CHANGE IN CONTROL AGREEMENT

This Change in Control Agreement (“Agreement”) dated as of June 30, 2005 is
entered into by and between Black Hills Corporation (“Company”) and David R.
Emery (“Employee”).

1.
RECITALS.

The Board of Directors of the Company ("Board") has determined that it is in the
best interests of the Company and its shareholders to encourage the Employee’s
full attention and dedication to the Company currently and in the event of any
threatened or pending Change in Control (as defined below). Therefore, in order
to accomplish these objectives, the Board has caused the Company to enter into
this Agreement.

2.     DEFINITIONS. 

“AFFILIATE” shall have the meaning ascribed to such term in Rule 12b-2 of the
General Rules and Regulations of the Exchange Act.

“BENEFICIAL OWNER” or “BENEFICIAL OWNERSHIP” shall have the meaning ascribed to
such term in Rule 13d-3 of the General Rules and Regulations under the Exchange
Act”

“CAUSE” means those events or conditions described in paragraph 9(a)(1) and (2)
below.
 
"CHANGE IN CONTROL" shall mean any of the following events:

(a) The acquisition in a transaction or series of transactions by any Person of
Beneficial Ownership of thirty percent (30%) or more of the combined voting
power of the then outstanding shares of common stock of the Company; provided,
however, that for purposes of this Agreement, the following acquisitions will
not constitute a Change in Control: (A) any acquisition by the Company; (B) any
acquisition of common stock of the Company by an underwriter holding securities
of the Company in connection with a public offering thereof; and (C) any
acquisition by any Person pursuant to a transaction which complies with
subsections (c) (i), (ii) and (iii), below;

(b) Individuals who, as of December 31, 2004 are members of the Board (the
"Incumbent Board"), cease for any reason to constitute at least a majority of
the members of the Board; provided, however, that if the election, or nomination
for election by the Company's common shareholders, of any new director was
approved by a vote of at least two-thirds of the Incumbent Board, such new
director shall, for purposes of this Plan, be considered as a member of the
Incumbent Board; provided further, however, that no individual shall be
considered a member of the Incumbent Board if such individual initially assumed
office as a result of either an actual or threatened "Election Contest" (as
described in Rule 14a-11 promulgated under the Exchange Act) or other actual or
threatened solicitation of proxies or consents by or on behalf of a Person other
than the Board (a "Proxy Contest") including by reason of any agreement intended
to avoid or settle any Election Contest or Proxy Contest;
 
 
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(c) Consummation, following shareholder approval, of a reorganization, merger,
or consolidation of the Company and/or its subsidiaries, or a sale or other
disposition (whether  by sale, taxable or non-taxable exchange, formation of a
joint venture or otherwise) of fifty percent (50%) or more of the assets of the
Company and/or its subsidiaries (each a “Business Combination”), unless, in each
case, immediately following such Business Combination, (i) all or substantially
all of the individuals and entities who were beneficial owners of shares of the
common stock of the Company immediately prior to such Business Combination
beneficially own, directly or indirectly, more that fifty percent (50%) of the
combined voting power of the then outstanding shares of the entity resulting
from the Business Combination or any direct or indirect parent corporation
thereof (including, without limitation, an entity which as a result of such
transaction owns the Company or all or substantially all of the Company’s assets
either directly or through one (1) or more subsidiaries)(the “Successor
Entity”); (ii) no Person (excluding any Successor entity or any employee benefit
plan or related trust, of the Company or such Successor Entity) owns, directly
or indirectly, thirty percent (30%) or more of the combined voting power of the
then outstanding shares of common stock of the Successor Entity, except to the
extent that such ownership existed prior to such Business Combination; and (iii)
at least a majority of the members of the Board of Directors of the entity
resulting from such Business Combination or any direct or indirect parent
corporation thereof were members of the Incumbent Board at the time of the
execution of the initial agreement or action of the Board providing for such
Business Combination; or

(d) Approval by the shareholders of the Company of a complete liquidation or
dissolution of the Company, except pursuant to a Business Combination that
complies with subsections (c) (i), (ii), and (iii) above.

(e) A Change in Control shall not be deemed to occur solely because any Person
(the "Subject Person") acquired Beneficial Ownership of more than the permitted
amount of the then outstanding Common Stock as a result of the acquisition of
Common Stock by the Company which, by reducing the number of shares of Common
Stock then outstanding, increases the proportional number of shares Beneficially
Owned by the Subject Persons, provided that if a Change in Control would occur
(but for the operation of this sentence) as a result of the acquisition of
Common Stock by the Company, and after such stock acquisition by the Company,
the Subject Person becomes the Beneficial Owner of any additional Common Stock
which increases the percentage of the then outstanding Common Stock Beneficially
Owned by the Subject Person, then a Change in Control shall occur.

(f) A Change in Control shall not be deemed to occur unless and until all
regulatory approvals required in order to effectuate a Change in Control of the
Company have been obtained and the transaction constituting the Change in
Control has been consummated.
 

 
 
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“EFFECTIVE DATE" shall mean the first date on which a Change in Control occurs.
The Effective Date does not occur and no benefits shall be paid under this
Agreement if for any reason the Employee is not an employee of the Company on
the day prior to the Effective Date.

“EXCHANGE ACT” means the Securities Exchange Act of 1934, as amended from time
to time, or any successor act thereto.”

"GOOD REASON" means those events or conditions described in paragraph 9(c)(i)
through (vii) below.

"NOTICE OF TERMINATION" shall mean a notice which indicates the specific
termination provision in this Agreement, if any, relied upon and shall set forth
in reasonable detail the facts and circumstances claimed to provide a basis for
termination of Employee’s employment under the provisions so indicated. Any
purported termination by the Company or Employee shall be communicated by
written notice of termination to the other.

“OMNIBUS INCENTIVE COMPENSATION PLAN” shall mean the incentive compensation plan
known as the “Black Hills Corporation Omnibus Incentive Compensation Plan” as
adopted on May 30, 2001, and as amended or replaced from time to time thereafter
prior to the Effective Date.

