##### 



Confidential information has been omitted from this Exhibit and filed separately with the
Commission pursuant to a confidential treatment request under Rule 24b-2.
 Exhibit 10.1
 Big Stone II Power Plant
 Participation Agreement
 By And Among
 CENTRAL MINNESOTA MUNICIPAL POWER AGENCY,
 GREAT RIVER ENERGY,
 HEARTLAND CONSUMERS POWER DISTRICT,
 MONTANA-DAKOTA UTILITIES CO., A DIVISION OF MDU
RESOURCES GROUP, INC.,
 OTTER TAIL CORPORATION dba OTTER TAIL POWER COMPANY,
 SOUTHERN MINNESOTA MUNICIPAL POWER AGENCY, AND
 WESTERN MINNESOTA MUNICIPAL POWER AGENCY
 As
 Owners
 JUNE 30, 2005




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Participation Agreement
    
    PageiBig Stone II Power Plant
    
    June 30, 2005
 TABLE OF CONTENTS
 PageARTICLE I DEFINITIONS, RULES OF INTERPRETATION
    
    
    21.01 Rules of Construction
    
    
    21.02 Interpretation with 2005 Joint Facilities Agreement
    
    
    31.03 Defined Terms
    
    
    3ARTICLE II THE PROJECT
    
    
    132.01 Project
    
    
    132.02 Owners Commitment
    
    
    142.03 Ratification and Acceptance of Phase I Activities
    
    
    14ARTICLE III DEVELOPMENT, FINANCING AND WITHDRAWAL
    
    
    143.01 Development Phases
    
    
    143.02 Financing Plan
    
    
    153.03 Financing Obligations
    
    
    153.04 General Prohibition on Withdrawal
    
    
    173.05
Withdrawal Rights as a Result
of (*)
    
    
    173.06 Limited Withdrawal Rights of GRE, Otter Tail and Other Owners
    
    
    183.07 Obligations of an Owner That Withdraws Pursuant to Section 3.06
    
    
    193.08 General Obligations of a Withdrawing Owner
    
    
    193.09 Reallocation of Ownership Shares
    
    
    203.10 Termination for Failure to Obtain Financing Approvals
    
    
    21ARTICLE IV OWNERSHIP
    
    
    214.01 Plant Property
    
    
    214.02 Title
    
    
    224.03 Waiver of Partition Rights
    
    
    224.04 Right of Possession
    
    
    224.05 Transfer of Title
    
    
    22ARTICLE V DISPOSITION OF OWNERSHIP INTERESTS
    
    
    235.01 General Prohibition on Transfers of Ownership Interests
    
    
    235.02 Acts or Circumstance Not Deemed Transfers
    
    
    235.03 Right of First Refusal
    
    
    245.04 Covenants Run With Land
    
    
    26ARTICLE VI PROJECT AND PLANT MANAGEMENT
    
    
    266.01 Management by Committee
    
    
    266.02 Composition of Committees
    
    
    266.03 Authority of Representatives to Act on Behalf of Owner
    
    
    266.04 Committee Operational Procedures
    
    
    276.05 Coordination Committee
    
    
    286.06 Actions Requiring Coordination Committee Approval
    
    
    296.07 Engineering and Operating Committee
    
    
    30




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Participation Agreement
    
    PageiiBig Stone II Power Plant
    
    June 30, 2005
 Page6.08 Actions Requiring Unanimous Coordination Committee Approval
    
    
    31ARTICLE VII CONTRIBUTIONS; EXPENDITURES
    
    
    317.01 Obligation to Pay Project Costs; Trust Account
    
    
    317.02 Payment Procedures
    
    
    327.03 Reservation of Right to Dispute Payments
    
    
    337.04 Services and Property Contributed by Owners
    
    
    337.05 Emergency Services
    
    
    347.06 Taxes
    
    
    347.07 Fuel
    
    
    347.08 Station Power
    
    
    357.09 Insurance
    
    
    357.10 Assurances of Creditworthiness
    
    
    367.11 Right to Obtain Financing
    
    
    37ARTICLE VIII CASUALTY LOSS; CONDEMNATION
    
    
    378.01 Repair or Replacement
    
    
    378.02 Eminent Domain
    
    
    38ARTICLE IX LIABILITY
    
    
    399.01 Limitation and Release of Liability to Other Owners
    
    
    399.02 Waiver of Certain Damages
    
    
    409.03 Assignment of Rights
    
    
    409.04 Reduction of Damages
    
    
    409.05 Shared Liability
    
    
    409.06 Indemnification for Willful Actions
    
    
    409.07 Availability of Insurance Proceeds
    
    
    409.08 Operator Indemnity
    
    
    41ARTICLE X ENTITLEMENT TO ENERGY AND CAPACITY
    
    
    4110.01 Interconnection and Transmission Upgrade Allocation Agreement
    
    
    4110.02 Generation Entitlement
    
    
    4110.03 Ancillary Services
    
    
    4210.04 Midwest ISO Market Development
    
    
    4410.05 Data to be Provided to the Midwest ISO
    
    
    44ARTICLE XI DEFAULTS AND REMEDIES
    
    
    4511.01 Event of Default
    
    
    4511.02 Contribution by Non-Defaulting Owners
    
    
    4511.03 Disputed Event of Default
    
    
    4611.04 No Waiver
    
    
    4611.05 Cumulative Rights
    
    
    46ARTICLE XII RELATIONSHIP OF PARTIES
    
    
    4712.01 Nature of Obligations
    
    
    4712.02 Tax Status
    
    
    47ARTICLE XIII DISPUTE RESOLUTION
    
    
    47




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Participation Agreement
    
    PageiiiBig Stone II Power Plant
    
    June 30, 2005
 PageARTICLE XIV TERM
    
    
    4714.01 Term
    
    
    4714.02 Windup Events
    
    
    4814.03 Termination by Agreement
    
    
    4814.04 Return of Real Property to Otter Tail
    
    
    48ARTICLE XV REPRESENTATIONS, WARRANTIES
    
    
    4815.01 Representations and Warranties
    
    
    48ARTICLE XVI MISCELLANEOUS
    
    
    4916.01 Publicity Policy
    
    
    4916.02 Successors and Assigns; Assignment
    
    
    5016.03 Notices
    
    
    5016.04 Force Majeure
    
    
    5016.05 Waiver
    
    
    5116.06 Survival
    
    
    5116.07 Severability
    
    
    5116.08 Governing Law
    
    
    5116.09 Consent to Jurisdiction
    
    
    5116.10 Waiver of Trial by Jury
    
    
    5216.11 No Third-Party Beneficiaries
    
    
    5216.12 Cooperation
    
    
    5216.13 Captions
    
    
    5216.14 Entire Agreement
    
    
    5216.15 Counterparts
    
    
    5216.16 Further Assurances
    
    
    53
 EXHIBIT A
    
    
    55EXHIBIT B
    
    
    58EXHIBIT B-1
    
    
    59SCHEDULE 3.02(A) OWNER FINANCING PLANS
    
    
    60SCHEDULE 3.03(A) REAL AND/OR PERSONAL PROPERTY INTENDED TO BE PLANT PROPERTY
    
    
    61SCHEDULE 3.05(A) REFERENCE RATE METHODOLOGY
    
    
    63SCHEDULE 7.01 TRUST AGREEMENT
    
    
    64SCHEDULE 10.01 INTERCONNECTION AND TRANSMISSION UPGRADE ALLOCATION AGREEMENT
    
    
    79




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##### 



Participation Agreement
    
    Page 1Big Stone II Power Plant
    
    June 30, 2005
 Participation Agreement
  RECITALS
 WHEREAS,
 WHEREAS,
 WHEREAS,
 WHEREAS,




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##### 



Participation Agreement
    
    Page 2Big Stone II Power Plant
    
    June 30, 2005
 WHEREAS,
 WHEREAS,
 WHEREAS,
 NOW, THEREFORE,
 AGREEMENTS
 ARTICLE I
DEFINITIONS, RULES OF INTERPRETATION
 1.01 Rules of Construction.
 (a)
    
    The masculine shall include the feminine and neuter.(b)
    
    References to Articles, Sections, Schedules, or Exhibits shall be to
Articles, Sections, Schedules or Exhibits of this Agreement.(c)
    
    This Agreement was negotiated and prepared by each of the Parties with the
advice and participation of counsel. The Parties have agreed to the wording of this
Agreement and none of the provisions hereof shall be construed against one Party on the
ground that such Party is the author of this Agreement or any part hereof.(d)
    
    The Parties shall act reasonably and in accordance with the principles of good
faith and fair dealing in the performance of this Agreement.




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##### 



Participation Agreement
    
    Page 3Big Stone II Power Plant
    
    June 30, 2005
 
 1.02 Interpretation with 2005 Joint Facilities Agreement.
 (a)
    
    acknowledge that the terms of this Agreement are not binding upon NorthWestern;
and(b)
    
    notwithstanding any other provision in this Agreement to the contrary, nothing
in the Joint Facilities Agreements or the O&M Agreement shall alter or modify a Partys
rights, duties and obligations under this Agreement.
 1.03 Defined Terms.
 2005 Joint Facilities Agreement:
 Affiliate(s):
 (a)
    
    any Person that directly or indirectly, controls or is controlled by or is
under common control with such Person; or(b)
    
    any Person that beneficially owns or holds fifty percent (50%) or more of any
class of voting securities of such Person or owns or holds fifty percent (50%) or more
of an ownership interest (on a fully-diluted basis) in such Person.
  Agreement:
 Ancillary Services:




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##### 



Participation Agreement
    
    Page 4Big Stone II Power Plant
    
    June 30, 2005
  Applicable Law:
 (a)
    
    any and all laws, legislation, statutes, codes, acts, rules, regulations,
ordinances, treaties or other similar legal requirements enacted, issued or promulgated
by a Governmental Authority;(b)
    
    any and all orders, judgments, writs, decrees, injunctions, Governmental
Approvals or other decisions of a Governmental Authority; and(c)
    
    any and all legally binding announcements, directives or published practices or
interpretations, regarding any of the foregoing in (a) or (b) of this definition,
enacted, issued or promulgated by a Governmental Authority;
  Blanket Easement Agreement:
 BSP I:
 BSP II or Plant:
 Capacity:
 CMMPA:
 Commercial Operation:
 Commercial Operation Readiness:




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##### 



Participation Agreement
    
    Page 5Big Stone II Power Plant
    
    June 30, 2005
 Committee:
 Common Interconnection Facilities:
 Construction Contracts:
 Contributing Owner Facilities:
 Coordination Committee:
 Decision Period:
 Determination Rate:
 Dispute:
 Double Majority:
 Effective Date:
 Election Period:
 EMT:
 Energy:
 Engineering and Operating Committee or E&O Committee:
 Event of Default:
 FERC:




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##### 



Participation Agreement
    
    Page 6Big Stone II Power Plant
    
    June 30, 2005
 FERC Accounts:
 Financial Closing:
 Financing:
 Financing and Approval Deadline:
 Financing Documents:
 Fixed Fuel:
 Force Majeure Event:
 (a)
    
    the refusal of RUS to approve GREs participation in the Project;(b)
    
    the refusal of the MNPUC to approve Otter Tails integrated resource plan with
respect to BSP II; or




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##### 



Participation Agreement
    
    Page 7Big Stone II Power Plant
    
    June 30, 2005
 (c)
    
    Owners failure to perform any obligation under this Agreement due to its
inability to obtain an authorization or approval from a Governmental Authority where
such Governmental Authority issuing the authorization or approval is also the Owner;
  Fuel:
 Governmental Approvals:
 Governmental Authority:
 GRE:
 Heartland:
 Interconnection and Transmission Upgrade Allocation Agreement:
 Interconnection Study:
 Joint Facilities Agreements:
 Laws:




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##### 



Participation Agreement
    
    Page 8Big Stone II Power Plant
    
    June 30, 2005
 MAPP:
 Materials and Supplies:
 Midwest ISO or MISO:
 Midwest ISO Tariff:
 Minimum Net Generation:
 Minimum Rating:
 MNPUC:
 Montana-Dakota:
 NERC:
 Net Effective Generating Capacity:
 Net Energy Generation:
 Network Resource:
 Non-Transferring Owner:
 Non-Withdrawing Owner:
 NorthWestern:




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##### 



Participation Agreement
    
    Page 9Big Stone II Power Plant
    
    June 30, 2005
 O&M Agreement:
 Operating Capacity:
 Operating Capacity Entitlement:
 Operating Plan and Budget:
 Operator:
 Option to Purchase Contract:
 Otter Tail:
 Owner Financing Plan:
 Owners:
 Ownership Share: Exhibit B Exhibit B-1
 Party(ies):
 Performance Testing:
 Person:
 Phase I:




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##### 



Participation Agreement
    
    Page 10Big Stone II Power Plant
    
    June 30, 2005
 Phase II:
 Phase III:
 Phase IV:
 Plans and Specifications:
 Plant Property:
 Plant Site:
 Point of Interconnection:
 Point of Physical Connection:
 Progress Payment:
 Project:
 Project Agreements:
 Project Budget:




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Participation Agreement
    
    Page 11Big Stone II Power Plant
    
    June 30, 2005
 Project Costs:
 Project Financing Plan:
 Proposed Purchaser:
 Prudent Utility Practice:
 Record of Decision:
 Reference Rate:
 RUS:
 SEC:
 SMMPA:




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Participation Agreement
    
    Page 12Big Stone II Power Plant
    
    June 30, 2005
 Term:
 Termination Date:
 Total Load Regulation:
 Total Operating Reserves:
 Transfer, Transferred or Transferring:
 Transferring Owner:
 Transferred Share:
 Transmission System:
 Trust Account:
 Trust Account Deposit(s)
 URGE Testing:
 WAPA:
 Willful Action:
 (a)
    
    is knowingly or intentionally done or not done with conscious indifference to
the consequences, or with the expectation that injury or damage to other Owners or any
other Person would, or would be reasonably likely to, result therefrom; or




