              ======             =======                 ======            ======

         At September 30, 2002, the Company had a mark to fair value unrealized
         gain of $8.4 million for its energy marketing activities. Of this
         amount, $7.6 million was current and $0.8 million was non-current.
         Substantially all of the unrealized gain at September 30, 2002 results
         from "back to back" transactions. The Company anticipates that
         substantially all of the current portion of unrealized gains for hedged
         transactions will be realized during the next twelve months.

                                       18

         Non-trading Energy Activities

         On September 30, 2002, December 31, 2001 and September 30, 2001, the
         Company had the following swaps and related balances for its
         non-trading energy operations (in thousands):

                                                                                                             Pre-tax
                                                                                                           Accumulated
                                    Maximum       Current      Non-current   Current       Non-current        Other         Pretax
                                    Terms in     Derivative    Derivative     Derivative    Derivative     Comprehensive    Income
                       Notional*      Years        Assets       Assets      Liabilities    Liabilities     Income (Loss)    (Loss)
                       ---------      -----      ---------      ------      -----------    -----------     -------------    ------
September 30, 2002
                                                                                                     
Crude oil swaps          420,000        1        $    18          $  12        $1,027         $  73           $(1,003)       $  (67)
Natural gas swaps        600,000        1            267              -           142            28                90             7
                                                 -------          -----        ------         -----           -------        ------
                                                 $   285          $  12        $1,169         $ 101           $  (913)       $  (60)
                                                 =======          =====        ======         =====           =======        ======
December 31, 2001

Crude oil swaps           90,000        1        $   529          $   -        $    -         $   -           $   529        $    -
Natural gas swaps      1,216,000        1          1,593              -             -             -             1,463           130
                                                 -------          -----        ------         -----           -------        ------
                                                 $ 2,122          $   -        $    -         $   -           $ 1,992        $  130
                                                 =======          =====        ======         =====           =======        ======
September 30, 2001

Crude oil swaps          141,000        1        $   312          $   -        $    -         $   -           $   327        $  (15)
Crude oil options         60,000        1             35              -             -             -               105           (70)
Natural gas swaps      1,676,000        1          2,277              -             -             -             2,184            93
                                                 -------          -----        ------         -----           -------        ------
                                                 $ 2,624          $   -        $    -         $   -           $ 2,616        $    8
                                                 =======          =====        ======         =====           =======        ======
- -----------------------
*crude in bbls, gas in MMBtu's

         Based on September 30, 2002 market prices, $(0.9) million will be
         realized and reported in earnings during the next twelve months. These
         estimated realized losses for the next twelve months were calculated
         using September 30, 2002 market prices. Estimated and actual realized
         losses will likely change during the next twelve months as market
         prices change.

                                       19

         Financing Activities

         On September 30, 2002, December 31, 2001 and September 30, 2001, the
         Company's interest rate swaps and related balances were as follows (in
         thousands):

                                   Weighted                                                                    Pre-tax
                                    Average                             Non-                      Non-        Accumulated
                        Current      Fixed     Maximum       Current   current      Current      current        Other       Pre-tax
                        Notional    Interest   Terms in    Derivative Derivative   Derivative   Derivative   Comprehensive  Income
                         Amount      Rate       Years        Assets    Assets      Liabilities  Liabilities      Loss       (Loss)
                         -----       ----       -----        ------    ------      -----------  -----------      ----       ------
September 30, 2002
                                                                                                
Swaps on project
  financing              $213,636    5.99%        4           $  -    $        -    $  9,114     $  9,022      $(18,136)   $      -
Swaps on corporate
  debt                     75,000    4.45%        2              -                     1,201          333        (1,534)          -
                         --------                             ----    ----------    --------     --------      --------    --------

     Total               $288,636                             $  -    $        -    $ 10,315     $  9,355      $(19,670)   $      -
                         ========                             ====    ==========    ========     ========      ========    ========

December 31, 2001

Swaps on project
  financing              $316,397    5.85%        4           $  -    $    5,746    $ 10,212     $  5,949      $(10,415)   $      -
Swaps on corporate
  debt                     75,000    4.45%        3              -                     1,535          217        (1,752)          -
                         --------                             ----    ----------    --------     --------      --------    --------

     Total               $391,397                             $  -    $    5,746    $ 11,747     $  6,166      $(12,167)   $
                         ========                             ====    ==========    ========     ========      ========    ========

September 30, 2001

Swaps on project
  financing              $318,906    5.86%        5           $  -    $        -     $15,101     $      -      $(15,101)   $      -
Swaps on corporate
  debt                     75,000    4.45%        3              -             -       1,758                     (1,758)          -
                         --------                             ----    ----------    --------     --------      --------    --------

     Total               $393,906                             $  -    $        -    $ 16,859     $      -      $(16,859)   $      -
                         ========                             ====    ==========    ========     ========      ========    ========

         Based on September 30, 2002 market interest rates, approximately $10.3
         million will be realized as additional interest expense during the next
         twelve months. Estimated and realized amounts will likely change during
         the next twelve months as market interest rates change.

         At December 31, 2001, the Company had a $100 million forward starting
         floating-to-fixed interest rate swap to hedge the anticipated floating
         rate debt financing related to the Company's Las Vegas Cogeneration
         expansion. This swap terminated during the second quarter 2002 and
         resulted in a $1.1 million gain. This swap was treated as a cash flow
         hedge and accordingly in the second quarter of 2002 the resulting gain
         was carried in Accumulated Other Comprehensive Income on the Condensed
         Consolidated Balance Sheet and was to be amortized over the life of the
         anticipated long-term financing. In the third quarter of 2002, this
         cash flow hedge was determined to be ineffective due to uncertainties
         about the eventual timing and form of financing for this project. As a
         result, $1.1 million was taken into earnings. The gain was offset by
         the expensing of approximately $1.0 million of deferred financing costs
         related to the anticipated financing.

                                       20

         In addition, the Company entered into a $50 million treasury lock to
         hedge a portion of the Company's $75 million First Mortgage Bond
         offering completed in August 2002 (Note 9). The treasury lock cash
         settled on August 8, 2002, the bond pricing date, and resulted in a
         $1.8 million loss. This treasury lock was treated as a cash flow hedge
         and accordingly the resulting loss is carried in Accumulated Other
         Comprehensive Loss on the Condensed Consolidated Balance Sheet and
         amortized over the life of the related bonds as additional interest
         expense.

(12)     LEGAL PROCEEDINGS

         In June 2002, a forest fire damaged approximately 11,000 acres of
         private and government land located near Deadwood and Lead, South
         Dakota. The fire destroyed approximately 20 structures (seven houses
         and 13 outbuildings) and caused the evacuation of the cities of Lead
         and Deadwood for approximately 48 hours.

         The cause of the fire was investigated by the State of South Dakota.
         Alleged contact between power lines owned by the Company and
         undergrowth were implicated as the cause. The Company has initiated its
         own investigation into the cause of the fire, including the hiring of
         expert fire investigators, and that investigation is continuing.

         The Company has been put on notice of potential private civil claims
         for property damage and business loss. In addition, the State of South
         Dakota initiated a civil action in the Seventh Judicial Circuit Court,
         Pennington County, South Dakota, seeking recovery of damages for fire
         suppression costs, reclamation and remediation. If it is determined
         that power line contact was the cause of the fire, and that the Company
         was negligent in the maintenance of those power lines, the Company
         could be liable for resultant damages. Management cannot predict the
         outcome of either the Company's investigation, or the viability of
         potential claims. Management believes that any such claims will not
         have a material adverse effect on the Company's financial condition or
         results of operations.

(13)     ACQUISITIONS

         On March 8, 2002, the Company acquired an additional 67 percent
         ownership interest in Millennium Pipeline Company L.P., which owns and
         operates a 200-mile pipeline. The pipeline has a capacity of
         approximately 65,000 barrels of oil per day and transports imported
         crude oil from Beaumont, Texas to Longview, Texas, which is the
         transfer point to connecting carriers. The Company also acquired
         additional ownership interest in Millennium Terminal Company, L.P.,
         which has 1.1 million barrels of crude oil storage connected to the
         Millennium Pipeline at the Oil Tanking terminal in Beaumont. The
         Millennium system is presently operating near capacity through shipper
         agreements. These acquisitions give the Company 100 percent ownership
         in the Millennium companies. Total cost of the acquisitions was $11.0
         million and was funded through borrowings under short-term revolving
         credit facilities.

         On March 15, 2002, the Company paid $25.7 million to acquire an
         additional 30 percent interest in the Harbor Cogeneration Facility (the
         Facility), a 98-megawatt gas-fired plant located in Wilmington,
         California. This acquisition was funded through borrowings under
         short-term revolving credit facilities. At September 30, 2002 the
         Company had an 88 percent ownership interest in the Facility.

                                       21

         The Company's investments in these entities prior to the above
         acquisitions were accounted for under the equity method of accounting
         and included in Investments on the accompanying Condensed Consolidated
         Balance Sheets. Each of the above acquisitions gave the Company
         majority ownership and voting control of the respective entities,
         therefore, the Company now includes the accounts of each of the
         entities in its consolidated financial statements.

         During July 2002, the Company purchased the assets of the Kilgore to
         Houston Pipeline System from Equilon Pipeline Company, LLC. The Kilgore
         pipeline transports crude oil from the Kilgore, Texas region south to
         Houston, Texas, which is the transfer point to connecting carriers via
         the Oiltanking Houston terminal facilities. The 10-inch pipeline is
         approximately 190 miles long and has a capacity of up to approximately
         35,000 barrels per day. In addition, the Kilgore system has
         approximately 400,000 barrels of crude oil storage at Kilgore and
         375,000 barrels of storage at the Texoma Tank Farm located in Longview,
         Texas. Total cost of the acquisition was $6.7 million and was funded
         through borrowings under short-term credit facilities.

         The above acquisitions have been accounted for under the purchase
         method of accounting and, accordingly, the purchase prices have been
         allocated to the acquired assets and liabilities based on preliminary
         estimates of the fair values of the assets purchased and the
         liabilities assumed as of the date of acquisition. The estimated
         purchase price allocations are subject to adjustment, generally within
         one year of the date of the acquisition. The purchase prices and
         related acquisition costs exceeded the fair values assigned to net
         tangible assets by approximately $9.3 million, which was recorded as
         long-lived intangible assets.

         The impact of these acquisitions was not material in relation to the
         Company's results of operations. Consequently, pro forma information is
         not presented.

(14)     SUBSEQUENT EVENT

         On October 1, 2002, the Company entered into a definitive merger
         agreement to acquire Denver-based Mallon Resources Corporation. Total
         cost of the acquisition is estimated to be $52 million, which includes
         the Company's acquisition on October 1, 2002 of Mallon's debt to Aquila
         Energy Capital Corporation and the settlement of outstanding hedges,
         amounting to $30.5 million. The merger agreement, which has been
         approved by both companies' Board of Directors, provides that Mallon
         shareholders will receive 0.044 of a share of Black Hills for each
         share of Mallon. Completion of the acquisition which is subject to
         customary conditions, including approval by the shareholders of Mallon,
         is expected in the first quarter of 2003.

         Mallon Resources' proved reserves, as reported at December 31, 2001,
         were 53.3 billion cubic feet of gas equivalent. The Company estimates
         that Mallon's current proved reserves could be substantially higher
         based on its independent review of the reserves and current oil and gas
         prices. The reserves are located primarily on the Jicarilla Apache
         Nation in the San Juan Basin of New Mexico and are comprised almost
         entirely of natural gas in shallow sand formations. The oil and gas
         leases of the acquisition total more than 66,500 gross acres (56,000
         net), most of which is contained in a contiguous block that is in the
         early stages of development. The Company believes it can recover
         additional gas reserves from the shallow sands and from deeper horizons
         that have yet to be explored but are productive elsewhere in the San
         Juan Basin.

                                       22

         Current daily net production of the Mallon properties is nearly 13
         million cubic feet of gas equivalent. Mallon operates 149 of 171 total
         gas and oil wells, with working interests averaging 90 to 100 percent
         in most of the wells and undeveloped acreage.

         Upon closing, the acquisition is expected to increase gas and oil
         production immediately by approximately 60 percent and more than double
         our proven oil and gas reserves. After the acquisition is closed, the
         Company plans to initiate a development and exploratory drilling
         program on the properties. The acquisition is expected to have a
         nominal earnings-per-share impact until production levels can be
         increased.

                                       23

ITEM 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
         CONDITION AND RESULTS OF OPERATIONS

We are a growth oriented, diversified energy holding company operating
principally in the United States. Our unregulated and regulated businesses have
expanded significantly in recent years. Our integrated energy group, Black Hills
Energy, Inc., produces and markets electric power and fuel. We produce and sell
electricity in a number of markets, with a strong emphasis in the western United
States. We also produce coal, natural gas and crude oil, primarily in the Rocky
Mountain region, and transport crude oil in Texas. Our electric utility, Black
Hills Power, Inc., serves an average of 59,600 customers in South Dakota,
Wyoming and Montana. Our communications group offers state-of-the-art broadband
communications services to over 23,700 residential and business customers in
Rapid City and the northern Black Hills region of South Dakota through Black
Hills FiberCom, LLC.

The following discussion should be read in conjunction with Item 7. -
Management's Discussion and Analysis of Financial Condition and Results of
Operations - included in our 2001 Annual Report on Form 10-K filed with the
Securities and Exchange Commission.

                              Results of Operations

Consolidated Results

Revenue and Income (loss) from continuing operations provided by each
business group as a percentage of our total revenue and Income (loss)
from continuing operations were as follows:

                              Three Months Ended           Nine Months Ended
                                 September 30                 September 30
                            2002              2001       2002              2001
                            ----              ----       ----              ----
Revenues

Integrated energy            52%               49%        53%               48%
Electric utility             40                45         39                48
Communications                8                 6          8                 4
                            ---               ---        ---               ---
                            100%              100%       100%              100%
                            ===               ===        ===               ===
Income/(Loss) from
Continuing Operations

Integrated energy            62%               70%        64%               61%
Electric utility             48                47         49                50
Communications and other    (10)              (17)       (13)              (11)
                            ---               ---        ---               ---
                            100%              100%       100%              100%
                            ===               ===        ===               ===

                                       24

Three Months Ended September 30, 2002 Compared to Three Months Ended September
30, 2001. Consolidated income from continuing operations for the three-month
period ended September 30, 2002 was $17.4 million or $0.64 per share compared to
$17.0 million or $0.63 per share in the same period of the prior year.

The increase in net income from continuing operations was a result of an
increase in power generation and electric utility net income and a decrease in
the net loss of our communications business group offset by decreases in net
income in the energy marketing, oil and gas production and coal mining segments.
The power generation segment's net income more than tripled due to its
additional generating capacity and increased earnings from additional ownership
of an energy partnership. Net income for the electric utility business group
increased due to an increase in off-system sales and the communications business
group showed a decrease in its net loss attributable to a substantial expansion
of its customer base and a $0.6 million after-tax collection of previously
reserved amounts. Net income from energy marketing decreased due to a
substantial decline in margins received offset by increased volumes marketed and
unrealized gains recognized through mark-to-market accounting. The oil and gas
production segment's net income decreased due to a 17 percent decrease in
production volumes and an 11 percent decrease in average prices received. Coal
mining had strong operational performance with production increasing 27 percent,
however net income decreased due to a $3.4 million after-tax gain related to a
coal contract settlement that was recognized in the third quarter of 2001.

In addition, during the second quarter of 2002 we decided to discontinue
operations in our coal marketing business due primarily to challenges
encountered in marketing our Wyodak coal from the Powder River Basin of Wyoming
to midwestern and eastern coal markets. We sold the non-strategic assets
effective August 1, 2002. Net loss from discontinued operations was $(0.6)
million or $(0.02) per share for the three months ended September 30, 2001.
Prior year results of operations have been restated to reflect the discontinued
operations.

Consolidated revenues for the three-month period ended September 30, 2002 were
$112.6 million compared to $94.8 million for the same period in 2001. The
increase in revenues was a result of increased revenue in the communications
business unit and power generation segment and an increase in coal production
and volumes of energy marketed, partially offset by lower energy commodity
prices in 2002 and a decrease in the production of oil and gas.

Consolidated operating expenses for the three-month period increased from $66.0
million in 2001 to $78.0 million in 2002. The increase was due to an increase in
fuel and depreciation expense as a result of our increased investment in
independent power generation, partially offset by a substantial decrease in gas
prices as discussed above.

Nine Months Ended September 30, 2002 Compared to Nine Months Ended September 30,
2001. Consolidated income from continuing operations for the nine-month period
ended September 30, 2002 was $47.1 million or $1.74 per share compared to $83.0
million or $3.27 per share in the same period of the prior year.

The decrease in income from continuing operations was a result of substantial
decreases in prevailing prices for natural gas, crude oil and wholesale
electricity and in gross margins from natural gas marketing activities compared
to the same period in 2001. Unusual energy marketing conditions existed in the
first half of 2001 stemming primarily from gas and electricity shortages in the
West. Approximately $1.40 per share of the 2001 year to date income from
continuing operations was attributed to the unusual market conditions that
existed at that time. Wholesale electricity average peak prices at Mid-Columbia

                                       25

were approximately  $182 per megawatt-hour  during the first nine-months of 2001
compared to approximately $21 per megawatt-hour  during the first nine months of
2002. Average spot gas prices in the West Coast region were approximately  $8.60
per MMBtu in the first nine  months of 2001  compared to $2.80 in the first nine
months of 2002.  2001 net  income  reflects  a coal  contract  settlement  which
resulted in a one-time  gain of  approximately  $3.4 million or $0.13 per share.
While the above factors negatively  impacted income from continuing  operations,
they were  offset in part by an  increase  in the  production  of coal,  oil and
natural  gas, an increase  in  independent  power  generation  capacity  and our
communications  business group showed a decrease in its net loss attributable to
the continued expansion of its customer base.

In  addition,  during  the second  quarter  of 2002 we  decided  to  discontinue
operations  in our coal  marketing  business due to  challenges  encountered  in
marketing  our Wyodak coal from the Powder River Basin of Wyoming to  midwestern
and eastern coal markets.  We sold the non-strategic  assets effective August 1,
2002. Income (loss) from  discontinued  operations was $(2.6) million or $(0.09)
per share for the nine months ended  September 30, 2002 compared to $0.3 million
or $0.01 per share for the same period of the prior year.  Prior year results of
operations have been restated to reflect the discontinued operations.

Consolidated revenues for the nine-month period ended September 30, 2002 were
$312.2 million compared to $365.8 million for the same period in 2001. The
decrease in revenues was a result of the high energy commodity prices in 2001,
slightly offset by increased revenue in the communications business unit and
power generation segment, increased production in coal, oil and gas and
increased marketing volumes.

Consolidated operating expenses for the nine-month period decreased from $221.5
million in 2001 to $216.0 million in 2002. The decrease was primarily due to
lower fuel costs and incentive compensation offset by increased expenses related
to our increased investment in independent power generation.

The following results of operations for the Integrated Energy Group and its
segments, Electric Utility Group and Communications Group, does not include
intercompany eliminations.

Integrated Energy Group

                                Three Months Ended                  Nine Months Ended
                                   September 30                        September 30
                              2002              2001              2002              2001
                              ----              ----              ----              ----
                                                 (in thousands)
                                                                     
Revenue:
   Energy marketing        $    9,388       $    9,692         $  21,722         $  71,795
   Power generation            34,700           21,544           102,849            56,061
   Oil and gas                  6,561            8,496            19,515            26,353
   Mining                       8,309            6,870            23,391            23,014
                           ----------       ----------         ---------         ---------
Total revenue                  58,958           46,602           167,477           177,223
                           ----------       ----------         ---------         ---------
Equity in investments of
  unconsolidated
  subsidiaries                    907            1,958             4,187            11,066
                           ----------       ----------         ---------         ---------
Operating expenses             38,475           29,916           107,689            96,685
                           ----------       ----------         ---------         ---------
Operating income           $   21,390       $   18,644         $  63,975         $  91,604
Net income                 $   10,961       $   12,029         $  31,271         $  50,718

                                       26

The following is a summary of sales volumes of our coal, oil and natural gas
production and various measures of power generation:

                                             Three Months Ended                  Nine Months Ended
                                                September 30                       September 30
                                           2002              2001             2002              2001
                                           ----              ----             ----              ----
                                                                                  
Fuel production:
   Tons of coal sold                      1,110,800          872,900         2,955,500        2,465,700
   Barrels of oil sold                      110,403          126,557           340,036          335,585
   Mcf of natural gas sold                1,019,564        1,273,667         3,567,135        3,295,442
   Mcf equivalent sales                   1,681,982        2,033,000         5,607,351        5,309,000

                                                                                   September 30
                                                                               2002             2001
                                                                               ----             ----
                                                                                          
Independent power capacity:
   MWs of independent power capacity in service                                657               625
   MWs of independent power capacity under construction*                       364               360
- -------------------

*includes a 90 MW plant under a lease arrangement

The following is a summary of average daily energy marketing volumes:

                                            Three Months Ended                  Nine Months Ended
                                                September 30                       September 30
                                           2002              2001             2002              2001
                                           ----              ----             ----              ----
                                                                                    
Natural gas - MMBtus                      1,140,200        1,062,600         1,039,200          947,900
Crude oil - barrels                          57,200           35,100            53,700           37,000

Three Months Ended  September 30, 2002 Compared to Three Months Ended  September
30, 2001. Net income for the integrated  energy group for the three months ended
September  30,  2002 was $11.0  million  compared  to $12.0  million in the same
period of the prior year. Net income decreased slightly due to a decrease in net
income from energy marketing,  oil and gas production and coal mining, partially
offset by an  increase in power  generation  net  income.  The power  generation
segment's net income more than tripled due to its additional generating capacity
and increased earnings from additional  ownership of an energy partnership.  Net
income from energy marketing  decreased due to a substantial  decline in margins
received offset by increased volumes marketed, the addition of pipeline earnings
and unrealized gains recognized through mark-to-market  accounting.  The oil and
gas production  segment's net income  decreased due to a 17 percent  decrease in
production  volumes and an 11 percent decrease in average prices received.  Coal
mining had strong operational performance with production increasing 27 percent,
however net income  decreased due to a $3.4 million  after-tax gain related to a
coal contract settlement that was recognized in the third quarter of 2001.

                                       27

The integrated energy business group's revenues and expenses increased 27
percent and 29 percent respectively for the three months ended September 30,
2002 compared to the same period in 2001. The increase in revenue was a result
of increased generation capacity offset by the substantial decline in commodity
prices. Expenses increased due to higher fuel costs and depreciation
expense resulting from increased capacity.

Nine Months Ended September 30, 2002 Compared to Nine Months Ended September 30,
2001. Net income for the integrated energy group for the nine months ended
September 30, 2002 was $31.3 million compared to $50.7 million in the same
period of the prior year. Net income decreased primarily due to a substantial
decline in energy prices. The power generation segment reported net income
growth attributed to additional generating capacity, additional ownership of an
energy partnership, the addition of pipeline earnings and the reporting of
additional net income relating to the collection in 2002 of receivables from
California operations that were reserved for in the prior period. A 6 percent
increase in gas and oil production sales partially offset an earnings decrease
in the oil and gas segment caused by a 34 percent decrease in the average price
received. The energy marketing segment's net income decreased primarily due to a
substantial decrease in margins received, partially offset by increased volumes
marketed. Net income for the coal mining segment decreased due to a $3.4 million
after-tax gain related to a coal contract settlement that was recognized in the
third quarter of 2001 which was partially offset by the increase in tons of coal
sold in 2002.

The integrated energy business group's revenues decreased 6 percent and expenses
increased 11 percent, respectively, for the nine months ended September 30, 2002
compared to the same period in 2001. The decrease in revenue was a direct result
of the substantial decline in commodity prices. The increase in expenses
was primarily due to higher fuel costs and depreciation expense resulting from
the increased generating capacity.

Energy Marketing

                                                Three Months Ended                  Nine Months Ended
                                                   September 30                       September 30
                                              2002              2001             2002              2001
                                              ----              ----             ----              ----
                                                                  (in thousands)
                                                                                     
Revenue*                                    $    9,388       $    9,692         $  21,722        $  71,795
Operating income                            $    4,860       $    6,601         $  10,479        $  48,960
Net income                                  $    3,130       $    4,536         $   7,033        $  30,910

*Revenues presented for Energy marketing represent trading margins.  See Note 2.

Three Months Ended September 30, 2002 Compared to Three Months Ended September
30, 2001. The decrease in revenues is attributed to a decline in commodity
prices, partially offset by a 7 percent increase in natural gas average daily
volumes marketed and a 63 percent increase in crude oil average daily volumes
marketed. Net income decreased 31 percent due to a substantial decline in
commodity prices and margins.  As a result of changing commodity prices,
net income was impacted by unrealized gains recognized through mark-to-market
accounting treatment. Unrealized pre-tax mark-to-market gains for the
three-month periods ended September 30, 2002 and 2001 were $1.5 million and $0.5
million, respectively, resulting in a quarter over quarter net income increase
of $1.0 million.

                                       28

In addition, during the second quarter of 2002 we decided to discontinue
operations in our coal marketing business due primarily to challenges
encountered in marketing our Wyodak coal from the Powder River Basin of Wyoming
to midwestern and eastern coal markets. We sold the non-strategic assets
effective August 1, 2002. Net loss from discontinued operations was $(0.6)
million or $(0.02) per share for the third quarter of 2001. Prior year results
of operations have been restated to reflect the discontinued operations and the
coal marketing business is no longer reflected in the energy marketing segment.

Nine Months Ended September 30, 2002 Compared to Nine Months Ended September 30,
2001. Revenues and net income decreased substantially primarily due to a
substantial decline in commodity prices and margins received, offset by a 10
percent increase in natural gas average daily volumes marketed and a 45 percent
increase in crude oil average daily volumes marketed. Unusual energy marketing
conditions existed in the first six months of 2001 stemming primarily from gas
and electricity shortages in the West. Average spot gas prices in the West Coast
region were approximately $8.60 per MMBtu in the first nine months of 2001
compared to $2.80 in the first nine months of 2002.

Income (loss) from discontinued operations was $(2.6) million or $(0.09) per
share for the nine months ended September 30, 2002 compared to $0.3 million or
$0.01 per share for the same period of the prior year.

Power Generation

                                Three Months Ended                  Nine Months Ended
                                   September 30                        September 30
                              2002              2001              2002              2001
                              ----              ----              ----              ----
                                                    (in thousands)

Revenue                      $34,700          $21,544         $ 102,849           $56,061
Operating income             $13,036          $ 7,752         $  43,736           $25,316
Net income (loss)            $ 4,822          $ 1,246         $  14,670           $ 3,827

Three Months Ended  September 30, 2002 Compared to Three Months Ended  September
30,  2001.  Revenue and  operating  income  increased 61 percent and 68 percent,
respectively,  and net income more than tripled for the three-month period ended
September  30, 2002  compared to the same  period in 2001 and is  attributed  to
additional  generating capacity and increased earnings from additional ownership
of an energy  partnership.  As of September  30, 2002,  we had 657  megawatts of
independent power capacity in service compared to 625 megawatts at September 30,
2001.  Approximately 300 megawatts of the 625 megawatts of capacity at September
30,  2001  were  brought  on  during  the  third  quarter  of  2001.  Additional
partnership equity was earned by the Company in July 2002 as a result of certain
performance  measures  being  met  at a  consolidated  energy  partnership.  The
earnings  impact was  approximately  $1.6 million  pre-tax and was recorded as a
reduction  to  "Minority   interest"  expense  on  the  accompanying   Condensed
Consolidated Statement of Income.

Nine Months Ended September 30, 2002 Compared to Nine Months Ended September 30,
2001. Revenue and operating income increased 83 percent and 73 percent,
respectively, and net income more than tripled for the nine-month period ended
September 30, 2002 compared to the same period in 2001 and is attributed to
additional generating capacity and increased earnings from additional ownership
of an energy partnership. As of September 30, 2002, we had 657 megawatts of

                                       29

independent power capacity in service compared to 625 megawatts at September 30,
2001.  Approximately 300 megawatts of the 625 megawatts of capacity at September
30, 2001 were brought on during the third quarter of 2001.

The increase in net income for the nine-month period ended September 30, 2002
was also benefited by a $1.9 million after-tax benefit relating to the
collection of receivables previously reserved for in the prior period for
exposure to the California market and a $0.9 million after-tax adjustment for
negative goodwill to reflect the impact of a change in accounting for goodwill
in accordance with the adoption of Statement of Financial Accounting Standards
No. 142, "Goodwill and Other Intangible Assets" (SFAS 142) effective January 1,
2002.

Oil and Gas

                        Three Months Ended                 Nine Months Ended
                           September 30                       September 30
                      2002              2001             2002             2001
                      ----              ----             ----             ----
                                           (in thousands)

Revenue               $6,561           $8,496           $19,515         $26,353
Operating income      $1,408           $4,305           $ 4,191         $12,929
Net income            $1,066           $2,804           $ 3,227         $ 8,723

The following is a summary of our internally estimated economically recoverable
oil and gas reserves measured using constant product prices as of September 30,
2002 and 2001. Estimates of economically recoverable reserves are based on a
number of variables, which may differ from actual results.

                                                        September 30
                                               2002                      2001
                                               ----                      ----

 Barrels of oil (in millions)                   4.9                        4.2
 Bcf of natural gas                            32.3                       25.7
 Total in Bcf equivalents                      61.7                       50.9

Three Months Ended September 30, 2002 Compared to Three Months Ended September
30, 2001. Revenue and net income of the oil and gas production business segment
decreased 23 percent and 62 percent, respectively for the three-month period
ended September 30, 2002, compared to the same period in 2001 due to an 11
percent decrease in the average price received and a 17 percent decrease in
production volumes due in part to delayed drilling.

Nine Months Ended September 30, 2002 Compared to Nine Months Ended September 30,
2001. Revenue and net income of the oil and gas production business segment
decreased 26 percent and 63 percent respectively, for the nine-month period
ended September 30, 2002, compared to the same period in 2001 due to a 34
percent decrease in the average price received partially offset by a 6 percent
increase in production volumes.

                                       30

Mining

                      Three Months Ended                  Nine Months Ended
                         September 30                       September 30
                     2002             2001              2002             2001
                     ----             ----              ----             ----
                                          (in thousands)

Revenue             $8,309          $6,870            $23,391           $23,014
Operating income    $2,503          $  830            $ 6,937           $ 5,664
Net income          $2,103          $3,876            $ 6,932           $ 8,499

Three Months Ended September 30, 2002 Compared to Three Months Ended September
30, 2001. Revenue from our mining segment increased 21 percent and net income
decreased 46 percent for the three-month period ended September 30, 2002,
compared to the same period in 2001. Revenues increased due to a 27 percent
increase in tons of coal sold, partially offset by lower prices received.

Net income decreased due to a $3.4 million after-tax gain related to a coal
contract settlement that was recognized in the third quarter of 2001 which was
partially offset by the increase in tons of coal sold in the third quarter of
2002.

Nine Months Ended September 30, 2002 Compared to Nine Months Ended September 30,
2001. Revenue from our mining segment increased 2 percent and net income
decreased 18 percent for the nine-month period ended September 30, 2002,
compared to the same period in 2001. Revenue increased due to a 20 percent
increase in tons of coal sold, partially offset by lower prices received.

Net income decreased due to a $3.4 million after-tax gain related to a coal
contract settlement that was recognized in the third quarter of 2001 which was
partially offset by the increase in tons of coal sold in 2002.

Electric Utility Group

                                                Three Months Ended                  Nine Months Ended
                                                    September 30                       September 30
                                                2002             2001              2002             2001
                                                ----             ----              ----             ----
                                                                     (in thousands)
                                                                                        
Revenue                                         $45,291           $43,518         $120,786          $175,698
Operating expenses                               29,316            28,272           77,131           102,477
                                                -------           -------         --------          --------
Operating income                                $15,975           $15,246         $ 43,655          $ 73,221
Net income                                      $ 8,304           $ 7,929         $ 22,918          $ 42,053

The following table provides certain operating statistics:

                               Three Months Ended             Nine Months Ended
                                  September 30                   September 30
                              2002           2001         2002             2001
                              ----           ----         ----             ----

Firm (system) sales - MWh   510,500        537,000     1,466,000       1,527,000
Off-system sales - MWh      317,600        211,000       688,700         761,000

                                       31

Three Months Ended September 30, 2002 Compared to Three Months Ended September
30, 2001. Revenue, operating expenses and net income increased 4 percent, 4
percent and 5 percent, respectively for the three-month period ended September
30, 2002 compared to the same period in the prior year primarily due to a 51
percent increase in off-system electric megawatt-hour sales offset by a 22
percent decrease in the average price per megawatt-hour sold off-system. Firm
residential and contracted electricity sales increased, but were offset by a
decline in industrial sales due to the closing of the Homestake Gold Mine at
year-end 2001.

Nine Months Ended September 30, 2002 Compared to Nine Months Ended September 30,
2001. Revenue, operating expenses and net income decreased 31 percent, 25
percent and 46 percent, respectively for the nine-month period ended September
30, 2002 compared to the same period in the prior year primarily due to a 10
percent decrease in off-system electric megawatt-hour sales and a 69 percent
decrease in the average price per megawatt-hour sold off-system. Firm
residential and contracted electricity sales increased, but were offset by a
decline in industrial sales due to the closing of the Homestake Gold Mine at
year-end 2001. Revenue declines were partially offset by lower operating
expenses attributable to lower fuel and purchased power costs.

Communications Group

                       Three Months Ended                  Nine Months Ended
                          September 30                       September 30
                      2002             2001              2002           2001
                      ----             ----              ----           ----
                                           (in thousands)

Revenue                 $ 8,392        $ 5,154          $24,155       $13,717
Operating expenses        9,770          8,101           30,203        23,237
                        -------        -------          -------       -------
Operating loss          $(1,378)       $(2,947)         $(6,048)      $(9,520)
Net loss                $(1,453)       $(2,661)         $(5,729)      $(9,343)

                      September 30       June 30      December 31   September 30
                          2002             2002          2001           2001
                          ----             ----          ----           ----

Business customers        2,960          2,970            2,250         1,940
Business access lines     8,772          8,380            6,836         6,180
Residential customers    20,760         19,450           15,660        13,780

Three Months Ended September 30, 2002 Compared to Three Months Ended September
30, 2001. The communications business group's net loss for the three-month
period ended September 30, 2002 was $(1.5) million, compared to $(2.7) million
in 2001. The performance improvement is due largely to a 63 percent increase in
revenue as a result of a larger customer base and a $0.6 million after-tax
collection of previously reserved amounts, partially offset by increased costs
of sales and administrative expenses.

The total number of customers exceeded 23,700 at the end of September 2002 - a 6
percent and 32 percent increase over the customer base at June 30, 2002 and
December 31, 2001, respectively, and a 51 percent increase compared to September
30, 2001.

                                       32

Nine Months Ended September 30, 2002 Compared to Nine Months Ended September 30,
2001. The communications business group's net loss for the nine month period
ended September 30, 2002 was $(5.7) million, compared to $(9.3) million in 2001.
The performance improvement is due largely to a 76 percent increase in revenue
as a result of a larger customer base, partially offset by increased costs of
sales and administrative expenses.

The total number of customers exceeded 23,700 at the end of September 2002 - a 6
percent and 32 percent increase over the customer base at June 30, 2002 and
December 31, 2001, respectively, and a 51 percent increase compared to September
30, 2001.

We expect our communications group will sustain approximately $7.0 million in
net losses in calendar year 2002, with annual losses decreasing in 2003 and
profitability expected by 2004.

Earnings Guidance

We reaffirm confidence in our ongoing business strategy, which seeks long-term
growth through the expansion of integrated, balanced and diverse competitive
energy operations supplemented by the strength and stability of our electric
utility and improving results from our communication business. The energy
industry has encountered challenging market conditions this year, including low
and volatile prices for natural gas and wholesale power. Until market conditions
improve, we expect annual earnings per share percentage growth to be in the 8 to
10 percent range. We also expect recurring earnings for 2002 to be in the range
of $2.25 to $2.30 per share. We recognize that sustained growth requires capital
deployment to continue expanding our integrated energy operations. We strongly
believe that we are strategically positioned to take advantage of opportunities
to acquire and develop energy assets consistent with our investment criteria.

                          Critical Accounting Policies

Defined Benefit Pension Plan

We have a noncontributory defined benefit pension plan (Plan) covering our
employees and certain subsidiaries who meet eligibility requirements. The
benefits are based on years of service and compensation levels during the
highest five consecutive years of the last ten years of service. Our funding
policy is in accordance with the federal government's funding requirements. The
Plan's assets are held in trust and consist primarily of equity securities and
cash equivalents. The determination of our obligation and expense for pension
benefits is dependent on the use of certain assumptions by actuaries in
calculating the amounts. Those assumptions include, among others, the expected
long-term rate of return on Plan assets, the discount rate and the rate of
increase in compensation levels. The actuaries review the Plan annually and are
currently in the process of reviewing our Plan to determine our obligation and
our expense for next year. The market value of the Plan's assets has been
affected by declines in the equity market in the last year. As a result, we
could be required to recognize an additional minimum liability in the fourth
quarter of 2002 as prescribed by Statement of Financial Accounting Standards
(SFAS) No. 87 "Employers' Accounting for Pensions" and SFAS No. 132 "Employers'
Disclosure about Pensions and Postretirement Benefits." If required, the
liability would be recorded as a reduction to Other Comprehensive Income, and
would not affect net income. We do not expect this liability to be material, if
it is required. However, we currently anticipate the amount of our pre-tax
pension expense in 2003 will be in a range of $2.5 million to $3.5 million more
than the amount for 2002, which would have a negative effect on earnings per
share of $0.06 to $0.09 in 2003.

                                       33

Special Purpose Entities

As described more fully in the Management's Discussion and Analysis of Financial
Condition and Results of Operations in the Company's Annual Report on Form 10-K
for the year ended December 31, 2001, Black Hills Generation, a subsidiary in
our power generation segment, has entered into agreements with Wygen Funding,
Limited Partnership to lease the Wygen Plant, a 90 megawatt coal-fired power
plant under construction in Campbell County, Wyoming. Wygen Funding is a special
purpose entity that owns the Wygen Plant and has financed the project. Neither
Wygen Funding, its owners, nor its officers are related to us, and other than
the lease transaction and obligations incurred as a result of the transaction,
we have no obligation to provide additional funding or issue securities to Wygen
Funding. Lease payments are based on final construction and financing costs and
will begin after substantial completion of construction scheduled to occur in
the first quarter of 2003. The lease will be accounted for as an operating
lease.

The Financial Accounting Standards Board (FASB) expects to issue a new
accounting standard regarding the accounting treatment for special purpose
entities. The final provisions of this new standard may affect the accounting of
the lease arrangement. If the special purpose entity were to be consolidated
into our financial statements, we would record both the Wygen asset and its
related debt on our balance sheet. Total project costs are estimated to be in
the $130 - $140 million range. In addition, we would also have to recognize the
depreciation expense associated with the project which is estimated to be
approximately $3.5 million per year based upon a 40-year plant life and would
have reclassifications on the income statement primarily between operating
expenses and interest expense. We estimate the impact on earnings per share
would be approximately $(0.09) per share. We are monitoring this FASB project
and may consider other financing structures for the project in the future.

Goodwill and Other Intangible Assets

As required, on January 1, 2002 we adopted the provisions of Statement of
Financial Accounting Standards No. 142, "Goodwill and Other Intangible Assets"
(SFAS 142). Under SFAS 142, goodwill and intangible assets with indefinite lives
are no longer amortized but the carrying values are reviewed annually (or more
frequently if impairment indicators arise) for impairment. Intangible assets
with a defined life will continue to be amortized over their useful lives (but
with no maximum life). Initial adoption of SFAS 142 did not have a material
impact on our financial position or results of operations. Adoption of SFAS 142
provisions for non-amortization of goodwill and indefinite lived intangibles
will impact our future earnings results. Results for the three and nine months
ended September 30, 2002 were approximately $0.4 million and $1.2 million, or
$0.01 per share and $0.05 per share, higher than the comparable periods in 2001
due to non-amortization of goodwill.

Other than the above, there have been no material changes in our critical
accounting policies from those reported in our 2001 Annual Report on Form 10-K
filed with the Securities Exchange Commission. For more information on our
critical accounting policies, see Part II, Item 7 in our 2001 Annual Report on
Form 10-K.

                                       34

                         Liquidity and Capital Resources

Cash Flow Activities

During the nine-month period ended September 30, 2002, we generated sufficient
cash flow from operations to meet our operating needs, to pay dividends on
common and preferred stock, to pay a portion of our long-term debt maturities
and to fund a portion of our property additions. We continue to fund property
and investment additions primarily related to construction of additional
electric generation facilities for our integrated energy business group through
a combination of operating cash flow, increased short-term debt, long-term debt
and long-term non-recourse project financing.

Cash flows from operations decreased $27.2 million for the nine-month period
ended September 30, 2002 compared to the same period in the prior year primarily
due to the decrease in net income and cash provided by changes in working
capital.

On March 8, 2002, we acquired an additional 67 percent interest in Millennium
Pipeline Company, L.P., which owns and operates a 200-mile pipeline and an
additional ownership interest in Millennium Terminal Company, L.P., which has
1.1 million barrels of crude oil storage connected to the Millennium Pipeline at
the Oil Tanking terminal in Beaumont, Texas. Total cost of the acquisition was
$11.0 million and was funded through borrowings under short-term revolving
credit facilities.

On March 15, 2002, we acquired an additional 30 percent interest in the Harbor
Cogeneration Facility, a 98-megawatt gas-fired plant located in Wilmington,
California for $25.7 million. This acquisition was also funded through
borrowings under short-term revolving credit facilities.

On March 14, 2002, we closed on $135 million five-year senior secured
project-level financing for the Arapahoe and Valmont facilities. These projects
have a total of 210 megawatts in service and are located in the Denver, Colorado
area. Proceeds from this financing were used to refinance $53.8 million of an
existing seven-year, secured term project-level facility, pay down approximately
$50.0 million of short-term credit facility borrowings, and the remainder was
used for project construction.

During the first quarter of 2002, we completed a $50 million bridge credit
agreement. The credit agreement supplements our revolving credit facilities and
had the same terms as those facilities with an original expiration date of June
30, 2002, which subsequently was extended to September 27, 2002. On September
27, 2002 this $50 million facility was replaced by a $50 million secured
financing for the expansion at our Las Vegas II project, a 224 megawatt
gas-fired generation facility located in North Las Vegas, Nevada which expires
on November 26, 2002. This financing is guaranteed by the Company.

On June 18, 2002, we closed on a $75 million bridge credit agreement. This
credit agreement bridged the issuance of $75 million of Black Hills Power First
Mortgage bonds, which we issued on August 13, 2002. The termination date of the
bridge credit agreement was August 13, 2002, the date on which the First
Mortgage Bonds were issued.

During July 2002, we purchased the assets of the Kilgore to Houston Pipeline
System from Equilon Pipeline Company, LLC. The Kilgore pipeline transports crude
oil from the Kilgore, Texas region south to Houston, Texas, which is the
transfer point to connecting carriers via the Oil Tanking Houston terminal

                                       35

facilities. The 10-inch pipeline is approximately 190 miles long and has a
capacity of up to approximately 35,000 barrels per day. In addition, the Kilgore
system has approximately 400,000 barrels of crude oil storage at Kilgore and
375,000 barrels of storage at the Texoma Tank Farm located in Longview, Texas.
Total cost of the acquisition was $6.7 million and was funded through borrowings
under short-term credit facilities.

On August 13, 2002, our electric utility subsidiary, Black Hills Power, Inc.,
issued $75 million of First Mortgage Bonds, series AE, due 2032. The Mortgage
Bonds have a 7.23 percent coupon with interest payable semiannually, commencing
February 15, 2003. Net proceeds from the offering were and will be used to fund
the utility's portion of construction and installation costs for an AC-DC-AC
Converter Station; for general capital expenditures for the remainder of 2002
and 2003; to repay a portion of current bank indebtedness; to satisfy bond
maturities for certain outstanding first mortgage bonds due in 2003; and for
general corporate purposes.

In August 2002, we closed on a $195 million revolving unsecured credit facility
that expires August 26, 2003. The credit facility extended our previous $200
million 364-day credit facility that expired on August 27, 2002.

On September 25, 2002, we closed on a $35 million unsecured two-year credit
agreement. Proceeds were used to fund our working capital needs and for general
corporate purposes.

Dividends

Dividends paid on our common stock totaled $0.29 per share in each of the first
three quarters of 2002. This reflects a 3.6 percent increase, as approved by our
board of directors in January 2002, from the prior periods. The determination of
the amount of future cash dividends, if any, to be declared and paid will depend
upon, among other things, our financial condition, funds from operations, the
level of our capital expenditures, restrictions under our credit facilities and
our future business prospects.

Short-Term Liquidity and Financing Transactions

Our principal sources of short-term liquidity are our revolving bank facilities
and cash provided by operations. As of September 30, 2002 we had approximately
$75 million of cash and $480 million of bank facilities. Approximately $46
million of the cash balance at September 30, 2002 was restricted by subsidiary
debt agreements in regards to the ability to dividend the cash to the parent
company. The bank facilities consisted of a $50 million facility due November
26, 2002, a $195 million facility due August 26, 2003, a $200 million facility
due August 27, 2004 and a $35 million facility due September 30, 2004. These
bank facilities can be used to fund our working capital needs, for general
corporate purposes and to provide liquidity for a commercial paper program if
implemented. At September 30, 2002, we had $383.5 million of bank borrowings
outstanding under these facilities. After inclusion of applicable letters of
credit, the remaining borrowing capacity under the bank facilities was $57.1
million at September 30, 2002.

Two significant cash events occurred subsequent to the third quarter. On October
1, 2002 we acquired Mallon Resources Corporation's debt to Aquila Energy Capital
Corporation and settled Mallon's outstanding hedges, amounting to $30.5 million,
as part of the definitive merger agreement to acquire Denver-based Mallon
Resources Corporation. The acquisition of this debt was funded with our
corporate credit facilities. Also, during October we received a $23.7 million
federal income tax refund as a result of filing our 2001 federal income tax
return. The refund was primarily due to accelerated depreciation and other plant

                                       36

related timing differences for tax purposes. The income tax refund was used to
pay down our corporate credit facilities. At October 31, 2002, we had $403.0
million of bank borrowings outstanding under our corporate credit facilities
with $37.6 million of remaining borrowing capacity available after the inclusion
of applicable letters of credit.

The above bank facilities include covenants that are common in such
arrangements. Several of the facilities require that we maintain a consolidated
net worth in an amount of not less than the sum of $375 million and 50 percent
of the aggregate consolidated net income beginning June 30, 2001; a recourse
leverage ratio not to exceed 0.65 to 1.00; and an interest coverage ratio of not
less than 3.00 to 1.00. The $35 million credit facility's covenants include
consolidated net worth in an amount of not less than the sum of $425 million and
50 percent of the aggregate consolidated net income beginning April 1, 2002; a
recourse leverage ratio not to exceed 0.65 to 1.00; and an interest coverage
ratio of not less than 1.50 to 1.00. In addition the $195 million 364 day credit
facility, the $200 million three-year credit facility and the $35 million
two-year credit facility contain a liquidity covenant that requires us to have
$30 million of liquid assets as of the last day of each fiscal quarter beginning
with December 31, 2002. Liquid assets are defined as unrestricted cash and
available unused capacity under our credit facilities. If these covenants are
violated, it would be considered an event of default entitling the lender to
terminate the remaining commitment and accelerate all principal and interest
outstanding. In addition, certain of our interest rate swap agreements include
cross-default provisions. These provisions would allow the counterparty the
right to terminate the swap agreement and liquidate at a prevailing market rate,
in the event of default. As of September 30, 2002, we were in compliance with
the above covenants.

Some of the facilities previously had a covenant whereby we were required to
maintain a credit rating of at least "BBB-" from Standard & Poor's or "Baa3"
from Moody's Investor Service. The facilities that contained the rating triggers
were amended during the second quarter of 2002 to remove default provisions
pertaining to our credit rating status.

Our consolidated net worth was $534.8 million at September 30, 2002. The
long-term debt component of our capital structure at September 30, 2002 was 51
percent and our total debt leverage (long-term debt and short-term debt) was 64
percent.

In addition, Enserco Energy, Inc., our gas marketing unit, has a $135 million
uncommitted, discretionary line of credit to provide support for the purchase of
natural gas. We provided no guarantee to the lender under this facility. At
September 30, 2002, there were outstanding letters of credit issued under the
facility of $26.1 million with no borrowing balances on the facility.
Similarly, Black Hills Energy Resources, Inc., our oil marketing unit, had a $25
million uncommitted, discretionary credit facility. This line of credit provided
credit support for the purchases of crude oil by Black Hills Energy Resources.
We provided no guarantee to the lender under this facility. At September 30,
2002, Black Hills Energy Resources had letters of credit outstanding of $18.9
million and no balance outstanding on its overdraft line.

We continue to seek non-recourse project-level financing for our independent
power projects. Due to creditworthiness concerns with counterparties, financing
arrangements for the Las Vegas Cogeneration power plant expansion, currently
under construction, have been delayed.

                                       37

Allegheny Energy Supply Company (AESC), a subsidiary of Allegheny Energy Inc.,
has a contract to purchase all of the facility's capacity and all associated
energy and ancillary services. Both AESC and its parent, Allegheny Energy Inc.
have recently had their credit ratings downgraded below investment grade status
and have technically defaulted on some of their credit agreements with other
counterparties. The Las Vegas expansion is expected to be operational in the
fourth quarter of 2002 and has been funded with the corporate credit facilities.
Total construction and acquisition costs, including Las Vegas Cogeneration I,
are expected to be $330 million of which $302 million was expended as of
September 30, 2002.

If we are not successful in extending the $50 million facility that expires on
November 26, 2002 or in obtaining other financing, a deficiency in our liquidity
could occur.

Our ability to obtain additional financing will depend upon a number of factors,
including our future performance and financial results and capital market
conditions. We can provide no assurance that we will be able to raise additional
capital on reasonable terms or at all.

There have been no other material changes in our forecasted changes in liquidity
and capital requirements from those reported in Item 7 of our 2001 Annual Report
on Form 10-K filed with the Securities Exchange Commission.

                                  RISK FACTORS

We have substantial indebtedness and will require significant additional amounts
of debt and equity capital to grow our businesses and service our indebtedness.
Our future access to these funds is not certain, and our inability to access
funds in the future could adversely affect our liquidity.

Financing for construction requirements and operational needs is dependent upon
the cost and availability of external funds from capital markets and financial
institutions at both company and project levels. Access to funds is dependent
upon factors such as general economic conditions, regulatory authorizations and
policies, our credit rating, the operations of the projects funded, the credit
ratings of project counterparties, and the economics of the projects under
construction.

Counterparty Credit Risk

We perform ongoing credit evaluations of our customers and adjust credit limits
based upon payment history and the customer's current creditworthiness, as
determined by our review of their current credit information. We continuously
monitor collections and payments from our customers and maintain a provision for
estimated credit losses based upon historical experience and any specific
customer collection issue that we have identified. We cannot guarantee that we
will continue to experience the same credit loss rates that we have in the past
or that an investment grade counterparty will not default, as was the case with
Enron in 2001.

Our agreements with counterparties that have recently experienced downgrades in
their credit ratings expose us to the risk of counterparty default, which could
adversely affect our cash flow and profitability.

                                       38

The credit ratings of the senior unsecured debt of Public Service Company of
Colorado (PSCo), Nevada Power Company and Allegheny Energy Supply Company,
counterparties under tolling agreements with our subsidiaries, have recently
been downgraded by one or more rating agencies. The credit ratings of Nevada
Power Company, its parent holding company, Sierra Pacific Resources, and
Allegheny Energy Supply Company, have all been downgraded to non-investment
grade status. In addition, project level financing arrangements in place for
projects in Colorado and New York provide for the potential acceleration of
payment obligations in the event of nonperformance by a counterparty under
related power purchase agreements. If these or other counterparties fail to
perform their obligations under their respective power purchase agreements,
our financial condition and results of operation may be adversely affected. We
may not be able to enter into agreements in replacement of our existing power
purchase agreements on terms as favorable as our existing agreements, or at all.

Our rate freeze agreement with the South Dakota Public Utilities Commission,
which prevents us, absent extraordinary circumstances, from passing on to our
South Dakota retail customers cost increases we may incur during the rate freeze
period, could decrease our operating margins.

Our rate freeze agreement with the South Dakota Public Utilities Commission
provides that, until January 1, 2005, we may not apply to the Commission for any
increase in rates, except upon the occurrence of various extraordinary events.
Our utility's historically stable returns could be threatened by plant outages,
machinery failure, increases in purchased power costs over which we have no
control, acts of nature or other unexpected events that could cause our
operating costs to increase and our operating margins to decline. Moreover, in
the event of unexpected plant outages or machinery failures, we may be required
to purchase replacement power in wholesale power markets at prices, which exceed
the rates we are permitted to charge our retail customers.

Because wholesale power, fuel prices and other costs are subject to volatility,
our revenues and expenses may fluctuate.

A substantial portion of our growth in net income in recent years is
attributable to increasing wholesale sales into a robust market. The prices of
energy products in the wholesale power markets have declined significantly since
the first half of 2001. Power prices are influenced by many factors outside our
control, including fuel prices, transmission constraints, supply and demand,
weather, economic conditions, and the rules, regulations and actions of the
system operators in those markets. Moreover, unlike most other commodities,
electricity cannot be stored and therefore must be produced concurrently with
its use. As a result, wholesale power markets are subject to significant price
fluctuations over relatively short periods of time and can be unpredictable.

Our broadband communications business is subject to significant competition for
its services and to rapid technological change.

Our communications group, which provides a full suite of communication
services, faces strong competition for its services from the incumbent local
exchange carrier as well as from long distance providers, Internet service
providers, the incumbent cable television provider and others.

                                       39

The communications industry is subject to rapid and significant changes in
technology. There can be no assurance that future technological developments
will not have a material adverse effect on our competitive position.

Our ability to recover our capital investment is dependent on our ability to
sustain our customer base and is subject to the risk that technological advances
may render our network obsolete. If we determine that we will be unable to
recover our investment, we would be required to take a non-cash charge to
earnings in an amount that could be material in order to write down a portion of
our investment in our broadband communications business.

Construction, expansion, refurbishment and operation of power generation
facilities involve significant risks which could lead to lost revenues or
increased expenses.

The construction, expansion and refurbishment of power generation and
transmission and resource recovery facilities involve many risks, including: the
inability to obtain required governmental permits and approvals; the
unavailability of equipment; supply interruptions; work stoppages; labor
disputes; social unrest; weather interferences; unforeseen engineering,
environmental and geological problems and unanticipated cost overruns.

The ongoing operation of our facilities involves all of the risks described
above, in addition to risks relating to the breakdown or failure of equipment or
processes and performance below expected levels of output or efficiency. New
plants may employ recently developed and technologically complex equipment,
especially in the case of newer environmental emission control technology. Any
of these risks could cause us to operate below expected capacity levels, which
in turn could result in lost revenues, increased expenses, higher maintenance
costs and penalties. While we maintain insurance, obtain warranties from vendors
and obligate contractors to meet certain performance levels, the proceeds of
such insurance, and our rights under warranties or performance guarantees may
not be adequate to cover lost revenues, increased expenses or liquidated damage
payments.

Estimates of our proved reserves may materially change due to numerous
uncertainties inherent in estimating oil and natural gas reserves.

There are many uncertainties inherent in estimating quantities of proved
reserves and their values. The process of estimating oil and natural gas
reserves requires interpretations of available technical data and various
assumptions, including assumptions relating to economic factors. Any significant
inaccuracies in these interpretations or assumptions could materially affect the
estimated quantities and present value of our reserves. The accuracy of any
reserve estimate is a function of the quality of available data, engineering and
geological interpretations and judgement, and the assumptions used regarding
quantities of recoverable oil and gas reserves and prices for oil and natural
gas. Actual prices, production, development expenditures, operating expenses,
and quantities of recoverable oil and natural gas reserves will vary from those
assumed in our estimates, and these variances may be significant. Any
significant variance from the assumptions used could result in the actual
quantity of our reserves and future net cash flow being materially different
from the estimates in our reported reserves. In addition, results of drilling,
testing and production and changes in oil and natural gas prices after the date
of the estimate may result in substantial upward or downward revisions.

                                       40

We face potential claims related to a forest fire in South Dakota.

In June 2002, a forest fire damaged approximately 11,000 acres of private and
governmental land located near Deadwood and Lead, South Dakota. The fire
destroyed approximately 20 structures (seven houses and 13 outbuildings) and
caused the evacuation of the cities of Lead and Deadwood for approximately 48
hours.

The cause of the fire was investigated by the State of South Dakota. Alleged
contact between power lines owned by us and undergrowth were implicated as the
cause. We have initiated our own investigation into the cause of the fire,
including the hiring of expert fire investigators and that investigation is
continuing.

We have been put on notice of potential private civil claims for property damage
and business loss. In addition, the State of South Dakota initiated a civil
action in the Seventh Judicial Circuit Court, Pennington County, South Dakota,
seeking recovery of damages for fire suppression costs, reclamation and
remediation. If it is determined that power line contact was the cause of the
fire and that we were negligent in the maintenance of those power lines, we
could be liable for resultant damages. We cannot predict the outcome of either
our investigation or the viability of potential claims. Management believes that
any such claims will not have a material adverse effect on our financial
condition or results of operations.

Our business is subject to substantial governmental regulation and permitting
requirements as well as on-site environmental liabilities we assumed when we
acquired some of our facilities. We may be adversely affected by any future
inability to comply with existing or future regulations or requirements or the
potentially high cost of maintaining the compliance of our facilities.

In General. Our business is subject to extensive energy, environmental and other
laws and regulations of federal, state and local authorities. We generally are
required to obtain and comply with a wide variety of licenses, permits and other
approvals in order to operate our facilities. In the course of complying with
these requirements, we may incur significant additional costs. If we fail to
comply with these requirements, we could be subject to civil or criminal
liability and the imposition of liens or fines. In addition, existing
regulations may be revised or reinterpreted, new laws and regulations may be
adopted or become applicable to us or our facilities, and future changes in laws
and regulation may have a detrimental effect on our business.

Environmental Regulation. In acquiring some of our facilities, we assumed
on-site liabilities associated with the environmental condition of those
facilities, regardless of when such liabilities arose and whether known or
unknown, and in some cases agreed to indemnify the former owners of those
facilities for on-site environmental liabilities. We strive at all times to be
in compliance with all applicable environmental laws and regulations. However,
steps to bring our facilities into compliance, if necessary, could be expensive,
and thus could adversely affect our financial condition. Furthermore, with the
continuing trends toward stricter standards, greater regulation, more extensive
permitting requirements and an increase in the assets we operate, we expect our
environmental expenditures to be substantial in the future.

                                       41

Ongoing changes in the United States utility industry, such as state and federal
regulatory changes, a potential increase in the number of our competitors or the
imposition of price limitations to address market volatility, could adversely
affect our profitability.

The United States electric utility industry is currently experiencing increasing
competitive pressures as a result of consumer demands, technological advances,
deregulation, greater availability of natural gas-fired generation and other
factors. The FERC has implemented and continues to propose regulatory changes to
increase access to the nationwide transmission grid by utility and non-utility
purchasers and sellers of electricity. In addition, a number of states have
implemented or are considering or currently implementing methods to introduce
and promote retail competition. Industry deregulation in some states has led to
the disaggregation of some vertically integrated utilities into separate
generation, transmission and distribution businesses, and deregulation
initiatives in a number of states may encourage further disaggregation. As a
result, significant additional competitors could become active in the
generation, transmission and distribution segments of our industry.

Proposals have been introduced in Congress to repeal the Public Utility Holding
Company Act of 1935, or PUHCA, and the FERC has publicly indicated support for
the PUHCA repeal effort. To the extent competitive pressures increase and the
pricing and sale of electricity assume more characteristics of a commodity
business, the economics of domestic independent power generation projects may
come under increasing pressure.

In addition, the independent system operators who oversee most of the wholesale
power markets have in the past imposed, and may in the future continue to
impose, price limitations and other mechanisms to address some of the volatility
in these markets. These types of price limitations and other mechanisms may
adversely affect the profitability of our generation facilities that sell energy
into the wholesale power markets. Given the extreme volatility and lack of
meaningful long-term price history in some of these markets and the imposition
of price limitations by independent system operators, we may not be able to
operate profitably in all wholesale power markets.

                          NEW ACCOUNTING PRONOUNCEMENTS

During June 2002, the Emerging Issues Task Force (EITF) reached a consensus on
Issues 1 and 3 of EITF Issue No. 02-3, "Recognition and Reporting of Gains and
Losses on Energy Trading Contracts under EITF Issue No. 98-10, "Accounting for
Contracts Involved in Energy Trading and Risk Management Activities," and No.
00-17, "Measuring the Fair Value of Energy-Related Contracts in Applying Issue
No. 98-10."

At a meeting on October 25, 2002, the EITF reached new consensuses that
effectively supersede the consensuses on EITF 02-3, reached at its June 2002
meeting. At its October 2002 meeting, the EITF reached a consensus to rescind
EITF 98-10, the impact of which is to preclude mark-to-market accounting for all
energy trading contracts not within the scope of FASB Statement No. 133,
"Accounting for Derivative Instruments and Hedging Activities." The EITF also
reached a consensus that gains and losses on derivative instruments within the
scope of Statement 133 should be shown net in the income statement if the
derivative instruments are held for trading purposes. The consensus regarding
the rescission of Issue 98-10 is applicable for fiscal periods beginning after
December 15, 2002. Energy trading contracts not within the scope of Statement
133 purchased after October 25, 2002, but prior to the implementation of the
consensus are not permitted to apply mark-to-market accounting. We have not yet

                                       42

quantified the financial statement effect of this EITF action. We currently
report our energy trading activities on a net basis.

Other than the above, and the new pronouncements reported in our 2001 Annual
Report on Form 10-K filed with the Securities Exchange Commission, there have
been no new accounting pronouncements issued that when implemented would require
us to either retroactively restate prior period financial statements or record a
cumulative catch-up adjustment.

                           Forward Looking Statements

Some of the statements in this Form 10-Q include "forward-looking statements" as
defined by the Securities and Exchange Commission, or SEC. We make these
forward-looking statements in reliance on the safe harbor protections provided
under the Private Securities Litigation Reform Act of 1995. All statements,
other than statements of historical facts, included in this Form 10-Q that
address activities, events or developments that we expect, believe or anticipate
will or may occur in the future are forward-looking statements. These
forward-looking statements are based on assumptions, which we believe are
reasonable based on current expectations and projections about future events and
industry conditions and trends affecting our business. However, whether actual
results and developments will conform to our expectations and predictions is
subject to a number of risks and uncertainties that could cause actual results
to differ materially from those contained in the forward-looking statements,
including, among other things: (1) unanticipated developments in the western
power markets, including unanticipated governmental intervention, deterioration
in the financial condition of counterparties, default on amounts due from
counterparties, adverse changes in current or future litigation, adverse changes
in the tariffs of the California Independent System Operator, market disruption
and adverse changes in energy and commodity supply, volume and pricing and
interest rates; (2) prevailing governmental policies and regulatory actions with
respect to allowed rates of return, industry and rate structure, acquisition and
disposal of assets and facilities, operation and construction of plant
facilities, recovery of purchased power and other capital investments, and
present or prospective wholesale and retail competition; (3) the State of
California's efforts to reform its long-term power purchase contracts and
recover refunds for alleged price manipulation; (4) changes in and compliance
with environmental and safety laws and policies; (5) weather conditions; (6)
population growth and demographic patterns; (7) competition for retail and
wholesale customers; (8) pricing and transportation of commodities; (9) market
demand, including structural market changes; (10) changes in tax rates or
policies or in rates of inflation; (11) changes in project costs; (12)
unanticipated changes in operating expenses or capital expenditures; (13)
capital market conditions; (14) technological advances by competitors; (15)
competition for new energy development opportunities; (16) legal and
administrative proceedings that influence our business and profitability; (17)
the effects on our business, including the availability of insurance, resulting
from the terrorist actions on September 11, 2001, or any other terrorist actions
or responses to such actions; (18) the effects on our business resulting from
the financial difficulties of Enron and other energy companies, including their
effects on liquidity in the trading and power industry, and their effects on the
capital markets views of the energy or trading industry, and our ability to
access the capital markets on the same favorable terms as in the past; (19) the
effects on our business in connection with a lowering of our credit rating (or
actions we may take in response to changing credit ratings criteria), including,
increased collateral requirements to execute our business plan, demands for
increased collateral by our current counterparties, refusal by our current or
potential counterparties or customers to enter into transactions with us and our
inability to obtain credit or capital in amounts or on terms favorable to us;
(20) risk factors discussed in this Form 10-Q; and (21) other factors discussed
from time to time in our filings with the SEC. New factors that could cause

                                       43

actual results to differ materially from those described in forward-looking
statements emerge from time to time, and it is not possible for us to predict
all such factors, or the extent to which any such factor or combination of
factors may cause actual results to differ from those contained in any
forward-looking statement. We assume no obligation to update publicly any such
forward-looking statements, whether as a result of new information, future
events, or otherwise.

ITEM 3.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

There have been no material changes in market risk faced by us from those
reported in our 2001 Annual Report on Form 10-K filed with the Securities
Exchange Commission. For more information on market risk, see Part II, Item 7 in
our 2001 Annual Report on Form 10-K, and Notes to Condensed Consolidated
Financial Statements in this Form 10-Q.

ITEM 4.  CONTROLS AND PROCEDURES

With the participation of management, our Chief Executive Officer and Chief
Financial Officer evaluated our disclosure controls and procedures within 90
days of the filing of this quarterly report. Based on this evaluation, the Chief
Executive Officer and Chief Financial Officer concluded that the disclosure
controls and procedures are effective in ensuring that information required to
be disclosed by us in the reports filed or submitted by us under the Exchange
Act is recorded, processed, summarized and reported within the time periods
specified in the Securities and Exchange Commission's rules and forms.

There have been no significant changes in our internal controls or other factors
that could significantly affect these controls subsequent to the date of our
evaluation, including any significant deficiencies or material weaknesses of
internal controls that would require corrective action.

                                       44

                             BLACK HILLS CORPORATION

                           Part II - Other Information

Item 1. Legal Proceedings

        For information regarding legal proceedings, see Note 10 to the
        Company's 2001  Annual  Report  on Form  10-K and Note 12 in Item 1 of
        Part I of this Quarterly Report on Form 10-Q, which  information from
        Note 12 is incorporated by reference into this item.

Item 6. Exhibits and Reports on Form 8-K

          (a)  Exhibits -

               Exhibit 10.1                 $195 million Amended and
                                            Restated 364-day Credit Agreement
                                            dated as of August 27, 2002, Among
                                            Black Hills Corporation as Borrower,
                                            the Financial Institutions Party
                                            Hereto, as Banks, ABN Amro Bank
                                            N.A., as Syndication Agent, Bank of
                                            Montreal, as Co-Syndication Agent,
                                            US Bank, National Association, as
                                            Documentation Agent and Bank of Nova
                                            Scotia, as Co-Documentation Agent.

                Exhibit 10.2                $35 million Term Credit
                                            Agreement dated as of September 25,
                                            2002 among Black Hills Corporation
                                            (Borrower), The Financial
                                            Institutions Party Hereto (Banks),
                                            and Credit Lyonnais New York Branch
                                            (Administrative Agent).

                Exhibit 10.3                The First Supplemental Indenture,
                                            dated as of August 13, 2002,
                                            between Black Hills Power, Inc. and
                                            JPMorgan Chase Bank, as Trustee.

                Exhibit 10.4                First Amendment to 3-year Credit
                                            Agreement.

                Exhibit 10.5                Second Amendment to 3-year Credit
                                            Agreement.

                Exhibit 99.1                Certification pursuant to 18
                                            U.S.C. Section 1350, as adopted
                                            pursuant to Section 906 of the
                                            Sarbanes-Oxley Act of 2002.

                Exhibit 99.2                Certification pursuant to 18
                                            U.S.C. Section 1350, as adopted
                                            pursuant to Section 906 of the
                                            Sarbanes-Oxley Act of 2002.

                                       45

          (b)  Reports on Form 8-K

               We have filed the following Reports on Form 8-K
               during the quarter ended September 30, 2002.

               Form 8-K dated August 12, 2002.

               Reported under Item 9 the filing of sworn statements
               by Daniel P. Landguth, Black Hills Corporation's
               Principal Executive Officer and Mark T. Thies, Black
               Hills Corporation's Principal Financial Officer
               pursuant to Securities and Exchange
               Commission Order No. 4-460.

               Form 8-K dated October 1, 2002.

               Reported under Item 5 that Black Hills Corporation
               and Mallon Resources Corporation entered into a
               definitive merger agreement for the acquisition of
               Mallon Resources in a stock-for-stock transaction.

                                       46

                             BLACK HILLS CORPORATION

Signatures

         Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.

                                 BLACK HILLS CORPORATION

                                        /s/ Daniel P. Landguth
                                        ----------------------------------------
                                        Daniel P. Landguth, Chairman and
                                          Chief Executive Officer

                                        /s/ Mark T. Thies
                                        ----------------------------------------
                                        Mark T. Thies, Senior Vice President and
                                          Chief Financial Officer

Dated:   November 14, 2002

                                       47

                                  CERTIFICATION

I, Daniel P. Landguth, certify that:

1.   I have  reviewed  this  quarterly  report  on  Form  10-Q  of  Black  Hills
     Corporation;

2.   Based on my knowledge,  this  quarterly  report does not contain any untrue
     statement of a material fact or omit to state a material fact  necessary to
     make the statements  made, in light of the  circumstances  under which such
     statements  were made, not misleading with respect to the period covered by
     this quarterly report;

3.   Based on my  knowledge,  the  financial  statements,  and  other  financial
     information  included  in this  quarterly  report,  fairly  present  in all
     material respects the financial  condition,  results of operations and cash
     flows of the  registrant  as of, and for,  the  periods  presented  in this
     quarterly report;

4.   The  registrant's  other  certifying  officers  and I are  responsible  for
     establishing and maintaining disclosure controls and procedures (as defined
     in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:

     a)   designed  such  disclosure  controls  and  procedures  to ensure  that
          material  information  relating  to  the  registrant,   including  its
          consolidated subsidiaries,  is made known to us by others within those
          entities,  particularly  during  the  period in which  this  quarterly
          report is being prepared;

     b)   evaluated the  effectiveness of the registrant's  disclosure  controls
          and procedures as of a date within 90 days prior to the filing date of
          this quarterly report (the "Evaluation Date"); and

     c)   presented  in  this  quarterly   report  our  conclusions   about  the
          effectiveness  of the disclosure  controls and procedures based on our
          evaluation as of the Evaluation Date;

5.   The registrant's other certifying  officers and I have disclosed,  based on
     our most recent  evaluation,  to the  registrant's  auditors  and the audit
     committee of  registrant's  board of directors (or persons  performing  the
     equivalent function):

     a)   all  significant  deficiencies  in the design or operation of internal
          controls  which could  adversely  affect the  registrant's  ability to
          record,  process,   summarize  and  report  financial  data  and  have
          identified for the  registrant's  auditors any material  weaknesses in
          internal controls; and

     b)   any fraud, whether or not material,  that involves management or other
          employees who have a  significant  role in the  registrant's  internal
          controls; and

                                       48

6.   The  registrant's  other  certifying  officers and I have indicated in this
     quarterly report whether or not there were significant  changes in internal
     controls  or in other  factors  that could  significantly  affect  internal
     controls  subsequent to the date of our most recent  evaluation,  including
     any corrective actions with regard to significant deficiencies and material
     weaknesses.

Date:  November 14, 2002

                                                  /s/ Daniel P. Landguth
                                                  ------------------------
                                                  Chairman and
                                                  Chief Executive Officer

                                       49

                                  CERTIFICATION

I, Mark T. Thies, certify that:

1.   I have  reviewed  this  quarterly  report  on  Form  10-Q  of  Black  Hills
     Corporation;

2.   Based on my knowledge,  this  quarterly  report does not contain any untrue
     statement of a material fact or omit to state a material fact  necessary to
     make the statements  made, in light of the  circumstances  under which such
     statements  were made, not misleading with respect to the period covered by
     this quarterly report;

3.   Based on my  knowledge,  the  financial  statements,  and  other  financial
     information  included  in this  quarterly  report,  fairly  present  in all
     material respects the financial  condition,  results of operations and cash
     flows of the  registrant  as of, and for,  the  periods  presented  in this
     quarterly report;

4.   The  registrant's  other  certifying  officers  and I are  responsible  for
     establishing and maintaining disclosure controls and procedures (as defined
     in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:

     a.   designed  such  disclosure  controls  and  procedures  to ensure  that
          material  information  relating  to  the  registrant,   including  its
          consolidated subsidiaries,  is made known to us by others within those
          entities,  particularly  during  the  period in which  this  quarterly
          report is being prepared;

     b.   evaluated the  effectiveness of the registrant's  disclosure  controls
          and procedures as of a date within 90 days prior to the filing date of
          this quarterly report (the "Evaluation Date"); and

     c.   presented  in  this  quarterly   report  our  conclusions   about  the
          effectiveness  of the disclosure  controls and procedures based on our
          evaluation as of the Evaluation Date;

5.   The registrant's other certifying  officers and I have disclosed,  based on
     our most recent  evaluation,  to the  registrant's  auditors  and the audit
     committee of  registrant's  board of directors (or persons  performing  the
     equivalent function):

     a.   all  significant  deficiencies  in the design or operation of internal
          controls  which could  adversely  affect the  registrant's  ability to
          record,  process,   summarize  and  report  financial  data  and  have
          identified for the  registrant's  auditors any material  weaknesses in
          internal controls; and

     b.   any fraud, whether or not material,  that involves management or other
          employees who have a  significant  role in the  registrant's  internal
          controls; and

                                       50

6.   The  registrant's  other  certifying  officers and I have indicated in this
     quarterly report whether or not there were significant  changes in internal
     controls  or in other  factors  that could  significantly  affect  internal
     controls  subsequent to the date of our most recent  evaluation,  including
     any corrective actions with regard to significant deficiencies and material
     weaknesses.

Date:  November 14, 2002

                                                     /s/ Mark T. Thies
                                                     -------------------------
                                                     Senior Vice President and
                                                     Chief Financial Officer

                                       51

                                  EXHIBIT INDEX

Exhibit Number    Description

Exhibit 10.1               $195 million Amended and Restated 364-day Credit
                           Agreement dated as of August 27, 2002, Among Black
                           Hills Corporation as Borrower, the Financial
                           Institutions Party Hereto, as Banks, ABN Amro
                           Bank N.A., as Syndication Agent, Bank of Montreal, as
                           Co-Syndication Agent, US Bank, National Association,
                           as Documentation Agent and Bank of Nova Scotia,
                           as Co-Documentation Agent.

Exhibit 10.2               $35 million Term Credit Agreement dated as of
                           September 25, 2002 among Black Hills Corporation
                           (Borrower), The Financial Institutions Party Hereto
                           (Banks), and Credit Lyonnais New York Branch
                           (Administrative Agent).

Exhibit 10.3               The First Supplemental Indenture, dated as of
                           August 13, 2002, between Black Hills
                           Power, Inc. and JPMorgan Chase Bank, as Trustee.

Exhibit 10.4               First Amendment to 3-year Credit Agreement.

Exhibit 10.5               Second Amendment to 3-year Credit Agreement.

Exhibit 99.1               Certification pursuant to 18 U.S.C. Section
                           1350, as adopted pursuant to Section 906 of the
                           Sarbanes-Oxley Act of 2002.

Exhibit 99.2               Certification pursuant to 18 U.S.C. Section
                           1350, as adopted pursuant to Section 906 of the
                           Sarbanes-Oxley Act of 2002.