 
"PENSION EQUALIZATION PLAN" is the Company's pension equalization plan as
amended and restated effective January 27, 1995, and as amended or replaced from
time to time thereafter prior to the Effective Date.

"PENSION PLAN" is the Company's tax qualified defined benefit pension plan as
amended and restated effective October 1, 1989, and as amended from time to time
thereafter prior to the Effective Date.

“PERSON” shall have the meaning ascribed to such term in Section 3(a)(9) of the
Exchange Act and used in Sections 13(d) and 14(d) thereof, including a “group”
as defined in Section 13(d).

"PROTECTION PERIOD" shall mean the time period beginning on the Effective Date
and which shall expire on the third anniversary of the Effective Date; provided,
that the Protection Period shall in no event extend beyond the first day of the
month following the month in which the Employee attains age 65, if Employee is
an executive officer of the Company on the Effective Date.

“RETIREMENT SAVINGS PLAN” shall mean the Black Hills Corporation Retirement
Savings Plan (401K) as amended and restated on June 1, 2000, and as further
amended from time to time thereafter prior to the effective date.
 
 
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“SEVERANCE COMPENSATION” means the Employee’s base salary and annual incentive
payment, together with discretionary bonuses paid in cash or vested stock, on a
calendar-year basis.

 
“SUBSIDIARY” means any corporation, partnership, limited liability company,
joint venture, or other entity in which the Company has a majority voting
interest.

 
"TERMINATION DATE" shall mean the date subsequent to a Change in Control that
the Employee’s employment with the Company terminates.

"WELFARE BENEFITS" shall mean the Black Hills Corporation Medical and Dental
Plan, the Black Hills Corporation Flexible Benefit Plan, and the Black Hills
Corporation Employee Life and Long-Term Disability Plan, and the Short-Term
Disability Plan, as the
plans and the terms and conditions thereof exist on the day prior to the
Effective Date.

3.
TERM OF AGREEMENT.

The Term of this Agreement shall commence on the date of execution and shall
continue in effect until June 1, 2008. If no Change in Control shall have
occurred during the Term, this Agreement shall expire. If a Change in Control
occurs during the Term, this Agreement shall remain in effect for full
performance according to its terms. Upon expiration of this Agreement, the
Company, by action of its Board of Directors, may elect to renew or not renew
this Agreement, or may offer to renew the Agreement subject to modifications of
any term or condition, at its discretion. The Board of Directors may, in its
discretion, terminate this Agreement prior to the expiration of the Term, in the
event that Employee, for any reason, ceases to be employed with the Company in a
position as an executive officer within the meaning of the Exchange Act..

4.
EMPLOYMENT.

Subject to the provisions of this Agreement, during the Protection Period the
Company agrees to continue to employ the Employee and the Employee agrees to
remain in the employ of the Company. During the Protection Period, the Employee
shall be employed at a position substantially similar to Employee’s position
prior to the Change in Control or in such other capacity as may be mutually
agreed to in writing by the parties. Employee shall perform the duties,
undertake the responsibilities and exercise the authority customarily performed,
undertaken and exercised by persons situated in a similar capacity.

During the Protection Period, excluding periods of vacation and sick leave to
which Employee is entitled, Employee agrees to devote full attention and time
during usual business hours to the business and affairs of the Company to the
extent necessary to discharge the responsibilities assigned to Employee
hereunder. It is expressly understood and agreed that to the extent that any
civic, charitable or industry-related activities have been conducted by Employee
prior to the Effective Date, the continued conduct of such activities (or the
conduct of activities similar in nature and scope thereto) subsequent to the
Effective Date shall not thereafter be deemed to interfere with the performance
of Employee’s responsibilities to the Company.
 
 
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5.
COMPENSATION.

During the Protection Period, the Company agrees to pay or cause to be paid to
employee Annual Compensation at a rate at least equal to the highest rate of the
Employee’s Annual Compensation as in effect at any time within one year
preceding the Effective Date, and as may be increased from time to time. Such
Annual Compensation shall be payable in accordance with the Company's customary
practices applicable to its officers and employees. For purposes of this
Agreement, "Annual Compensation" shall mean all of the following compensation
paid to the Employee by the Company during a calendar year: (a) amounts which
are includable in the gross income of the Employee for federal income tax
purposes, including base salary, targeted annual incentive bonus, targeted
long-term incentive grants and awards; and (b) matching contributions or other
benefits payable under the Retirement Savings Plan; but excluding restricted
stock awards, performance units or stock options that become vested or
exercisable pursuant to Article 15 (Change in Control) of the Omnibus Incentive
Compensation Plan, in a calendar year.

6.
EMPLOYEE WELFARE AND PENSION BENEFITS.

During the Protection Period, the Company shall provide to the Employee the
Welfare Benefits and the Pension Plan, including supplemental medical insurance,
travel accident insurance, short-term disability, long-term disability or life
insurance benefits, or other substantially similar employee welfare and pension
benefits, but in no event on a basis less favorable in terms of benefit levels
and coverage than the Welfare Benefits and the Pension Plan. In the event
Employee is not a participant in the Welfare Benefits or the Pension Plan prior
to a Change of Control, then Company shall have no obligation to provide the
Welfare Benefits or the Pension Plan or other substantially similar employee
welfare and pension benefits as provided in this paragraph.

7.
PENSION EQUALIZATION PLAN.
 

During the Protection Period, the Company shall continue to provide to Employee
(if Employee was a participant prior to the Change in Control) coverage and
participation under the Pension Equalization Plan or a substantially similar
supplemental retirement plan, but in no event on a basis less favorable in terms
of benefit levels and coverage than the Pension Equalization Plan.