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##### 



Participation Agreement
    
    Page 13Big Stone II Power Plant
    
    June 30, 2005
 (b)
    
    is determined by final judgment or decree of a court having jurisdiction, to be
a material default under any Project Agreement, and occurs or continues beyond the time
specified in such judgment or decree for curing such default, or if no time to cure is
specified therein, occurs or continues beyond a reasonable time to cure such default.
 Withdrawing Owner:
 Withdrawn Share:
 WMMPA:
 ARTICLE II
THE PROJECT
 2.01 Project.
 (a)
    
    the acquisition of the Plant Site (including feasibility studies and testing),
including, without limitation, the acquisition of all properties, easements, rights and
public and private permits, licenses, orders and other authorizations necessary or
desirable to provide access to the Plant Site by railroad and from public roads, to
provide communications and other necessary utility services to the Plant Site, and to
provide water of the quality and quantity required for the construction and operation
of the Plant and allow discharge and/or storage of water and wastes from the Plant, and
to enable in all other respects the construction, operation, maintenance and repair of
the Plant and other Plant Property;(b)
    
    the design, construction, equipping and testing of the Plant on the Plant Site
in preparation for Commercial Operation Readiness at a planned Capacity of
approximately 600 MW, including the interconnection of the Plant to the Transmission
System, including all related interconnection and transmission upgrades;(c)
    
    the arrangements for the supply of Fuel, or such substantial portion thereof as
the Owners deem advisable, and for the delivery thereof to the Plant, as is necessary
to test the Plant and to ensure operating of the Plant at Net Available Capacity
thereafter during the Term;(d)
    
    the selection and training of the initial staff needed to test and operate the
Plant;(e)
    
    the procurement of all Materials and Supplies (including an appropriate supply
of spare parts) necessary to conduct Performance Testing and thereafter commence the
Commercial Operation of the Plant;(f)
    
    coordination with BSP I and the owners thereof as contemplated in the Joint
Facilities Agreements; and




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Participation Agreement
    
    Page 14Big Stone II Power Plant
    
    June 30, 2005
 (g)
    
    all matters incidental to the foregoing, which, consistent with Prudent Utility
Practice, should be done to prepare the Plant for Commercial Operation.
 2.02 Owners Commitment.
 2.03 Ratification and Acceptance of Phase I Activities.
 ARTICLE III
DEVELOPMENT, FINANCING AND WITHDRAWAL
 3.01 Development Phases.
 (a)
    
    Phase I shall consist of all development activities undertaken by the Owners,
individually or collectively, relating to the Project prior to the Effective Date.(b)
    
    Phase II shall consist of due diligence, preparation for Financial Closing,
design and engineering work, negotiation of the Construction Contracts and the other
Project Agreements and other necessary activities on the Effective Date and continuing
until one (1) day prior to the later of the date of Financial Closing or the date of
execution of the Construction Contracts.During Phase II, to the extent not completed as of the Effective Date, the Owners,
acting through the Engineering and Operating Committee, shall conclude all plans and
preparations necessary for development and financing of the Project, including, but
not limited to (i) the preparation of a development plan, Owner Financing Plan,
Project Financing Plan, construction schedule and Project Budget, (ii) the
preparation and negotiation of the Project Agreements, (iii) the application for,
and acquisition of, such permits and other Governmental Approvals as are necessary
for the development and construction of the Plant, and (iv) completion of all
documentation and other preparations required for Financial Closing and execution
and delivery of Construction Contracts.(c)
    
    Phase III shall consist of the construction, Performance Testing and start-up
of the Plant. Phase III shall commence on the later of the date of Financial Closing
or the date of execution of the Construction Contracts, and shall end one (1) day prior
to the date the Plant commences Commercial Operation.During Phase III, the Owners, acting through the Engineering and Operating
Committee, shall complete Financial Closing (if not previously completed), execute
Construction Contracts (if not previously executed), cause construction, Performance
Testing and start-up of the Plant to occur, prepare for




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Participation Agreement
    
    Page 15Big Stone II Power Plant
    
    June 30, 2005
 commencement of Commercial
Operation (including the training and hiring of necessary operating staff) and
obtaining any permits or Governmental Approvals not previously obtained that are
required for the operation of the Plant.(d)
    
    Phase IV shall consist of the Commercial Operation of the Plant, which phase
shall commence on the date the Plant commences Commercial Operation and end on the
Termination Date.During Phase IV, the Owners, acting through the Engineering and Operating Committee,
shall operate and maintain the Plant in accordance with Prudent Utility Practices
and the Project Agreements. Subject to oversight by the Engineering and Operating
Committee, the obligations of the Owners during Phase IV shall be carried out by the
Operator in accordance with, and to the extent set forth in, the O&M Agreement.
 3.02 Financing Plan.
 (a)
    
    On or before the Effective Date, each Owner shall confirm that it has delivered
to each of the other Owners a plan detailing how it will obtain all financing and
regulatory approvals necessary for it to obtain its Financing and own its undivided
interest in the Plant (each such plan, an Owner Financing Plan). A copy of each
Owner Financing Plan is attached hereto as Schedule 3.02(a).(b)
    
    On or before the date that is six (6) months after the Effective Date, the
Owners will collectively develop a final plan for the financing of the Project (the
Project Financing Plan), taking into account the Owner Financing Plans provided by
each of the Owners and any special financing benefits or restrictions. The Project
Financing Plan will provide for the coordination among the Owners lenders and set
forth in detail the Financing Documents that will be required for Financial Closing.
 3.03 Financing Obligations.
 (a)
    
    Attached hereto as Schedule 3.03(a) each Owner has described (i) all real
and/or personal property held by such Owner as of the Effective Date that is intended
to be Plant Property, including, but not limited to, interests in the Joint Facilities
Agreements and the work product resulting from development activities undertaken during
Phase I relating to the Project, but excluding Contributing
Owner Facilities, and (ii) all Project Costs incurred by such Owner prior to the
Effective Date, including, but not limited to, the costs to acquire the real and/or
personal property and interests listed on Schedule 3.03(a).(b)
    
    On the Effective Date:
 (i)
    
    each Owner that has incurred Project Costs prior to the
Effective Date as listed in Schedule 3.03(a) shall be reimbursed by the other
Owners in




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##### 



Participation Agreement
    
    Page 16Big Stone II Power Plant
    
    June 30, 2005
 proportion to their respective Ownership Shares, to the extent not
previously reimbursed;(ii)
    
    to the extent reimbursement has been provided to the Owner as
described in Section 3.03(b)(i), each Owners interest in its work product
resulting from development activities undertaken prior to the Effective Date
(other than its interests in personal property, real property and the Joint
Facilities Agreements) as identified in Schedule 3.03(a), shall be transferred
to and vest in the Owners as tenants in common in proportion to their
respective Ownership Shares and each Owner transferring such property shall
cause it to be transferred; and(iii)
    
    each Owner shall pay into the Trust Account its proportionate
share, based on Ownership Share, of the Progress Payment to finance the
development of the Project until the Financial Closing.
 (c)
    
    At least thirty (30) days before the date of the Financial Closing, each Owner
shall amend its disclosures in Schedule 3.03(a) to reflect (i) any additional real
and/or personal property held by such Owner that is intended to be Plant Property and
that has not been previously transferred to the Owners as tenants in common, including,
but not limited to, interests in the Joint Facilities Agreements and the work product
resulting from development activities undertaken during Phase II relating to the
Project, and (ii) all reasonable and documented Project Costs incurred by such Owner
during Phase II, including, but not limited to, the costs to acquire the additional
real and/or personal property listed on Schedule 3.03(a).(d)
    
    On the date of Financial Closing,
 (i)
    
    each Owner that has incurred Project Costs prior to the
Financial Closing as listed in amended Schedule 3.03(a) shall be reimbursed by
the other Owners in proportion to their respective Ownership Shares in
accordance with Section 4.02, to the extent not previously reimbursed;(ii)
    
    to the extent not previously transferred, each Owners title
to, or other property interest in all property and rights resulting from
development activities undertaken prior to the Financial Closing (including,
but not limited to, its interests in personal property, real property
(including any rights necessary to exercise any options for real property) and
the Joint Facilities Agreements) as identified in Schedule 3.03(a), but
excluding
Contributing Owner Facilities, shall vest in the Owners as tenants in common
in proportion to their respective Ownership Shares in accordance with
Section 4.02; and(iii)
    
    each Owner shall deliver its cash or binding financial
obligation of a well-known financial institution to finance its Ownership Share
and to fund its share of the balance of the Project Costs through the
completion of construction and the commencement of Commercial
Operation. Each




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Participation Agreement
    
    Page 17Big Stone II Power Plant
    
    June 30, 2005
 Owner shall provide to the Engineering and Operating Committee and the other
Owners such customary documents, including reasonable and customary legal
opinions, consents to assignment and certificates as may be requested with
respect to the financing of the Project and shall use its best efforts to cause
its Lenders to enter into any intercreditor or similar documents as are
customary in transactions of this nature.
 (e)
    
    To the extent not otherwise specifically provided in any Project Agreement or
other written agreement among the Owners, (i) any additional real and/or personal
property or interests therein acquired after the Financial Closing intended to be Plant
Property shall be acquired by the Owners, acting through the Engineering and Operating
Committee, as tenants in common with undivided interests equal to their respective
Ownership Shares and (ii) all Project Costs and other liabilities or obligations
incurred with respect to the Project during Phase III shall be the responsibility and
obligation of the Owners in proportion to their respective Ownership Shares.
 3.04 General Prohibition on Withdrawal.
 3.05
Withdrawal Rights as a Result of (*).
 (a)
    
    On June 20, 2006, the E&O Committee shall determine
(*) (the Determination Rate), using the
same methodology used in determining the Reference Rate, as detailed on Schedule
3.05(a) hereof, and which determination shall include only those anticipated costs
properly authorized under this Agreement.(b)
    
    (*), then the Owners, acting
through the Coordination Committee, shall meet on June 30, 2006 and shall take the
following vote:
 (i)
    
    If a Double Majority approves the continuation of the Project,
then any Owner who did not vote to continue the Project may withdraw from the
Project, so long as it: (A) provides written notice to the other Owners of its
withdrawal within seven (7) days of the vote, and (B) deposits into the
Trust Account on or before July 31, 2006, a payment equal to (*) per
kilowatt multiplied by that Owners Ownership Share. An Owner who properly
withdraws under this Section 3.05(b)(i) shall have no other obligations
under this Agreement, except as required under Section 3.08. (*) If both Montana-Dakota and Otter Tail withdraw from the Project
under this Section 3.05(b)(i), any of the Progress Payments paid by
Montana-Dakota and Otter Tail prior to withdrawal under this Section
3.05(b)(i) that are not needed to pay Project Costs incurred prior to
withdrawal under Section 3.05(b)(i) shall remain Plant Property and




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Participation Agreement
    
    Page 18Big Stone II Power Plant
    
    June 30, 2005
 Montana-Dakota and Otter Tail shall have no claim to such Progress Payments.
In the event that the Progress Payments paid by Montana-Dakota and Otter
Tail prior to withdrawal under this Section 3.05(b)(i) are not sufficient to
pay Montana-Dakotas and Otter Tails respective shares of Project Costs
incurred prior to withdrawal under this Section 3.05(b)(i), Montana-Dakota
and Otter Tail shall pay into the Trust Account their respective amounts of
the shortfall. Any such payments required of Montana-Dakota and Otter Tail
shall be made within five (5) business days after the amount of the
shortfall is determined.(ii)
    
    If a Double Majority does not approve the continuation of the
Project, then those Owners who wish to withdraw from the Project may do so by
providing written notice to the other Owners of their withdrawal within seven
(7) days of the vote, and shall have no other obligations under this Agreement,
except as required under Section 3.08; provided, however, that notwithstanding
the lack of Double Majority approval to continue the Project, those Owners who
do not withdraw from the Project may continue the Project under the Project
Agreements as long as either Montana-Dakota or Otter Tail has not withdrawn
from the Project. If Montana-Dakota and Otter Tail both withdraw from the
Project pursuant to this Section 3.05(b)(ii), then the Project shall be wound
up as provided for in Section 14.02 of this Agreement.
 3.06 Limited Withdrawal Rights of GRE, Otter Tail and Other Owners.
 (a)
    
    GRE and Otter Tail may withdraw from the Project if they do not obtain their
required approvals described above by giving written notice of withdrawal to the other
Owners at least five (5) business days prior to the Financing and Approval Deadline.
The withdrawal shall be effective as of the date of such notice. If such notice is
given, then the Financing and Approval Deadline for the non-withdrawing Owners shall
automatically be extended by sixty (60) days.(b)
    
    In the event GRE withdraws pursuant to Section 3.06(a), any other Owner may,
for a period of thirty (30) days after GRE gives its notice of withdrawal, also
withdraw from the Project by giving written notice to the other Owners. The withdrawal
shall be effective as of the date of the withdrawing Owners written notice.




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Participation Agreement
    
    Page 19Big Stone II Power Plant
    
    June 30, 2005
 
 3.07 Obligations of an Owner That Withdraws Pursuant to Section 3.06.
 3.08 General Obligations of a Withdrawing Owner.
 (a)
    
    transfer to the remaining Owners all rights it has under the Project
Agreements;(b)
    
    transfer to the remaining Owners all rights it has to Plant Property,
including, but not limited to, any amounts on deposit in the Trust Account and any
previous paid Progress Payments;(c)
    
    with the exception of Contributing Owner Facilities, transfer to the remaining
Owners any and all other rights, interests or property, whether real, personal,
tangible or intangible or otherwise, relating in any way to the Project, the Plant, the
Plant Site or otherwise;(d)
    
    to the extent not previously paid, pay its proportion (based upon its Ownership
Share prior to termination) of Project Costs incurred through the withdrawal date; and(e)
    
    to the extent not previously paid, pay its proportion (based upon its Ownership
Share prior to termination) of Project Costs incurred after the date of its withdrawal,
provided such Project Costs relate to obligations created prior to the date of its
withdrawal, and provided the remaining Owners are unable to mitigate those Project
Costs with reasonable effort and minimal impact upon their ability to continue with the
Project; provided, however that this Section 3.08(e) shall not apply to a withdrawal
pursuant to Section 3.06.




