Exhibit 10.1
 

CHANGE IN CONTROL AGREEMENT

This Change in Control Agreement (“Agreement”) dated as of September 7, 2010 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 subsections 9(a)(1) and
(2).

“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);

(b)   Individuals who, as of December 31, 2009 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 Agreement, 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 than 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.

“CODE” means the Internal Revenue Code of 1986, as amended.

“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.

“DISABILITY DATE” means the date subsequent to a Change in Control on which the
Employee is determined to have a Disability.

 
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“EFFECTIVE DATE” means 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.

“ERISA” means the Employee Retirement Income Security Act of 1974, as amended.

“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 subsections 9(c)(i)
through (vi) below.

“NONQUALIFIED DEFERRED COMPENSATION PLAN” means the Company’s Nonqualified
Deferred Compensation Plan as amended and restated effective January 1, 2010,
and as amended or replaced from time to time thereafter prior to the Effective
Date.

“NOTICE OF TERMINATION” means 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” means the incentive compensation plan
known as the “Black Hills Corporation 2005 Omnibus Incentive Compensation Plan”
as effective May 25, 2005, and as amended or replaced from time to time
thereafter prior to the Effective Date.

“2005 PENSION EQUALIZATION PLAN” means the Company’s 2005 Pension Equalization
Plan as in effect on January 1, 2008 and as amended or replaced from time to
time thereafter prior to the Effective Date.

“PENSION PLAN” means the Company’s tax qualified defined benefit pension plan as
amended and restated effective October 1, 2000, 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” means 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 of the Effective Date.

“RELATED COMPANY” means any business organization or legal entity that directly
or indirectly, controls, is controlled by or is under common control with the
Company.  For purposes of this definition, the term “control” (including the
terms “controlling”,

 
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“controlled by”, and “under common control with”) includes the possession,
direct or indirect, of the power to vote 50 percent or more of the voting equity
securities, membership interest, or other voting interest, or to direct or cause
the direction of the management and policies of such business organization or
other legal entity, whether through the ownership of voting equity securities,
membership interest, by contract, or otherwise.

“RESTORATION PLAN” means the Company’s Restoration Plan as in effect on
January 1, 2008 and as amended or replaced from time to time thereafter prior to
the Effective Date.

“RETIREE HEALTHCARE PLAN” means the Company’s Retiree Healthcare Plan as amended
and restated effective January 1, 2010, and as further amended from time to time
thereafter prior to the Effective Date.

“RETIREMENT SAVINGS PLAN” means the Black Hills Corporation Retirement Savings
Plan (401K) as amended and restated effective January 1, 2000, and as further
amended from time to time thereafter prior to the effective date.

“SEVERANCE COMPENSATION” means the Employee’s base salary and annual incentive
target on the date of the Change in Control.

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

“SUCCESSOR EMPLOYER” means any Successor Entity (as defined in the definition of
“Change in Control” herein) or any other successor in interest or assign
(whether direct or indirect, by purchase, merger, consolidation or otherwise) of
the business and/or assets of the Company.

“TERMINATION DATE” means the date, subsequent to the Effective Date, of the
Employee’s separation from service (as defined for purposes of Code Section
409A) with the Company and all Related Companies.

“WELFARE BENEFITS” means 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.  Following the Employee’s Termination Date, the
term Welfare Benefits shall not include a “flexible spending arrangement”
(within the meaning of Proposed Regulation Section 1.125-5(a) or subsequent
authoritative guidance).

3.
TERM OF AGREEMENT.

The Term of this Agreement shall commence on the date of execution and shall
continue in effect until November 15, 2013.  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

 
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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, sick leave or
another approved leave of absence, 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.  In addition, if Employee serves
on a public Board of Directors prior to the effective date, the Employee shall
retain the right to continue to serve on that particular Board.

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 including: (a) base
salary, targeted annual incentive bonus, targeted long-term incentive grants and
awards; and (b) Company Matching Contributions and Company Retirement
Contributions or other benefits payable under the Retirement Savings Plan and
Supplemental Matching Contributions, Supplemental Retirement Contributions and
Supplemental Target Contributions under the Nonqualified Deferred Compensation
Plan.

6.           EMPLOYEE WELFARE AND PENSION BENEFITS.

During the Protection Period, the Company or the Successor Employer shall
provide to the Employee the Welfare Benefits (including Retiree Healthcare Plan
credits for purposes of this Section 6) 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.  Subsequent to the Protection Period, the Company
or Successor Employer shall provide to the Employee ongoing Welfare Benefits
(whether in active or subsequent inactive status) under terms at least as
favorable as provided to other Company or Successor Employer employees.  In the

 
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event Employee is not a participant in a Welfare Benefits plan or the Pension
Plan prior to the Effective Date, then Company shall have no obligation to
provide that Welfare Benefits plan or the Pension Plan or other substantially
similar employee welfare and pension benefits as provided in this
Section 6.  For purposes of this Section 6, if the Employee is not entitled to
any future benefit accruals in the Pension Plan as of the Effective Date the
Employee shall not be treated as a participant in the Pension Plan for purposes
of accruing benefits under the Pension Plan.