8.
OTHER BENEFITS.

(a) Fringe Benefits, Perquisites, Vacation and Sick Leave. During the Protection
Period, Employee shall be entitled to all fringe benefits, perquisites, and
paid-time-off generally made available by the Company to its Employees. Unless
otherwise provided herein, the fringe benefits, perquisites, and paid-time-off
provided to Employee shall be on the same basis and terms as other similarly
situated employees of the Company, but in no event shall be less favorable than
the most favorable fringe benefits, perquisites, or paid-time-off to Employee at
any time within one year preceding the Effective Date, or if more favorable, at
any time thereafter.
 
 
 
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(b) Expenses. Employee shall be entitled to receive prompt reimbursement of all
expenses reasonably incurred by him in connection with the performance of his
duties hereunder or for promoting, pursuing or otherwise furthering the business
or interests of the Company.

(c) Indemnity. If, at the time of a Change in Control, the Employee was covered
by an Indemnity Agreement, and/or Directors’ and Officers’ Insurance (D & O)
coverage, then the Indemnity Agreement and D & O coverage shall continue in full
force and effect throughout the Protection Period, and beyond the Protection
Period, with respect to claims arising out of acts or omissions of the Employee
prior to a Change in Control. If, following a Change in Control, Company or a
Successor Entity adopts substitute Indemnity Agreements, and/or D & O coverage,
for employees having substantially the same authority, duties, and
responsibilities as Employee, then Employee shall be entitled to receive the
benefit of such protection with respect to claims arising from acts or omissions
of Employee following a Change in Control.
 

9.
TERMINATION.

During the Protection Period, Employee’s employment hereunder may be terminated
under the following circumstances:

(a) Cause. The Company may terminate Employee’s employment for "Cause." A
termination of employment is for "Cause" if Employee (1) enters a guilty plea,
pleads nolo contendre to, or is convicted of a felony offense that is
demonstrably injurious to the Company; (2) intentionally engages in other
conduct which is demonstrably injurious to the Company, monetarily or otherwise;
or (3) fails, after reasonable request, to cooperate with the Company or
governmental authorities in connection with a civil or criminal regulatory
investigation or proceeding, or other civil litigation involving the Company;
provided, however, that no termination of Employee’s employment shall be for
Cause as set forth in clauses (2) or (3), above, unless (i) there shall have
been delivered to Employee a copy of a written Notice of Termination, at least
thirty (30) days in advance of the Termination Date, setting forth that Employee
was guilty of the conduct set forth in such applicable clause and specifying the
particulars thereof in detail; and (ii) Employee shall have been provided an
opportunity to be heard by the Board (with the assistance of Employee’s counsel
if Employee so desires). No act, nor failure to act, on Employee’s part shall be
considered "intentional" unless he has acted, or failed to act, with an absence
of good faith and without a reasonable belief that his action or failure to act
was in the best interest of the Company. Notwithstanding anything contained in
this Agreement to the contrary, no failure to perform by Employee after a Notice
of Termination is given to the Employee shall constitute Cause for purposes of
this Agreement.

(b) Disability. The Company may terminate Employee’s employment after having
established Employee’s Disability. For purposes of this Agreement, "Disability"
means a physical or mental infirmity because of which Employee is receiving
benefits under the Company sponsored long-term disability plan in which the
Employee participates. Employee shall be entitled to the compensation and
benefits provided for under this Agreement for any period during Protection
Period and prior to the establishment of Employee’s Disability, during which
Employee is unable to work due to a physical or mental infirmity, and up to the
date long-term disability benefits are actually paid. Notwithstanding anything
contained in this Agreement to the contrary, and subject to applicable law and
the provisions of the Company’s long-term disability policy, until the
Termination Date specified in a Notice of Termination relating to Employee’s
Disability, Employee shall be entitled to return to his position with the
Company as set forth in this Agreement in which event no Disability of Employee
will be deemed to have occurred.
 
 
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(c) Good Reason. During the Protection Period, the Employee may terminate his
employment for "Good Reason." For purposes of this Agreement, "Good Reason"
shall mean the occurrence after the Effective Date of any of the events or
conditions described below:

(i) A material reduction of the Employee’s authority, duties, or
responsibilities from those in effect prior to the Effective Date, other than an
insubstantial or inadvertent reduction that is remedied by the Company promptly
after receipt of notice thereof given by Employee; provided that, any reduction
in the foregoing resulting merely from the acquisition of the Company, or any
Business Combination, by reason of which the Company thereafter exists as a
subsidiary or division of another entity, shall not constitute Good Reason;

(ii) A reduction in the Employee’s Annual Compensation as defined in Section 5,
or any failure to pay the Employee any compensation or benefits to which he is
entitled within seven (7) days of the date due;

(iii) Any material breach by the Company of any provision of this Agreement,
including, but not limited to, the Company's failure to provide the Employee
Welfare and Pension Benefits and Pension Equalization Plan as set forth in
Sections 6 and 7 above;

(iv) The Company's requiring the Employee to be based outside a 50-mile radius
from Employee’s usual and normal place of work prior to the Change in Control,
except for reasonably required travel on the Company's business which is not
substantially greater than such travel requirements prior to the Effective Date;

(v) Any purported termination of the Employee’s employment for Cause by the
Company which does not comply with the terms of Section 9(a) above; or

(vi) The failure of the Company to obtain an agreement, satisfactory to the
Employee, from any successor or assign of the Company to assume and agree to
perform this Agreement, as contemplated in Section 14 hereof.

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(vii) During the “Window Period”, which shall mean the 30-day period immediately
following the first anniversary of the Effective Date, the Employee may elect to
terminate his employment for any reason, and such termination will be considered
termination for Good Reason.

In order to effectuate a termination under this Section 9(c), the Employee shall
promptly deliver written notice to the Company upon the occurrence of, and
stating the grounds for Good Reason in support of termination. For purposes of
determining the amount of any cash payment payable to the Employee in accordance
with Section 10, any reduction in compensation or benefits that would constitute
Good Reason hereunder shall be deemed not to have occurred.