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Participation Agreement
    
    Page 20Big Stone II Power Plant
    
    June 30, 2005
  3.09 Reallocation of Ownership Shares.
 (a)
    
    If Otter Tail and/or GRE withdraws from the Project pursuant to Section 3.06,
then their rights that are forfeited, property transferred and money paid by either or
both, as applicable, shall be transferred or allocated to all remaining Owners in
proportion to their respective Ownership Shares (and such Ownership Shares shall be
re-calculated without the withdrawing Owners Ownership Share). Notwithstanding
anything in this Agreement to the contrary, if Otter Tail withdraws pursuant to Section
3.06 then, unless another owner of BSP I shall be a participant in the Project as an
Owner, Otter Tail shall retain ownership of any real property rights it has in the
Plant Site and any such rights previously transferred by Otter Tail to the Owners shall
be returned to Otter Tail.(b)
    
    If an Owner withdraws from the Project pursuant to Section 3.05(b), and either
Montana-Dakota or Otter Tail (or both) have not withdrawn, then:
 (i)
    
    After such withdrawal, the E&O Committee shall promptly meet
and determine whether the non-withdrawing Owners (collectively, for purposes of
this Section 3.09(b), the Non-Withdrawing Owners) are able to unanimously
agree as to the reallocation of the withdrawing Owners (each, a Withdrawing
Owner and collectively, the Withdrawing Owners) Ownership Shares without
completing the reallocation process in Section 3.09(b)(ii). Withdrawing Owners
may not participate in such determination by the E&O Committee, or any other
decision of the E&O Committee under this Section 3.09(b).(ii)
    
    If the E&O Committee is unable to unanimously agree as to the
reallocation of a Withdrawing Owners Ownership Shares (the Withdrawn Share)
pursuant to Section 3.09(b)(i), then the Withdrawn Share shall be offered to
each of the Non-Withdrawing Owners according to the following reallocation
process:
 (A)
    
    The reallocation process shall occur within a
sixty (60) day period, which period shall begin on the date after the
E&O Committee has met as required under Section 3.09(b)(i) (the
Decision Period). The reallocation process shall be administered by
or at the direction of the E&O Committee, which shall have the
authority and discretion to set the deadlines therefor, subject at all
times to the requirement that the reallocation process be completed
within the Decision Period.(B)
    
    Each Non-Withdrawing Owner shall promptly
inform all other Non-Withdrawing Owners in writing whether it intends
to accept




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Participation Agreement
    
    Page 21Big Stone II Power Plant
    
    June 30, 2005
 reallocation of its ratable share of the Withdrawn Share. If
any Non-Withdrawing Owner does not intend to accept its ratable share
of the Withdrawn Share, then those Non-Withdrawing Owners that have
elected to accept
reallocation of their ratable share of the Withdrawn
Share shall again have the opportunity to elect to accept reallocation
of their ratable share of the unaccepted Withdrawn Share. This process
shall continue until either (1) the Non-Withdrawing Owners have elected
to accept reallocation of the entire Withdrawn Share, or (2) all
Non-Withdrawing Owners have elected to not accept some amount of the
Withdrawn Share.(C)
    
    If some amount of the Withdrawn Share remains
unallocated by the earlier of the end of the process described in
Section 3.09(b)(ii)(B) and the end of the Decision Period, then the E&O
Committee shall meet to (1) determine if one or more of the
Non-Withdrawing Owners will accept the unallocated Withdrawn Share, (2)
reduce the size of the Project, or (3) wind up the Project as provided
in Section 14.02(b) of this Agreement.
 3.10
Termination for Failure to Obtain Financing Approvals.
 ARTICLE IV
 OWNERSHIP
 4.01 Plant Property. Schedule 3.03(a)
 (a)
    
    the Project Site, including all land and interests in land not a part of such
site but intended for exclusive use in connection with the construction, operation,
maintenance or repair of the Plant, as from time to time located or contemplated;




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Participation Agreement
    
    Page 22Big Stone II Power Plant
    
    June 30, 2005
 (b)
    
    all public and private permits, licenses, orders and other authorizations
issued or obtained in connection with the construction, operation, maintenance or
repair of the Plant or other Plant Property;(c)
    
    all materials, parts and component equipment acquired for incorporation or
installation in the Plant or other Plant Property, either in the initial construction
thereof or as subsequent additions or betterments thereto or replacements thereof, and
all tools and construction equipment acquired for use or consumption exclusively in
connection with the construction, operation, maintenance or repair of the Plant or
other Plant Property;(d)
    
    all products and byproducts produced from Plant Property;(e)
    
    all railroad equipment, vehicles, tools, office and other equipment and
furnishings, Fuel and any other fuel supplies, spare parts, other Materials and
Supplies and all other materials and supplies, whether to be located in the Plant or on
the Plant Site or off-site, which are intended for exclusive use in connection with the
construction, operation, maintenance or repair of the Plant or other Plant Property;
and(f)
    
    all contracts regarding the Plant and all options and contract rights to
acquire any of the foregoing Plant Property.
 4.02 Title.
 4.03 Waiver of Partition Rights.
 4.04 Right of Possession.
 4.05 Transfer of Title.




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Participation Agreement
    
    Page 23Big Stone II Power Plant
    
    June 30, 2005
  ARTICLE V
 DISPOSITION OF OWNERSHIP INTERESTS
 5.01
General Prohibition on Transfers of Ownership Interests.
 5.02
Acts or Circumstance Not Deemed Transfers.
 (a)
    
    subject to the right of first refusal provisions of this Agreement, the sale by
any Owner of all or part of its Ownership Share of the Plant Property or any part
thereof if made by a trustee, mortgagee or other secured party as a remedy for a
default under such encumbrance; provided that the transferee must agree to be bound by
the terms of this Agreement and to perform the obligations of an Owner hereunder;(b)
    
    the transfer of the title of any Owner to all of its Ownership Share of the
Plant Property as an incident to a sale, merger or other transfer of all or
substantially all of such Owners assets as an entirety or of all or substantially all
of such Owners assets used in its electric utility business, as an entirety;(c)
    
    liens for taxes not yet due, or non-material liens for taxes or material liens
for taxes which are being reasonably contested;




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Participation Agreement
    
    Page 24Big Stone II Power Plant
    
    June 30, 2005
 (d)
    
    liens incurred in the ordinary course of business and not in connection with
the borrowing of money, including, without limitation, liens incidental to the
operation and maintenance of the Plant, liens in connection with construction
improvements in compliance with any Project Documents or otherwise, liens in connection
with an Owners maintenance of bank accounts, workers compensation, unemployment
insurance and other types of social security, surety and appeal bonds, bids, and
performance bonds (provided any of the foregoing liens that are material are being
contested and adequate reserves are maintained with respect thereto);(e)
    
    the pledge or granting a security interest in, or assigning as collateral, all
or any portion of an Ownership Share or the Plant Property or an Owners interest in
this Agreement in order to obtain Financing. Any Person receiving such an interest in
connection with a default by an Owner on its Financing shall be required to assume and
become obligated to perform all of the obligations of Owner at such time as that Person
including, without limitation, (i) perform any of that Owners obligations then
outstanding with respect to the foregoing, (ii) cure any monetary defaults of such
Owner and any non-monetary defaults that are reasonably capable of being performed by
such Person, and (iii) be deemed to have assumed and become obligated to perform the
obligations of such Owner thereafter arising
under this Agreement in respect of such property; provided that the transferee must
agree to be bound by the terms of this Agreement and to perform the obligations of
an Owner hereunder;(f)
    
    the transfer of the title of any Owner to all or any part of its Ownership
Share of the Plant Property to an Affiliate; provided, however, that any such Affiliate
must satisfy the creditworthiness assurances set forth in Section 7.10; and(g)
    
    any necessary reallocation of Ownership Shares as a result of a decision by
certain Owners to continue the Project under Section 3.05(b).
 5.03 Right of First Refusal.
 (a)
    
    If any Owner (the Transferring Owner) desires to transfer all or any part of
its Ownership Share pursuant to a bona fide written offer from a third party including,
without limitation, another Owner (the Proposed Purchaser), the Transferring Owner
shall first offer the proportion of its Ownership Share that it desires to Transfer
(the Transferred Share) to each of the other Owners (collectively, for purposes of
this Section 5.03, the Non-Transferring Owners) according to the following procedure:
 (i)
    
    The Transferring Owner shall notify the Non-Transferring Owners
of its intention to Transfer the Transferred Share and furnish the
Non-




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Participation Agreement
    
    Page 25Big Stone II Power Plant
    
    June 30, 2005
 Transferring Owners with a copy of the bona fide written offer signed by
the Proposed Purchaser setting forth, in reasonable detail, the price, terms
and conditions (including, without limitation, the source and terms of any
financing) of the proposed Transfer. To be a bona fide offer, such offer must
be for all cash and the Proposed Purchaser must satisfy the creditworthiness
assurances set forth in Section 7.10.(ii)
    
    The right of first refusal process (including the closing of
any transactions thereunder) shall occur within a one hundred eighty (180) day
period, which period shall begin on the date the Transferring Owner provides
the Non-Transferring Owners with a copy of the bona fide written offer pursuant
to Section 5.03(a)(ii) (the Election Period). The right of first refusal
process shall be administered by or at the direction of the E&O Committee,
which shall have the authority and discretion to set the deadlines therefor,
subject at all times to the requirement that the process be completed within
the Election Period. Non-Transferring Owners who elect to purchase any portion
of the Transferred Share must do so on all of the same terms and conditions as
are set forth in the Proposed Purchasers bona fide offer to the Transferring
Owner. Notwithstanding anything to
the contrary in this Section 5.03, the Non-Transferring Owners, or one of
them, must collectively purchase the entire Transferred Share in order to
validly exercise the right of first refusal.(iii)
    
    Each Owner shall promptly inform the Transferring Owner in
writing whether it intends to purchase its ratable share of the Transferred
Share. If any Non-Transferring Owner does not elect to purchase its ratable
share of the Transferred Share, then those Owners who have elected to purchase
their ratable share of the Transferred Share shall again have the opportunity
to elect to purchase their ratable share (vis-à-vis those Owners who elected to
participate in the initial round). This process shall continue until either
(A) the Non-Transferring Owners have elected to purchase the entire Transferred
Share, or (B) the Non-Transferring Owners have not elected to purchase the
entire Transferred Share.(iv)
    
    If the Non-Transferring Owners have not elected to purchase the
entire Transferred Share, the Transferring Owner shall be entitled, for a
period ninety (90) days after the end of the Election Period, to complete the
transfer of the Transferred Share to the Proposed Purchaser, in all respects
pursuant to the terms of its bona fide written offer; provided, however, that
no such sale may occur unless the Proposed Purchaser shall have agreed, in
writing, to be bound by all of the terms of this Agreement and any other
Project Agreements to which all other Owners are parties.(v)
    
    If the sale of the Transferred Share is not completed within
said ninety (90) day period, the Transferred Share may not be Transferred
without again complying with the requirements of this Section 5.03.




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Participation Agreement
    
    Page 26Big Stone II Power Plant
    
    June 30, 2005
 
 5.04 Covenants Run With Land.
 ARTICLE VI
PROJECT AND PLANT MANAGEMENT
 6.01 Management by Committee.
 6.02 Composition of Committees.
 6.03 Authority of Representatives to Act on Behalf of Owner.
 (a)
    
    The primary representative and alternative representative of any Owner on any
Committee shall be deemed for all purposes to be duly authorized to represent and act
on behalf of the Owner in respect of all business conducted by the Committee and each
Owner agrees to be bound by action taken by each Committee on matters within the
authority of such Committee, to the extent allowed by Applicable Law.(b)
    
    If both the primary representative and alternative representative of an Owner
are unable to attend a Committee meeting, then an Owner shall send another natural
Person to represent it at such Committee meeting and such natural Person shall
presumptively be deemed to be duly authorized to represent and act on behalf of the
Owner in respect of all business conducted by the Committee. Similarly, if a Committee
proposes to act via a written action, an Owner shall ensure that a natural Person, duly
authorized, duly considers such proposed written action.




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Participation Agreement
    
    Page 27Big Stone II Power Plant
    
    June 30, 2005
 (c)
    
    Failure of an Owner to send another natural Person or to respond to a request
to take action by written action shall not preclude any Committee from taking such
action on behalf of all Owners (provided that notice of such meeting or action was
properly given and that the requisite approval to take such action is received),
despite any such failure to be present or to respond to a request to act by written
action. For the avoidance of doubt, it is the explicit agreement of the Owners that no
Owner or Owners may prevent Committee action by failing to be present at a duly called
Committee after receiving proper notice or to respond to a request for written action.(d)
    
    Notwithstanding anything in this Agreement to the contrary, an Owners
representative on a Committee shall be prohibited from taking action, voting or
otherwise approving or disapproving of any action under this Agreement if (i) such
Owner has been removed from the Project pursuant to Section 3.10 because it has not
obtained all approvals necessary for it to finance and own its Ownership
    Share by the Financing and Approval Deadline, (ii) such Owners right to vote its
Ownership Share is under suspension pursuant to Section 11.02, or (iii) one or more
other Owners have acquired such Owners rights in the manner described in Section
11.02(a) and the defaulting Owner has not repurchased those rights as described in
Section 11.02(b). In the event an Owners representative is prohibited from taking
action as described in the foregoing sentence, such Owners Ownership Share shall
not be counted for the purpose of calculating the vote required to achieve a Double
Majority except to the extent that one or more other Owners have acquired that
Ownership Share pursuant to Section 11.02(a), and such Owners Committee
representatives shall not be counted for the purpose of determining the number of
Committee members required to take the action being considered.
 6.04 Committee Operational Procedures.
 (a)
    
    Each Committee shall meet with such frequency and in accordance with such rules
and procedures as it deems advisable for the conduct of its business, including, by way
of illustration only, Roberts Rules of Order; provided that, in any instance
in which such rules or procedures conflict with this Agreement, the provisions of this
Agreement shall control.(b)
    
    Each Committee shall designate one of its members as a chairperson, who shall
prepare and maintain minutes of all meetings and records of written actions for all
acts of a Committee taken without a meeting, copies of which shall be provided to each
Owner as promptly as reasonably possible after each such meeting or action without a
meeting.(c)
    
    Each Committee member shall be given advance written notice of any meeting of
the Committee stating the place, date and hour of the meeting and the purpose(s) for
which the meeting is called. Such advance written notice shall be given not less than
three (3) days and no more than thirty (30) days in advance of a meeting. A Committee
member who is present at a meeting shall be deemed to have




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Participation Agreement
    
    Page 28Big Stone II Power Plant
    
    June 30, 2005
 waived notice thereof.
Physical presence shall not be required for attendance of a meeting of any Committee
if, by telephone or other means, the Committee members not physically present are able
simultaneously to hear and be heard by all other Committee members present. Each
Committee member shall be given reasonable advance written notice of any proposed
action to be taken.(d)
    
    The E&O Committee may conduct its business without meetings and may act by oral
or written consent of the representatives; provided, however, that except when
impracticable because of emergency conditions or except as to representatives who waive
(in advance) this requirement, the representative of each Owner shall be consulted as
to his approval or disapproval of any action proposed to be authorized by oral or
written consent.(e)
    
    The Coordination Committee may conduct its business without meetings and may
act by the unanimous written (but not oral) consent of the number of members of the
Coordination Committee that is required at a minimum to take action at a meeting at
which all Coordination Committee members are present.(f)
    
    Any two (2) Committee members of a particular Committee may call a Committee
meeting by giving notice as required by this Agreement.(g)
    
    Any Committee member may put an item on the agenda for a Committee meeting,
provided he serves on such Committee, and any Committee member may initiate any
proposal for written action by a Committee of which he is a Committee member.(h)
    
    Whenever any Committee, except the Coordination Committee, is unable to act
because of the inability or failure of Committee members to unanimously agree to take
or not to take any particular action, then such matter shall be referred to the
Coordination Committee for action.
 6.05 Coordination Committee.
 (a)
    
    Coordination Committee members shall be the most senior officer of each Owner
or of an Owners operating utility, as applicable, or be a natural Person who has been
granted the same level of authority of such more senior officer for purposes of acting
on its behalf.(b)
    
    In addition to any purposes, responsibilities and authority specified elsewhere
herein, the Coordination Committee shall have as its purposes, responsibilities and
authority, the following:
 (i)
    
    to act as the liaison between the Owners as to matters relating
to the Project, the Plant or other Plant Property and to supervise and
coordinate the functions of the other Committees;(ii)
    
    to be the definitive policy-making body of the Owners in all
matters relating to the Project, the Plant or other Plant Property which are
not by




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Participation Agreement
    
    Page 29Big Stone II Power Plant
    
    June 30, 2005
 this Agreement or by action of the Coordination Committee delegated to
another Committee;(iii)
    
    to take responsibility, or delegate such responsibility to
another Committee including the responsibility for taking, all action necessary
or deemed advisable in connection with the Project or the ownership, operation,
maintenance or repair of the Plant or other Plant Property which has not been
provided for in this Agreement or other contract heretofore or hereafter made
by the Owners;(iv)
    
    to take action on all matters which are referred to it by the
E&O Committee or another Committee; and(v)
    
    to remove and replace the Operator and appoint another as
Operator if it finds that the then serving Operator has materially failed to
perform the services required of it.
 (c)
    
    To the extent necessary, Coordination Committee members shall execute all
documents required to effectuate a particular duly authorized and approved act of the
Coordination Committee, regardless of whether a particular Coordination Committee
member acted to approve such act.(d)
    
    In the event of conflict between the actions or decisions of the Coordination
Committee and any other Committee, then the act or decision, as the case may be, of the
Coordination Committee shall govern in all respects.(e)
    
    The approval of at least a Double Majority shall constitute an act of the
Coordination Committee.
 6.06 Actions Requiring Coordination Committee Approval.
 (a)
    
    awarding any Construction Contract;(b)
    
    any matter referred to the Coordination Committee by the Engineering and
Operating Committee;(c)
    
    any contracts or arrangements with any Owner or Affiliate of any Owner;(d)
    
    to consider and take appropriate action against any defaulting Owner in the
event of an Event of Default; and(e)
    
    removal of the Operator for any reason; provided, however, that an Owner who is
also the Operator subject to removal may not vote on the termination of itself as
Operator.