7.           2005 PENSION EQUALIZATION PLAN; RESTORATION PLAN.

If Employee was a participant in the 2005 Pension Equalization Plan prior to the
Effective Date, then during the Protection Period, the Company or Successor
Employer shall continue to provide Employee with coverage and participation
under the 2005 Pension Equalization Plan or a substantially similar supplemental
retirement plan.

If Employee was a participant in the Restoration Plan prior to the Effective
Date, then during the Protection Period, the Company or Successor Employer shall
continue to provide Employee with coverage and participation under the
Restoration Plan or a substantially similar supplemental retirement plan.  For
purposes of this Section 7, if the Employee is not entitled to any future
benefit accruals in the Restoration Plan as of the Effective Date the Employee
shall not be treated as a participant in the Restoration Plan for purposes of
accruing benefits under the Restoration Plan.

In no event shall coverage during the Protection Period be on a basis less
favorable in terms of benefit levels and coverage than the 2005 Pension
Equalization Plan and the Restoration 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 and
Successor Employer to its executives or other 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 period preceding the Effective Date, or if more favorable, at
any time thereafter.

(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 or Successor Employer.  All reimbursements
under this Section 8(b) will be paid as promptly as administratively
practicable, but in no event later than by December 31st of the year next
following the calendar year in which the expense was incurred.

(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,

 
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following a Change in Control, Company or the Successor Employer 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.  Payment for expenses to be reimbursed under this Section 8(c) shall
be made in accordance with the time specified under the Indemnity Agreement or D
& O coverage, but in no event later than by December 31st of the year next
following the year in which the expense was incurred.

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), 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 the
Employee’s Disability Date.  Employee shall be entitled to the compensation and
benefits provided for under this Agreement for any period during the Protection
Period and prior to the Employee’s Disability Date, during which Employee is
unable to work due to a physical or mental infirmity, and up to the Employee’s
Disability Date.  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 Date will be deemed to have occurred.

(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.

 
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(i)   A material reduction of the Employee’s authority, duties, or
responsibilities from those in effect immediately prior to the Effective Date;
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 material reduction in the Employee’s “base compensation” within the
meaning of such term under the Final Treasury Regulations issued under Code
Section 409A, or a failure to pay the Employee any compensation or benefits to
which he is entitled within a reasonable period after the date due, provided
that such failure to pay constitutes a material breach under subsection 9(c)(vi)
(unless otherwise specified in authority under Code Section 409A, a material
reduction in base compensation for this purpose shall occur if the Employee’s
base compensation is reduced by two percent (2%) or more of the base
compensation as in effect immediately prior to such reduction);

(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 or the Pension Equalization Plan or Restoration
Plan benefits, as set forth in Sections 6 and 7, provided that such failure
constitutes a material breach under subsection 9(c)(vi);

(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), provided that such
termination constitutes a material breach under subsection 9(c)(vi); or

(vi)    Any other action or inaction that constitutes a material breach by the
Company of the agreements under which the Employee provides services including,
but not limited to, the failure of the Company to obtain an agreement,
satisfactory to the Employee, from any Successor Employer or assign of the
Company, to assume and agree to perform this Agreement in the same manner and to
the same extent that the Company would be obligated to perform under this
Agreement, as contemplated in Section 14.
 
In order to effectuate a termination for Good Reason under this Section 9(c),
the Employee shall, within 90 days after the initial existence of the condition,
deliver written notice to the Company stating the grounds for Good Reason in
support of termination.  The Company may, within 30 days after receipt of such
notice, remedy the condition, in which case the Good Reason for termination
shall be deemed not to have occurred.  For purposes of determining the amount of
any cash payment payable to the Employee in accordance with Section 10, any
reduction in compensation or benefit that would constitute Good Reason hereunder
shall be deemed not to have occurred.

 
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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 compensation and 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” pursuant to Section 9(c), 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” 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.  All amounts payable under
this Section 10(a) shall be paid in a lump sum within 60 days following the
Employee’s Termination Date.

(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,
or (ii) by Employee for Good Reason, then following his Termination Date, the
Employee shall be entitled to the following:

(i)   he 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 2.99 times (2.99x) the Employee’s Severance
Compensation.  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.  The lump sum severance payment described in this paragraph shall be
paid within 60 days after the Employee’s Termination Date (unless the Company’s
deduction for the payment is restricted by Code Section 162(m), in which case
payment must be made as soon as practicable or as soon as the payment becomes
deductible).