10.
COMPENSATION UPON TERMINATION.
 

Upon termination of Employee's employment, prior to the end of the Protection
Period, Employee shall be entitled to the following benefits:

(a) If Employee’s employment with the Company shall be terminated (i) by the
Company for Cause or Disability, or (ii) by reason of Employee’s death, or
(iii) by Employee without "Good Reason," the Company shall pay Employee all
amounts earned or accrued through the Termination Date, but not paid as of the
Termination Date, including all Annual Compensation, reimbursement for
reasonable and necessary expenses incurred by Employee on behalf of the Company
during the period ending on the Termination Date, together with accrued vacation
pay, and paid time off (collectively "Accrued Compensation"). In addition to the
foregoing, if the Employee’s employment is terminated by the Company for
Disability or by reason of the Employee’s death, the Company shall pay to the
Employee or his beneficiaries an amount equal to the "Pro Rata Bonus" (as
hereinafter defined). For purposes of this Agreement, "Pro Rata Bonus" shall
mean an amount equal to 100% of the target bonus that the Employee would have
been eligible to receive for the Company's fiscal year in which the Employee's
employment terminates, multiplied by a fraction, the numerator of which is the
number of days in such fiscal year through the Termination Date and the
denominator of which is 365.

(b) If the Employee’s employment with the Company shall be terminated (other
than by reason of death) (i) by the Company other than for Cause or Disability,
(ii) by Employee for Good Reason, Employee shall be entitled to the following:

(i) The Company shall pay Employee all Accrued Compensation and a Pro Rata
Bonus;

(ii) The Company shall pay Employee, in lieu of any further compensation for
periods subsequent to the Termination Date, a lump sum severance payment, in
cash, in an amount equal to (w) 2.99 times (x) the Employee’s average Severance
Compensation for the most recent five taxable years ending prior to the Change
in Control. Notwithstanding the foregoing, if the Employee is an executive
officer who has attained the age of 62 on the Termination Date, the severance
payment to be paid under this subsection shall be the amount described above
multiplied by a fraction, the numerator of which shall be the number of days
remaining until the Employee’s 65th birthday, and the denominator of which shall
be 1095.
 
 
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(iii) Within ten (10) business days after the Termination Date, and as a
condition of receiving payments provided in Section 10 (b) (ii), Employee shall
execute and deliver to Company the Waiver and Release Agreement (“Release”)
attached hereto as Exhibit A. The severance payment shall not be paid unless the
Employee has executed and delivered the Release, and the Release has become
irrevocable as provided therein. Prior to the Effective Date, the Company may
revise the Release to conform to applicable law, so long as the Release does not
increase the obligations of Employee thereunder;

(iv) If Employee, prior to the Termination Date, was a participant in any
Welfare Benefits, the Company shall at its expense continue on behalf of
Employee and his dependents and beneficiaries, for a period of three (3) years
following the Termination Date, the Welfare Benefits or similar benefits no less
favorable than the benefit levels and coverage provided to Employee prior to the
Termination Date. Employee shall pay the employee portion of applicable premiums
required to be paid by active employees of the Company. At its election, the
Company may provide Employee and his dependents with equivalent benefits outside
the Welfare Benefit plans or by providing Employee a cash payment sufficient for
Employee to purchase equivalent benefits, so long as the net after-tax benefit
is the same as if the Employee had remained an employee of the Company, and the
benefits made available to Employee provide no loss or discontinuation of
benefits, and full waiver of any preexisting condition of the Employee and any
of the Employee’s eligible dependents. The Company's obligation with respect to
the foregoing benefits shall be discontinued in the event that Employee becomes
covered under the health insurance coverage of a subsequent employer which does
not contain any exclusion or limitation with respect to any preexisting
condition of the Employee or the Employee’s eligible dependents. For purposes of
this provision, Employee shall have a duty to inform Company as to the terms and
conditions of any subsequent employment and the corresponding benefits earned
from such employment.

(v) Following the three (3) year period described in Section 10(b)(iv), above,
Employee may elect to receive coverage under employee welfare plans of the
Successor Entity at his then-current level of benefits (or reduced coverage at
Employee’s election) by paying the premiums charged to regular full-time
employees for such coverage. Such coverage shall provide benefits no less
favorable than the benefits and coverage provided in the Welfare Benefits, with
no loss or discontinuation of benefits, and full waiver of any preexisting
condition of the Employee and any of the Employee’s eligible dependents. In the
event of this election, Employee shall be eligible to receive such coverage,
through the date of his retirement, and subsequently shall be eligible to
continue coverage under the Successor Entity’s retiree health insurance
coverage.
 
 
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(vi) Employee shall be entitled to an amount of credited service for benefit
accrual and vesting purposes under the Pension Equalization Plan (if Employee
was a participant therein prior to a Change in Control) equal to a period of
three (3) years following the Termination Date, and it shall be assumed for
purposes of determining benefits under the Pension Equalization Plan, that
Employee’s employment continued during such time period at the compensation
level provided for in Section 5 above. In addition (if Employee was a
participant in the Pension Plan prior to a Change in Control), the Employee
shall be entitled to a supplemental Pension Plan benefit, which shall be the
excess, if any, of (x) the amount that Employee would have been entitled to
receive under the Pension Plan as if (i) Employee received additional credited
service under the Pension Plan for an additional three (3) years, and
(ii) Employee’s Annual Compensation as defined in Section 5 above remained in
effect during such time period over (y) the amount that Employee will actually
receive under the Pension Plan. This supplemental benefit shall be determined
using the same factors, actuarial or otherwise, as used in determining
Employee’s Pension Plan benefit and shall be payable at like terms and in like
manner as the Pension Plan benefit. This supplemental benefit is not payable
unless and until the Employee receives Pension Plan benefits.

(vii) The Company shall, to the extent necessary and only to the extent
necessary, modify the timing of delivery of Severance Compensation if it is
determined that the timing would subject the Severance Compensation to the
additional tax and/or interest assessed under Code Section 409A. In such event,
such payments shall occur as soon as practicable without causing such payments
to trigger tax penalty under Code Section 409A.