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Participation Agreement
    
    Page 30Big Stone II Power Plant
    
    June 30, 2005
 
 6.07 Engineering and Operating Committee.
 (a)
    
    In addition to any purposes, responsibilities and authority specified elsewhere
herein, the Engineering and Operating Committee shall have as its purposes,
responsibilities and authority, the following:
 (i)
    
    to determine policy for the Owners on a day-to-day basis as to
matters relating to the proper design, construction, operation, maintenance and
repair of the Plant and Plant Property and to provide general supervision of
the Operator as to such matters and of the planning and execution of the
various undertakings involved in the Project and the operation, maintenance and
repair of the Plant and Plant Property;(ii)
    
    to develop and approve a plan for development of the Project,
construction schedule, Project Budget, Operating Plan and Budget and any
material changes or amendments thereto;(iii)
    
    to advise and direct the Operator as to the identity and
general form and content of the reports and formal statements of policies and
procedures to be prepared by the Operator for review and approval of the
Engineering and Operating Committee in respect to the construction, operation,
maintenance and repair of the Plant and Plant Property;(iv)
    
    except as set forth herein or in the O&M Agreement, to approve
the form and substance, and to authorize the execution, of the Joint Facilities
Agreements, the O&M Agreement and other Project Agreements not executed as of
the Effective Date;(v)
    
    to review and approve the procedures developed by the Operator
for determining the Net Effective Generating Capacity, Minimum Net Generation
and Net Energy Generation;(vi)
    
    to take all actions necessary in connection with the Project
within the scope of its powers and responsibilities hereunder;(vii)
    
    to authorize and direct the Operator to approve mechanical
completion, substantial completion and final completion of the Plant pursuant
to the Construction Contracts and to accept the results of the Performance
Testing, and to contest, settle, off-set or waive liquidated damages that may
become due and payable pursuant to the terms of the Construction Contracts;(viii)
    
    to make the determination as to when the Plant has commenced Commercial
Operation;(ix)
    
    subject to the terms of the O&M Agreement and taking into
account the particular financing arrangements of the Owners, to determine when
Plant Property should be retired and to authorize disposition by the Operator
of




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Participation Agreement
    
    Page 31Big Stone II Power Plant
    
    June 30, 2005
 such Plant Property no longer needed for the operation, maintenance or
repair of the Plant or other Plant Property;(x)
    
    to act upon all matters referred to it by the Coordination
Committee and upon all matters relating to the Project or the operation,
maintenance and repair of the Plant or other Plant Property referred to it by
any other Committee;(xi)
    
    to take all action necessary or deemed advisable in connection
with the Project or the operation, maintenance and repair of the Plant or other
Plant Property for which provision has not otherwise been made by or on behalf
of the Owners;(xii)
    
    to develop the Fuel procurement policies, Fuel cost allocation
adjustment factor and other procedures necessary for the O&M Agreement; and(xiii)
    
    any contract in excess of Five Hundred Thousand Dollars ($500,000) if such
contract is not provided for in the most recent BSP II annual budget.
 (b)
    
    The Engineering and Operating Committee may act only by unanimous approval of
its members and shall refer to the Coordination Committee for resolution any matters
which it does not approve.
 6.08 Actions Requiring Unanimous Coordination Committee Approval.
 (a)
    
    withdrawal of any Owner, except as provided in Section 3.05 and Section 3.06;(b)
    
    termination of this Agreement or sale of the Project or the Plant before the
fiftieth (50th) anniversary of the date of Commercial Operation; and(c)
    
    reduction of size of Plant below 540 MW prior to Financial Closing.
 ARTICLE VII
 CONTRIBUTIONS; EXPENDITURES
 7.01 Obligation to Pay Project Costs; Trust Account.
 (a)
    
    Except as otherwise provided in this Agreement, each Owner shall be liable for
Project Costs in proportion to their Ownership Shares and each Owner shall deposit
monies in the Trust Account as required to pay for its proportion of the Project Costs.
Funds deposited into the Trust Account are Plant Property and are for the payment of
Project Costs and otherwise for the account of the Project and the operation,
maintenance or repair of the Plant or other Plant Property, and no Owner shall have any
right, title or ownership interest in the Trust Account other than a beneficial
interest, in proportion to its Ownership Share, nor right to




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Participation Agreement
    
    Page 32Big Stone II Power Plant
    
    June 30, 2005
 withdraw or direct
application of such funds, nor otherwise exercise control over such Trust Account,
except as provided for in this Agreement.(b)
    
    The Operator, on behalf of the Owners, has caused the Trust Account to be
established pursuant to a trust agreement substantially in the form attached hereto as
Schedule 7.01. Each Owner hereby acknowledges that any such funds contributed by it for
deposit in the Trust Account constitute a prepayment of its obligation to pay Project
Costs. Each Owner further acknowledges that its interest in funds in the Trust Account
are subject to applicable rights of set off, recoupment, and such other legal or
equitable defenses as may be available to the Operator, and other Owners under
Applicable Law.
 7.02 Payment Procedures.
 (a)
    
    Funds to pay for Project Costs shall be requisitioned from the Owners as
follows:
 (i)
    
    Before the Effective Date, the Operator, on behalf of the
Engineering and Operating Committee, shall issue a written notice to the
Owners, which written notice shall state the amount required to be deposited
into the Trust Account for each Owner (i) to reimburse the Owners for the
Project Costs that have been expended prior to the Effective Date in connection
with Phase I activities but not yet reimbursed by the other Owners, and (ii) to
provide a Progress Payment in the amount of Ten Million Dollars ($10,000,000).
The Owners shall pay such amounts on the Effective Date.(ii)
    
    In the event that the Progress Payment made pursuant to Section
7.02(a)(i) or any subsequent Progress Payment is not sufficient to fund the
completion of all Phase II activities, then prior to the depletion of all
previously made Progress Payments, the Operator, on behalf of the Engineering
and Operating Committee, shall issue a written requisition notice to the
Owners, which written notice shall state the amount required to be deposited
into the Trust Account for each Owner to provide for the Phase II Project Costs
reasonably expected to be expended in excess of previously made Progress
Payments. The Owners shall pay such amounts within thirty (30) days of such
requisition.(iii)
    
    During Phases II, III and IV, unless the Engineering and
Operating Committee directs otherwise, funds shall be requisitioned from the
Owners from time to time as reasonably determined by the Operator. Unless
otherwise directed by the Engineering and Operating Committee, the Operator
shall issue a requisition notice to the Owners no later than the 15th of each
month, which notice shall state amounts required to be deposited into the Trust
Account by each Owner on each Monday (or the next Business Day in the event a
Monday is a bank holiday) of the upcoming month, and include an accounting of
the Project Costs then due and payable (or that will become due and payable
before the end of the upcoming month) and copies of any invoices or other
supporting




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Participation Agreement
    
    Page 33Big Stone II Power Plant
    
    June 30, 2005
 materials. The Owners shall promptly pay such amounts by electronic
funds transfer into the Trust Account on the Monday (or next Business Day) so
indicated on the notice. In no event shall the Engineering and Operating
Committee direct requisitions for the Trust Account Deposits described in this
Section 7.02(a)(iii) in any manner that would require deposits from all Owners
to pay all Project obligations before they become due.(iv)
    
    To the extent funds are available in the Trust Account, the
Operator shall pay all invoices for Project Costs, subject in all respects to
the oversight of the E&O Committee. For purposes of this Agreement, Project
Costs shall only be paid to the extent they are Project Costs identified and
included in
the Project Budget, additional expenses approved by the Engineering and
Operating Committee as Project Costs or required to be expended in response
to an emergency. The Engineering and Operating Committee may alter the
payment procedures set forth in this Section 7.02 by issuance of directives
to the Operator and shall have the right to request information regarding
the Project Costs to be paid.(v)
    
    The Owners shall require Operator to prepare and deliver to the
Owners, not later than forty-five (45) days following the end of each calendar
year during the Term and not later than sixty (60) days following the date on
which this Agreement is terminated, a cash-based reconciliation of Trust
Account Deposits paid during the previous calendar year or, in the case of the
reconciliation done following the termination of this Agreement, the period
from January 1 of the calendar year in which termination of this Agreement
occurs until the end of the Term. Such reconciliation shall also include an
analysis of any differences between Project Costs on a cost basis and the
applicable budget for such Project Costs. Owners may withdraw from the Trust
Account the amount by which such reconciliation indicates the sum of all Trust
Account Deposits exceeded the sum of all Project Costs paid or due and payable
in accordance with this Agreement during the period to which the reconciliation
applies. Not later than twenty (20) days following receipt of such
reconciliation, Owners shall deposit in the Trust Account the amount in
immediately available funds by which such reconciliation indicates the sum of
all Project Costs paid or due and payable in accordance with this Agreement
exceeds the sum of all Trust Account Deposits during the period to which the
reconciliation applies.
 7.03 Reservation of Right to Dispute Payments.
 7.04 Services and Property Contributed by Owners.




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Participation Agreement
    
    Page 34Big Stone II Power Plant
    
    June 30, 2005
  7.05 Emergency Services.
 7.06 Taxes.
 7.07 Fuel.
 (a)
    
    The Engineering and Operating Committee shall establish practices and
procedures for determining the Fixed Fuel requirements of the Plant.(b)
    
    Fuel, when delivered to the burners at the Plant, shall be charged from
inventory to operation. The cost of Fuel delivered to the burners at the Plant shall
consist of all charges to that account which under the FERC Accounts in effect on the
Effective Date is designated account 501, including the cost of coal and ash handling,
and shall be apportioned among the Owners as follows:
 (i)
    
    the cost of the Plants Fixed Fuel requirements shall be
apportioned among the Owners in accordance with their Ownership Shares; and




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Participation Agreement
    
    Page 35Big Stone II Power Plant
    
    June 30, 2005
 (ii)
    
    the cost of all other Fuel requirements of the Plant shall be
apportioned among the Owners in the same proportion that their respective
generation scheduled in excess of their Ownership Share of the Minimum Net
Generation bears to the total Net Energy Generation scheduled in excess of
Minimum Net Generation;
  7.08 Station Power.
 7.09 Insurance.
 (a)
    
    During Phases I, II, and III of the Project, in accordance with the direction
and specifications of the Engineering and Operating Committee, the Owners shall jointly
procure or cause to be procured and maintain in force policies of comprehensive bodily
injury and property damage liability insurance, pollution liability, professional
liability, extra expense and delay in start up, all-risk builders risk insurance,
employees dishonesty bond, automobile liability insurance, workers compensation
insurance, and such other policies of insurance as are normally carried by utilities
constructing facilities similar to the Project.(b)
    
    During Phase IV of the Project, in accordance with the direction and
specifications of the Engineering and Operating Committee, the Owners shall jointly
procure or cause to be procured and maintain in force policies of broad form property
insurance, broad form boiler and pressure vessel insurance, workers compensation
insurance covering employees of the Operator engaged in the performance of its
responsibilities under the Project Agreements at the job site, comprehensive bodily
injury and property damage liability insurance, pollution liability, professional
liability, employees dishonesty bond, automobile liability insurance, and such other
policies of insurance as are normally carried by utilities operating facilities similar
to the Project.




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Participation Agreement
    
    Page 36Big Stone II Power Plant
    
    June 30, 2005
 (c)
    
    Each Owner shall be named an insured with the other Owners as their interests
appear on all insurance, and when appropriate, the insurance shall carry
cross-liability endorsements.(d)
    
    The insurable values, limits, deductibles, retentions and other special terms
of the Owners Insurance shall be determined by the Engineering and Operating Committee
prior to the placement of such Owners Insurance. After such
determination, a policy of Owners Insurance shall not be changed without the prior
approval of the Engineering and Operating Committee except for minor changes as to
which notification shall be given to the Engineering and Operating Committee.(e)
    
    Each Owner shall be given a copy of the insurance policies forms together with
a line sheet therefore naming the insurers and underwriters and the extent of their
participation.(f)
    
    Each Owner shall have the right, by written notice to the party procuring the
policy, to name any mortgage, trustee or secured party on all or any of the Owners
Insurance policies as loss payees or additional insured as their interests may appear.(g)
    
    Insurance policies procured pursuant to this Section 7.09 shall be primary
insurance for all purposes and shall be so endorsed.(h)
    
    It is expressly understood and agreed that each Owner has an insurable interest
in the Project and may procure for its own account additional insurance with respect to
its interest as it may determine. The cost of such insurance shall be paid by such
Owner from its own funds and the proceeds of such insurance shall be payable to such
Owner. Other Owners shall not have any rights or interest in such insurance or the
proceeds thereof.
 7.10 Assurances of Creditworthiness.