(iii)   Within ten (10) business days after the Termination Date, and as a
condition of receiving payments provided in subsection 10(b)(ii) above, Employee
shall execute and deliver to Company the Waiver and Release Agreement
(“Release”) in the same form as 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

 
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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 or the Successor Employer, or any affiliate of the
Successor Employer as determined under the rules of Code Sections 414(b) and
(c), 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.  Following the three year period, the Company or the Successor Employer
shall provide to the Employee Welfare Benefits (whether in active or subsequent
inactive status) under terms at least as favorable as provided to other Company
or Successor Employer employees.  Employee shall pay the employee portion of
applicable premiums required to be paid by similarly-situated active employees
(or retired employees in the case that the Employee is retired) of the
Company.  At its election, the Company may provide Employee and his dependents
with equivalent benefits outside the Welfare Benefits plans (though not by
method of direct cash payment).  The Company’s obligation with respect to the
foregoing benefit shall be discontinued in the event that Employee becomes
covered under the health insurance coverage of a subsequent employer, other than
the Successor Employer or any affiliate thereof, which does not contain any
exclusion or limitation with respect to any preexisting condition of the
Employee and his 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.  The
continued coverage or provision of equivalent benefits under this
subsection 10(b)(iv) or subsection 10(b)(v) shall be provided in a manner that
is intended to satisfy an exception to Code Section 409A, and therefore not
treated as an arrangement providing for nonqualified deferred compensation that
is subject to taxation under Code Section 409A, including (i) providing such
benefits on a nontaxable basis to Employee, (ii) providing for the reimbursement
of medical expenses incurred during the time period during which Employee would
be entitled to continuation coverage under a group health plan of the Company
pursuant to Code Section 4980B (i.e., COBRA continuation coverage),
(iii) providing that such benefits constitute the reimbursement or provision of
in-kind benefits payable at a specified time or pursuant to a fixed schedule as
permitted under Code Section 409A, or (4) such other manner as determined to be
in compliance with an exception from being treated as nonqualified deferred
compensation that is subject to taxation under Code Section 409A.

(v)           If Employee was a participant in the Retiree Healthcare Plan
immediately prior to a Change in Control, then as of Employee’s Termination
Date, the Employee’s benefit under the Retiree Healthcare Plan shall be
determined as if (i) Employee had completed an additional three (3) Years of
Plan Participation (as defined in the Retiree Healthcare Plan), and (ii)
Employee were three (3) years older for determining eligibility for plan
benefits. Furthermore, if the Employee is not eligible for benefits after the
age and participation adjustment, then the Retirement Medical Savings Account
(after adjustment for three years of participation) will be considered vested,
and upon attainment of age 55 the Employee shall be deemed eligible for Retiree

 
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Healthcare Plan benefits, with the vested Retirement Medical Savings Account
available to offset premiums.  At its election, the Company may provide Employee
and his dependents with equivalent benefits outside the Retiree Healthcare Plan
(though not by method of direct cash payment).

 (vi)           If Employee was a participant in the 2005 Pension Equalization
Plan immediately prior to a Change in Control, then as of Employee’s Termination
Date, the Employee’s benefit under the 2005 Pension Equalization Plan shall be
determined as if (i) Employee had completed an additional three (3) Years of
Plan Participation (as defined in the 2005 Pension Equalization Plan), and (ii)
Employee received Annual Compensation (as defined in Section 5) during each
additional Year of Plan Participation.

If Employee was a participant in the Restoration Plan and the Pension Plan
immediately prior to a Change in Control, then as of Employee’s Termination
Date, Employee’s Restoration Plan benefit shall be determined as if (i) Employee
completed three (3) additional years of Credited Service under the Pension Plan,
and (ii) the Employee received Annual Compensation (as defined in Section 5)
during each additional year of Credited Service.  For purposes of this
subsection 10(b)(vi), if the Employee is not entitled to any future benefit
accruals in the Restoration Plan as of the Effective Date the Employee shall not
receive any additional Credited Service or Annual Compensation when determining
their Restoration benefit.

Furthermore, the Employee shall be made 100% vested for purposes of both the
2005 Pension Equalization Plan and Restoration Plan, if the Employee is a
participant in such plans (for purposes of this subsection) and is not already
fully vested.

(vii)           If Employee was a participant in the Nonqualified Deferred
Compensation Plan immediately prior to a Change in Control, then as of
Employee’s Termination Date, Employee’s Non-Elective Account in the Nonqualified
Deferred Compensation Plan shall become immediately vested and be determined as
if (i) Employee had completed three (3) additional Plan Years of participation
and earned the related Supplemental Matching Contributions, Supplemental
Retirement Contributions, and Supplemental Target Contributions (all as defined
in the Nonqualified Deferred Compensation Plan); no investment earnings shall be
attributed for this additional period, and (ii) Employee received Annual
Compensation (as defined in Section 5) during each additional Plan Year of
participation.