11.
OFFSET.

Employee shall not be required to mitigate the amount of any payment provided
for in this Agreement by seeking other employment or otherwise, and except as
provided in Section 10(b)(iv), such payments shall not be reduced whether or not
Employee obtains other employment.

12.
TAX EFFECT.

(a) Gross-Up Payment. In the event it shall be determined that any Severance
Compensation payment or distribution of any type by the Company, or by any
Affiliate of the Company, or by any Person who acquires ownership or effective
control of the Company or ownership of a substantial portion of the Company's
assets (within the meaning of Section 280G of the Internal Revenue Code of 1986,
as amended (the "Code"), and the regulations thereunder) or any Affiliate of
such Person, to or for the benefit of the Employee, whether paid or payable or
distributed or distributable pursuant to the terms of this Agreement or
otherwise (the "Total Payments") (including but not limited to distribution of
stock or options which vest upon a Change in Control pursuant to the Omnibus
Incentive Stock Plan), is or will be subject to the excise tax imposed by
Section 4999 of the Code or any interest or penalties with respect to such
excise tax (such excise tax, together with any such interest and penalties, are
collectively referred to as the "Excise Tax"), then the Company shall pay an
additional amount (the "Gross-Up Payment") such that the net amount retained by
the Employee after deduction of any Excise Tax upon the Total Payments and any
federal, state, and local income tax, penalties, interest and Excise Tax upon
the Gross-Up Payment, shall be equal to the Total Payments. The Gross-Up Payment
shall not include applicable payroll taxes, state or federal income taxes on the
Total Payments, however. The Gross-Up Payment shall be made by the Company to
the Department of the Treasury, Internal Revenue Service (IRS), or other
appropriate taxing agency.
 
 
 
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Notwithstanding the foregoing, in the event that the amount of the Total
Payments does not exceed 110% of the largest amount that would result in no
portion of the Total Payments being subject to the Excise Tax (the “Safe Harbor
Amount”), then the Employee’s Total Payments shall be reduced to an amount equal
to the Safe Harbor Amount. In applying any reduction required herein, Employee
may elect whether the non-cash severance benefits or the cash severance benefits
shall first be reduced.

(b) For purposes of determining the Gross-Up Payment, Employee shall be deemed
to pay federal, state, and local income taxes at the highest applicable marginal
rate for the calendar year in which the Gross-Up Payment is to be made net of
the maximum reduction in federal income taxes that could be obtained from the
deduction of state and local taxes. All determinations required to be made under
this Section 12 shall be made by the Company in reliance upon any advice it
deems appropriate, including but not limited to decisions regarding whether and
when a Gross-Up Payment is required and the amount of such Gross-Up Payment,
whether and in what manner any Payments are to be reduced, and the assumptions
to be used in arriving at such determinations. The decision of the Company shall
be binding on the Employee, except to the extent the IRS or a court of competent
jurisdiction makes a final and binding determination inconsistent therewith. The
Company shall provide detailed supporting calculations to the Employee within 15
business days after receiving notice from Employee that there has been a
Payment, or such earlier time as is requested by the Company. Any Gross-Up
Payment that becomes due pursuant to this Section 12 shall be paid promptly by
the Company to Employee, but not later than five business days prior to the due
date for the payment of the Excise Tax. As a result of the uncertainty in the
application of Section 4999 of the Code at the time of the initial determination
by the Company, it is possible that Gross-Up Payments which will not have been
made by the Company should have been made (“Underpayment”), consistent with the
calculations required to be made hereunder. In the event that the Company
determines that there has been an Underpayment or exhausts its remedies pursuant
to Section 12 (c), and Employee thereafter is required to make a payment of any
Excise Tax, the Company shall determine the amount of the Underpayment that has
occurred and any such Underpayment shall be promptly paid by the Company to or
for the benefit of Employee.

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(c) Employee shall notify the Company in writing of any claim by the IRS that,
if successful, would require the payment by the Company of a Gross-Up Payment
(or an additional Gross-Up Payment). Such notification shall be given as soon as
practicable, but no later than ten business days after Employee is informed in
writing of such claim. Employee shall apprise the Company of the nature of such
claim and the date on which such claim is requested to be paid. Employee shall
not pay such claim prior to the expiration of the 30-day period following the
date on which it gives such notice to the Company (or such shorter period ending
on the date that any payment of taxes with respect to such claim is due). If the
Company notifies Employee in writing prior to the expiration of such period that
it desires to contest such claim, Employee shall:

(i) give the Company any information reasonably requested by the Company
relating to such claim,

(ii) Take such action in connection with contesting such claim as the Company
shall reasonably request in writing from time to time, including, without
limitation, accepting legal representation with respect to such claim by an
attorney reasonably selected by the Company,

 
        (iii)
Cooperate with the Company in good faith in order effectively to contest such
claim, and

(iv) Permit the Company to participate in any proceedings relating to such
claim;

provided, however, that the Company shall bear and pay directly all costs and
expenses (including additional interest and penalties) incurred in connection
with such contest and shall indemnify and hold Employee harmless, on an
after-tax basis, for any Excise Tax or income tax (including interest and
penalties with respect thereto) imposed as a result of such representation and
payment of costs and expenses. Without limitation of the foregoing provisions of
this Section 12(c), the Company shall control all proceedings taken in
connection with such contest and, in its sole discretion, may pursue or forgo
any and all administrative appeals, proceedings, hearings and conferences with
the taxing authority in respect of such claim and may, in its sole discretion,
either direct Employee to pay the tax claimed and sue for a refund or contest
the claim in any permissible manner, and Employee agrees to prosecute such
contest to a determination before any administrative tribunal, in a court of
initial jurisdiction and in one or more appellate courts, as the Company shall
determine; provided, however, that if the Company directs Employee to pay such
claim and sue for a refund, the Company shall indemnify and hold Employee
harmless, on an after-tax basis, from any Excise Tax or income tax (including
interest or penalties with respect thereto) imposed with respect to such
payment; and further provided that any extension of the statute of limitations
relating to payment of taxes for the taxable year of Employee with respect to
which such contested amount is claimed to be due is limited solely to such
contested amount. Furthermore, the Company’s control of the contest shall be
limited to issues with respect to which a Gross-Up Payment would be payable
hereunder. Employee shall be entitled to settle or contest, as the case may be,
any other issue raised by the IRS or any other taxing authority.
 