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Participation Agreement
    
    Page 37Big Stone II Power Plant
    
    June 30, 2005
 (a)
    
    After Financial Closing, in order to demonstrate its ability to fulfill its
ongoing obligations under this Agreement, each Owner shall submit to the Engineering
and Operating Committee:
 (i)
    
    its audited or unaudited balance sheet and income statement on
not less than a quarterly basis and audited annual financial statements, in
each case in the form regularly prepared by such Owner or its accountants for
such period and corresponding periods in previous years;(ii)
    
    evidence that it has a credit rating of at least the Minimum
Rating; and(iii)
    
    such other financial information as may reasonably be
requested by the Engineering and Operating Committee.
 (b)
    
    If, after review of such financial information, the Engineering and Operating
Committee determines that an Owner does not have a credit rating of at least the
Minimum Rating, such Owner shall be required to deposit, in addition to any other
amounts required to be deposited pursuant to this Agreement, a sum equal to the largest
two (2) weeks of Project Costs anticipated to be requisitioned in the next twelve (12)
months (as determined by the E&O Committee in its sole discretion) into the Trust
Account until such Owner again achieves a credit rating of at least the Minimum Rating.
 7.11 Right to Obtain Financing.
 ARTICLE VIII
 CASUALTY LOSS; CONDEMNATION
 8.01 Repair or Replacement.




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Participation Agreement
    
    Page 38Big Stone II Power Plant
    
    June 30, 2005
  8.02 Eminent Domain.
 (a)
    
    If all of the Plant is taken from the Owners by the exercise of the power of
eminent domain (or by voluntary conveyance in lieu thereof), or if a part of the Plant
Property is thus taken and the Engineering and Operating Committee determines, pursuant
to this Section 8.02, that the part taken cannot be replaced and/or the remainder of
the Plant Property cannot be restored in such a way that the Plant and other Plant
Property, considered as a whole, will have substantially the same Net Effective
Generating Capacity and operating and economic characteristics as existed immediately
prior to such taking, then this Agreement shall be terminated by the Owners upon
request by any Owner.(b)
    
    If a part of the Plant Property is taken from the Owners by the exercise of the
power of eminent domain (or by voluntary conveyance in lieu thereof), and if the
Engineering and Operating Committee determines, pursuant to this Section 8.02, that the
part so taken can be replaced and/or the part not taken can be restored so that the
Plant and other Plant Property, considered as a whole, will have substantially the same
Net Effective Generating Capacity and operating and economic characteristics as existed
immediately prior to such taking, then:
 (i)
    
    if the cost of such replacement and/or restoration is estimated
by the Engineering and Operating Committee to be less than Thirty Million
Dollars ($30,000,000), the Operator shall be directed to cause, as




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Participation Agreement
    
    Page 39Big Stone II Power Plant
    
    June 30, 2005
 expeditiously as possible, such replacement and/or restoration to be
accomplished so as to restore the Plant and other Plant Property, considered as
a whole, to substantially the same Net Effective Generating Capacity and
operating and economic characteristics as existed immediately prior to such
taking; and the cost thereof shall constitute Project Costs; or(ii)
    
    if the cost of such replacement and/or restoration is estimated
by the Engineering and Operating Committee to be Thirty Million Dollars
($30,000,000) or more, the Operator shall be directed to cause such replacement
and/or restoration to be accomplished in the manner agreed upon by the Owners,
but if the Owners shall be unable to agree, within forty-five (45) days after
the taking has occurred, upon the manner of such replacement and/or restoration
or upon any alternative disposition of the matter, then the Operator shall be
directed to cause such replacement and/or restoration to be accomplished so as
to restore the Plant and other Plant Property, considered as a whole, to
substantially the same Net Effective Generating Capacity and operating and
economic characteristics as existed immediately prior to such taking; and the
cost thereof shall constitute Project Costs.
 ARTICLE IX
 LIABILITY
 9.01 Limitation and Release of Liability to Other Owners.
 (a)
    
    the performance or non-performance of services or the supplying of, or failure
to supply, any property, in connection with the Project, or the ownership, operation,
maintenance or repair of the Plant or other Plant Property, or(b)
    
    the past or future performance or non-performance of the obligations of any
Owner under this Agreement or any Project Agreement.




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Participation Agreement
    
    Page 40Big Stone II Power Plant
    
    June 30, 2005
 9.02 Waiver of Certain Damages.
 9.03 Assignment of Rights.
 9.04 Reduction of Damages.
 9.05 Shared Liability.
 9.06 Indemnification for Willful Actions.
 9.07 Availability of Insurance Proceeds.




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Participation Agreement
    
    Page 41Big Stone II Power Plant
    
    June 30, 2005
  9.08 Operator Indemnity.
 ARTICLE X
 ENTITLEMENT TO ENERGY AND CAPACITY; INTERCONNECTION
 10.01 Interconnection and Transmission Upgrade Allocation Agreement. Schedule 10.01
 10.02 Generation Entitlement.
 (a)
    
    Initial Production.During Phase III, each Owner shall be entitled to its
Operating Capacity Entitlement and its Ownership Share of Net Energy Generation
including all that produced by Performance Testing, URGE Testing or through Plant
start-up procedures. Each Owner shall take delivery of such Capacity and Energy at the
Point of Interconnection. The Owners shall cause the Operator to provide the Owners
with a schedule of when the Plant will be producing Energy related to testing. If an
Owner cannot use Capacity and Energy produced during testing, then the Owners shall
authorize the Operator to dispose of such Capacity and Energy in a commercially
reasonable manner, including, but not limited to, transacting Energy in the Midwest ISO
energy market or as unscheduled Energy into the Otter Tail control area. For any such
transactions, the Owners shall cause the Operator to collect funds for any and all
settlements and disburse the net proceeds (after deducting its reasonable transaction
costs) to the Owner(s) based on its unscheduled amounts.(b)
    
    Regular Production Allocation.During Phase IV, each Owner shall own its
Operating Capacity Entitlement and its Ownership Share of Net Energy Generation (or
Ancillary Services if so elected pursuant to Section 10.03) produced by the Plant.(c)
    
    Minimum Obligations.When any Owner schedules its Ownership Share of Minimum
Net Generation (or a greater amount, not to exceed its Ownership Share), every other
Owner shall be required to schedule their Ownership Share of Minimum Net Generation (or
a greater amount, not to exceed its Ownership Share). In the event one or more Owners
with Ownership Shares equal to or greater than (*) desire that the Plant not be
operated when it is otherwise available
to be operated, and one or more Owners desire to schedule Energy and/or




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Participation Agreement
    
    Page 42Big Stone II Power Plant
    
    June 30, 2005
 Ancillary
Services from the Plant, the Owner or Owners desiring that the Plant not be operated
may, in lieu of operating the Plant, provide an equal amount of Energy and/or
Ancillary Services from other sources to the Owner(s) that desires to schedule
Energy and/or Ancillary Services from the Plant; any such Energy and/or Ancillary
Services provided from other sources shall be delivered to the Point of
Interconnection (or such other point of delivery as may be agreed) in an amount
equal to that desired to be scheduled. In the event any Owner with less than or
equal to a (*) Ownership Share wishes to schedule Energy from the Plant, and any
other Owner or Owners with greater than (*) Ownership Share do not wish to schedule
Energy from the Plant when the Plant is available, the Owner or Owners not desiring
to schedule shall have the option of providing lower cost energy from other sources
as may be available to the Owner wishing to schedule from the Plant at such point of
delivery as may be mutually agreed; provided however, that if one or more Owners
with an aggregate Ownership Share of greater than or equal to (*) wish to schedule
Energy from the Plant, then this option shall not apply and all Owners shall
schedule at least their respective Ownership Share of the Minimum Net Generation as
provided above.(d)
    
    Disposition of Plant Output.The Owners shall cause or otherwise direct the
Operator to keep the system operator for each Owner advised of the Net Effective
Generating Capacity (or Operating Capacity if lower). It is the intent of the Owners
that the Plant will be operated as a high availability, base load Network Resource
within the parameters of Prudent Utility Practice in order to maximize the life of the
Plant and to avoid high maintenance costs that may be incurred due to operation of the
Plant above its Net Effective Generating Capacity. It is recognized that at times of
testing, when essential to fulfill applicable reliability organization or regional
transmission organization obligations and in emergencies, it may become necessary to
operate the Plant for short periods of time above its Net Effective Generating Capacity
(up to the Rated Capacity). The Operator shall be directed by the Owners to keep such
operations to a minimum.
 10.03
    
    Ancillary Services.
 (a)
    
    Payment for Ancillary Services Generally.The Owners acknowledge that the
markets for Ancillary Services are likely to evolve and that some or all Ancillary
Services from the Plant may be sold either pursuant to a regional or other tariff rate,
or a competitive market (e.g., allowing bidding) may develop for some or all Ancillary
Services. Regardless of the specific market structures that exist at any point in
time, the sale of Ancillary Services by the Owners from the Plant shall follow the
following principles:
 (i)
    
    if the particular Ancillary Service is subject to a Midwest ISO
or other applicable tariff, then the Owners shall be paid for Ancillary Service
on a pro rata based on each Owners Ownership Share; and(ii)
    
    if a competitive market exists for the particular Ancillary
Service then an Owner or Owners may sell the Ancillary Service into the
competitive




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Participation Agreement
    
    Page 43Big Stone II Power Plant
    
    June 30, 2005
 market and the selling Owner shall be entitled to the proceeds from
such sale;
 provided, however, the remaining provisions of this Section 10.03 shall apply to any
sales made under the immediately preceding clauses (i) or (ii).(b)
    
    Operating Reserves.The Owners hereby direct the E&O Committee, as soon as
practicable, to determine the number of megawatts of spinning reserve and supplemental
reserve Ancillary Services that the Plant, based on the Plants design, will be able to
reasonably provide (the Total Operating Reserves). The E&O Committee may update the
Total Operating Reserves from time to time. Each Owner shall be entitled to provide or
sell Operating Reserves from the Plant in an amount no greater that its pro rata share
of Total Operating Reserves based on its Ownership Share.(c)
    
    Reactive Power.Each Owner owns its Ownership Share of all reactive power
produced or available from the Plant and shall have the right to sell such reactive
power into the Midwest ISO market in accordance with this Section 10.03 or self-supply
its own needs with its share of reactive power from the Plant; except that if the
Midwest ISO (or other transmission operator authorized to make such a request) requires
any Owner or the Plant Operator to provide Reactive Power from the Plant and to the
extent the Plant is operated as a single plant as determined under Section 10.03(d)
below, then the revenues and costs recovered by that Owner under the applicable tariff
shall be allocated pro rata to the Owners based on each Owners Ownership Share; or to
the respective Owner(s) providing such reactive power to the extent the Plant is
operated on a pseudo-tie basis as determined under Section 10.03(d) below.(d)
    
    Load Regulation and Frequency Response Service.The Owners hereby direct the
E&O Committee, as soon as practicable, to determine the extent to which Load Regulation
and Frequency Response Service can be supplied by the Plant (Total Load Regulation).
Each Owner shall be entitled to provide or sell Load Regulation and Frequency Response
Service from the Plant in an amount no greater than its pro rata share of Total Load
Regulation based on its Ownership Share.(e)
    
    Plant Operations; Pseudo-Tie.Because the Plant is interconnected with
transmission systems whose owners are members of the Midwest ISO, the E&O Committee
shall review the Midwest ISO Tariff Business Practices that are in effect at the time
of Commercial Operation and determine whether the Plant will be operated as separate
physical generators for the Owners on a pseudo-tie basis or as a single operating
entity, taking into consideration the Owners ability to self-supply their needs for
Reactive Power and other Ancillary Services from the Plant, and other appropriate
factors (with appropriate accounting between the Owners) and the costs of the various
operating options available to the Owners at
that time. The E&O Committee shall also determine the amount of Reactive Power in
VARS that can be supplied by the Plant from time to time and the effect




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##### 



Participation Agreement
    
    Page 44Big Stone II Power Plant
    
    June 30, 2005
 On Net
Available Capacity of the Plant, and so inform the Operator for purposes of possible
supply of Reactive Power to the market and for scheduling of the Net Available
Capacity, associated Energy and bidding or self-supplying Reactive Power by the
Owners. The determination of the E&O Committee may be revised from time to time as
determined by the Owners through the E&O Committee. Should the E&O Committee
determine to operate the Plant on a pseudo-tie or similar basis as if individual
units were supplying such Reactive Power, the Operator may supply any unscheduled
Reactive Power into the market to the extent individual Owners are not harmed and
deposit the proceeds of such market transactions pro rata to Owners not scheduling
or self-supplying Reactive Power during that hour of operation.(f)
    
    In the event an Owner takes Plant output in the form of Ancillary Services
pursuant to this Agreement, the Owners shall cause the Operator to calculate a
reduction in that Owners entitlement to Net Energy Generation and/or Operating
Capacity, as appropriate.(g)
    
    Midwest ISO Directives.Notwithstanding anything to the contrary in Sections
10.03(a) through 10.03(f) above, each Owner that is a transmission-owning member or
market participant in the Midwest ISO shall comply with all directives from the Midwest
ISO regarding supply of Ancillary Services from the Plant.
 10.04 Midwest ISO Market Development.
 10.05 Data to be Provided to the Midwest ISO.




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Participation Agreement
    
    Page 45Big Stone II Power Plant
    
    June 30, 2005
  ARTICLE XI
 DEFAULTS AND REMEDIES
 11.01 Event of Default.
 (a)
    
    the failure of any Owner (i) to pay funds to the Trust Account, upon
requisition by the Operator on or before the date due, (ii) to provide the further
assurances specified by the Coordination Committee at the times and in the amounts
specified by the Coordination Committee in its notice to the Owners, or (iii) to pay
funds to the Trust Account necessary to cure an Event of Default by that Owner in the
ratio that its Ownership Share bears to the total Ownership Shares of the
non-defaulting Owner or as otherwise required by this Agreement; and(b)
    
    the failure of any Owner to perform or observe any of the other covenants and
conditions of this Agreement to be performed or observed by it, or the failure of any
Owner to perform or observe any of the covenants and conditions to be performed or
observed by it under any other contract made by the Owners for the Project or for the
ownership, operation, maintenance or repair of the Plant or other Plant Property, which
continues for a period of five (5) days after notice of such failure is given to it by
any other Owner (unless a different notice period is expressly otherwise expressly
provided for in this Agreement, in which case the other notice period shall control).
 11.02 Contribution by Non-Defaulting Owners.
 (a)
    
    Upon any such payment or performance by non-defaulting contributing Owners, the
defaulting Owners entitlement to Capacity and Energy generated by the
Plant, including the defaulting Owners Operating Capacity Entitlement, any
receivables and all related rights set forth in Article X and the Interconnection
and Transmission Upgrade Allocation Agreement, or otherwise in this Agreement,
including, without limitation, the right to vote its Ownership Share, shall be




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Participation Agreement
    
    Page 46Big Stone II Power Plant
    
    June 30, 2005
 deemed transferred to such non-defaulting contributing Owners in proportion to their
Ownership Shares (based on the ratio that each non-defaulting Owners Ownership
Share bears to the total Ownership Shares of all non-defaulting Owners) and the
defaulting Owner shall have no ownership or other rights with respect to such Energy
or Operating Capacity Entitlement.(b)
    
    For a period of sixty (60) days from the date of the Event of Default, the
defaulting Owner or a Lender may effect a repurchase of its Operating Capacity
Entitlement by paying to the respective non-defaulting contributing Owners the total
amount of money (and/or the reasonable equivalent in money for services or property
provided) paid by each non-defaulting contributing Owner, together with interest
thereon at a rate of interest one percent (1%) greater than the prime rate of
interest published in The Wall Street Journal, Eastern Edition, from the date of
expenditure by the non-defaulting contributing Owners to the date of payment by the
defaulting Owner; provided, however, that such repurchase shall not entitle the
defaulting Owner to any Capacity or Energy sold, used or scheduled from the date of
non-payment or non-performance through such payment date, including any proceeds or
receivables relating thereto, which shall remain for the account of the non-defaulting
contributing Owners. If the defaulting Owner has not cured its default during the
sixty (60) day cure period in this Section, such Event of Default shall be incurable
and the non-defaulting contributing Owners shall have the right to continue to exercise
their rights under this Section 11.02 for the remainder of the Term.
 11.03 Disputed Event of Default.
 11.04 No Waiver.
 11.05 Cumulative Rights.