For purposes of this subsection 10(b)(vii), the additional contributions under
the Nonqualified Deferred Compensation Plan (Supplemental Matching
Contributions, Supplemental Retirement Contributions, and Supplemental Target
Contributions) shall be determined without regard to any offsets from the
Retirement Savings Plan.  (This has the same effect as if the Supplemental
Matching Contributions and Supplemental Retirement Contributions were determined
on total pay rather than only on pay over IRS pay limits.)

 
11

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(viii)    Notwithstanding any provision herein to the contrary, if the Employee
is a “specified employee” (as defined for purposes of Code Section 409A), no
payment under this Agreement shall be made before the date which is six (6)
months after the date of the Employee’s Termination Date, or such earlier date
upon which such amount can be paid or provided under Code Section 409A without
being subject to additional taxes thereunder, if such payment constitutes
deferred compensation subject to Code Section 409A.  To the extent that the
Agreement provides for such nonqualified deferred compensation, it is intended
to be compliant with Code Section 409A, and shall be interpreted and
administered accordingly.

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.

No additional payments shall be made to the Employee to account for any excise
taxes, income taxes, interest or penalties the employee may incur due to receipt
of any Severance Compensation payment or distribution of any type by the
Company.

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 Code Section 280G) 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 (the “Excise Tax”), and the
Total Payments after reducing for the Excise Tax does not exceed the largest
amount that would result in no portion of the Total Payments being subject to
the Excise Tax (the “Safe Harbor Amount”), the Employee’s Total Payments shall
be reduced to an amount equal to the Safe Harbor Amount.  However, if the amount
of the Total Payments after reducing for the Excise Tax exceeds the Safe Harbor
Amount, then no reduction shall be applied to the Total Payments.  In applying
any reduction required herein, Employee may elect whether the non-cash severance
benefits or the cash severance benefits shall first be reduced.

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.  All outplacement services shall be provided by the last
day of the second calendar year beginning after the Employee’s Termination Date.

 
12

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14.
SUCCESSORS AND ASSIGNS.

This Agreement shall be fully binding upon any Successor Employer or assign
(whether direct or indirect, by purchase, merger, consolidation or otherwise) to
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 as 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 all 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.  Any failure to obtain
such assumption and continuation of this Agreement shall constitute a material
breach hereof.

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 the Effective Date.  For purposes of
this Section 15, 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.  In addition, only with regard to claims by the Employee based on
wrongful termination, employment discrimination, the Fair Labor Standards Act,
or worker’s compensation statutes, in no event shall the Company pay any legal
fees or related expenses in accordance with this Section 15 unless (i) such fees
and expenses are incurred with respect to a bona fide claim by the Employee and
(ii) no payment of legal fees or related expenses shall be made with respect to
such claims to the extent that they are incurred with respect to benefits that
would have been paid regardless of a claim by the Employee, even if such amounts
are paid or modified as part of a settlement or award resolving an actual bona
fide claim.

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 on the third business day after the mailing thereof, except that notice
of change of address shall be effective only upon receipt.

 
13

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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 or affiliates 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 or affiliates.  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 or
affiliates 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 of 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.

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.

 
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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, as the parties agree that the benefits provided hereunder that are
not subject to the terms of a separate plan are capable of simple or mechanical
determination upon the happening or 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 or Affiliate of the Company, or in the event that
any Employee is an employee of a subsidiary or Affiliate of the Company, the
references to “Company” in this Agreement shall be deemed to be a reference to
the subsidiary or Affiliate which may employ the Employee to the full extent
necessary or appropriate to preserve the intent of this Agreement; provided,
however, nothing herein shall mean or suggest that any benefits are applicable
hereunder upon a Change in Control of a subsidiary or Affiliate rather than the
Company.

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 7th day of September, 2010.

BLACK HILLS CORPORATION

By: /s/ Steven J. Helmers 
Steven J. Helmers
Senior 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 ________________, 20__,
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, suites, 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, as amended (“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.

 A-1
 
 

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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 damage, 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. Section 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.

 A-2
 
 

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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.

9.           Acknowledgement.  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 of 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.

 A-3
 
 

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10.           Choice of Laws.  This Waiver and Release and the rights and
obligation so 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 hereof, 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 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 embodies herein shall be of any
force or effect.

Please read this document carefully, as it includes a release of claims.

IN WITNESS WHEREOF, the undersigned acknowledges that he has read this Waiver
and Release Agreement and sets his hand and seal this ______ day of
____________, 20__.

EMPLOYEE

_____________________________
David R. Emery

BLACK HILLS CORPORATION

By:___________________________
Title:

 A-4