 
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(d) If, at any time after receiving a Gross-Up Payment, Employee receives any
refund of the associated Excise Tax, Employee shall (subject to the Company’s
having complied with the requirements of Section 12(c), if applicable) promptly
pay to the Company the amount of such refund (together with any interest paid or
credited thereon net of all applicable taxes.

13.
OUTPLACEMENT SERVICES.

The Company shall, at its expense, permit the Employee to participate in
outplacement assistance services, as determined by the Company, which are: (a)
as to executive officers, at a level appropriate for senior management of a
public company; and (b) not more than six (6) months in duration. Outplacement
services shall be provided in kind; cash shall not be paid in lieu thereof, nor
will cash compensation be increased if Employee declines or does not use
outplacement services.

14.
SUCCESSORS AND ASSIGNS.

This Agreement shall be binding upon any successor or assign (whether direct or
indirect, by purchase, merger, consolidation or otherwise) to all or
substantially all of the business and/or assets of the Company, in the same
manner and to the same extent that the Company would be obligated under this
Agreement if no succession had taken place. In the case of any transaction in
which a successor or assign would not by the foregoing provision or by operation
of law be bound by this Agreement, the Company shall require such successor or
assign to expressly and unconditionally assume and agree to perform the
obligations of the Company and each Employer under this Agreement, in the same
manner and to the same extent that the Company and each Employer would be
required to perform it if no such succession or assignment had taken place.

Neither this Agreement nor any right or interest hereunder shall be assignable
or transferable by the Employee, his beneficiaries or legal representatives,
except by will or by the laws of descent and distribution. This Agreement shall
inure to the benefit of and be enforceable by the Employee’s legal personal
representative.

15.
FEES AND EXPENSES.

The Company shall pay all legal fees and related expenses (including the costs
of experts, evidence and counsel) reasonably and in good faith incurred by the
Employee as they become due as a result of (a) the Employee’s termination of
employment (including all such fees and expenses, if any, incurred in contesting
or disputing any such termination of employment), (b) the Employee seeking to
obtain or enforce any right or benefit provided by this Agreement or by any
other plan or arrangement maintained by the Company under which the Employee is
or may be entitled to receive benefits; provided, however, that the
circumstances set forth in clauses (a) and (b) of this Section (other than as a
result of the Employee’s termination of employment at the expiration of the
Protection Period) occurred on or after a Change in Control. For purposes of
this Section, the Employee will not be deemed to have incurred legal fees or
expenses reasonably or in good faith if, following resolution of a dispute under
this Agreement, he has failed to prevail on at least one material issue in
dispute.
 
 
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16.
NOTICE.

For the purposes of this Agreement, notices and all other communications
provided for in the Agreement (including the Notice of Termination) shall be in
writing and shall be deemed to have been duly given when personally delivered or
sent by certified mail, return receipt requested, postage prepaid, addressed to
the respective addresses last given by each party to the other. All notices and
communications shall be deemed to have been received on the date of delivery
thereof or on the third business day after the mailing thereof, except that
notice of change of address shall be effective only upon receipt.

17.
NONEXCLUSIVITY OF RIGHTS.

Except as expressly provided herein, nothing in this Agreement shall prevent or
limit Employee’s continuing or future participation in any benefit, bonus,
incentive or other plan or program provided by the Company or any of its
subsidiaries and for which Employee may qualify, nor shall anything herein limit
or reduce such rights as Employee may have under any other agreements with the
Company or any of its subsidiaries. Amounts which are vested benefits or which
Employee is otherwise entitled to receive under any plan or program of the
Company or any of its subsidiaries shall be payable in accordance with such plan
or program, except as explicitly modified by this Agreement; provided, however,
and notwithstanding anything contained in this Agreement, in the event that
Employee is not a participant in or eligible to participate in any Welfare
Benefits or the Pension Plan, then nothing contained in this Agreement shall be
deemed to provide for or suggest the right in Employee to be a participant in or
be eligible to participate in the Welfare Benefits or the Pension Plan.

18.
CONFIDENTIAL INFORMATION.

The Employee shall hold in a fiduciary capacity for the benefit of the Company
all material proprietary information, knowledge or data relating to the Company
or any of its affiliated companies, and their respective businesses, which shall
have been obtained by the Employee during the Employee’s employment by the
Company or any of its affiliated companies and which shall not be or become
public knowledge (other than by acts by the Employee or representatives of the
Employee in violation of this Agreement). After termination of the Employee’s
employment with the Company, the Employee shall not, without the prior written
consent of the Company or as may otherwise be required by law or legal process,
communicate or divulge any such information, knowledge or data to anyone other
than the Company and those designated by it. 

19.
MISCELLANEOUS.

No provision of this Agreement may be modified, waived or discharged unless such
waiver, modification or discharge is agreed to in writing and signed by Employee
and the Company. No waiver by either party hereto at any time of any breach by
the other party hereto of, or compliance with, any condition or provision of
this Agreement to be performed by such other party shall be deemed a waiver of
similar or dissimilar provisions or conditions at the same or at any prior or
subsequent time. No agreement or representations, oral or otherwise, express or
implied, with respect to the subject matter hereof have been made by either
party which are not expressly set forth in this Agreement.
 
 
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20.
GOVERNING LAW.

This Agreement shall be governed by and construed and enforced in accordance
with the laws of the state of South Dakota.

21.
SEVERABILITY.

The provisions of this Agreement shall be deemed severable and the invalidity or
unenforceability of any provision shall not affect the validity or
enforceability of the other provisions hereof.