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Participation Agreement
    
    Page 47Big Stone II Power Plant
    
    June 30, 2005
 ARTICLE XII
 RELATIONSHIP OF PARTIES
 12.01 Nature of Obligations.
 12.02 Tax Status.
 ARTICLE XIII
 DISPUTE RESOLUTION
  ARTICLE XIV
 TERM
 14.01 Term. th th th th




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Participation Agreement
    
    Page 48Big Stone II Power Plant
    
    June 30, 2005
  14.02 Windup Events.
 (a)
    
    the termination of all Project Agreements upon the completion of the Windup
Events in accordance with the terms thereof, the cancellation costs for which shall
become Project Costs;(b)
    
    the timely disposition of all Plant Property by sale, auction, partition or
otherwise;(c)
    
    the deposit of any proceeds from the disposition in the Trust Account
(provided, however, than an Owner that withdraws from the Project pursuant to Section
3.05(b)(i) of this Agreement shall not be entitled to receive any payment paid by such
Owner in connection with such withdrawal pursuant to Section 3.05(b)(i) of this
Agreement or otherwise); and(d)
    
    any other steps necessary steps for the winding-up of the Project, including
the disbursement to the Owners proportionately based on Ownership Shares of any balance
remaining in the Trust Account after the payment of all obligations related in any way
to the Project, the Plant or other Plant Property.
 14.03 Termination by Agreement.
 14.04 Return of Real Property to Otter Tail.
 ARTICLE XV
 REPRESENTATIONS, WARRANTIES
 15.01 Representations and Warranties.
 (a)
    
    it is, as applicable, an agency, cooperative corporation, consumers power
district, municipal corporation and political subdivision, corporation duly organized,
validly existing and in good standing under the laws of the state of its formation and
authorized to conduct business in South Dakota;(b)
    
    it has the power and authority to enter into and perform this Agreement and is
not prohibited from entering into this Agreement or discharging and performing all




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Participation Agreement
    
    Page 49Big Stone II Power Plant
    
    June 30, 2005
 covenants and obligations on its part to be performed under and pursuant to this
Agreement;(c)
    
    it has taken all action required by Applicable Law in order to approve, execute
and deliver this Agreement;(d)
    
    the execution and delivery of this Agreement, the consummation of the
transactions contemplated herein and the fulfillment of and compliance by such Owner
with the provisions of this Agreement will not conflict with or constitute a breach of
or a default under or require any consent, license or approval that has not been
obtained pursuant to any of the terms, conditions or provisions of any law, rule or
regulation, any order, judgment, writ, injunction, decree, determination, award or
other instrument or legal requirement of any court or other agency of government, the
documents of its formation or any contractual limitation, restriction or outstanding
trust indenture, deed of trust, mortgage, loan agreement, lease, other evidence of
indebtedness or any other agreement or instrument to which it is a party or by which it
or any of its property is bound and will not result in a breach of or a default under
any of the foregoing;(e)
    
    it has taken all such action as may be necessary or advisable and proper to
authorize this Agreement, the execution and delivery hereof, and the consummation of
transactions contemplated hereby;(f)
    
    there are no bankruptcy, insolvency, reorganization or receiverships pending or
being contemplated by it, or to its knowledge threatened against it;(g)
    
    to its knowledge, there are no actions, proceedings, judgments, rulings or
orders issued by, or pending before any court or other governmental body that would
materially adversely affect its ability to perform its obligations under this
Agreement; and(h)
    
    this Agreement is a legal, valid and binding obligation of such Owner
enforceable in accordance with its terms, except as limited by laws of general
applicability limiting the enforcement of creditors rights or by the exercise of
judicial discretion in accordance with general principles of equity.
 ARTICLE XVI
 MISCELLANEOUS
 16.01 Publicity Policy.
 (a)
    
    disclose information regarding BSP II as may be required by any Applicable Law;(b)
    
    provide information regarding BSP II to its Affiliates, employees, agents,
lenders, investors, consultants, advisors, contractors, accountants and counsel; and




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Participation Agreement
    
    Page 50Big Stone II Power Plant
    
    June 30, 2005
 (c)
    
    publicize to any third-party (including, but not limited to, through press
releases and other media) information about the general activities of BSP II and any
otherwise publicly available information; provided, however, Parties shall seek to
avoid publicizing to third parties:
 (i)
    
    financial information about BSP II, including the economics of
the Project, except as required to obtain financing or to update rating
agencies or an Owners lender;(ii)
    
    information regarding other Parties;(iii)
    
    information a Party specifically identifies as commercially sensitive
(such as information about ongoing Project negotiations); and(iv)
    
    information respecting the positions of BSP II on federal or
state policy matters (unless consistent with the policy goals or a policy
initiative of BSP II as generally understood by the Parties).
  16.02 Successors and Assigns; Assignment.
 16.03 Notices. Exhibit A
 16.04 Force Majeure.




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Participation Agreement
    
    Page 51Big Stone II Power Plant
    
    June 30, 2005
  16.05 Waiver.
 16.06 Survival.
 16.07 Severability.
 16.08 Governing Law.
 16.09 Consent to Jurisdiction.
 (a)
    
    accepts the non-exclusive jurisdiction of the aforesaid courts;(b)
    
    irrevocably agrees to be bound by any final judgment (after any and all
appeals) of any such court with respect to such documents;(c)
    
    irrevocably waives, to the fullest extent permitted by law, any objection which
it may now or hereafter have to the laying of venue of any suit, action or proceedings
with respect to such documents brought in any such court, and further irrevocably
waives, to the fullest extent permitted by law, any claim that




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Participation Agreement
    
    Page 52Big Stone II Power Plant
    
    June 30, 2005
 any such suit, action or
proceedings brought in any such court has been brought in any inconvenient forum;(d)
    
    agrees that service of process in any such action may be effected by mailing a
copy thereof by registered or certified mail (or any substantially similar form of
mail), postage prepaid, to such Owner or Party at its address set forth below, or at
such other address of which the other Owners or Parties hereto shall have been
notified; and(e)
    
    agrees that nothing herein shall affect the right to effect service of process
in any other manner permitted by law or limit the right to bring any suit, action or
proceeding in any other jurisdiction.
 16.10 Waiver of Trial by Jury.
 16.11 No Third-Party Beneficiaries.
 16.12 Cooperation.
 16.13 Captions.
 16.14 Entire Agreement.
 16.15 Counterparts.




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Participation Agreement
    
    Page 53Big Stone II Power Plant
    
    June 30, 2005
 16.16 Further Assurances.
 [The next page is the signature page.]




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Participation Agreement
    

Page
54Big Stone II Power Plant
    
    June 30, 2005
 IN WITNESS WHEREOF
 OWNERS:
 CENTRAL MINNESOTA MUNICIPAL
    
    
    
    GREAT RIVER ENERGYPOWER AGENCYBy /s/ Paul I. Leland
    
    
    
    By /s/ David SaggauPaul Leland
    
    
    
    David SaggauIts President
    
    
    
    Its President and Chief Executive OfficerHEARTLAND CONSUMERS POWER
    
    
    
    MONTANA-DAKOTA UTILITIES CO., aDISTRICT
    
    
    
    Division of MDU Resources Group, Inc.By /s/ Michael McDowell
    
    
    
    By /s/ Bruce T. ImsdahlMichael McDowell
    
    
    
    Bruce T. ImsdahlIts General Manager
    
    
    
    Its President and Chief Executive OfficerSOUTHERN MINNESOTA MUNICIPAL
    
    
    
    OTTER TAIL CORPORATION dba Otter TailPOWER AGENCY
    
    
    
    Power CompanyBy /s/ Raymond A. Hayward
    
    
    
    By /s/ Charles S. MacFarlaneRaymond A. Hayward
    
    
    
    Charles S. MacFarlaneIts Executive Director and CEO
    
    
    
    Its PresidentWESTERN MINNESOTA MUNICIPALPOWER AGENCYBy /s/ Donald E. HabichtDonald E. HabichtIts President




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Participation Agreement
    

Page
55Big Stone II Power Plant
    
    June 30, 2005
 EXHIBIT A
 PARTY
 donk@utplus.com
 dsaggau@grenergy.com
 mmcdow@hcpd.com
 andrea.stomberg@mdu.com




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##### 



Participation Agreement
    

Page
56Big Stone II Power Plant
    
    June 30, 2005
 cmacfarlane@otpoc.com
 pj.reinarts@smmpa.org
  dp.geschwind@smmpa.org




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##### 



Participation Agreement
    

Page
57Big Stone II Power Plant
    
    June 30, 2005
 nd      david.fhmab@midconetwork.com
  rwahle@mrenergy.com




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##### 



Participation Agreement
    

Page
58Big Stone II Power Plant
    
    June 30, 2005
 EXHIBIT B
 OWNER
    
    OWNERSHIP SHARECMMPA
    
    30 Megawatts (5%)GRE
    
    116 Megawatts (19.333333%)Heartland
    
    25 Megawatts (4.166667 %)Montana-Dakota
    
    116 Megawatts (19.333333%)Otter Tail
    
    116 Megawatts (19.333333%)SMMPA
    
    47 Megawatts (7.833333%)WMMPA
    
    150 Megawatts (25%)Total:
    

600 Megawatts (100%)




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##### 



Participation Agreement
    

Page
59Big Stone II Power Plant
    
    June 30, 2005
 EXHIBIT
B-1
 CMMPA
    
    30 (5.357143%)GRE
    
    116 (20.714286%)Heartland
    
    25 (4.464286%)Montana-Dakota
    
    116 (20.714286%)Otter Tail
    
    116 (20.714286%)SMMPA
    
    47 (8.392857%)WMMPA
    
    110 (19.642857%)Total:
    
    560 (100%)




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Participation Agreement
    

Page
60Big Stone II Power Plant
    
    June 30, 2005
 SCHEDULE 3.02(a)
 OWNER FINANCING PLANS




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##### 



Participation Agreement
    

Page 61Big Stone II Power Plant
    
    June 30, 2005
 SCHEDULE 3.03(a)
 REAL AND/OR PERSONAL PROPERTY INTENDED TO BE PLANT PROPERTY
 HELD BY OTTER TAIL
  Real Property Owned in Fee Title :
  1 2 1 4 1 2 1 4 1 4
  1 2 1 4 1 2 1 4 1 2 th
  1 2 1 4 1 4
  1 4 th
 Options to Purchase Real Property :
 1.
    
    Bray property, 34.31 acres, more or less. Lot 1, Bray Subdivision, located in the East 1/2 of
the Northeast 1/4, and the East 1/2 of the Southeast 1/4, Section 15, Township 121 North, Range 47
West of the 5th P.M., Grant County, South Dakota. $699,940.50 to be paid upon
exercise.2.
    
    E & M Farms, Inc., 305.75 acres, more or less. The East 1/2 of the Northwest 1/4, the West 1/2 of
the Southeast 1/4, except Lot 1, E & M Farms, Inc. Addition in the Southwest 1/4 of the Southeast
1/4, the East 1/2 of the Southwest 1/4, and the West 1/2 of the Northeast 1/4, all in Section 15,
Township 121 North, Range 47 West of the 5th P.M., Grant County, South Dakota.
$749,087.50 to be paid upon exercise.




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##### 



Participation Agreement
    

Page
62Big Stone II Power Plant
    
    June 30, 2005
 
 3.
    
    Donald & Nicole Bray, Record Title Holder, and Timothy & Nikki Rabe, Contract for Deed
Purchaser, 285.69 acres, more or less. The West 1/2 of the West 1/2 of Section 14, and the East 1/2
of the East 1/2 of Section 15, in Township 121 North, Range 47, except the building site and
approximately 20 acres adjoining the buildings on the Southwest part of the East 1/2 of the
Southeast 1/4 of Section 15, Township 121 North of Range 47 West of the 5th P.M.,
Grant County, South Dakota, containing 256 tillable acres, EXCEPTION: Lot 1, Bray
Subdivision, located in the East 1/2 of the Northeast 1/4 and the East 1/2 of the Southeast 1/4,
Section 15, Township 121 North, Range 47 West of the 5th P.M., Lot 1 contains 5.73
acres in the East 1/2 of the Northeast 1/4 and 28.58 acres in the East 1/2 of the Southeast 1/4,
Section 15, Township 121 North, Range 47. Subject to easements and reservations of record.
$84,059.50 to be paid upon exercise.




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Participation Agreement
    

Page
63Big Stone II Power Plant
    
    June 30, 2005
 SCHEDULE 3.05(a)
 REFERENCE RATE METHODOLOGY




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Participation Agreement
    

Page
64Big Stone II Power Plant
    
    June 30, 2005
 SCHEDULE 7.01
 TRUST AGREEMENT
  WITNESSETH:
 WHEREAS,
 WHEREAS,
 NOW, THEREFORE,




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##### 



Participation Agreement
    
    Page 65Big Stone II Power Plant
    
    June 30, 2005
 Deposit of Funds with Trustee
 Investment of Trust Funds Exhibit A
 Trust Account Procedures




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##### 



Participation Agreement
    
    Page 66Big Stone II Power Plant
    
    June 30, 2005
  Exhibit B




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##### 



Participation Agreement
    
    Page 67Big Stone II Power Plant
    
    June 30, 2005
    Exhibit C Exhibit D Exhibit D




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##### 



Participation Agreement
    
    Page 68Big Stone II Power Plant
    
    June 30, 2005
 Termination of Trust
 Trustee Duties
 Indemnification




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##### 



Participation Agreement
    
    Page 69Big Stone II Power Plant
    
    June 30, 2005
  Resignation of Trustee
 Notice.




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##### 



Participation Agreement
    
    Page 70Big Stone II Power Plant
    
    June 30, 2005
   
  th
  
 Exhibit E
 Expenses Exhibit F
 Binding Effect
 Counterparts
 Performance of Obligations
 Governing Law
 [The next page is the signature page.]




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Participation Agreement
    

Page 71Big Stone II Power Plant
    
    June 30, 2005
 IN WITNESS WHEREOF,
 U.S. BANK NATIONAL ASSOCIATION, as Trustee
 By:
 BSP II OWNERS:
 CENTRAL MINNESOTA MUNICIPAL POWER
AGENCY
    
    
    
    GREAT RIVER ENERGYBy
    
    
    
    
    
    ByPaul Leland
    
    
    
    David SaggauIts President
    
    
    
    Its President and Chief Executive OfficerHEARTLAND CONSUMERS POWER DISTRICT
    
    
    
    MONTANA-DAKOTA UTILITIES CO., a Division
of MDU Resources Group, Inc.By
    
    
    
    
    
    ByMichael McDowell
    
    
    
    Bruce T. ImsdahlIts General Manager
    
    
    
    Its President and Chief Executive OfficerSOUTHERN MINNESOTA MUNICIPAL
POWER AGENCY
    
    
    
    OTTER TAIL CORPORATION dba Otter Tail
Power CompanyBy
    
    
    
    
    
    ByRaymond A. Hayward
    
    
    
    Charles S. MacFarlaneIts Executive Director and CEO
    
    
    
    Its PresidentWESTERN MINNESOTA MUNICIPAL
POWER AGENCYByDonald E. HabichtIts President




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Participation Agreement
    

Page 72Big Stone II Power Plant
    
    June 30, 2005
 Exhibit A
 AUTOMATIC MONEY MARKET INVESTMENTS  INVESTMENT AUTHORIZATION LETTER
 X
 X
  Fee Basis




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##### 



Participation Agreement
    

Page 73Big Stone II Power Plant
    
    June 30, 2005
 Exhibit B
 Deposit requirements on June 30, 2005 for BSP II owners
 Company
    
    GRE
    
    
    WMMPA
    
    
    OTP
    
    
    MDU
    
    
    HCPD
    
    
    SMMPA
    
    
    CMMPA
    
    
    TotalOwnership
share
    
    
    116
    
    
    
    150
    
    
    
    116
    
    
    
    116
    
    
    
    25
    
    
    
    47
    
    
    
    30
    
    
    
    600percentage
    
    
    19.33
    %
    
    
    25.00
    %
    
    
    19.33

    %
    
    
    19.33
    %
    
    
    4.17
    %
    
    
    7.83
    %
    
    
    5.00
    %
    
    
    100.00
    %Progress Payment
    
    
    1,933,333
    
    
    
    2,500,000
    
    
    
    1,933,333
    
    
    
    1,933,333
    
    
    
    416,667
    
    
    
    783,333
    
    
    
    500,000
    
    
    
    10,000,000Unreimbursed development costs
    
    
    128,889
    
    
    
    166,666
    
    
    
    128,889
    
    
    
    128,889
    
    
    
    27,778
    
    
    
    52,222
    
    
    
    33,333
    
    
    
    666,665Total amount due
    
    
    2,062,222
    
    
    
    2,666,666
    
    
    
    2,062,222
    
    
    
    2,062,222
    
    
    
    444,444
    
    
    
    835,555
    
    
    
    533,333
    
    
    
    10,666,665




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Participation Agreement
    

Page 74Big Stone II Power Plant
    
    June 30, 2005
 Exhibit C
 Form of Request for Withdrawal
   OTTER TAIL CORPORATION,DBA OTTER TAIL POWER COMPANYDated:
    
    
    
    
    
    ByName:Title:




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Participation Agreement
    

Page
75Big Stone II Power Plant
    
    June 30, 2005
 Exhibit D
 Person(s) Designated to Authorize Disbursement of Trust Funds
 Name (printed)
    
    Signature1.2.3.4.




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Participation Agreement
    

Page 76Big Stone II Power Plant
    
    June 30, 2005
 Exhibit E




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##### 



Participation Agreement
    

Page 77Big Stone II Power Plant
    
    June 30, 2005




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##### 



Participation Agreement
    

Page 78Big Stone II Power Plant
    
    June 30, 2005
 Exhibit F
  
 If all funds are invested in a U.S. Bank proprietary investment vehicle
    
    $2,000.00If funds are invested other than above
    
    $3,500.00Transactional Charges*Disbursements (checks or wires)
    
    $20.00 eachFee for security transactions:A.
    
    Settlement of trades in the open market at
direction of customer
    
    $75.00 per buy or sellB.
    
    Maturities
    
    $50.00 per maturity*(if all funds are invested in a U.S Bank proprietary investment instrument, transactional charges
will not apply)Out-of-Pocket Expenses:Expenses, including but not limited to stationery,
    
    Billed at Costpostage, telephone, insurance, shipping, telex-telegram,reasonable services of outside counsel and agents.(Plus indirect out-of-pocket at 3% of administrative fee.)Note:
    
    Charges for performing other escrow services not specifically covered in this schedule will
be determined by an appraisal of the services rendered. The fees shown in this schedule may be
increased annually.




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Participation Agreement
    

Page
79Big Stone II Power Plant
    
    June 30, 2005
 SCHEDULE 10.01
 Big Stone II Power Plant
 Interconnection and
Transmission Upgrade
Allocation Agreement
 By And Among
 CENTRAL MINNESOTA MUNICIPAL POWER AGENCY,
 GREAT RIVER ENERGY,
 HEARTLAND CONSUMERS POWER DISTRICT,
 MONTANA-DAKOTA UTILITIES CO., A DIVISION OF MDU RESOURCES GROUP, INC.,
 OTTER TAIL CORPORATION OTTER TAIL POWER COMPANY,
 SOUTHERN MINNESOTA MUNICIPAL POWER AGENCY, AND
 WESTERN MINNESOTA MUNICIPAL POWER AGENCY
 JUNE30, 2005




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Interconnection and Transmission Upgrade Allocation Agreement
    

Page 80Big Stone II Power Plant
    
    June 30, 2005
 TABLE OF CONTENTS
 PageARTICLE I
    
    DEFINITIONS, RULES OF INTERPRETATION
    
    
    821.01
    
    
    Rules of Construction
    
    
    821.02
    
    
    Defined Terms
    
    
    82ARTICLE II
    
    INTERCONNECTION AND TRANSMISSION ALLOCATION
    
    
    872.01
    
    
    Interconnection and Transmission Allocation
    
    
    872.02
    
    
    Generator Interconnection Study and Plan
    
    
    882.03
    
    
    Common Interconnection Facilities: Ownership and Cost
Responsibility
    
    
    892.04
    
    
    Common Interconnection Facilities Upgrades: Ownership and Cost
Responsibility
    
    
    902.05
    
    
    Delivery Service Upgrades: Ownership and Cost Responsibility
    
    
    912.06
    
    
    (*) Cost Allocation for Delivery Service Upgrades
    
    
    922.07
    
    
    Alternative Arrangements
    
    
    932.08
    
    
    Establishment and Restoration of Equitable Cost Impacts
    
    
    932.09
    
    
    Conditions
    
    
    942.10
    
    
    Financial Transmission Rights
    
    
    952.11
    
    
    Repayments and Credits
    
    
    952.12
    
    
    Implementation of Interconnection Plan by Operator
    
    
    952.13
    
    
    Transmission Service Requests
    
    
    96ARTICLE III
    
    MISCELLANEOUS
    
    
    963.01
    
    
    Incorporation by Reference
    
    
    963.01
    
    
    Captions
    
    
    963.02
    
    
    Counterparts
    
    
    96EXHIBIT A
    
    
    
    
    98




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Interconnection and Transmission Upgrade Allocation Agreement
    

Page 81Big Stone II Power Plant
    
    June 30, 2005
 Interconnection and Transmission Upgrade
Allocation Agreement
  RECITALS
 WHEREAS,
 WHEREAS,
 WHEREAS,
 WHEREAS,
 NOW, THEREFORE,




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Interconnection and Transmission Upgrade Allocation Agreement
    

Page 82Big Stone II Power Plant
    
    June 30, 2005
 AGREEMENTS
 ARTICLE I
DEFINITIONS, RULES OF INTERPRETATION
 1.01 Rules of Construction.
 (a)
    
    The masculine shall include the feminine and neuter.(b)
    
    References to Articles, Sections, Schedules, or Exhibits shall be to
Articles, Sections, Schedules or Exhibits of this Agreement.(c)
    
    This Agreement was negotiated and prepared by each of the Parties with the
advice and participation of counsel. The Parties have agreed to the wording of this
Agreement and none of the provisions hereof shall be construed against one Party on the
ground that such Party is the author of this Agreement or any part hereof.(d)
    
    The Parties shall act reasonably and in accordance with the principles of good
faith and fair dealing in the performance of this Agreement.
 1.02 Defined Terms.
 2005 Joint Facilities Agreement:
 Affiliate(s):
 (a)
    
    any Person that directly or indirectly, controls or is controlled by or is
under common control with such Person; or(b)
    
    any Person that beneficially owns or holds fifty percent (50%) or more of any
class of voting securities of such Person or owns or holds fifty percent (50%) or more
of an ownership interest (on a fully diluted basis) in such Person.




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Interconnection and Transmission Upgrade Allocation Agreement
    

Page 83Big Stone II Power Plant
    
    June 30, 2005
  Agreement:
 Applicable Law:
 (a)
    
    any and all Laws, legislation, statutes, codes, acts, rules, regulations,
ordinances, treaties or other similar legal requirements enacted, issued or promulgated
by a Governmental Authority;(b)
    
    any and all orders, judgments, writs, decrees, injunctions, Governmental
Approvals or other decisions of a Governmental Authority; and(c)
    
    any and all legally binding announcements, directives or published practices or
interpretations, regarding any of the foregoing in (a) or (b) of this definition,
enacted, issued or promulgated by a Governmental Authority;
  ATRR:
 Baseline Rate Impact:
 BSP I:
 BSP II or Plant:
 Capacity:
 Commercial Operation:
 Commercial Operation Readiness:




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Interconnection and Transmission Upgrade Allocation Agreement
    

Page 84Big Stone II Power Plant
    
    June 30, 2005
  Common Interconnection Facilities:
 Common Interconnection Facilities Upgrades:
 Construction Contracts:
 Contributing Owner:
 Contributing Owner Facilities:
 Delivery Service Upgrades DSUs: ,
 Effective Date:
 Energy:




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Interconnection and Transmission Upgrade Allocation Agreement
    

Page 85Big Stone II Power Plant
    
    June 30, 2005
 Facility Book Value:
 FERC:
 Final Baseline Rate Impact:
 Governmental Approvals:
 Governmental Authority:
 GRE:
 Interconnection Study:
 Laws:
 Midwest ISO or MISO:
 Midwest ISO Tariff:
 Net Energy Generation:
 Non-Owner System DSUs:




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Interconnection and Transmission Upgrade Allocation Agreement
    

Page 86Big Stone II Power Plant
    
    June 30, 2005
 O&M Agreement:
 Operator:
 Otter Tail:
 Owner System DSUs:
 Owner(s):
 Ownership Share: Exhibit B
 Participation Agreement:
 Party(ies):
 Person:
 Plans and Specifications:
 Plant Property:
 Plant Site:
 Point of Interconnection:




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Interconnection and Transmission Upgrade Allocation Agreement
    

Page 87Big Stone II Power Plant
    
    June 30, 2005
 Point of Physical Connection:
 Project:
 Project Funds:
 Prudent Utility Practice:
 Transmission Owner:
 Transmission Provider:
 Transmission System:
 WMMPA:
 ARTICLE II
 INTERCONNECTION AND TRANSMISSION ALLOCATION
 2.01 Interconnection and Transmission Allocation.




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Interconnection and Transmission Upgrade Allocation Agreement
    

Page 88Big Stone II Power Plant
    
    June 30, 2005
 (a)
    
    The provisions of the following Sections 2.02 through 2.13 express the
intention of the Owners to enter into appropriate agreements that will allocate among
them their respective obligations for, and rights to, transmission facilities that are
the result of the Interconnection Request and Delivery Service Requests contemplated
herein. Those facilities shall include: (i) Common Interconnection Facilities; (ii)
Common Interconnection Facility Upgrades; and (iii) DSUs. The Owners agree that any
transmission facilities and/or upgrades associated with generator interconnection and
delivery of energy from the Plant to their respective customers will be assigned to one
of the three types of facilities.(b)
    
    The Owners acknowledge that they will, in order to interconnect the Plant to
the Transmission System, become parties to a Midwest ISO Interconnection Agreement and
other definitive agreements setting forth the terms and conditions to implement the
intentions expressed in Sections 2.02 through 2.13. The Owners agree to incorporate the
principles and economic effect expressed herein into that Midwest ISO Interconnection
Agreement and definitive agreements to the fullest extent possible. To the extent there
is any conflict between this Agreement and the Midwest ISO Interconnection Agreement
and other definitive agreements with regard to interconnection and transmission-related
issues, those agreements shall control.(c)
    
    The Parties acknowledge that this Agreement must be filed with and approved by
FERC. Accordingly, the Parties shall cooperate with the preparation of such filing and
the pursuit of such approval.
 2.02 Generator Interconnection Study and Plan.
 (a)
    
    Interconnection Study and Updates to Request.The Owners acknowledge receipt
of a copy of the Interconnection Study results. The Owners shall cooperate and
promptly make any updates or revisions to the interconnection request that may be
required for any proposed changes in the Plant design, size, interconnection
configuration, or modeling data given in the request, recognizing that there may be
additional interconnection costs incurred as a result. The E&O Committee shall approve
any such changes.(b)
    
    Interconnection and Transmission Plan Identification.The Owners acknowledge
that transmission tariffs of the Owners, Midwest ISO and other
affected transmission providers in existence on the Effective Date may change one or
more times prior to the date on which engineering and construction for the Common
Interconnection Facilities, Common Interconnection Facilities Upgrades and DSUs must
begin in order for the Plant to achieve scheduled Commercial Operation and therefore
the allocation of costs for Common Interconnection Facilities and Common
Interconnection Facilities Upgrades may not be readily ascertainable. In light of
this, the Owners agree that they will as soon as practicable, develop, to facilitate
planning and financing of the Project, a range of possible transmission scenarios
and estimate the likelihood of each scenario