                                       52

Execution Copy                                                 Exhibit 10.1

- -----------------------------------------------------------------------------

                          AMENDED AND RESTATED 364-DAY
                                CREDIT AGREEMENT

                                   DATED AS OF

                                 AUGUST 27, 2002

                                      AMONG

                            BLACK HILLS CORPORATION,
                                  as Borrower,

                    THE FINANCIAL INSTITUTIONS PARTY HERETO,
                                    as Banks,

                               ABN AMRO BANK N.V.,
                            as Administrative Agent,

                         UNION BANK OF CALIFORNIA, N.A.,
                              as Syndication Agent,

                                BANK OF MONTREAL,
                            as Co-Syndication Agent,

                        U.S. BANK, NATIONAL ASSOCIATION,
                             as Documentation Agent

                                       and

                            THE BANK OF NOVA SCOTIA,
                            as Co-Documentation Agent

- -----------------------------------------------------------------------------

                                TABLE OF CONTENTS

              (This Table of Contents is not part of the Agreement)

                                                                                                                PAGE
SECTION 1         DEFINITIONS; INTERPRETATION.....................................................................1
                                                                                                      
         Section 1.1       Definitions............................................................................1
         Section 1.2       Interpretation........................................................................13
SECTION 2         THE CREDITS....................................................................................13
         Section 2.1       The Revolving Loan Commitment.........................................................14
         Section 2.2       [Intentionally Omitted]...............................................................14
         Section 2.3       Applicable Interest Rates. (a) Base Rate Loans........................................14
         Section 2.4       Minimum Borrowing Amounts.............................................................16
         Section 2.5       Manner of Borrowing Loans and Designating Interest Rates Applicable to Loans 16.......16
         Section 2.6       Interest Periods......................................................................18
         Section 2.7       Maturity of Loans.....................................................................18
         Section 2.8       Prepayments...........................................................................18
         Section 2.9       Default Rate..........................................................................19
         Section 2.10      The Notes.............................................................................19
         Section 2.11      Funding Indemnity.....................................................................20
         Section 2.12      Commitments...........................................................................20
SECTION 3         FEES AND EXTENSIONS............................................................................21
         Section 3.1       Fees..................................................................................21
         Section 3.2       Extensions............................................................................22
SECTION 4         PLACE AND APPLICATION OF PAYMENTS..............................................................22
         Section 4.1       Place and Application of Payments.....................................................22
SECTION 5         REPRESENTATIONS AND WARRANTIES.................................................................23
         Section 5.1       Corporate Organization and Authority..................................................23
         Section 5.2       Subsidiaries..........................................................................23
         Section 5.3       Corporate Authority and Validity of Obligations.......................................23
         Section 5.4       Financial Statements..................................................................24
         Section 5.5       No Litigation; No Labor Controversies.................................................24
         Section 5.6       Taxes.................................................................................24
         Section 5.7       Approvals.............................................................................24
         Section 5.8       ERISA.................................................................................24
         Section 5.9       Government Regulation.................................................................25
         Section 5.10      Margin Stock; Use of Proceeds.........................................................25
         Section 5.11      Licenses and Authorizations; Compliance with Laws.....................................25
         Section 5.12      Ownership of Property; Liens..........................................................26
         Section 5.13      No Burdensome Restrictions; Compliance with Agreements................................26
         Section 5.14      Full Disclosure.......................................................................26
         Section 5.15      Solvency..............................................................................26
SECTION 6         CONDITIONS PRECEDENT...........................................................................26
         Section 6.1       Initial Credit Event..................................................................26
         Section 6.2       All Credit Events.....................................................................27
SECTION 7         COVENANTS......................................................................................28

                                                                               i

         Section 7.1       Corporate Existence; Subsidiaries.....................................................28
         Section 7.2       Maintenance...........................................................................28
         Section 7.3       Taxes.................................................................................28
         Section 7.4       ERISA.................................................................................28
         Section 7.5       Insurance.............................................................................29
         Section 7.6       Financial Reports and Other Information...............................................29
         Section 7.7       Bank Inspection Rights................................................................31
         Section 7.8       Conduct of Business...................................................................31
         Section 7.9       Liens.................................................................................31
         Section 7.10      Use of Proceeds; Regulation U.........................................................33
         Section 7.11      Sales and Leasebacks..................................................................33
         Section 7.12      Mergers, Consolidations and Sales of Assets...........................................34
         Section 7.13      Use of Property and Facilities; Environmental and Health and Safety Laws..............35
         Section 7.14      Investments, Acquisitions, Loans, Advances and Guaranties.............................35
         Section 7.15      Restrictions on Indebtedness..........................................................37
         Section 7.16      Consolidated Net Worth................................................................39
         Section 7.17      Recourse Leverage Ratio...............................................................39
         Section 7.18      Fixed Charge Coverage Ratio...........................................................39
         Section 7.19      Dividends and Other Shareholder Distributions.........................................39
         Section 7.20      No Negative Pledge....................................................................39
         Section 7.21      Transactions with Affiliates..........................................................40
         Section 7.22      Compliance with Laws..................................................................40
         Section 7.23      Pari-Passu............................................................................40
         Section 7.24      Certain Subsidiaries..................................................................40
         Section 7.25      Ratings...............................................................................40
         Section 7.26      Liquidity Covenant....................................................................40
SECTION 8         EVENTS OF DEFAULT AND REMEDIES.................................................................40
         Section 8.1       Events of Default.....................................................................40
         Section 8.2       Non-Bankruptcy Defaults...............................................................42
         Section 8.3       Bankruptcy Defaults...................................................................43
         Section 8.4       [Intentionally Omitted]...............................................................43
         Section 8.5       Expenses..............................................................................43
SECTION 9         CHANGE IN CIRCUMSTANCES........................................................................43
         Section 9.1       Change of Law.........................................................................43
         Section 9.2       Unavailability of Deposits or Inability to Ascertain, or Inadequacy
                  of, LIBOR......................................................................................43
         Section 9.3       Increased Cost and Reduced Return.....................................................44
         Section 9.4       Lending Offices.......................................................................45
         Section 9.5       Discretion of Bank as to Manner of Funding............................................45
SECTION 10        THE AGENT......................................................................................46
         Section 10.1      Appointment and Authorization of Administrative Agent.................................46
         Section 10.2      Administrative Agent and its Affiliates...............................................46
         Section 10.3      Action by Administrative Agent........................................................46
         Section 10.4      Consultation with Experts.............................................................46
         Section 10.5      Liability of Administrative Agent; Credit Decision....................................47
         Section 10.6      Indemnity.............................................................................47
                                       ii

         Section 10.7      Resignation of Administrative Agent and Successor Administrative Agent................47
SECTION 11        MISCELLANEOUS..................................................................................48
         Section 11.1      Withholding Taxes.....................................................................48
         Section 11.2      No Waiver of Rights...................................................................49
         Section 11.3      Non-Business Day......................................................................49
         Section 11.4      Documentary Taxes.....................................................................49
         Section 11.5      Survival of Representations...........................................................50
         Section 11.6      Survival of Indemnities...............................................................50
         Section 11.7      Set-Off...............................................................................50
         Section 11.8      Notices...............................................................................50
         Section 11.9      Counterparts..........................................................................52
         Section 11.10     Successors and Assigns................................................................52
         Section 11.11     Participants and Note Assignees.......................................................52
         Section 11.12     Assignment of Commitments by Banks....................................................52
         Section 11.13     Amendments............................................................................53
         Section 11.14     Headings..............................................................................54
         Section 11.15     Legal Fees, Other Costs and Indemnification...........................................54
         Section 11.16     Entire Agreement......................................................................54
         Section 11.17     Construction..........................................................................54
         Section 11.18     Governing Law.........................................................................54
         Section 11.19     SUBMISSION TO JURISDICTION; WAIVER OF JURY TRIAL......................................54
         Section 11.20     Replacement of Bank...................................................................55
         Section 11.21     Confidentiality.......................................................................56
         Section 11.22     Rights and Liabilities of Documentation Agents and  Syndication Agents................56
         Section 11.23     Amendment and Restatement of Existing 364-Day Credit Agreement........................56

                                      iii

EXHIBITS

         A        -                 Form of Note
         B        -                 Form of Compliance Certificate

SCHEDULES

         SCHEDULE 1                 Pricing Grid
         SCHEDULE 4 Administrative Agent Notice and Payment Info SCHEDULE 5.2
         Schedule of Existing Subsidiaries SCHEDULE 5.5 Litigation and Labor
         Controversies SCHEDULE 5.11 Environmental Matters SCHEDULE 7.9 Existing
         Liens SCHEDULE 7.14 Existing Investments SCHEDULE 7.15(a) Marketing
         Subsidiary Indebtedness SCHEDULE 7.15(b) Existing Secured Indebtedness
         SCHEDULE 7.19 Restrictions on Distributions and Existing Negative
         Pledges

                                       iv

                  AMENDED AND RESTATED 364-DAY CREDIT AGREEMENT

         AMENDED AND RESTATED 364-DAY CREDIT AGREEMENT, dated as of August 27,
2002 among Black Hills Corporation, a South Dakota corporation ("Borrower"), the
financial institutions from time to time party hereto (each a "Bank," and
collectively the "Banks"), U.S. Bank, National Association, and The Bank of Nova
Scotia, in their capacity as documentation agents for the Banks hereunder (in
such capacity, "Documentation Agents"), Union Bank of California, N.A., and Bank
of Montreal, in their capacity as syndication agents for the Banks hereunder (in
such capacity, "Syndication Agents") and ABN AMRO Bank N.V. in its capacity as
agent for the Banks hereunder (in such capacity, the "Administrative Agent").

                                WITNESSETH THAT:

         WHEREAS, the Borrower, ABN AMRO Bank N.V., in its capacity as
administrative agent and certain other financial institutions are party to that
certain 364-Day Credit Agreement dated as of August 28, 2001 (the "Existing
364-Day Credit Agreement"); and

         WHEREAS, the Borrower desires to amend and restate the Existing 364-Day
Credit Agreement in its entirety to be and to read as set forth herein and to
obtain the several commitments of the Banks to make available a revolving credit
for loans and letters of credit (the "Revolving Credit"), as described herein;
and

         WHEREAS, the Banks are willing to extend such commitments subject to
all of the terms and conditions hereof and on the basis of the representations
and warranties hereinafter set forth.

         NOW, THEREFORE, in consideration of the recitals set forth above and
for other good and valuable consideration, the receipt and adequacy of which are
hereby acknowledged, the parties hereto hereby agree that the Existing 364-Day
Credit Agreement shall be amended and restated in its entirety as follows:

     SECTION 1 DEFINITIONS; INTERPRETATION.

     Section  1.1  Definitions.  The  following  terms when used herein have the
following meanings:

          "Adjusted Consolidated EBITDA" means, for any period, (A) Consolidated
EBITDA less (B) Restricted Earnings.

         "Adjusted LIBOR" is defined in Section 2.3(b) hereof.

         "Affiliate" means, as to any Person, any other Person which directly or
indirectly controls, or is under common control with, or is controlled by, such
Person. As used in this definition, "control" (including, with their correlative
meanings, "controlled by" and "under common control with") means possession,
directly or indirectly, of power to direct or cause the direction of management
or policies of a Person (whether through ownership of securities or partnership
or other ownership interests, by contract or otherwise), provided that, in any
event for purposes of this definition: (i) any Person which owns directly or
indirectly twenty percent (20%) or more of the securities having ordinary voting
power for the election of directors or

                                       1

other  governing  body of a corporation  or twenty  percent (20%) or more of the
partnership or other  ownership  interests of any other Person will be deemed to
control such  corporation or other Person;  and (ii) each director and executive
officer of Borrower or any  Subsidiary of Borrower  shall be deemed an Affiliate
of Borrower and each of its Subsidiaries.

         "Administrative Agent" is defined in the first paragraph of this
Agreement and includes any successor Administrative Agent pursuant to Section
10.7 hereof.

         "Agreement" means this Credit Agreement, including all Exhibits and
Schedules hereto, as it may be amended, supplemented or otherwise modified from
time to time in accordance with the terms hereof.

         "Applicable Margin" means, at any time (i) with respect to Base Rate
Loans, the Base Rate Margin and (ii) with respect to Eurodollar Loans, the
Eurodollar Margin.

         "Applicable Telerate Page" is defined in Section 2.3(b) hereof.

         "Arrangers"  means,  collectively,  ABN AMRO Bank N.V.,  Union Bank of
California,  N.A.,  and U.S. Bank, National Association.

         "Authorized Representative" means those persons shown on the list of
officers provided by Borrower pursuant to Section 6.1(e) hereof, or on any
updated such list provided by Borrower to the Administrative Agent, or any
further or different officer of Borrower so named by any Authorized
Representative of Borrower in a written notice to the Administrative Agent.

         "Bank" and "Banks" are defined in the first paragraph of this
Agreement.

         "Base Rate" is defined in Section 2.3(a) hereof.

         "Base Rate Loan" means a Loan bearing interest prior to maturity at a
rate specified in Section 2.3(a) hereof.

         "Base Rate Margin" means the percentage set forth in Schedule 1 hereto
beside the then applicable Level.

         "BHP" means Black Hills Power, Inc., a South Dakota corporation.

         "Borrower" is defined in the first paragraph of this Agreement.

         "Borrowing" means the total of Loans of a single type advanced,
continued for an additional Interest Period, or converted from a different type
into such type by the Banks on a single date and for a single Interest Period.
Borrowings of Loans are made by and maintained ratably for each of the Banks
according to their Percentages. A Borrowing is "advanced" on the day Banks
advance funds comprising such Borrowing to Borrower, is "continued" on the date
a new Interest Period for the same type of Loans commences for such Borrowing
and is "converted" when such Borrowing is changed from one type of Loan to the
other, all as requested by Borrower pursuant to Section 2.5(a).

                                       2

         "Business Day" means any day other than a Saturday or Sunday on which
Banks are not authorized or required to close in New York, New York, Chicago,
Illinois or Rapid City, South Dakota and, if the applicable Business Day relates
to the borrowing or payment of a Eurodollar Loan, on which banks are dealing in
U.S. Dollars in the interbank market in London, England.

         "Capital" means, as of any date of determination thereof, without
duplication, the sum of (A) Consolidated Net Worth plus (B) all Recourse
Indebtedness (provided that for purposes of clause (B) of this definition, to
the extent otherwise included, Indebtedness of Marketing Subsidiaries in an
aggregate amount not to exceed the Marketing Subsidiary Indebtedness Limit
incurred under Marketing Subsidiary Excluded Credit Facilities shall not be
deemed to be Recourse Indebtedness).

         "Capital Lease" means at any date any lease of Property which, in
accordance with GAAP, would be required to be capitalized on the balance sheet
of the lessee.

         "Capitalized Lease Obligations" means, for any Person, the amount of
such Person's liabilities under Capital Leases determined at any date in
accordance with GAAP.

         "Change of Control Event" means one or more of the following events:

               (a) less than a majority of the members of the Board of Directors
          of Borrower  shall be persons who either (i) were serving as directors
          on the Effective Date or (ii) were nominated as directors and approved
          by the  vote  of the  majority  of the  directors  who  are  directors
          referred to in clause (i) above or this clause (ii); or

               (b) the  stockholders  of  Borrower  shall  approve  any  plan or
          proposal for the liquidation or dissolution of Borrower; or

               (c) a Person or group of Persons  acting in concert  (other  than
          the  direct  or  indirect  beneficial  owners of the  Voting  Stock of
          Borrower as of the Effective  Date) shall,  as a result of a tender or
          exchange offer, open market purchases,  privately negotiated purchases
          or  otherwise,  have  become the direct or indirect  beneficial  owner
          (within the meaning of Rule 13d-3 under the Securities Exchange Act of
          1934,  as  amended  from  time to time) of  Voting  Stock of  Borrower
          representing  more than ten percent (10%) of the combined voting power
          of the outstanding  Voting Stock or other ownership  interests for the
          election of  directors  or shall have the right to elect a majority of
          the Board of Directors of Borrower; or

               (d) Except as permitted by Section 7.12,  Borrower  ceases at any
          time to own one hundred  percent  (100%) of the Voting Stock and other
          equity interest of any Material Subsidiary.

         "Code" means the Internal Revenue Code of 1986, as amended.

         "Commitment" and "Commitments" are defined in Section 2.1 hereof.

         "Compliance Certificate" means a certificate in the form of Exhibit B
hereto.

                                       3

         "Consolidated Assets" means all assets which should be listed on the
consolidated balance sheet of Borrower and its Consolidated Subsidiaries, as
determined on a consolidated basis in accordance with GAAP.

         "Consolidated EBITDA" means, for any period, for Borrower and its
Consolidated Subsidiaries on a consolidated basis, (A) the sum of the amounts
for such period of (i) Consolidated Net Income, (ii) to the extent deducted in
arriving at Consolidated Net Income, net federal, state and local income taxes
in respect of such period, (iii) to the extent deducted in arriving at
Consolidated Net Income, Consolidated Interest Expense, (iv) to the extent
deducted in arriving at Consolidated Net Income, the amount charged for the
amortization of intangible assets, (v) to the extent deducted in arriving at
Consolidated Net Income, the amount charged for the depreciation of assets, and
(vi) to the extent deducted in arriving at Consolidated Net Income, losses on
sales of assets (excluding sales in the ordinary course of business) and other
extraordinary losses, less (B) the amount for such period of (i) to the extent
added in arriving at Consolidated Net Income, interest income arising from
traditional investment activities with banks, investments banks and other
financial institutions or relating to governmental or other marketable
securities, (ii) to the extent added in arriving at Consolidated Net Income,
gains on sales of assets (excluding sales in the ordinary course of business)
and other extraordinary gains, all as determined on a consolidated basis in
accordance with GAAP, (iii) any maintenance capital expenditures made by the
Borrower or its Consolidated Subsidiaries in such period, (iv) without
duplication, any payments made by a Consolidated Subsidiary constituting a
repayment of principal Indebtedness (other than (x) the Obligations and (y)
repayments of principal made with the proceeds of a refinancing of such
Indebtedness otherwise permitted pursuant to this Agreement) or with respect to
a reserve, and (v) without duplication, any other mandatory payment made by a
Consolidated Subsidiary in such period not included as an expense or loss in
calculating Consolidated Net Income.

         "Consolidated Fixed Charges" means, for any period and without
duplication the sum of (i) the aggregate amount of Consolidated Interest Expense
with respect to Recourse Indebtedness paid or scheduled to be paid for such
period, and (ii) the aggregate amount of all mandatory scheduled payments
(whether designated as payments or prepayments) and scheduled sinking fund
payments with respect to principal of any Recourse Indebtedness of the Borrower
or its Subsidiaries (including payments in the nature of principal under Capital
Leases).

         "Consolidated Interest Expense" means, with reference to any period of
the Borrower and its Subsidiaries, the sum of (i) all interest charges
(including capitalized interest, imputed interest charges with respect to
Capitalized Lease Obligations and all amortization of debt discount and expense
and other deferred financing charges) of the Borrower and its Subsidiaries on a
consolidated basis for such period determined in accordance with GAAP, other
than interest charges relating to Non-Recourse Indebtedness, (ii) all commitment
or other fees payable in respect of the issuance of standby letters of credit or
other credit facilities for the account of the Borrower or its Subsidiaries, and
(iii) net costs/expenses incurred by the Borrower and its Subsidiaries under
Derivative Arrangements.

         "Consolidated Net Income" means, for any period of the Borrower and its
Consolidated Subsidiaries, the amount for such period of consolidated net income
(or net loss) of the Borrower and its Consolidated Subsidiaries, as determined
on a consolidated basis in accordance with GAAP.

                                      4

         "Consolidated Net Worth" means, as of any time the same is to be
determined, the total shareholders' equity (including capital stock, additional
paid-in-capital and retained earnings after deducting treasury stock, but
excluding (to the extent otherwise included in calculating shareholders'
equity), minority interests in Subsidiaries) which would appear on the
consolidated balance sheet of Borrower determined on a consolidated basis in
accordance with GAAP.

         "Consolidated Subsidiary" means, as to any Person, each subsidiary of
such Person (whether now existing or hereafter created or acquired) the
financial statements of which shall be (or should have been) consolidated, with
the financial statements of such Person in accordance with GAAP, including
principles of consolidation.

          "Contractual Obligation" means, as to any Person, any provision of any
security issued by such Person or of any agreement, instrument or undertaking to
which such Person is a party or by which it or any of its Property is bound.

         "Controlled Group" means all members of a controlled group of
corporations and all trades and businesses (whether or not incorporated) under
common control that, together with Borrower or any of its Subsidiaries, are
treated as a single employer under Section 414 of the Code.

         "Credit Documents" means this Agreement, the Notes, the Fee Letter and
all other documents executed in connection herewith or therewith.

         "Credit Event" means any Borrowing.

         "Default" means any event or condition the occurrence of which would,
with the passage of time or the giving of notice, or both, constitute an Event
of Default.

         "Derivative Arrangement" means any agreement (including any master
agreement and any agreement, whether or not in writing, relating to any single
transaction) that is an interest rate swap agreement, basis swap, forward rate
agreement, commodity swap, commodity option, equity or equity index swap or
option, bond option, interest rate option, forward foreign exchange agreement,
rate cap, collar or floor agreement, future agreement, currency swap agreement,
cross-currency rate swap agreement, swaption, currency option, that relates to
fluctuations in raw material prices or utility or energy prices or other costs,
or any other similar agreement, including any option to enter into any of the
foregoing, or any combination of any of the foregoing. "Derivative Arrangements"
shall include all such agreements or arrangements made or entered into at any
time, or in effect at any time, whether or not related to a Loan.

         "Derivative Obligations" means, with respect to any Person, all
liabilities of such Person under any Derivative Arrangement (including but not
limited to obligations and liabilities arising in connection with or as a result
of early or premature termination of a Derivative Arrangement, whether or not
occurring as a result of a default thereunder), absolute or contingent, now or
hereafter existing or incurred or due or to become due.

         "Documentation Agents" is defined in the first paragraph of this
Agreement.

         "Effective Date" means August 27, 2002.

                                       5

         "Environmental and Health Laws" means any and all federal, state, local
and foreign statutes, laws, regulations, ordinances, judgments, permits and
other governmental rules or restrictions relating to human health, safety
(including without limitation occupational safety and health standards), or the
environment or to emissions, discharges or releases of pollutants, contaminants,
hazardous or toxic substances, wastes or any other controlled or regulated
substance into the environment, including without limitation ambient air,
surface water, ground water or land, or otherwise relating to the manufacture,
processing, distribution, use, treatment, storage, disposal, transport or
handling of pollutants, contaminants, hazardous or toxic substances, wastes or
any other controlled or regulated substance or the clean-up or other remediation
thereof.

         "ERISA" is defined in Section 5.8 hereof.

         "Eurodollar Loan" means a Loan bearing interest prior to its maturity
at the rate specified in Section 2.3(b) hereof.

         "Eurodollar Margin" means the percentage set forth in Schedule 1 hereto
beside the then applicable Level.

         "Eurodollar Reserve Percentage" is defined in Section 2.3(b) hereof.

         "Event of Default" means any of the events or circumstances specified
in Section 8.1 hereof.

         "Existing 364-Day Credit Agreement" is defined in the first Whereas
clause above.

         "Facility Fee Rate" means the percentage set forth in Schedule 1 hereto
beside the then applicable Level.

         "Federal Funds Rate" means, for any period, a fluctuating interest rate
per annum equal for each day during such period to:

               (a) the weighted average of the rates on overnight  federal funds
          transactions  with members of the United States Federal Reserve System
          arranged by federal funds  brokers,  as published for such day (or, if
          such day is not a Business Day, for the next  preceding  Business Day)
          by the United States Federal Reserve Bank of New York; or

               (b) if such  rate is not so  published  for  any day  which  is a
          Business  Day,  the  average  of the  quotations  for such day on such
          transactions  received by the Administrative  Agent from three federal
          funds brokers of recognized standing selected by it.

         "Fee Letter" means that certain letter among the Administrative Agent
and Borrower pertaining to fees to be paid by Borrower to the Administrative
Agent for its sole account and benefit.

         "Fixed Charge Coverage Ratio" means, for any period of four consecutive
quarters of the Borrower ending with the most recently completed such fiscal
quarter, the ratio of (A) Adjusted Consolidated EBITDA to (B) Consolidated Fixed
Charges for such period.

                                       6

         "GAAP" means generally accepted accounting principles as in effect in
the United States from time to time, applied by Borrower and its Subsidiaries on
a basis consistent with the preparation of Borrower's financial statements
furnished to the Banks as described in Section 5.4 hereof.

         "Guarantee" means, in respect of any Person, any obligation, contingent
or otherwise, of such Person directly or indirectly guaranteeing any
Indebtedness or other obligations of another Person, including, without
limitation, by means of an agreement to purchase or pay (or advance or supply
funds for the purchase or payment of) such Indebtedness or to maintain financial
covenants, or to assure the payment of such Indebtedness by an agreement to make
payments in respect of goods or services regardless of whether delivered, or
otherwise, provided, that the term "Guarantee" shall not include endorsements
for deposit or collection in the ordinary course of business; and such term when
used as a verb shall have a correlative meaning.

         "Hazardous Material" means any substance or material which is hazardous
or toxic, and includes, without limitation, (a) asbestos, polychlorinated
biphenyls, dioxins and petroleum or its by-products or derivatives (including
crude oil or any fraction thereof) and (b) any other material or substance
classified or regulated as "hazardous" or "toxic" pursuant to any Environmental
and Health Law.

         "Immaterial Subsidiary" shall mean, any direct or indirect subsidiary
of Borrower (i) whose total assets (as determined in accordance with GAAP) do
not represent at least five percent (5%) of the total assets (as determined in
accordance with GAAP) of Borrower and its subsidiaries on a consolidated basis
or (ii) whose total revenues (as determined in accordance with GAAP) do not
represent at least five percent (5%) of the total revenues (as determined in
accordance with GAAP) of Borrower and its subsidiaries on a consolidated basis,
provided that no subsidiary shall be deemed an Immaterial Subsidiary to the
extent (a) the total assets of such subsidiary, when combined with the total
assets of other subsidiaries which are Immaterial Subsidiaries, represent at
least ten percent (10%) of the total assets (as determined in accordance with
GAAP) of Borrower and its subsidiaries on a consolidated basis or (ii) the total
revenues of such subsidiary, when combined with the total revenues of other
Immaterial Subsidiaries, (as determined in accordance with GAAP) represent at
least ten percent (10%) of the total revenues (as determined in accordance with
GAAP) of Borrower and its subsidiaries on a consolidated basis. As used in this
definition "subsidiary" shall mean any Person whose financial statements are
consolidated into the financial statements of Borrower in accordance with GAAP.

         "Indebtedness" means, as to any Person, without duplication: (i) all
obligations of such Person for borrowed money or evidenced by bonds, debentures,
notes or similar instruments; (ii) all obligations of such Person for the
deferred purchase price of property or services (other than in respect of trade
accounts payable arising in the ordinary course of business which are not
past-due); (iii) all Capitalized Lease Obligations of such Person; (iv) all
Indebtedness of others secured by a Lien on any properties, assets or revenues
of such Person (other than stock, partnership interests or other equity
interests of Borrower or any Subsidiary of Borrower in other entities) to the
extent of the lesser of the value of the property subject to such Lien or the
amount of such Indebtedness; (v) all Guarantees issued by such Person, provided
that Long-Term Guaranties shall not be deemed "Indebtedness" for purposes of
calculating Borrower's compliance with the financial covenants set forth in
Sections 7.16, 7.17 and 7.18 hereof; (vi) all obligations of such Person,
contingent or otherwise, in respect of any letters or credit (whether

                                       7

commercial or standby) or bankers' acceptances, (vii) all Derivative Obligations
of such Person,  provided that for purposes of determining Borrower's compliance
with the  financial  covenants  set forth  herein,  only  Borrower's  Derivative
Obligations  under Derivative  Arrangements  which must be  marked-to-market  in
accordance with GAAP shall be included as  Indebtedness of Borrower,  and (viii)
all  obligations  of such  Person  under  synthetic  (and  similar  type)  lease
arrangements,   provided  that  for  purposes  of   calculating   such  Person's
Indebtedness  under such  synthetic (or similar type) lease  arrangements,  such
lease arrangement shall be treated as if it were a Capitalized Lease.

          "Interest Period" is defined in Section 2.6 hereof.

         "Investments" is defined in Section 7.14.

         "L/C Obligations" has the same meaning herein as in the 3-Year Credit
Agreement.

         "Lending Office" is defined in Section 9.4 hereof.

         "Level I Status" means Borrower's S&P Rating is A+ or higher and its
Moody's Rating is A1 or higher.

         "Level II Status" means Level I Status does not exist, but Borrower's
S&P Rating is A- or higher and its Moody's Rating is A3 or higher.

         "Level III Status" means neither Level I Status nor Level II Status
exists, but Borrower's S&P Rating is BBB+ or higher and its Moody's rating is
Baa1 or higher.

         "Level IV Status" means neither Level I Status, Level II Status, nor
Level III Status exists, but Borrower's S&P Rating is BBB or higher and its
Moody's rating is Baa2 or higher.

         "Level V Status" means neither Level I Status, Level II Status, Level
III Status, nor Level IV Status exists, but Borrower's S&P Rating is BBB- or
higher and its Moody's rating is Baa3 or higher.

         "Level VI Status" means none of Level I Status, Level II Status, Level
III Status, Level IV Status nor Level V Status exists.

         "LIBOR" is defined in Section 2.3(b) hereof.

         "LIBOR Loan Restriction Period" means the period commencing on and
including the fifth to last Business Day of any calendar year and ending on and
including the fifth Business Day of the immediately succeeding calendar year.

         "Lien" means any interest in Property securing an obligation owed to,
or a claim by, a Person other than the owner of the Property, whether such
interest is based on the common law, statute or contract, including, but not
limited to, the security interest or lien arising from a mortgage, encumbrance,
pledge, conditional sale, security agreement or trust receipt, or a lease,
consignment or bailment for security purposes. For the purposes of this
definition, a Person shall be deemed to be the owner of any Property which it
has acquired or holds subject to a conditional sale agreement, Capital Lease or
other arrangement pursuant to which title to the

                                       8

Property  has been  retained  by or vested in some  other  Person  for  security
purposes, and such retention of title shall constitute a "Lien."

         "Liquid Assets" means, as the date of any calculation thereof, the sum
of (i) the amount of unrestricted cash which the Borrower then has available,
plus (ii) the aggregate amount of then available (meaning the Borrower is
entitled to borrow such amounts pursuant to the applicable documentation) unused
capacity under the Borrower's senior unsecured credit facilities (including this
Agreement and the 3-Year Credit Agreement).

          "Loan" and "Loans" are defined in Section 2.1 hereof and includes a
Base Rate Loan or Eurodollar Loan, each of which is a "type" of Loan hereunder.

         "Long-Term Guarantee" means (i) any Guarantee issued by Borrower or its
Subsidiaries under which the holder or beneficiary of such Guarantee is not
permitted under any circumstance or contingency to make demand or exercise any
other remedies under such Guarantee prior to the Termination Date, as extended
from time to time in accordance with the terms hereof and (ii) any coal mining
reclamation bonds or contingent indemnity or reimbursement obligations with
respect to such reclamation bonds (so long as such reclamation bonds have not
been called upon).

         "Marketing  Subsidiary" means each of Black Hills Coal Network,  Inc.,
a South Dakota  corporation,  Black Hills Energy Resources,  Inc., a South
Dakota  corporation,  and Enserco Energy,  Inc., a South Dakota corporation,
and their respective subsidiaries.

         "Marketing Subsidiary Excluded Credit Facilities" means those certain
credit facilities of the Marketing Subsidiaries described on Schedule 7.15(a)
hereof, as such credit facilities are in effect on the Effective Date, provided
that such credit facilities shall cease to be Marketing Subsidiary Excluded
Credit Facilities to the extent availability thereunder is increased, any
substantive term thereof is materially modified, or such credit facility is
extended more than once in any fiscal year for a period of more than one year.
Any replacement credit facility of a Marketing Subsidiary Excluded Credit
Facility shall be deemed a Marketing Subsidiary Excluded Credit Facility only if
such replacement credit facility contains terms substantially the same as the
Marketing Subsidiary Excluded Credit Facility being replaced (including tenor)
or is approved in writing by the Required Banks.

         "Marketing Subsidiary Indebtedness Limit" means the sum of (i)
aggregate amount of credit availability (used or unused) under Marketing
Subsidiary Excluded Credit Facilities as of the Effective Date and (ii)
$25,000,000.

         "Material Adverse Effect" means a material adverse effect on (i) the
business, financial position or results of operations of Borrower or Borrower
and its Subsidiaries taken as a whole, (ii) the ability of Borrower to perform
its material obligations under the Credit Documents, (iii) the validity or
enforceability of the material obligations of Borrower under any Credit
Document, (iv) the rights and remedies of the Banks or the Administrative Agent
against Borrower; or (v) the timely payment of the principal of and interest on
the Loans or other amounts payable by Borrower hereunder, provided, that a
downgrade of Borrower's S&P Rating and/or Moody's Rating shall not, in and of
itself, be deemed a "Material Adverse Effect" for purposes of this Agreement.

                                       9

         "Material  Subsidiaries"  means  BHP,  Black  Hills  Energy,  Inc., a
South  Dakota  corporation,  Wyodak Resources Development Corp., a Delaware
corporation,  Black Hills Energy Capital,  Inc., a Delaware corporation and
any other Subsidiary of Borrower which is not either an Immaterial Subsidiary
or a Project Finance Subsidiary.

         "Moody's Rating" means the rating assigned by Moody's Investors
Service, Inc. and any successor thereto that is a nationally recognized rating
agency to the outstanding senior unsecured non-credit enhanced long-term
indebtedness of a Person (or if neither Moody's Investors Service, Inc. nor any
such successor shall be in the business of rating long-term indebtedness, a
nationally recognized rating agency in the United States of America as mutually
agreed between the Required Banks and Borrower). Any reference in this Agreement
to any specific rating is a reference to such rating as currently defined by
Moody's Investors Service, Inc. (or such a successor) and shall be deemed to
refer to the equivalent rating if such rating system changes.

         "Non-Recourse Indebtedness" means, without duplication, all
Indebtedness of Borrower and its Consolidated Subsidiaries determined on a
consolidated basis in accordance with GAAP incurred in connection with project
financings (including project financings of existing assets the proceeds of
which are used to refinance such assets) as to which the holder of such
Indebtedness has recourse solely against the assets which were purchased or
refinanced with, or leased in connection with, such Indebtedness and not against
Borrower or a Consolidated Subsidiary of Borrower other than a Project Finance
Subsidiary or any of their other assets (whether directly, through a Guarantee
or otherwise), other than the pledge of the stock (or similar equity interest)
of the Project Finance Subsidiary which incurred such Indebtedness. For purposes
of clarification, any Indebtedness of a Project Finance Subsidiary which would
otherwise constitute Non-Recourse Indebtedness but for the issuance by the
Borrower or a Consolidated Subsidiary of the Borrower of a Guarantee or other
document which provides recourse with respect to such Indebtedness, such
Indebtedness shall for all purposes of this Agreement be deemed Non-Recourse
Indebtedness so long as (i) the Borrower's or such Consolidated Subsidiary's
obligations under such Guarantee or other document are treated for all purposes
as Recourse Indebtedness hereunder, (ii) such Recourse Indebtedness of the
Borrower or such Consolidated Subsidiary is unsecured and is otherwise permitted
by this Agreement, and (iii) such Recourse Indebtedness of the Borrower or such
Consolidated Subsidiary does not in the aggregate exceed $100,000,000 at any one
time outstanding.

         "Note" is defined in Section 2.10(a) hereof.

         "Obligations" means all fees payable hereunder, all obligations of
Borrower to pay principal or interest on Loans, fees, expenses, indemnities, and
all other payment obligations of Borrower arising under or in relation to any
Credit Document.

         "Percentage" means, for each Bank, the percentage of the Commitments
represented by such Bank's Commitment or, if the Commitments have been
terminated, the percentage held by such Bank of the aggregate principal amount
of all outstanding Obligations.

         "Permitted Derivative Obligations" means all Derivative Obligations as
to which the Derivative Arrangements giving rise to such Derivative Obligation
are entered into in the ordinary course of business to hedge interest rate risk,
currency risk, commodity price risk or the

                                       10

production of Borrower or its  Subsidiaries  (and not for speculative  purposes)
and if such Derivative Obligation is an obligation of Borrower,  such Derivative
Obligation ranks no greater than pari passu to the Obligations.

         "Person" means an individual, partnership, corporation, limited
liability company, association, trust, unincorporated organization or any other
entity or organization, including a government or any agency or political
subdivision thereof.

         "Plan " means at any time an employee pension benefit plan covered by
Title IV of ERISA or subject to the minimum funding standards under Section 412
of the Code that is either (i) maintained by a member of the Controlled Group or
(ii) maintained pursuant to a collective bargaining agreement or any other
arrangement under which more than one employer makes contributions and to which
a member of the Controlled Group is then making or accruing an obligation to
make contributions or has within the preceding five plan years made
contributions.

         "PBGC" is defined in Section 5.8 hereof.

         "Project Finance Subsidiary" means any special purpose Subsidiary of
Borrower created to limit the recourse of the creditors of such Subsidiary and
as to which the creditors and other holders of Indebtedness of such Subsidiary
have recourse solely against the assets of such Subsidiary and not against
Borrower or any other Subsidiary of Borrower or any of their other assets
(whether directly, through a Guarantee or otherwise) other than (i) pursuant to
a Guarantee permitted hereunder and (ii) the stock of such special purpose
Subsidiary (or similar equity interest).

         "Property" means any interest in any kind of property or asset, whether
real, personal or mixed, or tangible or intangible, whether now owned or
hereafter acquired.

         "Recourse Indebtedness" means, without duplication, all Indebtedness of
Borrower and its Consolidated Subsidiaries determined on a consolidated basis in
accordance with GAAP other than Non-Recourse Indebtedness.

         "Recourse Leverage Ratio" means, as of any time the same is to be
determined, the ratio of the amount of (A) Recourse Indebtedness outstanding at
such time (provided that for purposes of clause (A) of this definition, to the
extent otherwise included, Indebtedness of Marketing Subsidiaries in an
aggregate amount not to exceed the Marketing Subsidiary Indebtedness Limit
incurred under Marketing Subsidiary Excluded Credit Facilities shall not be
deemed to be Recourse Indebtedness) to (B) the amount of Capital at such time.

         "Required Banks" means, as of the date of determination thereof, any
Banks holding in the aggregate more than fifty percent (50%) of the Percentages,
provided, that at any time there are two (2) or less Banks, Required Banks shall
mean Banks holding one hundred percent (100%) of the Percentages.

         "Restricted Earnings" means, for any period, the amount of all
Consolidated Net Income earned by each of Borrower's Consolidated Subsidiaries
during such period which may not be distributed or dividended to Borrower due to
contractual or other restrictions on such distributions or dividends.

                                       11

         "SEC" means the United States Securities and Exchange Commission.

         "Security" has the same meaning as in Section 2(l) of the Securities
Act of 1933, as amended.

         "S&P Rating" means the rating assigned by Standard & Poor's Ratings
Group, a division of The McGraw-Hill Companies, Inc. and any successor thereto
that is a nationally recognized rating agency to the outstanding senior
unsecured non-credit enhanced long-term indebtedness of a Person (or, if neither
such division nor any successor shall be in the business of rating long-term
indebtedness, a nationally recognized rating agency in the United States as
mutually agreed between the Required Banks and Borrower). Any reference in this
Agreement to any specific rating is a reference to such rating as currently
defined by Standard & Poor's Ratings Group, a division of The McGraw-Hill
Companies, Inc. (or such a successor) and shall be deemed to refer to the
equivalent rating if such rating system changes.

         "Solvent" means that (a) the fair value of a Person's assets is in
excess of the total amount of such Person's debts, as determined in accordance
with the United States Bankruptcy Code, and (b) the present fair saleable value
of a Person's assets is in excess of the amount that will be required to pay
such Person's debts as they become absolute and matured. As used in this
definition, the term "debts" includes any legal liability, whether matured or
unmatured, liquidated or unliquidated, absolute, fixed or contingent, as
determined in accordance with the United States Bankruptcy Code.

         "Subsidiary" means, as to Borrower, any corporation or other entity (i)
which is consolidated into the financial statements of such Borrower in
accordance with GAAP or (ii) of which more than fifty percent (50%) of the
outstanding stock or comparable equity interests having ordinary voting power
for the election of the Board of Directors of such corporation or similar
governing body in the case of a non-corporation (irrespective of whether or not,
at the time, stock or other equity interests of any other class or classes of
such corporation or other entity shall have or might have voting power by reason
of the happening of any contingency) is at the time directly or indirectly owned
by such Borrower or by one or more of its Subsidiaries.

         "Syndication Agents" is defined in the first paragraph of this
Agreement.

         "Telerate Service" means the Dow Jones Telerate Service.

         "Termination Date" means August 26, 2003, as extended from time to time
pursuant to Section 3.2.

         "3-Year Credit Agreement" means that certain 3-Year Credit Agreement
dated as of August 28, 2001 among Borrower, ABN AMRO Bank, N.V., in its capacity
as administrative agent for the Banks thereunder, U.S. Bank, National
Association, and The Bank of Nova Scotia, in their capacity as documentation
agents for the Banks thereunder, Union Bank of California, N.A., and Bank of
Montreal, in their capacity as syndication agents for the Banks thereunder and
the various financial institutions from time to time party thereto as Banks, as
amended from time to time.

                                       12

         "3-Year Commitments" shall mean "Commitments", as such term is defined
in the 3-Year Day Credit Agreement.

         "3-Year Credit Documents" shall mean "Credit Documents", as such term
is defined in the 3-Year Credit Agreement.

         "3-Year Loans" shall mean "Loans", as such term is defined in the
3-Year Credit Agreement.

         "Total Commitments" shall mean the sum of the Commitments and the
3-Year Commitments.

         "Total Loans" shall mean the sum of the Loans and the 3-Year Loans.

         "Unfunded Vested Liabilities" means, with respect to any Plan at any
time, the amount (if any) by which (i) the present value of all vested
nonforfeitable accrued benefits under such Plan exceeds (ii) the fair market
value of all Plan assets allocable to such benefits, all determined as of the
then most recent valuation date for such Plan, but only to the extent that such
excess represents a potential liability of a member of the Controlled Group to
the PBGC or the Plan under Title IV of ERISA.

         "Utilization  Fee Rate" means the  percentage  set forth in Schedule 1
hereto  beside the then  applicable Level.

         "U.S.  Dollars" and "$" each means the lawful currency of the United
States of America.

         "Voting Stock" of any Person means capital stock of any class or
classes or other equity interests (however designated) having ordinary voting
power for the election of directors or similar governing body of such Person.

          "Welfare Plan" means a "welfare plan", as defined in Section 3(l) of
ERISA.

         "Wholly-Owned" when used in connection with any Subsidiary means a
Subsidiary of which all of the issued and outstanding shares of stock or other
equity interests (other than directors' qualifying shares as required by law)
shall be owned by Borrower and/or one or more of its Wholly-Owned Subsidiaries.

Section 1.2 Interpretation. The foregoing definitions shall be equally
applicable to both the singular and plural forms of the terms defined. All
references to times of day in this Agreement shall be references to New York,
New York time unless otherwise specifically provided. The word "including" means
including without limiting the generality of any description preceding such
term. Where the character or amount of any asset or liability or item of income
or expense is required to be determined or any consolidation or other accounting
computation is required to be made for the purposes of this Agreement, the same
shall be done in accordance with GAAP in effect on the Effective Date, to the
extent applicable, except where such principles are inconsistent with the
specific provisions of this Agreement.

SECTION 2         THE CREDITS.

                                       13

     Section  2.1 The  Revolving  Loan  Commitment.  Subject  to the  terms  and
conditions hereof (including Sections 6.1 and 6.2), each Bank, by its acceptance
hereof,  severally  agrees to make a loan or loans  (individually  a "Loan"  and
collectively "Loans") to Borrower from time to time on a revolving basis in U.S.
Dollars in an aggregate  outstanding  amount up to the amount of its  commitment
set forth on the  applicable  signature  page hereof  (such  amount,  as reduced
pursuant to Section 2.12(a),  increased pursuant to Section 2.12(b),  or changed
as a result of one or more  assignments  under Section 11.12,  its  "Commitment"
and,  cumulatively for all the Banks, the "Commitments")  before the Termination
Date,  provided that the aggregate amount of Loans at any time outstanding shall
not exceed the Commitments in effect at such time. On the  Termination  Date the
Commitments shall terminate.  Each Borrowing of Loans shall be made ratably from
the Banks in proportion to their respective Percentages.  As provided in Section
2.5(a)  hereof,  Borrower may elect that each  Borrowing of Loans be either Base
Rate Loans or Eurodollar  Loans.  Loans may be repaid and the  principal  amount
thereof  reborrowed  before the Termination  Date,  subject to all the terms and
conditions  hereof.  Unless an earlier  maturity is provided for hereunder,  all
Loans  shall   mature  and  be  due  and  payable  on  the   Termination   Date.
Notwithstanding  anything is this Agreement to the contrary, no Eurodollar Loans
may be advanced during the LIBOR Loan Restriction Period.

     Section 2.2 [Intentionally Omitted]. (a)

     Section 2.3 Applicable  Interest Rates. (a) Base Rate Loans. Each Base Rate
Loan made or  maintained  by a Bank shall bear  interest  during  each  Interest
Period it is  outstanding  (computed  (x) at all times the Base Rate is based on
the rate  described in clause (i) of the definition  thereof,  on the basis of a
year of 365 or 366 days,  as  applicable,  and actual days elapsed or (y) at all
times  the  Base  Rate is  based on the rate  described  in  clause  (ii) of the
definition  thereof, on the basis of a year of 360 days and actual days elapsed)
on the unpaid  principal  amount  thereof  from the date such Loan is  advanced,
continued  or created  by  conversion  from a  Eurodollar  Loan  until  maturity
(whether by  acceleration  or otherwise) at a rate per annum equal to the sum of
the Applicable Margin plus the Base Rate from time to time in effect, payable on
the last day of its Interest Period and at maturity  (whether by acceleration or
otherwise).

         "Base Rate" means for any day the greater of:

          (i) the rate of interest  announced by ABN AMRO Bank N.V. from time to
     time as its prime rate,  or  equivalent,  for U.S.  Dollar loans within the
     United  States as in effect on such day,  with any  change in the Base Rate
     resulting  from a change in said prime rate to be  effective as of the date
     of the relevant change in said prime rate; and

          (ii) the sum of (x) the Federal Funds Rate, plus (y)1/2of 1% (0.50%).

     (b) Eurodollar  Loans.  Each  Eurodollar  Loan made or maintained by a Bank
shall bear interest during each Interest  Period it is outstanding  (computed on
the basis of a year of 360 days and actual days elapsed) on the unpaid principal
amount  thereof  from the date such Loan is advanced,  continued,  or created by
conversion  from a Base Rate Loan until  maturity  (whether by  acceleration  or
otherwise)  at a rate per annum equal to the sum of the  Applicable  Margin plus
the Adjusted LIBOR applicable for such Interest Period,  payable on the last day
of the Interest  Period and at maturity  (whether by acceleration or otherwise),
and, if the applicable  Interest

                                       14

Period is longer than three months, on each day occurring every three months
after the commencement of such Interest Period.

         "Adjusted LIBOR" means, for any Borrowing of Eurodollar Loans, a rate
per annum determined in accordance with the following formula:

                     Adjusted LIBOR =               LIBOR
                                    -------------------------------------------
                                        1 - Eurodollar Reserve Percentage

         "LIBOR" means, for an Interest Period for a Borrowing of Eurodollar
Loans, (a) the LIBOR Index Rate for such Interest Period, if such rate is
available, and (b) if the LIBOR Index Rate cannot be determined, the
arithmetical average of the rates of interest per annum (rounded upwards, if
necessary, to the nearest one-sixteenth of one percent) at which deposits in
U.S. Dollars, in immediately available funds are offered to the Administrative
Agent at 11:00 a.m. (London, England time) two (2) Business Days before the
beginning of such Interest Period by major banks in the interbank eurodollar
market for delivery on the first day of and for a period equal to such Interest
Period in an amount equal or comparable to the principal amount of the
Eurodollar Loan scheduled to be made by each Lender as part of such Borrowing.

         "LIBOR Index Rate" means, for any Interest Period, the rate per annum
(rounded upwards, if necessary, to the next higher one-sixteenth of one percent)
for deposits in U.S. Dollars for delivery on the first day of and for a period
equal to such Interest Period in an amount equal or comparable to the principal
amount of the Eurodollar Loan scheduled to be made by each Lender as part of
such Borrowing, which appears on the Applicable Telerate Page as of 11:00 a.m.
(London, England time) on the day two (2) Business Days before the commencement
of such Interest Period.

         "Applicable Telerate Page" means the display page designated as "Page
3750" on the Telerate Service (or such other pages as may replace any such page
on that service or such other service as may be nominated by the British
Bankers' Association as the information vendor for the purpose of displaying
British Bankers' Association Interest Settlement Rates for deposits in U.S.
Dollars).

         "Eurodollar Reserve Percentage" means for an Borrowing of Eurodollar
Loans from any Bank, the daily average for the applicable Interest Period of the
actual effective rate, expressed as a decimal, at which reserves (including,
without limitation, any supplemental, marginal and emergency reserves) are
maintained by such Bank during such Interest Period pursuant to Regulation D of
the Board of Governors of the Federal Reserve System (or any successor) on
"eurocurrency liabilities", as defined in such Board's Regulation D (or in
respect of any other category of liabilities that includes deposits by reference
to which the interest rate on Eurodollar Loans is determined or any category of
extensions of credit or other assets that include loans by non-United States
offices of any Bank to United States residents), subject to any amendments of
such reserve requirement by such Board or its successor, taking into account any
transitional adjustments thereto. For purposes of this definition, the
Eurodollar Loans shall be deemed to be "eurocurrency liabilities" as defined in
Regulation D without benefit or credit for any prorations, exemptions or offsets
under Regulation D.

                                       15

     (c) Rate  Determinations.  The  Administrative  Agent shall  determine each
interest rate  applicable to  Obligations,  and a  determination  thereof by the
Administrative  Agent  shall be  conclusive  and  binding  except in the case of
manifest error.

     Section 2.4 Minimum  Borrowing  Amounts.  Each Borrowing of Base Rate Loans
and  Eurodollar  Loans shall be in an amount not less than (i) if such Borrowing
is comprised of Borrowing of Base Rate Loans,  $1,000,000 and integral multiples
of  $500,000 in excess  thereof,  and (ii) if such  Borrowing  is  comprised  of
Borrowing of Eurodollar Loans,  $2,000,000 and integral  multiples of $1,000,000
in excess thereof.

     Section  2.5  Manner of  Borrowing  Loans and  Designating  Interest  Rates
Applicable to Loans.  (a) Notice to the  Administrative  Agent. (a) The Borrower
shall give notice to the  Administrative  Agent by no later than 12:00 noon (New
York  time)  (i) at least  three  (3)  Business  Days  before  the date on which
Borrower  requests the Banks to advance a Borrowing of Eurodollar Loans, or (ii)
on the date on which Borrower  requests the Banks to advance a Borrowing of Base
Rate Loans.  The Loans included in each Borrowing shall bear interest  initially
at the type of rate  specified  in such notice of a new  Borrowing.  Thereafter,
Borrower  may from time to time elect to change or continue the type of interest
rate  borne by each  Borrowing  or,  subject  to Section  2.4's  minimum  amount
requirement for each outstanding  Borrowing,  a portion thereof, as follows: (i)
if such Borrowing is of Eurodollar Loans, on the last day of the Interest Period
applicable  thereto,  Borrower  may  continue  part or all of such  Borrowing as
Eurodollar  Loans  for an  Interest  Period or  Interest  Periods  specified  by
Borrower or convert part or all of such Borrowing into Base Rate Loans, and (ii)
if such  Borrowing  is of Base Rate Loans,  on any  Business  Day,  Borrower may
convert  all or part of such  Borrowing  into  Eurodollar  Loans for an Interest
Period or Interest Periods  specified by Borrower.  Borrower shall give all such
notices requesting, the advance,  continuation,  or conversion of a Borrowing to
the  Administrative  Agent by  telephone  or  telecopy  (which  notice  shall be
irrevocable  once given and, if by  telephone,  shall be promptly  confirmed  in
writing).  Notices of the continuation of a Borrowing of Eurodollar Loans for an
additional Interest Period or of the conversion of part or all of a Borrowing of
Eurodollar  Loans into Base Rate  Loans or of Base Rate  Loans  into  Eurodollar
Loans must be given by no later  than 12:00 noon (New York time) at least  three
(3) Business Days before the date of the requested  continuation  or conversion.
All such  notices  concerning  the advance,  continuation,  or  conversion  of a
Borrowing  shall be  irrevocable  once given and shall  specify  the date of the
requested  advance,  continuation or conversion of a Borrowing (which shall be a
Business Day), the amount of the requested Borrowing to be advanced,  continued,
or  converted,  the type of Loans to comprise  such new,  continued or converted
Borrowing  and, if such  Borrowing is to be comprised of Eurodollar  Loans,  the
Interest Period  applicable  thereto.  Borrower  agrees that the  Administrative
Agent may rely on any such  telephonic or telecopy notice given by any person it
in good faith believes is an Authorized  Representative without the necessity of
independent  investigation,  and in the  event  any  such  notice  by  telephone
conflicts with any written confirmation,  such telephonic notice shall govern if
the  Administrative  Agent has acted in reliance  thereon.  There may be no more
than six different Interest Periods in effect at any one time, provided that for
purposes  of  determining  the number of  Interest  Periods in effect at any one
time,  all Base Rate  Loans  shall be  deemed to have one and the same  Interest
Period.

                                       16

     (b)  Notice to the  Banks.  The  Administrative  Agent  shall  give  prompt
telephonic or telecopy notice to each Bank of any notice from Borrower  received
pursuant to Section 2.5(a) above. The Administrative  Agent shall give notice to
Borrower and each Bank by like means of the  interest  rate  applicable  to each
Borrowing of Eurodollar Loans.

     (c) Borrower'  Failure to Notify.  Any  outstanding  Borrowing of Base Rate
Loans shall,  subject to Section 6.2 hereof,  automatically  be continued for an
additional  Interest Period on the last day of its then current  Interest Period
unless Borrower has notified the Administrative Agent within the period required
by Section  2.5(a) that it intends to convert such Borrowing into a Borrowing of
Eurodollar Loans or notifies the Administrative Agent within the period required
by Section 2.8(a) that it intends to prepay such Borrowing. If Borrower fails to
give notice  pursuant to Section 2.5(a) above of the  continuation or conversion
of any outstanding  principal  amount of a Borrowing of Eurodollar  Loans before
the last day of its then current  Interest  Period within the period required by
Section 2.5(a) and has not notified the  Administrative  Agent within the period
required  by  Section  2.8(a)  that it intends to prepay  such  Borrowing,  such
Borrowing shall  automatically be converted into a Borrowing of Base Rate Loans,
subject to Section 6.2 hereof.  The  Administrative  Agent shall promptly notify
the Banks of Borrower's failure to so give a notice under Section 2.5(a).

     (d) Disbursement of Loans. Not later than 12:00 noon (New York time) on the
date of any requested  advance of a new Borrowing of Eurodollar  Loans,  and not
later than 2:00 p.m. (New York time) on the date of any  requested  advance of a
new Borrowing of Base Rate Loans,  subject to Section 6 hereof,  each Bank shall
make available its Loan comprising  part of such Borrowing in funds  immediately
available at the principal office of the  Administrative  Agent in New York, New
York.  The  Administrative  Agent shall make  available to Borrower Loans at the
Administrative  Agent's  principal  office in New York,  New York or such  other
office as the  Administrative  Agent has  previously  agreed in  writing to with
Borrower, in each case in the type of funds received by the Administrative Agent
from the Banks.

     (e)   Administrative   Agent   Reliance   on  Bank   Funding.   Unless  the
Administrative Agent shall have been notified by a Bank before the date on which
such  Bank is  scheduled  to make  payment  to the  Administrative  Agent of the
proceeds of a Loan (which notice shall be effective upon receipt) that such Bank
does not intend to make such payment,  the Administrative  Agent may assume that
such Bank has made such  payment  when due and the  Administrative  Agent may in
reliance upon such  assumption  (but shall not be required to) make available to
Borrower  the  proceeds of the Loan to be made by such Bank and, if any Bank has
not in fact made such payment to the  Administrative  Agent, such Bank shall, on
demand,  pay to the  Administrative  Agent the amount made available to Borrower
attributable to such Bank together with interest  thereon in respect of each day
during the period  commencing  on the date such  amount  was made  available  to
Borrower  and ending on (but  excluding)  the date such Bank pays such amount to
the  Administrative  Agent  at a rate per  annum  equal to (i) from the date the
related  payment  was  made by the  Administrative  Agent  to the  date  two (2)
Business  Days after  payment by such Bank is due  hereunder,  the Federal Funds
Rate for each such day and (ii) from the date two (2)  Business  Days  after the
date such payment is due from such Bank to the date such payment is made by such
Bank,  the Base Rate in effect for each such day. If such amount is not received
from such Bank by the  Administrative  Agent  immediately upon demand,  Borrower
will,  on demand,  repay to the  Administrative  Agent the  proceeds of the Loan

                                       17

attributable to such Bank with interest thereon at a rate per annum equal to the
interest rate applicable to the relevant Loan.

Section 2.6 Interest Periods. As provided in Section 2.5(a) hereof, at the time
of each request of a Borrowing of Eurodollar Loans, Borrower shall select an
Interest Period applicable to such Loans from among the available options. The
term "Interest Period" means the period commencing on the date a Borrowing of
Loans is advanced, continued, or created by conversion and ending: (a) in the
case of Base Rate Loans, on the last Business Day of the calendar quarter in
which such Borrowing is advanced, continued, or created by conversion (or on the
last day of the following calendar quarter if such Loan is advanced, continued
or created by conversion on the last Business Day of a calendar quarter), and
(b) in the case of Eurodollar Loans, 1, 2, 3, or 6 months thereafter; provided,
however, that:

          (a) any  Interest  Period  for a  Borrowing  of Base Rate  Loans  that
     otherwise would end after the Termination Date shall end on the Termination
     Date;

          (b) for any Borrowing of Eurodollar Loans,  Borrower may not select an
     Interest  Period that extends  beyond either (i) the fifth to last Business
     Day of any calendar year or (ii) the Termination Date;

          (c) whenever the last day of any Interest  Period would otherwise be a
     day that is not a Business Day, the last day of such Interest  Period shall
     be extended to the next  succeeding  Business Day,  provided  that, if such
     extension would cause the last day of an Interest Period for a Borrowing of
     Eurodollar Loans to occur in the following  calendar month, the last day of
     such Interest Period shall be the immediately preceding Business Day; and

          (d) for purposes of determining an Interest  Period for a Borrowing of
     Eurodollar  Loans, a month means a period starting on one day in a calendar
     month and ending on the numerically  corresponding day in the next calendar
     month; provided, however, that if there is no numerically corresponding day
     in the  month  in which  such an  Interest  Period  is to end or if such an
     Interest Period begins on the last Business Day of a calendar  month,  then
     such  Interest  Period  shall end on the last  Business Day of the calendar
     month in which such Interest Period is to end.

     Section 2.7 Maturity of Loans.  Unless an earlier  maturity is provided for
hereunder  (whether by  acceleration or otherwise),  all Obligations  (including
principal and interest on all outstanding Loans) shall mature and become due and
payable by Borrower on the Termination Date.

     Section 2.8  Prepayments.  (a) (a) Borrower may prepay  without  premium or
penalty and in whole or in part (but, if in part, then (i) in an amount not less
than $5,000,000 and integral multiples of $1,000,000 in excess thereof, and (ii)
in an amount such that the minimum amount  required for a Borrowing  pursuant to
Section 2.4 hereof remains  outstanding)  any Borrowing of Eurodollar Loans upon
three (3) Business Days' prior irrevocable  notice to the  Administrative  Agent
or, in the case of a Borrowing of Base Rate Loans,  irrevocable notice delivered
to the Administrative Agent no later than 12:00 noon (New York time) on the date
of prepayment, such prepayment to be made by the payment of the principal amount
to be prepaid and accrued

                                       18

interest  thereon to the date fixed for  prepayment.  In the case of  Eurodollar
Loans,  any  amounts  owing  under  Section  2.11  hereof  as a  result  of such
prepayment  shall  be  paid   contemporaneously   with  such   prepayment.   The
Administrative  Agent  will  promptly  advise  each Bank of any such  prepayment
notice it  receives  from  Borrower.  Any  amount  paid or  prepaid  before  the
Termination Date may, subject to the terms and conditions of this Agreement,  be
borrowed, repaid and borrowed again.

     (b) If the aggregate amount of outstanding  Loans shall at any time for any
reason exceed the Commitments  then in effect,  Borrower shall,  immediately and
without  notice or demand,  pay the amount of such excess to the  Administrative
Agent for the ratable  benefit of the Banks as a prepayment of the Loans and, if
necessary,  a prefunding of Letters of Credit.  Immediately upon determining the
need to make any such prepayment Borrower shall notify the Administrative  Agent
of such required  prepayment.  Each such  prepayment  shall be  accompanied by a
payment of all  accrued and unpaid  interest  on the Loans  prepaid and shall be
subject to Section 2.11.

     Section 2.9 Default  Rate.  If any payment of  principal or interest on any
Loan,  or  payment of any other  Obligation,  is not made when due  (whether  by
acceleration or otherwise),  such principal,  interest or other Obligation shall
bear  interest  (computed  on the  basis of a year of 360 days and  actual  days
elapsed or, if based on the rate  described in clause (i) of the  definition  of
Base Rate,  on the basis of a year of 365 or 366 days,  as  applicable,  and the
actual  number of days elapsed) from the date such payment was due until paid in
full, payable on demand, at a rate per annum equal to:

          (a)  for  any  Obligation  other  than a  Eurodollar  Loan  (including
     principal  and  interest  relating  to Base  Rate  Loans  and  interest  on
     Eurodollar  Loans),  the sum of two percent (2%) plus the Applicable Margin
     plus the Base Rate from time to time in effect; and

          (b) for the principal of any  Eurodollar  Loan, the sum of two percent
     (2%)  plus the  rate of  interest  in  effect  thereon  at the time of such
     default  until  the end of the  Interest  Period  applicable  thereto  and,
     thereafter,  at a rate per annum equal to the sum of two percent  (2%) plus
     the Applicable Margin plus the Base Rate from time to time in effect.

     Section  2.10 The Notes.  (a) The Loans made to Borrower by each Bank shall
be evidenced by a single  promissory note of Borrower issued to such Bank in the
form of Exhibit A hereto.  Each such promissory note is hereinafter  referred to
as a "Note"  and  collectively  such  promissory  notes are  referred  to as the
"Notes."

     (a) Each Bank shall record on its books and records or on a schedule to its
Note the  amount of each Loan  advanced,  continued,  or  converted  by it,  all
payments of principal and interest and the  principal  balance from time to time
outstanding  thereon,  the type of such Loan, and, for any Eurodollar  Loan, the
Interest  Period and the interest rate applicable  thereto.  The record thereof,
whether  shown on such books and records of a Bank or on a schedule to any Note,
shall be prima facie evidence of the same; provided,  however,  that the failure
of any Bank to record any of the foregoing or any error in any such record shall
not limit or otherwise affect the obligation of Borrower to repay all Loans made
hereunder together with accrued interest thereon. At the request of any Bank and
upon such Bank  tendering to Borrower the Note to be

                                       19

replaced,  Borrower  shall  furnish  a new  Note to such  Bank  to  replace  any
outstanding Note, and at such time the first notation appearing on a schedule on
the  reverse  side of, or attached  to, such Note shall set forth the  aggregate
unpaid principal amount of all Loans, if any, then outstanding thereon.

Section 2.11 Funding Indemnity. If any Bank shall incur any loss, cost or
expense (including, without limitation, any loss, cost or expense (excluding
loss of margin) incurred by reason of the liquidation or re-employment of
deposits or other funds acquired by such Bank to fund or maintain any Eurodollar
Loan or the relending or reinvesting of such deposits or amounts paid or prepaid
to such Bank) as a result of:

          (a) any payment (whether by acceleration or otherwise),  prepayment or
     conversion  of a  Eurodollar  Loan on a date other than the last day of its
     Interest Period,

          (b) any  failure  (because  of a  failure  to meet the  conditions  of
     Section 6 or  otherwise)  by Borrower  to borrow or  continue a  Eurodollar
     Loan,  or to convert a Base Rate Loan into a Eurodollar  Loan,  on the date
     specified  in a notice  given  pursuant  to Section  2.5(a) or  established
     pursuant to Section 2.5(c) hereof,

          (c) any  failure by  Borrower  to make any  payment or  prepayment  of
     principal  on any  Eurodollar  Loan when due  (whether by  acceleration  or
     otherwise), or

          (d) any  acceleration of the maturity of a Eurodollar Loan as a result
     of the occurrence of any Event of Default hereunder,  then, upon the demand
     of such Bank, Borrower shall pay to such Bank such amount as will reimburse
     such Bank for such loss,  cost or  expense.  If any Bank makes such a claim
     for  compensation,  it  shall  provide  to  Borrower,  with a  copy  to the
     Administrative  Agent,  a  certificate  executed by an officer of such Bank
     setting forth the amount of such loss, cost or expense in reasonable detail
     (including  an  explanation  of the basis for and the  computation  of such
     loss,  cost or  expense)  and the  amounts  shown  on such  certificate  if
     reasonably  calculated  shall be prima facie evidence of the amount of such
     loss, cost or expense.

     Section 2.12 Commitments. (a) Borrower shall have the right at any time and
from time to time,  upon five (5)  Business  Days' prior  written  notice to the
Administrative  Agent, to terminate the Commitments  without premium or penalty,
in whole or in part,  any  partial  termination  to be (i) in an amount not less
than $5,000,000 and integral multiples of $1,000,000 in excess thereof, and (ii)
allocated ratably among the Banks in proportion to their respective Percentages,
provided  that the  Commitments  may not be reduced  to an amount  less than the
amount of the Loans then outstanding. The Administrative Agent shall give prompt
notice to each Bank of any such  termination of Commitments.  Any termination of
Commitments pursuant to this Section 2.12 may not be reinstated.

          (b) The  Borrower and the  Administrative  Agent may from time to time
     add additional financial institutions as parties to this Agreement or, with
     the written  consent of an existing  Bank,  increase the Commitment of such
     existing  Bank (any such  financial  institution  or existing Bank which is
     increasing its commitment being referred to as an "Added Bank") pursuant to
     documentation satisfactory to the Borrower and the Administrative Agent and
     any such  Added  Bank  shall  for all  purposes  be  considered  a Bank for
     purposes of this Agreement and

                                       20

     the  other  Credit  Documents  with a  Commitment  as  set  forth  in  such
     documentation.  Any such  Added Bank shall on the date it is deemed a party
     to this  Agreement  purchase  from the other Banks its  Percentage  (or the
     increase  in its  Percentage,  in the  case of an  Added  Bank  which is an
     existing Bank) of the Loans outstanding. Notwithstanding anything contained
     in  this  Section  2.12(b)  to  the  contrary,   the  aggregate  amount  of
     Commitments may not at any time exceed $300,000,000  without the consent of
     the Required Banks.

SECTION 3         FEES AND EXTENSIONS.

Section 3.1       Fees.

     (a) Facility Fee. From and after the Effective Date,  Borrower shall pay to
the Administrative Agent for the ratable account of the Banks in accordance with
their  Percentages  a facility  fee  accruing  at a rate per annum  equal to the
Facility Fee Rate on the average daily amount of the  Commitments  (whether used
or unused),  or if the Commitments have expired or terminated,  on the principal
amount of Loans then outstanding. Such facility fee is payable in arrears on the
last Business Day of each calendar  quarter and on the Termination  Date, and if
the Commitments  are terminated in whole prior to the Termination  Date, the fee
for the period to but not including the date of such  termination  shall be paid
in whole on the date of such termination.

     (b) [Intentionally Omitted].

     (c)  Utilization  Fee.  From and after the Effective  Date,  for any day on
which (i) the aggregate principal amount of Total Loans and L/C Obligations then
outstanding  exceeds thirty three percent (33%) of the Total Commitments then in
effect or (ii) the Commitments have been terminated by the Administrative  Agent
or the Lenders in  accordance  with this  Agreement,  Borrower  shall pay to the
Administrative  Agent for the ratable  account of the Banks in  accordance  with
their  Percentages a  utilization  fee accruing at a rate per annum equal to the
Utilization Fee Rate on the aggregate  amount of Total Loans and L/C Obligations
outstanding  on such date.  Such fee is payable in arrears on the last  Business
Day of each calendar quarter and on the Termination Date, and if the Commitments
are terminated in whole prior to the Termination Date, the fee for the period to
but not  including  the date of such  termination  shall be paid in whole on the
date of such  termination.  The utilization fee payable pursuant to this Section
3.2(c) shall be one and the same,  and not in addition to, the  utilization  fee
payable by the Borrower  under the 3-Year Credit  Agreement and shall be divided
among this  Agreement  and the  3-Year  Credit  Agreement  pro rata based on the
percentage  which the amount of Loans  outstanding  under this  Agreement on the
date such fee accrued  comprises of the aggregate  amount of Total Loans and L/C
Obligations outstanding on such date.

     (d) Arranger Fees. Borrower shall pay to the Arrangers for the sole account
of the  Arrangers  the fees agreed to between the  Arrangers and Borrower in the
Fee Letter or as otherwise agreed in writing among them.

     (e) Fee  Calculations.  All fees  payable  under  this  Agreement  shall be
payable  in U.S.  Dollars  and shall be  computed  on the basis of a year of 360
days, for the actual number of days elapsed. All determinations of the amount of
fees  owing  hereunder  (and  the  components  thereof)

                                       21

shall be made by the  Administrative  Agent and shall be prima facie evidence of
the amount of such fee.

     Section  3.2  Extensions.   The  Borrower  may  request  that  each  Bank's
Commitment be renewed by providing notice of such requests to the Administrative
Agent  no  earlier  than 45 days  but no  later  than 30 days  prior to the then
existing  Termination Date (the "Existing  Termination Date") applicable to such
Banks.  If a Bank agrees,  in its individual and sole  discretion,  to renew its
Commitment,  such Bank (a "Renewing Bank") will notify the Administrative Agent,
in  writing,  of its  decision  to do so no  earlier  than 30 days  prior to the
Existing  Termination  Date  applicable  to such Bank (but in any event no later
than 20 days  prior  to the  Existing  Termination  Date).  If a Bank  does  not
affirmatively  notify  the Bank in  writing  of its  willingness  to  renew  its
Commitment  within such time period,  such Bank shall be deemed to have declined
the Borrower's  request.  Notwithstanding any provision of this Agreement to the
contrary,  any  notice by any Bank of its  willingness  to renew its  Commitment
shall be revocable by such Bank in its sole and absolute  discretion at any time
prior to the date which is 20 days prior to the related  Commitment  Termination
Date then in effect.  The  Administrative  Agent will  notify the  Borrower,  in
writing,  of each Bank's  decision  no later than 15 days prior to the  Existing
Termination  Date applicable to such Bank. The Renewing Banks'  Commitments will
be renewed  pursuant to an  amendment to this  Agreement  in form and  substance
satisfactory  to the Renewing  Banks,  provided  that (x) each  extension of the
Termination  Date pursuant to this Section 3.2 shall be for a period of 364 days
and (y) any such  extension  shall  only be  permitted  if more  than 50% of the
aggregate  Commitments as of the Termination Date then in effect are extended or
otherwise  committed  to by  Renewing  Banks  and any new  Banks.  Any Bank that
declines the Borrower's  request for a Commitment  renewal (a "Declining  Bank")
will have its Commitment  terminated on the Existing Termination Date applicable
to such Bank (without regard to any renewals by other Banks),  unless terminated
earlier in accordance with this  Agreement.  The Borrower will have the right to
accept  Commitments from Persons  acceptable to the  Administrative  Agent in an
amount up to the  amount of the  pre-termination  Commitments  of any  Declining
Banks,  provided that the Renewing  Banks will have the right to increase  their
Commitments  up to the amount of the  Declining  Banks'  Commitments  before the
Borrower will be permitted to substitute Persons for the Declining Banks.

     SECTION 4 PLACE AND APPLICATION OF PAYMENTS.

     Section 4.1 Place and Application of Payments. All payments of principal of
and  interest  on the  Loans,  and of all other  Obligations  and other  amounts
payable by  Borrower  under the Credit  Documents,  shall be made by Borrower in
U.S.  Dollars to the  Administrative  Agent by no later than 2:00 p.m. (New York
time) on the due date  thereof  at the  principal  office of the  Administrative
Agent in New York,  New York pursuant to the payment  instructions  set forth on
Part A of Schedule 4 hereof (or such other location in the, United States as the
Administrative Agent may designate to Borrower) for the benefit of the Person or
Persons entitled thereto.  Any payments received after such time shall be deemed
to have been received by the Administrative  Agent on the next Business Day. All
such payments  shall be made free and clear of, and without  deduction  for, any
set-off,  defense,  counterclaim,  levy,  or any other  deduction of any kind in
immediately  available funds at the place of payment. The Administrative  Agent,
will promptly  thereafter  cause to be  distributed  like funds  relating to the
payment of  principal  or interest on

                                       22

Loans or  applicable  fees  ratably to the Banks and like funds  relating to the
payment of any other amount  payable to any Person to such Person,  in each case
to be applied in accordance with the terms of this Agreement.

     SECTION 5 REPRESENTATIONS AND WARRANTIES.

     The Borrower hereby  represents and warrants to each Bank as to itself and,
where the following representations and warranties apply to its Subsidiaries, as
to each Subsidiary of Borrower, as follows:

     Section  5.1  Corporate  Organization  and  Authority.   Borrower  is  duly
organized  and  existing in good  standing  under the laws of the state of South
Dakota; has all necessary corporate power to carry on its present business;  and
is duly licensed or qualified and in good standing in each jurisdiction in which
the nature of the business  transacted by it or the nature of the Property owned
or leased by it makes such licensing,  qualification or good standing  necessary
and in which the failure to be so licensed,  qualified or in good standing would
have a Material Adverse Effect.

     Section  5.2  Subsidiaries.  Schedule  5.2 (as  updated  from  time to time
pursuant to Section 7.1) hereto  identifies  each  Subsidiary  of Borrower,  the
jurisdiction of incorporation,  the percentage of issued and outstanding  shares
of each class of its capital  stock owned by the Borrower  and its  Subsidiaries
and, if such percentage is not one hundred percent (100%) (excluding  directors'
qualifying  shares as  required  by law),  a  description  of each  class of its
authorized  capital  stock and the  number of shares of each  class  issued  and
outstanding.  Each Subsidiary is duly incorporated and existing in good standing
as a corporation  under the laws of the jurisdiction of its  incorporation,  has
all  necessary  corporate  power to carry on its present  business,  and is duly
licensed or qualified  and in good  standing in each  jurisdiction  in which the
nature of the business  transacted by it or the nature of the Property  owned or
leased by it makes such  licensing or  qualification  necessary and in which the
failure to be so licensed or qualified would have a Material Adverse Effect. All
of the issued and outstanding  shares of capital stock of each Subsidiary  owned
directly or indirectly by Borrower are validly issued and  outstanding and fully
paid and  nonassessable  except as set forth on Schedule  5.2  hereto.  All such
shares  owned by Borrower  are owned  beneficially,  and of record,  free of any
Lien, except as permitted in Section 7.9.

     Section 5.3 Corporate  Authority and Validity of Obligations.  Borrower has
full right and  authority  to enter  into this  Agreement  and the other  Credit
Documents to which it is a party, to make the borrowings herein provided for, to
issue its Notes in  evidence  thereof,  to apply (and to have  applied)  for the
issuance of the Letters of Credit,  and to perform all of its obligations  under
the Credit Documents to which it is a party. Each Credit Document to which it is
a party has been  duly  authorized,  executed  and  delivered  by  Borrower  and
constitutes valid and binding obligations of Borrower  enforceable in accordance
with its terms,  except as such  enforceability  may be  limited by  bankruptcy,
insolvency,   reorganization,   moratorium   or  similar  laws   affecting   the
enforceability  of creditors'  rights  generally and by equitable  principles of
general  applicability  (regardless of whether such enforceability is considered
in a proceeding in equity or at law). No Credit Document, nor the performance or
observance  by Borrower of any of the matters or things  therein  provided  for,
contravenes any provision of law or any charter or by-law  provision of Borrower
or any  material  Contractual  Obligation  of or  affecting  Borrower  or any of

                                       23

Borrower's  Properties  or results in or requires the creation or  imposition of
any Lien on any of the Properties or revenues of Borrower.

Section 5.4 Financial Statements. All financial statements heretofore delivered
to the Banks showing historical performance of Borrower for Borrower's fiscal
years ending on or before December 31, 2001, have been prepared in accordance
generally accepted accounting principles applied on a basis consistent, except
as otherwise noted therein, with that of the previous fiscal year. The unaudited
financial statements for the fiscal period ended June 30, 2002 have been
prepared in accordance generally accepted accounting principles applicable to
interim financial statements applied on a basis consistent, except as otherwise
noted therein, with the previous same fiscal period of Borrower in the prior
fiscal year (subject to normal year-end adjustments). Each of such financial
statements fairly presents on a consolidated basis the financial condition of
Borrower and its Subsidiaries as of the dates thereof and the results of
operations for the periods covered thereby. Borrower and its Subsidiaries have
no material contingent liabilities other than those disclosed in such financial
statements referred to in this Section 5.4 or in comments or footnotes thereto,
or in any report supplementary thereto, heretofore furnished to the Banks. Since
December 31, 2001, there has been no event or series of events which has
resulted in, or reasonably could be expected to result in, a Material Adverse
Effect.

     Section 5.5 No Litigation;  No Labor Controversies.(a)  Except as set forth
on Schedule 5.5, there is no litigation or governmental  proceeding  pending, or
to the knowledge of Borrower,  threatened, against Borrower or any Subsidiary of
Borrower  in which  there is a  reasonable  possibility  of an adverse  decision
which, if adversely determined,  could (individually or in the aggregate) have a
Material Adverse Effect.

     (b) Except as set forth on Schedule 5.5,  there are no labor  controversies
pending or, to the best knowledge of Borrower,  threatened  against  Borrower or
any Subsidiary of Borrower which could (individually or in the aggregate) have a
Material Adverse Effect.