22.
NO GUARANTEED EMPLOYMENT.

Employee and the Company acknowledge that, except as may otherwise be provided
under any other written agreement between Employee and the Company, the
employment of Employee by the Company is "at will" and, prior to the Effective
Date, may be terminated by either Employee or the Company at any time. Moreover,
if prior to the Effective Date, Employee’s employment with the Company
terminates, Employee shall have no further rights under this Agreement.

23.
NO ADMINISTRATION.

The parties hereto understand and agree that this Agreement shall not be subject
to a separate ongoing administrative scheme to administer the benefits of this
Agreement in that the benefits provided hereunder are capable of simple or
mechanical determination upon the happening of a required event or events.

24.
SUBSIDIARY DEEMED TO BE COMPANY FOR PORTIONS OF AGREEMENT.

In the event that subsequent to the date of this Agreement the Employee becomes
an employee of a Subsidiary of the Company, or in the event that any Employee is
an employee of a Subsidiary of the Company, the references to “Company” in this
Agreement shall be deemed to be a reference to the Subsidiary which may employ
the Employee to the extent necessary to preserve the intent of this Agreement;
provided, that nothing herein shall mean or suggest that any benefits are
applicable hereunder upon a Change in Control of a Subsidiary rather than the
Company.

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25.
ENTIRE AGREEMENT.

This Agreement constitutes the entire agreement between the parties hereto and
supersedes all prior agreements, if any, understandings and arrangements, oral
or written, between the parties hereto with respect to the subject matter
hereof.

Dated this 30th day of June, 2005.

BLACK HILLS CORPORATION

By: /s/Steven J. Helmers
Title: Sr. Vice President
and General Counsel

 
EMPLOYEE

/s/ David R. Emery
David R. Emery

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EXHIBIT A

WAIVER AND RELEASE AGREEMENT

This Waiver and Release Agreement (the "Waiver and Release") is entered into by
and among Black Hills Corporation ("Company") and David R. Emery ("Employee")
this ____ day of _______________, _____.

1.  General Waiver and Release. For and in consideration of the agreement of
Company to provide Employee the severance benefits described in that certain
Change in Control Agreement, dated as of June ____, 2005, between Employee and
the Company (the "Agreement"), Employee, with the intention of binding himself
and all of his heirs, executors, administrators and assigns, does hereby
release, remise, acquit and forever discharge the Company, and all of their
respective past and present officers, directors, stockholders, employees,
agents, parent corporations, predecessors, subsidiaries, affiliates, estates,
successors, assigns and attorneys (hereinafter collectively referred to as
"Released Parties") from any and all claims, charges, actions, causes of action,
sums of money due, suits, debts, covenants, contracts, agreements, rights,
damages, promises, demands or liabilities (hereinafter collectively referred to
as "Claims") whatsoever, in law or in equity, whether known or unknown,
suspected or unsuspected, which Employee, individually or as a member of any
class, now has, owns or holds or has at any time heretofore ever had, owned or
held against the Released Parties, which arise out of or are in any way
connected with Employee's employment with the Company or any of the Released
Parties or the termination of any such employment relationship, including, but
not by way of limitation, Claims pursuant to federal, state or local statute,
regulation, ordinance or common-law for (i) employment discrimination; (ii)
wrongful discharge; (iii) breach of contract; (iv) tort actions of any type,
including those for intentional or negligent infliction of emotional harm; and
(v) unpaid benefits, wages, compensation, commissions, bonuses or incentive
payments of any type, except as follows:

 
a.
Those obligations of the Company and its affiliates under the Agreement,
pursuant to which this Waiver and Release is being executed and delivered;

 
b.
Claims, if any, for Employee's accrued or vested benefits under the retirement
plans, savings plans, investment plans and employee welfare benefit plans, if
any, of the Released Parties (within the meaning of Section 3(1) of the Employee
Retirement Income Security Act of 1974 ("ERISA")), as amended; provided,
however, that nothing herein is intended to or shall be construed to require the
Released Parties to institute or continue in effect any particular plan or
benefit sponsored by the Released Parties and the Company and all other Released
Parties hereby reserve the right to amend or terminate any such plan or benefit
at any time; and
 

 
c.
Any rights to indemnification or advancement of expenses to which Employee may
otherwise be entitled pursuant to the Articles of Incorporation or Bylaws of any
of the Released Parties, or by contract or applicable law, as a result of
Employee's service as an officer or director of any of the Released Parties.

 
 

 
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Employee further understands and agrees that he has knowingly relinquished,
waived and forever released any and all remedies arising out of the aforesaid
employment relationship or the termination thereof, including, without
limitation, claims for backpay, front pay, liquidated damages, compensatory
damages, general damages, special damages, punitive damages, exemplary damages,
costs, expenses and attorneys' fees.

2.  Waiver and Release of ADEA Claims. Without limiting the generality of the
foregoing, and also for and in consideration of the Company's agreement to
provide Employee severance payments and benefits as described in the Agreement,
Employee specifically acknowledges and agrees that he does hereby knowingly and
voluntarily release the Company and all other Released Parties from any and all
claims arising under the Age Discrimination in Employment Act, 29 U.S.C. §§ 621,
et seq. ("ADEA"), which Employee ever had or now has from the beginning of time
up to the date this Waiver and Release is executed, including, but not by way of
limitation, those ADEA Claims which are in any way connected with any employment
relationship or the termination of any employment relationship which existed
between the Company or any other Released Parties and Employee. Employee also
acknowledges that he has been provided with a notice, as required by the Older
Workers Benefit Protection Act of 1990, that contains (i) information about the
individuals covered under the Agreement, (ii) the eligibility factors for
participation in the Agreement, (iii) the time limits applicable to the
Agreement, (iv) the job titles and ages of the employees designated to
participate in the Agreement, (v) and the ages of the employees in the same job
classification who have not been designated to participate in the Agreement.
Employee further acknowledges and agrees that he has been advised to consult
with an attorney prior to executing this Waiver and Release and that he has been
given forty-five (45) days to consider this Waiver and Release prior to its
execution. Employee agrees that in the event that he executes this Waiver and
Release prior to the expiration of the forty-five (45) day period, he shall
waive the balance of said period. Employee also understands that he may revoke
this Waiver and Release of ADEA Claims at any time within seven (7) days
following its execution and that, if Employee revokes this Waiver and Release of
ADEA Claims within such seven (7) day period, it shall not be effective or
enforceable and he will not receive the above-described consideration or any
payments provided for in the Agreement that have not been paid.