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Interconnection and Transmission Upgrade Allocation Agreement
    

Page
89Big Stone II Power Plant
    
    June 30, 2005
 
  2.03 Common Interconnection Facilities: Ownership and Cost Responsibility.
 (a)
    
    Ownership.The Owners acknowledge that GRE, Otter Tail and WMMPA (each a
Contributing Owner) have made investments in, and are currently the owners of certain
transmission facilities (the Contributing Owner Facilities). Prior to Commercial
Operation, the Owners shall use their respective best efforts to restructure the
existing individual ownership of the Contributing Owner Facilities and structure the
ownership of the new Common Interconnection Facilities so that prior to Commercial
Operation each Owner will own a pro rata tenancy-in-common interest in all Common
Interconnection Facilities and the right to a share of transfer capability in the
Common Interconnection Facilities equal to (*). Responsibility, control
and decision-making regarding the scheduling, operations and maintenance of such Common
Interconnection Facilities shall vest in Otter Tail, unless otherwise agreed by the
Owners. A definitive agreement shall be entered into among the Owners setting forth the
maintenance arrangements for the Common Interconnection Facilities.(b)
    
    Cost Responsibility.The Owners acknowledge and agree that:
 (i)
    
    as of December 31, 2004, each of the Contributing Owner
Facilities had a corresponding book value which shall be provided by the
Contributing Owners to the other Owners as soon as reasonably practicable after
the date hereof (the Facility Book Value);(ii)
    
    each Owner shall bear (*) of the total
costs of the new Common Interconnection Facilities and the total value of the
Contributing Owner Facilities to be provided by the Contributing Owners as soon
as reasonably practicable after the date hereof; and




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Interconnection and Transmission Upgrade Allocation Agreement
    

Page 90Big Stone II Power Plant
    
    June 30, 2005
 (iii)
    
    the Contributing Owner shall be compensated for the Facility
Book Value of the Contributing Owner Facilities (*) to the extent ownership in Contributing Owner
Facilities is restructured as described in Section 2.03(a). Therefore:
 (x)
    
    in consideration of receipt of its undivided
ownership interest in the new Common Interconnection Facilities and the
Contributing Owner Facilities, each Owner shall (*)(y)
    
    in consideration of the restructured ownership
and conveyance of such undivided interest in the Contributing Owner
Facilities, each Contributing Owner shall (*)
 2.04 Common Interconnection Facilities Upgrades: Ownership and Cost Responsibility.
 (a)
    
    Ownership.To the extent Common Interconnection Facilities Upgrades are owned
by the Owners, or any of them, the Owners shall use their best efforts to allocate
ownership (*). It is contemplated
that the provisions herein will be accomplished by allocating ownership in the new
Common Interconnection Facilities Upgrades. The Owners acknowledge that each Owner may
use the facilities comprising the Common Interconnection Facilities Upgrades, but owned
by any other Owner, consistent with any applicable tariff.(b)
    
    Cost Responsibility.The Owners shall share in the cost of Common
Interconnection Facilities Upgrades on the basis of (*). Each
Owner shall be responsible for the cost of the Common Interconnection Facilities
Upgrades in which it is allocated ownership pursuant to Section 2.04(a), subject to
payment or credit of the difference between the cost so allocated and the cost
determined on the basis of (*).(c)
    
    Direct Assignment Facilities (Non-Owner System).For any Common
Interconnection Facilities Upgrades that are directly assigned to a non-Owner
Transmission System, and the non-Owner offers such direct assignment Common
Interconnection Facilities Upgrades for sale, the Owners may elect to purchase




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Interconnection and Transmission Upgrade Allocation Agreement
    

Page 91Big Stone II Power Plant
    
    June 30, 2005
 
  (d)
    
    Operation and Maintenance Costs.Responsibility for operation and maintenance
costs for Common Interconnection Facility Upgrades shall be addressed, if at all, in a
separate agreement with the owners of such facility.
 2.05 Delivery Service Upgrades: Ownership and Cost Responsibility.
 (a)
    
    Owner System DSUs: Modifications to Existing Facilities.With respect to
Delivery Service Upgrades that involve modification, upgrade, or replacement of the
existing facilities belonging to an Owner, each Owners Ownership thereof and Cost
responsibility therefor shall be as follows:
 (i)
    
    Ownership:Each Owner shall be entitled to retain one hundred
percent (100%) of its ownership interest in any existing facilities (including
modifications) comprising the Owner System DSUs.(ii)
    
    Cost Responsibility:The total cost of Owner System DSUs
facilities that have been identified in the Midwest ISO delivery service
request studies pursuant to the Owners delivery service requests (after taking
into account any salvage value and unrecoverable investment in existing
facilities that are to be upgraded or replaced, and the advancement costs of
planned transmission projects) shall be allocated to each Owner by applying the
cost allocation described in Section 2.06 hereof.
 (b)
    
    Owner System DSUs: New Facilities.With respect to Delivery Service Upgrades
that require the installation of new facilities and that do not fall under Section
2.04(a) hereof, each Owners Ownership thereof and Cost responsibility therefor shall
be as follows:
 (i)
    
    Ownership:The Owners agree to use their best efforts to
allocate Ownership so that each Owner will, as nearly as possible, own new
discrete facilities (*) (rather than
jointly owning such facilities). In order to give effect to this provision, as
part of finalizing any delivery service plan the Owners shall agree on a plan
to transfer and/or vest title to each of the Owners in new discrete facilities
and/or equipment comprising the Owner System DSUs such that each Owner receives
title to Owner System DSU new facilities and/or equipment that are, as near as
possible, equal in value to (*)




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Interconnection and Transmission Upgrade Allocation Agreement
    

Page 92Big Stone II Power Plant
    
    June 30, 2005
 
  (ii)
    
    Cost Responsibility:Notwithstanding the ratio of ownership
interests in new facilities comprising Owner System DSUs set forth in Section
2.05(b)(i) above, each Owner shall be responsible for the cost of all new
discrete facilities and/or equipment comprising the Owner System DSUs by
applying the cost allocation described in Section 2.06 below.
 (c)
    
    Non-Owner System DSUs: Ownership.Ownership of Non-Owner System DSUs shall be
as permitted by the tariff applicable to the relevant Transmission Owner.(d)
    
    Non-Owner System DSUs: Cost Responsibility.Each Owner shall be responsible
for the cost of all Non-Owner System DSUs assessed directly to the Project by applying
the cost allocation described in Section 2.06 below. Owners shall be entitled to any
crediting or reimbursements that may be available pursuant to any applicable tariff in
the same proportion as costs for such facilities were allocated to the Owners pursuant
to this Section 2.05.(e)
    
    Operation and Maintenance Costs.Responsibility for operation and maintenance
costs for DSUs shall be addressed, if at all, in a separate agreement with the owners
of such facility.
 2.06 Cost Allocation for Delivery Service Upgrades.
 (a)
    
    (*)(b)
    
    The amount of the costs due from each Owner based on (*) under this
Section 2.06(b) shall be determined by the E&O Committee utilizing (*).(c)
    
    In no event shall any Owner be entitled to cost allocations hereunder for DSUs
in excess of those necessary to deliver its Ownership Share of Net Energy Generation to
its loads.




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Interconnection and Transmission Upgrade Allocation Agreement
    

Page 93Big Stone II Power Plant
    
    June 30, 2005
 
 2.07 Alternative Arrangements.
 2.08 Establishment and Restoration of Equitable Cost Impacts.
 (a)
    
    Establishment of Rate Impacts.As soon as reasonably practicable after the
date hereof the Owners shall provide their best estimate, as of the Effective Date, of
the impact (the Baseline Rate Impact) of the allocation to the specified Owners of
the costs of the Common Interconnection Facilities, Common Interconnection Facilities
Upgrades, and DSUs pursuant to Sections 2.02 through 2.07 on each such Owners annual
transmission revenue requirements for all transmission facilities (ATRR). The Owners
agree to periodically update such estimate as more current and reliable information
becomes available, including prior to adoption of any final interconnection or
transmission plan by the Owners. After actual construction of the Common
Interconnection Facilities, Common Interconnection Facilities Upgrades, and DSUs
pursuant to Sections 2.02 and 2.07, the Owners shall cause the E&O Committee to adopt a
Final Baseline Rate Impact (the Final Baseline Rate Impact).(b)
    
    Restoration of Equitable Cost Impacts.If any Owner determines that (*)
because of deviations from the cost allocation methodology agreed to by the Owners
pursuant to this Agreement, and such Owner is without full cost recovery from parties
other than the Owners, then such Owner shall promptly notify the other Owners. Any
such notice shall be given by the later of Commercial Operation Readiness or the date
that the last transmission facility (i.e., the Common Interconnection Facilities,
Common Interconnection Facilities Upgrades, and DSUs) is placed in service. Upon
receipt of such notice, the Owners, through the E&O Committee, shall use their best
efforts to implement a true-up or other restoration mechanism, and/or payment or
credit, that would result in (*). For illustration purposes only, and without
limitation, the determination of the extent to which an Owners (*) shall take into
account cost allocations required by MISO, or other Persons with jurisdiction over
transmission facilities, that differ from this Agreement.




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Page 94Big Stone II Power Plant
    
    June 30, 2005
 
 2.09 Conditions.
 (a)
    
    Conditions.In order that a final interconnection agreement with the Midwest
ISO can be finalized in accordance with the Project schedule, each Owner shall in a
timely fashion cooperate in the implementation of the provisions set forth in Sections
2.02 through 2.09; provided, however, no Party shall be obligated to implement any such
ownership structure contemplated thereunder that would be inconsistent with the
following:
 (i)
    
    each Owner shall have received all Governmental Approvals
necessary to implement such ownership structures;(ii)
    
    each Owner shall have received any approvals or consents
required by any Lender, trustee, bondholder or other Person providing any
existing or proposed financing to such Owner;(iii)
    
    ownership and cost responsibility of the Common
Interconnection Facilities, Common Interconnection Facilities Upgrades, and
Delivery Service Upgrades shall be in accordance with Sections 2.02 through
2.08 above;(iv)
    
    the value of the Contributing Owner Facilities is recognized in
accordance with Section 2.03;(v)
    
    implementation of any of the specific ownership structures set
forth in Sections 2.03 through 2.08 shall not jeopardize the tax-exempt status
of an Owners debt;(vi)
    
    any Owner that is or becomes a transmission owning member of
the Midwest ISO shall have all rights under the Midwest ISO Tariff, or if not a
transmission owning member of the Midwest ISO then under such other
lawful tariff, in effect from time to time to: (A) recover its revenue
requirements associated with its ownership of Common Interconnection
Facilities, Common Interconnection Facilities Upgrades and DSUs; and/or (B)
charge any lawful transmission service rate for service thereon;(vii)
    
    each Contributing Owner that is a transmission owning member
of the Midwest ISO shall modify its transmission facilities controlled by the
Midwest ISO under Appendix H of their respective MISO Agreement and adjust its
rates for transmission revenue and rate recovery submitted under Attachment O
and other provisions of the Midwest ISO Tariff to reflect the implementation of
ownership structure for Common Interconnection Facilities pursuant to Section
2.03 (Owners who are not transmission owning members of Midwest ISO shall
similarly remove the purchase price received from purchasing Owners from their
transmission revenue requirements);




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Page 95Big Stone II Power Plant
    
    June 30, 2005
 
 (viii)
    
    implementation of any of the proposed ownership structure of the Contributing
Owner Facilities shall not be inconsistent with the terms of any grandfathered
integrated transmission agreements or joint use obligations in effect and in
favor of current transmission users with respect to the relevant structure;
provided, however, that the Owners shall cooperate and make such revisions with
respect to facility ownership restructuring, equalization accounts and facility
investment records as required under such grandfathered agreements; and(ix)
    
    each Owner shall be responsible for its share of losses
involved with transmission over the Common Interconnection Facilities and
Interconnection Facility Upgrades.
 (b)
    
    Waiver.The above conditions are for the benefit of each Owner and any Owner
may choose to waive any or all conditions, but only as to itself.
 2.10 Financial Transmission Rights.
 2.11 Repayments and Credits.
 2.12 Implementation of Interconnection Plan by Operator.
 (a)
    
    Construction of Common Interconnection Facilities and Common Interconnection
Facilities Upgrades.The Owners shall cause the Operator to disburse Project Funds on
behalf of the Owners for design, procurement, installation and construction of the
Common Interconnection Facilities, the Common Interconnection Facilities Upgrades and
the DSUs. The Owners shall also cause the Operator to supervise and oversee the
execution of such construction as required by the Interconnection Study.(b)
    
    Third Party Interconnection Facility Upgrades.It is acknowledged that the
Owners shall likewise cause the Operator to request and disburse Project Funds on
behalf of the Owners for design, procurement, installation and construction of the
Interconnection Facility Upgrades that are owned by third parties and identified in the
Interconnection Study. The Owners shall also cause the Operator, on their behalf, to
supervise and oversee the construction of any




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Interconnection and Transmission Upgrade Allocation Agreement
    

Page 96Big Stone II Power Plant
    
    June 30, 2005
 
  2.13 Transmission Service Requests.
 ARTICLE III
 MISCELLANEOUS
 3.01 Incorporation by Reference.
 3.02 Captions.
 3.02 Counterparts.
 [The next page is the signature page.]




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Interconnection and Transmission Upgrade Allocation Agreement
    

Page 97Big Stone II Power Plant
    
    June 30, 2005
 IN WITNESS WHEREOF
 OWNERS:CENTRAL MINNESOTA MUNICIPAL POWER AGENCY
    
    
    
    GREAT RIVER ENERGYBy
    
    
    
    
    
    ByPaul Leland
    
    
    
    David SaggauIts President
    
    
    
    Its President and Chief Executive OfficerHEARTLAND CONSUMERS POWER DISTRICT
    
    
    
    SOUTHERN MINNESOTA MUNICIPAL POWER AGENCYBy
    
    
    
    
    
    ByMichael McDowell
    
    
    
    Raymond A. HaywardIts General Manager
    
    
    
    Its Executive Director and CEOMONTANA-DAKOTA UTILITIES CO., a Division
of MDU Resources Group, Inc.
    
    
    
    WESTERN MINNESOTA MUNICIPAL
POWER AGENCYBy
    
    
    
    
    
    ByBruce T. Imsdahl
    
    
    
    Donald E. HabichtIts President and Chief Executive Officer
    
    
    
    Its PresidentOTTER TAIL CORPORATION dba Otter Tail
Power CompanyByCharles S. MacFarlaneIts President




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Interconnection and Transmission Upgrade Allocation Agreement
    

Page 98Big Stone II Power Plant
    
    June 30, 2005
 EXHIBIT A
 PARTY




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Interconnection and Transmission Upgrade Allocation Agreement
    

Page
99Big Stone II Power Plant
    
    June 30, 2005
 
  
 nd