     Section  5.6 Taxes.  Borrower  and its  Subsidiaries  have filed all United
States federal tax returns,  and all other foreign,  state,  local and other tax
returns,  required  to be filed and have paid all  taxes  due  pursuant  to such
returns or pursuant to any assessment  received by Borrower or any Subsidiary of
Borrower,  except such taxes,  if any, as are being  contested in good faith and
for which  adequate  reserves have been  provided.  No notices of tax liens have
been filed and no claims are being  asserted  concerning  any such taxes,  which
liens or claims are  material to the  financial  condition of Borrower or any of
its Subsidiaries  (individually or in the aggregate).  The charges, accruals and
reserves on the books of Borrower  and its  Subsidiaries  for any taxes or other
governmental charges are adequate and in conformance with GAAP.

     Section  5.7  Approvals.  No  authorization,  consent,  approval,  license,
exemption,  filing or registration  with any court or  governmental  department,
agency or  instrumentality,  nor any approval or consent of the  stockholders of
Borrower or any Subsidiary of Borrower or from any other Person, is necessary to
the valid  execution,  delivery or  performance by Borrower or any Subsidiary of
Borrower of any Credit Document to which it is a party.

     Section  5.8 ERISA.  With  respect to each  Plan,  Borrower  and each other
member of the Controlled  Group has fulfilled its obligations  under the minimum
funding  standards of and is

                                       24

in  compliance  in all material  respects  with the Employee  Retirement  Income
Security  Act of 1974,  as  amended  ("ERISA"),  and with the Code to the extent
applicable  to it and has not  incurred  any  liability  to the Pension  Benefit
Guaranty  Corporation  ("PBGC")  or a Plan under  Title IV of ERISA other than a
liability to the PBGC for premiums under Section 4007 of ERISA. Neither Borrower
nor  any  Subsidiary  of  Borrower  has  any  contingent   liabilities  for  any
post-retirement  benefits  under  a  Welfare  Plan,  other  than  liability  for
continuation coverage described in Part 6 of Title I of ERISA.

     Section 5.9 Government  Regulation.  Neither Borrower nor any Subsidiary of
Borrower is an "investment company" within the meaning of the Investment Company
Act of 1940, as amended,  or a "registered  holding  company",  or a "Subsidiary
company" of a "registered  holding company",  or an "affiliate" of a "registered
holding company" or of a "Subsidiary company" of a "registered holding company",
within  the  meaning of the  Public  Utility  Holding  Company  Act of 1935,  as
amended.

     Section  5.10 Margin  Stock;  Use of  Proceeds.  Neither  Borrower  nor any
Subsidiary  of  Borrower  is  engaged  principally,  or as one  of  its  primary
activities, in the business of extending credit for the purpose of purchasing or
carrying  margin stock  ("margin  stock" to have the same  meaning  herein as in
Regulation  U of the Board of  Governors  of the Federal  Reserve  System).  The
proceeds of the Loans and Letters of Credit are to be used solely (i) to provide
liquidity  support  for  Borrower's  commercial  paper  program,  (ii)  to  fund
Borrower's  working capital needs, and (iii) for general  corporate  purposes of
Borrower.  Borrower  will not use the  proceeds  of any  Loan in a  manner  that
violates  any  provision  of  Regulation U or X of the Board of Governors of the
Federal Reserve System.

     Section 5.11 Licenses and  Authorizations;  Compliance  with Laws.  (a) (a)
Borrower and each of its  Subsidiaries has all necessary  licenses,  permits and
governmental  authorizations  to own and operate its  Properties and to carry on
its business as currently  conducted and contemplated.  Borrower and each of its
Subsidiaries is in compliance with all applicable laws, regulations,  ordinances
and orders of any governmental or judicial  authorities except for any such law,
regulation, ordinance or order which, the failure to comply therewith, could not
reasonably expected to have a Material Adverse Effect.

     (a) In the  ordinary  course  of its  business,  Borrower  and  each of its
Subsidiaries conduct an ongoing review of the effect of Environmental and Health
Laws on the  Properties  and all aspects of the business and  operations of such
Borrower and its  Subsidiaries  in the course of which such Borrower  identifies
and evaluates associated  liabilities and costs (including,  without limitation,
any  capital or  operating  expenditures  required  for  clean-up  or closure of
Properties currently or previously owned, any capital or operating  expenditures
required to achieve or maintain compliance with standards imposed by law and any
actual  or  potential  liabilities  to third  parties,  including  employees  or
governmental entities, and any related costs and expenses). On the basis of this
review, Borrower has reasonably concluded that Environmental and Health Laws are
unlikely to have any Material Adverse Effect.

     (b) Except as set forth on Schedule  5.11 (as amended  from time to time in
accordance with the provisions hereof),  neither the Borrower nor any Subsidiary
of Borrower  has given,  nor is it required to give,  nor has it  received,  any
notice, letter, citation, order, warning, complaint, inquiry, claim or demand to
or from any governmental entity or in connection with

                                       25

any court  proceeding  which could  reasonably  have a Material  Adverse  Effect
claiming that:  (i) Borrower or any  Subsidiary of Borrower has violated,  or is
about to  violate,  any  Environmental  and  Health  Law;  (ii) there has been a
release, or there is a threat of release, of Hazardous Materials from Borrower's
or any of its Subsidiary's Property,  facilities,  equipment or vehicles;  (iii)
Borrower or any of its Subsidiary may be or is liable,  in whole or in part, for
the costs of cleaning up,  remediating  or  responding to a release of Hazardous
Materials;  or (iv) any of  Borrower's  or any of its  Subsidiary's  Property or
assets  are  subject  to a Lien in  favor  of any  governmental  entity  for any
liability,  costs or  damages,  under any  Environmental  and Health Law arising
from, or costs incurred by such governmental entity in response to, a release of
a Hazardous Materials.

     Section 5.12 Ownership of Property;  Liens. Borrower and each Subsidiary of
Borrower has good title to or valid  leasehold  interests  in all its  Property.
None of Borrower's or any Subsidiary's  Property is subject to any Lien,  except
as permitted in Section 7.9.

     Section  5.13  No  Burdensome  Restrictions;  Compliance  with  Agreements.
Neither  Borrower nor any  Subsidiary of Borrower is (a) party or subject to any
law,   regulation,   rule  or  order,  or  any  Contractual   Obligation,   that
(individually or in the aggregate)  materially  adversely  affects the business,
operations,  Property  or  financial  or other  condition  of  Borrower  and its
Subsidiaries  (individually  or in  the  aggregate)  or (b)  in  default  in the
performance,  observance or fulfillment of any of the obligations,  covenants or
conditions  contained  in any  agreement to which it is a party  (including  any
Contractual  Obligation),  which default could materially  adversely affects the
business,  operations,  Property or financial or other condition of Borrower and
its Subsidiaries (individually or in the aggregate).

     Section  5.14 Full  Disclosure.  All  information  heretofore  furnished by
Borrower  to  the  Administrative  Agent  or  any  Bank  for  purposes  of or in
connection with the Credit Documents or any transaction contemplated thereby is,
and all such information  hereafter  furnished by Borrower to the Administrative
Agent or any Bank will be, true and  accurate in all  material  respects and not
misleading.

     Section 5.15 Solvency. Borrower and each of its Subsidiaries,  individually
and on a consolidated basis, is Solvent.

     SECTION 6 CONDITIONS PRECEDENT.

     The  obligation of each Bank to effect a Borrowing  shall be subject to the
following conditions precedent:

     Section 6.1 Initial Credit Event.  Before or concurrently  with the initial
Credit Event:

          (a) The  Administrative  Agent shall have  received  for each Bank the
     favorable  written opinion of (i) Morgan,  Lewis & Bockius LLP,  counsel to
     Borrower, and (ii) General Counsel to the Borrower;

          (b) The Administrative  Agent shall have received for each Bank copies
     of Borrower's (i) Articles of  Incorporation,  together with all amendments
     and (ii) bylaws (or

                                       26

     comparable  constituent  documents) and any amendments thereto,
     certified  in each  instance  by its  Secretary  or an  Assistant
     Secretary;

          (c) The Administrative  Agent shall have received for each Bank copies
     of resolutions of Borrower's  Board of Directors  authorizing the execution
     and  delivery  of  the  Credit   Documents  and  the  consummation  of  the
     transactions  contemplated thereby together with specimen signatures of the
     persons authorized to execute such documents on such Borrower's behalf, all
     certified in each instance by its Secretary or Assistant Secretary;

          (d) The  Administrative  Agent shall have  received for each Bank such
     Bank's duly executed  Note of Borrower  dated the date hereof and otherwise
     in compliance with the provisions of Section 2.10(a) hereof;

          (e) The Administrative  Agent shall have received for each Bank a duly
     executed  original  of (i) this  Agreement,  and (ii) a list of  Borrower's
     Authorized Representatives;

          (f) All legal  matters  incident to the  execution and delivery of the
     Credit Documents shall be satisfactory to the Banks;

          (g) The  Administrative  Agent  shall have  received  a duly  executed
     original of the Fee Letter;

          (h) The  Administrative  Agent  shall have  received  a duly  executed
     Compliance  Certificate  containing  financial  information  as of June 30,
     2002;

          (i) With the exception of the $75,000,000  First Mortgage Bonds issued
     by BHP, neither Borrower nor any of its Subsidiaries shall have, during the
     period from July 1, 2002 to the Effective Date, issued, incurred,  assumed,
     created,  become  liable  for,  contingently  or  otherwise,  any  material
     Indebtedness;

          (j) The Borrower  shall have provided a  certificate  stating that the
     conditions  set forth  precedent  set forth in this  Section  6.1 have been
     satisfied;

          (k) The Borrower shall have  converted,  continued or repaid each Loan
     previously  outstanding  so that the Effective  Date is the first day of an
     Interest Period for all outstanding Loans; and

          (l) The Borrower shall have paid to each Bank the applicable  fees for
     providing its Commitment under this Agreement; and

          (m) The Administrative  Agent shall have received such other documents
     and information as it may reasonably request.

     Section  6.2  All  Credit  Events.  As of the  time of  each  Credit  Event
hereunder:

          (a) The  Administrative  Agent shall have received the notice required
     by Section 2.5 hereof;

                                       27

          (b) Each of the  representations and warranties set forth in Section 5
     hereof shall be and remain true and correct in all material  respects as of
     said time,  except  that if any such  representation  or  warranty  relates
     solely to an earlier date it need only remain true as of such date; and

          (c)  Borrower  shall be in full  compliance  with all of the terms and
     conditions  hereof,  and no Default or Event of Default shall have occurred
     and be continuing or would occur as a result of such Credit Event.

         Each request for a Credit Event shall be deemed to be a representation
and warranty by Borrower on the date of such Credit Event as to the facts
specified in paragraphs (b) and (c) of this Section 6.2.

          SECTION 7 COVENANTS.

     Borrower  covenants  and  agrees  that,  so  long  as any  Note  or Loan is
outstanding  hereunder,  or any Commitment is available to or in use by Borrower
hereunder,  except to the extent  compliance in any case is waived in writing by
the Required Banks:

     Section 7.1 Corporate  Existence;  Subsidiaries.  Borrower shall, and shall
cause  each  of  its  Subsidiaries  to,  preserve  and  maintain  its  corporate
existence,  subject to the provisions of Section 7.12 hereof.  Together with any
financial  statements  delivered pursuant to Section 7.6 hereof,  Borrower shall
deliver an  updated  Schedule  5.2 to  reflect  any  changes  from the  existing
Schedule 5.2.

     Section 7.2  Maintenance.  Borrower  will  maintain,  preserve and keep its
plants, Properties and equipment necessary to the proper conduct of its business
in  reasonably  good repair,  working  order and condition and will from time to
time make all reasonably necessary repairs,  renewals,  replacements,  additions
and  betterments  thereto  so that at all  times  such  plants,  Properties  and
equipment shall be reasonably preserved and maintained,  and Borrower will cause
each of its  Subsidiaries  to do so in respect of Property  owned or used by it;
provided,  however, that nothing in this Section 7.2 shall prevent Borrower or a
Subsidiary of Borrower from  discontinuing  the operation or  maintenance of any
such Properties if such  discontinuance is not  disadvantageous  to the Banks or
the holders of the Notes,  does not materially impair the operations of Borrower
or any Subsidiary of Borrower and is, in the judgment of Borrower,  desirable in
the conduct of its business or the business of its Subsidiaries.

     Section 7.3 Taxes.  Borrower  will duly pay and  discharge,  and will cause
each  of  its  Subsidiaries  duly  to  pay  and  discharge,  all  taxes,  rates,
assessments,  fees and  governmental  charges  upon or against it or against its
Properties, in each case before the same becomes delinquent and before penalties
accrue  thereon,  unless and to the extent that the same is being  contested  in
good faith by appropriate  proceedings and reserves in conformity with GAAP have
been provided therefor on the books of Borrower.

     Section 7.4 ERISA.  Borrower will, and will cause each of its  Subsidiaries
to, promptly pay and discharge all  obligations  and  liabilities  arising under
ERISA  of a  character  which if  unpaid  or  unperformed  might  result  in the
imposition  of a Lien against any of its  properties or assets and will promptly
notify the  Administrative  Agent of (i) the occurrence of any reportable

                                       28

event (as defined in ERISA) affecting a Plan, other than any such event of which
the PBGC has waived notice by  regulation,  (ii) receipt of any notice from PBGC
of its intention to seek  termination  of any Plan or  appointment  of a trustee
therefor,  (iii)  its or any of its  Subsidiaries'  intention  to  terminate  or
withdraw from any Plan, and (iv) the occurrence of any event  affecting any Plan
which could result in the incurrence by Borrower or any of its  Subsidiaries  of
any  material  liability,  fine or  penalty,  or any  material  increase  in the
contingent   liability  of  Borrower  or  any  of  its  Subsidiaries  under  any
post-retirement  Welfare Plan benefit.  The  Administrative  Agent will promptly
distribute to each Bank any notice it receives  from  Borrower  pursuant to this
Section 7.4.

     Section 7.5  Insurance.  Borrower will insure,  and keep insured,  and will
cause  each of its  Subsidiaries  to  insure,  and keep  insured,  with good and
responsible  insurance  companies,  all  insurable  Property  owned  by  it of a
character  usually  insured by companies  similarly  situated and operating like
Property.  To the extent  usually  insured by companies  similarly  situated and
conducting similar businesses,  Borrower will also insure, and cause each of its
Subsidiaries to insure,  employers' and public and product  liability risks with
good and  responsible  insurance  companies.  Borrower will, upon request of any
Bank,  furnish to such Bank a summary setting forth the nature and extent of the
insurance maintained pursuant to this Section 7.5.

     Section 7.6  Financial  Reports and Other  Information.  (a) Borrower  will
maintain a system of accounting in accordance  with GAAP and will furnish to the
Banks and their  respective duly  authorized  representatives  such  information
respecting the business and financial condition of Borrower and its Subsidiaries
as any Bank may reasonably request;  and without any request, the Borrower shall
deliver  to the  Administrative  Agent in form and  detail  satisfactory  to the
Administrative   Agent,  with  copies  for  each  Bank  in  form  and  substance
satisfactory to them, each of the following:

          (i) within 120 days after the end of each fiscal year of  Borrower,  a
     copy of Borrower financial  statements for such fiscal year,  including the
     consolidated  balance sheet of Borrower and its  Subsidiaries for such year
     and the related  statements of income and statements of cash flow,  each as
     certified by independent public accountants of recognized national standing
     selected  by  Borrower  in  accordance  with GAAP  with  such  accountants'
     unqualified  opinion to the effect that the financial  statements have been
     prepared  in  accordance  with  GAAP and  present  fairly  in all  material
     respects in accordance  with GAAP the  consolidated  financial  position of
     Borrower and its  Subsidiaries  as of the close of such fiscal year and the
     results of their  operations  and cash flows for the fiscal year then ended
     and that an examination of such accounts in connection  with such financial
     statements  has been made in accordance  with generally  accepted  auditing
     standards and,  accordingly,  such  examination  included such tests of the
     accounting  records and such other auditing  procedures as were  considered
     necessary in the circumstances,  provided that if Borrower files its annual
     report on Form  10-K for the  applicable  annual  period,  and such  annual
     report contains the financial  statements and  accountants  certifications,
     opinions  and  statements  described  above,  the  Borrower may satisfy the
     requirements of this Section  7.6(a)(i) by delivering a copy of such annual
     report to each Bank.  Together  with such  information  the Borrower  shall
     provide to each Bank such consolidating information as may be necessary for
     the Banks to determine the Borrower's compliance with Section 7.17 hereof;

                                       29

          (ii) within 60 days after the end of each of the first three quarterly
     fiscal  periods of Borrower,  a  consolidated  unaudited  balance  sheet of
     Borrower and its  Subsidiaries,  and the related  statements  of income and
     statements  of  cash  flow,  as of the  close  of such  period,  all of the
     foregoing prepared by Borrower in reasonable detail in accordance with GAAP
     and certified by Borrower's chief financial officer or corporate controller
     as fairly  presenting  the financial  condition as at the dates thereof and
     the results of operations for the periods covered thereby, provided that if
     Borrower files a Form 10-Q for the applicable  quarterly  period,  and such
     quarterly  report  contains the  financial  statements  and  certifications
     described  above, the Borrower may satisfy the requirements of this Section
     7.6(a)(ii)  by  delivering  a copy of such  quarterly  report to each Bank.
     Together with such information the Borrower shall provide to each Bank such
     consolidating  information  as may be necessary  for the Banks to determine
     the Borrower's compliance with Section 7.17 hereof;

          (iii) within the period provided in subsection (i) above,  the written
     statement  of the  accountants  who  certified  the  audit  report  thereby
     required  that in the course of their audit they have obtained no knowledge
     of any Default or Event of Default,  or, if such  accountants have obtained
     knowledge of any such Default or Event of Default,  they shall  disclose in
     such statement the nature and period of the existence thereof; and

          (iv) promptly after the sending or filing thereof, copies of all proxy
     statements,  financial  statements  and  reports  Borrower  or  any  of its
     Subsidiaries sends to their shareholders,  and copies of all other regular,
     periodic and special reports and all  registration  statements  Borrower or
     any of its Subsidiaries file with the SEC or any successor thereto, or with
     any national securities exchanges.

     (b) Each financial  statement furnished to the Banks pursuant to subsection
(i) or  (ii)  of  this  Section  7.6  shall  be  accompanied  by  (A) a  written
certificate signed by Borrower's chief financial officer or corporate controller
to the effect  that (i) no Default or Event of Default has  occurred  during the
period  covered by such  statements  or, if any such Default or Event of Default
has occurred during such period,  setting forth a description of such Default or
Event of Default and specifying the action,  if any, taken by Borrower to remedy
the same, (ii) the representations and warranties  contained in Section 5 hereof
are true and correct in all material respects as though made on the date of such
certificate (other than those made solely as of an earlier date, which need only
remain true as of such date), except as otherwise  described therein,  and (B) a
Compliance  Certificate  in the  form of  Exhibit  B hereto  showing  Borrower's
compliance  with the covenants set forth in Sections  7.9,  7.11,  7.12 and 7.14
through 7.19 hereof.

     (c) Borrower  will  promptly  (and in any event within three  Business Days
after  an  officer  of  Borrower  has  knowledge  thereof)  give  notice  to the
Administrative Agent and each Bank:

          (i) of the occurrence of any Default or Event of Default;

          (ii) any event or condition which could reasonably be expected to have
     a Material Adverse Effect;

                                       30

          (iii)  of any  litigation  or  governmental  proceeding  of  the  type
     described in Section 5.5 hereof;

          (iv) of any  material  change  in the  information  set  forth  on the
     Schedules hereto; and

          (v) of the entering  into of any  Long-Term  Guaranties,  and Borrower
     shall  promptly  provide the  Administrative  Agent with a copy of any such
     Guarantee and any modification to such Guarantee.

     Section 7.7 Bank Inspection Rights.  For purposes of confirming  compliance
with the Credit  Documents or after the occurrence and during the continuance of
an Event of Default, upon reasonable notice from the Administrative Agent or the
Required  Banks,  Borrower will, at Borrower's  expense,  permit such Banks (and
such Persons as any Bank may  designate)  during normal  business hours to visit
and inspect, under Borrower's guidance, any of the Properties of Borrower or any
of its Subsidiaries,  to examine all of their books of account, records, reports
and other papers,  to make copies and extracts  therefrom,  and to discuss their
respective  affairs,  finances  and  accounts  with their  respective  officers,
employees and with their independent  public  accountants (and by this provision
Borrower authorizes such accountants to discuss with the Banks (and such Persons
as any  Bank may  designate)  the  finances  and  affairs  of  Borrower  and its
Subsidiaries)  all at such  reasonable  times and as often as may be  reasonably
requested;  provided,  however,  that except upon the  occurrence and during the
continuation  of any Default or Event of  Default,  not more than one such visit
and inspection may be conducted each calendar quarter.

     Section 7.8 Conduct of Business.  Neither  Borrower nor any  Subsidiary  of
Borrower will engage in any line of business  other than business  activities in
the field of (i) cogeneration and related thermal uses, (ii) energy  production,
(iii)  energy  development,  (iv) energy  recovery,  (v) utility  operation  and
management,  (vi) demand side management services,  (vii) energy trading, (viii)
management of investment  funds which invest in energy  related  businesses  and
investments in such funds, (ix) hedging but not speculative  activities relating
to any  of  the  foregoing  lines  of  business,  (x)  telecommunications,  (xi)
management  and  operating  services  related to any of the  foregoing  lines of
business,  and (xii) other  businesses not described in the foregoing so long as
the  Investments  and  expenses  made in such other  businesses  does not exceed
$20,000,000.

     Section  7.9  Liens.  Borrower  will not,  and will not  permit  any of its
Subsidiaries  to, create,  incur,  permit to exist or to be incurred any Lien of
any kind on any Property  owned by the Borrower or any  Subsidiary  of Borrower;
provided,  however,  that this  Section  7.9 shall  not apply to or  operate  to
prevent:

          (a) Liens  arising  by  operation  of law in respect  of  Property  of
     Borrower or any of its  Subsidiaries  which are  incurred  in the  ordinary
     course of business  which do not in the aggregate  materially  detract from
     the value of such  Property  or  materially  impair the use  thereof in the
     operation of the business of Borrower or any of its Subsidiaries;

          (b) Liens  securing  Non-Recourse  Indebtedness  of any  Subsidiary of
     Borrower,  provided  that any such Lien is  limited to the  Property  being
     financed  or

                                       31

     refinanced  by such  Indebtedness  and the stock (or  similar equity
     interest)  of  the  Subsidiary  which  incurred  such  Non-Recourse
     Indebtedness;

          (c) Liens for taxes or  assessments  or other  government  charges  or
     levies on  Borrower  or any  Subsidiary  of  Borrower  or their  respective
     Properties   which  are  being  contested  in  good  faith  by  appropriate
     proceedings  and for  which  reserves  in  conformity  with  GAAP have been
     provided on the books of Borrower;  provided that the  aggregate  amount of
     liabilities (including interest and penalties,  if any) of Borrower and its
     Subsidiaries  secured by such Liens shall not exceed $20,000,000 at any one
     time outstanding;

          (d) Liens arising out of judgments or awards  against  Borrower or any
     Subsidiary  of Borrower,  or in  connection  with surety or appeal bonds in
     connection with bonding such judgments or awards,  the time for appeal from
     which or petition  for  rehearing  of which shall not have  expired or with
     respect to which such Borrower or such  Subsidiary  shall be prosecuting an
     appeal or  proceeding  for review,  and with respect to which it shall have
     obtained a stay of execution  pending such appeal or proceeding for review;
     provided that the aggregate amount of liabilities  (including  interest and
     penalties,  if any) of Borrower and its Subsidiaries  secured by such Liens
     shall not exceed $20,000,000 at any one time outstanding;

          (e) Survey exceptions or encumbrances,  easements or reservations,  or
     rights of others for  rights-of-way,  utilities and other similar purposes,
     or zoning or other  restrictions as to the use of real properties which are
     necessary for the conduct of the  activities of Borrower and any Subsidiary
     of  Borrower  or which  customarily  exist on  properties  of  corporations
     engaged in similar  activities  and similarly  situated and which do not in
     any event  materially  impair their use in the operation of the business of
     Borrower or any Subsidiary of Borrower;

          (f) Liens  existing  on the date  hereof  and listed on  Schedule  7.9
     hereto;

          (g) Liens securing (i) Indebtedness  evidencing the deferred  purchase
     price of newly acquired  property or incurred to finance the acquisition of
     personal  property  of  Borrower or a  Subsidiary  of Borrower  used in the
     ordinary  course of business of Borrower or a Subsidiary of Borrower,  (ii)
     Capitalized  Lease  Obligations,  and (iii)  the  performance  of  tenders,
     statutory  obligations,  bids, leases or other similar  obligations  (other
     than for borrowed money) entered into in the ordinary course of business or
     to secure obligations on performance bonds; provided, that such Liens shall
     only be permitted to the extent the aggregate  amount of  Indebtedness  and
     other  obligations  secured by all such Liens does not exceed five  percent
     (5%) of  Consolidated  Assets as reflected on the most recent balance sheet
     delivered by Borrower pursuant to Section 7.6;

          (h) Liens in favor of carriers,  warehousemen,  mechanics, materialmen
     and  landlords  granted in the ordinary  course of business for amounts not
     overdue  or  being  diligently  contested  in  good  faith  by  appropriate
     proceedings  and for which adequate  reserves in accordance with GAAP shall
     have been set aside on its books;

                                       32

          (i) Liens incurred or deposits made in the ordinary course of business
     in connection with worker's  compensation,  unemployment insurance or other
     forms of governmental insurance or benefits;

          (j) Liens relating to synthetic  lease  arrangements  of Borrower or a
     Subsidiary  of  Borrower,  provided  that (i) such Lien is  limited  to the
     Property  being  leased,  and (ii) to the  extent  the  lessor or any other
     Person  has  recourse  to the  Borrower,  any  Subsidiary  or any of  their
     Property  (other than the  Property  being so leased),  through a Guarantee
     (including a residual guarantee) or otherwise, such Lien shall be permitted
     if Borrower  has  included  the  recourse  portion of such  obligations  as
     Indebtedness for all purposes (including  financial covenant  calculations)
     under the Credit Documents;

          (k) Liens on  assets  of the  Marketing  Subsidiaries  granted  in the
     ordinary  course of business  securing  the  reimbursement  obligations  of
     Marketing  Subsidiaries  with  respect to letters of credit and any working
     capital  facility of the  Marketing  Subsidiaries  so long as the holder of
     such reimbursement  obligation or provider of such working capital facility
     has no recourse against  Borrower or a Consolidated  Subsidiary of Borrower
     other than such Marketing  Subsidiary or any of their other assets (whether
     directly,  through a  Guarantee  or  otherwise)  other than  pursuant  to a
     Guarantee permitted pursuant to Section 7.15(f);

          (l)  Liens  securing  Indebtedness  issued  pursuant  to that  certain
     Restated  and Amended  Indenture  of Mortgage and Deed of Trust dated as of
     September 1, 1999 between Borrower and The Chase Manhattan Bank, as trustee
     (and any successor trustee thereunder); and

          (m) Any extension,  renewal or replacement (or successive  extensions,
     renewals or  replacements)  in whole or in part of any Lien  referred to in
     the foregoing  paragraphs (a) through (j),  inclusive,  provided,  however,
     that the principal amount of Indebtedness  secured thereby shall not exceed
     the  principal  amount  of  Indebtedness  so  secured  at the  time of such
     extension,  renewal or  replacement,  and that such  extension,  renewal or
     replacement  shall be limited to the Property which was subject to the Lien
     so extended, renewed or replaced.

provided, that the foregoing paragraphs shall not be deemed under any
circumstance to permit a Lien to exist on any capital stock or other equity
interests of the Material Subsidiaries.

     Section 7.10 Use of Proceeds; Regulation U. The proceeds of each Borrowing,
and the credit  provided by Letters of Credit,  will be used by Borrower  solely
(i) to provide liquidity support for Borrower's  commercial paper program,  (ii)
to fund  Borrower's  working  capital  needs,  and (iii) for  general  corporate
purposes of Borrower.  Borrower  will not use any part of the proceeds of any of
the Borrowings or of the Letters of Credit directly or indirectly to purchase or
carry any margin stock (as defined in Section  5.10 hereof) or to extend  credit
to others for the purpose of purchasing or carrying any such margin stock.

     Section 7.11 Sales and  Leasebacks.  Borrower  will not, nor will it permit
any of its Subsidiaries to, enter into any arrangement with any bank,  insurance
company or other lender or investor providing for the leasing by Borrower or any
Subsidiary  of Borrower of any  Property

                                       33

theretofore  owned by it and which has been or is to be sold or  transferred  by
such  owner to such  lender or  investor  if the total  amount of rent and other
obligations of the Borrower and its Subsidiaries under such lease, when combined
with all rent and other  obligations of Borrower and its Subsidiaries  under all
such leases,  would exceed $30,000,000 in the aggregate,  provided that Borrower
and its Subsidiaries  may engage in synthetic lease  transactions so long as the
Borrower's or such Subsidiary's, as applicable, obligations under such synthetic
leases are  included  as  Indebtedness  for all  purposes  (including  financial
covenant calculations) under the Credit Documents.

     Section 7.12 Mergers, Consolidations and Sales of Assets.

          (a)  Borrower  will  not,  and will  not  permit  any of its  Material
     Subsidiaries  to,  (i)  consolidate  with or be a party to merger  with any
     other  Person  or  (ii)  sell,  lease  or  otherwise  dispose  of  all or a
     "substantial  part"  of  the  assets  of  Borrower  and  its  Subsidiaries;
     provided,  however,  that (w) the  foregoing  shall not  prohibit any sale,
     lease,  transfer or disposition to which the Required Banks have consented,
     such consent not to by unreasonably  withheld if (A) such  transaction does
     not  result in a  downgrade  of either  Borrower's  S&P  Rating or  Moody's
     Rating,   (B)  such  transaction  is  for  cash   consideration  (or  other
     consideration  acceptable to the Required Banks) in an amount not less than
     the fair market value of the applicable  assets,  and (C) such transaction,
     when combined with all other such  transactions,  would not have a Material
     Adverse Effect,  taken as a whole, (x) any Subsidiary of Borrower may merge
     or  consolidate  with or into or sell,  lease or otherwise  convey all or a
     substantial  part of its  assets to  Borrower  or any  Subsidiary  of which
     Borrower holds (directly or indirectly) at least the same percentage equity
     ownership;  provided  that in any such  merger or  consolidation  involving
     Borrower,  Borrower shall be the surviving or continuing  corporation,  (y)
     Borrower and its Subsidiaries may sell inventory,  reserves and electricity
     in the  ordinary  course of  business,  and (z)  Borrower  may enter into a
     merger with, or acquisition of all of, another Person so long as:

     (1)  Borrower is the surviving entity,

     (2)  unless  consented  to by  the  Required  Banks,  no  downgrade  in the
          Borrower's S&P Rating or Moody's Rating would occur as a result of the
          consummation of such a transaction,

     (3)  if such  transaction  is an  acquisition,  the Board of Directors  (or
          similar  governing  body) of the Person  being  acquired  has approved
          being so acquired,

     (4)  no Default or Event of Default would has occurred and is continuing at
          the time of, or would occur as a result of, such transaction.

     As used in this Section 7.12(a), a sale, lease,  transfer or disposition of
assets during any fiscal year shall be deemed to be of a  "substantial  part" of
the  consolidated  assets of Borrower and its Subsidiaries if the net book value
of such  assets,  when  added to the net book  value of all other  assets  sold,
leased,  transferred  or  disposed  of by  the  Borrower  and  its  Subsidiaries
(excluding  the  Marketing  Subsidiaries)  during  such  fiscal year (other than
inventory,  reserves and electricity in the ordinary course of business) exceeds
ten  percent  (10%)  of the  total  assets  of

                                       34

Borrower and its Consolidated  Subsidiaries,  determined on a consolidated basis
as of the last day of the immediately preceding fiscal year.

          (b) Except as permitted pursuant to Section 7.14 hereof, Borrower will
     not  sell,  transfer  or  otherwise  dispose  of,  or  permit  any  of  its
     Subsidiaries to issue,  sell,  transfer or otherwise dispose of, any shares
     of stock of any class  (including  as "stock" for purposes of this Section,
     any warrants,  rights or options to purchase or otherwise  acquire stock or
     other  Securities  exchangeable  for  or  convertible  into  stock)  of any
     Subsidiary of Borrower,  except to Borrower or a Wholly-Owned Subsidiary of
     Borrower or except for the purpose of qualifying directors.

     Section 7.13 Use of Property and Facilities;  Environmental  and Health and
Safety Laws.

          (a) Borrower will, and will cause each of its  Subsidiaries to, comply
     in all material  respects with the  requirements of all  Environmental  and
     Health Laws  applicable  to or  pertaining  to the  Properties  or business
     operations of Borrower or any Subsidiary of Borrower.  Without limiting the
     foregoing,  Borrower will not, and will not permit any Person to, except in
     accordance  with applicable  law,  dispose of any Hazardous  Material into,
     onto or upon any real property  owned or operated by Borrower or any of its
     Subsidiaries.

          (b) Borrower will promptly provide the Banks with copies of any notice
     or other instrument of the type described in Section 5.11(b) hereof, and in
     no event later than five (5) Business  Days after an officer of Borrower or
     a Subsidiary of Borrower receives such notice or instrument.

     Section 7.14  Investments,  Acquisitions,  Loans,  Advances and Guaranties.
Borrower will not, nor will it permit any Subsidiary of Borrower to, directly or
indirectly,  make,  retain or have outstanding any investments  (whether through
purchase of stock or  obligations or otherwise) in, or loans or advances to, any
other Person,  or acquire all or any substantial  part of the assets or business
of any other  Person or division  thereof,  or be or become  liable as endorser,
guarantor,  surety or otherwise (such as liability as a general partner) for any
debt,  obligation  or  undertaking  of any other Person,  or otherwise  agree to
provide funds for payment of the obligations of another, or supply funds thereto
or invest  therein or otherwise  assure a creditor of another  against  loss, or
apply for or become liable to the issuer of a letter of credit which supports an
obligation  of another,  or  subordinate  any claim or demand it may have to the
claim  or  demand  of any  other  Person  (cumulatively,  all  of the  foregoing
"Investments"); provided, however, that the foregoing provisions shall not apply
to nor operate to prevent:

          (a) investments in direct  obligations of the United States of America
     or of any agency or  instrumentality  thereof whose obligations  constitute
     full faith and credit  obligations of the United States of America provided
     that any  such  obligation  matures  within  one  year  from the date it is
     acquired by Borrower or Subsidiary;

          (b)  investments  in commercial  paper rated P-1 by Moody's  Investors
     Services,  Inc. or A-1 by Standard & Poor's Corporation maturing within one
     year of its date of issuance;

                                       35

          (c)  investments in  certificates of deposit issued by any Bank or any
     United States  commercial  bank having capital and surplus of not less than
     $200,000,000  maturing within one year from the date of issuance thereof or
     in banker's  acceptances endorsed by any Bank or other such commercial bank
     and maturing within six months of the date of acceptance;

          (d) investments in repurchase obligations with a term of not more than
     seven  (7)  days  for  underlying  securities  of the  types  described  in
     subsection (a) above entered into with any bank meeting the  qualifications
     specified in subsection  (c) above,  provided all such  agreements  require
     physical  delivery of the securities  securing such  repurchase  agreement,
     except those delivered through the Federal Reserve Book Entry System;

          (e)  investments in money market funds that invest  solely,  and which
     are  restricted  by  their  respective   charters  to  invest  solely,   in
     investments of the type described in the immediately  preceding subsections
     (a), (b), (c) and (d) above;

          (f)  ownership  of  stock,   obligations  or  securities  received  in
     settlement of debts (created in the ordinary  course of business)  owing to
     Borrower or any Subsidiary;

          (g)  endorsements  of  negotiable  instruments  for  collection in the
     ordinary course of business;

          (h) loans and advances to employees in the ordinary course of business
     for travel, relocation, and similar purposes;

          (i)  Investments (i) existing on the Effective Date in Subsidiaries of
     Borrower,  (ii) existing on the Effective  Date and  identified in Schedule
     7.14 hereof, or (iii) consisting of intercompany  loans permitted  pursuant
     to Section 7.15(e);

          (j) Investments  constituting (i) accounts  receivable  arising,  (ii)
     trade debt granted,  or (iii) deposits made in connection with the purchase
     price  of  goods  or  services,  in each  case in the  ordinary  course  of
     business;

          (k) Investments in Persons other than Marketing  Subsidiaries  engaged
     in lines of business related to the lines of business  described in Section
     7.8 so long as (i) both before and after giving  effect to such  Investment
     no Default of Event of Default shall have occurred and be continuing,  (ii)
     such  Investments  do not permit any  creditor of such  Person  recourse to
     Borrower or any other  Subsidiary of Borrower or any of their assets (other
     than the assets and/or the stock or similar equity interest of such Person)
     and  (iii) if such  Investments  are in  Persons  engaged  in the  lines of
     business  described in clause (xii) of Section 7.8,  such  Investments  and
     expenses in the  aggregate  do not exceed  $20,000,000  outstanding  at any
     time;

          (l)  Guaranties,  other  than  Long-Term  Guaranties,  so long as such
     Indebtedness is permitted pursuant to Section 7.15;

          (m) acquisitions permitted pursuant to Section 7.12(a);

                                       36

          (n) Investments constituting Long-Term Guaranties other than Long-Term
     Guarantees of Indebtedness of the Marketing Subsidiaries;

          (o) (i) Investments in Marketing  Subsidiaries (other than Investments
     in Marketing  Subsidiaries  consisting  of Guaranties  of  Indebtedness  of
     Marketing  Subsidiaries) existing on August 28, 2001 and listed on Schedule
     7.14 and (ii)  Investments  consisting  of Guaranties  of  Indebtedness  of
     Marketing  Subsidiaries  in existence on the Effective Date and Investments
     in Marketing  Subsidiaries made after the Effective Date (including through
     Guaranties (including Long-Term Guaranties))  provided,  that the aggregate
     amount of Investments  permitted by this clause (ii) when combined with the
     amount  of  intercompany   Indebtedness  owing  by  Marketing  Subsidiaries
     permitted  pursuant  to  Section  7.15(e)(iii)  shall not in the  aggregate
     exceed  $10,000,000  outstanding at any time (it being  understood that any
     increase  in  the  value  of  any  such  Investment   attributable  to  the
     undistributed  net  earnings  of the  Marketing  Subsidiaries  shall not be
     deemed a violation of this Section 7.14(o)); and

          (p) Investments consisting of promissory notes issued in consideration
     for the sale by the Borrower or a Subsidiary  of a portion of the stock (or
     similar equity interests) of a Subsidiary where (i) such note is secured by
     the stock (or similar equity  interest)  sold, and (ii) one of the purposes
     of such sale is to ensure that such  Subsidiary  qualifies as a "qualifying
     facility"  under the Public  Utility  Regulatory  Policies Act of 1978,  as
     amended

     Any Investment which when made complies with the requirements of paragraphs
(a) through (e) may continue to be held  notwithstanding that such Investment if
made thereafter would not comply with such requirements;

     In determining the amount of investments, acquisitions, loans, advances and
guarantees permitted under this Section 7.14, investments and acquisitions shall
always be taken at the  original  cost  thereof  (regardless  of any  subsequent
appreciation or depreciation therein),  loans and advances shall be taken at the
principal amount thereof then remaining unpaid, and guarantees shall be taken at
the amount of obligations guaranteed thereby.

     Section 7.15  Restrictions on Indebtedness.  Borrower will not, nor will it
permit any  Subsidiary  of Borrower to, issue,  incur,  assume,  create,  become
liable for,  contingently or otherwise,  or have  outstanding any  Indebtedness;
provided,  however, that the foregoing provisions shall not restrict nor operate
to prevent the following Indebtedness, so long as the incurrence and maintenance
of such Indebtedness  would not cause the Borrower to be in violation of Section
7.17 hereof if  compliance  with such  covenant were measured on the date of the
incurrence of such Indebtedness:

          (a) the Obligations;

          (b) Non-Recourse Indebtedness of any Project Finance Subsidiary;

          (c) so long as the Borrower  would be in compliance  with Section 7.17
     hereof  (calculated  as of the date of,  and after  giving  affect  to, the
     incurrence  of  such   Indebtedness),   secured   Indebtedness   (excluding
     Indebtedness of the type described in (e),

                                       37

     (f),  and (g) below but  including  the pledge of stock or  similar  equity
     interest of any Project  Finance  Subsidiary or any  Subsidiary  which is a
     special  purpose  entity  whose sole purpose is to own the stock or similar
     equity interest of a Project Finance  Subsidiary) (A) set forth on Schedule
     7.15(b) hereto,  and (B) (i) of BHP, (ii) evidencing the deferred  purchase
     price of newly acquired  property or incurred to finance the acquisition of
     personal  property of the Borrower or a Subsidiary  of the Borrower used in
     the  ordinary  course of business  of the  Borrower  or  Subsidiary,  (iii)
     constituting Capitalized Lease Obligations or with respect to synthetic (or
     similar type) lease  arrangements,  or (iv) incurred in connection with the
     performance  of  tenders,  statutory  obligations,  bids,  leases  or other
     similar  obligations  (other than for borrowed  money)  entered into in the
     ordinary course of business or to secure  obligations on performance bonds;
     provided,  that the  aggregate  amount of  Indebtedness  permitted  by this
     clause  (B) at any time  outstanding  shall not  exceed 5% of  Consolidated
     Assets as  reflected  on the most recent  balance  sheet  delivered  by the
     Borrower  pursuant to Section 7.6,  provided that Borrower  shall  promptly
     provide  the  Administrative   Agent  with  a  copy  of  any  documentation
     evidencing such  Indebtedness in excess of $25,000,000 and any modification
     to such Indebtedness;

          (d) so long as the Borrower  would be in compliance  with Section 7.17
     hereof  (calculated  as of the date of,  and after  giving  affect  to, the
     incurrence   of   such   Indebtedness),   other   Indebtedness   (excluding
     Indebtedness  of the type  described  in (e),  (f), and (g) below) which is
     unsecured and either junior in right of payment to the  Obligations or pari
     passu  to the  Obligations  or is  equally  and  ratably  secured  with the
     Obligations,   provided   that   Borrower   shall   promptly   provide  the
     Administrative  Agent  with a copy  of any  documentation  evidencing  such
     Indebtedness  in  excess  of  $25,000,000  and  any  modification  to  such
     Indebtedness;

          (e) intercompany  loans (i) from (x) Subsidiary to Borrower so long as
     such  loans  are  subordinated  to  the  Obligations  on  terms  reasonably
     satisfactory to the Administrative  Agent, and (y) Borrower to a Subsidiary
     of  Borrower,  (ii)  among  Wholly-Owned  Subsidiaries,  and  (iii)  from a
     Subsidiary of Borrower to a Marketing Subsidiary,  so long as the aggregate
     amount of such loans from time to time owing by the Marketing  Subsidiaries
     does not exceed the difference  between (I) $10,000,000,  less (II) the sum
     of (A) the aggregate amount of Guaranties  outstanding  pursuant to Section
     7.15(f), and (B) the aggregate amount of other Investments then made in the
     Marketing Subsidiaries pursuant to Section 7.14(o)(ii) (it being understood
     that to the extent such limit is exceeded solely as a result of an increase
     in the value of any such Investment  attributable to the  undistributed net
     earnings of the Marketing Subsidiaries,  it shall not be deemed a violation
     of this Section 7.15(e));

          (f)  Indebtedness  consisting of Guaranties of the Indebtedness of the
     Marketing Subsidiaries (including Long-Term Guaranties), provided that such
     Indebtedness  shall only be permitted to the extent the aggregate amount of
     such Indebtedness, when added to the sum of (i) the aggregate amount of all
     intercompany loans made to the Marketing  Subsidiaries  pursuant to Section
     7.15(e),  plus (ii) the aggregate  amount of all other  Investments made in
     Marketing  Subsidiaries  pursuant to Section  7.14(o)(ii),  does not exceed
     $10,000,000 (it being  understood that to the extent such limit is exceeded
     solely  as a result  of an  increase  in the  value of any such

                                       38

     Investment  attributable to the undistributed net earnings of the Marketing
     Subsidiaries,  it shall not be deemed a violation of this Section  7.15(f))
     provided,  further that Borrower shall promptly provide the  Administrative
     Agent  with a copy  of any  such  Guarantee  and any  modification  to such
     Guarantee;

          (g)  Indebtedness  of  the  Marketing   Subsidiaries  under  Marketing
     Subsidiary  Excluded Credit Facilities in an aggregate amount not to exceed
     the Marketing Subsidiary Indebtedness Limit;

          (h) Permitted Derivative Obligations; and

          (i)  Indebtedness   pursuant  to  Long-Term   Guaranties  (other  than
     Long-Term Guaranties of Indebtedness of Marketing Subsidiaries).

     Indebtedness  shall only be permitted under (e), (f), (h), and (i) above to
the  extent  such  Indebtedness  will  have  a  priority  of  payment  with  the
Obligations which is no greater than pari passu.

     Section  7.16  Consolidated  Net  Worth.  Borrower  will at the end of each
fiscal quarter maintain Consolidated Net Worth in an amount of not less than the
sum  of  (i)  $425,000,000  and  (ii)  fifty  percent  (50%)  of  the  aggregate
Consolidated Net Income, if positive, for the period beginning April 1, 2002 and
ending on the last day of such fiscal quarter.

     Section 7.17 Recourse  Leverage Ratio.  Borrower will not at the end of any
fiscal quarter permit the Recourse Leverage Ratio to exceed 0.65 to 1.00.

     Section 7.18 Fixed Charge  Coverage  Ratio.  Borrower will maintain a Fixed
Charge  Coverage Ratio of not less than  1.50:1.00,  as determined at the end of
each fiscal quarter.

     Section  7.19  Dividends  and  Other  Shareholder  Distributions.  (a)  (a)
Borrower  shall not (i) declare or pay any dividends or make a  distribution  of
any kind (including by redemption or purchase) on or relating to its outstanding
capital  stock,  or (ii) repay  (directly,  through  sinking  fund  payments  or
otherwise) any Indebtedness or other obligations  owing to a shareholder  unless
in either  circumstance  no Default or Event of Default exists prior to or would
result after giving effect to such action.

     (b) Except (i) as set forth on Schedule  7.19 and (ii) in  connection  with
Non-Recourse  Indebtedness of a Project Finance  Subsidiary,  Borrower will not,
and will not permit any of its Subsidiaries, directly or indirectly to create or
otherwise  cause  or  suffer  to  exist  or  become   effective  any  consensual
encumbrance or restriction of any kind on the ability of any such Subsidiary to:
(1) pay  dividends or make any other  distribution  on any of such  Subsidiary's
capital  stock owned by  Borrower or any  Subsidiary  of  Borrower;  (2) pay any
Indebtedness  owed to  Borrower  or any  other  Subsidiary;  (3)  make  loans or
advances  to  Borrower  or any  other  Subsidiary;  or (4)  transfer  any of its
property or assets to Borrower or any other Subsidiary.

     Section 7.20 No Negative  Pledge.  Except (i) as set forth on Schedule 7.19
and (ii) in  connection  with  Non-Recourse  Indebtedness  of a Project  Finance
Subsidiary,  the Borrower will not, and will not permit any of its  Subsidiaries
(other than Project Finance Subsidiaries),  directly

                                       39

or  indirectly  to enter  into or assume any  agreement  (other  than  customary
non-assignment   and  no  sub-letting   provisions  in  leases  consistent  with
Borrower's  past practices and the Credit  Documents and, solely with respect to
the asset so financed,  Capitalized  Leases,  to the extent such Indebtedness is
permitted  herein)  prohibiting  the creation or assumption of any Lien upon its
properties or assets, whether now owned or hereafter acquired.

     Section 7.21 Transactions with Affiliates.  Borrower will not, and will not
permit any of its  Subsidiaries  to,  enter  into or be a party to any  material
transaction  or  arrangement  with any  Affiliate  of such  Person  (other  than
Borrower),  including without limitation, the purchase from, sale to or exchange
of Property with, any merger or consolidation  with or into, or the rendering of
any  service by or for,  any  Affiliate,  except in the  ordinary  course of and
pursuant to the  reasonable  requirements  of  Borrower's  or such  Subsidiary's
business and upon terms no less  favorable to such  Borrower or such  Subsidiary
than could be obtained in a similar transaction involving a third-party.

     Section  7.22  Compliance  with  Laws.  Without  limiting  any of the other
covenants of Borrower in this Section 7, Borrower  will,  and will cause each of
its Subsidiaries to, conduct its business,  and otherwise be, in compliance with
all applicable laws,  regulations,  ordinances and orders of any governmental or
judicial  authorities;   provided,   however,  that  neither  Borrower  nor  any
Subsidiary  of  Borrower  shall  be  required  to  comply  with  any  such  law,
regulation,  ordinance  or order if the  failure to comply  therewith  could not
reasonably be expected to have a Material Adverse Effect.

     Section 7.23  Pari-Passu.  Borrower will at all times cause the Obligations
to rank at least pari  passu with all other  senior  unsecured  Indebtedness  of
Borrower.

     Section 7.24 Certain Subsidiaries. Unless pursuant to Indebtedness which is
authorized  pursuant to this Agreement,  Borrower will not, and the Subsidiaries
of Borrower will not, permit any creditor of a Marketing Subsidiary or a Project
Finance  Subsidiary  to have  recourse  to any  Borrower  or any  Subsidiary  of
Borrower  or any of their  assets  (other  than (i) the stock or similar  equity
interest  of the  applicable  Subsidiary  and (ii) with  respect to a  Permitted
Derivative  Obligation) other than recourse under Guaranties  permitted pursuant
to Sections 7.15(f) and (i).

     Section  7.25  Ratings.  Borrower  will at all times this  Agreement  is in
effect  maintain a S&P  Rating  and a Moody's  Rating (or if one or both of such
ratings are unavailable,  rating(s) from such other  recognized  national rating
agency or  agencies as may be  acceptable  to the  Administrative  Agent and the
Required Banks).

     Section 7.26 Liquidity Covenant.  Borrower will, as of the last day of each
fiscal quarter  commencing  with the fiscal  quarter  ending  December 31, 2002,
maintain Liquid Assets of at least $30,000,000.

     SECTION 8 EVENTS OF DEFAULT AND REMEDIES.

     Section  8.1  Events of  Default.  Any one or more of the  following  shall
constitute an Event of Default:

                                       40

          (a) (i)  default in the payment  when due of any fees,  interest or of
     any other  Obligation  not  covered by clause  (ii) below and such  payment
     default  continues  for three (3) days or (ii)  default in the payment when
     due of the principal amount of any Loan;

          (b)  default  by  Borrower  or any  Subsidiary  in the  observance  or
     performance  of any  covenant  set forth in Section  7.1,  Section  7.6(c),
     Section 7.9 through 7.12,  Sections 7.14 through 7.21,  7.23, 7.24 and 7.25
     hereof;

          (c)  default  by  Borrower  or any  Subsidiary  in the  observance  or
     performance  of any  provision  hereof or of any other Credit  Document not
     mentioned  in (a) or (b) above,  which is not remedied  within  thirty (30)
     days after  notice  thereof  shall have been given to the  Borrower  by the
     Administrative Agent;

          (d) (i) failure to pay when due Indebtedness in an aggregate principal
     amount of (x)  $10,000,000 or more of Borrower or any Material  Subsidiary,
     or (ii) default  shall occur under one or more  indentures,  agreements  or
     other  instruments  under which any  Indebtedness of Borrower or any of its
     Material Subsidiary in an aggregate principal amount of $10,000,000 or more
     may be issued or created and such  default  shall  continue for a period of
     time sufficient to permit the holder or beneficiary of such Indebtedness or
     a trustee  therefor to cause the  acceleration  of the maturity of any such
     Indebtedness or any mandatory unscheduled  prepayment,  purchase or funding
     thereof,  or (iii) a default shall occur under the US Bank Credit Agreement
     or the Wells Fargo Credit Agreement;

          (e) any  representation or warranty made herein or in any other Credit
     Document by Borrower or any Subsidiary of Borrower,  or in any statement or
     certificate  furnished  pursuant  hereto or  pursuant  to any other  Credit
     Document by Borrower or any Subsidiary of Borrower,  or in connection  with
     any Credit  Document,  proves untrue in any material respect as of the date
     of the issuance or making, or deemed making or issuance, thereof;

          (f)  Borrower  or any  Material  Subsidiary  shall (i) fail to pay its
     debts generally as they become due or admit in writing its inability to pay
     its debts  generally as they become due,  (ii) make an  assignment  for the
     benefit of creditors,  (iii) apply for, seek,  consent to, or acquiesce in,
     the appointment of a receiver,  custodian, trustee, examiner, liquidator or
     similar  official  for it or any  substantial  part of its  Property,  (iv)
     institute any  proceeding  seeking to have entered  against it an order for
     relief under the United States  Bankruptcy Code, as amended,  to adjudicate
     it   insolvent,   or  seeking   dissolution,   winding   up,   liquidation,
     reorganization,  arrangement,  adjustment or composition of it or its debts
     under any law  relating to  bankruptcy,  insolvency  or  reorganization  or
     relief of debtors or fail to file an answer or other  pleading  denying the
     material  allegations  of  any  such  proceeding  filed  against  it or any
     analogous  action is taken  under  any other  applicable  law  relating  to
     bankruptcy  or  insolvency,  (v) take  any  corporate  action  (such as the
     passage by its board of directors of a resolution)  in  furtherance  of any
     matter  described in parts (i)-(iv)  above, or (vi) fail to contest in good
     faith any appointment or proceeding described in Section 8.1(g) hereof;

          (g) a custodian,  receiver,  trustee, examiner,  liquidator or similar
     official shall be appointed for Borrower or any Material Subsidiary, or any
     substantial  part of any of

                                       41

     their Property,  or a proceeding  described in Section  8.1(f)(iv) shall be
     instituted   against  Borrower  or  any  Material   Subsidiary,   and  such
     appointment continues undischarged or such proceeding continues undismissed
     or unstayed for a period of sixty (60) days;

          (h) Borrower or any Material  Subsidiary shall fail within thirty (30)
     days to pay,  bond or  otherwise  discharge  any  judgment or order for the
     payment of money in excess of $10,000,000, which is not stayed on appeal or
     otherwise  being  appropriately  contested  in good faith in a manner  that
     stays execution thereon;

          (i) Borrower or any other member of the Controlled Group shall fail to
     pay when due an amount or amounts which it shall have become liable, to pay
     to the PBGC or to a Plan  under  Title IV of ERISA;  or notice of intent to
     terminate a Plan or Plans having aggregate  Unfunded Vested  Liabilities in
     excess of  $10,000,000  (collectively,  a "Material  Plan")  shall be filed
     under Title IV of ERISA by Borrower  or any  Subsidiary  of Borrower or any
     other  member  of the  Controlled  Group,  any  plan  administrator  or any
     combination of the foregoing; or the PBGC shall institute proceedings under
     Title IV of ERISA to  terminate  or to cause a trustee to be  appointed  to
     administer  any Material  Plan or a  proceeding  shall be  instituted  by a
     fiduciary of any Material Plan against  Borrower or any other member of the
     Controlled  Group to enforce  Section 515 or  4219(c)(5)  of ERISA and such
     proceeding   shall  not  have  been  dismissed   within  thirty  (30)  days
     thereafter; or a condition shall exist by reason of which the PBGC would be
     entitled to obtain a decree  adjudicating  that any  Material  Plan must be
     terminated;

          (j)  Borrower or any  Subsidiary  of Borrower or any Person  acting on
     behalf of Borrower,  a Subsidiary or any governmental  authority challenges
     the  validity  of  any  Credit   Document  or  Borrower's  or  one  of  its
     Subsidiary's  obligations thereunder or any Credit Document ceases to be in
     full force and effect or is  modified  other  than in  accordance  with the
     terms thereof and hereof;

          (k) a Change of Control Event shall have occurred; or

          (l) Borrower  shall for any reason  cease to be wholly  liable for the
     full amount of the Obligations.

     Section 8.2 Non-Bankruptcy  Defaults.  When any Event of Default other than
those described in subsections (f) or (g) of Section 8.1 hereof has occurred and
is continuing,  the  Administrative  Agent shall, if so directed by the Required
Banks,  by written notice to Borrower:  (a) terminate the remaining  Commitments
and all other  obligations  of the Banks  hereunder  on the date  stated in such
notice (which may be the date thereof); and (b) declare the principal of and the
accrued  interest on all  outstanding  Notes to be forthwith due and payable and
thereupon all outstanding Notes,  including both principal and interest thereon,
and all other  Obligations,  shall be and  become  immediately  due and  payable
together  with all other  amounts  payable  under the Credit  Documents  without
further demand,  presentment,  protest or notice of any kind. The Administrative
Agent,  after  giving  notice to  Borrower  pursuant  to Section  8.1(c) or this
Section 8.2,  shall also promptly send a copy of such notice to the other Banks,
but the failure to do so shall not impair or annul the effect of such notice.

                                       42

     Section 8.3  Bankruptcy  Defaults.  When any Event of Default  described in
subsections  (f) or (g) of Section 8.1 hereof has  occurred  and is  continuing,
then all outstanding Notes,  including both interest and principal thereon,  and
all other Obligations shall immediately become due and payable together with all
other amounts payable under the Credit Documents  without  presentment,  demand,
protest or notice of any kind,  the  obligation  of the Banks to extend  further
credit  pursuant to any of the terms  hereof  shall  immediately  terminate  and
Borrower shall immediately pay to the Administrative  Agent,  subject to Section
8.4, the full amount then available for drawing,  under all outstanding  Letters
of Credit,  Borrower  acknowledging  that the Banks  would not have an  adequate
remedy at law for  failure  by  Borrower  to honor any such  demand and that the
Banks,  and the  Administrative  Agent on their behalf,  shall have the right to
require  Borrower to specifically  perform such  undertaking  whether or not any
draws or other  demands for  payment  have been made under any of the Letters of
Credit.

     Section 8.4 [Intentionally Omitted](a).

     Section 8.5 Expenses.  Borrower agrees to pay to the  Administrative  Agent
and each Bank, and any other holder of any Note outstanding hereunder, all costs
and expenses  incurred or paid by the  Administrative  Agent or such Bank or any
such holder,  including  attorneys' fees  (including  allocable fees of in-house
counsel) and court costs,  in connection with (i) any amendment or waiver to the
Credit Documents requested by Borrower,  (ii) any Default or Event of Default by
Borrower hereunder, or (iii) the enforcement of any of the Credit Documents.

     SECTION 9 CHANGE IN CIRCUMSTANCES.

     Section 9.1 Change of Law.  Notwithstanding  any other  provisions  of this
Agreement  or any Note,  if at any time  after  the date  hereof  any  change in
applicable law or regulation or in the interpretation  thereof makes it unlawful
for any Bank to make or continue to maintain  Eurodollar Loans or to perform its
obligations as contemplated hereby, such Bank shall promptly give notice thereof
to Borrower and such Bank's  obligations  to make or maintain  Eurodollar  Loans
under this Agreement  shall  terminate  until it is no longer  unlawful for such
Bank to make or maintain  Eurodollar Loans.  Borrower shall prepay on demand the
outstanding  principal amount of any such affected  Eurodollar  Loans,  together
with all interest accrued thereon at a rate per annum equal to the interest rate
applicable  to such  Loan;  provided,  however,  subject to all of the terms and
conditions  of this  Agreement,  Borrower may then elect to borrow the principal
amount of the  affected  Eurodollar  Loans  from such Bank by means of Base Rate
Loans from such Bank,  which  Base Rate Loans  shall not be made  ratably by the
Banks but only from such affected Bank.

     Section 9.2  Unavailability  of  Deposits or  Inability  to  Ascertain,  or
Inadequacy of, LIBOR. If on or prior to the first day of any Interest Period for
any Borrowing of Eurodollar Loans:

          (a) the Administrative  Agent determines that deposits in U.S. Dollars
     (in the  applicable  amounts)  are not being  offered to major banks in the
     eurodollar  interbank market for such Interest Period, or that by reason of
     circumstances  affecting  the  interbank  eurodollar  market  adequate  and
     reasonable means do not exist for ascertaining the applicable LIBOR, or

                                       43

          (b) Banks having more than 33% percent  (33)% or more of the aggregate
     amount  of  the  Commitments   reasonably   determine  and  so  advise  the
     Administrative   Agent  that  LIBOR  as   reasonably   determined   by  the
     Administrative  Agent will not  adequately  and fairly  reflect the cost to
     such Banks or Bank of  funding  their or its  Eurodollar  Loans or Loan for
     such Interest Period,

then the Administrative Agent shall forthwith give notice thereof to Borrower
and the Banks, whereupon until the Administrative Agent notifies Borrower that
the circumstances giving rise to such suspension no longer exist, the
obligations of the Banks or of the relevant Bank to make Eurodollar Loans shall
be suspended.

     Section 9.3 Increased Cost and Reduced Return.

          (a) If, on or after the date hereof,  the  adoption of any  applicable
     law,  rule or  regulation,  or any  change  therein,  or any  change in the
     interpretation  or  administration  thereof by any governmental  authority,
     central  bank or  comparable  agency  charged  with the  interpretation  or
     administration  thereof,  or compliance by any Bank (or its Lending Office)
     with any request or directive  (whether or not having the force of law but,
     if not having the force of law,  compliance  with which is customary in the
     relevant  jurisdiction)  of any such authority,  central bank or comparable
     agency:

          (i) shall subject any Bank (or its Lending Office) to any tax, duty or
     other  charge  with  respect  to its  Eurodollar  Loans,  its  Notes or its
     obligation to make Eurodollar  Loans, or shall change the basis of taxation
     of  payments  to any Bank (or its Lending  Office) of the  principal  of or
     interest  on its  Eurodollar  Loans or any other  amounts  due  under  this
     Agreement  in respect of its  Eurodollar  Loans or its  obligation  to make
     Eurodollar  Loans (except for changes in the rate of tax on the overall net
     income  or  profits  of such  Bank or its  Lending  Office  imposed  by the
     jurisdiction  in which such Bank or its lending office is  incorporated  in
     which such Bank's principal executive office or Lending Office is located);
     or

          (ii) shall  impose,  modify or deem  applicable  any reserve,  special
     deposit or similar requirement  (including,  without  limitation,  any such
     requirement  imposed  by the  Board of  Governors  of the  Federal  Reserve
     System,  but  excluding  with  respect  to any  Eurodollar  Loans  any such
     requirement  included  in  an  applicable  Eurodollar  Reserve  Percentage)
     against assets of,  deposits with or for the account of, or credit extended
     by, any Bank (or its  Lending  Office) or shall  impose on any Bank (or its
     Lending Office) or on the interbank  market any other  condition  affecting
     its  Eurodollar  Loans,  its Notes,  or its  obligation to make  Eurodollar
     Loans;

and the result of any of the foregoing is to increase the cost to such Bank (or
its Lending Office) of making or maintaining any Eurodollar Loan or to reduce
the amount of any sum received or receivable by such Bank (or its Lending
Office) under this Agreement or under its Notes with respect thereto, by an
amount deemed by such Bank to be material, then, within fifteen (15) days after
demand by such Bank (with a copy to the Administrative Agent), Borrower shall be
obligated to pay to such Bank such additional amount or amounts as will
compensate such Bank for such increased cost or reduction. In the event any law,
rule, regulation or interpretation described above is revoked, declared invalid
or inapplicable or is otherwise rescinded, and as a

                                       44

result  thereof  a Bank is  determined  to be  entitled  to a  refund  from  the
applicable  authority for any amount or amounts which were paid or reimbursed by
Borrower to such Bank  hereunder,  such Bank shall refund such amount or amounts
to Borrower without interest.

     (b) If, after the date hereof, any Bank or the  Administrative  Agent shall
have  determined  that the adoption of any  applicable  law,  rule or regulation
regarding  capital  adequacy,   or  any  change  therein   (including,   without
limitation, any revision in the Final Risk-Based Capital Guidelines of the Board
of Governors of the Federal Reserve System (12 CFR Part 208,  Appendix A; 12 CFR
Part 225,  Appendix A) or of the Office of the  Comptroller  of the Currency (12
CFR Part 3, Appendix A), or in any other  applicable  capital  rules  heretofore
adopted  and  issued  by  any  governmental  authority),  or any  change  in the
interpretation or administration thereof by any governmental authority,  central
bank or comparable  agency  charged with the  interpretation  or  administration
thereof,  or compliance by any Bank (or its Lending  Office) with any request or
directive  regarding  capital  adequacy  (whether or not having the force of law
but, if not having the force of law,  compliance  with which is customary in the
applicable  jurisdiction)  of any such  authority,  central  bank or  comparable
agency,  has or would  have the  effect of  reducing  the rate of return on such
Bank's capital, or on the capital of any corporation controlling such Bank, as a
consequence of its  obligations  hereunder to a level below that which such Bank
could have achieved but for such  adoption,  change or  compliance  (taking into
consideration  such Bank's  policies  with  respect to capital  adequacy)  by an
amount  deemed by such  Bank to be  material,  then  from  time to time,  within
fifteen (15) days after  demand by such Bank (with a copy to the  Administrative
Agent),  Borrower  shall pay to such Bank such  additional  amount or amounts as
will compensate such Bank for such reduction.

     (c) Each Bank that determines to seek  compensation  under this Section 9.3
shall notify Borrower and the  Administrative  Agent of the  circumstances  that
entitle  the Bank to such  compensation  pursuant  to this  Section 9.3 and will
designate a different  Lending  Office if such  designation  will avoid the need
for,  or reduce the  amount  of,  such  compensation  and will not,  in the sole
judgment of such Bank, be otherwise  disadvantageous to such Bank. A certificate
of any Bank claiming  compensation  under this Section 9.3 and setting forth the
additional  amount or amounts to be paid to it  hereunder  submitted to Borrower
and the  Administrative  Agent by such Bank in good faith  shall be prima  facie
evidence of the amount of such  compensation.  In determining such amount,  such
Bank may use any reasonable averaging and attribution methods.

     Section 9.4 Lending  Offices.  Each Bank may, at its option,  elect to make
its  Loans  hereunder  at the  branch,  office  or  affiliate  specified  on the
appropriate  signature  page  hereof or in the  assignment  agreement  which any
assignee  bank  executes  pursuant  to  Section  11.12  hereof  (each a "Lending
Office")  for each  type of Loan  available  hereunder  or at such  other of its
branches,  offices or affiliates as it may from time to time elect and designate
in a written notice to Borrower and the  Administrative  Agent,  so long as such
election does not increase  costs or other  amounts  payable by Borrower to such
Bank hereunder.

     Section 9.5 Discretion of Bank as to Manner of Funding. Notwithstanding any
other  provision  of this  Agreement,  each Bank shall be  entitled  to fund and
maintain  its funding of all or any part of its Loans in any manner it sees fit,
it being  understood,  however,  that for the  purposes  of this  Agreement  all
determinations  hereunder  shall be made as if each Bank had actually funded and
maintained  each  Eurodollar  Loan  through  the  purchase  of  deposits  in the

                                       45

eurodollar  interbank  market  having a maturity  corresponding  to such  Loan's
Interest  Period and bearing an interest  rate equal to LIBOR for such  Interest
Period.

     SECTION 10 THE AGENT.

     Section 10.1 Appointment and  Authorization of  Administrative  Agent. Each
Bank hereby  appoints ABN AMRO Bank N.V. as the  Administrative  Agent under the
Credit  Documents and hereby  authorizes the  Administrative  Agent to take such
action as  Administrative  Agent on its behalf and to exercise such powers under
the Credit Documents as are delegated to the  Administrative  Agent by the terms
thereof,  together with such powers as are reasonably  incidental  thereto.  The
Administrative  Agent  shall  have no duties or  responsibilities  except  those
expressly set forth in this  Agreement and the Credit  Documents.  The duties of
the  Administrative  Agent shall be mechanical and administrative in nature; the
Administrative  Agent  shall not have by reason of this  Agreement  or any other
Credit  Document a fiduciary  relationship in respect of any Bank, the holder of
any Note or any other Person;  and nothing in this Agreement or any other Credit
Document,  expressed  or implied,  is intended to or shall be so construed as to
impose  upon  the  Administrative  Agent  any  obligations  in  respect  of this
Agreement or any other Credit  Document  except as expressly set forth herein or
therein.

     Section 10.2  Administrative  Agent and its Affiliates.  The Administrative
Agent shall have the same rights and powers under this  Agreement  and the other
Credit  Documents as any other Bank and may exercise or refrain from  exercising
the same as though it were not the Administrative  Agent, and the Administrative
Agent and its affiliates may accept  deposits from, lend money to, and generally
engage in any kind of business  with Borrower or any Affiliate of Borrower as if
it were not the Administrative Agent under the Credit Documents.

     Section 10.3 Action by Administrative  Agent. If the  Administrative  Agent
receives  from  Borrower  a written  notice of an Event of Default  pursuant  to
Section 7.6(c)(i) hereof, the  Administrative  Agent shall promptly give each of
the Banks written notice thereof.  The obligations of the  Administrative  Agent
under the Credit  Documents are only those expressly set forth therein.  Without
limiting the generality of the foregoing,  the Administrative Agent shall not be
required to take any action  hereunder  with  respect to any Default or Event of
Default,  except as  expressly  provided in  Sections  8.2 and 8.3. In no event,
however,  shall  the  Administrative  Agent be  required  to take any  action in
violation of applicable law or of any provision of any Credit Document,  and the
Administrative  Agent  shall in all  cases  be fully  justified  in  failing  or
refusing to act hereunder or under any other Credit  Document unless it shall be
first  indemnified to its reasonable  satisfaction  by the Banks against any and
all costs,  expense,  and  liability  which may be  incurred  by it by reason of
taking or continuing to take any such action. The Administrative  Agent shall be
entitled to assume that no Default or Event of Default exists unless notified to
the  contrary  in  writing  by a Bank or  Borrower.  In all cases in which  this
Agreement and the other Credit Documents do not require the Administrative Agent
to take certain actions,  the  Administrative  Agent shall be fully justified in
using its  discretion  in failing to take or in taking any action  hereunder and
thereunder.

     Section  10.4  Consultation  with  Experts.  The  Administrative  Agent may
consult with legal counsel,  independent  public  accountants  and other experts
selected  by it and shall not be liable  for any  action  taken or omitted to be
taken  by it in good  faith  in  accordance  with the  advice  of such  counsel,
accountants or experts.

                                       46

     Section 10.5 Liability of Administrative  Agent;  Credit Decision.  Neither
the  Administrative  Agent  nor  any  of its  directors,  officers,  agents,  or
employees  shall be liable for any action taken or not taken by it in connection
with the Credit Documents (i) with the consent or at the request of the Required
Banks or (ii) in the absence of its own gross negligence or willful  misconduct.
Neither the Administrative Agent nor any of its directors,  officers,  agents or
employees shall be responsible  for or have any duty to ascertain,  inquire into
or verify (i) any statement,  warranty or representation made in connection with
this  Agreement,  any  other  Credit  Document  or any  Credit  Event;  (ii) the
performance  or  observance of any of the covenants or agreements of Borrower or
any other party  contained  herein or in any other  Credit  Document;  (iii) the
satisfaction  of any  condition  specified  in  Section  6  hereof;  or (iv) the
validity, effectiveness,  genuineness, enforceability,  perfection, value, worth
or  collectibility  hereof  or of any  other  Credit  Document  or of any  other
documents or writing  furnished in connection with any Credit Document;  and the
Administrative  Agent  makes no  representation  of any kind or  character  with
respect to any such matter mentioned in this sentence.  The Administrative Agent
may execute any of its duties  under any of the Credit  Documents  by or through
employees,  agents,  and  attorneys-in-fact  and shall not be  answerable to the
Banks,  Borrower,  or any other Person for the default or misconduct of any such
agents or  attorneys-in-fact  selected with reasonable care. The  Administrative
Agent  shall not incur any  liability  by acting in  reliance  upon any  notice,
consent,  certificate,  other  document or statement  (whether  written or oral)
believed by it to be genuine or to be sent by the proper  party or  parties.  In
particular and without limiting any of the foregoing,  the Administrative  Agent
shall have no  responsibility  for  confirming  the  accuracy of any  Compliance
Certificate  or other  document  or  instrument  received by it under the Credit
Documents.  The  Administrative  Agent  may  treat  the payee of any Note as the
holder  thereof until written  notice of transfer shall have been filed with the
Administrative   Agent  signed  by  such  payee  in  form  satisfactory  to  the
Administrative  Agent.  Each Bank  acknowledges  that it has  independently  and
without reliance on the  Administrative  Agent or any other Bank, and based upon
such information, investigations and inquiries as it deems appropriate, made its
own credit  analysis and decision to extend credit to Borrower in the manner set
forth in the Credit  Documents.  It shall be the  responsibility of each Bank to
keep  itself  informed  as to the  creditworthiness  of  Borrower  and any other
relevant  Person,  and the  Administrative  Agent shall have no liability to any
Bank with respect thereto.

     Section 10.6 Indemnity.  The Banks shall ratably,  in accordance with their
respective  Percentages,  indemnify and hold the  Administrative  Agent, and its
directors,  officers,  employees,  agents and representatives  harmless from and
against any liabilities,  losses,  costs or expenses  suffered or incurred by it
under any Credit  Document or in connection with the  transactions  contemplated
thereby,  regardless  of when  asserted  or  arising,  except to the  extent the
Administrative  Agent is promptly reimbursed for the same by Borrower and except
to the  extent  that any event  giving  rise to a claim was  caused by the gross
negligence or willful  misconduct of the party  seeking to be  indemnified.  The
obligations  of the Banks under this Section 10.6 shall survive  termination  of
this Agreement.

     Section   10.7   Resignation   of   Administrative   Agent  and   Successor
Administrative  Agent. The Administrative Agent may resign at any time by giving
written notice thereof to the Banks and Borrower.  Upon any such  resignation of
the  Administrative  Agent, the Required Banks shall have the right to appoint a
successor  Administrative  Agent with the consent of  Borrower.  If no successor
Administrative  Agent shall have been so appointed by the  Required  Banks,  and
shall

                                       47

have  accepted  such  appointment,  within  thirty (30) days after the  retiring
Administrative  Agent's  giving  of  notice of  resignation,  then the  retiring
Administrative   Agent  may,  on  behalf  of  the  Banks,  appoint  a  successor
Administrative  Agent,  which shall be any Bank hereunder or any commercial bank
organized under the laws of the United States of America or of any State thereof
and having a combined  capital  and surplus of at least  $200,000,000.  Upon the
acceptance  of its  appointment  as the  Administrative  Agent  hereunder,  such
successor Administrative Agent shall thereupon succeed to and become vested with
all the rights and duties of the retiring or removed  Administrative Agent under
the Credit Documents,  and the retiring Administrative Agent shall be discharged
from its duties and obligations  thereunder.  After any retiring  Administrative
Agent's  resignation  hereunder as Administrative  Agent, the provisions of this
Section 10 and all  protective  provisions of the other Credit  Documents  shall
inure to its benefit as to any actions  taken or omitted to be taken by it while
it was Administrative Agent.

     SECTION 11 MISCELLANEOUS.

     Section 11.1 Withholding Taxes.

          (a) Payments Free of Withholding.  Subject to Section 11.1 (b) hereof,
     each payment by Borrower under this Agreement or the other Credit Documents
     shall be made  without  withholding  for or on  account  of any  present or
     future taxes (other than overall net income taxes on the recipient). If any
     such withholding is so required,  Borrower shall make the withholding,  pay
     the  amount  withheld  to the  appropriate  governmental  authority  before
     penalties attach thereto or interest accrues thereon and forthwith pay such
     additional  amount  as may be  necessary  to  ensure  that  the net  amount
     actually received by each Bank and the Administrative  Agent free and clear
     of such taxes (including such taxes on such additional  amount) is equal to
     the amount which that Bank or the Administrative Agent (as the case may be)
     would  have   received  had  such   withholding   not  been  made.  If  the
     Administrative  Agent or any Bank pays any  amount in  respect  of any such
     taxes,  penalties or interest  Borrower shall reimburse the  Administrative
     Agent or that Bank for that payment on demand in the currency in which such
     payment was made.  If Borrower  pay any such taxes,  penalties or interest,
     they  shall  deliver  official  tax  receipts  evidencing  that  payment or
     certified  copies  thereof  to the  Bank or  Administrative  Agent on whose
     account such withholding was made (with a copy to the Administrative  Agent
     if not the  recipient of the original) on or before the thirtieth day after
     payment. If any Bank or the Administrative Agent determines it has received
     or been granted a credit  against or relief or remission  for, or repayment
     of, any taxes paid or  payable  by it  because of any taxes,  penalties  or
     interest paid by Borrower and evidenced by such a tax receipt, such Bank or
     Administrative Agent shall, to the extent it can do so without prejudice to
     the retention of the amount of such credit, relief, remission or repayment,
     pay to Borrower such amount as such Bank or Administrative Agent determines
     is  attributable to such deduction or withholding and which will leave such
     Bank or  Administrative  Agent  (after such  payment) in no better or worse
     position  than it would have been in if Borrower  had not been  required to
     make  such  deduction  or  withholding.  Nothing  in this  Agreement  shall
     interfere  with the  right of each  Bank  and the  Administrative  Agent to
     arrange its tax affairs in whatever  manner it thinks fit nor  obligate any
     Bank or the  Administrative  Agent to disclose any information  relating to
     its tax affairs or any computations in connection with such taxes.

                                       48

          (b) U.S.  Withholding Tax  Exemptions.  Each Bank that is not a United
     States person (as such term is defined in Section  7701(a)(30) of the Code)
     shall submit to Borrower and the Administrative Agent on or before the date
     of the initial Borrowing  hereunder two duly completed and signed copies of
     either Form W8BEN  (relating  to such Bank and  entitling  it to a complete
     exemption from withholding  under the Code on all amounts to be received by
     such Bank,  including fees, pursuant to the Credit Documents and the Loans)
     or Form  W8ECI  (relating  to all  amounts  to be  received  by such  Bank,
     including  fees,  pursuant  to the Credit  Documents  and the Loans) of the
     United States Internal Revenue  Service.  Thereafter and from time to time,
     each Bank  shall  submit to  Borrower  and the  Administrative  Agent  such
     additional  duly  completed  and signed  copies of one or the other of such
     Forms (or such successor forms as shall be adopted from time to time by the
     relevant  United  States  taxing  authorities)  as may be (i)  requested by
     Borrower in a written notice, directly or through the Administrative Agent,
     to such Bank and (ii)  required  under then  current  United  States law or
     regulations to avoid or reduce United States  withholding taxes on payments
     in respect of all  amounts to be  received  by such Bank,  including  fees,
     pursuant to the Credit Documents or the Loans.

          (c) Inability of Bank to Submit Forms.  If any Bank  determines,  as a
     result of any change in applicable  law,  regulation  or treaty,  or in any
     official application or interpretation thereof, that it is unable to submit
     to Borrower or Administrative  Agent any form or certificate that such Bank
     is obligated to submit  pursuant to subsection  (b) of this Section 11.1 or
     that  such  Bank is  required  to  withdraw  or  cancel  any  such  form or
     certificate  previously submitted or any such form or certificate otherwise
     becomes ineffective or inaccurate, such Bank shall promptly notify Borrower
     and Administrative Agent of such fact and the Bank shall to that extent not
     be obligated to provide any such form or  certificate  and will be entitled
     to withdraw or cancel any affected form or certificate, as applicable.

     Section  11.2 No Waiver of  Rights.  No delay or failure on the part of the
Administrative  Agent or any Bank or on the part of the holder or holders of any
Note in the  exercise  of any power or right  under any  Credit  Document  shall
operate as a waiver thereof,  nor as an  acquiescence in any default,  nor shall
any single or partial exercise thereof preclude any other or further exercise of
any  other  power  or  right,  and the  rights  and  remedies  hereunder  of the
Administrative  Agent,  the Banks and the  holder  or  holders  of any Notes are
cumulative  to, and not exclusive  of, any rights or remedies  which any of them
would otherwise have.

     Section 11.3  Non-Business  Day. If any payment of principal or interest on
any Loan or of any  other  Obligation  shall  fall  due on a day  which is not a
Business Day, interest or fees (as applicable) at the rate, if any, such Loan or
other Obligation bears for the period prior to maturity shall continue to accrue
on such  Obligation  from the stated due date thereof to and  including the next
succeeding Business Day, on which the same shall be payable.

     Section  11.4  Documentary  Taxes.  Borrower  agrees  that it will  pay any
documentary,  stamp or similar taxes payable in respect to any Credit  Document,
including  interest  and  penalties,  in the event any such taxes are  assessed,
irrespective  of when such  assessment  is made and whether or not any credit is
then in use or available hereunder.

                                       49

     Section  11.5  Survival  of   Representations.   All   representations  and
warranties  made herein or in  certificates  given pursuant hereto shall survive
the execution and delivery of this Agreement and the other Credit Documents, and
shall  continue  in full force and effect  with  respect to the date as of which
they were made as long as any credit is in use or available hereunder.

     Section  11.6  Survival  of  Indemnities.  All  indemnities  and all  other
provisions  relative  to  reimbursement  to the Banks of amounts  sufficient  to
protect  the yield of the Banks with  respect to the Loans,  including,  but not
limited to,  Section 2.11,  Section 9.3 and Section 11.15 hereof,  shall survive
the termination of this Agreement and the other Credit Documents and the payment
of the Loans and all other Obligations.

     Section  11.7  Set-Off.  (a) (a) In addition to any rights now or hereafter
granted  under  applicable  law and not by way of limitation of any such rights,
upon the  occurrence  of any Event of  Default,  each  Bank and each  subsequent
holder of any Note is hereby  authorized by Borrower at any time or from time to
time,  without notice to Borrower or to any other Person,  any such notice being
hereby expressly  waived, to set off and to appropriate and to apply any and all
deposits  (general or  special,  including,  but not  limited  to,  Indebtedness
evidenced by  certificates  of deposit,  whether  matured or  unmatured,  and in
whatever  currency  denominated) and any other  Indebtedness at any time held or
owing by that Bank or that subsequent holder to or for the credit or the account
of Borrower,  whether or not matured,  against and on account of the obligations
and  liabilities  of Borrower to that Bank or that  subsequent  holder under the
Credit  Documents,  including,  but not  limited to, all claims of any nature or
description arising out of or connected with the Credit Documents,  irrespective
of whether or not (a) that Bank or that  subsequent  holder  shall have made any
demand  hereunder or (b) the  principal of or the interest on the Loans or Notes
and other  amounts due hereunder  shall have become due and payable  pursuant to
Section 8 and although said obligations and liabilities,  or any of them, may be
contingent or unmatured.

     (b) Each Bank agrees with each other Bank a party  hereto that if such Bank
shall  receive  and retain any  payment,  whether by set-off or  application  of
deposit  balances  or  otherwise,  on any of the Loans in excess of its  ratable
share of payments on all such obligations  then  outstanding to the Banks,  then
such Bank shall purchase for cash at face value, but without  recourse,  ratably
from each of the other  Banks  such  amount of the Loans held by each such other
Banks (or  interest  therein) as shall be  necessary to cause such Bank to share
such excess payment ratably with all the other Banks; provided, however, that if
any such  purchase  is made by any  Bank,  and if such  excess  payment  or part
thereof is thereafter recovered from such purchasing Bank, the related purchases
from the other Banks shall be rescinded  ratably and the purchase price restored
as to the portion of such excess payment so recovered, but without interest.

     Section 11.8 Notices.  Except as otherwise  specified  herein,  all notices
under the Credit  Documents  shall be in writing  (including  facsimile or other
electronic communication) and shall be given to a party hereunder at its address
or facsimile number set forth below or such other address or facsimile number as
such  party may  hereafter  specify  by notice to the  Administrative  Agent and
Borrower, given by courier, by United States certified or registered mail, or by
other  telecommunication  device  capable of  creating a written  record of such
notice and its receipt. Notices under the Credit Documents to the Banks shall be
addressed to their  respective  addresses,  facsimile  or telephone  numbers set
forth on the signature  pages hereof or in the

                                       50

assignment  agreement which any assignee bank executes pursuant to Section 11.12
hereof, and to Borrower and to the Administrative Agent to:

                  If to Borrower:

                  Black Hills Corporation
                  625 9th Street
                  Rapid City, South Dakota 57709
                  Attention: Garner M. Anderson
                  Facsimile:  605.721.2597
                  Telephone: 605.721.2311

                  with copies to:

                  Black Hills Corporation
                  625 9th Street
                  Rapid City, South Dakota 57709
                  Attention: Mark T. Thies
                  Facsimile:  605.721.2599
                  Telephone: 605.721.2331

                  Black Hills Corporation
                  1075 Noel Avenue
                  Wheeling, Illinois 60090
                  Attention: Richard T. Ashbeck
                  Facsimile:  847.459.4140
                  Telephone: 847.465.3033

                  If to the Administrative Agent:

                  Notices shall be sent to the applicable address set forth on
                  Part B of Schedule 4 hereto.

                  With copies of all such notices to:

                  ABN AMRO Bank N.V.
                  135 South LaSalle Street
                  Suite 710
                  Chicago, Illinois 60603
                  Attention: David B.  Bryant/Saad Qais
                  Facsimile: 312.904.1466
                  Telephone: 312.904.2799 (Mr. Bryant)
                             312.904.6473 (Mr. Qais)

     Each such notice,  request or other communication shall be effective (i) if
given by facsimile,  when such facsimile is transmitted to the facsimile  number
specified  in  this

                                       51

Section 11.8 or on the signature  pages hereof and a confirmation  of receipt of
such facsimile has been received by the sender,  (ii) if given by courier,  when
delivered,  (iii) if given by mail, three business days after such communication
is deposited in the mail, registered with return receipt requested, addressed as
aforesaid or (iv) if given by any other means,  when  delivered at the addresses
specified  in this Section  11.8;  provided  that any notice  given  pursuant to
Section 2 hereof shall be effective only upon receipt.

     Section 11.9 Counterparts.  This Agreement may be executed in any number of
counterpart   signature  pages,  and  by  the  different  parties  on  different
counterparts,  each of which when  executed  shall be deemed an original but all
such counterparts taken together shall constitute one and the same instrument.

     Section 11.10 Successors and Assigns.  This Agreement shall be binding upon
Borrower and its successors and assigns,  and shall inure to the benefit of each
of the Banks and the  benefit  of their  permitted  respective  successors,  and
assigns,  including any subsequent  holder of any Note.  Borrower may not assign
any of its  rights or  obligations  under any  Credit  Document  unless (i) such
assignation  occurs in connection with a merger or acquisition by Borrower which
is otherwise  permitted  under the terms of this  Agreement and the  appropriate
Credit  Document,  if  applicable  and (ii)  Borrower  obtains the prior written
consent  of all of the  Banks,  which  consent  shall be in form  and  substance
satisfactory to Administrative Agent.

     Section 11.11  Participants  and Note  Assignees.  Each Bank shall have the
right at its own cost to grant  participations  (to be  evidenced by one or more
agreements or certificates of participation) in the Loans made, Commitments held
and/or  participations  in Letters of Credit,  by such Bank at any time and from
time to time,  and to assign its rights under such Loans or the Note  evidencing
such Loans to a federal reserve bank; provided that (i) no such participation or
assignment  shall  relieve  any  Bank  of  any  of its  obligations  under  this
Agreement, (ii) no such assignee or participant shall have any rights under this
Agreement except as provided in this Section 11.11, and (iii) the Administrative
Agent  shall  have  no  obligation  or  responsibility  to such  participant  or
assignee,  except  that  nothing  herein is  intended to affect the rights of an
assignee  of a Note to  enforce  the Note  assigned.  Any party to which  such a
participation  or assignment has been granted shall have the benefits of Section
2.11 and Section 9.3,  but shall not be entitled to receive any greater  payment
under either such Section than the Bank granting such  participation  would have
been  entitled  to  receive  in  connection  with the  rights  transferred.  Any
agreement  pursuant  to which any Bank may grant such a  participating  interest
shall provide that such Bank shall retain the sole right and  responsibility  to
enforce the obligations of Borrower  hereunder,  including,  without limitation,
the right to approve any amendment,  modification  or waiver of any provision of
this Agreement; provided that such participation agreement may provide that such
Bank will not agree to any  modification,  amendment or waiver of this Agreement
that would (A) increase any  Commitment of such Bank if such increase would also
increase the  participant's  obligations,  (B) forgive any amount of or postpone
the date for payment of any  principal  of or interest on any Loan or of any fee
payable  hereunder in which such  participant  has an interest or (C) reduce the
stated rate at which interest or fees in which such  participant has an interest
accrue hereunder.

     Section 11.12 Assignment of Commitments by Banks.  Each Bank shall have the
right at any time,  with the  written  consent of  Administrative  Agent,  which
consent shall not be  unreasonably  withheld,  and, prior to the occurrence of a
Default  or  Event  of  Default,  Borrower,

                                       52

to assign all or any part of its Commitment  (including  the same  percentage of
its Note and  outstanding  Loanst,  and provided that the same percentage of its
commitment  and loans  outstanding  under the 3-Year  Credit  Agreement are also
assigned) to one or more other Persons;  provided that such  assignment is in an
amount of at least $5,000,000 or the entire Commitment of such Bank, and if such
assignment is not for such Bank's entire  Commitment then such Bank's Commitment
after giving effect to such assignment  shall not be less than  $5,000,000;  and
provided  further that  neither the consent of Borrower  nor the  Administrative
Agent shall be required for any Bank to assign all or part of its  Commitment to
any  Affiliate  of the  assigning  Bank so long as the same  percentage  of such
Bank's  commitment  under the 3-Year Credit  Agreement are also assigned to such
Affiliate.  Each such  assignment  shall set forth  the  assignees  address  for
notices to be given under  Section  11.8  hereof  hereunder  and its  designated
Lending  Office  pursuant  to  Section  9.4  hereof.  Upon any such  assignment,
delivery  to the  Administrative  Agent of an executed  copy of such  assignment
agreement and the forms referred to in Section 11.1 hereof,  if applicable,  and
the  payment  of a  $3,500  recordation  fee to the  Administrative  Agent,  the
assignee shall become a Bank hereunder, all Loans,  participations in Letters of
Credit and the  Commitment  it thereby  holds shall be governed by all the terms
and  conditions  hereof and the Bank  granting  such  assignment  shall have its
Commitment,  and its obligations and rights in connection therewith,  reduced by
the amount of such assignment.

     Section  11.13  Amendments.  Any  provision of the Credit  Documents may be
amended or waived if, but only if, such amendment or waiver is in writing and is
signed by (a) Borrower,  (b) the Required Banks, and (c) if the rights or duties
of the  Administrative  Agent are affected thereby,  the  Administrative  Agent;
provided that:

          (i) no amendment or waiver  pursuant to this Section.  11.13 shall (A)
     increase, decrease or extend any Commitment of any Bank without the consent
     of such Bank or (B)  reduce the  amount of or  postpone  any fixed date for
     payment of any  principal of or interest on any Loan or of any fee or other
     Obligation payable hereunder without the consent of each Bank; and

          (ii) no  amendment  or waiver  pursuant to this  Section  11.13 shall,
     unless signed by each Bank, change this Section 11.13, or the definition of
     Required  Banks,  or affect the number of Banks required to take any action
     under the Credit Documents.

     Anything in this Agreement to the contrary notwithstanding,  if at any time
when the  conditions  precedent  set  forth in  Section  6.2  hereof to any Loan
hereunder are satisfied,  any Bank shall fail to fulfill its obligations to make
such Loan (any such Bank, a "Defaulting Bank") then, for so long as such failure
shall continue,  the Defaulting Bank shall (unless Borrower,  the Administrative
Agent and the Required Banks  (determined  as if the Defaulting  Bank were not a
Bank hereunder)  shall otherwise  consent in writing) be deemed for all purposes
related to amendments,  modifications,  waivers or consents under this Agreement
(other than  amendments or waivers  referred to in clause (i) and (ii) above) to
have no Loans or  Commitments  and shall not be treated as a Bank hereunder when
performing  the   computation  of  the  Required   Banks.   To  the  extent  the
Administrative Agent receives any payments or other amounts for the account of a
Defaulting  Bank such Defaulting Bank shall be deemed to have requested that the
Administrative Agent use such payment or other amount to fulfill its obligations
to make such Loan.

                                       53

     Section 11.14  Headings.  Section  headings used in this  Agreement are for
reference only and shall not affect the construction of this Agreement.

     Section 11.15 Legal Fees, Other Costs and Indemnification.  Borrower agrees
to pay all reasonable costs and expenses of the Arrangers in connection with the
preparation and negotiation of the Credit  Documents  (including past and future
reasonable  out-of-pocket  expenses incurred by the Arrangers in connection with
the  syndication  of  the  transaction),   including  without  limitation,   the
reasonable  fees and  disbursements  of counsel to the Arrangers,  in connection
with the preparation and execution of the Credit  Documents,  and any amendment,
waiver or consent related hereto,  whether or not the transactions  contemplated
herein are  consummated.  Borrower  further  agrees to indemnify  each Bank, the
Administrative  Agent,  and their  respective  directors,  agents,  officers and
employees,   against  all  losses,  claims,   damages,   penalties,   judgments,
liabilities  and  expenses  (including,  without  limitation,  all  expenses  of
litigation or preparation  therefor,  whether or not the indemnified Person is a
party  thereto)  which any of them may incur or reasonably pay arising out of or
relating to any Credit Document  (including any relating to a  misrepresentation
by Borrower under any Credit Document) or any of the  transactions  contemplated
thereby or the direct or indirect  application  or proposed  application  of the
proceeds of any Loan,  other than those which arise from the gross negligence or
willful misconduct of the party claiming indemnification.  Borrower, upon demand
by any of the  Administrative  Agentor a Bank at any time,  shall  reimburse the
Administrative  Agent  or Bank  for  any  reasonable  legal  or  other  expenses
(including  allocable  fees  and  expenses  of  in-house  counsel)  incurred  in
connection with  investigating or defending  against any of the foregoing except
if the same is directly due to the gross negligence or willful misconduct of the
party to be indemnified,  provided that with respect to legal costs and expenses
incurred in connection with the enforcement of the Banks rights hereunder or any
work-out or similar situation, Borrower shall only be obligated to pay the legal
fees of the Administrative Agent and not of any other Bank.

     Section 11.16 Entire Agreement.  The Credit Documents constitute the entire
understanding  of the parties thereto with respect to the subject matter thereof
and any prior or  contemporaneous  agreements,  whether  written  or oral,  with
respect thereto are superseded thereby.

     Section 11.17  Construction.  The parties hereto acknowledge and agree that
neither this  Agreement nor the other Credit  Documents  shall be construed more
favorably  in favor of one than the other  based upon which  party  drafted  the
same, it being acknowledged that all parties hereto contributed substantially to
the negotiation of this Agreement and the other Credit Documents.

     Section 11.18 Governing Law. This Agreement and the other Credit Documents,
and the  rights  and  duties  of the  parties  hereto,  shall be  construed  and
determined in accordance with the internal laws of the State of New York.

     Section 11.19  SUBMISSION TO JURISDICTION;  WAIVER OF JURY TRIAL.  BORROWER
HEREBY SUBMITS TO THE  NONEXCLUSIVE  JURISDICTION  OF THE UNITED STATES DISTRICT
COURT FOR THE  SOUTHERN  DISTRICT  OF NEW YORK AND OF ANY NEW YORK  STATE  COURT
SITTING IN THE CITY OF NEW YORK FOR  PURPOSES OF ALL LEGAL  PROCEEDINGS  ARISING
OUT OF

                                       54

OR RELATING TO THIS AGREEMENT,  THE OTHER CREDIT  DOCUMENTS OR THE  TRANSACTIONS
CONTEMPLATED  HEREBY OR THEREBY.  BORROWER  IRREVOCABLY  WAIVES,  TO THE FULLEST
EXTENT PERMITTED BY LAW, ANY OBJECTION WHICH IT MAY NOW OR HEREAFTER HAVE TO THE
LAYING OF THE VENUE OF ANY SUCH PROCEEDING BROUGHT IN SUCH A COURT AND ANY CLAIM
THAT  ANY  SUCH  PROCEEDING  BROUGHT  IN SUCH A COURT  HAS  BEEN  BROUGHT  IN AN
INCONVENIENT  FORUM.  BORROWER  HEREBY  IRREVOCABLY  WAIVES ANY AND ALL RIGHT TO
TRIAL BY JURY IN ANY LEGAL  PROCEEDING  ARISING OUT OF OR RELATING TO ANY CREDIT
DOCUMENT OR THE TRANSACTIONS CONTEMPLATED THEREBY.

     Section  11.20  Replacement  of  Bank.  Each  Bank  agrees  that,  upon the
occurrence of any event set forth in Sections 9.1, 9.3 and 11.1,  such Bank will
use  reasonable  efforts  to book and  maintain  its Loans  through a  different
Lending  Office or to transfer its Loans to an Affiliate  with the  objective of
avoiding  or  minimizing  the  consequences  of such event;  provided  that such
booking or transfer is not otherwise  disadvantageous to such Bank as determined
by such Bank in its sole and absolute discretion. If any Bank has demanded to be
paid additional  amounts pursuant to Sections 9.1, 9.3 and 11.1, and the payment
of such  additional  amounts are, and are likely to continue to be, more onerous
in the  reasonable  judgment of Borrower  than with  respect to the other Banks,
then  Borrower  shall  have the  right at any time when no  Default  or Event of
Default  shall have  occurred and be  continuing  to seek one or more  financial
institutions  which are not Affiliates of Borrower (each, a "Replacement  Bank")
to purchase with the written consent of the Administrative  Agent (which consent
shall not be (x) required if such proposed  Replacement  Bank is already a Bank,
or an  Affiliate  of a  Bank,  or (y)  unreasonably  delayed  or  withheld)  the
outstanding  Loans and  Commitments of such Bank (the "Affected  Bank"),  and if
Borrower locate a Replacement Bank, the Affected Bank shall, upon

          i.   prior written notice to the Administrative Agent,

          ii.  (i) payment to the  Affected  Bank of the  purchase  price agreed
               between it and the Replacement  Bank (or, failing such agreement,
               a  purchase  price in the  amount  of the  outstanding  principal
               amount of the Affected Bank's Loans and accrued  interest thereon
               to the date of payment) by the Replacement Bank plus (ii) payment
               by Borrower of all Obligations (other than principal and interest
               with respect to Loans) then due to the  Affected  Bank or accrued
               for its account hereunder or under any other Loan Document,

          iii. satisfaction of the provisions set forth in Section 11.12, and

          iv.  payment by Borrower to the Affected  Bank and the  Administrative
               Agent of all reasonable out-of-pocket expenses in connection with
               such  assignment and assumption  (including the  recordation  fee
               described in Section 11.12),

assign and delegate all its rights and obligations under this Agreement and any
other Credit Document to which it is a party (including its outstanding Loans)
to the Replacement Bank (such assignment to be made without recourse,
representation or warranty), and the Replacement Bank

                                       55

shall assume such rights and  obligations,  whereupon the Replacement Bank shall
in accordance with Section 11.12 become a party to each Credit Document to which
the Affected Bank is a party and shall have the rights and obligations of a Bank
thereunder  and the  Affected  Bank  shall  be  released  from  its  obligations
hereunder and each other Credit  Document to the extent of such  assignment  and
delegation.

     Section 11.21 Confidentiality. The Administrative Agent and the Banks shall
hold all non-public  information  provided to them by Borrower pursuant to or in
connection with this Agreement in accordance with their customary procedures for
handling confidential information of this nature, but may make disclosure to any
of their examiners, regulators,  Affiliates, outside auditors, counsel and other
professional  advisors in  connection  with this  Agreement  or any other Credit
Document  or as  reasonably  required  by any  potential  bona fide  transferee,
participant or assignee,  or in connection with the exercise of remedies under a
Credit Document,  or to any direct or indirect contractual  counterparty in swap
agreements or such contractual  counterparty's  professional advisor (so long as
such  contractual  counterparty  or  professional  advisor  to such  contractual
counterparty  agrees to be bound by the provisions of this Section 11.21), or to
any  nationally  recognized  rating agency that requires  access to  information
about a Bank's  investment  portfolio in  connection  with  ratings  issued with
respect  to  such  Bank,  or  as  requested  by  any   governmental   agency  or
representative  thereof or pursuant to legal process;  provided,  however,  that
unless   specifically   prohibited  by  applicable  law  or  court  order,   the
Administrative  Agent and each Bank shall use  reasonable  efforts  to  promptly
notify  Borrower of any  request by any  governmental  agency or  representative
thereof  (other than any such request in connection  with an  examination of the
financial   condition  of  the  Administrative   Agent  or  such  Bank  by  such
governmental  agency) for  disclosure of any such  non-public  information  and,
where  practicable,  prior to disclosure of such information.  Prior to any such
disclosure  pursuant to this Section 11.21,  the  Administrative  Agent and each
Bank shall  require  any such bona fide  transferee,  participant  and  assignee
receiving a disclosure of non-public  information  to agree,  for the benefit of
Borrower,  in writing to be bound by this  Section  11.21;  and to require  such
Person to require any other Person to whom such Person discloses such non-public
information to be similarly bound by this Section 11.21.

     Section  11.22  Rights  and   Liabilities  of   Documentation   Agents  and
Syndication Agents. Neither Documentation Agents nor Syndication Agents have any
special rights,  powers,  obligations,  liabilities,  responsibilities or duties
under this  Agreement  as a result of acting in the  capacity  of  Documentation
Agents or Syndication Agents, as applicable, other than those applicable to them
in their capacity as Banks hereunder.  Without  limiting the foregoing,  neither
Documentation  Agents nor  Syndication  Agents shall have or be deemed to have a
fiduciary   relationship  with  any  Bank.  Each  Bank  hereby  makes  the  same
acknowledgments  and undertakings  with respect to Documentation  Agents and the
Syndication Agents as it makes with respect to the Administrative  Agent and any
directors, officers, agents and employees of the Administrative Agent in Section
10.5.

     Section  11.23  Amendment  and  Restatement  of  Existing   364-Day  Credit
Agreement.  This  Agreement  amends and  restates the  Existing  364-Day  Credit
Agreement  in its  entirety.  From and  after  the  date  hereof  any  financial
institution  that was a "Bank" under the Existing  364-Day Credit  Agreement but
which is not a party to this Agreement shall have no obligation to make

                                       56

loans to the Borrower either under the Existing 364-Day Credit  Agreement,  this
Agreement or any other Credit Document.

                 - Remainder of Page Intentionally Left Blank -
                            [Signature Page Follows]

                                       57

         In Witness Whereof, the parties hereto have caused this Agreement to be
duly executed and delivered in New York, New York by their duly authorized
officers as of the day and year first above written.

                                         BLACK HILLS CORPORATION, a
                                         South Dakota corporation

                                         By:      _____________________________
                                         Name:    _____________________________
                                         Title:   _____________________________

                                       58

Commitment: $[___________]             ABN AMRO BANK N.V., in its individual
                                       capacity as a Bank and as Administrative
                                       Agent

                                       By:      _____________________________
                                       Name:    David B. Bryant
                                       Title:   Senior Vice President &
                                                Managing Director

                                       By:      _____________________________
                                       Name:    _____________________________
                                       Title:   _____________________________

Address for notices:
         ABN AMRO Bank N.V.
         135 South LaSalle Street
         Suite 710
         Chicago, Illinois 60603
         Attention: David B. Bryant/Saad Qais
         Facsimile:  312.904.1466
         Telephone:  312.904.2799 (Mr. Bryant)
                     312.904.6473 (Mr. Qais)

With copy to:

         ABN AMRO Bank N.V.
         208 South LaSalle Street
         Suite 1500
         Chicago, Illinois 60604-1003
         Attention: Ken Keck
         Facsimile: (312) 992-5111
         Telephone: (312) 992-5134

Lending Offices:              Same as above

Base Rate Loans:              Same as above

Eurocurrency Loans:           Same as above

                                       59

Commitment: $[__________]                UNION BANK OF CALIFORNIA, N.A.

                                         By:      _____________________________
                                         Name:    Robert J. Cole
                                         Title:   Vice President

Address for notices:

1980 Saturn St.
Monterey Park, CA 91754

Attention:  Ruby Gonzales
Phone:  (323) 720-7055
Fax:    (323) 724-6198

Lending Offices:

445 South Figueroa St., 15th Floor
Los Angeles, CA 90071

Attention:  Bryan Read

Base Rate Loans:

Same as address for notices.

Eurocurrency Loans:

Same as address for notices.

                                       60

Commitment: $[___________]            U.S. BANK, NATIONAL
                                      ASSOCIATION, in its individual capacity
                                      as a Bank and as Documentation Agent

                                      By:      _____________________________
                                      Name:    Sandra Vollmer
                                      Title:   Senior Lender

Address for notices:

         U.S. Bank, National Association
         701 St. Joseph Street
         Rapid City, South Dakota 57701
         Attention: Ms. Sandra Vollmer
         Facsimile:   605.394.5500
         Telephone:  605.394.2019

Lending Offices:              Same as above

Base Rate Loans:              Same as above

Eurocurrency Loans:           Same as above

                                       61

Commitment: $[____________]              BANK OF MONTREAL

                                         By:      _____________________________
                                         Name:    Ian M. Plester
                                         Title:   Director

Address for notices:

115 South LaSalle St.
Floor: 111-17W
Chicago, Illinois 60603
Attention: Client Services
Phone:  (312) 750 3771
Fax:    (312) 750 6061

Lending Offices:

Base Rate Loans:

115 South LaSalle St.
Floor: 111-17W
Chicago, Illinois 60603

Eurocurrency Loans:

115 South LaSalle St.
Floor: 111-17W
Chicago, Illinois 60603

                                       62

Commitment: $[____________]          THE BANK OF NOVA SCOTIA

                                     By:      _____________________________
                                     Name:    F.C.H. Ashby
                                     Title:   Senior Manager Loan Operations

Address for notices:

600 Peachtree Street, N.E.
Suite 2700
Atlanta, Georgia 30308
Attention: Demetria January
Phone:  (404) 877-1578
Fax:    (404) 888-8998

Lending Offices:

Base Rate Loans:

Same As Above

Eurocurrency Loans:

Same As Above

                                       63

Comitment: $[____________]            CIBC INC., as a Lender

                                      By:      _____________________________
                                      Name:    M. Sanjeeva Senanayake
                                      Title:   Executive Director
                                               CIBC World Markets Corp. As Agent

Address for notices:

CIBC Inc.
425 Lexington Avenue
New York, NY 10017
Attention:        Sanjeeva Senanayake
Phone:            (212) 856-3595
Fax:              (212) 885-4911

Lending Offices:

Base Rate Loans:

CIBC Inc.
2727 Paces Ferry Road, Suite 1200
Atlanta, GA 30339
Attention: Miriam McCart
Facsimile No.: (770) 319-4950

Eurocurrency Loans:

CIBC Inc.
2727 Paces Ferry Road, Suite 1200
Atlanta, GA 30339
Attention:   Miriam McCart
Facsimile No.: (770) 319-4950

                                       64

Commitment: $[____________]              COBANK, ACB

                                         By:      _____________________________
                                         Name:    Cathleen Reed
                                         Title:   Assistant Vice President

Address for notices:

5500 S. Quebec St.
Greenwood Village, CO 80111
Attention: Cathleen Reed
Phone:  303-740-4101
Fax:    303-224-2590

Lending Offices:
5500 S. Quebec St.
Greenwood Village, CO 80111

Base Rate Loans:
5500 S. Quebec St.
Greenwood Village, CO 80111

Eurocurrency Loans:
5500 S. Quebec St.
Greenwood Village, CO 80111

                                       65

Commitment: $[___________]              WELLS FARGO BANK, N.A.

                                        By:      _____________________________
                                        Name:    Thomas M. Foncannon
                                        Title:   Senior Vice President

Address for notices:

         Wells Fargo Bank, N.A.
         Energy Department
         MAC C7301-046
         1740 Broadway
         Denver, CO 80274
         Attention: Thomas M. Foncannon
         Phone:  303.863.5017
         Fax:    303.863.5196

Lending Offices:  Same as above

Base Rate Loans:  Same as above

Eurocurrency Loans:        Same as above

                                       66

Commitment: $[___________]               THE DAI-ICHI KANGYO BANK, LTD.

                                         By:      _____________________________
                                         Name:    Nobuyasu Fukatsu
                                         Title:   General Manager

Address for notices:

10 South Wacker Drive, Suite 2600
Chicago, IL 60606

Attention: J. Richard Cummings
Phone:  312-715-6386
Fax:    312-876-2011

Lending Offices:

Base Rate Loans:

Loan Operations Department
1 World Trade Center, Suite 4911
New York, NY 10048-0487

Eurocurrency Loans:

Loan Operations Department
1 World Trade Center, Suite 4911
New York, NY 10048-0487

                                       67

Commitment: $[___________]          THE FUJI BANK, LIMITED

                                    By:      _____________________________
                                    Name:    Peter L. Chinnic
                                    Title:   Senior Vice President & Group Head

Address for notices:

Suite 2000
225 W. Wacker Drive
Chicago, IL 60606
Attention:  Takeyuki Kuroki
Phone:  (312) 621-0534
Fax:    (312) 621-3386

Lending Offices:

Two World Trade Center
New York, NY 10048
Attention: Tina Catapana
Phone: (212) 898-2069
Fax:   (212) 775-1460

Base Rate Loans:

Two World Trade Center
New York, NY 10048
Attention: Tina Catapana
Phone: (212) 898-2069
Fax:   (212) 775-1460

Eurocurrency Loans:

Two World Trade Center
New York, NY 10048
Attention: Tina Catapana
Phone: (212) 898-2069
Fax:   (212) 775-1460

                                       68

Commitment: $[_____________]             NATIONAL CITY BANK OF
                                         MICHIGAN/ILLINOIS

                                         By:      _____________________________
                                         Name:    Mark R. Long
                                         Title:   Senior Vice President

Address for notices:

National City Bank of Michigan/Illinois
2021 Spring Road, Suite 600
Oak Brook, IL 60523
Attention:        Donna Benson
Phone:            630-954-3189
Fax:              630-954-5570

Lending Offices:

National City Bank of Michigan/Illinois
2021 Spring Road, Suite 600
Oak Brook, IL 60523

Base Rate Loans:

National City Bank of Michigan/Illinois
2021 Spring Road, Suite 600
Oak Brook, IL 60523

Eurocurrency Loans:

National City Bank of Michigan/Illinois
2021 Spring Road, Suite 600
Oak Brook, IL 60523

                                       69

Commitment: $[______________]         NORDEUTSCHE LANDESBANK
                                      GIROZENTRALE NEW YORK/
                                      CAYMAN ISLANDS BRANCH

                                      By:      _____________________________
                                      Name:    Stephanie Finnen
                                      Title:   Vice President

                                      By:      _____________________________
                                      Name:    Joseph Haas
                                      Title:   Vice President

Address for notices:

Norddeutsche Landesbank Girozentrale
1114 Avenue of the Americas, 37th Floor
New York, NY 10036
Attention: Stephanie Finnen
Phone:        212-812-6806
Fax:          212-812-6860

Lending Offices:

Base Rate Loans:

Norddeutsche Landesbank Girozentrale
1114 Avenue of the Americas, 37th Floor
New York, NY 10036
Attention: Andrea Johann
Phone:        212-812-6830
Fax:          212-812-6930

Eurocurrency Loans:

Norddeutsche Landesbank Girozentrale
1114 Avenue of the Americas, 37th Floor
New York, NY 10036
Attention: Andrea Johann
Phone:        212-812-6830
Fax:          212-812-6930

                                       70

                                    EXHIBIT A

                                  364-DAY NOTE

                                                             August [__], 2002

         FOR VALUE RECEIVED, the undersigned, Black Hills Corporation, a South
Dakota corporation ("Borrower"), promises to pay to the order of
[_________________] (the "Bank") on the Termination Date of the hereinafter
defined Credit Agreement, at the principal office of ABN AMRO Bank N.V., in New
York, New York, in accordance with Section 4.1 of the Credit Agreement (as
hereafter defined), the aggregate unpaid principal amount of all Loans made by
the Bank to Borrower pursuant to the Credit Agreement, together with interest on
the principal amount of each Loan from time to time outstanding hereunder at the
rates, and payable in the manner and on the dates, specified in the Credit
Agreement.

         The Bank shall record on its books or records or on a schedule attached
to this Note, which is a part hereof, each Loan made by it pursuant to the
Credit Agreement, together with all payments of principal and interest and the
principal balances from time to time outstanding hereon, whether the Loan is a
Base Rate Loan or a Eurodollar Loan, and the interest rate and Interest Period
applicable thereto, provided that prior to the transfer of this Note all such
amounts shall be recorded on a schedule attached to this Note. The record
thereof, whether shown on such books or records or on a schedule to this Note,
shall be shall be prima facie evidence of the same; provided, however, that the
failure of the Bank to record any of the foregoing or any error in any such
record shall not limit or otherwise affect the obligation of Borrower to repay
all Loans made to it pursuant to the Credit Agreement together with accrued
interest thereon.

         This Note is one of the Notes referred to in the Amended and Restated
364-Day Credit Agreement dated as of August 27, 2002, among Borrower, ABN AMRO
Bank N.V., as Administrative Agent, U.S. Bank, National Association and The Bank
of Nova Scotiaas Documentation Agents, Union Bank of California, N.A. and Bank
of Montreal, as Syndication Agents and the financial institutions party thereto
(the "Credit Agreement"), and this Note and the holder hereof are entitled to
all the benefits provided for thereby or referred to therein, to which Credit
Agreement reference is hereby made for a statement thereof. All defined terms
used in this Note, except terms otherwise defined herein, shall have the same
meaning as in the Credit Agreement. This Note shall be governed by and construed
in accordance with the internal laws of the State of New York.

         Prepayments may be made hereon and this Note may be declared due prior
to the expressed maturity hereof, all in the events, on the terms and in the
manner as provided for in the Credit Agreement.

                 - Remainder of Page Intentionally Left Blank -
                            [Signature Page Follows]

                                       71

         The Borrower hereby waives demand, presentment, protest or notice of
any kind hereunder.

                        BLACK HILLS CORPORATION, a
                        South Dakota corporation

                        By:      _____________________________
                        Name:    _____________________________
                        Title:   _____________________________

                                       72

                                    EXHIBIT B

                             COMPLIANCE CERTIFICATE

         This Compliance Certificate is furnished to ABN AMRO Bank N.V., as
Administrative Agent pursuant to the Amended and Restated 364-Day Credit
Agreement dated as of August 27, 2002, among Black Hills Corporation, a South
Dakota corporation ("Borrower"), ABN AMRO Bank N.V., as Administrative Agent,
U.S. Bank, National Association and The Bank of Nova Scotia, as Documentation
Agents, Union Bank of California, N.A., and Bank of Montreal, as Syndication
Agents and the financial institutions party thereto (the "Credit Agreement").
Unless otherwise defined herein, the terms used in this Compliance Certificate
have the meanings ascribed thereto in the Credit Agreement.

         THE UNDERSIGNED HEREBY CERTIFIES THAT:

          1. I am the duly elected or appointed ___________________of Borrower;

          2. I have reviewed the terms of the Credit  Agreement and I have made,
     or have caused to be made under my  supervision,  a detailed  review of the
     transactions  and  conditions of Borrower and its  Subsidiaries  during the
     accounting period covered by the attached financial statements;

          3. The examinations  described in paragraph 2 did not disclose,  and I
     have no  knowledge  of,  the  existence  of any  condition  or event  which
     constitutes  a Default or an Event of  Default  during or at the end of the
     accounting period covered by the attached financial statements or as of the
     date of this Certificate, except as set forth below; and

          4.  Schedule  1  attached   hereto  sets  forth   financial  data  and
     computations  evidencing  compliance  with certain  covenants of the Credit
     Agreement,  all of which  data and  computations  are  true,  complete  and
     correct.  All  computations  are made in  accordance  with the terms of the
     Credit Agreement.

     Described below are the exceptions,  if any, to paragraph 3 by listing,  in
detail,  the nature of the  condition or event,  the period  during which it has
existed and the action which Borrower has taken, is taking,  or proposes to take
with respect to each such condition or event:

_______________________________________________________________________________
_______________________________________________________________________________

     The foregoing  certifications,  together with the computations set forth in
Schedule 1 hereto and the financial  statements  delivered with this Certificate
in support  hereof,  are made and delivered this  ___________day  of __________,
200_.

                                            ___________________________________

                                       73

                      SCHEDULE 1 TO COMPLIANCE CERTIFICATE

                  Compliance Calculations for Credit Agreement

                       CALCULATION AS OF ________ __,200_

- ------------------------------------------------------------------ --------------------- ---------------------------
A.       Liens (Sec. 7.9(c), (d), and (g))
- ------------------------------------------------------------------ --------------------- ---------------------------
- ------------------------------------------------------------------ --------------------- ---------------------------

         1.       Liens securing taxes or assessments or other     _____________________ (Answer should be yes)
                  government charges or levies equal to or less
                  than $20,000,000 (Section 7.9(c))
- ------------------------------------------------------------------ --------------------- ---------------------------
- ------------------------------------------------------------------ --------------------- ---------------------------
         2.       Liens securing judgments or awards or surety     _____________________ (Answer should be yes)
                  or appeal bonds issued in connection therewith
                  equal to or less than $20,000,000 (Section
                  7.9(d))
- ------------------------------------------------------------------ --------------------- ---------------------------
- ------------------------------------------------------------------ --------------------- ---------------------------
         3.       Is the aggregate amount of Indebtedness and      _____________________ (Answer should be yes)
                  other obligations consisting of (i) the
                  deferred purchase price of newly acquired
                  property or incurred to finance the
                  acquisition of personal property of Borrower
                  used in the ordinary course of business of
                  such Borrower, (ii) Capitalized Lease
                  Obligations, and (iii) the performance of
                  tenders, statutory obligations, bids, leases
                  or other similar obligations (other than for
                  borrowed money) entered into in the ordinary
                  course of business or to secure obligations on
                  performance bonds which is secured by Liens
                  equal to or less than 5% of Consolidated
                  Assets as reflected on the most recent balance
                  sheet delivered by Borrower (Section 7.9(g)).
- ------------------------------------------------------------------ --------------------- ---------------------------
- ------------------------------------------------------------------ --------------------- ---------------------------
B.       Sale and Leasebacks (Section 7.11)
- ------------------------------------------------------------------ --------------------- ---------------------------
- ------------------------------------------------------------------ --------------------- ---------------------------
         1.       Aggregate obligations under all Sale and         $____________________ (Line B1 not to exceed
                  Leasebacks arrangements (other than synthetic                          $30,000,000)
                  lease transactions excluded by Section 7.11)
- ------------------------------------------------------------------ --------------------- ---------------------------
- ------------------------------------------------------------------ --------------------- ---------------------------
C.       Sale of Assets (Section 7.12)
- ------------------------------------------------------------------ --------------------- ---------------------------
- ------------------------------------------------------------------ --------------------- ---------------------------
         1.       Net book value of assets (other than             $____________________ (Line C1 not to exceed
                  inventory, reserves and electricity in the                             10% of total consolidated
                  ordinary course of business) sold during this                          assets)
                  fiscal year
- ------------------------------------------------------------------ --------------------- ---------------------------

                                       74

- ------------------------------------------------------------------ --------------------- ---------------------------
D.       Permitted Investments (Section 7.14)
- ------------------------------------------------------------------ --------------------- ---------------------------
- ------------------------------------------------------------------ --------------------- ---------------------------
         1.       Aggregate amount of Investments in Marketing     $____________________
                  Subsidiaries made after the August 28, 2001
                  (Section 7.14(o)(ii))
- ------------------------------------------------------------------ --------------------- ---------------------------
- ------------------------------------------------------------------ --------------------- ---------------------------
         2.       Investments consisting of Guaranties of          $____________________
                  Indebtedness of Marketing Subsidiaries
                  existing on the Effective Date
- ------------------------------------------------------------------ --------------------- ---------------------------
- ------------------------------------------------------------------ --------------------- ---------------------------
         3.       Intercompany loans permitted pursuant to         $____________________ Line E3
                  Section 7.15(e)(iii) owing by Marketing
                  Subsidiaries (Line E3)
- ------------------------------------------------------------------ --------------------- ---------------------------
- ------------------------------------------------------------------ --------------------- ---------------------------
         4.       Sum of Lines D1, D2 and D3                       $____________________
- ------------------------------------------------------------------ --------------------- ---------------------------
- ------------------------------------------------------------------ --------------------- ---------------------------
         5.       Is Line D4 equal to or less than $10,000,000?    _____________________ (Answer should be yes)
- ------------------------------------------------------------------ --------------------- ---------------------------
- ------------------------------------------------------------------ --------------------- ---------------------------
         6.       Aggregate amount of Investments in Persons       $____________________ (Line D6 not to exceed
                  engaged in the lines of business described in                          $20,000,000)
                  clause (xii) of Section 7.8 (Section 7.14(k))
- ------------------------------------------------------------------ --------------------- ---------------------------
- ------------------------------------------------------------------ --------------------- ---------------------------
E.       Permitted Indebtedness (Section 7.15)
- ------------------------------------------------------------------ --------------------- ---------------------------
- ------------------------------------------------------------------ --------------------- ---------------------------
         1.       Secured Indebtedness except as set forth on      $____________________ (Line E1 not to exceed 5%
                  Schedule 7.15(b): (i) of BHP (ii) evidencing                           of Consolidated Assets)
                  the deferred purchase price of newly acquired property or
                  incurred to finance the acquisition of personal property of
                  Borrower or a Subsidiary used in the ordinary course of
                  business of the Borrower of a Subsidiary, (iii) constituting
                  Capitalized Lease Obligations or with respect to synthetic (or
                  similar type) lease transactions, or (iv) incurred in
                  connection with the performance of tenders, statutory
                  obligations, bids, leases or other similar obligations (other
                  than for borrowed money) entered into in the ordinary course
                  of business or to secure obligations on performance bonds
                  (Section 7.15(c))
- ------------------------------------------------------------------ --------------------- ---------------------------
- ------------------------------------------------------------------ --------------------- ---------------------------
         2.       Intercompany loans owing by Borrower (Section    $____________________ (Must be subordinated to
                  7.15(e)(i)(x))                                                         Obligations)
- ------------------------------------------------------------------ --------------------- ---------------------------

                                       75

- ------------------------------------------------------------------ --------------------- ---------------------------
         3.       Intercompany Indebtedness owing by Marketing     $____________________ (Line E3 not to exceed
                  Subsidiaries to Subsidiaries (Section                                  the difference between
                  7.15(e)(iii))                                                          (i) $10,000,000 less (ii)
                                                                                         the sum of  Lines E4 and
                                                                                         D1)
- ------------------------------------------------------------------ --------------------- ---------------------------
- ------------------------------------------------------------------ --------------------- ---------------------------
         4.       Indebtedness consisting of Guarantees            $____________________ (Line E4 not to exceed
                  (including Long-Term Guaranties) of Marketing                          the difference between
                  Subsidiary Indebtedness  (Section 7.15(f))                             (i) $10,000,000 less (ii)
                                                                                         the sum of Lines E3 and
                                                                                         D1)
- ------------------------------------------------------------------ --------------------- ---------------------------
- ------------------------------------------------------------------ --------------------- ---------------------------
         5.       Indebtedness of Marketing Subsidiaries under     $____________________ (Line E5 not to exceed
                  Marketing Subsidiary Excluded Credit                                   Marketing Subsidiary
                  Facilities (Section 7.15(g))                                           Indebtedness Limit)
- ------------------------------------------------------------------ --------------------- ---------------------------
- ------------------------------------------------------------------ --------------------- ---------------------------
F.       Consolidated Net Worth (Section 7.16)
- ------------------------------------------------------------------ --------------------- ---------------------------
- ------------------------------------------------------------------ --------------------- ---------------------------
         1.       Consolidated Net Worth                           $____________________
- ------------------------------------------------------------------ --------------------- ---------------------------
- ------------------------------------------------------------------ --------------------- ---------------------------
         2.       50% of aggregate Consolidated Net Income, if     $____________________
                  positive, from and including April 1, 2002
- ------------------------------------------------------------------ --------------------- ---------------------------
- ------------------------------------------------------------------ --------------------- ---------------------------
         3.       Does Line F1 exceed sum of (i) $425,000,000      _____________________ (Answer should be yes)
                  plus (ii) line F2
- ------------------------------------------------------------------ --------------------- ---------------------------
- ------------------------------------------------------------------ --------------------- ---------------------------
G.       Recourse Leverage Ratio (Section 7.17)
- ------------------------------------------------------------------ --------------------- ---------------------------
- ------------------------------------------------------------------ --------------------- ---------------------------
         1.       consolidated Indebtedness                        $____________________
- ------------------------------------------------------------------ --------------------- ---------------------------
- ------------------------------------------------------------------ --------------------- ---------------------------
         2.       Non-Recourse Indebtedness                        $____________________
- ------------------------------------------------------------------ --------------------- ---------------------------
- ------------------------------------------------------------------ --------------------- ---------------------------
         3.       Recourse Indebtedness (Line G1 minus Line G2)    $____________________
- ------------------------------------------------------------------ --------------------- ---------------------------
- ------------------------------------------------------------------ --------------------- ---------------------------
         4.       Indebtedness of Marketing Subsidiaries under     $____________________ (Not to exceed Marketing
                  Marketing Subsidiary Excluded Credit                                   Subsidiary Indebtedness
                  Facilities (Line E5)                                                   Limit)
- ------------------------------------------------------------------ --------------------- ---------------------------
- ------------------------------------------------------------------ --------------------- ---------------------------
         5.       Consolidated Net Worth                           $____________________
- ------------------------------------------------------------------ --------------------- ---------------------------
- ------------------------------------------------------------------ --------------------- ---------------------------
         6.       Capital (Line G3 minus Line G4 plus Line G5)     $____________________
- ------------------------------------------------------------------ --------------------- ---------------------------
- ------------------------------------------------------------------ --------------------- ---------------------------
         7.       Recourse Leverage Ratio                          _________ :1.00       (ratio of (A) difference
                                                                                         between (x) Line G3 minus
                                                                                         (y) Line G4 to (B) Line
                                                                                         G6 not to exceed 0.65 to
                                                                                         1.00)
- ------------------------------------------------------------------ --------------------- ---------------------------
- ------------------------------------------------------------------ --------------------- ---------------------------
H.       Fixed Charge Coverage Ratio (Section 7.18)
- ------------------------------------------------------------------ --------------------- ---------------------------

                                       76

- ------------------------------------------------------------------ --------------------- ---------------------------
         1.       Consolidated Net Income for past four fiscal     $____________________
                  quarters
- ------------------------------------------------------------------ --------------------- ---------------------------
- ------------------------------------------------------------------ --------------------- ---------------------------
         2.       Income taxes for past four fiscal quarters (to   $____________________
                  the extent subtracted in calculating H1)
- ------------------------------------------------------------------ --------------------- ---------------------------
- ------------------------------------------------------------------ --------------------- ---------------------------
         3.       Consolidated Interest Expense for past four      $____________________ Insert amount from Line
                  fiscal quarters (to the extent subtracted in                           H18
                  calculating H1)
- ------------------------------------------------------------------ --------------------- ---------------------------
- ------------------------------------------------------------------ --------------------- ---------------------------
         4.       Amortization expense for intangible assets       $____________________
                  for past four fiscal quarters (to the extent
                  subtracted in calculating H1)
- ------------------------------------------------------------------ --------------------- ---------------------------
- ------------------------------------------------------------------ --------------------- ---------------------------
         5.       Depreciation expense for past four fiscal
                  quarters (to the extent subtracted in
                  calculating H1)
- ------------------------------------------------------------------ --------------------- ---------------------------
- ------------------------------------------------------------------ --------------------- ---------------------------
         6.       Losses on sales of assets (excluding sales in    $____________________
                  the ordinary course of business) and other
                  extraordinary losses for past four fiscal
                  quarters (to the extent subtracted in
                  calculating H1)
- ------------------------------------------------------------------ --------------------- ---------------------------
- ------------------------------------------------------------------ --------------------- ---------------------------
         7.       Interest income for past four fiscal quarters    $____________________
                  arising from traditional investment
                  activities with banks, investment banks
                  and other financial institutions or relating
                  to governmental or other marketable securities
                  (to the extent added in calculating H1)
- ------------------------------------------------------------------ --------------------- ---------------------------
- ------------------------------------------------------------------ --------------------- ---------------------------
         8.       Gains on sales of assets (excluding sales in     $____________________
                  the ordinary course of business) and other
                  extraordinary gains for past four fiscal
                  quarters (to the extent added in calculating
                  H1)
- ------------------------------------------------------------------ --------------------- ---------------------------
- ------------------------------------------------------------------ --------------------- ---------------------------
         9.       Capital Expenditures for past four fiscal        $____________________
                  quarters
- ------------------------------------------------------------------ --------------------- ---------------------------
- ------------------------------------------------------------------ --------------------- ---------------------------
         10.      Without duplication, any payments made by a
                  Consolidated Subsidiary constituting a
                  repayment of principal Indebtedness (other
                  than (x) the Obligations and (y) repayments of
                  principal made with the proceeds of a            $____________________
                  refinancing of such Indebtedness otherwise
                  permitted pursuant to this Agreement) or with
                  respect to a reserve, and
- ------------------------------------------------------------------ --------------------- ---------------------------

                                       77

- ------------------------------------------------------------------ --------------------- ---------------------------
         11.       Without duplication, any other mandatory
                  payment made by a Consolidated Subsidiary in
                  such period not included as an expense or loss   $____________________
                  in calculating Consolidated Net Income
- ------------------------------------------------------------------ --------------------- ---------------------------
- ------------------------------------------------------------------ --------------------- ---------------------------
         12.      Consolidated EBITDA (sum of Lines H1, H2, H3,    $____________________
                  H4, H5 and H6 less sum of Lines H7, H8, H9,
                  H10 and H11)
- ------------------------------------------------------------------ --------------------- ---------------------------
- ------------------------------------------------------------------ --------------------- ---------------------------
         13.      Restricted Earnings for the past four fiscal     $____________________
                  quarters
- ------------------------------------------------------------------ --------------------- ---------------------------
- ------------------------------------------------------------------ --------------------- ---------------------------
         14.      Adjusted Consolidated EBITDA (Line H12 minus     $____________________
                  Line H13)
- ------------------------------------------------------------------ --------------------- ---------------------------
- ------------------------------------------------------------------ --------------------- ---------------------------
         15.      All interest charges (including capitalized      $____________________
                  interest, imputed interest charges with
                  respect to Capitalized Lease Obligations and
                  all amortization of debt discount and expense
                  and other deferred financing charges) of the
                  Borrower and its Subsidiaries on a
                  consolidated basis for such period determined
                  in accordance with GAAP, other than interest
                  charges relating to Non-Recourse Indebtedness
- ------------------------------------------------------------------ --------------------- ---------------------------
- ------------------------------------------------------------------ --------------------- ---------------------------
         16.      All commitment or other fees payable in          $____________________
                  respect of the issuance of standby letters of
                  credit or other credit facilities for the
                  account of the Borrower or its Subsidiaries
- ------------------------------------------------------------------ --------------------- ---------------------------
- ------------------------------------------------------------------ --------------------- ---------------------------
         17.      Net costs/expenses incurred by the Borrower      $____________________
                  and its Subsidiaries under Derivative
                  Arrangements
- ------------------------------------------------------------------ --------------------- ---------------------------
- ------------------------------------------------------------------ --------------------- ---------------------------
         18.      Consolidated Interest Expense (Sum of Lines      $____________________
                  H15, H16 and H17)
- ------------------------------------------------------------------ --------------------- ---------------------------
- ------------------------------------------------------------------ --------------------- ---------------------------
         19.      The aggregate amount of all mandatory            $____________________
                  scheduled payments (whether designated as
                  payments or prepayments) and scheduled sinking
                  fund payments with respect to principal of any
                  Recourse Indebtedness of the Borrower or its
                  Subsidiaries (including payments in the nature
                  of principal under Capital Leases) for the
                  last 4 quarters
- ------------------------------------------------------------------ --------------------- ---------------------------
- ------------------------------------------------------------------ --------------------- ---------------------------
         20.      Consolidated Fixed Charges (Sum of Lines H18     $____________________
                  and H19)
- ------------------------------------------------------------------ --------------------- ---------------------------

                                       78

- ------------------------------------------------------------------ --------------------- ---------------------------
         21.      Fixed Charge Coverage Ratio (ratio of Lines      _________1.00        (ratio must not be less
                  H14 to (ii) Line H20)                                                  than 1.50 to 1.00)
- ------------------------------------------------------------------ --------------------- ---------------------------
- ------------------------------------------------------------------ --------------------- ---------------------------
I.       Liquidity Covenant (Section 7.26)
- ------------------------------------------------------------------ --------------------- ---------------------------
- ------------------------------------------------------------------ --------------------- ---------------------------
         1.       Unrestricted cash at Borrower                    $____________________
- ------------------------------------------------------------------ --------------------- ---------------------------
- ------------------------------------------------------------------ --------------------- ---------------------------
         2.       Unused availability of senior unsecured credit   $____________________
                  facilities available to Borrower
- ------------------------------------------------------------------ --------------------- ---------------------------
- ------------------------------------------------------------------ --------------------- ---------------------------
         3.       Liquid Assets (Line I1 plus Line I2)             $___________________  (amount must exceed
                                                                                         $30,000,000)
- ------------------------------------------------------------------ --------------------- ---------------------------

                                       79

                                   SCHEDULE 1

                                  PRICING GRID

- ------------------ ------------------- ------------ ------------------- -------------------
  If the Level      The Facility Fee       The        The Eurodollar      The Base Rate
    Status Is           Rate is:       Utilization      Margin is:          Margin is:
                                        Fee Rate
                                           is:
- ------------------ ------------------- ------------ ------------------- -------------------
- ------------------ ------------------- ------------ ------------------- -------------------
                                                             
Level I Status     0.080%              0.100%       0.420%                    0.000%
- ------------------ ------------------- ------------ ------------------- -------------------
- ------------------ ------------------- ------------ ------------------- -------------------
Level II Status    0.100%              0.125%       0.500%                    0.000%
- ------------------ ------------------- ------------ ------------------- -------------------
- ------------------ ------------------- ------------ ------------------- -------------------
Level III Status   0.125%              0.150%       0.625%                    0.000%
- ------------------ ------------------- ------------ ------------------- -------------------
Level IV Status    0.150%              0.200%       0.725%                    0.000%
- ------------------ ------------------- ------------ ------------------- -------------------
- ------------------ ------------------- ------------ ------------------- -------------------
Level V Status     0.200%              0.250%       0.800%                    0.000%
- ------------------ ------------------- ------------ ------------------- -------------------
- ------------------ ------------------- ------------ ------------------- -------------------
Level VI Status    0.600%              0.500%       1.400%                    0.400%
- ------------------ ------------------- ------------ ------------------- -------------------

         Each change in a rating shall be effective as of the date it is
announced by the applicable rating agency.

         In the event that the Moody's Rating and the S&P Rating fall in
consecutive Levels, the rating falling in the lower Level (with Level I being
the highest Level and Level VI being the lowest Level) shall govern for purposes
of determining the applicable pricing pursuant to the above pricing grid. In the
event that the Moody's Rating and the S&P Rating fall in non-consecutive Levels,
the Level immediately above the Level in which the lower rating falls (with
Level I being the highest Level and Level VI being the lowest Level) shall
govern for purposes of determining the applicable pricing pursuant to the above
pricing grid.

                                       80

                                   SCHEDULE 4
              ADMINISTRATIVE AGENT'S NOTICE AND PAYMENT INFORMATION

                                Part A - Payments

Loan Repayments, Interest, Fees:

                  ABN AMRO Bank N.V.
                  New York, NY
                  ABA # 026009580
                  F/O ABN AMRO Bank, N.V.
                  Chicago Branch CPU
                  Account # 650-001-1789-41
                  Reference:  Agency Services  Black Hills Corporation

                                Part B - Notices

Notices related to commitments, covenants or extensions of expiry/termination
dates:

                  ABN AMRO Bank N.V.
                  208 South LaSalle Street, Suite 1500
                  Chicago, IL  60604-1003
                  Attn: Agency Services
                  E-Mail:   beata.konopko@abnamro.com
                  FAX:     (312)-992-5157

                  ABN AMRO Bank N.V.
                  208 South LaSalle Street, Suite 1500
                  Chicago, IL  60604-1003
                  Attn: Credit Administration
                  E-Mail: kenneth.keck@abnamro.com
                  FAX:     312-992-5111

                  ABN AMRO Bank N.V.
                  135 South LaSalle Street, Suite 710
                  Chicago, Illinois 60603
                  Attn: Thomas Sterr
                  E-Mail: thomas.sterr@abnamro.com
                  FAX: (312)-904-6387

Notices related to Loans, Letters of Credit and Fees:

                  ABN AMRO Bank N.V.
                  208 South LaSalle Street, Suite 1500
                  Chicago, IL  60604-1003
                  Attn: Agency Services

                                       81

                  E-Mail:   beata.konopko@abnamro.com
                  FAX:     312-992-5157

Address for all Required Executed Documentation and Financial Information:

                  ABN AMRO Bank N.V.
                  208 South LaSalle Street, Suite 1500
                  Chicago, IL  60604-1003
                  Attn: Credit Administration
                  E-Mail: kenneth.keck@abnamro.com
                  FAX:     312-992-5111

                                       82

                                  SCHEDULE 5.2

                      BLACK HILLS CORPORATION SUBSIDIARIES

                    Subsidiary Name                State of Origin          BHC's        Description of Subsidiary's
                                                                          Ownership       Authorized Capital Stock, if
                                                                                              not wholly owned

1        Acquisition Partners, L.P.             New York               100%                          N/A
2.       Adirondack Hydro Development           Delaware               100%                          N/A
         Corporation
3.       Adirondack Hydro-Fourth Branch, LLC    New York               100%                          N/A
4.       Adirondack Operating Services, LLC     New York               100%                          N/A
5.       Black Hills Berkshire, LLC             Delaware               100%                          N/A
6.       Black Hills Capital Development, Inc.  Illinois               100%                          N/A
7.       Black Hills Colorado, LLC              Delaware               100%                          N/A
8.       Black Hills Energy Capital, Inc.       Delaware               100%                          N/A
9.       Black Hills Energy Pipeline, LLC       Delaware               100%                          N/A
10.      Black Hills Energy Resources, Inc.     South Dakota           100%                          N/A
11.      Black Hills Energy Terminal, LLC       South Dakota           100%                          N/A
12.      Black Hills Energy, Inc.               South Dakota           100%                          N/A
13.      Black Hills Exploration and            Wyoming                100%                          N/A
         Production, Inc.
14.      Black Hills Fiber Systems, Inc.        South Dakota           100%                          N/A
15.      Black Hills Fibercom, LLC              South Dakota           51%              Black Hills Fibercom, LLC
                                                                                        has a single class of units
                                                                                        of membership of which 41
                                                                                        units are issued and
                                                                                        outstanding.  Black Hills
                                                                                        Fiber Systems, Inc. holds 21
                                                                                        units.
16.      Black Hills Fountain Valley, LLC       Delaware               100%                          N/A
17.      Black Hills Generation, Inc.           Wyoming                100%                          N/A

18.      Black Hills Harbor, LLC                Delaware               83.3%            Black Hills Harbor, LLC has

                                       83

                                                                                        a single class of units of
                                                                                        membership.  100 units of
                                                                                        which are currently issued
                                                                                        and outstanding. Black
                                                                                        Hills Corporation indirectly
                                                                                        holds interests in 83.3% of
                                                                                        the units.
19.      Black Hills High Desert, Inc.          Delaware               100%                          N/A
20.      Black Hills Idaho Operations, LLC      Delaware               100%                          N/A
21.      Black Hills Independent Power Fund,    Texas                  100%                          N/A
         Inc.
22.      Black Hills Kilgore Energy Pipeline,   Delaware               100%                          N/A
         LLC
23.      Black Hills Kilgore Pipeline, Inc.     Delaware               100%                          N/A
24.      Black Hills Kilgore Pipeline           Texas                  100%                          N/A
         Company, L.P.
25.      Black Hills Long Beach, Inc.           Delaware               100%                          N/A
26.      Black Hills Millennium Pipeline, Inc.  South Dakota           100%                          N/A
27.      Black Hills Millennium Terminal, Inc.  South Dakota           100%                          N/A
28.      Black Hills Nevada Operations, LLC     Delaware               100%                          N/A
29.      Black Hills Nevada Real Estate         Delaware               100%                          N/A
         Holdings, LLC
30.      Black Hills Nevada, LLC                Delaware               100%                          N/A
31.      Black Hills North America, Inc.        Delaware               100%                          N/A
32.      Black Hills Operating Company, LLC     Delaware               100%
33.      Black Hills Ontario, LLC               Delaware               50%              Black Hills Ontario, LLC has
                                                                                        a single class of units of
                                                                                        membership, of which 100
                                                                                        units are issued and
                                                                                        outstanding.
34.      Black Hills Power, Inc.                South Dakota           100%                          N/A
35.      Black Hills Southwest, LLC             Delaware               100%                          N/A
36       Black Hills Valmont Colorado, Inc.     Delaware               100%                          N/A
37.      DAKSOFT, Inc.                          South Dakota           100%                          N/A

38.      Desert Arc I, LLC                      Delaware               50%              Desert Arc I, LLC has a
                                                                                        single class of units of
                                                                                        membership, of which

                                       84

                                                                                        Black Hills Corporation
                                                                                        indirectly holds 50%.

39.      Desert Arc II, LLC                     Delaware               50%              Desert Arc II, LLC has a
                                                                                        single class of unites of
                                                                                        membership, of which
                                                                                        Black Hills Corporation
                                                                                        indirectly holds 50%.
40.      EIF Investors, Inc.                    Delaware               100%                          N/A
41.      E-Next A Equipment Leasing Company,    Delaware               100%                          N/A
         LLC
42.      Enserco Energy, Inc.                   South Dakota           100%                          N/A
43.      Fountain Valley Power, L.L.C.          Delaware               100%                          N/A
44.      Harbor Cogeneration Company            California             83.3%            Harbor Cogeneration Company
                                                                                        is a California general
                                                                                        partnership.  Black Hills
                                                                                        Corporation has an indirect
                                                                                        ownership interest of 83.3%
45.      Hudson Falls, LLC                      New York               100%                          N/A
46.      ICPM, Inc.                             Illinois               100%                          N/A
47.      Indeck Auburndale, LLC                 Delaware               100%                          N/A
48.      Indeck Gordonsville, LLC               Delaware               100%                          N/A
49.      Indeck North American Power Fund, LP   Delaware               81.9%            Indeck North American Power
                                                                                        Fund, L.P. is a limited.
                                                                                        Black Hills Corporation
                                                                                        holds direct and indirect
                                                                                        general and limited
                                                                                        partnership interests
                                                                                        totaling up to 81.9%.
50.      Indeck Hills North American Power      Delaware               85.7%            Indeck North American Power
         Partners, LP                                                                   Partners, LP is a limited.
                                                                                        Black Hills Corporation
                                                                                        holds direct and indirect
                                                                                        general and limited
                                                                                        partnership interests
                                                                                        totaling up to 85.7%

51.      Indeck Pepperell Power Associates,     Delaware               82.9%            Indeck Pepperell Power
         Inc.                                                                           Associates, Inc. has a
                                                                                        single class of stock
                                                                                        with 100 shares issued
                                                                                        and outstanding.  Black
                                       85

                                                                                        Hills Corporation
                                                                                        indirectly owns 82.9%
                                                                                        of the capital stock of
                                                                                        Indeck Pepperell, by
                                                                                        and through its interests
                                                                                        in Indeck North
                                                                                        American Power Fund,
                                                                                        L.P.

52.      Landrica Development Company           South Dakota           100%                          N/A
53.      Las Vegas Cogeneration Energy          Delaware               100%                          N/A
         Financing, LLC
54.      Las Vegas Cogeneration II, LLC         Delaware               100%                          N/A
55.      Las Vegas Cogeneration Limited         Nevada                 50%              Las Vegas Cogeneration
         Partnership                                                                    Limited Partnership has an
                                                                                        85% general partnership
                                                                                        interest, of which Black
                                                                                        Hills Corporation indirectly
                                                                                        owns 50%, and a 15% limited
                                                                                        partnership interest, of
                                                                                        which Black Hills
                                                                                        Corporation indirectly owns
                                                                                        50%.
56.      Middle Falls Corporation               New York               100%                          N/A
57.      Middle Falls II, LLC                   New York               100%                          N/A
58.      Middle Falls Limited Partnership       New York               50%              Middle Falls Limited
                                                                                        Partnership has a 2%
                                                                                        general partnership
                                                                                        interest, of which Black
                                                                                        Hills Corporation
                                                                                        indirectly holds 1%, and
                                                                                        a 98% limited
                                                                                        partnership interest, of
                                                                                        which Black Hills
                                                                                        Corporation indirectly
                                                                                        holds 49%

59.      Middle Falls Partners, LLC             New York               50%              Middle Falls Partners,
                                                                                        LLC has a single class
                                                                                        of units of membership,
                                                                                        of which Black Hills
                                                                                        Corporation indirectly

                                       86

                                                                                        holds 50%.
60.      Millennium Pipeline Company, L.P.      Texas                  100%
61.      Millennium Terminal Company, L.P.      Texas                  100%
62.      NHP, L.P.                              New York               100%                          N/A
63.      North American Funding, L.L.C.         Delaware               100%                          N/A
64.      Northern Electric Power Company, L.P.  New York               37%              Northern Electric Power
                                                                                        Company, L.P. has a
                                                                                        99% limited partnership
                                                                                        interest, of which Black
                                                                                        Hills Corporation
                                                                                        indirectly owns 36.5%
                                                                                        and a 1% general
                                                                                        partnership interest, of
                                                                                        which Black Hills
                                                                                        Corporation indirectly
                                                                                        owns 0.5%.
65.      NYSD Limited Partnership               New York               100%                          N/A
66.      NYSD Partners, LLC                     New York               100%                          N/A
67.      Sissonville Corporation                New York               100%                          N/A
68.      Sissonville II, LLC                    New York               100%                          N/A
69.      Sissonville Limited Partnership        New York               100%                          N/A
70.      Sissonville Partners, LLC              New York               100%                          N/A
71.      South Glens Falls, L.P.                New York               30.2%            South Glens Falls, L.P.
                                                                                        has a 99% limited
                                                                                        partnership interest, of
                                                                                        which Black Hills
                                                                                        Corporation indirectly
                                                                                        owns 29.7% and a 1%
                                                                                        general partnership
                                                                                        interest, of which Black
                                                                                        Hills Corporation
                                                                                        indirectly owns 0.5%.
72.      South Glens Falls, LLC                 New York               100%                          N/A
73.      State Dam Corporation                  New York               100%                          N/A
74.      State Dam II, LLC                      New York               100%                          N/A

75.      Sunco, Ltd., a limited liability       Nevada                 100%                          N/A
         company
76.      VariFuel, LLC                          South Dakota           100%                          N/A
77.      Warrensburg Corporation                New York               100%                          N/A
78.      Warrensburg Hydro Power Limited        New York               100%                          N/A
         Partnership

                                       87

79.      Warrensburg II Corporation             New York               100%                          N/A
80.      Wyodak Resources Development Corp.     Delaware               100%                          N/A

                                       88

                                  SCHEDULE 5.5

                       LITIGATION AND LABOR CONTROVERSIES

Black Hills Harbor, LLC - City of Long Beach

         In June of 2000, the City of Long Beach, a municipal corporation in the
State of California, acting for the Port of Long Beach ("City"), brought an
action against Black Hills Harbor, LLC (formerly known as Indeck Harbor, LLC)
("Fund"), alleging breaches of a partnership interest purchase agreement dated
as of January 1, 1995 ("Agreement"), relating to the amount and timing of
certain contingent payments, if any, due the City resulting in claims by the
City in excess of $9 million. The court ordered that the disputes raised in
litigation must be resolved by arbitration in accordance with the terms of the
Agreement. Representatives of the City and the Fund engaged in mediation to
attempt to resolve the disputes involving a transportation tax for natural gas
delivered to a power facility located in Long Beach and owned by the Fund.
Because the parties were unable to reach resolution of the dispute, they have
pursued arbitration.

Grizzly Gulch Fire

         On June 29, 2002, a forest fire began near Deadwood, South Dakota.
Before being contained more than eight days later, the fire consumed over 10,000
acres of public and private land, mostly consisting of rugged forested areas.
The fire destroyed 7 homes, and approximately 15 outbuildings. There are no
reported personal injuries at this time. In addition, the fire burned to the
edge of the City of Deadwood, forcing the evacuation of the City of Deadwood,
and an adjacent City of Lead, South Dakota. These communities are active in the
tourist and gaming industries. Individuals were ordered to leave their homes and
motels, and businesses were closed for a short period of time. On July 16, 2002,
the State of South Dakota announced the results of its investigation of the
cause and origin of the fire. The State concluded that the fire was caused by
tree encroachment into and contact with a transmission line owned and maintained
by Black Hills Power, Inc.

         Black Hills Power is in the process of completing its own investigation
of the fire, and will request access to the materials that form the basis for
the State's conclusions. This investigation is not complete. Depending on the
outcome of this process, it is possible that claims will be made against Black
Hills Power for damages allegedly caused by the fire, for fire suppression costs
and costs of remediation of burned areas, for individual and business losses
relating to injury to personal and real property, and lost income. No civil
action or regulatory proceeding is pending at this time.

                                       89

                                  SCHEDULE 5.11

                              ENVIRONMENTAL MATTERS

                                      None.

                                       90

                                  SCHEDULE 7.9

                                 EXISTING LIENS

1.   Enserco  Energy  Inc.  has  granted a security  interest in favor of Fortis
     Capital  Corp.,  with respect to Enserco  Energy Inc.'s  personal  property
     assets  to  secure  the  $135,000,000  credit  facility  referred  to in on
     Schedule 7.15.

2.   Black Hills Energy Resources, Inc. has granted a security interest in favor
     of Fortis  Capital  Corp.,  with respect to Black Hills  Energy  Resources,
     Inc.'s personal  property assets to secure the $25,000,000  credit facility
     referred to on Schedule 7.15.

3.   Black Hills Power, Inc. Indenture of Mortgage and Deed of Trust has a first
     mortgage lien on  substantially  all of the properties used in the electric
     utility business excluding "Excepted  Property." Excepted property includes
     all cash and securities;  all contracts,  leases and other agreements;  all
     permits, licenses,  franchises and rights granted by governmental entities;
     all movable  equipment and parts including  motor vehicles;  all materials,
     supplies  and  merchandise  offered  for  sale in the  ordinary  course  of
     business,  fuel and other  consumables;  all  office  furniture  and office
     equipment,  communications  equipment and computer equipment; all minerals,
     crops and timber harvested or extracted from land; all leasehold interests;
     and all property not used in the electric utility business.

4.   Black Hills  Exploration and Production has granted  security  interests in
     various  certificates  of  deposits  for oil & gas  leases  and  operations
     totaling less than $150,000 in aggregate.

5.   Wyodak  Resources  Development  Corp. has granted a security  interest in a
     certificate  of  deposit  in the  amount  of  $397,000  to  securitize  its
     self-insurance permit for black lung liability.

                                       91

                                  Schedule 7.14
                              Existing Investments

1.   Landrica  Development  Company holds 700,000  registered  and  unrestricted
     shares of the common stock of KFx, Inc. and 1,300,000  warrants to purchase
     a single  share of the  common  stock of KFx at $3.48 at any time  prior to
     April 30, 2005.

2.   Landrica  Development  Company holds a $450,000 equity  investment in Phase
     Technology, LLC.

3.   Landrica  Development  Company holds a $50,000 equity investment in Genesis
     Equity Fund, LLC.

4.   Black Hills Corporation  holds  investments in life insurance  policies and
     nonqualified deferred compensation plans in the amount of $2,363,000.

5.   Black Hills Power,  Inc. holds  investments in life insurance  policies and
     nonqualified deferred compensation plans in the amount of $2,586,000.

6.   Wyodak  Resources  Development  Corp.  holds  investments in life insurance
     policies in the amount of $451,000.

7.   Black Hills  Exploration  and  Production,  Inc. holds  investments in life
     insurance policies in the amount of $72,000.

8.   Black Hills FiberCom,  LLC holds investments in life insurance  policies in
     the amount of $108,000.

9.   Daksoft, Inc. holds investments in life insurance policies in the amount of
     $149,000.

10.  Black Hills Energy  Capital,  Inc. has an equity  investment in Black Hills
     Idaho Operations, LLC in the amount of $2,968,000.

11.  Black Hills Energy Capital,  Inc. has an equity  investment in EIF Funds in
     the amount of $9,888,000.

12.  Black Hills Energy  Capital,  Inc. holds other various notes  receivable in
     the aggregate amount of $1,676,000

13.  Black Hills Fiber Systems,  Inc. holds a convertible  debenture note in the
     amount of $40,000,000 due from Black Hills FiberCom, LLC.

                                       92

                                  SCHEDULE 7.15
                             PERMITTED INDEBTEDNESS

(A) Indebtedness of Marketing Subsidiaries
                                                                                                   
1.                    Enserco Energy Inc. Credit Facility with Fortis Capital Corp.                      $135,000,000
2.                    Black Hills Energy Resources, Inc. Credit Facility with Fortis Capital              $25,000,000
                      Corp. (In addition there is a $12,500,000 overdraft line).
(B) Other Indebtedness
1.                    Black Hills Power, Inc./Black Hills Generation, Inc. Note Payable to                   $992,909
                      Bear Paw Energy, LLC.
2.                    Credit Agreement between Black Hills Colorado, LLC, the Bank Nova                  $135,000,000
                      Scotia, and various other banks.
3.                    Black Hills Corporation First Mortgage Bonds.                                      $187,835,904
4.                    Black Hills Power, Inc. Pollution Control Revenue Bonds.                            $24,500,000
5.                    Black Hills Power, Inc. Environmental Improvement Revenue Bonds                      $2,855,000
                      (Floating Rate).
6.                    Wyodak Resources Development Corp. reclamation bond obligations                     $21,644,000
                      relating to its mining permits.
7.                    Landrica Development Company reclamation bond obligation relating to                 $3,794,997
                      its mining permits.
8.                    Black Hills Exploration and Production, Inc. miscellaneous performance                 $500,000
                      bonds and letters of credit relating to oil and gas well leases and
                      operations.
9.                    Black Hills Corporation and Black Hills Nevada, LLC bridge loan                     $50,000,000
                      secured by the Las Vegas Cogen II facility.
10.                   Term loan and letter of credit facility between Black Hills Fountain               $164,471,218
                      Valley, LLC, Fountain Valley Power, LLC, and E-Next A Equipment
                      Leasing Company, LLC and various banks (including Union Bank of
                      California as agent bank).
11.                   Northern Electric Power Co. L.P. project financing term loan secured                $66,878,240
                      by the Hudson Falls generating plant.
12.                   South Glens Falls LP project financing term loan secured by the South               $22,878,498
                      Glens Falls generating plant.
13.                   Black Hills Corporation guarantee of lease payments on the Wygen 1                 $140,000,000
                      facility.
14.                   Black Hills Corporation guarantee in favor of Cheyenne Light, Fuel and               $5,000,000
                      Power in connection with performance of the Wygen 1 Power Purchase
                      Agreement.
15.                   Black Hills Corporation guarantee in favor of Cheyenne Light, Fuel and              $10,000,000
                      Power in connection with performance of Black Hills Generation under
                      the Gillette Turbine Power Purchase Agreement.

                                       93

16.                   Black Hills Corporation guarantee in favor of Las Vegas Cogen II                       $749,970
                      interconnection agreement with Nevada Power Company.
17.                   Black Hills Corporation completion guarantee in favor of Bank of Nova              All payments
                      Scotia in connection with expanded Colorado facilities.
18.                   Black Hills Corporation guarantee in favor of UBS AG in connection                   $3,000,000
                      with Enserco Energy, Inc.'s Derivative, Power and Gas Agreements with
                      UBS AG.
19.                   Black Hills Corporation guarantee in favor of Koch Exploration                       $4,500,000
                      Company, LLC in connection with Enserco Energy, Inc. agreements with
                      Koch Exploration Company, LLC.

All indebtedness balances are as of June 30, 2002 (except for inclusion of
additional $75,000,000 on First Mortgage Bonds issued August 8, 2002).

                                       94

                                  SCHEDULE 7.19

           RESTRICTIONS ON DISTRIBUTIONS AND EXISTING NEGATIVE PLEDGES

1.   Enserco  Energy  Inc.  has  granted a security  interest in favor of Fortis
     Capital  Corp.,  with respect to Enserco  Energy Inc.'s  personal  property
     assets  to  secure  the  $135,000,000  credit  facility  referred  to in on
     Schedule 7.15.

2.   Black Hills Energy Resources, Inc. has granted a security interest in favor
     of Fortis  Capital  Corp.,  with respect to Black Hills  Energy  Resources,
     Inc.'s personal  property assets to secure the $25,000,000  credit facility
     referred to on Schedule 7.15.

3.   Black Hills Power, Inc.  Indenture of Mortgage and Deed of Trust contains a
     provision  which  prohibits  the payment of dividends  should the Company's
     retained  earnings amount not meet certain  minimal  levels.  Currently the
     Company is required to maintain a retained  earnings  level of greater than
     $318,000 for dividend payments to be allowed under the indenture.

4.   Substantially  all of Black Hills Energy  Capital,  Inc.'s project  finance
     subsidiaries'   nonrecourse  debt  contain   restrictions   which  prohibit
     distributions unless certain financial covenants limits are met.

Dividends on Black Hills Corporation's preferred stock must be paid or declared
and set apart for payment before any dividends may be paid or declared and set
apart for payment on the Company's common stock. The Company's preferred stock
is cumulative.

                                       95

Execution Copy                                                  Exhibit 10.2

- ----------------------------------------------------------------------------

                              TERM CREDIT AGREEMENT

                                   DATED AS OF

                               SEPTEMBER 25, 2002

                                      AMONG

                            BLACK HILLS CORPORATION,
                                  as Borrower,

                    THE FINANCIAL INSTITUTIONS PARTY HERETO,
                                    as Banks,

                                       AND

                        CREDIT LYONNAIS NEW YORK BRANCH,
                            as Administrative Agent,

- -----------------------------------------------------------------------------

                                TABLE OF CONTENTS

              (This Table of Contents is not part of the Agreement)

                                                                                                                PAGE
SECTION 1         DEFINITIONS; INTERPRETATION.....................................................................1
                                                                                                    
         Section 1.1       Definitions............................................................................1
         Section 1.2       Interpretation........................................................................12
SECTION 2         THE CREDITS....................................................................................12
         Section 2.1       The Term Loan.........................................................................12
         Section 2.2       [Intentionally Omitted]...............................................................13
         Section 2.3       Applicable Interest Rates. (a) Base Rate Loans........................................13
         Section 2.4       Minimum Borrowing Amounts.............................................................14
         Section 2.5       Manner of Borrowing Loans and Designating Interest Rates Applicable
                  to Loans 15
         Section 2.6       Interest Periods......................................................................16
         Section 2.7       Maturity of Loans.....................................................................17
         Section 2.8       Prepayments...........................................................................17
         Section 2.9       Default Rate..........................................................................17
         Section 2.10      The Notes.............................................................................18
         Section 2.11      Funding Indemnity.....................................................................18
SECTION 3         FEES...........................................................................................19
         Section 3.1       Fees..................................................................................19
SECTION 4         PLACE AND APPLICATION OF PAYMENTS..............................................................19
         Section 4.1       Place and Application of Payments.....................................................19
SECTION 5         REPRESENTATIONS AND WARRANTIES.................................................................19
         Section 5.1       Corporate Organization and Authority..................................................19
         Section 5.2       Subsidiaries..........................................................................20
         Section 5.3       Corporate Authority and Validity of Obligations.......................................20
         Section 5.4       Financial Statements..................................................................20
         Section 5.5       No Litigation; No Labor Controversies.................................................21
         Section 5.6       Taxes.................................................................................21
         Section 5.7       Approvals.............................................................................21
         Section 5.8       ERISA.................................................................................21
         Section 5.9       Government Regulation.................................................................21
         Section 5.10      Margin Stock; Use of Proceeds.........................................................22
         Section 5.11      Licenses and Authorizations; Compliance with Laws. (a)................................22
         Section 5.12      Ownership of Property; Liens..........................................................22
         Section 5.13      No Burdensome Restrictions; Compliance with Agreements................................23
         Section 5.14      Full Disclosure.......................................................................23
         Section 5.15      Solvency..............................................................................23
SECTION 6         CONDITIONS PRECEDENT...........................................................................23
         Section 6.1       Initial Credit Event..................................................................23
         Section 6.2       All Credit Events.....................................................................24
SECTION 7         COVENANTS......................................................................................25
         Section 7.1       Corporate Existence; Subsidiaries.....................................................25
         Section 7.2       Maintenance...........................................................................25
         Section 7.3       Taxes.................................................................................25

                                        i

         Section 7.4       ERISA.................................................................................25
         Section 7.5       Insurance.............................................................................26
         Section 7.6       Financial Reports and Other Information...............................................26
         Section 7.7       Bank Inspection Rights................................................................28
         Section 7.8       Conduct of Business...................................................................28
         Section 7.9       Liens.................................................................................28
         Section 7.10      Use of Proceeds; Regulation U.........................................................28
         Section 7.11      Sales and Leasebacks..................................................................28
         Section 7.12      Mergers, Consolidations and Sales of Assets...........................................29
         Section 7.13      Use of Property and Facilities; Environmental and Health and Safety Laws..............30
         Section 7.14      Investments, Acquisitions, Loans, Advances and Guaranties.............................30
         Section 7.15      Restrictions on Indebtedness..........................................................32
         Section 7.16      Consolidated Net Worth................................................................34
         Section 7.17      Recourse Leverage Ratio...............................................................34
         Section 7.18      Fixed Charge Coverage Ratio...........................................................34
         Section 7.19      Dividends and Other Shareholder Distributions.........................................34
         Section 7.20      No Negative Pledge....................................................................34
         Section 7.21      Transactions with Affiliates..........................................................35
         Section 7.22      Compliance with Laws..................................................................35
         Section 7.23      Pari-Passu............................................................................35
         Section 7.24      Certain Subsidiaries..................................................................35
         Section 7.25      Ratings...............................................................................35
         Section 7.26      Liquidity Covenant....................................................................35
         Section 7.27      Existing Credit Agreements............................................................35
SECTION 8         EVENTS OF DEFAULT AND REMEDIES.................................................................35
         Section 8.1       Events of Default.....................................................................36
         Section 8.2       Non-Bankruptcy Defaults...............................................................37
         Section 8.3       Bankruptcy Defaults...................................................................38
         Section 8.4       [Intentionally Omitted]...............................................................38
         Section 8.5       Expenses..............................................................................38
SECTION 9         CHANGE IN CIRCUMSTANCES........................................................................38
         Section 9.1       Change of Law.........................................................................38
         Section 9.2       Unavailability of Deposits or Inability to Ascertain, or Inadequacy of, LIBOR.........38
         Section 9.3       Increased Cost and Reduced Return.....................................................39
         Section 9.4       Lending Offices.......................................................................40
         Section 9.5       Discretion of Bank as to Manner of Funding............................................40
SECTION 10        THE AGENT......................................................................................40
         Section 10.1      Appointment and Authorization of Administrative Agent.................................40
         Section 10.2      Administrative Agent and its Affiliates...............................................41
         Section 10.3      Action by Administrative Agent........................................................41
         Section 10.4      Consultation with Experts.............................................................41
         Section 10.5      Liability of Administrative Agent; Credit Decision....................................41
         Section 10.6      Indemnity.............................................................................42
         Section 10.7      Resignation of Administrative Agent and Successor Administrative Agent................42

                                       ii

SECTION 11        MISCELLANEOUS..................................................................................43
         Section 11.1      Withholding Taxes.....................................................................43
         Section 11.2      No Waiver of Rights...................................................................44
         Section 11.3      Non-Business Day......................................................................44
         Section 11.4      Documentary Taxes.....................................................................44
         Section 11.5      Survival of Representations...........................................................44
         Section 11.6      Survival of Indemnities...............................................................45
         Section 11.7      Set-Off...............................................................................45
         Section 11.8      Notices...............................................................................45
         Section 11.9      Counterparts..........................................................................46
         Section 11.10     Successors and Assigns................................................................46
         Section 11.11     Participants and Note Assignees.......................................................47
         Section 11.12     Assignments by Banks..................................................................47
         Section 11.13     Amendments............................................................................48
         Section 11.14     Headings..............................................................................48
         Section 11.15     Legal Fees, Other Costs and Indemnification...........................................48
         Section 11.16     Entire Agreement......................................................................49
         Section 11.17     Construction..........................................................................49
         Section 11.18     Governing Law.........................................................................49
         Section 11.19     SUBMISSION TO JURISDICTION; WAIVER OF JURY TRIAL......................................49
         Section 11.20     Replacement of Bank...................................................................49
         Section 11.21     Confidentiality.......................................................................50

                                      iii

EXHIBITS

         A        -                 Form of Note
         B        -                 Form of Compliance Certificate

SCHEDULES

         SCHEDULE 1       Pricing Grid
         SCHEDULE 4       Administrative Agent Notice and Payment Info
         SCHEDULE 5.2     Schedule of Existing Subsidiaries
         SCHEDULE 5.5     Litigation and Labor Controversies
         SCHEDULE 5.11    Environmental Matters
         SCHEDULE 7.9     Existing Liens
         SCHEDULE 7.14    Existing Investments
         SCHEDULE 7.15(a) Marketing Subsidiary Indebtedness
         SCHEDULE 7.15(b) Existing Secured Indebtedness
         SCHEDULE 7.19    Restrictions on Distributions and Existing Negative
                          Pledges

                                       iv

                              TERM CREDIT AGREEMENT

         TERM CREDIT AGREEMENT, dated as of September 25, 2002 among Black Hills
Corporation, a South Dakota corporation ("Borrower"), the financial institutions
from time to time party hereto (each a "Bank," and collectively the "Banks"),
and Credit Lyonnais New York Branch in its capacity as agent for the Banks
hereunder (in such capacity, the "Administrative Agent").

                                WITNESSETH THAT:

         WHEREAS, the Borrower desires to obtain the several commitments of the
Banks to make available a term loan, as described herein; and

         WHEREAS, the Banks are willing to extend such commitments subject to
all of the terms and conditions hereof and on the basis of the representations
and warranties hereinafter set forth.

         NOW, THEREFORE, in consideration of the recitals set forth above and
for other good and valuable consideration, the receipt and adequacy of which are
hereby acknowledged, the parties hereto hereby agree as follows:

     SECTION 1 DEFINITIONS; INTERPRETATION.

     Section  1.1  Definitions.  The  following  terms when used herein have the
following meanings:

     "Adjusted  Consolidated  EBITDA" means,  for any period,  (A)  Consolidated
EBITDA less (B) Restricted Earnings.

     "Adjusted LIBOR" is defined in Section 2.3(b) hereof.

     "Affiliate"  means,  as to any Person,  any other Person which  directly or
indirectly controls,  or is under common control with, or is controlled by, such
Person. As used in this definition, "control" (including, with their correlative
meanings,  "controlled  by" and "under common control  with") means  possession,
directly or indirectly,  of power to direct or cause the direction of management
or policies of a Person (whether through  ownership of securities or partnership
or other ownership interests,  by contract or otherwise),  provided that, in any
event for purposes of this  definition:  (i) any Person  which owns  directly or
indirectly twenty percent (20%) or more of the securities having ordinary voting
power for the election of directors or other  governing body of a corporation or
twenty percent (20%) or more of the partnership or other ownership  interests of
any other Person will be deemed to control such corporation or other Person; and
(ii) each  director  and  executive  officer of  Borrower or any  Subsidiary  of
Borrower shall be deemed an Affiliate of Borrower and each of its Subsidiaries.

     "Administrative  Agent" is defined in the first paragraph of this Agreement
and includes any successor Administrative Agent pursuant to Section 10.7 hereof.

                                       1

         "Agreement" means this Term Credit Agreement, including all Exhibits
and Schedules hereto, as it may be amended, supplemented or otherwise modified
from time to time in accordance with the terms hereof.

         "Applicable Margin" means, at any time (i) with respect to Base Rate
Loans, the Base Rate Margin and (ii) with respect to Eurodollar Loans, the
Eurodollar Margin.

         "Applicable Telerate Page" is defined in Section 2.3(b) hereof.

         "Authorized Representative" means those persons shown on the list of
officers provided by Borrower pursuant to Section 6.1(e) hereof, or on any
updated such list provided by Borrower to the Administrative Agent, or any
further or different officer of Borrower so named by any Authorized
Representative of Borrower in a written notice to the Administrative Agent.

         "Bank" and "Banks" are defined in the first paragraph of this
Agreement.

         "Base Rate" is defined in Section 2.3(a) hereof.

         "Base Rate Loan" means a Loan bearing interest prior to maturity at a
rate specified in Section 2.3(a) hereof.

         "Base Rate Margin" means the percentage set forth in Schedule 1 hereto
beside the then applicable Level.

         "BHP" means Black Hills Power, Inc., a South Dakota corporation.

         "Borrower" is defined in the first paragraph of this Agreement.

         "Borrowing" means the total of Loans of a single type advanced,
continued for an additional Interest Period, or converted from a different type
into such type by the Banks on a single date and for a single Interest Period.
Borrowings of Loans are made by and maintained ratably for each of the Banks
according to their Percentages. A Borrowing is "advanced" on the day Banks
advance funds comprising such Borrowing to Borrower, is "continued" on the date
a new Interest Period for the same type of Loans commences for such Borrowing
and is "converted" when such Borrowing is changed from one type of Loan to the
other, all as requested by Borrower pursuant to Section 2.5(a).

         "Business Day" means any day other than a Saturday or Sunday on which
Banks are not authorized or required to close in New York, New York or Rapid
City, South Dakota and, if the applicable Business Day relates to the borrowing
or payment of a Eurodollar Loan, on which banks are dealing in U.S. Dollars in
the interbank market in London, England.

         "Capital" means, as of any date of determination thereof, without
duplication, the sum of (A) Consolidated Net Worth plus (B) all Recourse
Indebtedness (provided that for purposes of clause (B) of this definition, to
the extent otherwise included, Indebtedness of Marketing Subsidiaries in an
aggregate amount not to exceed the Marketing Subsidiary Indebtedness Limit
incurred under Marketing Subsidiary Excluded Credit Facilities shall not be
deemed to be Recourse Indebtedness).

                                       2

         "Capital Lease" means at any date any lease of Property which, in
accordance with GAAP, would be required to be capitalized on the balance sheet
of the lessee.

         "Capitalized Lease Obligations" means, for any Person, the amount of
such Person's liabilities under Capital Leases determined at any date in
accordance with GAAP.

         "Change of Control Event" means one or more of the following events:

               (a) less than a majority of the members of the Board of Directors
          of Borrower  shall be persons who either (i) were serving as directors
          on the Effective Date or (ii) were nominated as directors and approved
          by the  vote  of the  majority  of the  directors  who  are  directors
          referred to in clause (i) above or this clause (ii); or

               (b) the  stockholders  of  Borrower  shall  approve  any  plan or
          proposal for the liquidation or dissolution of Borrower; or

               (c) a Person or group of Persons  acting in concert  (other  than
          the  direct  or  indirect  beneficial  owners of the  Voting  Stock of
          Borrower as of the Effective  Date) shall,  as a result of a tender or
          exchange offer, open market purchases,  privately negotiated purchases
          or  otherwise,  have  become the direct or indirect  beneficial  owner
          (within the meaning of Rule 13d-3 under the Securities Exchange Act of
          1934,  as  amended  from  time to time) of  Voting  Stock of  Borrower
          representing  more than ten percent (10%) of the combined voting power
          of the outstanding  Voting Stock or other ownership  interests for the
          election of  directors  or shall have the right to elect a majority of
          the Board of Directors of Borrower; or

               (d) Except as permitted by Section 7.12,  Borrower  ceases at any
          time to own one hundred  percent  (100%) of the Voting Stock and other
          equity interest of any Material Subsidiary.

         "Code" means the Internal Revenue Code of 1986, as amended.

         "Commitment" and "Commitments" are defined in Section 2.1 hereof.

         "Compliance Certificate" means a certificate in the form of Exhibit B
hereto.

         "Consolidated Assets" means all assets which should be listed on the
consolidated balance sheet of Borrower and its Consolidated Subsidiaries, as
determined on a consolidated basis in accordance with GAAP.

         "Consolidated EBITDA" means, for any period, for Borrower and its
Consolidated Subsidiaries on a consolidated basis, (A) the sum of the amounts
for such period of (i) Consolidated Net Income, (ii) to the extent deducted in
arriving at Consolidated Net Income, net federal, state and local income taxes
in respect of such period, (iii) to the extent deducted in arriving at
Consolidated Net Income, Consolidated Interest Expense, (iv) to the extent
deducted in arriving at Consolidated Net Income, the amount charged for the
amortization of intangible assets, (v) to the extent deducted in arriving at
Consolidated Net Income, the amount charged for the depreciation of assets, and
(vi) to the extent deducted in arriving at Consolidated Net Income, losses on
sales of assets (excluding sales in the ordinary course of business) and other

                                       3

extraordinary losses, less (B) the amount for such period of (i) to the extent
added in arriving at Consolidated Net Income, interest income arising from
traditional investment activities with banks, investments banks and other
financial institutions or relating to governmental or other marketable
securities, (ii) to the extent added in arriving at Consolidated Net Income,
gains on sales of assets (excluding sales in the ordinary course of business)
and other extraordinary gains, all as determined on a consolidated basis in
accordance with GAAP, (iii) any maintenance capital expenditures made by the
Borrower or its Consolidated Subsidiaries in such period, (iv) without
duplication, any payments made by a Consolidated Subsidiary constituting a
repayment of principal Indebtedness (other than (x) the Obligations and (y)
repayments of principal made with the proceeds of a refinancing of such
Indebtedness otherwise permitted pursuant to this Agreement) or with respect to
a reserve, and (v) without duplication, any other mandatory payment made by a
Consolidated Subsidiary in such period not included as an expense or loss in
calculating Consolidated Net Income.

         "Consolidated Fixed Charges" means, for any period and without
duplication the sum of (i) the aggregate amount of Consolidated Interest Expense
with respect to Recourse Indebtedness paid or scheduled to be paid for such
period, and (ii) the aggregate amount of all mandatory scheduled payments
(whether designated as payments or prepayments) and scheduled sinking fund
payments with respect to principal of any Recourse Indebtedness of the Borrower
or its Subsidiaries (including payments in the nature of principal under Capital
Leases).

         "Consolidated Interest Expense" means, with reference to any period of
the Borrower and its Subsidiaries, the sum of (i) all interest charges
(including capitalized interest, imputed interest charges with respect to
Capitalized Lease Obligations and all amortization of debt discount and expense
and other deferred financing charges) of the Borrower and its Subsidiaries on a
consolidated basis for such period determined in accordance with GAAP, other
than interest charges relating to Non-Recourse Indebtedness, (ii) all commitment
or other fees payable in respect of the issuance of standby letters of credit or
other credit facilities for the account of the Borrower or its Subsidiaries, and
(iii) net costs/expenses incurred by the Borrower and its Subsidiaries under
Derivative Arrangements.

         "Consolidated Net Income" means, for any period of the Borrower and its
Consolidated Subsidiaries, the amount for such period of consolidated net income
(or net loss) of the Borrower and its Consolidated Subsidiaries, as determined
on a consolidated basis in accordance with GAAP.

         "Consolidated Net Worth" means, as of any time the same is to be
determined, the total shareholders' equity (including capital stock, additional
paid-in-capital and retained earnings after deducting treasury stock, but
excluding (to the extent otherwise included in calculating shareholders'
equity), minority interests in Subsidiaries) which would appear on the
consolidated balance sheet of Borrower determined on a consolidated basis in
accordance with GAAP.

         "Consolidated Subsidiary" means, as to any Person, each subsidiary of
such Person (whether now existing or hereafter created or acquired) the
financial statements of which shall be (or should have been) consolidated, with
the financial statements of such Person in accordance with GAAP, including
principles of consolidation.

                                       4

          "Contractual Obligation" means, as to any Person, any provision of any
security issued by such Person or of any agreement, instrument or undertaking to
which such Person is a party or by which it or any of its Property is bound.

         "Controlled Group" means all members of a controlled group of
corporations and all trades and businesses (whether or not incorporated) under
common control that, together with Borrower or any of its Subsidiaries, are
treated as a single employer under Section 414 of the Code.

         "Credit Documents" means this Agreement, the Notes, the Fee Letter and
all other documents executed in connection herewith or therewith.

         "Credit Event" means any Borrowing.

         "Default" means any event or condition the occurrence of which would,
with the passage of time or the giving of notice, or both, constitute an Event
of Default.

         "Derivative Arrangement" means any agreement (including any master
agreement and any agreement, whether or not in writing, relating to any single
transaction) that is an interest rate swap agreement, basis swap, forward rate
agreement, commodity swap, commodity option, equity or equity index swap or
option, bond option, interest rate option, forward foreign exchange agreement,
rate cap, collar or floor agreement, future agreement, currency swap agreement,
cross-currency rate swap agreement, swaption, currency option, that relates to
fluctuations in raw material prices or utility or energy prices or other costs,
or any other similar agreement, including any option to enter into any of the
foregoing, or any combination of any of the foregoing. "Derivative Arrangements"
shall include all such agreements or arrangements made or entered into at any
time, or in effect at any time, whether or not related to a Loan.

         "Derivative Obligations" means, with respect to any Person, all
liabilities of such Person under any Derivative Arrangement (including but not
limited to obligations and liabilities arising in connection with or as a result
of early or premature termination of a Derivative Arrangement, whether or not
occurring as a result of a default thereunder), absolute or contingent, now or
hereafter existing or incurred or due or to become due.

         "Effective Date" means September 25, 2002.

         "Environmental and Health Laws" means any and all federal, state, local
and foreign statutes, laws, regulations, ordinances, judgments, permits and
other governmental rules or restrictions relating to human health, safety
(including without limitation occupational safety and health standards), or the
environment or to emissions, discharges or releases of pollutants, contaminants,
hazardous or toxic substances, wastes or any other controlled or regulated
substance into the environment, including without limitation Hazardous Material,
ambient air, surface water, ground water or land, or otherwise relating to the
manufacture, processing, distribution, use, treatment, storage, disposal,
transport or handling of pollutants, contaminants, hazardous or toxic
substances, wastes or any other controlled or regulated substance or the
clean-up or other remediation thereof.

         "ERISA" is defined in Section 5.8 hereof.

                                       5

         "Eurodollar Loan" means a Loan bearing interest prior to its maturity
at the rate specified in Section 2.3(b) hereof.

         "Eurodollar Margin" means the percentage set forth in Schedule 1 hereto
beside the then applicable Level.

         "Eurodollar Reserve Percentage" is defined in Section 2.3(b) hereof.

         "Event of Default" means any of the events or circumstances specified
in Section 8.1 hereof.

         "Existing Credit Agreements" means that certain Amended and Restated
364-Day Credit Agreement dated as of August 27, 2002 and that certain 3-Year
Credit Agreement dated as of August 28, 2001, each among the Borrower, the
financial institutions from time to time party thereto, U.S. Bank and
ScotiaBank, in their capacity as documentation agents for the Banks thereunder
(in such capacity, "Documentation Agents"), UBOC and BMO, in their capacity as
syndication agents for the Banks thereunder (in such capacity, "Syndication
Agents") and ABN AMRO Bank N.V. in its capacity as Administrative Agent for such
financial institutions.

          "Federal Funds Rate" means, for any period, a fluctuating interest
rate per annum equal for each day during such period to:

               (a) the weighted average of the rates on overnight  federal funds
          transactions  with members of the United States Federal Reserve System
          arranged by federal funds  brokers,  as published for such day (or, if
          such day is not a Business Day, for the next  preceding  Business Day)
          by the United States Federal Reserve Bank of New York; or

               (b) if such  rate is not so  published  for  any day  which  is a
          Business  Day,  the  average  of the  quotations  for such day on such
          transactions  received by the Administrative  Agent from three federal
          funds brokers of recognized standing selected by it.

         "Fee Letter" means that certain letter among the Administrative Agent
and Borrower pertaining to fees to be paid by Borrower to the Administrative
Agent for its sole account and benefit.

         "Fixed Charge Coverage Ratio" means, for any period of four consecutive
quarters of the Borrower ending with the most recently completed such fiscal
quarter, the ratio of (A) Adjusted Consolidated EBITDA to (B) Consolidated Fixed
Charges for such period.

         "GAAP" means generally accepted accounting principles as in effect in
the United States from time to time, applied by Borrower and its Subsidiaries on
a basis consistent with the preparation of Borrower's financial statements
furnished to the Banks as described in Section 5.4 hereof.

         "Guarantee" means, in respect of any Person, any obligation, contingent
or otherwise, of such Person directly or indirectly guaranteeing any
Indebtedness or other obligations of another Person, including, without
limitation, by means of an agreement to purchase or pay (or advance or supply
funds for the purchase or payment of) such Indebtedness or to maintain financial

                                       6

covenants, or to assure the payment of such Indebtedness by an agreement to make
payments in respect of goods or services regardless of whether delivered, or
otherwise, provided, that the term "Guarantee" shall not include endorsements
for deposit or collection in the ordinary course of business; and such term when
used as a verb shall have a correlative meaning.

         "Hazardous Material" means any substance or material which is hazardous
or toxic, and includes, without limitation, (a) asbestos, polychlorinated
biphenyls, dioxins and petroleum or its by-products or derivatives (including
crude oil or any fraction thereof) and (b) any other material or substance
classified or regulated as "hazardous" or "toxic" pursuant to any Environmental
and Health Law.

         "Immaterial Subsidiary" shall mean, any direct or indirect subsidiary
of Borrower (i) whose total assets (as determined in accordance with GAAP) do
not represent at least five percent (5%) of the total assets (as determined in
accordance with GAAP) of Borrower and its subsidiaries on a consolidated basis
or (ii) whose total revenues (as determined in accordance with GAAP) do not
represent at least five percent (5%) of the total revenues (as determined in
accordance with GAAP) of Borrower and its subsidiaries on a consolidated basis,
provided that no subsidiary shall be deemed an Immaterial Subsidiary to the
extent (a) the total assets of such subsidiary, when combined with the total
assets of other subsidiaries which are Immaterial Subsidiaries, represent at
least ten percent (10%) of the total assets (as determined in accordance with
GAAP) of Borrower and its subsidiaries on a consolidated basis or (ii) the total
revenues of such subsidiary, when combined with the total revenues of other
Immaterial Subsidiaries, (as determined in accordance with GAAP) represent at
least ten percent (10%) of the total revenues (as determined in accordance with
GAAP) of Borrower and its subsidiaries on a consolidated basis. As used in this
definition "subsidiary" shall mean any Person whose financial statements are
consolidated into the financial statements of Borrower in accordance with GAAP.

         "Indebtedness" means, as to any Person, without duplication: (i) all
obligations of such Person for borrowed money or evidenced by bonds, debentures,
notes or similar instruments; (ii) all obligations of such Person for the
deferred purchase price of property or services (other than in respect of trade
accounts payable arising in the ordinary course of business which are not
past-due); (iii) all Capitalized Lease Obligations of such Person; (iv) all
Indebtedness of others secured by a Lien on any properties, assets or revenues
of such Person (other than stock, partnership interests or other equity
interests of Borrower or any Subsidiary of Borrower in other entities) to the
extent of the lesser of the value of the property subject to such Lien or the
amount of such Indebtedness; (v) all Guarantees issued by such Person, provided
that Long-Term Guaranties shall not be deemed "Indebtedness" for purposes of
calculating Borrower's compliance with the financial covenants set forth in
Sections 7.16, 7.17 and 7.18 hereof; (vi) all obligations of such Person,
contingent or otherwise, in respect of any letters or credit (whether commercial
or standby) or bankers' acceptances, (vii) all Derivative Obligations of such
Person, provided that for purposes of determining Borrower's compliance with the
financial covenants set forth herein, only Borrower's Derivative Obligations
under Derivative Arrangements which must be marked-to-market in accordance with
GAAP shall be included as Indebtedness of Borrower, and (viii) all obligations
of such Person under synthetic (and similar type) lease arrangements, provided
that for purposes of calculating such Person's Indebtedness under such synthetic
(or similar type) lease arrangements, such lease arrangement shall be treated as
if it were a Capitalized Lease.

                                       7

         "Interest Period" is defined in Section 2.6 hereof.

         "Investments" is defined in Section 7.14.

         "L/C Obligations" has the same meaning herein as in the 3-Year Credit
Agreement.

         "Lending Office" is defined in Section 9.4 hereof.

         "Level I Status" means Borrower's S&P Rating is BBB or higher and its
Moody's Rating is Baa2 or higher.

         "Level II Status" means Level I Status does not exist, but Borrower's
S&P Rating is BBB- or higher and its Moody's Rating is Baa3 or higher.

         "Level III Status" means neither Level I Status nor Level II Status
exists.

         "LIBOR" is defined in Section 2.3(b) hereof.

         "Lien" means any interest in Property securing an obligation owed to,
or a claim by, a Person other than the owner of the Property, whether such
interest is based on the common law, statute or contract, including, but not
limited to, the security interest or lien arising from a mortgage, encumbrance,
pledge, conditional sale, security agreement or trust receipt, or a lease,
consignment or bailment for security purposes. For the purposes of this
definition, a Person shall be deemed to be the owner of any Property which it
has acquired or holds subject to a conditional sale agreement, Capital Lease or
other arrangement pursuant to which title to the Property has been retained by
or vested in some other Person for security purposes, and such retention of
title shall constitute a "Lien."

         "Liquid Assets" means, as the date of any calculation thereof, the sum
of (i) the amount of unrestricted cash which the Borrower then has available,
plus (ii) the aggregate amount of then available (meaning the Borrower is
entitled to borrow such amounts pursuant to the applicable documentation) unused
capacity under the Borrower's senior unsecured credit facilities (including the
Existing Credit Agreements).

         "Loan" and "Loans" are defined in Section 2.1 hereof and includes a
Base Rate Loan or Eurodollar Loan, each of which is a "type" of Loan hereunder.

         "Long-Term Guarantee" means (i) any Guarantee issued by Borrower or its
Subsidiaries under which the holder or beneficiary of such Guarantee is not
permitted under any circumstance or contingency to make demand or exercise any
other remedies under such Guarantee prior to the Termination Date, as extended
from time to time in accordance with the terms hereof and (ii) any coal mining
reclamation bonds or contingent indemnity or reimbursement obligations with
respect to such reclamation bonds (so long as such reclamation bonds have not
been called upon).

         "Marketing Subsidiary" means each of Black Hills Energy Resources, Inc.
a South Dakota corporation,  and Enserco Energy, Inc., a South Dakota
corporation, and their respective subsidiaries.

                                       8

         "Marketing Subsidiary Excluded Credit Facilities" means those certain
credit facilities of the Marketing Subsidiaries described on Schedule 7.15(a)
hereof, as such credit facilities are in effect on the Effective Date, provided
that such credit facilities shall cease to be Marketing Subsidiary Excluded
Credit Facilities to the extent availability thereunder is increased, any
substantive term thereof is materially modified, or such credit facility is
extended more than once in any fiscal year for a period of more than one year.
Any replacement credit facility of a Marketing Subsidiary Excluded Credit
Facility shall be deemed a Marketing Subsidiary Excluded Credit Facility only if
such replacement credit facility contains terms substantially the same as the
Marketing Subsidiary Excluded Credit Facility being replaced (including tenor)
or is approved in writing by the Required Banks.

         "Marketing Subsidiary Indebtedness Limit" means the sum of (i)
aggregate amount of credit availability (used or unused) under Marketing
Subsidiary Excluded Credit Facilities as of the Effective Date and (ii)
$25,000,000.

         "Material Adverse Effect" means a material adverse effect on (i) the
business, financial position or results of operations of Borrower or Borrower
and its Subsidiaries taken as a whole, (ii) the ability of Borrower to perform
its material obligations under the Credit Documents, (iii) the validity or
enforceability of the material obligations of Borrower under any Credit
Document, (iv) the rights and remedies of the Banks or the Administrative Agent
against Borrower; or (v) the timely payment of the principal of and interest on
the Loans or other amounts payable by Borrower hereunder, provided, that a
downgrade of Borrower's S&P Rating and/or Moody's Rating shall not, in and of
itself, be deemed a "Material Adverse Effect" for purposes of this Agreement.

         "Material  Subsidiaries"  means  BHP,  Black  Hills  Energy,  Inc.,  a
South  Dakota  corporation,  Wyodak Resources Development Corp., a Delaware
corporation,  Black Hills Energy Capital,  Inc., a Delaware corporation and
any other Subsidiary of Borrower which is not either an Immaterial Subsidiary
or a Project Finance Subsidiary.

         "Moody's Rating" means the rating assigned by Moody's Investors
Service, Inc. and any successor thereto that is a nationally recognized rating
agency to the outstanding senior unsecured non-credit enhanced long-term
indebtedness of a Person (or if neither Moody's Investors Service, Inc. nor any
such successor shall be in the business of rating long-term indebtedness, a
nationally recognized rating agency in the United States of America as mutually
agreed between the Required Banks and Borrower). Any reference in this Agreement
to any specific rating is a reference to such rating as currently defined by
Moody's Investors Service, Inc. (or such a successor) and shall be deemed to
refer to the equivalent rating if such rating system changes.

         "Non-Recourse Indebtedness" means, without duplication, all
Indebtedness of Borrower and its Consolidated Subsidiaries determined on a
consolidated basis in accordance with GAAP incurred in connection with project
financings (including project financings of existing assets the proceeds of
which are used to refinance such assets) as to which the holder of such
Indebtedness has recourse solely against the assets which were purchased or
refinanced with, or leased in connection with, such Indebtedness and not against
Borrower or a Consolidated Subsidiary of Borrower other than a Project Finance
Subsidiary or any of their other assets (whether directly, through a Guarantee
or otherwise), other than the pledge of the stock (or similar equity interest)

                                       9

of the Project Finance Subsidiary which incurred such Indebtedness. For purposes
of clarification, any Indebtedness of a Project Finance Subsidiary which would
otherwise constitute Non-Recourse Indebtedness but for the issuance by the
Borrower or a Consolidated Subsidiary of the Borrower of a Guarantee or other
document which provides recourse with respect to such Indebtedness, such
Indebtedness shall for all purposes of this Agreement be deemed Non-Recourse
Indebtedness so long as (i) the Borrower's or such Consolidated Subsidiary's
obligations under such Guarantee or other document are treated for all purposes
as Recourse Indebtedness hereunder, (ii) such Recourse Indebtedness of the
Borrower or such Consolidated Subsidiary is unsecured and is otherwise permitted
by this Agreement, and (iii) such Recourse Indebtedness of the Borrower or such
Consolidated Subsidiary does not in the aggregate exceed $100,000,000 at any one
time outstanding.

         "Note" is defined in Section 2.10(a) hereof.

         "Obligations" means all fees payable hereunder, all obligations of
Borrower to pay principal or interest on Loans, fees, expenses, indemnities, and
all other payment obligations of Borrower arising under or in relation to any
Credit Document.

         "Percentage" means, for each Bank, the percentage held by such Bank of
the aggregate principal amount of all outstanding Obligations.

         "Permitted Derivative Obligations" means all Derivative Obligations as
to which the Derivative Arrangements giving rise to such Derivative Obligation
are entered into in the ordinary course of business to hedge interest rate risk,
currency risk, commodity price risk or the production of Borrower or its
Subsidiaries (and not for speculative purposes) and if such Derivative
Obligation is an obligation of Borrower, such Derivative Obligation ranks no
greater than pari passu to the Obligations.

         "Person" means an individual, partnership, corporation, limited
liability company, association, trust, unincorporated organization or any other
entity or organization, including a government or any agency or political
subdivision thereof.

         "Plan " means at any time an employee pension benefit plan covered by
Title IV of ERISA or subject to the minimum funding standards under Section 412
of the Code that is either (i) maintained by a member of the Controlled Group or
(ii) maintained pursuant to a collective bargaining agreement or any other
arrangement under which more than one employer makes contributions and to which
a member of the Controlled Group is then making or accruing an obligation to
make contributions or has within the preceding five plan years made
contributions.

         "PBGC" is defined in Section 5.8 hereof.

         "Project Finance Subsidiary" means any special purpose Subsidiary of
Borrower created to limit the recourse of the creditors of such Subsidiary and
as to which the creditors and other holders of Indebtedness of such Subsidiary
have recourse solely against the assets of such Subsidiary and not against
Borrower or any other Subsidiary of Borrower or any of their other assets
(whether directly, through a Guarantee or otherwise) other than (i) pursuant to
a Guarantee permitted hereunder and (ii) the stock of such special purpose
Subsidiary (or similar equity interest).

                                       10

         "Property" means any interest in any kind of property or asset, whether
real, personal or mixed, or tangible or intangible, whether now owned or
hereafter acquired.

         "Recourse Indebtedness" means, without duplication, all Indebtedness of
Borrower and its Consolidated Subsidiaries determined on a consolidated basis in
accordance with GAAP other than Non-Recourse Indebtedness.

         "Recourse Leverage Ratio" means, as of any time the same is to be
determined, the ratio of the amount of (A) Recourse Indebtedness outstanding at
such time (provided that for purposes of clause (A) of this definition, to the
extent otherwise included, Indebtedness of Marketing Subsidiaries in an
aggregate amount not to exceed the Marketing Subsidiary Indebtedness Limit
incurred under Marketing Subsidiary Excluded Credit Facilities shall not be
deemed to be Recourse Indebtedness) to (B) the amount of Capital at such time.

         "Required Banks" means, as of the date of determination thereof, any
Banks holding in the aggregate more than fifty percent (50%) of the Percentages,
provided, that at any time there are two (2) or less Banks, Required Banks shall
mean Banks holding one hundred percent (100%) of the Percentages.

         "Restricted Earnings" means, for any period, the amount of all
Consolidated Net Income earned by each of Borrower's Consolidated Subsidiaries
during such period which may not be distributed or dividended to Borrower due to
contractual or other restrictions on such distributions or dividends.

         "SEC" means the United States Securities and Exchange Commission.

         "Security" has the same meaning as in Section 2(l) of the Securities
Act of 1933, as amended.

         "S&P Rating" means the rating assigned by Standard & Poor's Ratings
Group, a division of The McGraw-Hill Companies, Inc. and any successor thereto
that is a nationally recognized rating agency to the outstanding senior
unsecured non-credit enhanced long-term indebtedness of a Person (or, if neither
such division nor any successor shall be in the business of rating long-term
indebtedness, a nationally recognized rating agency in the United States as
mutually agreed between the Required Banks and Borrower). Any reference in this
Agreement to any specific rating is a reference to such rating as currently
defined by Standard & Poor's Ratings Group, a division of The McGraw-Hill
Companies, Inc. (or such a successor) and shall be deemed to refer to the
equivalent rating if such rating system changes.

         "Solvent" means that (a) the fair value of a Person's assets is in
excess of the total amount of such Person's debts, as determined in accordance
with the United States Bankruptcy Code, and (b) the present fair saleable value
of a Person's assets is in excess of the amount that will be required to pay
such Person's debts as they become absolute and matured. As used in this
definition, the term "debts" includes any legal liability, whether matured or
unmatured, liquidated or unliquidated, absolute, fixed or contingent, as
determined in accordance with the United States Bankruptcy Code.

                                       11

         "Subsidiary" means, as to Borrower, any corporation or other entity (i)
which is consolidated into the financial statements of such Borrower in
accordance with GAAP or (ii) of which more than fifty percent (50%) of the
outstanding stock or comparable equity interests having ordinary voting power
for the election of the Board of Directors of such corporation or similar
governing body in the case of a non-corporation (irrespective of whether or not,
at the time, stock or other equity interests of any other class or classes of
such corporation or other entity shall have or might have voting power by reason
of the happening of any contingency) is at the time directly or indirectly owned
by such Borrower or by one or more of its Subsidiaries.

          "Telerate Service" means the Dow Jones Telerate Service.

         "Termination Date" means September 30, 2004.

         "Unfunded Vested Liabilities" means, with respect to any Plan at any
time, the amount (if any) by which (i) the present value of all vested
nonforfeitable accrued benefits under such Plan exceeds (ii) the fair market
value of all Plan assets allocable to such benefits, all determined as of the
then most recent valuation date for such Plan, but only to the extent that such
excess represents a potential liability of a member of the Controlled Group to
the PBGC or the Plan under Title IV of ERISA.

         "U.S.  Dollars" and "$" each means the lawful currency of the United
States of America.

         "Voting Stock" of any Person means capital stock of any class or
classes or other equity interests (however designated) having ordinary voting
power for the election of directors or similar governing body of such Person.

          "Welfare Plan" means a "welfare plan", as defined in Section 3(l) of
ERISA.

         "Wholly-Owned" when used in connection with any Subsidiary means a
Subsidiary of which all of the issued and outstanding shares of stock or other
equity interests (other than directors' qualifying shares as required by law)
shall be owned by Borrower and/or one or more of its Wholly-Owned Subsidiaries.

     Section 1.2  Interpretation.  The  foregoing  definitions  shall be equally
applicable  to both the  singular  and plural  forms of the terms  defined.  All
references  to times of day in this  Agreement  shall be references to New York,
New York time unless otherwise specifically provided. The word "including" means
including  without  limiting the  generality of any  description  preceding such
term.  Where the character or amount of any asset or liability or item of income
or expense is required to be determined or any consolidation or other accounting
computation is required to be made for the purposes of this Agreement,  the same
shall be done in accordance  with GAAP in effect on the  Effective  Date, to the
extent  applicable,  except  where such  principles  are  inconsistent  with the
specific provisions of this Agreement.

     SECTION 2 THE CREDITS.

     Section  2.1 The Term  Loan.  Subject  to the terms and  conditions  hereof
(including Sections 6.1 and 6.2), each Bank, by its acceptance hereof, severally
agrees  to make a loan  (individually  a "Loan"  and  collectively  "Loans")  to
Borrower on the Effective Date in U.S.

                                       12

Dollars in an aggregate  amount equal to the amount of its  commitment set forth
on the applicable  signature page hereof (for each Bank, its  "Commitment"  and,
cumulatively  for all the Banks,  the  "Commitments").  After the making of such
Loans on the Effective Date, the  Commitments  shall terminate and no Bank shall
have any further  obligation to advance any new  Borrowings.  Each  Borrowing of
Loans shall be made ratably  from the Banks in  proportion  to their  respective
Percentages.  As provided in Section 2.5(a) hereof, Borrower may elect that each
Borrowing  of Loans be either  Base Rate Loans or  Eurodollar  Loans.  Any Loans
repaid  may not be  reborrowed.  Unless an  earlier  maturity  is  provided  for
hereunder,  all Loans  shall  mature and be due and  payable on the  Termination
Date.

     Section 2.2 [Intentionally Omitted].

     Section 2.3 Applicable  Interest Rates. (a) Base Rate Loans. Each Base Rate
Loan made or  maintained  by a Bank shall bear  interest  during  each  Interest
Period it is  outstanding  (computed  (x) at all times the Base Rate is based on
the rate  described in clause (i) of the definition  thereof,  on the basis of a
year of 365 or 366 days,  as  applicable,  and actual days elapsed or (y) at all
times  the  Base  Rate is  based on the rate  described  in  clause  (ii) of the
definition  thereof, on the basis of a year of 360 days and actual days elapsed)
on the unpaid  principal  amount  thereof  from the date such Loan is  advanced,
continued  or created  by  conversion  from a  Eurodollar  Loan  until  maturity
(whether by  acceleration  or otherwise) at a rate per annum equal to the sum of
the Applicable Margin plus the Base Rate from time to time in effect, payable on
the last day of its Interest Period and at maturity  (whether by acceleration or
otherwise).

         "Base Rate" means for any day the greater of:

          (i) the rate of interest  announced by the  Administrative  Agent from
     time to time as its prime rate, or equivalent, for U.S. Dollar loans within
     the  United  States as in effect on such day,  with any  change in the Base
     Rate  resulting  from a change in said prime rate to be effective as of the
     date of the relevant change in said prime rate; and

          (ii) the sum of (x) the Federal Funds Rate, plus (y)1/2of 1% (0.50%).

     (b) Eurodollar  Loans.  Each  Eurodollar  Loan made or maintained by a Bank
shall bear interest during each Interest  Period it is outstanding  (computed on
the basis of a year of 360 days and actual days elapsed) on the unpaid principal
amount  thereof  from the date such Loan is advanced,  continued,  or created by
conversion  from a Base Rate Loan until  maturity  (whether by  acceleration  or
otherwise)  at a rate per annum equal to the sum of the  Applicable  Margin plus
the Adjusted LIBOR applicable for such Interest Period,  payable on the last day
of the Interest  Period and at maturity  (whether by acceleration or otherwise),
and, if the applicable  Interest Period is longer than three months, on each day
occurring every three months after the commencement of such Interest Period.

         "Adjusted LIBOR" means, for any Borrowing of Eurodollar Loans, a rate
per annum determined in accordance with the following formula:

           Adjusted LIBOR =               LIBOR
                            ---------------------------------------------
                                  1 - Eurodollar Reserve Percentage

                                       13

         "LIBOR" means, for an Interest Period for a Borrowing of Eurodollar
Loans, (a) the LIBOR Index Rate for such Interest Period, if such rate is
available, and (b) if the LIBOR Index Rate cannot be determined, the
arithmetical average of the rates of interest per annum (rounded upwards, if
necessary, to the nearest one-sixteenth of one percent) at which deposits in
U.S. Dollars, in immediately available funds are offered to the Administrative
Agent at 11:00 a.m. (London, England time) two (2) Business Days before the
beginning of such Interest Period by major banks in the interbank eurodollar
market for delivery on the first day of and for a period equal to such Interest
Period in an amount equal or comparable to the principal amount of the smallest
Eurodollar Loan scheduled to be made by a Lender as part of such Borrowing.

         "LIBOR Index Rate" means, for any Interest Period, the rate per annum
(rounded upwards, if necessary, to the next higher one-sixteenth of one percent)
for deposits in U.S. Dollars for delivery on the first day of and for a period
equal to such Interest Period in an amount equal or comparable to the principal
amount of the smallest Eurodollar Loan scheduled to be made by a Lender as part
of such Borrowing, which appears on the Applicable Telerate Page as of 11:00
a.m. (London, England time) on the day two (2) Business Days before the
commencement of such Interest Period.

         "Applicable Telerate Page" means the display page designated as "Page
3750" on the Telerate Service (or such other pages as may replace any such page
on that service or such other service as may be nominated by the British
Bankers' Association as the information vendor for the purpose of displaying
British Bankers' Association Interest Settlement Rates for deposits in U.S.
Dollars).

         "Eurodollar Reserve Percentage" means for any Borrowing of Eurodollar
Loans from any Bank, the daily average for the applicable Interest Period of the
actual effective rate, expressed as a decimal, at which reserves (including,
without limitation, any supplemental, marginal and emergency reserves) are
maintained by such Bank during such Interest Period pursuant to Regulation D of
the Board of Governors of the Federal Reserve System (or any successor) on
"eurocurrency liabilities", as defined in such Board's Regulation D (or in
respect of any other category of liabilities that includes deposits by reference
to which the interest rate on Eurodollar Loans is determined or any category of
extensions of credit or other assets that include loans by non-United States
offices of any Bank to United States residents), subject to any amendments of
such reserve requirement by such Board or its successor, taking into account any
transitional adjustments thereto. For purposes of this definition, the
Eurodollar Loans shall be deemed to be "eurocurrency liabilities" as defined in
Regulation D without benefit or credit for any prorations, exemptions or offsets
under Regulation D.

     (c) Rate  Determinations.  The  Administrative  Agent shall  determine each
interest rate  applicable to  Obligations,  and a  determination  thereof by the
Administrative  Agent  shall be  conclusive  and  binding  except in the case of
manifest error.

     Section 2.4 Minimum  Borrowing  Amounts.  Each Borrowing of Base Rate Loans
and  Eurodollar  Loans shall be in an amount not less than (i) if such Borrowing
is comprised of Base Rate Loans,  $1,000,000 and integral  multiples of $500,000
in excess thereof,  and (ii) if such Borrowing is comprised of Eurodollar Loans,
$2,000,000 and integral multiples of $1,000,000 in excess thereof.

                                       14

     Section  2.5  Manner of  Borrowing  Loans and  Designating  Interest  Rates
Applicable to Loans.  (a) Notice to the  Administrative  Agent. (a) The Borrower
shall give notice to the  Administrative  Agent by no later than 12:00 noon (New
York time) on the Effective  Date  specifying  the amount of Loans it desires to
borrow pursuant to this Agreement.  The initial Borrowing of Loans shall be Base
Rate  Loans.  Thereafter,  Borrower  may from  time to time  elect to  change or
continue  the type of  interest  rate  borne by each  Borrowing  or,  subject to
Section 2.4's minimum  amount  requirement  for each  outstanding  Borrowing,  a
portion thereof,  as follows:  (i) if such Borrowing is of Eurodollar  Loans, on
the last day of the Interest Period  applicable  thereto,  Borrower may continue
part or all of such  Borrowing  as  Eurodollar  Loans for an Interest  Period or
Interest Periods  specified by Borrower or convert part or all of such Borrowing
into Base Rate Loans,  and (ii) if such Borrowing is of Base Rate Loans,  on any
Business Day, Borrower may convert all or part of such Borrowing into Eurodollar
Loans for an Interest Period or Interest Periods specified by Borrower. Borrower
shall give all such notices  requesting  the  continuation  or  conversion  of a
Borrowing to the  Administrative  Agent by telephone or telecopy  (which  notice
shall be  irrevocable  once  given  and,  if by  telephone,  shall  be  promptly
confirmed in writing).  Notices of the continuation of a Borrowing of Eurodollar
Loans for an additional Interest Period or of the conversion of part or all of a
Borrowing  of  Eurodollar  Loans into Base Rate Loans or of Base Rate Loans into
Eurodollar  Loans  must be given by no later  than 12:00 noon (New York time) at
least three (3) Business Days before the date of the requested  continuation  or
conversion.  All such notices  concerning  the  continuation  or conversion of a
Borrowing  shall be  irrevocable  once given and shall  specify  the date of the
requested  continuation or conversion of a Borrowing  (which shall be a Business
Day),  the amount of the requested  Borrowing to be continued or converted,  the
type of Loans to comprise  such new,  continued or converted  Borrowing  and, if
such  Borrowing is to be  comprised of  Eurodollar  Loans,  the Interest  Period
applicable  thereto.  Borrower agrees that the Administrative  Agent may rely on
any such  telephonic  or  telecopy  notice  given by any person it in good faith
believes is an Authorized  Representative  without the necessity of  independent
investigation,  and in the event any such notice by telephone conflicts with any
written confirmation,  such telephonic notice shall govern if the Administrative
Agent has acted in  reliance  thereon.  There may be no more than six  different
Interest  Periods  in effect  at any one time,  provided  that for  purposes  of
determining  the number of Interest  Periods in effect at any one time, all Base
Rate Loans shall be deemed to have one and the same Interest Period.

     (b)  Notice to the  Banks.  The  Administrative  Agent  shall  give  prompt
telephonic or telecopy notice to each Bank of any notice from Borrower  received
pursuant to Section 2.5(a) above. The Administrative  Agent shall give notice to
Borrower and each Bank by like means of the  interest  rate  applicable  to each
Borrowing of Eurodollar Loans.

     (c) Borrower'  Failure to Notify.  Any  outstanding  Borrowing of Base Rate
Loans shall,  subject to Section 6.2 hereof,  automatically  be continued for an
additional  Interest Period on the last day of its then current  Interest Period
unless Borrower has notified the Administrative Agent within the period required
by Section  2.5(a) that it intends to convert such Borrowing into a Borrowing of
Eurodollar Loans or notifies the Administrative Agent within the period required
by Section 2.8(a) that it intends to prepay such Borrowing. If Borrower fails to
give notice  pursuant to Section 2.5(a) above of the  continuation or conversion
of any outstanding  principal  amount of a Borrowing of Eurodollar  Loans before
the last day of its then current  Interest  Period within the period required by
Section 2.5(a) and has not notified the  Administrative  Agent within

                                       15

the period  required by Section 2.8(a) that it intends to prepay such Borrowing,
such Borrowing  shall  automatically  be converted into a Borrowing of Base Rate
Loans,  subject to Section 6.2 hereof. The  Administrative  Agent shall promptly
notify the Banks of Borrower's failure to so give a notice under Section 2.5(a).

     (d)  Disbursement of Loans. Not later than 2:00 p.m. (New York time) on the
Effective Date, subject to Section 6 hereof,  each Bank shall make available its
Loan comprising part of the initial Borrowing in funds immediately  available at
the principal  office of the  Administrative  Agent in New York,  New York.  The
Administrative   Agent  shall  make   available   to   Borrower   Loans  at  the
Administrative  Agent's  principal  office in New York,  New York or such  other
office as the  Administrative  Agent has  previously  agreed in  writing to with
Borrower, in each case in the type of funds received by the Administrative Agent
from the Banks.

     (e)   Administrative   Agent   Reliance   on  Bank   Funding.   Unless  the
Administrative Agent shall have been notified by a Bank before the date on which
such  Bank is  scheduled  to make  payment  to the  Administrative  Agent of the
proceeds of a Loan (which notice shall be effective upon receipt) that such Bank
does not intend to make such payment,  the Administrative  Agent may assume that
such Bank has made such  payment  when due and the  Administrative  Agent may in
reliance upon such  assumption  (but shall not be required to) make available to
Borrower  the  proceeds of the Loan to be made by such Bank and, if any Bank has
not in fact made such payment to the  Administrative  Agent, such Bank shall, on
demand,  pay to the  Administrative  Agent the amount made available to Borrower
attributable to such Bank together with interest  thereon in respect of each day
during the period  commencing  on the date such  amount  was made  available  to
Borrower  and ending on (but  excluding)  the date such Bank pays such amount to
the  Administrative  Agent  at a rate per  annum  equal to (i) from the date the
related  payment  was  made by the  Administrative  Agent  to the  date  two (2)
Business  Days after  payment by such Bank is due  hereunder,  the Federal Funds
Rate for each such day and (ii) from the date two (2)  Business  Days  after the
date such payment is due from such Bank to the date such payment is made by such
Bank,  the Base Rate in effect for each such day. If such amount is not received
from such Bank by the  Administrative  Agent  immediately upon demand,  Borrower
will,  on demand,  repay to the  Administrative  Agent the  proceeds of the Loan
attributable to such Bank with interest thereon at a rate per annum equal to the
interest rate applicable to the relevant Loan.

     Section 2.6 Interest Periods.  As provided in Section 2.5(a) hereof, at the
time of each request of a Borrowing of Eurodollar  Loans,  Borrower shall select
an Interest  Period  applicable to such Loans from among the available  options.
The term "Interest  Period" means the period  commencing on the date a Borrowing
of Loans is advanced, continued, or created by conversion and ending: (a) in the
case of Base Rate Loans,  on the last  Business Day of the  calendar  quarter in
which such Borrowing is advanced, continued, or created by conversion (or on the
last day of the following  calendar quarter if such Loan is advanced,  continued
or created by conversion on the last  Business Day of a calendar  quarter),  and
(b) in the case of Eurodollar Loans, 1, 2, 3, or 6 months thereafter;  provided,
however, that:

          (a) any  Interest  Period  for a  Borrowing  of Base Rate  Loans  that
     otherwise would end after the Termination Date shall end on the Termination
     Date;

                                       16

          (b) for any Borrowing of Eurodollar Loans,  Borrower may not select an
     Interest Period that extends beyond the Termination Date;

          (c) whenever the last day of any Interest  Period would otherwise be a
     day that is not a Business Day, the last day of such Interest  Period shall
     be extended to the next  succeeding  Business Day,  provided  that, if such
     extension would cause the last day of an Interest Period for a Borrowing of
     Eurodollar Loans to occur in the following  calendar month, the last day of
     such Interest Period shall be the immediately preceding Business Day; and

          (d) for purposes of determining an Interest  Period for a Borrowing of
     Eurodollar  Loans, a month means a period starting on one day in a calendar
     month and ending on the numerically  corresponding day in the next calendar
     month; provided, however, that if there is no numerically corresponding day
     in the  month  in which  such an  Interest  Period  is to end or if such an
     Interest Period begins on the last Business Day of a calendar  month,  then
     such  Interest  Period  shall end on the last  Business Day of the calendar
     month in which such Interest Period is to end.

     Section 2.7 Maturity of Loans.  Unless an earlier  maturity is provided for
hereunder  (whether by  acceleration or otherwise),  all Obligations  (including
principal and interest on all outstanding Loans) shall mature and become due and
payable by Borrower on the Termination Date.

     Section 2.8  Prepayments.  (a) (a) Borrower may prepay  without  premium or
penalty and in whole or in part (but, if in part, then (i) in an amount not less
than $5,000,000 and integral multiples of $1,000,000 in excess thereof, and (ii)
in an amount such that the minimum amount  required for a Borrowing  pursuant to
Section 2.4 hereof remains  outstanding)  any Borrowing of Eurodollar Loans upon
three (3) Business Days' prior irrevocable  notice to the  Administrative  Agent
or, in the case of a Borrowing of Base Rate Loans,  irrevocable notice delivered
to the Administrative Agent no later than 12:00 noon (New York time) on the date
of prepayment, such prepayment to be made by the payment of the principal amount
to be prepaid and accrued interest thereon to the date fixed for prepayment.  In
the case of Eurodollar  Loans,  any amounts owing under Section 2.11 hereof as a
result of such prepayment shall be paid  contemporaneously with such prepayment.
The  Administrative  Agent will promptly advise each Bank of any such prepayment
notice it  receives  from  Borrower.  Any  amount  paid or  prepaid  before  the
Termination Date may not be borrowed again.

     Section 2.9 Default  Rate.  If any payment of  principal or interest on any
Loan,  or  payment of any other  Obligation,  is not made when due  (whether  by
acceleration or otherwise),  such principal,  interest or other Obligation shall
bear  interest  (computed  on the  basis of a year of 360 days and  actual  days
elapsed or, if based on the rate  described in clause (i) of the  definition  of
Base Rate,  on the basis of a year of 365 or 366 days,  as  applicable,  and the
actual  number of days elapsed) from the date such payment was due until paid in
full, payable on demand, at a rate per annum equal to:

          (a)  for  any  Obligation  other  than a  Eurodollar  Loan  (including
     principal  and  interest  relating  to Base  Rate  Loans  and  interest  on
     Eurodollar  Loans),  the sum of two

                                       17

percent (2%) plus the Applicable Margin plus the Base Rate from time to time in
effect; and

          (b) for the principal of any  Eurodollar  Loan, the sum of two percent
     (2%)  plus the  rate of  interest  in  effect  thereon  at the time of such
     default  until  the end of the  Interest  Period  applicable  thereto  and,
     thereafter,  at a rate per annum equal to the sum of two percent  (2%) plus
     the Applicable Margin plus the Base Rate from time to time in effect.

     Section  2.10 The Notes.  (a) The Loans made to Borrower by each Bank shall
be evidenced by a single  promissory note of Borrower issued to such Bank in the
form of Exhibit A hereto.  Each such promissory note is hereinafter  referred to
as a "Note"  and  collectively  such  promissory  notes are  referred  to as the
"Notes."

     (a) Each Bank shall record on its books and records or on a schedule to its
Note the  amount of each Loan  advanced,  continued,  or  converted  by it,  all
payments of principal and interest and the  principal  balance from time to time
outstanding  thereon,  the type of such Loan, and, for any Eurodollar  Loan, the
Interest  Period and the interest rate applicable  thereto.  The record thereof,
whether  shown on such books and records of a Bank or on a schedule to any Note,
shall be prima facie evidence of the same; provided,  however,  that the failure
of any Bank to record any of the foregoing or any error in any such record shall
not limit or otherwise affect the obligation of Borrower to repay all Loans made
hereunder together with accrued interest thereon. At the request of any Bank and
upon such Bank  tendering to Borrower the Note to be  replaced,  Borrower  shall
furnish a new Note to such Bank to replace  any  outstanding  Note,  and at such
time the first  notation  appearing  on a schedule  on the  reverse  side of, or
attached to, such Note shall set forth the aggregate  unpaid principal amount of
all Loans, if any, then outstanding thereon.

     Section 2.11 Funding  Indemnity.  If any Bank shall incur any loss, cost or
expense  (including,  without  limitation,  any loss, cost or expense (excluding
loss of  margin)  incurred  by reason of the  liquidation  or  re-employment  of
deposits or other funds acquired by such Bank to fund or maintain any Eurodollar
Loan or the relending or reinvesting of such deposits or amounts paid or prepaid
to such Bank) as a result of:

          (a) any payment (whether by acceleration or otherwise),  prepayment or
     conversion  of a  Eurodollar  Loan on a date other than the last day of its
     Interest Period,

          (b) any  failure  (because  of a  failure  to meet the  conditions  of
     Section 6 or  otherwise)  by Borrower  to borrow or  continue a  Eurodollar
     Loan,  or to convert a Base Rate Loan into a Eurodollar  Loan,  on the date
     specified  in a notice  given  pursuant  to Section  2.5(a) or  established
     pursuant to Section 2.5(c) hereof,

          (c) any  failure by  Borrower  to make any  payment or  prepayment  of
     principal  on any  Eurodollar  Loan when due  (whether by  acceleration  or
     otherwise), or

          (d) any  acceleration of the maturity of a Eurodollar Loan as a result
     of the occurrence of any Event of Default hereunder,  then, upon the demand
     of such Bank, Borrower shall pay to such Bank such amount as will reimburse
     such Bank for such loss,  cost or  expense.  If any Bank makes such a claim
     for  compensation,  it  shall  provide  to

                                       18

     Borrower,  with a copy to the Administrative  Agent, a certificate executed
     by an officer of such Bank setting  forth the amount of such loss,  cost or
     expense in reasonable detail (including an explanation of the basis for and
     the  computation  of such loss,  cost or expense) and the amounts  shown on
     such certificate if reasonably  calculated shall be prima facie evidence of
     the amount of such loss, cost or expense.

     SECTION 3 FEES.

     Section 3.1 Fees.

     (a)  Administrative  Agent Fees.  Borrower shall pay to the  Administrative
Agent, for the  Administrative  Agent's sole account,  the fees agreed to in the
Fee Letter, which fees shall be fully earned and non-refundable once paid.

     SECTION 4 PLACE AND APPLICATION OF PAYMENTS.

     Section 4.1 Place and Application of Payments. All payments of principal of
and  interest  on the  Loans,  and of all other  Obligations  and other  amounts
payable by  Borrower  under the Credit  Documents,  shall be made by Borrower in
U.S.  Dollars to the  Administrative  Agent by no later than 2:00 p.m. (New York
time) on the due date  thereof  at the  principal  office of the  Administrative
Agent in New York,  New York pursuant to the payment  instructions  set forth on
Part A of Schedule 4 hereof (or such other location in the, United States as the
Administrative Agent may designate to Borrower) for the benefit of the Person or
Persons entitled thereto.  Any payments received after such time shall be deemed
to have been received by the Administrative  Agent on the next Business Day. All
such payments  shall be made free and clear of, and without  deduction  for, any
set-off,  defense,  counterclaim,  levy,  or any other  deduction of any kind in
immediately  available funds at the place of payment. The Administrative  Agent,
will promptly  thereafter  cause to be  distributed  like funds  relating to the
payment of  principal  or interest on Loans or  applicable  fees  ratably to the
Banks and like funds  relating to the payment of any other amount payable to any
Person to such Person,  in each case to be applied in accordance  with the terms
of this Agreement.

     SECTION 5 REPRESENTATIONS AND WARRANTIES.

     The Borrower hereby  represents and warrants to each Bank as to itself and,
where the following representations and warranties apply to its Subsidiaries, as
to each Subsidiary of Borrower, as follows:

     Section  5.1  Corporate  Organization  and  Authority.   Borrower  is  duly
organized  and  existing in good  standing  under the laws of the state of South
Dakota; has all necessary corporate power to carry on its present business;  and
is duly licensed or qualified and in good standing in each jurisdiction in which
the nature of the business  transacted by it or the nature of the Property owned
or leased by it makes such licensing,  qualification or good standing  necessary
and in which the failure to be so licensed,  qualified or in good standing would
have a Material Adverse Effect.

                                       19

     Section  5.2  Subsidiaries.  Schedule  5.2 (as  updated  from  time to time
pursuant to Section 7.1) hereto  identifies  each  Subsidiary  of Borrower,  the
jurisdiction of incorporation,  the percentage of issued and outstanding  shares
of each class of its capital  stock owned by the Borrower  and its  Subsidiaries
and, if such percentage is not one hundred percent (100%) (excluding  directors'
qualifying  shares as  required  by law),  a  description  of each  class of its
authorized  capital  stock and the  number of shares of each  class  issued  and
outstanding.  Each Subsidiary is duly incorporated and existing in good standing
as a corporation  under the laws of the jurisdiction of its  incorporation,  has
all  necessary  corporate  power to carry on its present  business,  and is duly
licensed or qualified  and in good  standing in each  jurisdiction  in which the
nature of the business  transacted by it or the nature of the Property  owned or
leased by it makes such  licensing or  qualification  necessary and in which the
failure to be so licensed or qualified would have a Material Adverse Effect. All
of the issued and outstanding  shares of capital stock of each Subsidiary  owned
directly or indirectly by Borrower are validly issued and  outstanding and fully
paid and  nonassessable  except as set forth on Schedule  5.2  hereto.  All such
shares  owned by Borrower  are owned  beneficially,  and of record,  free of any
Lien, except as permitted in Section 7.9.

     Section 5.3 Corporate  Authority and Validity of Obligations.  Borrower has
full right and  authority  to enter  into this  Agreement  and the other  Credit
Documents to which it is a party, to make the borrowings herein provided for, to
issue its Notes in  evidence  thereof,  to apply (and to have  applied),  and to
perform  all of its  obligations  under the  Credit  Documents  to which it is a
party.  Each Credit  Document  to which it is a party has been duly  authorized,
executed and delivered by Borrower and constitutes valid and binding obligations
of  Borrower   enforceable  in  accordance  with  its  terms,   except  as  such
enforceability  may  be  limited  by  bankruptcy,  insolvency,   reorganization,
moratorium or similar laws  affecting the  enforceability  of creditors'  rights
generally and by equitable  principles of general  applicability  (regardless of
whether such  enforceability is considered in a proceeding in equity or at law).
No Credit Document,  nor the performance or observance by Borrower of any of the
matters or things therein provided for,  contravenes any provision of law or any
charter or by-law provision of Borrower or any material  Contractual  Obligation
of or  affecting  Borrower  or any of  Borrower's  Properties  or  results in or
requires  the creation or  imposition  of any Lien on any of the  Properties  or
revenues of Borrower.

     Section 5.4  Financial  Statements.  All  financial  statements  heretofore
delivered to the Banks showing historical performance of Borrower for Borrower's
fiscal  years  ending on or before  December  31,  2001,  have been  prepared in
accordance   generally  accepted  accounting   principles  applied  on  a  basis
consistent,  except as otherwise noted therein, with that of the previous fiscal
year.  The unaudited  financial  statements for the fiscal period ended June 30,
2002 have been prepared in accordance  generally accepted accounting  principles
applicable to interim financial statements applied on a basis consistent, except
as otherwise noted therein,  with the previous same fiscal period of Borrower in
the prior fiscal year  (subject to normal  year-end  adjustments).  Each of such
financial  statements  fairly  presents on a  consolidated  basis the  financial
condition  of  Borrower  and its  Subsidiaries  as of the dates  thereof and the
results  of  operations  for  the  periods  covered  thereby.  Borrower  and its
Subsidiaries have no material contingent  liabilities other than those disclosed
in such financial  statements  referred to in this Section 5.4 or in comments or
footnotes thereto, or in any report supplementary thereto,  heretofore furnished
to the Banks.  Since  December  31,  2001,  there has been no event or series

                                       20

of events which has resulted  in, or  reasonably could be expected to result in,
a Material Adverse Effect.

     Section 5.5 No Litigation;  No Labor Controversies.(a)  Except as set forth
on Schedule 5.5, there is no litigation or governmental  proceeding  pending, or
to the knowledge of Borrower,  threatened, against Borrower or any Subsidiary of
Borrower  in which  there is a  reasonable  possibility  of an adverse  decision
which, if adversely determined,  could (individually or in the aggregate) have a
Material Adverse Effect.

     (b) Except as set forth on Schedule 5.5,  there are no labor  controversies
pending or, to the best knowledge of Borrower,  threatened  against  Borrower or
any Subsidiary of Borrower which could (individually or in the aggregate) have a
Material Adverse Effect.

     Section  5.6 Taxes.  Borrower  and its  Subsidiaries  have filed all United
States federal tax returns,  and all other foreign,  state,  local and other tax
returns,  required  to be filed and have paid all  taxes  due  pursuant  to such
returns or pursuant to any assessment  received by Borrower or any Subsidiary of
Borrower,  except such taxes,  if any, as are being  contested in good faith and
for which  adequate  reserves have been  provided.  No notices of tax liens have
been filed and no claims are being  asserted  concerning  any such taxes,  which
liens or claims are  material to the  financial  condition of Borrower or any of
its Subsidiaries  (individually or in the aggregate).  The charges, accruals and
reserves on the books of Borrower  and its  Subsidiaries  for any taxes or other
governmental charges are adequate and in conformance with GAAP.

     Section  5.7  Approvals.  No  authorization,  consent,  approval,  license,
exemption,  filing or registration  with any court or  governmental  department,
agency or  instrumentality,  nor any approval or consent of the  stockholders of
Borrower or any Subsidiary of Borrower or from any other Person, is necessary to
the valid  execution,  delivery or  performance by Borrower or any Subsidiary of
Borrower of any Credit Document to which it is a party.

     Section  5.8 ERISA.  With  respect to each  Plan,  Borrower  and each other
member of the Controlled  Group has fulfilled its obligations  under the minimum
funding  standards of and is in  compliance  in all material  respects  with the
Employee Retirement Income Security Act of 1974, as amended ("ERISA"),  and with
the Code to the extent  applicable  to it and has not incurred any  liability to
the Pension Benefit  Guaranty  Corporation  ("PBGC") or a Plan under Title IV of
ERISA other than a liability  to the PBGC for  premiums  under  Section  4007 of
ERISA.  Neither  Borrower  nor any  Subsidiary  of Borrower  has any  contingent
liabilities for any  post-retirement  benefits under a Welfare Plan,  other than
liability for continuation coverage described in Part 6 of Title I of ERISA.

     Section 5.9 Government  Regulation.  Neither Borrower nor any Subsidiary of
Borrower is an "investment company" within the meaning of the Investment Company
Act of 1940, as amended,  or a "registered  holding  company",  or a "Subsidiary
company" of a "registered  holding company",  or an "affiliate" of a "registered
holding company" or of a "Subsidiary company" of a "registered holding company",
within  the  meaning of the  Public  Utility  Holding  Company  Act of 1935,  as
amended.

     Section  5.10 Margin  Stock;  Use of  Proceeds.  Neither  Borrower  nor any
Subsidiary  of  Borrower  is  engaged  principally,  or as one  of  its  primary
activities, in the business of extending

                                       21

credit for the purpose of purchasing or carrying margin stock ("margin stock" to
have the same meaning herein as in Regulation U of the Board of Governors of the
Federal Reserve System).  The proceeds of the Loans are to be used solely (i) to
provide liquidity support for Borrower's  commercial paper program, (ii) to fund
Borrower's  working capital needs, and (iii) for general  corporate  purposes of
Borrower.  Borrower  will not use the  proceeds  of any  Loan in a  manner  that
violates  any  provision  of  Regulation U or X of the Board of Governors of the
Federal Reserve System.

     Section 5.11 Licenses and  Authorizations;  Compliance  with Laws.  (a) (a)
Borrower and each of its  Subsidiaries has all necessary  licenses,  permits and
governmental  authorizations  to own and operate its  Properties and to carry on
its business as currently  conducted and contemplated.  Borrower and each of its
Subsidiaries is in compliance with all applicable laws, regulations,  ordinances
and orders of any governmental or judicial  authorities except for any such law,
regulation, ordinance or order which, the failure to comply therewith, could not
reasonably expected to have a Material Adverse Effect.

     (b) In the  ordinary  course  of its  business,  Borrower  and  each of its
Subsidiaries conduct an ongoing review of the effect of Environmental and Health
Laws on the  Properties  and all  aspects  of the  business  and  operations  of
Borrower and its  Subsidiaries  in the course of which such Borrower  identifies
and evaluates associated  liabilities and costs (including,  without limitation,
any  capital or  operating  expenditures  required  for  clean-up  or closure of
Properties  currently  or  previously  owned or used,  any capital or  operating
expenditures  required to achieve or maintain  compliance with standards imposed
by law and any  actual or  potential  liabilities  to third  parties,  including
employees or governmental entities, and any related costs and expenses).  On the
basis of this review,  Borrower has reasonably  concluded that Environmental and
Health Laws are unlikely to have any Material Adverse Effect.

     (c) Except as set forth on Schedule  5.11 (as amended  from time to time in
accordance with the provisions hereof),  neither the Borrower nor any Subsidiary
of Borrower  has given,  nor is it required to give,  nor has it  received,  any
notice, letter, citation, order, warning, complaint, inquiry, claim or demand to
or from any governmental entity or in connection with any court proceeding which
could  reasonably have a Material  Adverse Effect claiming that: (i) Borrower or
any  Subsidiary  of  Borrower  has  violated,   or  is  about  to  violate,  any
Environmental  and Health  Law;  (ii)  there has been a  release,  or there is a
threat  of  release,  of  Hazardous  Materials  from  Borrower's  or  any of its
Subsidiary's Property, facilities,  equipment or vehicles; (iii) Borrower or any
of its  Subsidiary  may be or is liable,  in whole or in part,  for the costs of
cleaning up, remediating or responding to a release of Hazardous  Materials;  or
(iv) any of Borrower's or any of its Subsidiary's Property or assets are subject
to a Lien in  favor  of any  governmental  entity  for any  liability,  costs or
damages,  under any Environmental and Health Law arising from, or costs incurred
by such governmental entity in response to, a release of a Hazardous Materials.

     Section 5.12 Ownership of Property;  Liens. Borrower and each Subsidiary of
Borrower has good title to or valid  leasehold  interests  in all its  Property.
None of Borrower's or any Subsidiary's  Property is subject to any Lien,  except
as permitted in Section 7.9.

     Section  5.13  No  Burdensome  Restrictions;  Compliance  with  Agreements.
Neither  Borrower nor any  Subsidiary of Borrower is (a) party or subject to any
law,   regulation,   rule  or

                                       22

order, or any Contractual  Obligation,  that  (individually or in the aggregate)
materially adversely affects the business, operations,  Property or financial or
other  condition  of  Borrower  and  its  Subsidiaries  (individually  or in the
aggregate) or (b) in default in the  performance,  observance or  fulfillment of
any of the  obligations,  covenants or conditions  contained in any agreement to
which it is a party (including any Contractual Obligation),  which default could
materially adversely affects the business, operations,  Property or financial or
other  condition  of  Borrower  and  its  Subsidiaries  (individually  or in the
aggregate).

     Section  5.14 Full  Disclosure.  All  information  heretofore  furnished by
Borrower  to  the  Administrative  Agent  or  any  Bank  for  purposes  of or in
connection with the Credit Documents or any transaction contemplated thereby is,
and all such information  hereafter  furnished by Borrower to the Administrative
Agent or any Bank will be, true and  accurate in all  material  respects and not
misleading.

     Section 5.15 Solvency. Borrower and each of its Subsidiaries,  individually
and on a consolidated basis, is Solvent.

     SECTION 6 CONDITIONS PRECEDENT.

     The  obligation of each Bank to effect a Borrowing  shall be subject to the
following conditions precedent:

     Section 6.1 Initial Credit Event.  Before or concurrently  with the initial
Credit Event:

     (a) The  Administrative  Agent  shall  have  received  for  each  Bank  the
favorable  written  opinion  of (i)  Morgan,  Lewis & Bockius  LLP,  counsel  to
Borrower, and (ii) General Counsel to the Borrower;

     (b) The  Administrative  Agent shall have  received for each Bank copies of
Borrower's (i) Articles of Incorporation,  together with all amendments and (ii)
bylaws  (or  comparable  constituent  documents)  and  any  amendments  thereto,
certified in each instance by its Secretary or an Assistant Secretary;

     (c) The  Administrative  Agent shall have  received for each Bank copies of
resolutions  of  Borrower's  Board of Directors  authorizing  the  execution and
delivery  of the  Credit  Documents  and the  consummation  of the  transactions
contemplated thereby together with specimen signatures of the persons authorized
to execute  such  documents on such  Borrower's  behalf,  all  certified in each
instance by its Secretary or Assistant Secretary;

     (d) The Administrative  Agent shall have received for each Bank such Bank's
duly executed Note of Borrower dated the date hereof and otherwise in compliance
with the provisions of Section 2.10(a) hereof;

     (e) The  Administrative  Agent  shall  have  received  for each Bank a duly
executed  original  of  (i)  this  Agreement,  and  (ii) a  list  of  Borrower's
Authorized Representatives;

                                       23

     (f) All legal matters  incident to the execution and delivery of the Credit
Documents shall be satisfactory to the Banks;

     (g) The  Administrative  Agent shall have received a duly executed original
of the Fee Letter;

     (h) The Administrative Agent shall have received a duly executed Compliance
Certificate containing financial information as of June 30, 2002;

     (i) With the exception of the  $75,000,000  First  Mortgage Bonds issued by
BHP,  the  extensions  of the maturity  date of the  $50,000,000  Bridge  Credit
Agreement  between  Borrower  and ABN AMRO Bank N.V.  relating  to the Las Vegas
Cogeneration  II, L.L.C.  project,  and the Amended and Restated  364-Day Credit
Agreement,  neither Borrower nor any of its Subsidiaries  shall have, during the
period  from July 1, 2002 to the  Effective  Date,  issued,  incurred,  assumed,
created,   become  liable  for,   contingently   or   otherwise,   any  material
Indebtedness;

     (j) The  Borrower  shall  have  provided  a  certificate  stating  that the
conditions  set  forth  precedent  set  forth  in this  Section  6.1  have  been
satisfied;

     (k) The  Borrower  shall  have  paid to each Bank the  applicable  fees for
providing its Commitment under this Agreement; and

     (l) The Borrower's S&P Rating shall be BBB or better and its Moody's Rating
shall be Baa2 or better; and

     (m) The  Administrative  Agent shall have received such other documents and
information as it may reasonably request.

     Section  6.2  All  Credit  Events.  As of the  time of  each  Credit  Event
hereunder:

     (a) The  Administrative  Agent shall have  received the notice  required by
Section 2.5 hereof;

     (b) Each of the  representations  and  warranties  set  forth in  Section 5
hereof shall be and remain true and correct in all material  respects as of said
time,  except that if any such  representation  or warranty relates solely to an
earlier date it need only remain true as of such date; and

     (c)  Borrower  shall  be in  full  compliance  with  all of the  terms  and
conditions hereof, and no Default or Event of Default shall have occurred and be
continuing or would occur as a result of such Credit Event.

     Each request for a Credit Event shall be deemed to be a representation  and
warranty by Borrower on the date of such Credit Event as to the facts  specified
in paragraphs (b) and (c) of this Section 6.2.

     SECTION 7 COVENANTS.

                                       24

     Borrower  covenants  and  agrees  that,  so  long  as any  Note  or Loan is
outstanding hereunder,  except to the extent compliance in any case is waived in
writing by the Required Banks:

     Section 7.1 Corporate  Existence;  Subsidiaries.  Borrower shall, and shall
cause  each  of  its  Subsidiaries  to,  preserve  and  maintain  its  corporate
existence,  subject to the provisions of Section 7.12 hereof.  Together with any
financial  statements  delivered pursuant to Section 7.6 hereof,  Borrower shall
deliver an  updated  Schedule  5.2 to  reflect  any  changes  from the  existing
Schedule 5.2.

     Section 7.2  Maintenance.  Borrower  will  maintain,  preserve and keep its
plants, Properties and equipment necessary to the proper conduct of its business
in  reasonably  good repair,  working  order and condition and will from time to
time make all reasonably necessary repairs,  renewals,  replacements,  additions
and  betterments  thereto  so that at all  times  such  plants,  Properties  and
equipment shall be reasonably preserved and maintained,  and Borrower will cause
each of its  Subsidiaries  to do so in respect of Property  owned or used by it;
provided,  however, that nothing in this Section 7.2 shall prevent Borrower or a
Subsidiary of Borrower from  discontinuing  the operation or  maintenance of any
such Properties if such  discontinuance is not  disadvantageous  to the Banks or
the holders of the Notes,  does not materially impair the operations of Borrower
or any Subsidiary of Borrower and is, in the judgment of Borrower,  desirable in
the conduct of its business or the business of its Subsidiaries.

     Section 7.3 Taxes.  Borrower  will duly pay and  discharge,  and will cause
each  of  its  Subsidiaries  duly  to  pay  and  discharge,  all  taxes,  rates,
assessments,  fees and  governmental  charges  upon or against it or against its
Properties, in each case before the same becomes delinquent and before penalties
accrue  thereon,  unless and to the extent that the same is being  contested  in
good faith by appropriate  proceedings and reserves in conformity with GAAP have
been provided therefor on the books of Borrower.

     Section 7.4 ERISA.  Borrower will, and will cause each of its  Subsidiaries
to, promptly pay and discharge all  obligations  and  liabilities  arising under
ERISA  of a  character  which if  unpaid  or  unperformed  might  result  in the
imposition  of a Lien against any of its  properties or assets and will promptly
notify the  Administrative  Agent of (i) the occurrence of any reportable  event
(as defined in ERISA)  affecting a Plan,  other than any such event of which the
PBGC has waived  notice by  regulation,  (ii) receipt of any notice from PBGC of
its  intention  to seek  termination  of any Plan or  appointment  of a  trustee
therefor,  (iii)  its or any of its  Subsidiaries'  intention  to  terminate  or
withdraw from any Plan, and (iv) the occurrence of any event  affecting any Plan
which could result in the incurrence by Borrower or any of its  Subsidiaries  of
any  material  liability,  fine or  penalty,  or any  material  increase  in the
contingent   liability  of  Borrower  or  any  of  its  Subsidiaries  under  any
post-retirement  Welfare Plan benefit.  The  Administrative  Agent will promptly
distribute to each Bank any notice it receives  from  Borrower  pursuant to this
Section 7.4.

     Section 7.5  Insurance.  Borrower will insure,  and keep insured,  and will
cause  each of its  Subsidiaries  to  insure,  and keep  insured,  with good and
responsible  insurance  companies,  all  insurable  Property  owned  by  it of a
character  usually  insured by companies  similarly  situated and operating like
Property.  To the extent  usually  insured by companies  similarly  situated and
conducting similar businesses,  Borrower will also insure, and cause each of its
Subsidiaries to

                                       25

insure,  employers'  and  public  and  product  liability  risks  with  good and
responsible  insurance  companies.  Borrower  will,  upon  request  of any Bank,
furnish  to such  Bank a summary  setting  forth the  nature  and  extent of the
insurance maintained pursuant to this Section 7.5.

     Section 7.6  Financial  Reports and Other  Information.  (a) Borrower  will
maintain a system of accounting in accordance  with GAAP and will furnish to the
Banks and their  respective duly  authorized  representatives  such  information
respecting the business and financial condition of Borrower and its Subsidiaries
as any Bank may reasonably request;  and without any request, the Borrower shall
deliver  to the  Administrative  Agent in form and  detail  satisfactory  to the
Administrative   Agent,  with  copies  for  each  Bank  in  form  and  substance
satisfactory to them, each of the following:

          (i) within 120 days after the end of each fiscal year of  Borrower,  a
     copy of Borrower financial  statements for such fiscal year,  including the
     consolidated  balance sheet of Borrower and its  Subsidiaries for such year
     and the related  statements of income and statements of cash flow,  each as
     certified by independent public accountants of recognized national standing
     selected  by  Borrower  in  accordance  with GAAP  with  such  accountants'
     unqualified  opinion to the effect that the financial  statements have been
     prepared  in  accordance  with  GAAP and  present  fairly  in all  material
     respects in accordance  with GAAP the  consolidated  financial  position of
     Borrower and its  Subsidiaries  as of the close of such fiscal year and the
     results of their  operations  and cash flows for the fiscal year then ended
     and that an examination of such accounts in connection  with such financial
     statements  has been made in accordance  with generally  accepted  auditing
     standards and,  accordingly,  such  examination  included such tests of the
     accounting  records and such other auditing  procedures as were  considered
     necessary in the circumstances,  provided that if Borrower files its annual
     report on Form  10-K for the  applicable  annual  period,  and such  annual
     report contains the financial  statements and  accountants  certifications,
     opinions  and  statements  described  above,  the  Borrower may satisfy the
     requirements of this Section  7.6(a)(i) by delivering a copy of such annual
     report to each Bank.  Together  with such  information  the Borrower  shall
     provide to each Bank such consolidating information as may be necessary for
     the Banks to determine the Borrower's compliance with Section 7.17 hereof;

          (ii) within 60 days after the end of each of the first three quarterly
     fiscal  periods of Borrower,  a  consolidated  unaudited  balance  sheet of
     Borrower and its  Subsidiaries,  and the related  statements  of income and
     statements  of  cash  flow,  as of the  close  of such  period,  all of the
     foregoing prepared by Borrower in reasonable detail in accordance with GAAP
     and certified by Borrower's chief financial officer or corporate controller
     as fairly  presenting  the financial  condition as at the dates thereof and
     the results of operations for the periods covered thereby, provided that if
     Borrower files a Form 10-Q for the applicable  quarterly  period,  and such
     quarterly  report  contains the  financial  statements  and  certifications
     described  above, the Borrower may satisfy the requirements of this Section
     7.6(a)(ii)  by  delivering  a copy of such  quarterly  report to each Bank.
     Together with such information the Borrower shall provide to each Bank such
     consolidating  information  as may be necessary  for the Banks to determine
     the Borrower's compliance with Section 7.17 hereof;

                                       26

          (iii) within the period provided in subsection (i) above,  the written
     statement  of the  accountants  who  certified  the  audit  report  thereby
     required  that in the course of their audit they have obtained no knowledge
     of any Default or Event of Default,  or, if such  accountants have obtained
     knowledge of any such Default or Event of Default,  they shall  disclose in
     such statement the nature and period of the existence thereof; and

          (iv) promptly after the sending or filing thereof, copies of all proxy
     statements,  financial  statements  and  reports  Borrower  or  any  of its
     Subsidiaries sends to their shareholders,  and copies of all other regular,
     periodic and special reports and all  registration  statements  Borrower or
     any of its Subsidiaries file with the SEC or any successor thereto, or with
     any national securities exchanges.

     (b) Each financial  statement furnished to the Banks pursuant to subsection
(i) or  (ii)  of  this  Section  7.6  shall  be  accompanied  by  (A) a  written
certificate signed by Borrower's chief financial officer or corporate controller
to the effect  that (i) no Default or Event of Default has  occurred  during the
period  covered by such  statements  or, if any such Default or Event of Default
has occurred during such period,  setting forth a description of such Default or
Event of Default and specifying the action,  if any, taken by Borrower to remedy
the same, (ii) the representations and warranties  contained in Section 5 hereof
are true and correct in all material respects as though made on the date of such
certificate (other than those made solely as of an earlier date, which need only
remain true as of such date), except as otherwise  described therein,  and (B) a
Compliance  Certificate  in the  form of  Exhibit  B hereto  showing  Borrower's
compliance  with the covenants set forth in Sections  7.9,  7.11,  7.12 and 7.14
through 7.19 hereof.

     (c) Borrower  will  promptly  (and in any event within three  Business Days
after  an  officer  of  Borrower  has  knowledge  thereof)  give  notice  to the
Administrative Agent and each Bank:

          (i) of the occurrence of any Default or Event of Default;

          (ii) any event or condition which could reasonably be expected to have
     a Material Adverse Effect;

          (iii)  of any  litigation  or  governmental  proceeding  of  the  type
     described in Section 5.5 hereof;

          (iv) of any  material  change  in the  information  set  forth  on the
     Schedules hereto; and

          (v) of the entering  into of any  Long-Term  Guaranties,  and Borrower
     shall  promptly  provide the  Administrative  Agent with a copy of any such
     Guarantee and any modification to such Guarantee.

     Section 7.7 Bank Inspection Rights.  For purposes of confirming  compliance
with the Credit  Documents or after the occurrence and during the continuance of
an Event of Default, upon reasonable notice from the Administrative Agent or the
Required  Banks,  Borrower will, at Borrower's  expense,  permit such Banks (and
such Persons as any Bank may  designate)  during normal  business hours to visit
and inspect, under Borrower's guidance, any of the Properties of

                                       27

Borrower or any of its  Subsidiaries,  to examine all of their books of account,
records, reports and other papers, to make copies and extracts therefrom, and to
discuss their  respective  affairs,  finances and accounts with their respective
officers,  employees and with their independent  public accountants (and by this
provision  Borrower  authorizes such  accountants to discuss with the Banks (and
such Persons as any Bank may designate) the finances and affairs of Borrower and
its Subsidiaries) all at such reasonable times and as often as may be reasonably
requested;  provided,  however,  that except upon the  occurrence and during the
continuation  of any Default or Event of  Default,  not more than one such visit
and inspection may be conducted each calendar quarter.

     Section 7.8 Conduct of Business.  Neither  Borrower nor any  Subsidiary  of
Borrower will engage in any line of business  other than business  activities in
the field of (i) cogeneration and related thermal uses, (ii) energy  production,
(iii)  energy  development,  (iv) energy  recovery,  (v) utility  operation  and
management,  (vi) demand side management services,  (vii) energy trading, (viii)
management of investment  funds which invest in energy  related  businesses  and
investments in such funds, (ix) hedging but not speculative  activities relating
to any  of  the  foregoing  lines  of  business,  (x)  telecommunications,  (xi)
management  and  operating  services  related to any of the  foregoing  lines of
business,  and (xii) other  businesses not described in the foregoing so long as
the  Investments  and  expenses  made in such other  businesses  does not exceed
$20,000,000.

     Section 7.9 Liens. To the extent Borrower or any of its Subsidiaries grants
a Lien on any of their  Property  to  secure  Borrower's  obligations  under the
Existing  Credit  Agreements,  Borrower will, or will cause such  Subsidiary to,
concurrently  with the  granting  of such  Lien,  grant a pari passu Lien to the
Administrative Agent for the benefit of the Banks to secure the Obligations.

     Section 7.10 Use of Proceeds;  Regulation U. The proceeds of each Borrowing
will be used by Borrower  solely to fund Borrower's  working capital needs,  and
(ii) for general corporate purposes of Borrower.  Borrower will not use any part
of the proceeds of any of the  Borrowings  directly or indirectly to purchase or
carry any margin stock (as defined in Section  5.10 hereof) or to extend  credit
to others for the purpose of purchasing or carrying any such margin stock.

     Section 7.11 Sales and  Leasebacks.  Borrower  will not, nor will it permit
any of its Subsidiaries to, enter into any arrangement with any bank,  insurance
company or other lender or investor providing for the leasing by Borrower or any
Subsidiary  of Borrower of any  Property  theretofore  owned by it and which has
been or is to be sold or transferred by such owner to such lender or investor if
the  total  amount  of  rent  and  other  obligations  of the  Borrower  and its
Subsidiaries under such lease, when combined with all rent and other obligations
of Borrower and its Subsidiaries under all such leases, would exceed $30,000,000
in the  aggregate,  provided  that Borrower and its  Subsidiaries  may engage in
synthetic lease transactions so long as the Borrower's or such Subsidiary's,  as
applicable, obligations under such synthetic leases are included as Indebtedness
for all purposes  (including  financial covenant  calculations) under the Credit
Documents.

     Section 7.12 Mergers, Consolidations and Sales of Assets.

                                       28

          (a)  Borrower  will  not,  and will  not  permit  any of its  Material
     Subsidiaries  to,  (i)  consolidate  with or be a party to merger  with any
     other  Person  or  (ii)  sell,  lease  or  otherwise  dispose  of  all or a
     "substantial  part"  of  the  assets  of  Borrower  and  its  Subsidiaries;
     provided,  however,  that (w) the  foregoing  shall not  prohibit any sale,
     lease,  transfer or disposition to which the Required Banks have consented,
     such consent not to by unreasonably  withheld if (A) such  transaction does
     not  result in a  downgrade  of either  Borrower's  S&P  Rating or  Moody's
     Rating,   (B)  such  transaction  is  for  cash   consideration  (or  other
     consideration  acceptable to the Required Banks) in an amount not less than
     the fair market value of the applicable  assets,  and (C) such transaction,
     when combined with all other such  transactions,  would not have a Material
     Adverse Effect,  taken as a whole, (x) any Subsidiary of Borrower may merge
     or  consolidate  with or into or sell,  lease or otherwise  convey all or a
     substantial  part of its  assets to  Borrower  or any  Subsidiary  of which
     Borrower holds (directly or indirectly) at least the same percentage equity
     ownership;  provided  that in any such  merger or  consolidation  involving
     Borrower,  Borrower shall be the surviving or continuing  corporation,  (y)
     Borrower and its Subsidiaries may sell inventory,  reserves and electricity
     in the  ordinary  course of  business,  and (z)  Borrower  may enter into a
     merger with, or acquisition of all of, another Person so long as:

     (1)  Borrower is the surviving entity,

     (2)  unless  consented  to by  the  Required  Banks,  no  downgrade  in the
          Borrower's S&P Rating or Moody's Rating would occur as a result of the
          consummation of such a transaction,

     (3)  if such  transaction  is an  acquisition,  the Board of Directors  (or
          similar  governing  body) of the Person  being  acquired  has approved
          being so acquired,

     (4)  no Default or Event of Default has occurred and is  continuing  at the
          time of, or would occur as a result of, such  transaction.

     As used in this Section 7.12(a), a sale, lease,  transfer or disposition of
assets during any fiscal year shall be deemed to be of a  "substantial  part" of
the  consolidated  assets of Borrower and its Subsidiaries if the net book value
of such  assets,  when  added to the net book  value of all other  assets  sold,
leased,  transferred  or  disposed  of by  the  Borrower  and  its  Subsidiaries
(excluding  the  Marketing  Subsidiaries)  during  such  fiscal year (other than
inventory,  reserves and electricity in the ordinary course of business) exceeds
ten  percent  (10%)  of the  total  assets  of  Borrower  and  its  Consolidated
Subsidiaries,  determined  on a  consolidated  basis  as of the  last day of the
immediately preceding fiscal year.

          (b) Except as permitted pursuant to Section 7.14 hereof, Borrower will
     not  sell,  transfer  or  otherwise  dispose  of,  or  permit  any  of  its
     Subsidiaries to issue,  sell,  transfer or otherwise dispose of, any shares
     of stock of any class  (including  as "stock" for purposes of this Section,
     any warrants,  rights or options to purchase or otherwise  acquire stock or
     other  Securities  exchangeable  for  or  convertible  into  stock)  of any
     Subsidiary of Borrower,  except to Borrower or a Wholly-Owned Subsidiary of
     Borrower or except for the purpose of qualifying directors.

                                       29

     Section 7.13 Use of Property and Facilities;  Environmental  and Health and
Safety Laws.

          (a) Borrower will, and will cause each of its  Subsidiaries to, comply
     in all material  respects with the  requirements of all  Environmental  and
     Health Laws  applicable  to or  pertaining  to the  Properties  or business
     operations of Borrower or any Subsidiary of Borrower.  Without limiting the
     foregoing,  Borrower will not, and will not permit any Person to, except in
     accordance  with applicable  law,  dispose of any Hazardous  Material into,
     onto or upon any real property  owned or operated by Borrower or any of its
     Subsidiaries.

          (b) Borrower will promptly provide the Banks with copies of any notice
     or other instrument of the type described in Section 5.11(c) hereof, and in
     no event later than five (5) Business  Days after an officer of Borrower or
     a Subsidiary of Borrower receives such notice or instrument.

     Section 7.14  Investments,  Acquisitions,  Loans,  Advances and Guaranties.
Borrower will not, nor will it permit any Subsidiary of Borrower to, directly or
indirectly,  make,  retain or have outstanding any investments  (whether through
purchase of stock or  obligations or otherwise) in, or loans or advances to, any
other Person,  or acquire all or any substantial  part of the assets or business
of any other  Person or division  thereof,  or be or become  liable as endorser,
guarantor,  surety or otherwise (such as liability as a general partner) for any
debt,  obligation  or  undertaking  of any other Person,  or otherwise  agree to
provide funds for payment of the obligations of another, or supply funds thereto
or invest  therein or otherwise  assure a creditor of another  against  loss, or
apply for or become liable to the issuer of a letter of credit which supports an
obligation  of another,  or  subordinate  any claim or demand it may have to the
claim  or  demand  of any  other  Person  (cumulatively,  all  of the  foregoing
"Investments"); provided, however, that the foregoing provisions shall not apply
to nor operate to prevent:

          (a) investments in direct  obligations of the United States of America
     or of any agency or  instrumentality  thereof whose obligations  constitute
     full faith and credit  obligations of the United States of America provided
     that any  such  obligation  matures  within  one  year  from the date it is
     acquired by Borrower or Subsidiary;

          (b)  investments  in commercial  paper rated P-1 by Moody's  Investors
     Services,  Inc. or A-1 by Standard & Poor's Corporation maturing within one
     year of its date of issuance;

          (c)  investments in  certificates of deposit issued by any Bank or any
     United States  commercial  bank having capital and surplus of not less than
     $200,000,000  maturing within one year from the date of issuance thereof or
     in banker's  acceptances endorsed by any Bank or other such commercial bank
     and maturing within six months of the date of acceptance;

          (d) investments in repurchase obligations with a term of not more than
     seven  (7)  days  for  underlying  securities  of the  types  described  in
     subsection (a) above entered into with any bank meeting the  qualifications
     specified in subsection  (c) above,  provided

                                       30

     all such agreements  require physical  delivery of the securities  securing
     such  repurchase  agreement,  except  those  delivered  through the Federal
     Reserve Book Entry System;

          (e)  investments in money market funds that invest  solely,  and which
     are  restricted  by  their  respective   charters  to  invest  solely,   in
     investments of the type described in the immediately  preceding subsections
     (a), (b), (c) and (d) above;

          (f)  ownership  of  stock,   obligations  or  securities  received  in
     settlement of debts (created in the ordinary  course of business)  owing to
     Borrower or any Subsidiary;

          (g)  endorsements  of  negotiable  instruments  for  collection in the
     ordinary course of business;

          (h) loans and advances to employees in the ordinary course of business
     for travel, relocation, and similar purposes;

          (i)  Investments (i) existing on the Effective Date in Subsidiaries of
     Borrower,  (ii) existing on the Effective  Date and  identified in Schedule
     7.14 hereof, or (iii) consisting of intercompany  loans permitted  pursuant
     to Section 7.15(e);

          (j) Investments  constituting (i) accounts  receivable  arising,  (ii)
     trade debt granted,  or (iii) deposits made in connection with the purchase
     price  of  goods  or  services,  in each  case in the  ordinary  course  of
     business;

          (k) Investments in Persons other than Marketing  Subsidiaries  engaged
     in lines of business related to the lines of business  described in Section
     7.8 so long as (i) both before and after giving  effect to such  Investment
     no Default of Event of Default shall have occurred and be continuing,  (ii)
     such  Investments  do not permit any  creditor of such  Person  recourse to
     Borrower or any other  Subsidiary of Borrower or any of their assets (other
     than the assets and/or the stock or similar equity interest of such Person)
     and  (iii) if such  Investments  are in  Persons  engaged  in the  lines of
     business  described in clause (xii) of Section 7.8,  such  Investments  and
     expenses in the  aggregate  do not exceed  $20,000,000  outstanding  at any
     time;

          (l)  Guaranties,  other  than  Long-Term  Guaranties,  so long as such
     Indebtedness is permitted pursuant to Section 7.15;

          (m) acquisitions permitted pursuant to Section 7.12(a);

          (n) Investments constituting Long-Term Guaranties other than Long-Term
     Guarantees of Indebtedness of the Marketing Subsidiaries;

          (o) (i) Investments in Marketing  Subsidiaries (other than Investments
     in Marketing  Subsidiaries  consisting  of Guaranties  of  Indebtedness  of
     Marketing  Subsidiaries) existing on August 28, 2001 and listed on Schedule
     7.14 and (ii)  Investments  consisting  of Guaranties  of  Indebtedness  of
     Marketing  Subsidiaries  in existence on the Effective Date and Investments
     in Marketing  Subsidiaries made after the Effective Date (including through
     Guaranties (including Long-Term Guaranties))  provided,  that the aggregate
     amount of Investments  permitted by this clause (ii) when

                                       31

     combined with the amount of  intercompany  Indebtedness  owing by Marketing
     Subsidiaries  permitted  pursuant to Section  7.15(e)(iii) shall not in the
     aggregate exceed  $10,000,000  outstanding at any time (it being understood
     that any increase in the value of any such  Investment  attributable to the
     undistributed  net  earnings  of the  Marketing  Subsidiaries  shall not be
     deemed a violation of this Section 7.14(o)); and

          (p) Investments consisting of promissory notes issued in consideration
     for the sale by the Borrower or a Subsidiary  of a portion of the stock (or
     similar equity interests) of a Subsidiary where (i) such note is secured by
     the stock (or similar equity  interest)  sold, and (ii) one of the purposes
     of such sale is to ensure that such  Subsidiary  qualifies as a "qualifying
     facility"  under the Public  Utility  Regulatory  Policies Act of 1978,  as
     amended.

         Any Investment which when made complies with the requirements of
paragraphs (a) through (e) may continue to be held notwithstanding that such
Investment if made thereafter would not comply with such requirements;

         In determining the amount of investments, acquisitions, loans, advances
and guarantees permitted under this Section 7.14, investments and acquisitions
shall always be taken at the original cost thereof (regardless of any subsequent
appreciation or depreciation therein), loans and advances shall be taken at the
principal amount thereof then remaining unpaid, and guarantees shall be taken at
the amount of obligations guaranteed thereby.

     Section 7.15  Restrictions on Indebtedness.  Borrower will not, nor will it
permit any  Subsidiary  of Borrower to, issue,  incur,  assume,  create,  become
liable for,  contingently or otherwise,  or have  outstanding any  Indebtedness;
provided,  however, that the foregoing provisions shall not restrict nor operate
to prevent the following Indebtedness, so long as the incurrence and maintenance
of such Indebtedness  would not cause the Borrower to be in violation of Section
7.17 hereof if  compliance  with such  covenant were measured on the date of the
incurrence of such Indebtedness:

          (a)  the Obligations;

          (b)  Non-Recourse Indebtedness of any Project Finance Subsidiary;

          (c) so long as the Borrower  would be in compliance  with Section 7.17
     hereof  (calculated  as of the date of,  and after  giving  affect  to, the
     incurrence  of  such   Indebtedness),   secured   Indebtedness   (excluding
     Indebtedness of the type described in (e), (f), and (g) below but including
     the pledge of stock or  similar  equity  interest  of any  Project  Finance
     Subsidiary or any Subsidiary  which is a special  purpose entity whose sole
     purpose is to own the stock or similar equity interest of a Project Finance
     Subsidiary) (A) set forth on Schedule  7.15(b) hereto,  and (B) (i) of BHP,
     (ii) evidencing the deferred  purchase price of newly acquired  property or
     incurred to finance the acquisition of personal property of the Borrower or
     a Subsidiary of the Borrower used in the ordinary course of business of the
     Borrower or Subsidiary, (iii) constituting Capitalized Lease Obligations or
     with respect to synthetic  (or similar  type) lease  arrangements,  or (iv)
     incurred  in  connection  with  the   performance  of  tenders,   statutory
     obligations,  bids,  leases or other  similar  obligations  (other than for
     borrowed money) entered into in the ordinary

                                       32

     course of business or to secure obligations on performance bonds; provided,
     that the aggregate  amount of Indebtedness  permitted by this clause (B) at
     any  time  outstanding  shall  not  exceed  5% of  Consolidated  Assets  as
     reflected  on the most  recent  balance  sheet  delivered  by the  Borrower
     pursuant to Section 7.6,  provided that Borrower shall promptly provide the
     Administrative  Agent  with a copy  of any  documentation  evidencing  such
     Indebtedness  in  excess  of  $25,000,000  and  any  modification  to  such
     Indebtedness;

          (d) so long as the Borrower  would be in compliance  with Section 7.17
     hereof  (calculated  as of the date of,  and after  giving  affect  to, the
     incurrence   of   such   Indebtedness),   other   Indebtedness   (excluding
     Indebtedness  of the type  described  in (e),  (f), and (g) below) which is
     unsecured and either junior in right of payment to the  Obligations or pari
     passu  to the  Obligations  or is  equally  and  ratably  secured  with the
     Obligations,   provided   that   Borrower   shall   promptly   provide  the
     Administrative  Agent  with a copy  of any  documentation  evidencing  such
     Indebtedness  in  excess  of  $25,000,000  and  any  modification  to  such
     Indebtedness;

          (e) intercompany  loans (i) from (x) Subsidiary to Borrower so long as
     such  loans  are  subordinated  to  the  Obligations  on  terms  reasonably
     satisfactory to the Administrative  Agent, and (y) Borrower to a Subsidiary
     of  Borrower,  (ii)  among  Wholly-Owned  Subsidiaries,  and  (iii)  from a
     Subsidiary of Borrower to a Marketing Subsidiary,  so long as the aggregate
     amount of such loans from time to time owing by the Marketing  Subsidiaries
     does not exceed the difference  between (I) $10,000,000,  less (II) the sum
     of (A) the aggregate amount of Guaranties  outstanding  pursuant to Section
     7.15(f), and (B) the aggregate amount of other Investments then made in the
     Marketing Subsidiaries pursuant to Section 7.14(o)(ii) (it being understood
     that to the extent such limit is exceeded solely as a result of an increase
     in the value of any such Investment  attributable to the  undistributed net
     earnings of the Marketing Subsidiaries,  it shall not be deemed a violation
     of this Section 7.15(e));

          (f)  Indebtedness  consisting of Guaranties of the Indebtedness of the
     Marketing Subsidiaries (including Long-Term Guaranties), provided that such
     Indebtedness  shall only be permitted to the extent the aggregate amount of
     such Indebtedness, when added to the sum of (i) the aggregate amount of all
     intercompany loans made to the Marketing  Subsidiaries  pursuant to Section
     7.15(e),  plus (ii) the aggregate  amount of all other  Investments made in
     Marketing  Subsidiaries  pursuant to Section  7.14(o)(ii),  does not exceed
     $10,000,000 (it being  understood that to the extent such limit is exceeded
     solely  as a result  of an  increase  in the  value of any such  Investment
     attributable   to  the   undistributed   net  earnings  of  the   Marketing
     Subsidiaries,  it shall not be deemed a violation of this Section  7.15(f))
     provided,  further that Borrower shall promptly provide the  Administrative
     Agent  with a copy  of any  such  Guarantee  and any  modification  to such
     Guarantee;

          (g)  Indebtedness  of  the  Marketing   Subsidiaries  under  Marketing
     Subsidiary  Excluded Credit Facilities in an aggregate amount not to exceed
     the Marketing Subsidiary Indebtedness Limit;

          (h)  Permitted Derivative Obligations; and

                                       33

          (i)  Indebtedness   pursuant  to  Long-Term   Guaranties  (other  than
     Long-Term Guaranties of Indebtedness of Marketing Subsidiaries).

         Indebtedness shall only be permitted under (e), (f), (h), and (i) above
to the extent such Indebtedness will have a priority of payment with the
Obligations which is no greater than pari passu.

     Section  7.16  Consolidated  Net  Worth.  Borrower  will at the end of each
fiscal quarter maintain Consolidated Net Worth in an amount of not less than the
sum  of  (i)  $425,000,000  and  (ii)  fifty  percent  (50%)  of  the  aggregate
Consolidated Net Income, if positive, for the period beginning April 1, 2002 and
ending on the last day of such fiscal quarter.

     Section 7.17 Recourse  Leverage Ratio.  Borrower will not at the end of any
fiscal quarter permit the Recourse Leverage Ratio to exceed 0.65 to 1.00.

     Section 7.18 Fixed Charge  Coverage  Ratio.  Borrower will maintain a Fixed
Charge  Coverage Ratio of not less than  1.50:1.00,  as determined at the end of
each fiscal quarter.

     Section  7.19  Dividends  and  Other  Shareholder  Distributions.  (a)  (a)
Borrower  shall not (i) declare or pay any dividends or make a  distribution  of
any kind (including by redemption or purchase) on or relating to its outstanding
capital  stock,  or (ii) repay  (directly,  through  sinking  fund  payments  or
otherwise) any Indebtedness or other obligations  owing to a shareholder  unless
in either  circumstance  no Default or Event of Default exists prior to or would
result after giving effect to such action.

     (b)  Except  (i) as set  forth  in the  Existing  Credit  Agreements  or on
Schedule 7.19 and (ii) in connection with Non-Recourse Indebtedness of a Project
Finance  Subsidiary,  Borrower  will  not,  and  will  not  permit  any  of  its
Subsidiaries,  directly or indirectly to create or otherwise  cause or suffer to
exist or become effective any consensual  encumbrance or restriction of any kind
on the ability of any such  Subsidiary  to: (1) pay  dividends or make any other
distribution on any of such Subsidiary's  capital stock owned by Borrower or any
Subsidiary of Borrower;  (2) pay any Indebtedness  owed to Borrower or any other
Subsidiary;  (3) make loans or advances to Borrower or any other Subsidiary;  or
(4) transfer any of its property or assets to Borrower or any other Subsidiary.

     Section  7.20 No Negative  Pledge.  Except (i) as set forth in the Existing
Credit  Agreements or on Schedule 7.19 and (ii) in connection with  Non-Recourse
Indebtedness  of a Project Finance  Subsidiary,  the Borrower will not, and will
not permit any of its  Subsidiaries  (other than Project Finance  Subsidiaries),
directly  or  indirectly  to enter  into or assume  any  agreement  (other  than
customary non-assignment and no sub-letting provisions in leases consistent with
Borrower's  past practices and the Credit  Documents and, solely with respect to
the asset so financed,  Capitalized  Leases,  to the extent such Indebtedness is
permitted  herein)  prohibiting  the creation or assumption of any Lien upon its
properties or assets, whether now owned or hereafter acquired.

     Section 7.21 Transactions with Affiliates.  Borrower will not, and will not
permit any of its  Subsidiaries  to,  enter  into or be a party to any  material
transaction  or  arrangement  with any  Affiliate  of such  Person  (other  than
Borrower),  including without limitation, the purchase from,

                                       34

sale to or exchange of Property with, any merger or consolidation  with or into,
or the rendering of any service by or for, any Affiliate, except in the ordinary
course of and pursuant to the  reasonable  requirements  of  Borrower's  or such
Subsidiary's  business and upon terms no less favorable to such Borrower or such
Subsidiary  than  could  be  obtained  in  a  similar  transaction  involving  a
third-party.

     Section  7.22  Compliance  with  Laws.  Without  limiting  any of the other
covenants of Borrower in this Section 7, Borrower  will,  and will cause each of
its Subsidiaries to, conduct its business,  and otherwise be, in compliance with
all applicable laws,  regulations,  ordinances and orders of any governmental or
judicial  authorities;   provided,   however,  that  neither  Borrower  nor  any
Subsidiary  of  Borrower  shall  be  required  to  comply  with  any  such  law,
regulation,  ordinance  or order if the  failure to comply  therewith  could not
reasonably be expected to have a Material Adverse Effect.

     Section 7.23  Pari-Passu.  Borrower will at all times cause the Obligations
to rank at least pari  passu with all other  senior  unsecured  Indebtedness  of
Borrower.

     Section 7.24 Certain Subsidiaries. Unless pursuant to Indebtedness which is
authorized  pursuant to this Agreement,  Borrower will not, and the Subsidiaries
of Borrower will not, permit any creditor of a Marketing Subsidiary or a Project
Finance  Subsidiary  to have  recourse  to any  Borrower  or any  Subsidiary  of
Borrower  or any of their  assets  (other  than (i) the stock or similar  equity
interest  of the  applicable  Subsidiary  and (ii) with  respect to a  Permitted
Derivative  Obligation) other than recourse under Guaranties  permitted pursuant
to Sections 7.15(f) and (i).

     Section  7.25  Ratings.  Borrower  will at all times this  Agreement  is in
effect  maintain a S&P  Rating  and a Moody's  Rating (or if one or both of such
ratings are unavailable,  rating(s) from such other  recognized  national rating
agency or  agencies as may be  acceptable  to the  Administrative  Agent and the
Required Banks).

     Section 7.26 Liquidity Covenant.  Borrower will, as of the last day of each
fiscal quarter  commencing  with the fiscal  quarter  ending  December 31, 2002,
maintain Liquid Assets of at least $30,000,000.

     Section  7.27  Existing  Credit  Agreements.  Borrower  will  not  make any
modification(s)  to the  Existing  Credit  Agreements  which is favorable to the
lenders thereunder (other than pricing) unless the same  modification(s) is made
to this Agreement.  In the event the Borrower makes any such modification to the
Existing Credit  Agreements,  the terms of this Agreement shall be automatically
modified to incorporate such favorable provision(s) for the benefit of the Banks
into this Agreement.  At the request of the Administrative Agent, Borrower shall
execute such  documentation as Administrative  Agent may request to evidence any
such modification to this Agreement.

     SECTION 8 EVENTS OF DEFAULT AND REMEDIES.

     Section  8.1  Events of  Default.  Any one or more of the  following  shall
constitute an Event of Default:

                                       35

          (a) (i)  default in the payment  when due of any fees,  interest or of
     any other  Obligation  not  covered by clause  (ii) below and such  payment
     default  continues  for three (3) days or (ii)  default in the payment when
     due of the principal amount of any Loan;

          (b)  default  by  Borrower  or any  Subsidiary  in the  observance  or
     performance  of any  covenant  set forth in Section  7.1,  Section  7.6(c),
     Section 7.9 through 7.12,  Sections 7.14 through 7.21,  7.23, 7.24 and 7.25
     hereof;

          (c)  default  by  Borrower  or any  Subsidiary  in the  observance  or
     performance  of any  provision  hereof or of any other Credit  Document not
     mentioned  in (a) or (b) above,  which is not remedied  within  thirty (30)
     days after  notice  thereof  shall have been given to the  Borrower  by the
     Administrative Agent;

          (d) (i) failure to pay when due Indebtedness in an aggregate principal
     amount of (x)  $10,000,000 or more of Borrower or any Material  Subsidiary,
     (ii) default shall occur under one or more indentures,  agreements or other
     instruments under which any Indebtedness of Borrower or any of its Material
     Subsidiary in an aggregate  principal  amount of $10,000,000 or more may be
     issued or created  and such  default  shall  continue  for a period of time
     sufficient to permit the holder or  beneficiary of such  Indebtedness  or a
     trustee  therefor  to cause the  acceleration  of the  maturity of any such
     Indebtedness or any mandatory unscheduled  prepayment,  purchase or funding
     thereof, or (iii) a default shall occur under either of the Existing Credit
     Agreements;

          (e) any  representation or warranty made herein or in any other Credit
     Document by Borrower or any Subsidiary of Borrower,  or in any statement or
     certificate  furnished  pursuant  hereto or  pursuant  to any other  Credit
     Document by Borrower or any Subsidiary of Borrower,  or in connection  with
     any Credit  Document,  proves untrue in any material respect as of the date
     of the issuance or making, or deemed making or issuance, thereof;

          (f)  Borrower  or any  Material  Subsidiary  shall (i) fail to pay its
     debts generally as they become due or admit in writing its inability to pay
     its debts  generally as they become due,  (ii) make an  assignment  for the
     benefit of creditors,  (iii) apply for, seek,  consent to, or acquiesce in,
     the appointment of a receiver,  custodian, trustee, examiner, liquidator or
     similar  official  for it or any  substantial  part of its  Property,  (iv)
     institute any  proceeding  seeking to have entered  against it an order for
     relief under the United States  Bankruptcy Code, as amended,  to adjudicate
     it   insolvent,   or  seeking   dissolution,   winding   up,   liquidation,
     reorganization,  arrangement,  adjustment or composition of it or its debts
     under any law  relating to  bankruptcy,  insolvency  or  reorganization  or
     relief of debtors or fail to file an answer or other  pleading  denying the
     material  allegations  of  any  such  proceeding  filed  against  it or any
     analogous  action is taken  under  any other  applicable  law  relating  to
     bankruptcy  or  insolvency or any such order for relief is in fact granted,
     (v)  take  any  corporate  action  (such  as the  passage  by its  board of
     directors of a resolution) in furtherance of any matter  described in parts
     (i)-(iv)  above,  or (vi) fail to contest in good faith any  appointment or
     proceeding described in Section 8.1(g) hereof;

          (g) a custodian,  receiver,  trustee, examiner,  liquidator or similar
     official shall be appointed for Borrower or any Material Subsidiary, or any
     substantial  part of any of

                                       36

     their Property,  or a proceeding  described in Section  8.1(f)(iv) shall be
     instituted   against  Borrower  or  any  Material   Subsidiary,   and  such
     appointment continues undischarged or such proceeding continues undismissed
     or unstayed for a period of sixty (60) days;

          (h) Borrower or any Material  Subsidiary shall fail within thirty (30)
     days to pay,  bond or  otherwise  discharge  any  judgment or order for the
     payment of money in excess of $10,000,000, which is not stayed on appeal or
     otherwise  being  appropriately  contested  in good faith in a manner  that
     stays execution thereon;

          (i) Borrower or any other member of the Controlled Group shall fail to
     pay when due an amount or amounts which it shall have become liable, to pay
     to the PBGC or to a Plan  under  Title IV of ERISA;  or notice of intent to
     terminate a Plan or Plans having aggregate  Unfunded Vested  Liabilities in
     excess of  $10,000,000  (collectively,  a "Material  Plan")  shall be filed
     under Title IV of ERISA by Borrower  or any  Subsidiary  of Borrower or any
     other  member  of the  Controlled  Group,  any  plan  administrator  or any
     combination of the foregoing; or the PBGC shall institute proceedings under
     Title IV of ERISA to  terminate  or to cause a trustee to be  appointed  to
     administer  any Material  Plan or a  proceeding  shall be  instituted  by a
     fiduciary of any Material Plan against  Borrower or any other member of the
     Controlled  Group to enforce  Section 515 or  4219(c)(5)  of ERISA and such
     proceeding   shall  not  have  been  dismissed   within  thirty  (30)  days
     thereafter; or a condition shall exist by reason of which the PBGC would be
     entitled to obtain a decree  adjudicating  that any  Material  Plan must be
     terminated;

          (j)  Borrower or any  Subsidiary  of Borrower or any Person  acting on
     behalf of Borrower,  a Subsidiary or any governmental  authority challenges
     the  validity  of  any  Credit   Document  or  Borrower's  or  one  of  its
     Subsidiary's  obligations thereunder or any Credit Document ceases to be in
     full force and effect or is  modified  other  than in  accordance  with the
     terms thereof and hereof;

          (k) a Change of Control Event shall have occurred; or

          (l) Borrower  shall for any reason  cease to be wholly  liable for the
     full amount of the Obligations.

     Section 8.2 Non-Bankruptcy  Defaults.  When any Event of Default other than
those described in subsections (f) or (g) of Section 8.1 hereof has occurred and
is continuing,  the  Administrative  Agent shall, if so directed by the Required
Banks,  by written notice to Borrower:  declare the principal of and the accrued
interest on all outstanding  Notes to be forthwith due and payable and thereupon
all outstanding  Notes,  including both principal and interest thereon,  and all
other Obligations, shall be and become immediately due and payable together with
all other amounts  payable under the Credit  Documents  without  further demand,
presentment,  protest or notice of any kind.  The  Administrative  Agent,  after
giving notice to Borrower  pursuant to Section 8.1(c) or this Section 8.2, shall
also promptly send a copy of such notice to the other Banks,  but the failure to
do so shall not impair or annul the effect of such notice.

     Section 8.3  Bankruptcy  Defaults.  When any Event of Default  described in
subsections (f) or (g) of Section 8.1 hereof has occurred,  then all outstanding
Notes,  including both interest and principal thereon, and all other Obligations
shall immediately become due and payable

                                       37

together  with all other  amounts  payable  under the Credit  Documents  without
presentment, demand, protest or notice of any kind.

     Section 8.4 [Intentionally Omitted](a).

     Section 8.5 Expenses.  Borrower agrees to pay to the  Administrative  Agent
and each Bank, and any other holder of any Note outstanding hereunder, all costs
and expenses  incurred or paid by the  Administrative  Agent or such Bank or any
such holder,  including  attorneys' fees  (including  allocable fees of in-house
counsel) and court costs,  in connection with (i) any amendment or waiver to the
Credit Documents requested by Borrower,  (ii) any Default or Event of Default by
Borrower hereunder, or (iii) the enforcement of any of the Credit Documents.

     SECTION 9 CHANGE IN CIRCUMSTANCES.

     Section 9.1 Change of Law.  Notwithstanding  any other  provisions  of this
Agreement  or any Note,  if at any time  after  the date  hereof  any  change in
applicable law or regulation or in the interpretation  thereof makes it unlawful
for any Bank to make or continue to maintain  Eurodollar Loans or to perform its
obligations as contemplated hereby, such Bank shall promptly give notice thereof
to Borrower and such Bank's  obligations  to make or maintain  Eurodollar  Loans
under this Agreement  shall  terminate  until it is no longer  unlawful for such
Bank to make or maintain  Eurodollar Loans.  Borrower shall prepay on demand the
outstanding  principal amount of any such affected  Eurodollar  Loans,  together
with all interest accrued thereon at a rate per annum equal to the interest rate
applicable  to such  Loan;  provided,  however,  subject to all of the terms and
conditions  of this  Agreement,  Borrower may then elect to borrow the principal
amount of the  affected  Eurodollar  Loans  from such Bank by means of Base Rate
Loans from such Bank,  which  Base Rate Loans  shall not be made  ratably by the
Banks but only from such affected Bank.

     Section 9.2  Unavailability  of  Deposits or  Inability  to  Ascertain,  or
Inadequacy of, LIBOR. If on or prior to the first day of any Interest Period for
any Borrowing of Eurodollar Loans:

          (a) the Administrative  Agent determines that deposits in U.S. Dollars
     (in the  applicable  amounts)  are not being  offered to major banks in the
     eurodollar  interbank market for such Interest Period, or that by reason of
     circumstances  affecting  the  interbank  eurodollar  market  adequate  and
     reasonable means do not exist for ascertaining the applicable LIBOR, or

          (b) Banks with  Percentages  aggregating at least 33% percent (33)% or
     more reasonably determine and so advise the Administrative Agent that LIBOR
     as reasonably  determined by the  Administrative  Agent will not adequately
     and fairly  reflect the cost to such Banks or Bank of funding  their or its
     Eurodollar Loans or Loan for such Interest Period,

then the Administrative Agent shall forthwith give notice thereof to Borrower
and the Banks, whereupon until the Administrative Agent notifies Borrower that
the circumstances giving rise to such suspension no longer exist, the
obligations of the Banks or of the relevant Bank to make Eurodollar Loans shall
be suspended.

                                       38

Section 9.3       Increased Cost and Reduced Return.

          (a) If, on or after the date hereof,  the  adoption of any  applicable
     law,  rule or  regulation,  or any  change  therein,  or any  change in the
     interpretation  or  administration  thereof by any governmental  authority,
     central  bank or  comparable  agency  charged  with the  interpretation  or
     administration  thereof,  or compliance by any Bank (or its Lending Office)
     with any request or directive  (whether or not having the force of law but,
     if not having the force of law,  compliance  with which is customary in the
     relevant  jurisdiction)  of any such authority,  central bank or comparable
     agency:

          (i) shall subject any Bank (or its Lending Office) to any tax, duty or
     other  charge  with  respect  to its  Eurodollar  Loans,  its  Notes or its
     obligation to make Eurodollar  Loans, or shall change the basis of taxation
     of  payments  to any Bank (or its Lending  Office) of the  principal  of or
     interest  on its  Eurodollar  Loans or any other  amounts  due  under  this
     Agreement  in respect of its  Eurodollar  Loans or its  obligation  to make
     Eurodollar  Loans (except for changes in the rate of tax on the overall net
     income  or  profits  of such  Bank or its  Lending  Office  imposed  by the
     jurisdiction  in which such Bank or its lending office is  incorporated  in
     which such Bank's principal executive office or Lending Office is located);
     or

          (ii) shall  impose,  modify or deem  applicable  any reserve,  special
     deposit or similar requirement  (including,  without  limitation,  any such
     requirement  imposed  by the  Board of  Governors  of the  Federal  Reserve
     System,  but  excluding  with  respect  to any  Eurodollar  Loans  any such
     requirement  included  in  an  applicable  Eurodollar  Reserve  Percentage)
     against assets of,  deposits with or for the account of, or credit extended
     by, any Bank (or its  Lending  Office) or shall  impose on any Bank (or its
     Lending Office) or on the interbank  market any other  condition  affecting
     its  Eurodollar  Loans,  its Notes,  or its  obligation to make  Eurodollar
     Loans;

and the result of any of the foregoing is to increase the cost to such Bank (or
its Lending Office) of making or maintaining any Eurodollar Loan or to reduce
the amount of any sum received or receivable by such Bank (or its Lending
Office) under this Agreement or under its Notes with respect thereto, by an
amount deemed by such Bank to be material, then, within fifteen (15) days after
demand by such Bank (with a copy to the Administrative Agent), Borrower shall be
obligated to pay to such Bank such additional amount or amounts as will
compensate such Bank for such increased cost or reduction. In the event any law,
rule, regulation or interpretation described above is revoked, declared invalid
or inapplicable or is otherwise rescinded, and as a result thereof a Bank is
determined to be entitled to a refund from the applicable authority for any
amount or amounts which were paid or reimbursed by Borrower to such Bank
hereunder, such Bank shall refund such amount or amounts to Borrower without
interest.

     (b) If, after the date hereof, any Bank or the  Administrative  Agent shall
have  determined  that the adoption of any  applicable  law,  rule or regulation
regarding  capital  adequacy,   or  any  change  therein   (including,   without
limitation, any revision in the Final Risk-Based Capital Guidelines of the Board
of Governors of the Federal Reserve System (12 CFR Part 208,  Appendix A; 12 CFR
Part 225,  Appendix A) or of the Office of the  Comptroller  of the Currency (12
CFR Part 3, Appendix A), or in any other  applicable  capital  rules  heretofore
adopted  and  issued  by  any  governmental  authority),  or any  change  in the
interpretation or

                                       39

administration thereof by any governmental authority, central bank or comparable
agency charged with the interpretation or administration  thereof, or compliance
by any Bank (or its  Lending  Office)  with any request or  directive  regarding
capital adequacy  (whether or not having the force of law but, if not having the
force of law, compliance with which is customary in the applicable jurisdiction)
of any such authority,  central bank or comparable agency, has or would have the
effect of reducing the rate of return on such Bank's capital,  or on the capital
of any  corporation  controlling  such Bank, as a consequence of its obligations
hereunder to a level below that which such Bank could have achieved but for such
adoption,  change or compliance  (taking into consideration such Bank's policies
with  respect  to  capital  adequacy)  by an  amount  deemed  by such Bank to be
material,  then from time to time, within fifteen (15) days after demand by such
Bank (with a copy to the Administrative Agent),  Borrower shall pay to such Bank
such  additional  amount  or  amounts  as will  compensate  such  Bank  for such
reduction.

     (c) Each Bank that determines to seek  compensation  under this Section 9.3
shall notify Borrower and the  Administrative  Agent of the  circumstances  that
entitle  the Bank to such  compensation  pursuant  to this  Section 9.3 and will
designate a different  Lending  Office if such  designation  will avoid the need
for,  or reduce the  amount  of,  such  compensation  and will not,  in the sole
judgment of such Bank, be otherwise  disadvantageous to such Bank. A certificate
of any Bank claiming  compensation  under this Section 9.3 and setting forth the
additional  amount or amounts to be paid to it  hereunder  submitted to Borrower
and the  Administrative  Agent by such Bank in good faith  shall be prima  facie
evidence of the amount of such  compensation.  In determining such amount,  such
Bank may use any reasonable averaging and attribution methods.

     Section 9.4 Lending  Offices.  Each Bank may, at its option,  elect to make
its  Loans  hereunder  at the  branch,  office  or  affiliate  specified  on the
appropriate  signature  page  hereof or in the  assignment  agreement  which any
assignee  bank  executes  pursuant  to  Section  11.12  hereof  (each a "Lending
Office")  for each  type of Loan  available  hereunder  or at such  other of its
branches,  offices or affiliates as it may from time to time elect and designate
in a written notice to Borrower and the  Administrative  Agent,  so long as such
election does not increase  costs or other  amounts  payable by Borrower to such
Bank hereunder.

     Section 9.5 Discretion of Bank as to Manner of Funding. Notwithstanding any
other  provision  of this  Agreement,  each Bank shall be  entitled  to fund and
maintain  its funding of all or any part of its Loans in any manner it sees fit,
it being  understood,  however,  that for the  purposes  of this  Agreement  all
determinations  hereunder  shall be made as if each Bank had actually funded and
maintained  each  Eurodollar  Loan  through  the  purchase  of  deposits  in the
eurodollar  interbank  market  having a maturity  corresponding  to such  Loan's
Interest  Period and bearing an interest  rate equal to LIBOR for such  Interest
Period.

     SECTION 10 THE AGENT.

     Section 10.1 Appointment and  Authorization of  Administrative  Agent. Each
Bank hereby appoints Credit Lyonnais New York Branch as the Administrative Agent
under the Credit  Documents and hereby  authorizes the  Administrative  Agent to
take such  action as  Administrative  Agent on its behalf and to  exercise  such
powers under the Credit Documents as are delegated to the  Administrative  Agent
by the terms  thereof,  together with such powers as are  reasonably  incidental
thereto.  The  Administrative  Agent  shall  have no duties or  responsibilities
except those expressly set forth in this Agreement and the Credit Documents. The
duties of the

                                       40

Administrative  Agent shall be  mechanical  and  administrative  in nature;  the
Administrative  Agent  shall not have by reason of this  Agreement  or any other
Credit  Document a fiduciary  relationship in respect of any Bank, the holder of
any Note or any other Person;  and nothing in this Agreement or any other Credit
Document,  expressed  or implied,  is intended to or shall be so construed as to
impose  upon  the  Administrative  Agent  any  obligations  in  respect  of this
Agreement or any other Credit  Document  except as expressly set forth herein or
therein.

     Section 10.2  Administrative  Agent and its Affiliates.  The Administrative
Agent shall have the same rights and powers under this  Agreement  and the other
Credit  Documents as any other Bank and may exercise or refrain from  exercising
the same as though it were not the Administrative  Agent, and the Administrative
Agent and its affiliates may accept  deposits from, lend money to, and generally
engage in any kind of business  with Borrower or any Affiliate of Borrower as if
it were not the Administrative Agent under the Credit Documents.

     Section 10.3 Action by Administrative  Agent. If the  Administrative  Agent
receives  from  Borrower  a written  notice of an Event of Default  pursuant  to
Section 7.6(c)(i) hereof, the  Administrative  Agent shall promptly give each of
the Banks written notice thereof.  The obligations of the  Administrative  Agent
under the Credit  Documents are only those expressly set forth therein.  Without
limiting the generality of the foregoing,  the Administrative Agent shall not be
required to take any action  hereunder  with  respect to any Default or Event of
Default,  except as  expressly  provided in  Sections  8.2 and 8.3. In no event,
however,  shall  the  Administrative  Agent be  required  to take any  action in
violation of applicable law or of any provision of any Credit Document,  and the
Administrative  Agent  shall in all  cases  be fully  justified  in  failing  or
refusing to act hereunder or under any other Credit  Document unless it shall be
first  indemnified to its reasonable  satisfaction  by the Banks against any and
all costs,  expense,  and  liability  which may be  incurred  by it by reason of
taking or continuing to take any such action. The Administrative  Agent shall be
entitled to assume that no Default or Event of Default exists unless notified to
the  contrary  in  writing  by a Bank or  Borrower.  In all cases in which  this
Agreement and the other Credit Documents do not require the Administrative Agent
to take certain actions,  the  Administrative  Agent shall be fully justified in
using its  discretion  in failing to take or in taking any action  hereunder and
thereunder.

     Section  10.4  Consultation  with  Experts.  The  Administrative  Agent may
consult with legal counsel,  independent  public  accountants  and other experts
selected  by it and shall not be liable  for any  action  taken or omitted to be
taken  by it in good  faith  in  accordance  with the  advice  of such  counsel,
accountants or experts.

     Section 10.5 Liability of Administrative  Agent;  Credit Decision.  Neither
the  Administrative  Agent  nor  any  of its  directors,  officers,  agents,  or
employees  shall be liable for any action taken or not taken by it in connection
with the Credit Documents (i) with the consent or at the request of the Required
Banks or (ii) in the absence of its own gross negligence or willful  misconduct.
Neither the Administrative Agent nor any of its directors,  officers,  agents or
employees shall be responsible  for or have any duty to ascertain,  inquire into
or verify (i) any statement,  warranty or representation made in connection with
this  Agreement,  any  other  Credit  Document  or any  Credit  Event;  (ii) the
performance  or  observance of any of the covenants or agreements of Borrower or
any other party  contained  herein or in any other  Credit  Document;  (iii) the
satisfaction  of any  condition  specified  in  Section  6  hereof;  or (iv) the
validity, effectiveness,  genuineness, enforceability,  perfection, value, worth
or  collectibility  hereof  or of

                                       41

any other  Credit  Document or of any other  documents  or writing  furnished in
connection  with any Credit  Document;  and the  Administrative  Agent  makes no
representation  of any  kind  or  character  with  respect  to any  such  matter
mentioned  in this  sentence.  The  Administrative  Agent may execute any of its
duties under any of the Credit Documents by or through  employees,  agents,  and
attorneys-in-fact  and shall not be  answerable to the Banks,  Borrower,  or any
other   Person  for  the   default  or   misconduct   of  any  such   agents  or
attorneys-in-fact  selected with reasonable care. The Administrative Agent shall
not  incur  any  liability  by  acting in  reliance  upon any  notice,  consent,
certificate,  other document or statement  (whether written or oral) believed by
it to be genuine or to be sent by the proper party or parties. In particular and
without limiting any of the foregoing,  the  Administrative  Agent shall have no
responsibility  for  confirming  the accuracy of any  Compliance  Certificate or
other  document or  instrument  received by it under the Credit  Documents.  The
Administrative Agent may treat the payee of any Note as the holder thereof until
written notice of transfer shall have been filed with the  Administrative  Agent
signed by such payee in form satisfactory to the Administrative Agent. Each Bank
acknowledges   that  it  has   independently   and   without   reliance  on  the
Administrative  Agent or any  other  Bank,  and  based  upon  such  information,
investigations  and  inquiries  as it deems  appropriate,  made  its own  credit
analysis  and  decision to extend  credit to Borrower in the manner set forth in
the Credit Documents. It shall be the responsibility of each Bank to keep itself
informed as to the  creditworthiness  of Borrower and any other relevant Person,
and the  Administrative  Agent shall have no  liability to any Bank with respect
thereto.

     Section 10.6 Indemnity.  The Banks shall ratably,  in accordance with their
respective  Percentages,  indemnify and hold the  Administrative  Agent, and its
directors,  officers,  employees,  agents and representatives  harmless from and
against any liabilities,  losses,  costs or expenses  suffered or incurred by it
under any Credit  Document or in connection with the  transactions  contemplated
thereby,  regardless  of when  asserted  or  arising,  except to the  extent the
Administrative  Agent is promptly reimbursed for the same by Borrower and except
to the  extent  that any event  giving  rise to a claim was  caused by the gross
negligence or willful  misconduct of the party  seeking to be  indemnified.  The
obligations  of the Banks under this Section 10.6 shall survive  termination  of
this Agreement.

     Section   10.7   Resignation   of   Administrative   Agent  and   Successor
Administrative  Agent. The Administrative Agent may resign at any time by giving
written notice thereof to the Banks and Borrower.  Upon any such  resignation of
the  Administrative  Agent, the Required Banks shall have the right to appoint a
successor  Administrative  Agent with the consent of  Borrower.  If no successor
Administrative  Agent shall have been so appointed by the  Required  Banks,  and
shall have accepted such appointment, within thirty (30) days after the retiring
Administrative  Agent's  giving  of  notice of  resignation,  then the  retiring
Administrative   Agent  may,  on  behalf  of  the  Banks,  appoint  a  successor
Administrative  Agent,  which shall be any Bank hereunder or any commercial bank
organized under the laws of the United States of America or of any State thereof
and having a combined  capital  and surplus of at least  $200,000,000.  Upon the
acceptance  of its  appointment  as the  Administrative  Agent  hereunder,  such
successor Administrative Agent shall thereupon succeed to and become vested with
all the rights and duties of the retiring or removed  Administrative Agent under
the Credit Documents,  and the retiring Administrative Agent shall be discharged
from its duties and obligations  thereunder.  After any retiring  Administrative
Agent's  resignation  hereunder as Administrative  Agent, the provisions of

                                       42

this Section 10 and all  protective  provisions  of the other  Credit  Documents
shall inure to its benefit as to any actions  taken or omitted to be taken by it
while it was Administrative Agent.

     SECTION 11 MISCELLANEOUS.

     Section 11.1 Withholding Taxes.

          (a) Payments Free of Withholding.  Subject to Section 11.1 (b) hereof,
     each payment by Borrower under this Agreement or the other Credit Documents
     shall be made  without  withholding  for or on  account  of any  present or
     future taxes (other than overall net income taxes on the recipient). If any
     such withholding is so required,  Borrower shall make the withholding,  pay
     the  amount  withheld  to the  appropriate  governmental  authority  before
     penalties attach thereto or interest accrues thereon and forthwith pay such
     additional  amount  as may be  necessary  to  ensure  that  the net  amount
     actually received by each Bank and the Administrative  Agent free and clear
     of such taxes (including such taxes on such additional  amount) is equal to
     the amount which that Bank or the Administrative Agent (as the case may be)
     would  have   received  had  such   withholding   not  been  made.  If  the
     Administrative  Agent or any Bank pays any  amount in  respect  of any such
     taxes,  penalties or interest  Borrower shall reimburse the  Administrative
     Agent or that Bank for that payment on demand in the currency in which such
     payment was made.  If Borrower  pay any such taxes,  penalties or interest,
     they  shall  deliver  official  tax  receipts  evidencing  that  payment or
     certified  copies  thereof  to the  Bank or  Administrative  Agent on whose
     account such withholding was made (with a copy to the Administrative  Agent
     if not the  recipient of the original) on or before the thirtieth day after
     payment. If any Bank or the Administrative Agent determines it has received
     or been granted a credit  against or relief or remission  for, or repayment
     of, any taxes paid or  payable  by it  because of any taxes,  penalties  or
     interest paid by Borrower and evidenced by such a tax receipt, such Bank or
     Administrative Agent shall, to the extent it can do so without prejudice to
     the retention of the amount of such credit, relief, remission or repayment,
     pay to Borrower such amount as such Bank or Administrative Agent determines
     is  attributable to such deduction or withholding and which will leave such
     Bank or  Administrative  Agent  (after such  payment) in no better or worse
     position  than it would have been in if Borrower  had not been  required to
     make  such  deduction  or  withholding.  Nothing  in this  Agreement  shall
     interfere  with the  right of each  Bank  and the  Administrative  Agent to
     arrange its tax affairs in whatever  manner it thinks fit nor  obligate any
     Bank or the  Administrative  Agent to disclose any information  relating to
     its tax affairs or any computations in connection with such taxes.

          (b) U.S.  Withholding Tax  Exemptions.  Each Bank that is not a United
     States person (as such term is defined in Section  7701(a)(30) of the Code)
     shall submit to Borrower and the Administrative Agent on or before the date
     of the initial Borrowing  hereunder two duly completed and signed copies of
     either Form W8BEN  (relating  to such Bank and  entitling  it to a complete
     exemption from withholding  under the Code on all amounts to be received by
     such Bank,  including fees, pursuant to the Credit Documents and the Loans)
     or Form  W8ECI  (relating  to all  amounts  to be  received  by such  Bank,
     including  fees,  pursuant  to the Credit  Documents  and the Loans) of the
     United States Internal Revenue  Service.  Thereafter and from time to time,
     each Bank  shall  submit to  Borrower  and the  Administrative  Agent  such
     additional  duly  completed

                                       43

     and  signed  copies  of one or the other of such  Forms (or such  successor
     forms as shall be adopted from time to time by the relevant  United  States
     taxing  authorities)  as may be (i)  requested  by  Borrower  in a  written
     notice, directly or through the Administrative Agent, to such Bank and (ii)
     required  under then current  United States law or  regulations to avoid or
     reduce  United  States  withholding  taxes on  payments  in  respect of all
     amounts to be received by such Bank, including fees, pursuant to the Credit
     Documents or the Loans.

          (c) Inability of Bank to Submit Forms.  If any Bank  determines,  as a
     result of any change in applicable  law,  regulation  or treaty,  or in any
     official application or interpretation thereof, that it is unable to submit
     to Borrower or Administrative  Agent any form or certificate that such Bank
     is obligated to submit  pursuant to subsection  (b) of this Section 11.1 or
     that  such  Bank is  required  to  withdraw  or  cancel  any  such  form or
     certificate  previously submitted or any such form or certificate otherwise
     becomes ineffective or inaccurate, such Bank shall promptly notify Borrower
     and Administrative Agent of such fact and the Bank shall to that extent not
     be obligated to provide any such form or  certificate  and will be entitled
     to withdraw or cancel any affected form or certificate, as applicable.

     Section  11.2 No Waiver of  Rights.  No delay or failure on the part of the
Administrative  Agent or any Bank or on the part of the holder or holders of any
Note in the  exercise  of any power or right  under any  Credit  Document  shall
operate as a waiver thereof,  nor as an  acquiescence in any default,  nor shall
any single or partial exercise thereof preclude any other or further exercise of
any  other  power  or  right,  and the  rights  and  remedies  hereunder  of the
Administrative  Agent,  the Banks and the  holder  or  holders  of any Notes are
cumulative  to, and not exclusive  of, any rights or remedies  which any of them
would otherwise have.

     Section 11.3  Non-Business  Day. If any payment of principal or interest on
any Loan or of any  other  Obligation  shall  fall  due on a day  which is not a
Business Day, interest or fees (as applicable) at the rate, if any, such Loan or
other Obligation bears for the period prior to maturity shall continue to accrue
on such  Obligation  from the stated due date thereof to and  including the next
succeeding Business Day, on which the same shall be payable.

     Section  11.4  Documentary  Taxes.  Borrower  agrees  that it will  pay any
documentary,  stamp or similar taxes payable in respect to any Credit  Document,
including  interest  and  penalties,  in the event any such taxes are  assessed,
irrespective  of when such  assessment  is made and whether or not any credit is
then in use or available hereunder.

     Section  11.5  Survival  of   Representations.   All   representations  and
warranties  made herein or in  certificates  given pursuant hereto shall survive
the execution and delivery of this Agreement and the other Credit Documents, and
shall  continue  in full force and effect  with  respect to the date as of which
they were made as long as any credit is in use or available hereunder.

     Section  11.6  Survival  of  Indemnities.  All  indemnities  and all  other
provisions  relative  to  reimbursement  to the Banks of amounts  sufficient  to
protect  the yield of the Banks with  respect to the Loans,  including,  but not
limited to,  Section 2.11,  Section 9.3 and Section 11.15 hereof,  shall survive
the termination of this Agreement and the other Credit Documents and the payment
of the Loans and all other Obligations.

                                       44

     Section  11.7  Set-Off.  (a) (a) In addition to any rights now or hereafter
granted  under  applicable  law and not by way of limitation of any such rights,
upon the  occurrence  of any Event of  Default,  each  Bank and each  subsequent
holder of any Note is hereby  authorized by Borrower at any time or from time to
time,  without notice to Borrower or to any other Person,  any such notice being
hereby expressly  waived, to set off and to appropriate and to apply any and all
deposits  (general or  special,  including,  but not  limited  to,  Indebtedness
evidenced by  certificates  of deposit,  whether  matured or  unmatured,  and in
whatever  currency  denominated) and any other  Indebtedness at any time held or
owing by that Bank or that subsequent holder to or for the credit or the account
of Borrower,  whether or not matured,  against and on account of the obligations
and  liabilities  of Borrower to that Bank or that  subsequent  holder under the
Credit  Documents,  including,  but not  limited to, all claims of any nature or
description arising out of or connected with the Credit Documents,  irrespective
of whether or not (a) that Bank or that  subsequent  holder  shall have made any
demand  hereunder or (b) the  principal of or the interest on the Loans or Notes
and other  amounts due hereunder  shall have become due and payable  pursuant to
Section 8 and although said obligations and liabilities,  or any of them, may be
contingent or unmatured.

     (b) Each Bank agrees with each other Bank a party  hereto that if such Bank
shall  receive  and retain any  payment,  whether by set-off or  application  of
deposit  balances  or  otherwise,  on any of the Loans in excess of its  ratable
share of payments on all such obligations  then  outstanding to the Banks,  then
such Bank shall purchase for cash at face value, but without  recourse,  ratably
from each of the other  Banks  such  amount of the Loans held by each such other
Banks (or  interest  therein) as shall be  necessary to cause such Bank to share
such excess payment ratably with all the other Banks; provided, however, that if
any such  purchase  is made by any  Bank,  and if such  excess  payment  or part
thereof is thereafter recovered from such purchasing Bank, the related purchases
from the other Banks shall be rescinded  ratably and the purchase price restored
as to the portion of such excess payment so recovered, but without interest.

     Section 11.8 Notices.  Except as otherwise  specified  herein,  all notices
under the Credit  Documents  shall be in writing  (including  facsimile or other
electronic communication) and shall be given to a party hereunder at its address
or facsimile number set forth below or such other address or facsimile number as
such  party may  hereafter  specify  by notice to the  Administrative  Agent and
Borrower, given by courier, by United States certified or registered mail, or by
other  telecommunication  device  capable of  creating a written  record of such
notice and its receipt. Notices under the Credit Documents to the Banks shall be
addressed to their  respective  addresses,  facsimile  or telephone  numbers set
forth on the signature  pages hereof or in the  assignment  agreement  which any
assignee bank executes pursuant to Section 11.12 hereof,  and to Borrower and to
the Administrative Agent to:

                  If to Borrower:

                  Black Hills Corporation
                  625 9th Street
                  Rapid City, South Dakota 57709
                  Attention: Garner M. Anderson
                  Facsimile:  605.721.2597
                  Telephone: 605.721.2311

                                       45

                  with copies to:

                  Black Hills Corporation
                  625 9th Street
                  Rapid City, South Dakota 57709
                  Attention: Mark T. Thies
                  Facsimile:  605.721.2599
                  Telephone: 605.721.2331

                  Black Hills Corporation
                  1075 Noel Avenue
                  Wheeling, Illinois 60090
                  Attention: Richard T. Ashbeck
                  Facsimile:  847.459.4140
                  Telephone: 847.465.3033

                  If to the Administrative Agent:

                  Notices shall be sent to the applicable address set forth on
                  Part B of Schedule 4 hereto.

     Each such notice,  request or other communication shall be effective (i) if
given by facsimile,  when such facsimile is transmitted to the facsimile  number
specified  in  this  Section  11.8  or  on  the  signature  pages  hereof  and a
confirmation of receipt of such facsimile has been received by the sender,  (ii)
if given by courier, when delivered, (iii) if given by mail, three business days
after such  communication  is  deposited  in the mail,  registered  with  return
receipt  requested,  addressed as aforesaid or (iv) if given by any other means,
when  delivered at the addresses  specified in this Section 11.8;  provided that
any notice  given  pursuant  to Section 2 hereof  shall be  effective  only upon
receipt.

     Section 11.9 Counterparts.  This Agreement may be executed in any number of
counterpart   signature  pages,  and  by  the  different  parties  on  different
counterparts,  each of which when  executed  shall be deemed an original but all
such  counterparts  taken together shall constitute one and the same instrument.
Delivery of an executed  counterpart  via  facsimile  shall for all  purposes be
deemed as effective as delivery of an original counterpart.

     Section 11.10 Successors and Assigns.  This Agreement shall be binding upon
Borrower and its successors and assigns,  and shall inure to the benefit of each
of the Banks and the  benefit  of their  permitted  respective  successors,  and
assigns,  including any subsequent  holder of any Note.  Borrower may not assign
any of its  rights or  obligations  under any  Credit  Document  unless (i) such
assignation  occurs in connection with a merger or acquisition by Borrower which
is otherwise  permitted  under the terms of this  Agreement and the  appropriate
Credit  Document,  if  applicable  and (ii)  Borrower  obtains the prior written
consent  of all of the  Banks,  which  consent  shall be in form  and  substance
satisfactory to Administrative Agent.

     Section 11.11  Participants  and Note  Assignees.  Each Bank shall have the
right at its own cost to grant  participations  (to be  evidenced by one or more
agreements or certificates of

                                       46

participation) in the Loans made by such Bank at any time and from time to time,
and to assign its rights under such Loans or the Note evidencing such Loans to a
federal  reserve  bank;  provided that (i) no such  participation  or assignment
shall relieve any Bank of any of its obligations  under this Agreement,  (ii) no
such assignee or participant  shall have any rights under this Agreement  except
as provided in this Section 11.11, and (iii) the Administrative Agent shall have
no obligation or  responsibility  to such  participant or assignee,  except that
nothing  herein is  intended  to affect the rights of an  assignee  of a Note to
enforce the Note assigned. Any party to which such a participation or assignment
has been  granted  shall have the  benefits of Section 2.11 and Section 9.3, but
shall not be entitled to receive any greater  payment  under either such Section
than the Bank granting such participation would have been entitled to receive in
connection with the rights transferred. Any agreement pursuant to which any Bank
may grant  such a  participating  interest  shall  provide  that such Bank shall
retain the sole right and  responsibility to enforce the obligations of Borrower
hereunder,  including,  without limitation,  the right to approve any amendment,
modification  or waiver of any provision of this  Agreement;  provided that such
participation  agreement  may  provide  that  such  Bank  will not  agree to any
modification,  amendment or waiver of this  Agreement that would (A) forgive any
amount of or postpone  the date for payment of any  principal  of or interest on
any Loan or of any fee  payable  hereunder  in  which  such  participant  has an
interest or (B) reduce the stated  rate at which  interest or fees in which such
participant has an interest accrue hereunder.

     Section 11.12  Assignments by Banks.  Each Bank shall have the right at any
time,  with the  written  consent of  Administrative  Agent,  and,  prior to the
occurrence of a Default or Event of Default,  Borrower, which consents shall not
be unreasonably  withheld, to assign all or any part of its Note and outstanding
Loans to one or more  other  Persons;  provided  that such  assignment  is in an
amount of at least $5,000,000 or the entire  outstanding amount of Loans made by
such Bank,  and if such  assignment  is not for such Bank's  entire  outstanding
amount of Loans  then the  amount of  outstanding  Loans made by such Bank after
giving effect to such assignment shall not be less than $5,000,000; and provided
further that neither the consent of Borrower nor the Administrative  Agent shall
be required for any Bank to assign all or part of its Note and outstanding Loans
to any Affiliate of the assigning Bank. Each such assignment shall set forth the
assignees  address for notices to be given under  Section 11.8 hereof  hereunder
and its designated Lending Office pursuant to Section 9.4 hereof.  Upon any such
assignment,  delivery to the  Administrative  Agent of an executed  copy of such
assignment  agreement  and the forms  referred  to in Section  11.1  hereof,  if
applicable,  and the payment of a $3,500  recordation fee to the  Administrative
Agent,  the assignee shall become a Bank  hereunder,  all Loans it thereby holds
shall be governed by all the terms and  conditions  hereof and the Bank granting
such  assignment  shall have its rights in connection  therewith  reduced by the
amount of such assignment.

     Section  11.13  Amendments.  Any  provision of the Credit  Documents may be
amended or waived if, but only if, such amendment or waiver is in writing and is
signed by (a) Borrower,  (b) the Required Banks, and (c) if the rights or duties
of the  Administrative  Agent are affected thereby,  the  Administrative  Agent;
provided that:

          (i) no  amendment  or waiver  pursuant  to this  Section.  11.13 shall
     reduce  the  amount  of or  postpone  any  fixed  date for  payment  of any
     principal  of or  interest  on any Loan or of any fee or  other  Obligation
     payable hereunder without the consent of each Bank; and

                                       47

          (ii) no  amendment  or waiver  pursuant to this  Section  11.13 shall,
     unless signed by each Bank, change this Section 11.13, or the definition of
     Required  Banks,  or affect the number of Banks required to take any action
     under the Credit Documents.

     Anything in this Agreement to the contrary notwithstanding,  if at any time
when the  conditions  precedent  set  forth in  Section  6.2  hereof to any Loan
hereunder are satisfied,  any Bank shall fail to fulfill its obligations to make
such Loan (any such Bank, a "Defaulting Bank") then, for so long as such failure
shall continue,  the Defaulting Bank shall (unless Borrower,  the Administrative
Agent and the Required Banks  (determined  as if the Defaulting  Bank were not a
Bank hereunder)  shall otherwise  consent in writing) be deemed for all purposes
related to amendments,  modifications,  waivers or consents under this Agreement
(other than  amendments or waivers  referred to in clause (i) and (ii) above) to
have no Loans and shall not be treated as a Bank hereunder  when  performing the
computation  of the  Required  Banks.  To the  extent the  Administrative  Agent
receives any payments or other amounts for the account of a Defaulting Bank such
Defaulting Bank shall be deemed to have requested that the Administrative  Agent
use such payment or other amount to fulfill its obligations to make such Loan.

     Section 11.14  Headings.  Section  headings used in this  Agreement are for
reference only and shall not affect the construction of this Agreement.

     Section 11.15 Legal Fees, Other Costs and Indemnification.  Borrower agrees
to pay  all  reasonable  costs  and  expenses  of the  Administrative  Agent  in
connection  with  the  preparation  and  negotiation  of  the  Credit  Documents
(including past and future  reasonable  out-of-pocket  expenses  incurred by the
Administrative  Agent in connection  with the  syndication of the  transaction),
including without  limitation,  the reasonable fees and disbursements of counsel
to the Administrative Agent, in connection with the preparation and execution of
the Credit  Documents,  and any  amendment,  waiver or consent  related  hereto,
whether or not the transactions  contemplated  herein are consummated.  Borrower
further  agrees to indemnify  each Bank,  the  Administrative  Agent,  and their
respective  directors,  agents,  officers  and  employees,  against  all losses,
claims,  damages,  penalties,  judgments,  liabilities and expenses  (including,
without limitation,  all expenses of litigation or preparation therefor, whether
or not the indemnified Person is a party thereto) which any of them may incur or
reasonably pay arising out of or relating to any Credit Document  (including any
relating to a misrepresentation by Borrower under any Credit Document) or any of
the transactions  contemplated  thereby or the direct or indirect application or
proposed  application of the proceeds of any Loan,  other than those which arise
from  the  gross  negligence  or  willful   misconduct  of  the  party  claiming
indemnification.  Borrower,  upon demand by any of the Administrative Agent or a
Bank at any  time,  shall  reimburse  the  Administrative  Agent or Bank for any
reasonable  legal or other  expenses  (including  allocable fees and expenses of
in-house counsel) incurred in connection with investigating or defending against
any of the foregoing  except if the same is directly due to the gross negligence
or willful misconduct of the party to be indemnified, provided that with respect
to legal costs and expenses  incurred in connection  with the enforcement of the
Banks rights hereunder or any work-out or similar situation, Borrower shall only
be  obligated to pay the legal fees of the  Administrative  Agent and not of any
other Bank.

     Section 11.16 Entire Agreement.  The Credit Documents constitute the entire
understanding  of the parties thereto with respect to the subject matter thereof
and any prior or

                                       48

contemporaneous  agreements,  whether  written or oral, with respect thereto are
superseded thereby.

     Section 11.17  Construction.  The parties hereto acknowledge and agree that
neither this  Agreement nor the other Credit  Documents  shall be construed more
favorably  in favor of one than the other  based upon which  party  drafted  the
same, it being acknowledged that all parties hereto contributed substantially to
the negotiation of this Agreement and the other Credit Documents.

     Section 11.18 Governing Law. This Agreement and the other Credit Documents,
and the  rights  and  duties  of the  parties  hereto,  shall be  construed  and
determined in accordance with the internal laws of the State of New York.

     Section 11.19 SUBMISSION TO JURISDICTION;  WAIVER OF JURY TRIAL.  BORROWER,
ADMINISTRATIVE   AGENT  AND  EACH  BANK  HEREBY  SUBMITS  TO  THE   NONEXCLUSIVE
JURISDICTION  OF THE UNITED STATES  DISTRICT COURT FOR THE SOUTHERN  DISTRICT OF
NEW YORK AND OF ANY NEW YORK  STATE  COURT  SITTING  IN THE CITY OF NEW YORK FOR
PURPOSES OF ALL LEGAL PROCEEDINGS  ARISING OUT OF OR RELATING TO THIS AGREEMENT,
THE OTHER CREDIT DOCUMENTS OR THE TRANSACTIONS  CONTEMPLATED  HEREBY OR THEREBY.
BORROWER,  ADMINISTRATIVE AGENT AND EACH BANK IRREVOCABLY WAIVES, TO THE FULLEST
EXTENT PERMITTED BY LAW, ANY OBJECTION WHICH IT MAY NOW OR HEREAFTER HAVE TO THE
LAYING OF THE VENUE OF ANY SUCH PROCEEDING BROUGHT IN SUCH A COURT AND ANY CLAIM
THAT  ANY  SUCH  PROCEEDING  BROUGHT  IN SUCH A COURT  HAS  BEEN  BROUGHT  IN AN
INCONVENIENT  FORUM.  BORROWER,   ADMINISTRATIVE  AGENT  AND  EACH  BANK  HEREBY
IRREVOCABLY  WAIVES  ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL  PROCEEDING
ARISING  OUT  OF  OR  RELATING  TO  ANY  CREDIT  DOCUMENT  OR  THE  TRANSACTIONS
CONTEMPLATED THEREBY.

     Section  11.20  Replacement  of  Bank.  Each  Bank  agrees  that,  upon the
occurrence of any event set forth in Sections 9.1, 9.3 and 11.1,  such Bank will
use  reasonable  efforts  to book and  maintain  its Loans  through a  different
Lending  Office or to transfer its Loans to an Affiliate  with the  objective of
avoiding  or  minimizing  the  consequences  of such event;  provided  that such
booking or transfer is not otherwise  disadvantageous to such Bank as determined
by such Bank in its sole and absolute discretion. If any Bank has demanded to be
paid additional  amounts pursuant to Sections 9.1, 9.3 and 11.1, and the payment
of such  additional  amounts are, and are likely to continue to be, more onerous
in the  reasonable  judgment of Borrower  than with  respect to the other Banks,
then  Borrower  shall  have the  right at any time when no  Default  or Event of
Default  shall have  occurred and be  continuing  to seek one or more  financial
institutions  which are not Affiliates of Borrower (each, a "Replacement  Bank")
to purchase with the written consent of the Administrative  Agent (which consent
shall not be (x) required if such proposed  Replacement  Bank is already a Bank,
or an  Affiliate  of a  Bank,  or (y)  unreasonably  delayed  or  withheld)  the
outstanding Loans of such Bank (the "Affected  Bank"),  and if Borrower locate a
Replacement Bank, the Affected Bank shall, upon

          i.   prior written notice to the Administrative Agent,

                                       49

          ii.  (i) payment to the  Affected  Bank of the  purchase  price agreed
               between it and the Replacement  Bank (or, failing such agreement,
               a  purchase  price in the  amount  of the  outstanding  principal
               amount of the Affected Bank's Loans and accrued  interest thereon
               to the date of payment) by the Replacement Bank plus (ii) payment
               by Borrower of all Obligations (other than principal and interest
               with respect to Loans) then due to the  Affected  Bank or accrued
               for its account hereunder or under any other Loan Document,

          iii. satisfaction of the provisions set forth in Section 11.12, and

          iv.  payment by Borrower to the Affected  Bank and the  Administrative
               Agent of all reasonable out-of-pocket expenses in connection with
               such  assignment and assumption  (including the  recordation  fee
               described in Section 11.12),

assign and delegate all its rights and obligations under this Agreement and any
other Credit Document to which it is a party (including its outstanding Loans)
to the Replacement Bank (such assignment to be made without recourse,
representation or warranty), and the Replacement Bank shall assume such rights
and obligations, whereupon the Replacement Bank shall in accordance with Section
11.12 become a party to each Credit Document to which the Affected Bank is a
party and shall have the rights and obligations of a Bank thereunder and the
Affected Bank shall be released from its obligations hereunder and each other
Credit Document to the extent of such assignment and delegation.

Section 11.21 Confidentiality. The Administrative Agent and the Banks shall hold
all non-public information provided to them by Borrower pursuant to or in
connection with this Agreement in accordance with their customary procedures for
handling confidential information of this nature, but may make disclosure to any
of their examiners, regulators, Affiliates, outside auditors, counsel and other
professional advisors in connection with this Agreement or any other Credit
Document or as reasonably required by any potential bona fide transferee,
participant or assignee, or in connection with the exercise of remedies under a
Credit Document, or to any direct or indirect contractual counterparty in swap
agreements or such contractual counterparty's professional advisor (so long as
such contractual counterparty or professional advisor to such contractual
counterparty agrees to be bound by the provisions of this Section 11.21), or to
any nationally recognized rating agency that requires access to information
about a Bank's investment portfolio in connection with ratings issued with
respect to such Bank, or as requested by any governmental agency or
representative thereof or pursuant to legal process; provided, however, that
unless specifically prohibited by applicable law or court order, the
Administrative Agent and each Bank shall use reasonable efforts to promptly
notify Borrower of any request by any governmental agency or representative
thereof (other than any such request in connection with an examination of the
financial condition of the Administrative Agent or such Bank by such
governmental agency) for disclosure of any such non-public information and,
where practicable, prior to disclosure of such information. Prior to any such
disclosure pursuant to this Section 11.21, the Administrative Agent and each
Bank shall require any such bona fide transferee, participant and assignee
receiving a disclosure of non-public information to agree, for the benefit of
Borrower, in writing to be bound by this Section 11.21; and to require such
Person

                                       50

to require any other Person to whom such Person discloses such non-public
information to be similarly bound by this Section 11.21.

                 - Remainder of Page Intentionally Left Blank -
                            [Signature Page Follows]

                                       51

         In Witness Whereof, the parties hereto have caused this Agreement to be
duly executed and delivered in New York, New York by their duly authorized
officers as of the day and year first above written.

                        BLACK HILLS CORPORATION, a
                        South Dakota corporation

                        By:      _____________________________
                        Name:    _____________________________
                        Title:   _____________________________

                                       52

Commitment: $35,000,000                 CREDIT  LYONNAIS NEW YORK
                                        BRANCH., in its individual capacity as a
                                        Bank and as Administrative Agent

                                        By:      _____________________________
                                        Name:    Richard Randall
                                        Title:   Vice President

Address for notices:

Richard Randall
Credit Lyonnais
1301 Avenue of the Americas
New York, New York 10019
Phone: 212-261-3367
Fax: 212-261-3421

Justine Ventrelli
Credit Lyonnais
1301 Avenue of the Americas
New York, New York 10019
Phone: 212-261- 7886
Fax: 212-261-3421

Lending Offices:              Same as above

Base Rate Loans:              Same as above

Eurocurrency Loans:           Same as above

                                       53

                                    EXHIBIT A

                                      NOTE

                                                            September 25, 2002

         FOR VALUE RECEIVED, the undersigned, Black Hills Corporation, a South
Dakota corporation ("Borrower"), promises to pay to the order of Credit Lyonnais
New York Branch (the "Bank") on the Termination Date of the hereinafter defined
Credit Agreement, at the principal office of Credit Lyonnais New York Branch, in
New York, New York, in accordance with Section 4.1 of the Credit Agreement (as
hereafter defined), the aggregate unpaid principal amount of all Loans made by
the Bank to Borrower pursuant to the Credit Agreement, together with interest on
the principal amount of each Loan from time to time outstanding hereunder at the
rates, and payable in the manner and on the dates, specified in the Credit
Agreement.

         The Bank shall record on its books or records or on a schedule attached
to this Note, which is a part hereof, each Loan made by it pursuant to the
Credit Agreement, together with all payments of principal and interest and the
principal balances from time to time outstanding hereon, whether the Loan is a
Base Rate Loan or a Eurodollar Loan, and the interest rate and Interest Period
applicable thereto, provided that prior to the transfer of this Note all such
amounts shall be recorded on a schedule attached to this Note. The record
thereof, whether shown on such books or records or on a schedule to this Note,
shall be shall be prima facie evidence of the same; provided, however, that the
failure of the Bank to record any of the foregoing or any error in any such
record shall not limit or otherwise affect the obligation of Borrower to repay
all Loans made to it pursuant to the Credit Agreement together with accrued
interest thereon.

         This Note is one of the Notes referred to in the Term Credit Agreement
dated as of September 25, 2002, among Borrower, Credit Lyonnais New York Branch,
as Administrative Agent and the financial institutions party thereto (the
"Credit Agreement"), and this Note and the holder hereof are entitled to all the
benefits provided for thereby or referred to therein, to which Credit Agreement
reference is hereby made for a statement thereof. All defined terms used in this
Note, except terms otherwise defined herein, shall have the same meaning as in
the Credit Agreement. This Note shall be governed by and construed in accordance
with the internal laws of the State of New York.

         Prepayments may be made hereon and this Note may be declared due prior
to the expressed maturity hereof, all in the events, on the terms and in the
manner as provided for in the Credit Agreement.

                 - Remainder of Page Intentionally Left Blank -
                            [Signature Page Follows]

                                       54

         The Borrower hereby waives demand, presentment, protest or notice of
any kind hereunder.

                               BLACK HILLS CORPORATION, a
                               South Dakota corporation

                               By:      _____________________________
                               Name:    _____________________________
                               Title:   _____________________________

                                       55

                                    EXHIBIT B

                             COMPLIANCE CERTIFICATE

         This Compliance Certificate is furnished to Credit Lyonnais New York
Branch, as Administrative Agent pursuant to the Term Credit Agreement dated as
of September 25, 2002, among Black Hills Corporation, a South Dakota corporation
("Borrower"), Credit Lyonnais New York Branch, as Administrative Agent and the
financial institutions party thereto (the "Credit Agreement"). Unless otherwise
defined herein, the terms used in this Compliance Certificate have the meanings
ascribed thereto in the Credit Agreement.

         THE UNDERSIGNED HEREBY CERTIFIES THAT:

               1. I am  the  duly  elected  or  appointed  ___________________of
          Borrower;

               2. I have  reviewed the terms of the Credit  Agreement and I have
          made,  or have  caused to be made  under my  supervision,  a  detailed
          review  of  the  transactions  and  conditions  of  Borrower  and  its
          Subsidiaries  during the  accounting  period  covered by the  attached
          financial statements;

               3. The  examinations  described in paragraph 2 did not  disclose,
          and I have no knowledge  of, the  existence of any  condition or event
          which  constitutes  a Default or an Event of Default  during or at the
          end  of the  accounting  period  covered  by  the  attached  financial
          statements or as of the date of this Certificate,  except as set forth
          below; and

               4.  Schedule 1 attached  hereto  sets  forth  financial  data and
          computations  evidencing  compliance  with  certain  covenants  of the
          Credit  Agreement,  all of  which  data  and  computations  are  true,
          complete and correct. All computations are made in accordance with the
          terms of the Credit Agreement.

         Described below are the exceptions, if any, to paragraph 3 by listing,
in detail, the nature of the condition or event, the period during which it has
existed and the action which Borrower has taken, is taking, or proposes to take
with respect to each such condition or event:

         _____________________________________________________________________
         _____________________________________________________________________
         _____________________________________________________________________

         The foregoing certifications, together with the computations set forth
in Schedule 1 hereto and the financial statements delivered with this
Certificate in support hereof, are made and delivered this ___________day of
__________, 200__.

                                                ______________________________

                                       56

                      SCHEDULE 1 TO COMPLIANCE CERTIFICATE

                  Compliance Calculations for Credit Agreement

                       CALCULATION AS OF ________ __,200_

- ------------------------------------------------------------------ --------------------- ---------------------------
A.       Liens (Sec. 7.9(c), (d), and (g))
- ------------------------------------------------------------------ --------------------- ---------------------------
- ------------------------------------------------------------------ --------------------- ---------------------------

         1.       Liens securing taxes or assessments or other     _____________________ (Answer should be yes)
                  government charges or levies equal to or less
                  than $20,000,000 (Section 7.9(c))
- ------------------------------------------------------------------ --------------------- ---------------------------
- ------------------------------------------------------------------ --------------------- ---------------------------
         2.       Liens securing judgments or awards or surety     _____________________ (Answer should be yes)
                  or appeal bonds issued in connection therewith
                  equal to or less than $20,000,000 (Section
                  7.9(d))
- ------------------------------------------------------------------ --------------------- ---------------------------
- ------------------------------------------------------------------ --------------------- ---------------------------
         3.       Is the aggregate amount of Indebtedness and      _____________________ (Answer should be yes)
                  other obligations consisting of (i) the
                  deferred purchase price of newly acquired
                  property or incurred to finance the
                  acquisition of personal property of Borrower
                  used in the ordinary course of business of
                  such Borrower, (ii) Capitalized Lease
                  Obligations, and (iii) the performance of
                  tenders, statutory obligations, bids, leases
                  or other similar obligations (other than for
                  borrowed money) entered into in the ordinary
                  course of business or to secure obligations on
                  performance bonds which is secured by Liens
                  equal to or less than 5% of Consolidated
                  Assets as reflected on the most recent balance
                  sheet delivered by Borrower (Section 7.9(g)).
- ------------------------------------------------------------------ --------------------- ---------------------------
- ------------------------------------------------------------------ --------------------- ---------------------------
B.       Sale and Leasebacks (Section 7.11)
- ------------------------------------------------------------------ --------------------- ---------------------------
- ------------------------------------------------------------------ --------------------- ---------------------------
         1.       Aggregate obligations under all Sale and         $____________________ (Line B1 not to exceed
                  Leasebacks arrangements (other than synthetic                          $30,000,000)
                  lease transactions excluded by Section 7.11)
- ------------------------------------------------------------------ --------------------- ---------------------------
- ------------------------------------------------------------------ --------------------- ---------------------------
C.       Sale of Assets (Section 7.12)
- ------------------------------------------------------------------ --------------------- ---------------------------
- ------------------------------------------------------------------ --------------------- ---------------------------
         1.       Net book value of assets (other than             $____________________ (Line C1 not to exceed
                  inventory, reserves and electricity in the                             10% of total consolidated
                  ordinary course of business) sold during this                          assets)
                  fiscal year
- ------------------------------------------------------------------ --------------------- ---------------------------

                                       57

- ------------------------------------------------------------------ --------------------- ---------------------------
D.       Permitted Investments (Section 7.14)
- ------------------------------------------------------------------ --------------------- ---------------------------
- ------------------------------------------------------------------ --------------------- ---------------------------
         1.       Aggregate amount of Investments in Marketing     $____________________
                  Subsidiaries made after the August 28, 2001
                  (Section 7.14(o)(ii))
- ------------------------------------------------------------------ --------------------- ---------------------------
- ------------------------------------------------------------------ --------------------- ---------------------------
         2.       Investments consisting of Guaranties of          $____________________
                  Indebtedness of Marketing Subsidiaries
                  existing on the Effective Date
- ------------------------------------------------------------------ --------------------- ---------------------------
- ------------------------------------------------------------------ --------------------- ---------------------------
         3.       Intercompany loans permitted pursuant to         $____________________ Line E3
                  Section 7.15(e)(iii) owing by Marketing
                  Subsidiaries (Line E3)
- ------------------------------------------------------------------ --------------------- ---------------------------
- ------------------------------------------------------------------ --------------------- ---------------------------
         4.       Sum of Lines D1, D2 and D3                       $____________________
- ------------------------------------------------------------------ --------------------- ---------------------------
- ------------------------------------------------------------------ --------------------- ---------------------------
         5.       Is Line D4 equal to or less than $10,000,000?    _____________________ (Answer should be yes)
- ------------------------------------------------------------------ --------------------- ---------------------------
- ------------------------------------------------------------------ --------------------- ---------------------------
         6.       Aggregate amount of Investments in Persons       $____________________ (Line D6 not to exceed
                  engaged in the lines of business described in                          $20,000,000)
                  clause (xii) of Section 7.8 (Section 7.14(k))
- ------------------------------------------------------------------ --------------------- ---------------------------
- ------------------------------------------------------------------ --------------------- ---------------------------
E.       Permitted Indebtedness (Section 7.15)
- ------------------------------------------------------------------ --------------------- ---------------------------
- ------------------------------------------------------------------ --------------------- ---------------------------
         1.       Secured Indebtedness except as set forth on      $____________________ (Line E1 not to exceed 5%
                  Schedule 7.15(b): (i) of BHP (ii) evidencing                           of Consolidated Assets)
                  the deferred purchase price of newly acquired
                  property or incurred to finance the acquisition
                  of personal property of Borrower or a Subsidiary
                  used in the ordinary course of business of the
                  Borrower of a Subsidiary, (iii) constituting
                  Capitalized Lease Obligations or with respect
                  to synthetic (or similar type) lease
                  transactions, or (iv) incurred in connection
                  with the performance of tenders, statutory
                  obligations, bids, leases or other similar
                  obligations (other than for borrowed money)
                  entered into in the ordinary course
                  of business or to secure obligations on
                  performance bonds (Section 7.15(c))
- ------------------------------------------------------------------ --------------------- ---------------------------
- ------------------------------------------------------------------ --------------------- ---------------------------
         2.       Intercompany loans owing by Borrower (Section    $____________________ (Must be subordinated to
                  7.15(e)(i)(x))                                                         Obligations)
- ------------------------------------------------------------------ --------------------- ---------------------------

                                       58

- ------------------------------------------------------------------ --------------------- ---------------------------
         3.       Intercompany Indebtedness owing by Marketing     $____________________ (Line E3 not to exceed
                  Subsidiaries to Subsidiaries (Section                                  the difference between
                  7.15(e)(iii))                                                          (i) $10,000,000 less (ii)
                                                                                         the sum of  Lines E4 and
                                                                                         D1)
- ------------------------------------------------------------------ --------------------- ---------------------------
- ------------------------------------------------------------------ --------------------- ---------------------------
         4.       Indebtedness consisting of Guarantees            $____________________ (Line E4 not to exceed
                  (including Long-Term Guaranties) of Marketing                          the difference between
                  Subsidiary Indebtedness  (Section 7.15(f))                             (i) $10,000,000 less (ii)
                                                                                         the sum of Lines E3 and
                                                                                         D1)
- ------------------------------------------------------------------ --------------------- ---------------------------
- ------------------------------------------------------------------ --------------------- ---------------------------
         5.       Indebtedness of Marketing Subsidiaries under     $____________________ (Line E5 not to exceed
                  Marketing Subsidiary Excluded Credit                                   Marketing Subsidiary
                  Facilities (Section 7.15(g))                                           Indebtedness Limit)
- ------------------------------------------------------------------ --------------------- ---------------------------
- ------------------------------------------------------------------ --------------------- ---------------------------
F.       Consolidated Net Worth (Section 7.16)
- ------------------------------------------------------------------ --------------------- ---------------------------
- ------------------------------------------------------------------ --------------------- ---------------------------
         1.       Consolidated Net Worth                           $____________________
- ------------------------------------------------------------------ --------------------- ---------------------------
- ------------------------------------------------------------------ --------------------- ---------------------------
         2.       50% of aggregate Consolidated Net Income, if     $____________________
                  positive, from and including April 1, 2002
- ------------------------------------------------------------------ --------------------- ---------------------------
- ------------------------------------------------------------------ --------------------- ---------------------------
         3.       Does Line F1 exceed sum of (i) $425,000,000      _____________________ (Answer should be yes)
                  plus (ii) line F2
- ------------------------------------------------------------------ --------------------- ---------------------------
- ------------------------------------------------------------------ --------------------- ---------------------------
G.       Recourse Leverage Ratio (Section 7.17)
- ------------------------------------------------------------------ --------------------- ---------------------------
- ------------------------------------------------------------------ --------------------- ---------------------------
         1.       consolidated Indebtedness                        $____________________
- ------------------------------------------------------------------ --------------------- ---------------------------
- ------------------------------------------------------------------ --------------------- ---------------------------
         2.       Non-Recourse Indebtedness                        $____________________
- ------------------------------------------------------------------ --------------------- ---------------------------
- ------------------------------------------------------------------ --------------------- ---------------------------
         3.       Recourse Indebtedness (Line G1 minus Line G2)    $____________________
- ------------------------------------------------------------------ --------------------- ---------------------------
- ------------------------------------------------------------------ --------------------- ---------------------------
         4.       Indebtedness of Marketing Subsidiaries under     $____________________ (Not to exceed Marketing
                  Marketing Subsidiary Excluded Credit                                   Subsidiary Indebtedness
                  Facilities (Line E5)                                                   Limit)
- ------------------------------------------------------------------ --------------------- ---------------------------
- ------------------------------------------------------------------ --------------------- ---------------------------
         5.       Consolidated Net Worth                           $____________________
- ------------------------------------------------------------------ --------------------- ---------------------------
- ------------------------------------------------------------------ --------------------- ---------------------------
         6.       Capital (Line G3 minus Line G4 plus Line G5)     $____________________
- ------------------------------------------------------------------ --------------------- ---------------------------
- ------------------------------------------------------------------ --------------------- ---------------------------
         7.       Recourse Leverage Ratio                          ________:1.00         (ratio of (A) difference
                                                                                         between (x) Line G3 minus
                                                                                         (y) Line G4 to (B) Line
                                                                                         G6 not to exceed 0.65 to
                                                                                         1.00)
- ------------------------------------------------------------------ --------------------- ---------------------------
- ------------------------------------------------------------------ --------------------- ---------------------------
H.       Fixed Charge Coverage Ratio (Section 7.18)
- ------------------------------------------------------------------ --------------------- ---------------------------

                                       59

- ------------------------------------------------------------------ --------------------- ---------------------------
         1.       Consolidated Net Income for past four fiscal     $____________________
                  quarters
- ------------------------------------------------------------------ --------------------- ---------------------------
- ------------------------------------------------------------------ --------------------- ---------------------------
         2.       Income taxes for past four fiscal quarters (to   $____________________
                  the extent subtracted in calculating H1)
- ------------------------------------------------------------------ --------------------- ---------------------------
- ------------------------------------------------------------------ --------------------- ---------------------------
         3.       Consolidated Interest Expense for past four      $____________________ Insert amount from Line
                  fiscal quarters (to the extent subtracted in                           H18
                  calculating H1)
- ------------------------------------------------------------------ --------------------- ---------------------------
- ------------------------------------------------------------------ --------------------- ---------------------------
         4.       Amortization expense for intangible assets       $____________________
                  for past four fiscal quarters (to the extent
                  subtracted in calculating H1)
- ------------------------------------------------------------------ --------------------- ---------------------------
- ------------------------------------------------------------------ --------------------- ---------------------------
         5.       Depreciation expense for past four fiscal
                  quarters (to the extent subtracted in
                  calculating H1)
- ------------------------------------------------------------------ --------------------- ---------------------------
- ------------------------------------------------------------------ --------------------- ---------------------------
         6.       Losses on sales of assets (excluding sales in    $____________________
                  the ordinary course of business) and other
                  extraordinary losses for past four fiscal
                  quarters (to the extent subtracted in
                  calculating H1)
- ------------------------------------------------------------------ --------------------- ---------------------------
- ------------------------------------------------------------------ --------------------- ---------------------------
         7.       Interest income for past four fiscal quarters    $____________________
                  arising from traditional investment activities
                  with banks, investment banks and other
                  financial institutions or relating to
                  governmental or other marketable securities
                  (to the extent added in calculating H1)
- ------------------------------------------------------------------ --------------------- ---------------------------
- ------------------------------------------------------------------ --------------------- ---------------------------
         8.       Gains on sales of assets (excluding sales in     $____________________
                  the ordinary course of business) and other
                  extraordinary gains for past four fiscal
                  quarters (to the extent added in calculating
                  H1)
- ------------------------------------------------------------------ --------------------- ---------------------------
- ------------------------------------------------------------------ --------------------- ---------------------------
         9.       Capital Expenditures for past four fiscal        $____________________
                  quarters
- ------------------------------------------------------------------ --------------------- ---------------------------
- ------------------------------------------------------------------ --------------------- ---------------------------
         10.      Without duplication, any payments made by a      $____________________
                  Consolidated Subsidiary constituting a
                  repayment of principal Indebtedness (other
                  than (x) the Obligations and (y) repayments of
                  principal made with the proceeds of a
                  refinancing of such Indebtedness otherwise
                  permitted pursuant to this Agreement) or with
                  respect to a reserve, and
- ------------------------------------------------------------------ --------------------- ---------------------------

                                       60

- ------------------------------------------------------------------ --------------------- ---------------------------
         11.      Without duplication, any other mandatory
                  payment made by a Consolidated Subsidiary in
                  such period not included as an expense or loss   $____________________
                  in calculating Consolidated Net Income
- ------------------------------------------------------------------ --------------------- ---------------------------
- ------------------------------------------------------------------ --------------------- ---------------------------
         12.      Consolidated EBITDA (sum of Lines H1, H2, H3,    $____________________
                  H4, H5 and H6 less sum of Lines H7, H8, H9,
                  H10 and H11)
- ------------------------------------------------------------------ --------------------- ---------------------------
- ------------------------------------------------------------------ --------------------- ---------------------------
         13.      Restricted Earnings for the past four fiscal     $____________________
                  quarters
- ------------------------------------------------------------------ --------------------- ---------------------------
- ------------------------------------------------------------------ --------------------- ---------------------------
         14.      Adjusted Consolidated EBITDA (Line H12 minus     $____________________
                  Line H13)
- ------------------------------------------------------------------ --------------------- ---------------------------
- ------------------------------------------------------------------ --------------------- ---------------------------
         15.      All interest charges (including capitalized      $____________________
                  interest, imputed interest charges with
                  respect to Capitalized Lease Obligations and
                  all amortization of debt discount and expense
                  and other deferred financing charges) of the
                  Borrower and its Subsidiaries on a
                  consolidated basis for such period determined
                  in accordance with GAAP, other than interest
                  charges relating to Non-Recourse Indebtedness
- ------------------------------------------------------------------ --------------------- ---------------------------
- ------------------------------------------------------------------ --------------------- ---------------------------
         16.      All commitment or other fees payable in          $____________________
                  respect of the issuance of standby letters of
                  credit or other credit facilities for the
                  account of the Borrower or its Subsidiaries
- ------------------------------------------------------------------ --------------------- ---------------------------
- ------------------------------------------------------------------ --------------------- ---------------------------
         17.      Net costs/expenses incurred by the Borrower      $____________________
                  and its Subsidiaries under Derivative
                  Arrangements
- ------------------------------------------------------------------ --------------------- ---------------------------
- ------------------------------------------------------------------ --------------------- ---------------------------
         18.      Consolidated Interest Expense (Sum of Lines      $____________________
                  H15, H16 and H17)
- ------------------------------------------------------------------ --------------------- ---------------------------
- ------------------------------------------------------------------ --------------------- ---------------------------
         19.      The aggregate amount of all mandatory            $____________________
                  scheduled payments (whether designated as
                  payments or prepayments) and scheduled sinking
                  fund payments with respect to principal of any
                  Recourse Indebtedness of the Borrower or its
                  Subsidiaries (including payments in the nature
                  of principal under Capital Leases) for the
                  last 4 quarters
- ------------------------------------------------------------------ --------------------- ---------------------------
- ------------------------------------------------------------------ --------------------- ---------------------------
         20.      Consolidated Fixed Charges (Sum of Lines H18     $____________________
                  and H19)
- ------------------------------------------------------------------ --------------------- ---------------------------

                                       61

- ------------------------------------------------------------------ --------------------- ---------------------------
         21.      Fixed Charge Coverage Ratio (ratio of Lines      _________:1.00        (ratio must not be less
                  H14 to (ii) Line H20)                                                  than 1.50 to 1.00)
- ------------------------------------------------------------------ --------------------- ---------------------------
- ------------------------------------------------------------------ --------------------- ---------------------------
I.       Liquidity Covenant (Section 7.26)
- ------------------------------------------------------------------ --------------------- ---------------------------
- ------------------------------------------------------------------ --------------------- ---------------------------
         1.       Unrestricted cash at Borrower                    $____________________
- ------------------------------------------------------------------ --------------------- ---------------------------
- ------------------------------------------------------------------ --------------------- ---------------------------
         2.       Unused availability of senior unsecured credit   $____________________
                  facilities available to Borrower
- ------------------------------------------------------------------ --------------------- ---------------------------
- ------------------------------------------------------------------ --------------------- ---------------------------
         3.       Liquid Assets (Line I1 plus Line I2)             $____________________ (amount must exceed
                                                                                         $30,000,000)
- ------------------------------------------------------------------ --------------------- ---------------------------

                                       62

                                   SCHEDULE 1

                                  PRICING GRID

- ---------------------- ------------------- ----------------------
 If the Level Status     The Eurodollar    The Base Rate Margin
         Is                Margin is:               is:
- ---------------------- ------------------- ----------------------
- ---------------------- ------------------- ----------------------
Level I Status               1.000%               0.000%
- ---------------------- ------------------- ----------------------
- ---------------------- ------------------- ----------------------
Level II Status              1.250%               0.250%
- ---------------------- ------------------- ----------------------
- ---------------------- ------------------- ----------------------
Level III Status             1.875%               0.875%
- ---------------------- ------------------- ----------------------

         Each change in a rating shall be effective as of the date it is
announced by the applicable rating agency.

         In the event that the Moody's Rating and the S&P Rating fall in
different Levels, the lower Level (with Level I being the highest Level and
Level III being the lowest Level) shall govern for purposes of determining the
applicable pricing pursuant to the above pricing grid.

                                       63

                                   SCHEDULE 4
              ADMINISTRATIVE AGENT'S NOTICE AND PAYMENT INFORMATION

                                Part A - Payments

                  [Credit Lyonnais to provide wiring instructions]

                                Part B - Notices

                  Richard Randall
                  Credit Lyonnais
                  1301 Avenue of the Americas
                  New York, New York 10019
                  Phone: 212-261-3367
                  Fax: 212-261-3421

                  Justine Ventrelli
                  Credit Lyonnais
                  1301 Avenue of the Americas
                  New York, New York 10019
                  Phone: 212-261- 7886
                  Fax: 212-261-3421

                                       64

                                  SCHEDULE 5.2

                      BLACK HILLS CORPORATION SUBSIDIARIES

  ------------------------------------- --------------------- ---------------- ------------------------------------------------
                                                                               Description of Subsidiary's
                                                              BHC's            Authorized Capital Stock, if not
  Subsidiary Name                       State of Origin       Ownership        wholly owned
  ------------------------------------- --------------------- ---------------- ------------------------------------------------
  ------------------------------------- --------------------- ---------------- ------------------------------------------------
                                                                   
  1.       Acquisition Partners, L.P.   New York              100%             N/A
  ------------------------------------- --------------------- ---------------- ------------------------------------------------
  ------------------------------------- --------------------- ---------------- ------------------------------------------------
  2.       Adirondack Hydro             Delaware              100%             N/A
           Development Corporation
  ------------------------------------- --------------------- ---------------- ------------------------------------------------
  ------------------------------------- --------------------- ---------------- ------------------------------------------------
  3.       Adirondack Hydro- Fourth     New York              100%             N/A
           Branch, LLC
  ------------------------------------- --------------------- ---------------- ------------------------------------------------
  ------------------------------------- --------------------- ---------------- ------------------------------------------------
  4.       Adirondack Operating         New York              100%             N/A
           Services, LLC
  ------------------------------------- --------------------- ---------------- ------------------------------------------------
  ------------------------------------- --------------------- ---------------- ------------------------------------------------
  5.       Black Hills Berkshire, LLC   Delaware              100%             N/A
  ------------------------------------- --------------------- ---------------- ------------------------------------------------
  ------------------------------------- --------------------- ---------------- ------------------------------------------------
  6.       Black Hills Capital          Illinois              100%             N/A
           Development, Inc.
  ------------------------------------- --------------------- ---------------- ------------------------------------------------
  ------------------------------------- --------------------- ---------------- ------------------------------------------------
  7.       Black Hills Colorado, LLC    Delaware              100%             N/A
  ------------------------------------- --------------------- ---------------- ------------------------------------------------
  ------------------------------------- --------------------- ---------------- ------------------------------------------------
  8.       Black Hills Energy           Delaware              100%             N/A
           Capital, Inc.
  ------------------------------------- --------------------- ---------------- ------------------------------------------------
  ------------------------------------- --------------------- ---------------- ------------------------------------------------
  9.       Black Hills Energy           Delaware              100%             N/A
           Pipeline, LLC
  ------------------------------------- --------------------- ---------------- ------------------------------------------------
  ------------------------------------- --------------------- ---------------- ------------------------------------------------
  10.      Black Hills Energy           South Dakota          100%             N/A
           Resources, Inc.
  ------------------------------------- --------------------- ---------------- ------------------------------------------------
  ------------------------------------- --------------------- ---------------- ------------------------------------------------
  11.      Black Hills Energy           South Dakota          100%             N/A
           Terminal, LLC
  ------------------------------------- --------------------- ---------------- ------------------------------------------------
  ------------------------------------- --------------------- ---------------- ------------------------------------------------
  12.      Black Hills Energy, Inc.     South Dakota          100%             N/A
  ------------------------------------- --------------------- ---------------- ------------------------------------------------
  ------------------------------------- --------------------- ---------------- ------------------------------------------------
  13.      Black Hills Exploration      Wyoming               100%             N/A
           and Production, Inc.
  ------------------------------------- --------------------- ---------------- ------------------------------------------------
  ------------------------------------- --------------------- ---------------- ------------------------------------------------
  14.      Black Hills Fiber Systems,   South Dakota          100%             N/A
           Inc.
  ------------------------------------- --------------------- ---------------- ------------------------------------------------

                                       65

  ------------------------------------- --------------------- ---------------- ------------------------------------------------
  15.      Black Hills Fibercom, LLC    South Dakota          51%              Black Hills Fibercom, LLC has a single class
                                                                               of units of membership of which 41 units are
                                                                               issued and outstanding.  Black Hills Fiber
                                                                               Systems, Inc. holds 21 units.
  ------------------------------------- --------------------- ---------------- ------------------------------------------------
  ------------------------------------- --------------------- ---------------- ------------------------------------------------
  16.      Black Hills Fountain         Delaware              100%             N/A
           Valley, LLC
  ------------------------------------- --------------------- ---------------- ------------------------------------------------
  ------------------------------------- --------------------- ---------------- ------------------------------------------------
  17.      Black Hills Generation,      Wyoming               100%             N/A
           Inc.
  ------------------------------------- --------------------- ---------------- ------------------------------------------------
  ------------------------------------- --------------------- ---------------- ------------------------------------------------
  18.      Black Hills Harbor, LLC      Delaware              76.11%           Black Hills Harbor, LLC has a single class of
                                                                               units of membership.  100 units of which are
                                                                               currently issued and outstanding.  Black Hills
                                                                               Corporation indirectly holds interests in
                                                                               76.12% of the units.
  ------------------------------------- --------------------- ---------------- ------------------------------------------------
  ------------------------------------- --------------------- ---------------- ------------------------------------------------
  19.      Black Hills High Desert,     Delaware              100%             N/A
           Inc.
  ------------------------------------- --------------------- ---------------- ------------------------------------------------
  ------------------------------------- --------------------- ---------------- ------------------------------------------------
  20.      Black Hills Idaho            Delaware              100%             N/A
           Operations, LLC
  ------------------------------------- --------------------- ---------------- ------------------------------------------------
  ------------------------------------- --------------------- ---------------- ------------------------------------------------
  21.      Black Hills Independent      Texas                 100%             N/A
           Power Fund, Inc.
  ------------------------------------- --------------------- ---------------- ------------------------------------------------
  ------------------------------------- --------------------- ---------------- ------------------------------------------------
  22.      Black Hills Kilgore Energy   Delaware              100%             N/A
           Pipeline, LLC
  ------------------------------------- --------------------- ---------------- ------------------------------------------------
  ------------------------------------- --------------------- ---------------- ------------------------------------------------
  23.      Black Hills Kilgore          Delaware              100%             N/A
           Pipeline, Inc.
  ------------------------------------- --------------------- ---------------- ------------------------------------------------
  ------------------------------------- --------------------- ---------------- ------------------------------------------------
  24.      Black Hills Kilgore          Texas                 100%             N/A
           Pipeline Company, L.P.
  ------------------------------------- --------------------- ---------------- ------------------------------------------------
  ------------------------------------- --------------------- ---------------- ------------------------------------------------
  25.      Black Hills Long Beach,      Delaware              100%             N/A
           Inc.
  ------------------------------------- --------------------- ---------------- ------------------------------------------------
  ------------------------------------- --------------------- ---------------- ------------------------------------------------
  26.      Black Hills Millennium       South Dakota          100%             N/A
           Pipeline, Inc.
  ------------------------------------- --------------------- ---------------- ------------------------------------------------
  ------------------------------------- --------------------- ---------------- ------------------------------------------------
  27.      Black Hills Millennium       South Dakota          100%             N/A
           Terminal, Inc.
  ------------------------------------- --------------------- ---------------- ------------------------------------------------
  ------------------------------------- --------------------- ---------------- ------------------------------------------------
  28.      Black Hills Nevada           Delaware              100%             N/A
           Operations, LLC
  ------------------------------------- --------------------- ---------------- ------------------------------------------------

                                       66

  ------------------------------------- --------------------- ---------------- ------------------------------------------------
  29.      Black Hills Nevada Real      Delaware              100%             N/A
          Estate Holdings, LLC
  ------------------------------------- --------------------- ---------------- ------------------------------------------------
  ------------------------------------- --------------------- ---------------- ------------------------------------------------
  30.      Black Hills Nevada, LLC      Delaware              100%             N/A
  ------------------------------------- --------------------- ---------------- ------------------------------------------------
  ------------------------------------- --------------------- ---------------- ------------------------------------------------
  31.      Black Hills North America,   Delaware              100%             N/A
           Inc.
  ------------------------------------- --------------------- ---------------- ------------------------------------------------
  ------------------------------------- --------------------- ---------------- ------------------------------------------------
  32.      Black Hills Operating        Delaware              100%
           Compnay, LLC
  ------------------------------------- --------------------- ---------------- ------------------------------------------------
  ------------------------------------- --------------------- ---------------- ------------------------------------------------
  33.      Black Hills Ontario, LLC     Delaware              50%              Black Hills Ontario, LLC has a single class of
                                                                               units of membership, of which 100 units are
                                                                               issued and outstanding.
  ------------------------------------- --------------------- ---------------- ------------------------------------------------
  ------------------------------------- --------------------- ---------------- ------------------------------------------------
  34.      Black Hills Power, Inc.      South Dakota          100%             N/A
  ------------------------------------- --------------------- ---------------- ------------------------------------------------
  ------------------------------------- --------------------- ---------------- ------------------------------------------------
  35.      Black Hills Southwest, LLC   Delaware              100%             N/A
  ------------------------------------- --------------------- ---------------- ------------------------------------------------
  ------------------------------------- --------------------- ---------------- ------------------------------------------------
  36.      Black Hills Valmont          Delaware              100%             N/A
           Colorado, Inc.
  ------------------------------------- --------------------- ---------------- ------------------------------------------------
  ------------------------------------- --------------------- ---------------- ------------------------------------------------
  37.      DAKSOFT, Inc.                South Dakota          100%             N/A
  ------------------------------------- --------------------- ---------------- ------------------------------------------------
  ------------------------------------- --------------------- ---------------- ------------------------------------------------
  38.      Desert Arc I, LLC            Delaware              50%              Desert Arc I, LLC has a single class of units
                                                                               of membership, of which Black Hills
                                                                               Corporation indirectly holds 50%
  ------------------------------------- --------------------- ---------------- ------------------------------------------------
  ------------------------------------- --------------------- ---------------- ------------------------------------------------
  39.      Desert Arc II, LLC           Delaware              50%              Desert Arc II, LLC has a single class of units
                                                                               of membership, of which Black Hills
                                                                               Corporation indirectly holds 50%
  ------------------------------------- --------------------- ---------------- ------------------------------------------------
  ------------------------------------- --------------------- ---------------- ------------------------------------------------
  40.      EIF Investors, Inc.          Delaware              100%             N/A
  ------------------------------------- --------------------- ---------------- ------------------------------------------------
  ------------------------------------- --------------------- ---------------- ------------------------------------------------
  41.      E-Next A Equipment Leasing   Delaware              100%             N/A
           Company, LLC
  ------------------------------------- --------------------- ---------------- ------------------------------------------------
  ------------------------------------- --------------------- ---------------- ------------------------------------------------
  42.      Enserco Energy Inc.          South Dakota          100%             N/A
  ------------------------------------- --------------------- ---------------- ------------------------------------------------
  ------------------------------------- --------------------- ---------------- ------------------------------------------------
  43.      Fountain Valley Power,       Delaware              100%             N/A
           L.L.C.
  ------------------------------------- --------------------- ---------------- ------------------------------------------------
  ------------------------------------- --------------------- ---------------- ------------------------------------------------
  44.      Harbor Cogeneration Company  California            100%             N/A
  ------------------------------------- --------------------- ---------------- ------------------------------------------------
  ------------------------------------- --------------------- ---------------- ------------------------------------------------
  45.      Hudson Falls, LLC            New York              100%             N/A
  ------------------------------------- --------------------- ---------------- ------------------------------------------------

                                       67

  ------------------------------------- --------------------- ---------------- ------------------------------------------------
  46.      ICPM, Inc.                   Illinois              100%             N/A
  ------------------------------------- --------------------- ---------------- ------------------------------------------------
  ------------------------------------- --------------------- ---------------- ------------------------------------------------
  47.      Indeck Auburndale, LLC       Delaware              100%             N/A
  ------------------------------------- --------------------- ---------------- ------------------------------------------------
  ------------------------------------- --------------------- ---------------- ------------------------------------------------
  48.      Indeck Gordonsville, LLC     Delaware              100%             N/A
  ------------------------------------- --------------------- ---------------- ------------------------------------------------
  ------------------------------------- --------------------- ---------------- ------------------------------------------------
  49.      Indeck North American        Delaware              81.9%            Indeck North American Power Fund, L.P. is a
           Power Fund, LP                                                      limited.  Black Hills Corporation holds direct
                                                                               and indirect general and limited partnerhsip
                                                                               interests totaling up to 81.9%..
  ------------------------------------- --------------------- ---------------- ------------------------------------------------
  ------------------------------------- --------------------- ---------------- ------------------------------------------------
  50.      Indeck Hills North           Delaware              85.7%            Indeck North American Power Partners, LP is a
           American Power Partners, LP                                         limited.  Black Hills Corporation holds direct
                                                                               and indirect general and limited partnership
                                                                               interests totaling up to 85.7%.
  ------------------------------------- --------------------- ---------------- ------------------------------------------------
  ------------------------------------- --------------------- ---------------- ------------------------------------------------
  51.      Indeck Pepperell Power       Delaware              82.9%            Indeck Pepperell Power Associates, Inc. has a
           Associates, Inc.                                                    single class of stock with 100 shares issued
                                                                               and outstanding. Black Hills Corporation
                                                                               indirectly owns 82.9% of the capital
                                                                               stock of Indeck Pepperell, by and through
                                                                               its interests in Indeck North American
                                                                               Power Fund, L.P.

  ------------------------------------- --------------------- ---------------- ------------------------------------------------
  ------------------------------------- --------------------- ---------------- ------------------------------------------------
  52.      Landrica Development         South Dakota          100%             N/A
           Company
  ------------------------------------- --------------------- ---------------- ------------------------------------------------
  ------------------------------------- --------------------- ---------------- ------------------------------------------------
  53.      Las Vegas Cogeneration       Delaware              100%             N/A
           Energy Financing, LLC
  ------------------------------------- --------------------- ---------------- ------------------------------------------------
  ------------------------------------- --------------------- ---------------- ------------------------------------------------
  54.      Las Vegas Cogeneration II,   Delaware              100%             N/A
           LLC
  ------------------------------------- --------------------- ---------------- ------------------------------------------------
  ------------------------------------- --------------------- ---------------- ------------------------------------------------
  55.      Las Vegas Cogeneration       Nevada                50%              Las Vegas Cogeneration Limited Partnership has
           Limited Partnership                                                 an 85% general partnership interest, of which
                                                                               Black Hills Corporation indirectly owns 50%,
                                                                               and a 15% limited partnership interest, of which
                                                                               Black Hills Corporation indirectly owns 50%
                                                                               Hills Corporation indirectly owns 50%.
  ------------------------------------- --------------------- ---------------- ------------------------------------------------
  ------------------------------------- --------------------- ---------------- ------------------------------------------------
  56.      Middle Falls Corporation     New York              100%             N/A
  ------------------------------------- --------------------- ---------------- ------------------------------------------------
  ------------------------------------- --------------------- ---------------- ------------------------------------------------
  57.      Middle Falls II, LLC         New York              100%             N/A
  ------------------------------------- --------------------- ---------------- ------------------------------------------------

                                       68

  ------------------------------------- --------------------- ---------------- ------------------------------------------------
  58.      Middle Falls Limited         New York              50%              Middle Falls Limited Partnership has a 2%
           Partnership                                                         general partnership interest, of which Black
                                                                               Hills Corporation indrectly holds 1%, and a
                                                                               98% limited partnership interest, of which Black
                                                                               Hills Corporation indirectly holds 49%.
  ------------------------------------- --------------------- ---------------- ------------------------------------------------
  ------------------------------------- --------------------- ---------------- ------------------------------------------------
  59.      Middle Falls Partners, LLC   New York              50%              Middle Falls Partners, LLC has a single class
                                                                               of units of membership, of which Black Hills
                                                                               Corporation indirectly holds 50%.
  ------------------------------------- --------------------- ---------------- ------------------------------------------------
  ------------------------------------- --------------------- ---------------- ------------------------------------------------
  60.      Millennium Pipeline          Texas                 100%
           Company, L.P.
  ------------------------------------- --------------------- ---------------- ------------------------------------------------
  ------------------------------------- --------------------- ---------------- ------------------------------------------------
  61.      Millennium Terminal          Texas                 100%
           Company, L.P.
  ------------------------------------- --------------------- ---------------- ------------------------------------------------
  ------------------------------------- --------------------- ---------------- ------------------------------------------------
  62.      NHP, L.P.                    New York              100%             N/A
  ------------------------------------- --------------------- ---------------- ------------------------------------------------
  ------------------------------------- --------------------- ---------------- ------------------------------------------------
  63.      North American Funding,      Delaware              100%             N/A
           L.L.C.
  ------------------------------------- --------------------- ---------------- ------------------------------------------------
  ------------------------------------- --------------------- ---------------- ------------------------------------------------
  64.      Northern Electric Power      New York              33%              Northern Electric Power Company, L.P. has a
           Company, L.P                                                        99% limited partnership interest, of which
                                                                               Black Hills Corporation indirectly owns 32.5%
                                                                               and a 1% general partnership interest, of which
                                                                               Black Hills Corporation indirectly owns 0.5%.
  ------------------------------------- --------------------- ---------------- ------------------------------------------------
  ------------------------------------- --------------------- ---------------- ------------------------------------------------
  65.      NYSD Limited Partnership     New York              100%             N/A
  ------------------------------------- --------------------- ---------------- ------------------------------------------------
  ------------------------------------- --------------------- ---------------- ------------------------------------------------
  66.      NYSD Partners, LLC           New York              100%             N/A
  ------------------------------------- --------------------- ---------------- ------------------------------------------------
  ------------------------------------- --------------------- ---------------- ------------------------------------------------
  67.      Sissonville Corporation      New York              100%             N/A
  ------------------------------------- --------------------- ---------------- ------------------------------------------------
  ------------------------------------- --------------------- ---------------- ------------------------------------------------
  68.      Sissonville II, LLC          New York              100%             N/A
  ------------------------------------- --------------------- ---------------- ------------------------------------------------
  ------------------------------------- --------------------- ---------------- ------------------------------------------------
  69.      Sissonville Limited          New York              100%             N/A
           Partnership
  ------------------------------------- --------------------- ---------------- ------------------------------------------------
  ------------------------------------- --------------------- ---------------- ------------------------------------------------
  70.      Sissonville Partners, LLC    New York              100%             N/A
  ------------------------------------- --------------------- ---------------- ------------------------------------------------

                                       69

  ------------------------------------- --------------------- ---------------- ------------------------------------------------
  71.      South Glens Falls, L.P.      New York              30.2%            South Glens Falls, L.P. has a 99% limited
                                                                               partnership interest, of which Black Hills
                                                                               Corporation indirectly owns 29.7%, and a 1%
                                                                               general partnership interest, of which Black
                                                                               Hills Corporation indirectly owns 0.5%.
  ------------------------------------- --------------------- ---------------- ------------------------------------------------
  ------------------------------------- --------------------- ---------------- ------------------------------------------------
  72.      South Glens Falls, LLC       New York              100%             N/A
  ------------------------------------- --------------------- ---------------- ------------------------------------------------
  ------------------------------------- --------------------- ---------------- ------------------------------------------------
  73.      State Dam Corporation        New York              100%             N/A
  ------------------------------------- --------------------- ---------------- ------------------------------------------------
  ------------------------------------- --------------------- ---------------- ------------------------------------------------
  74.      State Dam II, LLC            New York              100%             N/A
  ------------------------------------- --------------------- ---------------- ------------------------------------------------
  ------------------------------------- --------------------- ---------------- ------------------------------------------------
  75.      Sunco, Ltd., a limited       Nevada                100%             N/A
           liability company
  ------------------------------------- --------------------- ---------------- ------------------------------------------------
  ------------------------------------- --------------------- ---------------- ------------------------------------------------
  76.      VariFuel, LLC                South Dakota          100%             N/A
  ------------------------------------- --------------------- ---------------- ------------------------------------------------
  ------------------------------------- --------------------- ---------------- ------------------------------------------------
  77.      Warrensburg Corporation      New York              100%             N/A
  ------------------------------------- --------------------- ---------------- ------------------------------------------------
  ------------------------------------- --------------------- ---------------- ------------------------------------------------
  78.      Warrensburg Hydro Power      New York              100%             N/A
           Limited Partnership
  ------------------------------------- --------------------- ---------------- ------------------------------------------------
  ------------------------------------- --------------------- ---------------- ------------------------------------------------
  79.      Warrensburg II Corporation   New York              100%             N/A
  ------------------------------------- --------------------- ---------------- ------------------------------------------------
  ------------------------------------- --------------------- ---------------- ------------------------------------------------
  80.      Wyodak Resources             Delaware              100%             N/A
           Development Corp.
  ------------------------------------- --------------------- ---------------- ------------------------------------------------

                                       70

                                  SCHEDULE 5.5

                       LITIGATION AND LABOR CONTROVERSIES

Black Hills Harbor, LLC--City of Long Beach

         In June of 2000, the City of Long Beach, a municipal corporation in the
State of California, acting for the Port of Long Beach ("City"), brought an
action against Black Hills Harbor, LLC (formerly known as Indeck Harbor, LLC)
("Fund"), alleging breaches of a partnership interest purchase agreement dated
as of January 1, 1995 ("Agreement"), relating to the amount and timing of
certain contingent payments, if any, due the City resulting in claims by the
City in excess of $9 million. The court ordered that the disputes raised in
litigation must be resolved by arbitration in accordance with the terms of the
Agreement. Representatives of the City and the Fund engaged in mediation to
attempt to resolve the disputes involving a transportation tax for natural gas
delivered to a power facility located in Long Beach and owned by the Fund.
Because the parties were unable to reach resolution of the dispute, they have
pursued arbitration.

Grizzly Gulch Fire

         On June 29, 2002, a forest fire began near Deadwood, South Dakota.
Before being contained more than eight days later, the fire consumed over 10,000
acres of public and private land, mostly consisting of rugged forested areas.
The fire destroyed 7 homes, and approximately 15 outbuildings. There are no
reported personal injuries at this time. In addition, the fire burned to the
edge of the City of Deadwood, forcing the evacuation of the City of Deadwood,
and an adjacent City of Lead, South Dakota. These communities are active in the
tourist and gaming industries. Individuals were ordered to leave their homes and
motels, and businesses were closed for a short period of time. On July 16, 2002,
the State of South Dakota announced the results of its investigation of the
cause and origin of the fire. The State concluded that the fire was caused by
tree encroachment into and contact with a transmission line owned and maintained
by Black Hills Power, Inc.

         Black Hills Power is in the process of completing its own investigation
of the fire, and will request access to the materials that form the basis for
the State's conclusions. This investigation is not complete. Depending on the
outcome of this process, it is possible that claims will be made against Black
Hills Power for damages allegedly caused by the fire, for fire suppression costs
and costs of remediation of burned areas, for individual and business losses
relating to injury to personal and real property, and lost income. A civil
action has been commenced by the State against Black Hills Power, Inc., and we
anticipate others will intervene in this suit or will file separately.

                                       71

                                  SCHEDULE 5.11

                              ENVIRONMENTAL MATTERS

                                      None.

                                       72

                                  SCHEDULE 7.9

                                 EXISTING LIENS

1.   Enserco  Energy  Inc.  has  granted a security  interest in favor of Fortis
     Capital  Corp.,  with respect to Enserco  Energy Inc.'s  personal  property
     assets  to  secure  the  $135,000,000  credit  facility  referred  to in on
     Schedule 7.15.

2.   Black Hills Energy Resources, Inc. has granted a security interest in favor
     of Fortis  Capital  Corp.,  with respect to Black Hills  Energy  Resources,
     Inc.'s personal  property assets to secure the $25,000,000  credit facility
     referred to on Schedule 7.15.

3.   Black Hills Power, Inc. Indenture of Mortgage and Deed of Trust has a first
     mortgage lien on  substantially  all of the properties used in the electric
     utility business excluding "Excepted  Property." Excepted property includes
     all cash and securities;  all contracts,  leases and other agreements;  all
     permits, licenses,  franchises and rights granted by governmental entities;
     all movable  equipment and parts including  motor vehicles;  all materials,
     supplies  and  merchandise  offered  for  sale in the  ordinary  course  of
     business,  fuel and other  consumables;  all  office  furniture  and office
     equipment,  communications  equipment and computer equipment; all minerals,
     crops and timber harvested or extracted from land; all leasehold interests;
     and all property not used in the electric utility business.

4.   Black Hills  Exploration and Production has granted  security  interests in
     various  certificates  of  deposits  for oil & gas  leases  and  operations
     totaling less than $150,000 in aggregate.

5.   Wyodak  Resources  Development  Corp. has granted a security  interest in a
     certificate  of  deposit  in the  amount  of  $397,000  to  securitize  its
     self-insurance permit for black lung liability.

                                       73

                                  Schedule 7.14
                              Existing Investments

- ---------------------------------------------------------------------------------------------------------------
      
1.       Landrica Development Company holds 700,000 registered and unrestricted
         shares of the common stock of KFx, Inc. and 1,300,000 warrants to
         purchase a single share of the common stock of KFx at $3.48 at any time
         prior to April 30, 2005.
- ---------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------
2.       Landrica Development Company holds a $450,000 equity investment in Phase Technology, LLC.
- ---------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------
3.       Landrica Development Company holds a $50,000 equity investment in Genesis Equity Fund, LLC.
- ---------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------
4.       Black Hills Corporation holds investments in life insurance policies and nonqualified deferred
         compensation plans in the amount of $ 2,363,000.
- ---------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------
5.       Black Hills Power, Inc. holds investments in life insurance policies and nonqualified deferred
         compensation plans in the amount of $ 2,586,000.
- ---------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------
6.       Wyodak Resources Development Corp. holds investments in life insurance policies in the amount of
         $451,000.
- ---------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------
7.       Black Hills Exploration and Production, Inc. holds investments in life insurance policies in the
         amount of $72,000.
- ---------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------
8.       Black Hills FiberCom, LLC holds investments in life insurance policies in the amount of $108,000.
- ---------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------
9.       Daksoft, Inc. holds investments in life insurance policies in the amount of $149,000.
- ---------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------
10.      Black Hills Energy Capital, Inc. has an equity investment in Black Hills Idaho Operations, LLC in
         the amount of $ 2,968,000.
- ---------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------
11.      Black Hills Energy Capital, Inc. has an equity investment in EIF Funds in the amount of $9,888,000.
- ---------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------
12.      Black Hills Energy Capital, Inc. holds other various notes receivable in the aggregate amount of
         $1,676,000.
- ---------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------
13.      Black Hills Fiber Systems, Inc. holds a convertible debenture note in the amount of $40,000,000 due
         from Black Hills FiberCom, LLC.
- ---------------------------------------------------------------------------------------------------------------

                                       74

                                  SCHEDULE 7.15

                             PERMITTED INDEBTEDNESS

(A)      Indebtedness of Marketing Subsidiaries

                                                                                  
1.       Enserco Energy Inc. Credit Facility with Fortis Capital Corp.                  $135,000,000

2.       Black Hills Energy Resources, Inc. Credit Facility with Fortis Capital Corp.   $ 25,000,000
        (In addition there is a $12,500,000 overdraft line)

(B)      Other Indebtedness

1.       3-Year Credit Agreement (revolving credit facility) among Black Hills
         Corporation and various banks                                                  $200,000,000

2.       1-Year Credit Agreement (revolving credit facility) among Black Hills
         Corporation and various banks                                                  $195,000,000

3.       Black Hills Power, Inc./Black Hills Generation, Inc. Note Payable to
         Bear Paw Energy, LLC                                                           $    992,909

4.       Credit Agreement between Black Hills Colorado, LLC, the Bank
         Nova Scotia, and various other banks                                           $135,000,000

5.       Black Hills Corporation First Mortgage Bonds                                   $215,000,000

6.       Black Hills Power, Inc. Pollution Control Revenue Bonds                        $ 24,500,000

7.       Black Hills Power, Inc. Environmental Improvement Revenue Bonds
         (Floating Rate)                                                                $  2,855,000

8.       Wyodak Resources Development Corp. reclamation bond obligations
         relating to its mining permits.                                                $ 21,644,000

9.       Landrica Development Company reclamation bond obligation relating to its
         mining permits.                                                                $  3,794,997

10.      Black Hills Exploration and Production, Inc. miscellaneous performance
         bonds and letters of credit relating to oil and gas well leases and operations $    500,000

11.      Black Hills Corporation and Black Hills Nevada, LLC bridge
         loan relating to the Las Vegas Cogen II facility                               $ 50,000,000

12.      Term loan and letter of credit facility  between Black Hills Fountain Valley,
         LLC, Fountain Valley Power, LLC, and E-Next A Equipment Leasing
         Company, LLC  and various banks (including Union Bank of California

                                       75

         as agent bank)                                                                 $164,471,218

13.      Northern Electric Power Co. L.P. project financing term loan secured
         by the Hudson Falls generating plant.                                          $ 66,878,240

14.      South Glens Falls LP project financing term loan secured by the South
         Glens Falls generating plant.                                                  $ 22.878,498

15.      Black Hills Corporation guarantee of lease payments on the
         Wygen 1 facility.                                                              $140,000,000

16.      Black Hills Corporation guarantee in favor of Cheyenne Light, Fuel and Power
         in connection with performance of the Wygen 1 Power Purchase Agreement         $  5,000,000

17.      Black Hills Corporation guarantee in favor of Cheyenne Light, Fuel and
         Power in connection with performance of Black Hills Generation under the
         Gillette Turbine Power Purchase Agreement.                                     $ 10,000,000

16.      Black Hills Corporation guarantee in favor of Las Vegas Cogen II
         interconnection agreement with Nevada Power Company.                           $    749,970

17.      Black Hills Corporation completion guarantee in favor of Bank
         of Nova Scotia in connection expanded Colorado facilities.                     All payments

18.      Black Hills Corporation guarantee in favor of UBS AG in connection
         with Enserco Energy, Inc.'s Derivative, Power and Gas Agreements
         with UBS AG.                                                                   $  3,000,000

19.      Black Hills Corporation guarantee in favor of Koch Exploration
         Company, LLC in connection with Enserco Energy, Inc. agreements with
         Koch Exploration Company, LLC.                                                 $  4,500,000

                                       76

All indebtedness balances are as of June 30, 2002 (except for inclusion of
additional $75,000,000 on First Mortgage Bonds issued August 8, 2002).

                                  SCHEDULE 7.19

           RESTRICTIONS ON DISTRIBUTIONS AND EXISTING NEGATIVE PLEDGES

1.   Enserco  Energy  Inc.  has  granted a security  interest in favor of Fortis
     Capital  Corp.,  with respect to Enserco  Energy Inc.'s  personal  property
     assets  to  secure  the  $135,000,000  credit  facility  referred  to in on
     Schedule 7.15.

3.   Black Hills Energy Resources, Inc. has granted a security interest in favor
     of Fortis  Capital  Corp.,  with respect to Black Hills  Energy  Resources,
     Inc.'s personal  property assets to secure the $25,000,000  credit facility
     referred to on Schedule 7.15.

4.   Black Hills Power, Inc.  Indenture of Mortgage and Deed of Trust contains a
     provision  which  prohibits  the payment of dividends  should the Company's
     retained  earnings amount not meet certain  minimal  levels.  Currently the
     Company is required to maintain a retained  earnings  level of greater than
     $318,000  for  dividend  payments  to be allowed  under the  indenture.

5.   Substantially  all of Black Hills Energy  Capital,  Inc.'s project  finance
     subsidiaries'   nonrecourse  debt  contain   restrictions   which  prohibit
     distributions unless certain financial covenants limits are met.

Dividends on Black Hills Corporation's preferred stock must be paid or declared
and set apart for payment before any dividends may be paid or declared and set
apart for payment on the Company's common stock. The Company's preferred stock
is cumulative.

                                       77

                                                              Exhibit 10.3

                             BLACK HILLS POWER, INC.

                                       TO

                              JPMORGAN CHASE BANK,

                                   As Trustee

                          ____________________________

                          FIRST SUPPLEMENTAL INDENTURE

                           Dated as of August 13, 2002

                          ____________________________

Supplemental to Restated and Amended
Indenture of Mortgage and Deed of Trust
Dated as of September 1, 1999

First Mortgage Bonds, 7.23%
Series AE Due 2032

                  FIRST SUPPLEMENTAL INDENTURE, dated as of the 13 `h day of
August, 2002, between Black Hills Power, Inc., a corporation duly organized and
existing under the laws of the State of South Dakota (formerly known as Black
Hills Corporation) (hereinafter called the "Company"), party of the first part,
and JPMORGAN CHASE BANK, a corporation organized and existing under the laws of
the State of New York, as Trustee under the Indenture hereinafter mentioned
(hereinafter called the "Trustee"), party of the second part.

                  WHEREAS, in order to secure an authorized issue of First
Mortgage Bonds of the Company, the Company has executed and delivered a Restated
and Amended Indenture of Mortgage and Deed of Trust to JPMorgan Chase Bank f/k/a
The Chase Manhattan Bank, as Trustee, dated as of September 1, 1999 (hereinafter
referred to as the "Indenture"), which amended and restated the Indenture of
Mortgage and Deed of Trust to Central Hanover Bank and Trust Company (the
successor by various mergers of which is JPMorgan Chase Bank) hereinafter
referred to as the "Original Indenture."

                  WHEREAS, pursuant to the provisions of the Indenture, First
Mortgage Bonds have been duly issued under the Original Indenture and are
presently outstanding and continue to be secured by the Indenture as follows:

                                                      Principal Amount
              Series                                     Outstanding

Series Y, 9.49%, due June 15, 2018                        $4,550,000
Series Z, 9.35%, due May 29, 2021                         31,635,000
Series AA, 9.00%, due September 1, 2003                    1,650,904
Series AB, 8.30%, due September 1, 2024                   45,000,000
Series AC, 8.06%, due February 1, 2010                    30,000,000
                                                          ----------
                                                        $112,835,904

                  and

                  WHEREAS, as permitted by the Indenture, the Company, by
resolutions of its Board of Directors duly adopted, has determined to create a
new series of bonds to be known as its "First Mortgage Bonds, 7.23% Series AE
Due 2032" (herein called the "Series AE Bonds"), to be initially authenticated
and delivered in the aggregate principal amount of $75,000,000 in the form,
having the characteristics and being entitled to the benefits as in the
Indenture or as in this Supplemental Indenture provided; and

                  WHEREAS, the Company, in exercise of the powers and authority
conferred upon and reserved to it under and by virtue of the provisions of the
Indenture, and particularly the provisions contained in Articles Two and Sixteen
thereof, and pursuant to appropriate resolutions of its Board of Directors, has
duly resolved and determined to make, execute and deliver to the Trustee a First
Supplemental Indenture in the form hereof (herein sometimes referred to as "this
Supplemental Indenture") for the purposes herein provided; and

                  WHEREAS, all conditions and requirements necessary to make
this Supplemental Indenture a valid, binding and legal instrument in accordance
with its terms have been done,

                                       1

performed and fulfilled, and the execution and delivery hereof have been in
all respects duly authorized;

                  NOW THEREFORE, in consideration of the premises and of one
dollar to it duly paid by the Trustee at or before the ensealing and delivery of
these presents, the receipt whereof is hereby acknowledged, and of other good
and valuable consideration, in order to establish the terms of the Series AE
Bonds, the Company hereby further covenants and agrees to and with the Trustee
and its successors in the trust under the Indenture for the benefit of all those
who shall from time to time hold the Series AE Bonds as follows:

                  The Company does hereby ratify and confirm its Mortgage and
Pledge to the Trustee of all property described in the Indenture and does hereby
grant, bargain, sell, release, convey, assign, transfer, mortgage, pledge and
set over unto the Trustee, and to its successors and assigns forever, the
following described property acquired by the Company and not specifically
described under the Indenture which following described property shall be
incorporated into the terms of Exhibit A to the Indenture as if more fully set
forth therein:

                       LANDS IN BUTTE COUNTY, SOUTH DAKOTA

1.   Tracts C, D and E of the  Southeast  Quarter  (SE1/4) of Section  Ten (10),
     Township Eight (8) North, Range Two (2) East of the Black Hills Meridian in
     the City of Belle Fourche, Butte County, South Dakota, as shown by the Plat
     recorded in Plat Book 5, Page 18, excepting  therefrom that part of Tract C
     and Tract D deeded to Floyd  Cooper,  in instrument  recorded  December 22,
     1949,  in Book 137,  Page 137; and also  excepting  therefrom  that part of
     Tract C  deeded  to  Albert  W.  Turbiville  and  Alice L.  Turbiville,  in
     instrument  recorded  October 24,  1961 in Book 156,  Page 585 of the Butte
     County real estate records.

                       LANDS IN MEADE COUNTY, SOUTH DAKOTA

1.   Lots Twenty-seven  (27),  Twenty-eight  (28),  Twenty-nine (29), and Thirty
     (30),  in Block Four of Fort Meade  Addition to  Sturgis,  in the County of
     Meade and State of South Dakota.

2.   A parcel of land  approximately  3.08 acres known as the BHP&L  Utility Lot
     formerly  a  portion  of  lot  four  (4) of the  Northeast  Quarter  of the
     Southeast  Quarter (SE 1/4) of Section  Thirty-six (36),  Township Five (5)
     North,  Range Five (5) East of the Black Hills  Meridian,  in Meade County,
     South Dakota.

3.   Plat of Piedmont  Valley  Substation  Lot being a portion of Lot Eight (8),
     Block One (1), Coopers  Subdivision located in the Northwest Quarter of the
     Northeast Quarter (NW 1/4NE1/4),  Section Fifteen (15),  Township Three (3)
     North,  Range Six (6) East of the Black Hills  Meridian,  in Meade  County,
     South Dakota.

                                       2

                         LANDS IN PENNINGTON COUNTY, SOUTH DAKOTA

1.   A  Forty  (40)  acre  parcel  described  as the  Southwest  Quarter  of the
     Southwest Quarter (SW 1ASW1/4) of Section Twenty-four (24), in Township One
     (1) North,  Range Seven (7) East of the Black Hills  Meridian in Pennington
     County,  South  Dakota  excepting  therefrom  Highway  16  Bypass  and also
     excepting therefrom Lot H 1 as shown on the plat filed in Highway Plat Book
     6, Page 22 of the Pennington County real estate records.

2.   Lot Two (2) in  Prairie  Hills  Subdivision,  Rapid  City,  located  in the
     Southwest  Quarter  of the  Southwest  Quarter  (SW 1/4SW  1/4) of  Section
     Nineteen  (19),  Township Two (2) North,  Range Eight (8) East of the Black
     Hills Meridian, Pennington County, South Dakota.

                                   ARTICLE ONE

                                   DEFINITIONS

     SECTION 1.01. General. For all purposes of this Supplemental Indenture:

          (a) capitalized  terms used herein without  definition  shall have the
     meanings specified in the Indenture;

          (b) all references  herein to Articles and Sections,  unless otherwise
     specified,  refer  to the  corresponding  Articles  and  Sections  of  this
     Supplemental Indenture;

          (c) the terms  "herein,"  "hereof,"  "hereunder"  and  other  words of
     similar import refer to this Supplemental Indenture; and

          (d) in the event of a conflict between any definition set forth in the
     Indenture and any definition set forth in this Supplemental Indenture,  the
     definition set forth in this Supplemental Indenture shall control.

          SECTION 1.02.  Definitions.  The following  definitions shall apply to
     this Supplemental Indenture:

          "Business Day" means any day other than a Saturday or Sunday and other
     than a day on which banking  institutions in Rapid City,  South Dakota,  or
     New York, New York,  are authorized or obligated by law or executive  order
     to close.

          "Comparable  Treasury Issue" means the United States Treasury security
     selected  by  an  Independent   Investment  Banker  as  having  a  maturity
     comparable to the remaining term of the Series AE Bonds to be redeemed that
     would  be  utilized,  at the  time  of  selection  and in  accordance  with
     customary  financial  practice,  in pricing  new issues of  corporate  debt
     securities  of comparable  maturity to the remaining  term of the Series AE
     Bonds.

                                       3

          "Comparable  Treasury  Price"  means  the  average  of  two  Reference
     Treasury Dealer Quotations obtained with respect to any redemption date.

          "Depository"   means  The  Depository   Trust  Company,   a  New  York
     corporation, or any successor thereto.

          "Global  Bond" shall have the  meaning  set forth in Section  2.05(a).
     "Independent  Investment  Banker" means ABN AMRO Incorporated or one of the
     Reference Treasury Dealers appointed by the Trustee after consultation with
     the Company.

          "Reference  Treasury  Dealer"  means  ABN  AMRO  Incorporated  and its
     successors;  provided,  however,  that  if  ABN  AMRO  Incorporated  or its
     successors shall cease to be a primary United States government  securities
     dealer (a "Primary  Treasury  Dealer"),  the Company will substitute for it
     another  nationally  recognized  investment bank that is a Primary Treasury
     Dealer.

          "Reference  Treasury Dealer  Quotations"  means,  with respect to each
     Reference  Treasury  Dealer  and  any  redemption  date,  the  average,  as
     determined  by the  Independent  Investment  Banker,  of the bid and  asked
     prices  for the  Comparable  Treasury  Issue  (expressed  in each case as a
     percentage of its principal  amount)  quoted in writing to the  Independent
     Investment  Banker at 5:00 p.m.,  New York City time, on the third Business
     Day preceding such redemption date.

          "Treasury Rate" means, for any redemption  date, (i) the yield,  under
     the heading  which  represents  the average for the  immediately  preceding
     week,  appearing  in  the  most  recently  published   statistical  release
     designated  "H.15(519)"  or any  successor  publication  which is published
     weekly by the Board of  Governors of the Federal  Reserve  System and which
     establishes  yields on actively  traded United States  Treasury  securities
     adjusted  to  constant  maturity  under  the  caption  "Treasury   Constant
     Maturities,"  for the maturity  corresponding  to the  Comparable  Treasury
     Issue (if no maturity is within three months  before or after the remaining
     term of the Series AE Bonds,  yields for the two published  maturities most
     closely  corresponding to the Comparable Treasury Issue shall be determined
     and the  Treasury  Rate shall be  interpolated  or  extrapolated  from such
     yields on a straight line basis,  rounding to the nearest month) or (ii) if
     such release (or any successor  release) is not  published  during the week
     preceding the  calculation  date or does not contain such yields,  the rate
     per annum  equal to the  semiannual  equivalent  yield to  maturity  of the
     Comparable  Treasury  Issue,  calculated  using a price for the  Comparable
     Treasury Issue (expressed as a percentage of its principal amount) equal to
     the Comparable Treasury Price. The Treasury Rate shall be calculated on the
     third Business Day preceding the redemption date.

                                       4

                                   ARTICLE TWO

                     TERMS AND CONDITIONS OF SERIES AE BONDS

     SECTION 2.01. General.

          (a) There is hereby  created a series of Bonds,  known as and entitled
     "First  Mortgage  Bonds,  7.23%  Series AE Due 2032," and the form  thereof
     shall be as provided in this Supplemental Indenture.

          (b) The  aggregate  principal  amount of Series AE Bonds  which may be
     authenticated  and delivered and  outstanding  under the Indenture and this
     Supplemental  Indenture shall be limited in aggregate  principal  amount to
     $75,000,000,  except as provided under Section 2.02 of the  Indenture.  The
     Series AE Bonds  shall bear  interest  at the rate of 7.23% per annum until
     the  principal  thereof  becomes due and payable and shall bear interest on
     overdue principal (including any overdue mandatory prepayment of principal)
     and premium, if any, and (to the extent legally enforceable) on any overdue
     installment  of interest at the rate of 8.23% per annum until such  overdue
     principal,  premium or  interest  shall be paid.  The Series AE Bonds shall
     mature August 15, 2032.

          (c) The Series AE Bonds shall be registered  Bonds without  coupons in
     denominations of $100,000 and any multiples of $1,000 which may be executed
     by  the  Company  and  delivered  to the  Trustee  for  authentication  and
     delivery.  The date of  commencement  of the first interest  period for the
     Series AE Bonds shall be the date of initial  authentication  and  delivery
     thereof.  The Series AE Bonds shall be dated as provided in Section 2.06 of
     the  Indenture.  All  Series  AE  Bonds  shall  bear  interest  from  their
     respective issue dates. The principal and interest shall be due and payable
     as provided in the Bond form set forth in Section 2.02 of this Supplemental
     Indenture. The principal of, premium, if any, and interest on the Series AE
     Bonds  shall be  payable at the  principal  corporate  trust  office of the
     Trustee, in the Borough of Manhattan,  The City of New York, in any coin or
     currency of the United States of America which at the time of payment shall
     be legal tender for the payment of public and private debts.  The Series AE
     Bonds shall be subject to  redemption  only as provided in Section  2.03 of
     this Supplemental Indenture and Section 8.08 of the Indenture.

          (d) Without  limiting the other  indemnities  provided to the Trustee,
     the  Company  shall  indemnify  and  save  the  Trustee  harmless  from any
     liabilities  and costs incurred by the Trustee arising out of the making of
     the final payment when due of the  principal  owing on any of the Series AE
     Bonds without the surrender of such Bond to the Trustee.

          (e) The Trustee is hereby appointed Registrar in respect of the Series
     AE Bonds,  and the principal  corporate  trust office of the Trustee in the
     Borough of  Manhattan,  The City of New York,  is hereby  designated as the
     office or agency of the Company in said Borough where notices or demands in
     respect of Series AE Bonds may be served.

                                       5

     SECTION  2.02.  Form of Bonds.  The text of the  Series  AE Bonds,  and the
certificate of authentication  of the Trustee to be executed thereon,  are to be
substantially in the following forms, respectively:

                              [FORM OF GLOBAL BOND]

     Unless  this  Bond is  presented  by an  authorized  representative  of The
Depository Trust Company, a New York corporation  ("DTC"),  to the issuer or its
agent for registration of transfer,  exchange or payment, and any Bond issued is
registered in the name of Cede & Co. or in such other name as is requested by an
authorized  representative  of DTC (and any  payment is made to Cede & Co. or to
such other entity as is requested by an authorized  representative  of DTC), ANY
TRANSFER,  PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON
IS WRONGFUL inasmuch as the registered owner hereof, Cede & Co., has an interest
herein.

     Unless  and  until  it is  exchanged  in  whole  or in part  for  Bonds  in
definitive  registered form, this Bond may not be transferred  except as a whole
by the  Depositary  to the  nominee  of the  Depositary  or by a nominee  of the
Depositary  to the  Depositary  or another  nominee of the  Depositary or by the
Depositary  or any such nominee to a successor  Depositary  or a nominee of such
successor Depositary.

No.___________________                                  $______________________
CUSIP No. 092114 AA 5

                             BLACK HILLS POWER, INC.

                           FIRST MORTGAGE BOND, 7.23%
                               SERIES AE DUE 2032

     BLACK HILLS POWER, INC.  (hereinafter called the "Company"),  a corporation
organized and existing  under the laws of the State of South  Dakota,  for value
received,  hereby promises to pay to , or registered assigns, on the 15th day of
August,  2032, at the principal  corporate  trust office of the Trustee,  in the
Borough of Manhattan,  The City of New York, Dollars, in any coin or currency of
the United  States of America which at the time of payment shall be legal tender
for the payment of public and private  debts,  and to pay interest  thereon from
the date hereof,  at the rate of 7.23 percent,  per annum (computed on the basis
of a 360-day year of 12 thirty-day months),  payable at said principal office of
the Trustee in like coin or currency  semi-annually on February 15 and August 15
in each year until the principal  hereof shall have become due and payable,  and
thereafter if default be made in the payment of such  principal and premium,  if
any, and on any overdue  installment  of interest,  at the rate of 8.23 percent,
per annum until the overdue principal, premium or interest shall be paid.

                                       6

     This Bond shall not be valid or become obligatory for any purpose until the
certificate of authentication  hereon shall have been signed by the Trustee,  or
its successor as Trustee, under the Indenture.

     This Bond is one of an  authorized  issue of Bonds of the Company  known as
its "First Mortgage Bonds," issued and to be issued in one or more series under,
and all  equally  and  ratably  secured  (except as any  sinking,  amortization,
improvement, renewal or other analogous fund, established in accordance with the
provisions  of  the  Indenture  hereinafter  mentioned,  may  afford  additional
security  for the Bonds of any  particular  series)  by a Restated  and  Amended
Indenture of Mortgage and Deed of Trust, dated as of September 1, 1999, executed
by the  Company  to  JPMorgan  Chase  Bank f/k/a The Chase  Manhattan  Bank,  as
Trustee,  as supplemented and amended by a First Supplemental  Indenture,  dated
August 13, 2002 (said Restated  Indenture as so  supplemented  and amended being
hereinafter  collectively  called the  "Indenture"),  to which Indenture and all
further  instruments  supplemental  thereto  reference  is  hereby  made  for  a
description  of the properties  mortgaged and pledged,  the nature and extent of
the  security,  the  rights  of the  holders  of  said  Bonds  and  the  coupons
appurtenant  to coupon  Bonds,  if any, and of the Trustee and of the Company in
respect of such security, and the terms and conditions upon which said Bonds are
and are to be issued and secured.

     To the extent permitted by the Indenture and as provided therein,  with the
consent of the Company and upon the written  consent or  affirmative  vote of at
least  sixty-six  and  twothirds  percent in principal  amount of the Bonds then
outstanding  and entitled to consent,  and of not less than  sixty-six  and two-
third percent, in principal amount of the Bonds then outstanding and entitled to
consent of each series affected thereby in case one or more but less than all of
the series of Bonds issued under the Indenture  are so affected,  the rights and
obligations  of the Company and of the holders of Bonds and coupons  appurtenant
to coupon  Bonds,  if any, and the terms and  provisions of the Indenture and of
any instrument  supplemental thereto may be modified from time to time, provided
that no such  modification or alteration  shall be made which would postpone the
date fixed herein or in the  Indenture  for the payment of the  principal of, or
any  installment  of interest on, the Bonds,  or reduce the principal of, or the
rate of  interest  payable  on,  the  Bonds,  or reduce  the  percentage  of the
principal amount of Bonds the consent of which is required for the authorization
of any such  modification  or  alteration,  without  the  consent  of all of the
holders affected thereby. The rights,  duties or immunities of the Trustee shall
not be modified without the written consent of the Trustee.

     As provided in the  Indenture,  said Bonds are issuable in series which may
vary as in the Indenture provided or permitted.  This Bond is one of a series of
Bonds  authorized  by the  First  Supplemental  Indenture  and  entitled  "First
Mortgage Bonds, 7.23% Series AE Due 2032" (the "Series AE Bonds").

     Pursuant to the  provisions of Section 8.05 of the  Indenture,  the Company
may request  the  Trustee to apply  moneys  deposited  with the Trustee  ("Trust
Moneys") for various  reasons  toward the  redemption of those Bonds,  including
payment of premium and accrued interest,  selected by the Company.  In the First
Supplemental  Indenture,  the Company has covenanted  that the Bonds may only be
called for  redemption  by the  Company,  as a whole at any time or in part from
time to time,  at a  redemption  price  equal to the  greater of (i) 100% of the
principal  amount  of  Series  AE  Bonds to be  redeemed  or (ii) the sum of the
present values of the

                                       7

remaining scheduled payments of principal and interest thereon (exclusive of
interest accrued to the date of redemption) discounted, at the then current
Treasury Rate (as defined in the Supplemental Indenture) plus 30 basis points,
to the date of redemption on a semiannual basis (assuming a 360-day year
consisting of twelve 30-day months) plus in each case, accrued and unpaid
interest on the principal amount being redeemed to the date of redemption.

     Notice of each redemption shall be mailed to all registered owners not less
than thirty nor more than forty-five days before the redemption date.

     Pursuant to the provisions of Section 8.08 of the Indenture,  the Series AE
Bonds are further  subject to  redemption,  in whole or in part,  by the Trustee
applying  certain  Trust Moneys which have been held by the Trustee for a period
of over two  years.  Any such  redemption  is made pro rata  among the series of
Bonds then  outstanding in the ratio of principal  amount.  Redemption is at 100
percent of principal, plus any premium due at the time of redemption and accrued
interest to the redemption date.

     If this Bond or any portion  thereof  ($1,000 or a multiple)  shall be duly
called for  redemption as provided in the  Indenture,  this Bond or such portion
thereof shall (unless the Company shall default in the payment of the redemption
price) cease to bear interest from and after the date fixed for redemption.

     Upon any partial  redemption of this Bond,  this Bond may, at the option of
the  registered  holder  hereof,  be either (a)  surrendered  to the  Trustee in
exchange  for one or more new  Series AE Bonds for the  principal  amount of the
unredeemed  portion of this Bond or (b)  submitted  to the Trustee for  notation
hereon by the Trustee of the payment of the portion of the  principal  hereof so
called for redemption.

     If an Event of  Default,  as defined in the  Indenture,  shall  occur,  the
principal of this Bond may become or be declared due and payable,  in the manner
and with the effect provided in the Indenture.

     A certificate in global form representing all of a portion of the Bonds may
not be  transferred  except as a whole by the  Depositary  for such  series to a
nominee of such Depositary or by a nominee of such Depositary to such Depositary
or another  nominee of such Depositary or by such Depositary or any such nominee
to a  successor  Depositary  for  such  Bonds  or a  nominee  of such  successor
Depositary.

     The Series AE Bonds are issuable as fully  registered Bonds without coupons
of the  denominations  of  $100,000  and any  multiple  of  $1,000  which may be
executed by the  Company and  delivered  to the Trustee for  authentication  and
delivery.  The Series AE Bonds,  upon  surrender  thereof to the  Trustee at its
principal  corporate  trust office in the Borough of Manhattan,  The City of New
York,  are  exchangeable  for other Bonds of the same series in such  authorized
denomination or denominations in the same aggregate  principal amount, as may be
requested by the holders  surrendering the same.

     The  Company  and the  Trustee  may deem and treat the person in whose name
this Bond is  registered  as the  absolute  owner  hereof,  for the  purpose  of
receiving  payment of or on account of the  principal  hereof and  interest  due
hereon, and neither the Company nor the Trustee

                                       8

shall be affected by any notice to the contrary. Interest payable herein shall
be paid to the person in whose name the Bond is registered at the close of
business on February 1 or August 1 (whether or not on a business day) next
preceding the interest payment date, except for defaulted interest and unmatured
accrued interest on the Series AE Bonds called for redemption on a date other
than an interest payment date.

     No  recourse  shall  be had  for the  payment  of the  principal  of or the
interest on this Bond,  or for any claim based  hereon or  otherwise  in respect
hereof or of the Indenture or of any indenture supplemental thereto, against any
incorporator,  stockholder,  director  or  officer,  as such,  past,  present or
future,  of the Company or of any predecessor or successor  corporation,  either
directly or through the Company or any  predecessor  or  successor  corporation,
whether  by  virtue  of any  constitution,  statute  or rule  of law,  or by the
enforcement of any assessment or penalty or by any legal or equitable proceeding
or otherwise  howsoever;  all such liability being, by the acceptance hereof and
as a part of the  consideration  for the issuance  hereof,  expressly waived and
released  by every  holder  hereof,  as more fully  provided  in the  Indenture;
provided,  however,  that nothing herein or in the Indenture  contained shall be
taken to prevent  recourse to and the  enforcement of the liability,  if any, of
any  shareholder  or any  stockholder  or subscriber to capital stock upon or in
respect of shares of capital  stock not fully paid up.

     IN WITNESS  WHEREOF,  the  Company has caused this Bond to be signed in its
name by its President or one of its Vice  Presidents,  and its corporate seal to
be  impressed or  imprinted  hereon and attested by its  Secretary or one of its
Assistant Secretaries.

                Dated:

                                    BLACK HILLS POWER, INC.

                                    By:__________________________________
                                       Name:
                                       Title:

ATTEST:

___________________________________
Secretary

                                       9

                (FORM OF TRUSTEE'S CERTIFICATE OF AUTHENTICATION)

     This is one of the Bonds, of the series  designated  therein,  described in
the within mentioned Indenture.

                                        JPMORGAN CHASE BANK, as Trustee

                                        By:__________________________________
                                           Authorized Officer

     SECTION 2.03. Optional Redemption.

          (a)  Notwithstanding  the provisions of Section 8.05 of the Indenture,
     the Series AE Bonds,  upon the mailing of notice and in the manner provided
     in Section 10.03 of the Indenture, shall be redeemable at the option of the
     Company,  as a whole  at any  time  or in part  from  time  to  time,  at a
     redemption  price equal to the greater of (i) 100% of the principal  amount
     of Series AE Bonds to be redeemed or (ii) the sum of the present  values of
     the  remaining   scheduled  payments  of  principal  and  interest  thereon
     (exclusive of interest  accrued to the date of redemption)  discounted,  at
     the  then  current  Treasury  Rate  plus 30  basis  points,  to the date of
     redemption  on a semiannual  basis  (assuming a 360-day year  consisting of
     twelve 30-day months) plus in each case, accrued and unpaid interest on the
     principal amount being redeemed to the date of redemption.

          (b)  Notwithstanding the provisions of Section 10.03 of the Indenture,
     in case of the  redemption  at any time of less  than  all the  outstanding
     Series AE Bonds, the particular Bonds or parts thereof to be redeemed shall
     be  selected  by the  Trustee  from the  outstanding  Series  AE Bonds  not
     previously  called for redemption as nearly as  practicable  pro rata among
     the registered  holders of the Series AE Bonds  according to the respective
     principal  amounts  of  such  Bonds,  provided  that  the  portions  of the
     principal of Series AE Bonds at any time so selected for redemption in part
     shall be equal to $1,000 or a multiple thereof.  (c)  Notwithstanding  that
     Section 8.05 of the Indenture authorizes the Company to request the Trustee
     to apply Trust Moneys toward the  redemption of Bonds to be selected by the
     Company, the Company does hereby covenant that the Company will not request
     the Trustee to apply any Trust  Moneys to the  redemption  of the Series AE
     Bonds except pursuant to Section 2.03(a) of this Supplemental Indenture.

     SECTION 2.04. No Sinking Fund.  The Series AE Bonds are not entitled to the
benefit of any sinking fund.

                                       10

     SECTION 2.05. Bonds to be Issued in Global Form.

          (a) The Series AE Bonds will be initially  represented  by one or more
     Bonds in global form (the "Global  Bonds").  The Company hereby  designates
     The  Depository  Trust  Company as the  initial  Depositary  for the Global
     Bonds.  The Global Bonds will be deposited  with the Trustee,  as custodian
     for the  Depositary.  Unless and until it is  exchanged in whole or in part
     for Bonds in  certificated  form,  the Global Bonds may not be  transferred
     except as a whole by the  Depositary to a nominee of the Depositary or by a
     nominee of the  Depositary  to the  Depositary  or  another  nominee of the
     Depositary  or by  the  Depositary  or  any  such  nominee  to a  successor
     Depositary  for the Bonds or a nominee of such  successor  Depositary.  The
     Depositary  may  surrender the Global Bonds in exchange in whole or in part
     for  Bonds in  certificated  form on such  terms as are  acceptable  to the
     Company and the Depositary.

          (b) If at any time the  Depositary  for the Global Bonds  notifies the
     Company that it is unwilling or unable to continue as  Depositary  for such
     Global Bonds or if at any time the Depositary for the Series AE Bonds shall
     no longer be eligible or in good standing under the Securities Exchange Act
     of 1934, as amended, or other applicable statute or regulation, the Company
     shall appoint a successor  Depositary with respect to such Global Bonds. If
     a  successor  Depositary  for such  Global  Bonds is not  appointed  by the
     Company within 90 days after the Company  receives  notice or becomes aware
     of such  ineligibility,  the Series AE Bonds shall no longer be represented
     by Global Bonds and, subject to Section 2.07 of the Indenture,  the Company
     will  execute,  and the  Trustee,  upon  receipt of a Written  Order of the
     Company for the authentication and delivery of individual Bonds in exchange
     for such Global Bonds,  will  authenticate and deliver  individual Bonds of
     like tenor and terms in definitive  form in an aggregate  principal  amount
     equal to the  principal  amount of such Global  Bonds in exchange  for such
     Global Bonds.

          (c) The Company may at any time and in its sole  discretion  determine
     that the  Series  AE Bonds  issued or  issuable  in the form of one or more
     Global Bonds shall no longer be  represented  by such Global Bond or Bonds.
     In such event,  subject to Section 2.07 of the Indenture,  the Company will
     execute,  and the Trustee,  upon receipt of a Written  Order of the Company
     for the  authentication  and  delivery of  individual  Bonds in exchange in
     whole or in part for such  Global  Bonds,  will  authenticate  and  deliver
     individual Bonds of like tenor and terms in definitive form in an aggregate
     principal  amount  equal to the  principal  amount of such Global  Bonds in
     exchange for such Global Bonds.

          (d) In any  exchange  provided  for in  Section  2.05(b)  or (c),  the
     Company  will  execute  and  the  Trustee  will  authenticate  and  deliver
     individual Bonds in definitive registered form in authorized denominations.
     Upon the exchange of Global Bonds for individual  Bonds,  such Global Bonds
     shall be canceled by the  Trustee.  Series AE Bonds  issued in exchange for
     Global  Bonds  pursuant to this Section  2.05 shall be  registered  in such
     names  and in such  authorized  denominations  as the  Depositary  for such
     Global  Bonds,  pursuant  to  instructions  from  its  direct  or  indirect
     participants  or otherwise,  shall instruct the Trustee.  The Trustee shall
     deliver  such  Bonds  to the  Persons  in whose  names  such  Bonds  are so
     registered.

                                       11

                                  ARTICLE THREE

                                  MISCELLANEOUS

     SECTION 3.01.  Outstanding  Bonds. The aggregate  principal amount of Bonds
which,  immediately after the authentication and delivery of the Series AE Bonds
to be issued under this  Supplemental  Indenture,  will be outstanding under the
provisions  of, and secured by, the Indenture,  as amended by this  Supplemental
Indenture, will be $187,835,904,  consisting of the Bonds of Series Y, Z, AA, AB
and AC  hereinbefore  set  forth  in the  second  recital  of this  Supplemental
Indenture and $75,000,000  aggregate  principal amount of Series AE Bonds hereby
created.

     SECTION  3.02.  Receipt of  Supplemental  Indenture.  The  Company,  by the
execution hereof,  acknowledges that a true copy of this Supplemental  Indenture
has been delivered to and received by it.

     SECTION  3.03.  Ratification  of  Indenture.  Except  as  amended  by  this
Supplemental  Indenture,  all  the  provisions,  terms  and  conditions  of  the
Indenture  shall  continue  in full force and effect.  The  Company  does hereby
ratify and confirm  its  mortgage  and pledge to the  Trustee of that  property,
real, personal and mixed described in the Indenture as being subject to the Lien
of the Indenture.

     SECTION 3.04. Sufficiency of Supplemental  Indenture.  The Trustee makes no
representation as to the validity or sufficiency of this Supplemental Indenture.

     SECTION 3.05. Counterparts.  This Supplemental Indenture may be executed in
several counterparts, all or any of which may be treated for all purposes as one
original and shall constitute and be one and the same instrument.

     SECTION 3.06. Governing Law. This Supplemental Indenture and each Series AE
Bond shall be governed by and construed in accordance with the laws of the State
of  South  Dakota  without  regard  to the  choice  of law  principles  thereof.
Notwithstanding  the  foregoing,  the  immunities  and  standard  of care of the
Trustee,  Registrar and paying agent in connection  with the  administration  of
trusts and duties  hereunder  shall be governed by and  construed in  accordance
with the laws of the State of New York.

                                       12

     IN WITNESS  WHEREOF,  BLACK HILLS  POWER,  INC.,  party hereto of the first
part, has caused this Supplemental Indenture to be executed on its behalf by its
Chairman of the Board or its  President  or one of its Vice  Presidents  and its
corporate  seal to be hereto  affixed and to be attested by its  Secretary or an
Assistant  Secretary,  and JPMORGAN CHASE BANK, party hereto of the second part,
in evidence  of its  acceptance  of the trust  hereby  created,  has caused this
Supplemental  Indenture  to be  executed  on its  behalf  by  one  of  its  Vice
Presidents or Assistant  Vice  Presidents  and its  corporate  seal to be hereto
affixed and to be attested by a Trust Officer,  all as of the day and year first
above  written.

                                            BLACK HILLS POWER, INC.

                                            By:________________________________
                                               Name:
                                               Title:

ATTEST:

_____________________________________
Secretary

Signed, sealed and delivered by
BLACK HILLS POWER, INC.
in the presence of:

_____________________________________

_____________________________________

                                            JPMORGAN CHASE BANK, as Trustee

                                            By:________________________________
                                               Name:
                                               Title:

ATTEST:

_____________________________________
Trust Officer

Signed, sealed and delivered by
JPMORGAN CHASE BANK, as Trustee
in the presence of:

_____________________________________

_____________________________________

                                       13

STATE OF SOUTH DAKOTA           )
                                )SS.:
COUNTY OF PENNINGTON            )

     On this  12th  day of  August,  2002,  before  me,  Karen  R.  Tucker,  the
undersigned  officer,  personally  appeared  Everett E. Hoyt,  to me  personally
known, who acknowledged  himself to be, and being by me duly sworn, did say that
he is  President of BLACK HILLS POWER,  INC., a  corporation,  and that the seal
affixed to the foregoing  instrument is the corporate  seal of said  corporation
and that said  instrument  was  executed  by,  and  signed  in the name of,  the
corporation,  by him, as such President and sealed on behalf of the  corporation
by authority of its Board of Directors for the purposes therein  contained,  and
the said Everett E. Hoyt  acknowledged the same as the free act and deed of said
corporation.

     IN WITNESS WHEREOF, I hereunto set my hand and official seal.

[Notarial Seal]

                                               ________________________________
                                               Notary Public
                                               My Commission expires___________

STATE OF NEW YORK               )
                                )SS.:
COUNTY OF NEW YORK              )

     On this 9TH day of August, 2002, before me, James M. Foley, the undersigned
officer,   personally   appeared  L.  O'Brien,   to  me  personally  known,  who
acknowledged  himself  to be, and being by me duly  sworn,  did say that he is A
Vice President of JPMORGAN CHASE BANK, a corporation,  and that the seal affixed
to the foregoing  instrument is the corporate seal of said  corporation and that
said instrument was executed by, and signed in the name of, the corporation,  by
him,  as such  Vice  President,  and  sealed on  behalf  of the  corporation  by
authority of its Board of Directors for the purposes therein contained,  and the
said  L.O'Brien  acknowledged  the  same  as the  free  act  and  deed  of  said
corporation.

     IN WITNESS WHEREOF, I hereunto set my hand and official seal.

[Notarial Seal]

                                               ________________________________
                                               Notary Public
                                               My Commission expires___________

                                       14

                                                            Exhibit 10.4

        FIRST AMENDMENT TO 3-YEAR AND 364-DAY REVOLVING CREDIT AGREEMENTS

         This FIRST AMENDMENT TO 3-YEAR AND 364-DAY REVOLVING CREDIT AGREEMENTS
(this "Amendment") is dated as of June 13, 2002, and is entered into by and
among Black Hills Corporation, a South Dakota corporation (the "Borrower"), ABN
AMRO Bank N.V. in its capacity as administrative agent for the Banks party to
each of the Credit Agreements described below (in such capacity, the
"Administrative Agent"), and the Required Banks.

         WHEREAS, the Administrative Agent, the Banks and the Borrower have
entered into that certain 364-Day Credit Agreement (as the same has been
amended, extended, modified or restated, the "364-Day Credit Agreement") and
that certain 3-Year Credit Agreement (as the same has been amended, extended,
modified or restated, the "3-Year Credit Agreement") each dated as of August 28,
2001 and each among the Borrower, the financial institutions from time to time
party thereto (each a "Bank," and collectively the "Banks"), U.S. Bank, National
Association and The Bank of Nova Scotia, in their capacity as documentation
agents for the Banks thereunder (in such capacity, "Documentation Agents"),
Union Bank of California, N.A. and Bank of Montreal, in their capacity as
syndication agents for the Banks thereunder (in such capacity, "Syndication
Agents") and ABN AMRO Bank N.V. in its capacity as Administrative Agent for the
Banks thereunder (the 364-Day Credit Agreement and the 3-Year Credit Agreement
are each referred to individually as a "Credit Agreement" and collectively as
the "Credit Agreements");

         WHEREAS, the Borrower has requested that the Credit Agreement be
amended to, among other things, eliminate a downgrade of its S&P Rating or
Moody's Rating below investment grade as an Event of Default and the Banks are,
subject to the terms hereof, willing to so amend the Credit Agreement.

         NOW THEREFORE, in consideration of the mutual conditions and agreements
set forth in the Credit Agreements and this Amendment, and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto hereby agree as follows:

     1. Definitions.  Capitalized terms used in this Amendment, unless otherwise
defined herein, shall have the meaning ascribed to such terms in the Credit
Agreements.

     2.  Amendments.  Subject to the  conditions  set forth  below,  each Credit
Agreement is amended as follows:

          (a) Section 1.1 of each Credit Agreement is hereby amended by amending
     and restating the following definition in its entirety:

                                       1

                           "Material Adverse Effect" means a material adverse
                  effect on (i) the business, financial position or results of
                  operations of Borrower or Borrower and its Subsidiaries taken
                  as a whole, (ii) the ability of Borrower to perform its
                  material obligations under the Credit Documents, (iii) the
                  validity or enforceability of the material obligations of
                  Borrower under any Credit Document, (iv) the rights and
                  remedies of the Banks or the Administrative Agent against
                  Borrower; or (v) the timely payment of the principal of and
                  interest on the Loans or other amounts payable by Borrower
                  hereunder, provided, that a downgrade of Borrower's S&P Rating
                  and/or Moody's Rating shall not, in and of itself, be deemed a
                  "Material Adverse Effect" for purposes of this Agreement.

          (b) Section 1.1 of each Credit Agreement is hereby amended by amending
     and restating clause (v) of the definition of  "Indebtedness"  to be and to
     read as follows:

                            (v) all Guarantees issued by such Person, provided
                  that Long-Term Guaranties shall not be deemed "Indebtedness"
                  for purposes of calculating Borrower's compliance with the
                  financial covenants set forth in Sections 7.16, 7.17 and 7.18
                  hereof;

          (c)  Section  8.1 of each Credit  Agreement  is hereby  amended by (i)
     inserting the word "or" at the end of subsection (k) thereof, (ii) deleting
     the "; or" appearing at the end of subsection  (l) thereof and replacing it
     with ".", and (iii) deleting subsection (m) thereof in its entirety.

          (d) Schedule 1 to the 364-Day  Credit  Agreement is hereby  deleted in
     its entirety and a new Schedule 1 in the form of Schedule 1 (364-Day Credit
     Agreement) attached to this Amendment is hereby substituted therefor.

          (e) Schedule 1 to the 3-Year Credit Agreement is hereby deleted in its
     entirety  and a new  Schedule 1 in the form of  Schedule  1 (3-Year  Credit
     Agreement) attached to this Amendment is hereby substituted therefor.

          (f) Schedule 1 to Exhibit B of each Credit Agreement is hereby amended
     by changing the words "must not be less than"  appearing in Section G(7) of
     each such schedule to "not to exceed".

     3. Ratification.  The Borrower hereby ratifies,  acknowledges,  affirms and
reconfirms its rights,  interests and obligations under each Credit Document and
agrees to perform each of its  obligations  thereunder as and when required.  By
executing this Amendment,  the Borrower hereby further  ratifies,  acknowledges,
affirms and reconfirms that each Credit Document, as amended hereby, constitutes
a legal,  valid and binding obligation of the Borrower  enforceable  against the
Borrower in accordance with its terms,  and that each such Credit  Document,  as
amended hereby, is in full force and effect.

                                       2

     4.  Conditions.  The  effectiveness  of this  Amendment  is  subject to the
following conditions precedent (unless specifically waived in writing by the
Administrative Agent):

          (a) The  Borrower  and the  Required  Banks  shall have  executed  and
     delivered  this  Amendment,  and the Borrower  shall have  executed  and/or
     delivered such other documents and instruments as Administrative  Agent may
     require.

          (b) The  representations and warranties set forth in Section 5 of this
     Amendment shall be true and correct.

          (c)  All  proceedings   taken  in  connection  with  the  transactions
     contemplated  by this  Amendment and all documents,  instruments  and other
     legal  matters  incident  thereto  shall  be  reasonably   satisfactory  to
     Administrative Agent and its legal counsel.

     5.  Representations and Warranties.  To induce the Administrative Agent and
the Banks to enter into this Amendment,  the Borrower represents and warrants to
the  Administrative  Agent and the Banks that (i) the  execution,  delivery  and
performance  of  this  Amendment  has  been  duly  authorized  by all  requisite
corporate  action on the part of the Borrower and that this  Amendment  has been
duly  executed and  delivered by the Borrower and this  Amendment and the Credit
Agreements,  as amended hereby,  constitute valid and binding obligations of the
Borrower  enforceable in accordance with their respective terms, (ii) no Default
or Event of Default (after giving effect to this  Amendment) has occurred and is
continuing  under the Credit  Agreements  or would result from the execution and
delivery of this Amendment, and (iii) each of the representations and warranties
set forth in Section 5 of the Credit Agreements,  as amended hereby, is true and
correct in all material respects as of the date hereof,  except that if any such
representation or warranty relates solely to an earlier date it need only remain
true as of such date.

     6.  Severability.  Any  provision  of this  Amendment  held  by a court  of
competent  jurisdiction  to be  invalid  or  unenforceable  shall not  impair or
invalidate  the  remainder of this  Amendment  and the effect  thereof  shall be
confined to the provision so held to be invalid or unenforceable.

     7.  References.  Any  reference to the Credit  Agreements  contained in any
document,  instrument  or  agreement  executed  in  connection  with the  Credit
Agreements  shall be  deemed  to be a  reference  to the  Credit  Agreements  as
modified by this Amendment.

     8.   Counterparts.   This   Amendment  may  be  executed  in  one  or  more
counterparts, each of which shall constitute an original, but all of which taken
together  shall  be one and the  same  instrument.  This  Amendment  may also be
executed by facsimile and each  facsimile  signature  hereto shall be deemed for
all purposes to be an original signatory page.

                                       3

     9. Costs.  The Borrower  agrees to pay on demand all  reasonable  costs and
expenses  incurred by the  Administrative  Agent (including fees and expenses of
counsel)  incurred in connection  with the  negotiation  and preparation of this
Amendment.

     10.  Governing Law. The validity and  interpretation  of this Amendment and
the terms and conditions set forth herein, shall be governed by and construed in
accordance with the laws of the State of New York,  without giving effect to any
provisions  relating to conflict  of laws other than  section  5-1401 of the New
York General Obligations Laws.

     11. Miscellaneous. This Amendment shall be deemed to be a Credit Document.

           [- Remainder of Page Left Blank - Signature Pages Follow -]

                                       4

         In Witness Whereof, the parties hereto have caused this Agreement to be
duly executed and delivered in New York, New York by their duly authorized
officers as of the day and year first above written.

                         BLACK HILLS CORPORATION, a
                         South Dakota corporation

                         By:      _____________________________
                         Name:    _____________________________
                         Title:   _____________________________

                                       5

                         ABN AMRO BANK N.V., in its individual
                         capacity as a Bank and as Administrative
                         Agent

                         By:      _____________________________
                         Name:    David B. Bryant
                         Title:   Senior Vice President &
                                  Managing Director

                         By:      _____________________________
                         Name:    _____________________________
                         Title:   _____________________________

                                       6

                        UNION BANK OF CALIFORNIA, N.A.

                        By:      _____________________________
                        Name:    Robert J. Cole
                        Title:   Vice President

                                       7

                        U.S. BANK, NATIONAL
                        ASSOCIATION, in its individual capacity
                        as a Bank and as Documentation Agent

                        By:      _____________________________
                        Name:    Sandra Vollmer
                        Title:   Senior Lender

                                       8

                        BANK OF MONTREAL

                        By:      _____________________________
                        Name:    Ian M. Plester
                        Title:   Director

                                       9

                        THE BANK OF NOVA SCOTIA

                        By:      _____________________________
                        Name:    F.C.H. Ashby
                        Title:   Senior Manager Loan Operations

                                       10

                        CIBC INC., as a Lender

                        By:      _____________________________
                        Name:    M. Sanjeeva Senanayake
                        Title:   Executive Director
                                 CIBC World Markets Corp. As Agent

                                       11

                        COBANK, ACB

                        By:      _____________________________
                        Name:    Cathleen Reed
                        Title:   Assistant Vice President

                                       12

                        WELLS FARGO BANK, N.A.

                        By:      _____________________________
                        Name:    Thomas M. Foncannon
                        Title:   Senior Vice President

                                       13

                         MIZUHO CORPORATE BANK, LTD.

                         By:      _____________________________
                         Name:    Nobuyasu Fukatsu
                         Title:   Senior Vice President

                                       14

                          NATIONAL CITY BANK OF
                          MICHIGAN/ILLINOIS

                          By:      _____________________________
                          Name:    Mark R. Long
                          Title:   Senior Vice President

                                       15

                          NORDEUTSCHE LANDESBANK
                          GIROZENTRALE NEW YORK/
                          CAYMAN ISLANDS BRANCH

                          By:      _____________________________
                          Name:    Stephanie Finnen
                          Title:   Vice President

                          By:      _____________________________
                          Name:    Joseph Haas
                          Title:   Vice President

                                       16

                           CHANG HWA BANK, LOS ANGELES BRANCH

                           By:      _____________________________
                           Name:    James Lin
                           Title:   Senior Vice President and General Manager

                                       17

                      SCHEDULE 1 (364-Day Credit Agreement)

                                  PRICING GRID

- ------------------ ------------------- ------------ ------------------- -------------------
  If the Level       Subject to the        The        Subject to the      Subject to the
    Status Is        proviso below     Utilization    proviso below       proviso below
                     this grid, the     Fee Rate      this grid, the      this grid, the
                   Facility Fee Rate       is:      Eurodollar Margin    Base Rate Margin
                          is:                              is:                 is:
                                                            
- ------------------ ------------------- ------------ ------------------- -------------------
- ------------------ ------------------- ------------ ------------------- -------------------
Level I Status     0.080%              0.100%       0.420%                    0.000%
- ------------------ ------------------- ------------ ------------------- -------------------
- ------------------ ------------------- ------------ ------------------- -------------------
Level II Status    0.100%              0.125%       0.500%                    0.000%
- ------------------ ------------------- ------------ ------------------- -------------------
- ------------------ ------------------- ------------ ------------------- -------------------
Level III Status   0.125%              0.125%       0.625%                    0.000%
- ------------------ ------------------- ------------ ------------------- -------------------
Level IV Status    0.150%              0.125%       0.725%                    0.000%
- ------------------ ------------------- ------------ ------------------- -------------------
- ------------------ ------------------- ------------ ------------------- -------------------
Level V Status     0.200%              0.250%       0.800%                    0.000%
- ------------------ ------------------- ------------ ------------------- -------------------
- ------------------ ------------------- ------------ ------------------- -------------------
Level VI Status    0.600%              0.500%       1.400%                    0.475%
- ------------------ ------------------- ------------ ------------------- -------------------

         Each change in a rating shall be effective as of the date it is
announced by the applicable rating agency. Until the Borrower receives an S&P
Rating, the applicable Level shall be determined based upon the Borrower's
Moody's Rating.

         In the event that the Moody's Rating and the S&P Rating fall in
consecutive Levels, the rating falling in the lower Level (with Level I being
the highest Level and Level VI being the lowest Level) shall govern for purposes
of determining the applicable pricing pursuant to the above pricing grid. In the
event that the Moody's Rating and the S&P Rating fall in non-consecutive Levels,
the Level immediately above the Level in which the lower rating falls (with
Level I being the highest Level and Level VI being the lowest Level) shall
govern for purposes of determining the applicable pricing pursuant to the above
pricing grid.

                                       18

                      SCHEDULE 1 (3-Year Credit Agreement)

                                  PRICING GRID

- ------------------ ------------------- ------------ ------------------- ------------------ --------------------
  If the Level       Subject to the        The        Subject to the     Subject to the      Subject to the
    Status Is        proviso below     Utilization    proviso below       proviso below    proviso below this
                     this grid, the     Fee Rate      this grid, the     this grid, the      grid, the Base
                   Facility Fee Rate       is:       L/C Fee Rate is:      Eurodollar        Rate Margin is:
                          is:                                              Margin is:
                                                                            
- ------------------ ------------------- ------------ ------------------- ------------------ --------------------
- ------------------ ------------------- ------------ ------------------- ------------------ --------------------
Level I Status     0.100%              0.100%       0.400%              0.400%                   0.000%
- ------------------ ------------------- ------------ ------------------- ------------------ --------------------
- ------------------ ------------------- ------------ ------------------- ------------------ --------------------
Level II Status    0.125%              0.125%       0.475%              0.475%                   0.000%
- ------------------ ------------------- ------------ ------------------- ------------------ --------------------
- ------------------ ------------------- ------------ ------------------- ------------------ --------------------
Level III Status   0.150%              0.125%       0.600%              0.600%                   0.000%
- ------------------ ------------------- ------------ ------------------- ------------------ --------------------
Level IV Status    0.175%              0.125%       0700%               0.700%                   0.000%
- ------------------ ------------------- ------------ ------------------- ------------------ --------------------
- ------------------ ------------------- ------------ ------------------- ------------------ --------------------
Level V Status     0.250%              0.250%       0.750%              0.750%                   0.000%
- ------------------ ------------------- ------------ ------------------- ------------------ --------------------
- ------------------ ------------------- ------------ ------------------- ------------------ --------------------
Level VI Status    0.500%              0.500%       1.500%              1.500%                   0.500%
- ------------------ ------------------- ------------ ------------------- ------------------ --------------------

         Each change in a rating shall be effective as of the date it is
announced by the applicable rating agency. Until the Borrower receives an S&P
Rating, the applicable Level shall be determined based upon the Borrower's
Moody's Rating.

         In the event that the Moody's Rating and the S&P Rating fall in
consecutive Levels, the rating falling in the lower Level (with Level I being
the highest Level and Level VI being the lowest Level) shall govern for purposes
of determining the applicable pricing pursuant to the above pricing grid. In the
event that the Moody's Rating and the S&P Rating fall in non-consecutive Levels,
the Level immediately above the Level in which the lower rating falls (with
Level I being the highest Level and Level VI being the lowest Level) shall
govern for purposes of determining the applicable pricing pursuant to the above
pricing grid.

Execution Copy                                                   Exhibit 10.5

                   SECOND AMENDMENT TO 3-YEAR CREDIT AGREEMENT

         This SECOND AMENDMENT TO 3-YEAR CREDIT AGREEMENT (this "Amendment") is
dated as of August 27, 2002, and is entered into by and among Black Hills
Corporation, a South Dakota corporation (the "Borrower"), ABN AMRO Bank N.V. in
its capacity as administrative agent for the Banks party to the Credit Agreement
described below (in such capacity, the "Administrative Agent"), and the
financial institutions party hereto.

         WHEREAS, the Administrative Agent, the Banks and the Borrower have
entered into that certain 3-Year Credit Agreement (as the same has been amended
(including via that certain First Amendment to 3-Year and 364-Day Revolving
Credit Agreements dated as of June 13, 2002), extended, modified or restated,
the "Credit Agreement") dated as of August 28, 2001 among the Borrower, the
financial institutions from time to time party thereto (each a "Bank," and
collectively the "Banks"), U.S. Bank, National Association and The Bank of Nova
Scotia, in their capacity as documentation agents for the Banks thereunder (in
such capacity, "Documentation Agents"), Union Bank of California, N.A. and Bank
of Montreal, in their capacity as syndication agents for the Banks thereunder
(in such capacity, "Syndication Agents") and ABN AMRO Bank N.V. in its capacity
as Administrative Agent for the Banks thereunder; and

         WHEREAS, the Borrower has requested that the Credit Agreement be
amended as set forth herein and the Banks are, subject to the terms hereof,
willing to so amend the Credit Agreement.

         NOW THEREFORE, in consideration of the mutual conditions and agreements
set forth in the Credit Agreement and this Amendment, and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto hereby agree as follows:

     1. Definitions.  Capitalized terms used in this Amendment, unless otherwise
defined  herein,  shall have the  meaning  ascribed  to such terms in the Credit
Agreement.

     2.  Amendments.  Subject  to the  conditions  set forth  below,  the Credit
Agreement is amended as follows:

          (a) Section 1.1 of the Credit  Agreement is hereby amended by amending
     and restating the following definitions in their entirety as follows:

               "L/C Commitment" means an amount equal to $100,000,000.

                                       1

               "Level V Status" means  neither Level I Status,  Level II Status,
          Level III  Status,  nor Level IV Status  exists,  but  Borrower's  S&P
          Rating is BBB- or higher and its Moody's Rating is Baa3 or higher.

               "364  Day  Credit  Agreement"  means  that  certain  Amended  and
          Restated  364 Day Credit  Agreement  dated as of August 27, 2002 among
          Borrower, ABN AMRO Bank, N.V., in its capacity as administrative agent
          for the Banks thereunder, U.S. Bank, National Association and The Bank
          of Nova  Scotia,  in their  capacity as  documentation  agents for the
          Banks thereunder, Union Bank of California, N.A. and Bank of Montreal,
          in their capacity as syndication  agents for the Banks  thereunder and
          the various financial  institutions from time to time party thereto as
          Banks

          (b)  Section  1.1 of the  Credit  Agreement  is hereby  amended by (i)
     deleting the definitions of "ABN AMRO Credit Agreement", "Interest Coverage
     Ratio",  "Consolidating Interest Expense", "US Bank Credit Agreements", and
     "Wells  Fargo  Credit  Agreements"  appearing  therein,  (ii)  deleting the
     parenthetical "(once obtained)" in each place such parenthetical appears in
     the definitions of "Level I Status",  "Level II Status", "Level II Status",
     "Level IV Status",  "Level V Status", and "Level VI Status", (iii) changing
     the words  "Consolidating  Interest  Expense"  too  "Consolidated  Interest
     Expenses" in the  definition of  "Consolidated  EBITDA",  (iv) changing the
     words "Black Hills Energy Ventures,  Inc." to "Black Hills Energy, Inc." in
     the definition of "Material  Subsidiaries"  and (v) inserting the following
     definitions in proper alphabetical order:

               "Consolidated  Fixed Charges"  means,  for any period and without
          duplication  the  sum of (i)  the  aggregate  amount  of  Consolidated
          Interest  Expense  with  respect  to  Recourse  Indebtedness  paid  or
          scheduled to be paid for such period, and (ii) the aggregate amount of
          all mandatory  scheduled  payments (whether  designated as payments or
          prepayments)  and  scheduled  sinking  fund  payments  with respect to
          principal  of  any  Recourse  Indebtedness  of  the  Borrower  or  its
          Subsidiaries  (including  payments  in the nature of  principal  under
          Capital Leases).

               "Consolidated  Interest  Expense"  means,  with  reference to any
          period  of the  Borrower  and  its  Subsidiaries,  the  sum of (i) all
          interest charges  (including  capitalized  interest,  imputed interest
          charges  with  respect  to  Capitalized   Lease  Obligations  and  all
          amortization of debt discount and expense and other deferred financing
          charges) of the Borrower and its Subsidiaries on a consolidated  basis
          for such  period  determined  in  accordance  with  GAAP,  other  than
          interest  charges  relating  to  Non-Recourse  Indebtedness,  (ii) all
          commitment or other fees payable in respect of the issuance of standby
          letters of credit or other  credit  facilities  for the account of the
          Borrower or its Subsidiaries, and (iii) net costs/expenses incurred by
          the Borrower and its Subsidiaries under Derivative Arrangements.

                                       2

               "Fixed  Charge  Coverage  Ratio"  means,  for any  period of four
          consecutive  quarters of the  Borrower  ending with the most  recently
          completed such fiscal quarter, the ratio of (A) Adjusted  Consolidated
          EBITDA to (B) Consolidated Fixed Charges for such period.

               "Liquid Assets" means,  as the date of any  calculation  thereof,
          the sum of (i) the amount of unrestricted cash which the Borrower then
          has  available,  plus  (ii) the  aggregate  amount  of then  available
          (meaning the  Borrower is entitled to borrow such amounts  pursuant to
          the  applicable  documentation)  unused  capacity under the Borrower's
          senior unsecured credit  facilities  (including this Agreement and the
          364-Day Credit Agreement).

          (c) Section 2.2(a) of the Credit Agreement is hereby amended by adding
     the following sentence to the end of such subsection:

               No Issuing Agent shall have an obligation  pursuant to the Credit
          Documents to issue any Letter of Credit if, after giving effect to the
          issuance  of such  Letter of  Credit,  the  aggregate  face  amount of
          Letters of Credit issued by such Issuing Agent then outstanding  would
          exceed $50,000,000.

          (d)  Section  2.12(b) of the  Credit  Agreement  is hereby  amended by
     changing  the  amount  "$200,000,000"   appearing  in  such  subsection  to
     "$300,000,000".

          (e)  Section  5.4 of the  Credit  Agreement  is hereby  amended by (i)
     changing  the date  "December  31,  2000" in both places it appears in each
     Section to "December 31, 2001",  and (ii) changing the date "June 30, 2001"
     to "June 30, 2002".

          (f) Sections  7.15(c) and 7.15(d) of the Credit  Agreement  are hereby
     amended  be  inserting  the  following   text  at  the  beginning  of  such
     subsections:

                  so long as the Borrower would be in compliance with Section
                  7.17 hereof (calculated as of the date of, and after giving
                  affect to, such incurrence),

          (g)  Section  7.16 of the Credit  Agreement  is hereby  amended in its
     entirety to be and to read as follows:

                  Section 7.16 Consolidated Net Worth. Borrower will at the end
                  of each fiscal quarter maintain Consolidated Net Worth in an
                  amount of not less than the sum of (i) $425,000,000 plus (ii)
                  fifty percent (50%) of the aggregate Consolidated Net Income,
                  if positive, for the period beginning April 1, 2002 and ending
                  on the last day of such fiscal quarter.

          (h)  Section  7.18 of the Credit  Agreement  is hereby  amended in its
     entirety to be and to read as follows:

                                       3

                  Section 7.18 Fixed Charge Coverage Ratio. Borrower will
                  maintain a Fixed Charge Coverage Ratio of not less than
                  1.50:1.00, as determined at the end of each fiscal quarter.

          (i)  Section  7.25 of the Credit  Agreement  is hereby  amended in its
     entirety to be and to read as follows:

                  Section 7.25 Ratings. Borrower will at all times this
                  Agreement is in effect maintain a S&P Rating and a Moody's
                  Rating (or if one or both of such ratings are unavailable,
                  rating(s) from such other recognized national rating agency or
                  agencies as may be acceptable to the Administrative Agent and
                  the Required Banks).

          (j) A new  Section  7.26 of the Credit  Agreement  is hereby  added in
     proper numerical order to be and to read as follows:

                  Section 7.26 Liquidity Covenant. Borrower will, as of the last
                  day of each fiscal quarter commencing with the fiscal quarter
                  ending December 31, 2002, maintain Liquid Assets of at least
                  $30,000,000.

          (k)  Schedule  1 to the  Credit  Agreement  is hereby  deleted  in its
     entirety  and a new  Schedule 1 in the form of  Schedule  1 (3-Year  Credit
     Agreement) attached to this Amendment is hereby substituted therefor.

          (l) Schedule 1 to Exhibit B of the Credit  Agreement is hereby deleted
     in its  entirety and  Schedule 1 to this  Amendment  is hereby  substituted
     therefor.

          (m) Schedules 5.2, 5.5, 5.11, 7.9, 7.14, 7.15(a), 7.15(b), and 7.19 of
     the Credit Agreement are hereby amended in their entirety to be and to read
     the same as the  corresponding  schedules  attached  to the 364 Day  Credit
     Agreement being executed as of the date of this Amendment.

     3. Ratification.  The Borrower hereby ratifies,  acknowledges,  affirms and
reconfirms its rights,  interests and obligations under each Credit Document and
agrees to perform each of its  obligations  thereunder as and when required.  By
executing this Amendment,  the Borrower hereby further  ratifies,  acknowledges,
affirms and reconfirms that each Credit Document, as amended hereby, constitutes
a legal,  valid and binding obligation of the Borrower  enforceable  against the
Borrower in accordance with its terms,  and that each such Credit  Document,  as
amended hereby, is in full force and effect.

     4.  Conditions.  The  effectiveness  of this  Amendment  is  subject to the
following conditions precedent:

                                       4

          (a) The Borrower shall have executed and delivered this Amendment, and
     the Borrower shall have executed and/or  delivered such other documents and
     instruments as Administrative Agent may require.

          (b) The  representations and warranties set forth in Section 5 of this
     Amendment shall be true and correct.

          (c)  All  proceedings   taken  in  connection  with  the  transactions
     contemplated  by this  Amendment and all documents,  instruments  and other
     legal  matters  incident  thereto  shall  be  reasonably   satisfactory  to
     Administrative Agent and its legal counsel.

     5.  Representations and Warranties.  To induce the Administrative Agent and
the Banks to enter into this Amendment,  the Borrower represents and warrants to
the  Administrative  Agent and the Banks that (i) the  execution,  delivery  and
performance  of  this  Amendment  has  been  duly  authorized  by all  requisite
corporate  action on the part of the Borrower and that this  Amendment  has been
duly  executed and  delivered by the Borrower and this  Amendment and the Credit
Agreement,  as amended hereby,  constitutes valid and binding obligations of the
Borrower  enforceable in accordance with its terms,  (ii) no Default or Event of
Default  (after giving effect to this  Amendment) has occurred and is continuing
under the Credit  Agreement or would result from the  execution  and delivery of
this Amendment,  and (iii) each of the  representations and warranties set forth
in Section 5 of the Credit Agreement,  as amended hereby, is true and correct in
all  material  respects  as  of  the  date  hereof,  except  that  if  any  such
representation or warranty relates solely to an earlier date it need only remain
true as of such date.

     6.  Severability.  Any  provision  of this  Amendment  held  by a court  of
competent  jurisdiction  to be  invalid  or  unenforceable  shall not  impair or
invalidate  the  remainder of this  Amendment  and the effect  thereof  shall be
confined to the provision so held to be invalid or unenforceable.

     7.  References.  Any  reference  to the Credit  Agreement  contained in any
document,  instrument  or  agreement  executed  in  connection  with the  Credit
Agreement shall be deemed to be a reference to the Credit  Agreement as modified
by this Amendment.

     8.   Counterparts.   This   Amendment  may  be  executed  in  one  or  more
counterparts, each of which shall constitute an original, but all of which taken
together  shall  be one and the  same  instrument.  This  Amendment  may also be
executed by facsimile and each  facsimile  signature  hereto shall be deemed for
all purposes to be an original signatory page.

     9. Costs.  The Borrower  agrees to pay on demand all  reasonable  costs and
expenses  incurred by the  Administrative  Agent (including fees and expenses of
counsel)  incurred in connection  with the  negotiation  and preparation of this
Amendment or the syndication  (whether incurred before or after the date hereof)
of the Credit Agreement.

                                       5

     10.  Governing Law. The validity and  interpretation  of this Amendment and
the terms and conditions set forth herein, shall be governed by and construed in
accordance with the laws of the State of New York,  without giving effect to any
provisions  relating to conflict  of laws other than  section  5-1401 of the New
York General Obligations Laws.

     11. Miscellaneous. This Amendment shall be deemed to be a Credit Document.

           [- Remainder of Page Left Blank - Signature Pages Follow -]

                                       6

         In Witness Whereof, the parties hereto have caused this Agreement to be
duly executed and delivered in New York, New York by their duly authorized
officers as of the day and year first above written.

                                     BLACK HILLS CORPORATION, a
                                     South Dakota corporation

                                     By:      _____________________________
                                     Name:    _____________________________
                                     Title:   _____________________________

                                       7

                                     ABN AMRO BANK N.V., in its individual
                                     capacity as a Bank and as Administrative
                                     Agent

                                     By:      _____________________________
                                     Name:    David B. Bryant
                                     Title:   Senior Vice President &
                                              Managing Director

                                     By:      _____________________________
                                     Name:    _____________________________
                                     Title:   _____________________________

                                       8

                                     UNION BANK OF CALIFORNIA, N.A.

                                     By:      _____________________________
                                     Name:    Robert J. Cole
                                     Title:   Vice President

                                       9

                                     U.S. BANK, NATIONAL
                                     ASSOCIATION, in its individual capacity
                                     as a Bank and as Documentation Agent

                                     By:      _____________________________
                                     Name:    Sandra Vollmer
                                     Title:   Senior Lender

                                       10

                                     BANK OF MONTREAL

                                     By:      _____________________________
                                     Name:    Ian M. Plester
                                     Title:   Director

                                       11

                                     THE BANK OF NOVA SCOTIA

                                     By:      _____________________________
                                     Name:    F.C.H. Ashby
                                     Title:   Senior Manager Loan Operations

                                       12

                                     CIBC INC., as a Lender

                                     By:      _____________________________
                                     Name:    M. Sanjeeva Senanayake
                                     Title:   Executive Director
                                              CIBC World Markets Corp. As Agent

                                       13

                                     COBANK, ACB

                                     By:      _____________________________
                                     Name:    Cathleen Reed
                                     Title:   Assistant Vice President

                                       14

                                     WELLS FARGO BANK, N.A.

                                     By:      _____________________________
                                     Name:    Thomas M. Foncannon
                                     Title:   Senior Vice President

                                       15

                                     MIZUHO CORPORATE BANK, LTD.

                                     By:      _____________________________
                                     Name:    Nobuyasu Fukatsu
                                     Title:   Senior Vice President

                                       16

                                     NATIONAL CITY BANK OF
                                     MICHIGAN/ILLINOIS

                                     By:      _____________________________
                                     Name:    Mark R. Long
                                     Title:   Senior Vice President

                                       17

                                     NORDEUTSCHE LANDESBANK
                                     GIROZENTRALE NEW YORK/
                                     CAYMAN ISLANDS BRANCH

                                     By:      _____________________________
                                     Name:    Stephanie Finnen
                                     Title:   Vice President

                                     By:      _____________________________
                                     Name:    Joseph Haas
                                     Title:   Vice President

                                       18

                                     CHANG HWA BANK, LOS ANGELES
                                     BRANCH

                                     By:      _____________________________
                                     Name:    Jim Chen
                                     Title:   Vice President and General Manager

                                       19

                      SCHEDULE 1 (3-Year Credit Agreement)

                                  PRICING GRID

- ------------------ ------------------- ------------ ------------------- ------------------ --------------------
  If the Level      The Facility Fee       The       The L/C Fee Rate    The Eurodollar       The Base Rate
    Status Is           Rate is:       Utilization         is:             Margin is:          Margin is:
                                        Fee Rate
                                           is:
                                                                            
- ------------------ ------------------- ------------ ------------------- ------------------ --------------------
- ------------------ ------------------- ------------ ------------------- ------------------ --------------------
Level I Status     0.100%              0.100%       0.400%              0.400%                   0.000%
- ------------------ ------------------- ------------ ------------------- ------------------ --------------------
- ------------------ ------------------- ------------ ------------------- ------------------ --------------------
Level II Status    0.125%              0.125%       0.475%              0.475%                   0.000%
- ------------------ ------------------- ------------ ------------------- ------------------ --------------------
- ------------------ ------------------- ------------ ------------------- ------------------ --------------------
Level III Status   0.150%              0.150%       0.600%              0.600%                   0.000%
- ------------------ ------------------- ------------ ------------------- ------------------ --------------------
Level IV Status    0.175%              0.200%       0700%               0.700%                   0.000%
- ------------------ ------------------- ------------ ------------------- ------------------ --------------------
- ------------------ ------------------- ------------ ------------------- ------------------ --------------------
Level V Status     0.250%              0.250%       0.750%              0.750%                   0.000%
- ------------------ ------------------- ------------ ------------------- ------------------ --------------------
- ------------------ ------------------- ------------ ------------------- ------------------ --------------------
Level VI Status    0.6725%             0.500%       1.400%              1.400%                   0.400%
- ------------------ ------------------- ------------ ------------------- ------------------ --------------------

         Each change in a rating shall be effective as of the date it is
announced by the applicable rating agency.

         In the event that the Moody's Rating and the S&P Rating fall in
consecutive Levels, the rating falling in the lower Level (with Level I being
the highest Level and Level VI being the lowest Level) shall govern for purposes
of determining the applicable pricing pursuant to the above pricing grid. In the
event that the Moody's Rating and the S&P Rating fall in non-consecutive Levels,
the Level immediately above the Level in which the lower rating falls (with
Level I being the highest Level and Level VI being the lowest Level) shall
govern for purposes of determining the applicable pricing pursuant to the above
pricing grid.

                                       20

                      SCHEDULE 1 TO COMPLIANCE CERTIFICATE

                  Compliance Calculations for Credit Agreement

                       CALCULATION AS OF ________ __,200_

- ------------------------------------------------------------------ --------------------- ---------------------------
A.       Liens (Sec. 7.9(c), (d), and (g))
- ------------------------------------------------------------------ --------------------- ---------------------------
- ------------------------------------------------------------------ --------------------- ---------------------------

         1.       Liens securing taxes or assessments or other     _____________________ (Answer should be yes)
                  government charges or levies equal to or less
                  than $20,000,000 (Section 7.9(c))
- ------------------------------------------------------------------ --------------------- ---------------------------
- ------------------------------------------------------------------ --------------------- ---------------------------
         2.       Liens securing judgments or awards or surety     _____________________ (Answer should be yes)
                  or appeal bonds issued in connection therewith
                  equal to or less than $20,000,000 (Section
                  7.9(d))
- ------------------------------------------------------------------ --------------------- ---------------------------
- ------------------------------------------------------------------ --------------------- ---------------------------
         3.       Is the aggregate amount of Indebtedness and      _____________________ (Answer should be yes)
                  other obligations consisting of (i) the
                  deferred purchase price of newly acquired
                  property or incurred to finance the
                  acquisition of personal property of Borrower
                  used in the ordinary course of business of
                  such Borrower, (ii) Capitalized Lease
                  Obligations, and (iii) the performance of
                  tenders, statutory obligations, bids, leases
                  or other similar obligations (other than for
                  borrowed money) entered into in the ordinary
                  course of business or to secure obligations on
                  performance bonds which is secured by Liens
                  equal to or less than 5% of Consolidated
                  Assets as reflected on the most recent balance
                  sheet delivered by Borrower (Section 7.9(g)).
- ------------------------------------------------------------------ --------------------- ---------------------------
- ------------------------------------------------------------------ --------------------- ---------------------------
B.       Sale and Leasebacks (Section 7.11)
- ------------------------------------------------------------------ --------------------- ---------------------------
- ------------------------------------------------------------------ --------------------- ---------------------------
         1.       Aggregate obligations under all Sale and         $____________________ (Line B1 not to exceed
                  Leasebacks arrangements (other than synthetic                          $30,000,000)
                  lease transactions excluded by Section 7.11)
- ------------------------------------------------------------------ --------------------- ---------------------------
- ------------------------------------------------------------------ --------------------- ---------------------------
C.       Sale of Assets (Section 7.12)
- ------------------------------------------------------------------ --------------------- ---------------------------

                                       21

- ------------------------------------------------------------------ --------------------- ---------------------------
         1.       Net book value of assets (other than             $____________________ (Line C1 not to exceed
                  inventory, reserves and electricity in the                             10% of total consolidated
                  ordinary course of business) sold during this                          assets)
                  fiscal year
- ------------------------------------------------------------------ --------------------- ---------------------------
- ------------------------------------------------------------------ --------------------- ---------------------------
D.       Permitted Investments (Section 7.14)
- ------------------------------------------------------------------ --------------------- ---------------------------
- ------------------------------------------------------------------ --------------------- ---------------------------
         1.       Aggregate amount of Investments in Marketing     $____________________
                  Subsidiaries made after the Effective Date
                  (Section 7.14(o)(ii))
- ------------------------------------------------------------------ --------------------- ---------------------------
- ------------------------------------------------------------------ --------------------- ---------------------------
         2.       Investments consisting of Guaranties of          $____________________
                  Indebtedness of Marketing Subsidiaries
                  existing on the Effective Date
- ------------------------------------------------------------------ --------------------- ---------------------------
- ------------------------------------------------------------------ --------------------- ---------------------------
         3.       Intercompany loans permitted pursuant to         $____________________ Line E3
                  Section 7.15(e)(iii) owing by Marketing
                  Subsidiaries (Line E3)
- ------------------------------------------------------------------ --------------------- ---------------------------
- ------------------------------------------------------------------ --------------------- ---------------------------
         4.       Sum of Lines D1, D2 and D3                       $____________________
- ------------------------------------------------------------------ --------------------- ---------------------------
- ------------------------------------------------------------------ --------------------- ---------------------------
         5.       Is Line D4 equal to or less than $10,000,000?    _____________________ (Answer should be yes)
- ------------------------------------------------------------------ --------------------- ---------------------------
- ------------------------------------------------------------------ --------------------- ---------------------------
         6.       Aggregate amount of Investments in Persons       $____________________ (Line D6 not to exceed
                  engaged in the lines of business described in                          $20,000,000)
                  clause (xii) of Section 7.8 (Section 7.14(k))
- ------------------------------------------------------------------ --------------------- ---------------------------
- ------------------------------------------------------------------ --------------------- ---------------------------
E.       Permitted Indebtedness (Section 7.15)
- ------------------------------------------------------------------ --------------------- ---------------------------
- ------------------------------------------------------------------ --------------------- ---------------------------
         1.       Secured Indebtedness except as set forth on      $____________________ (Line E1 not to exceed 5%
                  Schedule 7.15(b): (i) of BHP (ii) evidencing                           of Consolidated Assets)
                  the deferred purchase price of newly acquired property or
                  incurred to finance the acquisition of personal property of
                  Borrower or a Subsidiary used in the ordinary course of
                  business of the Borrower of a Subsidiary, (iii) constituting
                  Capitalized Lease Obligations or with respect to synthetic (or
                  similar type) lease transactions, or (iv) incurred in
                  connection with the performance of tenders, statutory
                  obligations, bids, leases or other similar obligations (other
                  than for borrowed money) entered into in the ordinary course
                  of business or to secure obligations on performance bonds
                  (Section 7.15(c))
- ------------------------------------------------------------------ --------------------- ---------------------------

                                       22

- ------------------------------------------------------------------ --------------------- ---------------------------
         2.       Intercompany loans owing by Borrower (Section    $____________________ (Must be subordinated to
                  7.15(e)(i)(x))                                                         Obligations)
- ------------------------------------------------------------------ --------------------- ---------------------------
- ------------------------------------------------------------------ --------------------- ---------------------------
         3.       Intercompany Indebtedness owing by Marketing     $____________________ (Line E3 not to exceed
                  Subsidiaries to Subsidiaries (Section                                  the difference between
                  7.15(e)(iii))                                                          (i) $10,000,000 less (ii)
                                                                                         the sum of  Lines E4 and
                                                                                         D1)
- ------------------------------------------------------------------ --------------------- ---------------------------
- ------------------------------------------------------------------ --------------------- ---------------------------
         4.       Indebtedness consisting of Guarantees            $____________________ (Line E4 not to exceed
                  (including Long-Term Guaranties) of Marketing                          the difference between
                  Subsidiary Indebtedness  (Section 7.15(f))                             (i) $10,000,000 less (ii)
                                                                                         the sum of Lines E3 and
                                                                                         D1)
- ------------------------------------------------------------------ --------------------- ---------------------------
- ------------------------------------------------------------------ --------------------- ---------------------------
         5.       Indebtedness of Marketing Subsidiaries under     $____________________ (Line E5 not to exceed
                  Marketing Subsidiary Excluded Credit                                   Marketing Subsidiary
                  Facilities (Section 7.15(g))                                           Indebtedness Limit)
- ------------------------------------------------------------------ --------------------- ---------------------------
- ------------------------------------------------------------------ --------------------- ---------------------------
F.       Consolidated Net Worth (Section 7.16)
- ------------------------------------------------------------------ --------------------- ---------------------------
- ------------------------------------------------------------------ --------------------- ---------------------------
         1.       Consolidated Net Worth                           $____________________
- ------------------------------------------------------------------ --------------------- ---------------------------
- ------------------------------------------------------------------ --------------------- ---------------------------
         2.       50% of aggregate Consolidated Net Income, if     $____________________
                  positive, from and including April 1, 2002
- ------------------------------------------------------------------ --------------------- ---------------------------
- ------------------------------------------------------------------ --------------------- ---------------------------
         3.       Does Line F1 exceed sum of (i) $425,000,000      _____________________ (Answer should be yes)
                  plus (ii) line F2
- ------------------------------------------------------------------ --------------------- ---------------------------
- ------------------------------------------------------------------ --------------------- ---------------------------
G.       Recourse Leverage Ratio (Section 7.17)
- ------------------------------------------------------------------ --------------------- ---------------------------
- ------------------------------------------------------------------ --------------------- ---------------------------
         1.       consolidated Indebtedness                        $____________________
- ------------------------------------------------------------------ --------------------- ---------------------------
- ------------------------------------------------------------------ --------------------- ---------------------------
         2.       Non-Recourse Indebtedness                        $____________________
- ------------------------------------------------------------------ --------------------- ---------------------------
- ------------------------------------------------------------------ --------------------- ---------------------------
         3.       Recourse Indebtedness (Line G1 minus Line G2)    $____________________
- ------------------------------------------------------------------ --------------------- ---------------------------
- ------------------------------------------------------------------ --------------------- ---------------------------
         4.       Indebtedness of Marketing Subsidiaries under     $____________________ (Not to exceed Marketing
                  Marketing Subsidiary Excluded Credit                                   Subsidiary Indebtedness
                  Facilities (Line E5)                                                   Limit)
- ------------------------------------------------------------------ --------------------- ---------------------------
- ------------------------------------------------------------------ --------------------- ---------------------------
         5.       Consolidated Net Worth                           $____________________
- ------------------------------------------------------------------ --------------------- ---------------------------
- ------------------------------------------------------------------ --------------------- ---------------------------
         6.       Capital (Line G3 minus Line G4 plus Line G5)     $____________________
- ------------------------------------------------------------------ --------------------- ---------------------------

                                       23

- ------------------------------------------------------------------ --------------------- ---------------------------
         7.       Recourse Leverage Ratio                          _________:1.00        (ratio of (A) difference
                                                                                          between (x) Line G3 minus
                                                                                         (y) Line G4 to (B) Line
                                                                                         G6 not to exceed 0.65 to
                                                                                         1.00)
- ------------------------------------------------------------------ --------------------- ---------------------------
- ------------------------------------------------------------------ --------------------- ---------------------------
H.       Fixed Charge Coverage Ratio (Section 7.18)
- ------------------------------------------------------------------ --------------------- ---------------------------
- ------------------------------------------------------------------ --------------------- ---------------------------
         1.       Consolidated Net Income for past four fiscal     $____________________
                  quarters
- ------------------------------------------------------------------ --------------------- ---------------------------
- ------------------------------------------------------------------ --------------------- ---------------------------
         2.       Income taxes for past four fiscal quarters (to   $____________________
                  the extent subtracted in calculating H1)
- ------------------------------------------------------------------ --------------------- ---------------------------
- ------------------------------------------------------------------ --------------------- ---------------------------
         3.       Consolidated Interest Expense for past four      $____________________ Insert amount from Line
                  fiscal quarters (to the extent subtracted in                           H18
                  calculating H1)
- ------------------------------------------------------------------ --------------------- ---------------------------
- ------------------------------------------------------------------ --------------------- ---------------------------
         4.       Amortization expense for intangible assets       $____________________
                  for past four fiscal quarters (to the extent
                  subtracted in calculating H1)
- ------------------------------------------------------------------ --------------------- ---------------------------
- ------------------------------------------------------------------ --------------------- ---------------------------
         5.       Depreciation expense for past four fiscal
                  quarters (to the extent subtracted in
                  calculating H1)
- ------------------------------------------------------------------ --------------------- ---------------------------
- ------------------------------------------------------------------ --------------------- ---------------------------
         6.       Losses on sales of assets (excluding sales in    $____________________
                  the ordinary course of business) and other
                  extraordinary losses for past four fiscal
                  quarters (to the extent subtracted in
                  calculating H1)
- ------------------------------------------------------------------ --------------------- ---------------------------
- ------------------------------------------------------------------ --------------------- ---------------------------
         7.       Interest income for past four fiscal             $____________________
                  quarters arising from traditional
                  investment activities with banks,
                  investment banks and other financial
                  institutions or relating to
                  governmental or other marketable
                  securities (to the extent added in
                  calculating H1)
- ------------------------------------------------------------------ --------------------- ---------------------------
- ------------------------------------------------------------------ --------------------- ---------------------------
         8.       Gains on sales of assets (excluding sales in     $____________________
                  the ordinary course of business) and other
                  extraordinary gains for past four fiscal
                  quarters (to the extent added in calculating
                  H1)
- ------------------------------------------------------------------ --------------------- ---------------------------
- ------------------------------------------------------------------ --------------------- ---------------------------
         9.       Capital Expenditures for past four fiscal        $____________________
                  quarters
- ------------------------------------------------------------------ --------------------- ---------------------------

                                       24

- ------------------------------------------------------------------ --------------------- ---------------------------
         10.      Without duplication, any payments made by a
                  Consolidated Subsidiary constituting a
                  repayment of principal Indebtedness (other
                  than (x) the Obligations and (y) repayments of
                  principal made with the proceeds of a            $____________________
                  refinancing of such Indebtedness otherwise
                  permitted pursuant to this Agreement) or with
                  respect to a reserve, and
- ------------------------------------------------------------------ --------------------- ---------------------------
- ------------------------------------------------------------------ --------------------- ---------------------------
         11.      Without duplication, any other mandatory
                  payment made by a Consolidated Subsidiary in
                  such period not included as an expense or loss   $____________________
                  in calculating Consolidated Net Income
- ------------------------------------------------------------------ --------------------- ---------------------------
- ------------------------------------------------------------------ --------------------- ---------------------------
         12.      Consolidated EBITDA (sum of Lines H1, H2, H3,    $____________________
                  H4, H5 and H6 less sum of Lines H7, H8, H9,
                  H10 and H11)
- ------------------------------------------------------------------ --------------------- ---------------------------
- ------------------------------------------------------------------ --------------------- ---------------------------
         13.      Restricted Earnings for the past four fiscal     $____________________
                  quarters
- ------------------------------------------------------------------ --------------------- ---------------------------
- ------------------------------------------------------------------ --------------------- ---------------------------
         14.      Adjusted Consolidated EBITDA (Line H12 minus     $____________________
                  Line H13)
- ------------------------------------------------------------------ --------------------- ---------------------------
- ------------------------------------------------------------------ --------------------- ---------------------------
         15.      All interest charges (including capitalized      $____________________
                  interest, imputed interest charges with
                  respect to Capitalized Lease Obligations  and
                  all amortization of debt discount and expense
                  and other deferred financing charges) of the
                  Borrower and its Subsidiaries on a
                  consolidated basis for such period determined
                  in accordance with GAAP, other than interest
                  charges relating to Non-Recourse Indebtedness
- ------------------------------------------------------------------ --------------------- ---------------------------
- ------------------------------------------------------------------ --------------------- ---------------------------
         16.      All commitment or other fees payable in          $____________________
                  respect of the issuance of standby letters of
                  credit or other credit facilities for the
                  account of the Borrower or its Subsidiaries
- ------------------------------------------------------------------ --------------------- ---------------------------
- ------------------------------------------------------------------ --------------------- ---------------------------
         17.      Net costs/expenses incurred by the Borrower      $____________________
                  and its Subsidiaries under Derivative
                  Arrangements
- ------------------------------------------------------------------ --------------------- ---------------------------
- ------------------------------------------------------------------ --------------------- ---------------------------
         18.      Consolidated Interest Expense (Sum of Lines      $____________________
                  H15, H16 and H17)
- ------------------------------------------------------------------ --------------------- ---------------------------

                                       25

- ------------------------------------------------------------------ --------------------- ---------------------------
         19.      The aggregate amount of all mandatory            $____________________
                  scheduled payments (whether designated as
                  payments or prepayments) and scheduled sinking
                  fund payments with respect to principal of any
                  Recourse Indebtedness of the Borrower or its
                  Subsidiaries (including payments in the nature
                  of principal under Capital Leases) for the
                  last 4 quarters
- ------------------------------------------------------------------ --------------------- ---------------------------
- ------------------------------------------------------------------ --------------------- ---------------------------
         20.      Consolidated Fixed Charges (Sum of Lines H18     $____________________
                  and H19)
- ------------------------------------------------------------------ --------------------- ---------------------------
- ------------------------------------------------------------------ --------------------- ---------------------------
         21.      Fixed Charge Coverage Ratio (ratio of Lines      ________:1.00        (ratio must not be less
                  H14 to (ii) Line H20)                                                  than 1.50 to 1.00)
- ------------------------------------------------------------------ --------------------- ---------------------------
- ------------------------------------------------------------------ --------------------- ---------------------------
I.       Liquidity Covenant (Section 7.26)
- ------------------------------------------------------------------ --------------------- ---------------------------
- ------------------------------------------------------------------ --------------------- ---------------------------
         1.       Unrestricted cash at Borrower                    $____________________
- ------------------------------------------------------------------ --------------------- ---------------------------
- ------------------------------------------------------------------ --------------------- ---------------------------
         2.       Unused availability of senior unsecured credit   $____________________
                  facilities available to Borrower
- ------------------------------------------------------------------ --------------------- ---------------------------
- ------------------------------------------------------------------ --------------------- ---------------------------
         3.       Liquid Assets (Line I1 plus Line I2)             $____________________ (amount must exceed
                                                                                         $30,000,000)
- ------------------------------------------------------------------ --------------------- ---------------------------

                                       26

                                                                Exhibit 99.1

                             BLACK HILLS CORPORATION

                            CERTIFICATION PURSUANT TO
                             18 U.S.C. SECTION 1350,
                             AS ADOPTED PURSUANT TO
                  SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of Black Hills Corporation (the
"Company") on Form 10-Q for the period ending September 30, 2002 as filed with
the Securities and Exchange Commission on the date hereof (the "Report"), I,
Daniel P. Landguth, Chairman of the Board and Chief Executive Officer of the
Company, certify, pursuant to 18 U.S.C. ss. 1350, as adopted pursuant to ss. 906
of the Sarbanes-Oxley Act of 2002, that:

(1)  The Report fully complies with the requirements of Section 13 (a) or 15 (d)
     of the Securities Exchange Act of 1934; and

(2)  The information  contained in the Report fairly  presents,  in all material
     respects, the financial condition and results of operations of the Company.

Daniel P. Landguth
- ------------------------------------
Daniel P. Landguth
Chairman of the Board and
Chief Executive Officer
November 14, 2002

                                                                  Exhibit 99.2

                             BLACK HILLS CORPORATION

                            CERTIFICATION PURSUANT TO
                             18 U.S.C. SECTION 1350,
                             AS ADOPTED PURSUANT TO
                  SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of Black Hills Corporation (the
"Company") on Form 10-Q for the period ending September 30, 2002 as filed with
the Securities and Exchange Commission on the date hereof (the "Report"), I,
Mark T. Thies, Senior Vice President and Chief Financial Officer of the Company,
certify, pursuant to 18 U.S.C. ss. 1350, as adopted pursuant to ss. 906 of the
Sarbanes-Oxley Act of 2002, that:

(1)  The Report fully complies with the requirements of Section 13 (a) or 15 (d)
     of the Securities Exchange Act of 1934; and

(2)  The information  contained in the Report fairly  presents,  in all material
     respects, the financial condition and results of operations of the Company.

/s/ Mark T. Thies
- ---------------------------
Mark T. Thies
Senior Vice President and
Chief Financial Officer
November 14, 2002