3.  Covenant Not to Sue. Employee acknowledges and agrees that this Waiver and
Release may not be revoked at any time after the expiration of the seven (7) day
revocation period and that he will not institute any suit, action, or
proceeding, whether at law or equity, challenging the enforceability of this
Waiver and Release. Should Employee ever attempt to challenge the terms of this
Waiver and Release, attempt to obtain an order declaring this Waiver and Release
to be null and void, or institute litigation against any of the Released Parties
based upon a Claim other than an ADEA Claim which is covered by the terms of
this Waiver and Release, Employee will as a condition precedent to such action
repay all monies paid to him under the terms of this Waiver and Release.
Furthermore, if Employee does not prevail in an action to challenge this Waiver
and Release, to obtain an order declaring this Waiver and Release to be null and
void, or in any action against any of the Released Parties based upon a Claim
other than an ADEA Claim which is covered by the Waiver and Release set forth
herein, Employee shall pay to the Company and/or the appropriate Released
Parties all their costs and attorneys' fees incurred in their defense of
Employee's action.
 
 
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Provided, however, that it is understood and agreed by the parties that Employee
shall not be required to repay the monies paid to him under the terms of this
Waiver and Release or pay the Company and/or the appropriate Released Parties
all their costs and attorneys' fees incurred in their defense of Employee's
action (except those attorneys' fees or costs specifically authorized under
federal law) in the event that Employee seeks to challenge his Waiver and
Release of Claims under the ADEA.

4.  Denial of Liability. Employee acknowledges and agrees that neither the
payment of severance payments or benefits under the Agreement nor this Waiver
and Release is to be construed in any way as an admission of any liability
whatsoever by Company or any of the other Released Parties, by whom liability is
expressly denied.

5.  Agreement Not to Seek Further Relief. Employee acknowledges and agrees that
he has not, with respect to any transaction or state of facts existing prior to
the date of execution of this Waiver and Release, filed any complaints, charges
or lawsuits against any of the Released Parties with any governmental agency or
any court or tribunal, and that he will not do so at any time hereafter.
Employee further acknowledges and agrees that he hereby waives any right to
accept any relief or recovery, including costs and attorneys' fees that may
arise from any charge or complaint before any federal, state or local court or
administrative agency against the Released Parties.

6.  Company Property. Employee agrees that he will not retain or destroy, and
will immediately return to the Company, any and all property of the Company in
his possession or subject to his control, including, but not limited to, keys,
credit and identification cards, personal items or equipment provided for his
use, customer files and information, all other files and documents relating to
the Company and its business, together with all written or recorded materials,
documents, computer disks, plans, records or notes or other papers belonging to
the Company. Employee further agrees not to make, distribute or retain copies of
any such information or property.

7.  Confidentiality Agreement. Employee acknowledges that the terms of this
Waiver and Release must be kept confidential. Accordingly, Employee agrees not
to disclose or publish to any person or entity, except as required by law or as
necessary to prepare tax returns, the terms and conditions or sums being paid in
connection with this Waiver and Release.

8.  Cooperation. Employee agrees to cooperate with the Company and its attorneys
in connection with all lawsuits, claims, investigations, or similar proceedings,
including the provision of testimony as my reasonably be required, arising out
of or in any way related to Employee’s employment by the Company or any of its
Subsidiaries. 
 
 
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9.  Acknowledgment. Employee acknowledges that he has carefully read and fully
understands the terms of this Waiver and Release and the Agreement and that this
Waiver and Release is executed by Employee voluntarily and is not based upon any
representations or statements of any kind made by the Company or any or the
other Released Parties as to the merits, legal liabilities or value of his
claims. Employee further acknowledges that he has had a full and reasonable
opportunity to consider this Waiver Release and that he has not been pressured
or in any way coerced into executing this Waiver and Release.

10.           Choice of Laws. This Waiver and Release and the rights and
obligations of the parties hereto shall be governed and construed in accordance
with the laws of the State of South Dakota.

11.           Severability. With the exception of the waiver and releases
contained in Sections 1 and 2 above, if any provision of this Waiver and Release
is unenforceable or is held to be unenforceable, such provision shall be fully
severable, and this Waiver and Release and its terms shall be construed and
enforced as if such unenforceable provision had never comprised a part hereof,
the remaining provisions hereof shall remain in full force and effect, and the
court construing the provisions shall add as a part hereof a provision as
similar in terms and effect to such unenforceable provision as may be
enforceable, in lieu of the unenforceable provision. In the event that both of
the releases contained in Sections 1 and 2 above are unenforceable or are held
to be unenforceable, the parties understand and agree that the remaining
provisions of this Waiver and Release shall be rendered null and void and that
neither party shall have any further obligation under any provision of this
Waiver and Release.

12.           Entire Agreement. This document contains all terms of the Waiver
and Release and supersedes and invalidates any previous agreements or contracts
regarding the same subject matter. No representations, inducements, promises or
agreements, oral or otherwise, which are not embodied herein shall be of any
force or effect.

A-4

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IN WITNESS WHEREOF, the undersigned acknowledges that he has read this Waiver
and Release Agreement and sets his hand and seal this ____ day of
_______________, _____.

EMPLOYEE

____________________________________
David R. Emery

BLACK HILLS CORPORATION

By:__________________________________
Title:

Subscribed and sworn to and subscribed before me this _____ day of
_______________, _____.

____________________________________
Notary Public
My Commission Expires: