PENSION EQUALIZATION PLAN
                           OF BLACK HILLS CORPORATION


         1.       RECITALS.
                  --------
         Black Hills Corporation, a South Dakota corporation ("Company") is the
parent and holding company of, among other Affiliates (as defined below), Black
Hills Power, Inc., a South Dakota corporation formerly known as Black Hills
Corporation ("BHP"), and Wyodak Resources Development Corp., a Delaware
corporation ("WRDC"). BHP maintains a nonqualified "top hat" pension
equalization plan for certain of its management or highly compensated employees,
which plan was last restated the 6th day of January, 2000 and last amended
effective January 30, 2001 ("BHP Plan"). WRDC maintains a nonqualified "top hat"
pension equalization plan for certain of its and its Affiliates' management or
highly compensated employees, which plan was last restated the 6th day of
January, 2000 and last amended effective January 30, 2001 ("WRDC Plan"). The
Company hereby wishes to establish this Pension Equalization Plan of Black Hills
Corporation ("Plan") to consolidate the BHP Plan and the WRDC Plan into one plan
maintained by the Company for the Company's and its Affiliates' employees. Based
on the foregoing recitals, the Company hereby establishes the Plan effective the
6th day of November, 2001.

         2.       PURPOSE OF PLAN.
                  ---------------
         The purpose of the Plan is to provide to a select group of management
or highly compensated employees with certain retirement and death benefits in
addition to those benefits which the Participants may enjoy from the Company's
tax qualified defined benefit plan in order to supplement and attempt to
equalize total retirement benefits being paid to persons holding like

                                       1
<PAGE>


executive and management positions by other companies. The Plan is designed
to aid the Company in attracting and retaining its executive employees, persons
whose abilities, experience and judgment can contribute to the well-being of the
Company. It is the intention of Company that this Plan shall be administered as
an unfunded benefit plan established and maintained for a select group of
management or highly compensated employees.

         3.       DEFINITIONS.
                  -----------

                  "Affiliate" shall mean any business organization or legal
                  entity that, directly or indirectly, controls, is controlled
                  by or is under common control with the Company. For purposes
                  of this definition, the term "control" (including the terms
                  "controlling," "controlled by," and "under common control
                  with") includes the possession, direct or indirect, of the
                  power to vote 50 percent or more of the voting equity
                  securities, membership interest, or other voting interest, or
                  to direct or cause the direction of the management and
                  policies of such business organization or other legal entity,
                  whether through the ownership of voting equity securities,
                  membership interest, by contract, or otherwise.

                  "Annual Compensation Limitation" shall mean the limitation on
                  annual compensation for tax qualified retirement plans as set
                  forth in Internal Revenue Code Section 401(a)(17) as the same
                  may be amended hereafter from time to time.

                   "Average Earnings" shall mean whichever of the following
                  results in the highest annual average Earnings: (i) a
                  Participant's average Earnings for the five (5) consecutive
                  full calendar years of employment during the ten (10) full
                  calendar years of employment immediately preceding the
                  Calculation Date, which results in the highest such average;
                  or (ii) a Participant's average Earnings determined by
                  dividing the sum of the following by five (5): (a) the
                  Participant's Earnings for the four full calendar years
                  preceding the year containing his Calculation Date; (b) the
                  Participant's Earnings for the year containing his Calculation
                  Date as of the Calculation Date; and (c) a portion of the
                  Participant's Earnings for the fifth full calendar year
                  preceding the year containing his Calculation Date determined
                  by multiplying his Earnings for said fifth preceding full
                  calendar year by a ratio, the numerator of which shall be 365

                                       2
<PAGE>



                  minus the number of days in the year containing his
                  Calculation Date measured from the first day of said year to
                  his Calculation Date, and the denominator of which ratio shall
                  be 365. If the Participant has less than five (5) full
                  calendar years of employment, the average shall be taken over
                  his total full calendar years of employment.

                  "Board of Directors" means the Board of Directors of the
                  Company.

                  "Calculation Date" shall mean the earlier of (i) the date the
                  Participant's employment with the Company was terminated, (ii)
                  the date that the Participant's participation in the Plan was
                  terminated, or (iii) the date of the Participant's death.

                  "Committee" shall mean the Compensation Committee of the Board
                  of Directors of the Company.

                  "Earnings" shall mean the compensation paid to an Employee by
                  a Company during a calendar year, including any amounts paid
                  to him as overtime, bonus, commission, unused paid time off or
                  incentive compensation, any earnings reduction under a cash or
                  deferred arrangement established by the Company under Section
                  401(k) of the Code, any salary reduction under a flexible
                  benefit program established by the Company under Section 125
                  of the Code and, effective January 1, 2000, any compensation
                  reduction elected for qualified transportation fringe benefits
                  under Section 132(f)(4) of the Code, but excluding
                  reimbursements and expense allowances, taxable fringe
                  benefits, moving expenses, moving/relocation allowances,
                  non-cash incentives and stock options, long-term incentive
                  compensation (such as payments under the Black Hills
                  Corporation Omnibus Incentive Compensation Plan), nonqualified
                  deferred compensation and welfare benefits (such as group term
                  life insurance in excess of $50,000 and tuition assistance).

                  "Pension Restoration Benefit" shall mean the benefit payable
                   under paragraph 9.

                  "PEP Benefits" shall mean the benefits payable under paragraph
                  4.

                   "Salary Level" shall mean the base compensation paid to a
                  Participant by the Company or an Affiliate during a calendar
                  year, including any compensation reduction under a cash or
                  deferred arrangement under Section 401(k) of the Internal
                  Revenue Code or under a flexible benefit program under Section
                  125 of the Internal Revenue Code and any salary deferrals made


                                       3
<PAGE>


                  by a Participant under the Company's Nonqualified Deferred
                  Compensation Plan, but not including any amounts paid to the
                  Participant as overtime, bonus, commission or incentive
                  compensation, nor reimbursements and expense allowances,
                  fringe benefits, moving expenses, nonqualified deferred
                  compensation payments, or welfare benefits.

                  "Section 415 Benefit Limitation" shall mean the limitation on
                  the provision of annual benefits with respect to defined
                  benefit plans as set forth in Internal Revenue Code Section
                  415(b) as the same may be amended hereafter from time to time.

                  "Social Security Wage Base" shall mean the contribution base
                  as determined under Section 1402(k)(1) of the Internal Revenue
                  Code.


         4.       PARTICIPANTS.
                  ------------
         Those persons eligible for participation in the Plan ("Participants")
are those management or highly compensated employees of the Company or its
Affiliates whose Salary Level equals or exceeds the Social Security Wage Base
and who are designated by the Board of Directors of the Company upon
recommendation of the Chief Executive Officer of the Company. The Board of
Directors may in its discretion discontinue the participation of any Participant
in the Plan at any time.

         5.       PEP BENEFITS.
                  ------------
         Benefits payable to Participants ("PEP Benefits") shall consist of 180
equal monthly payments, each payment in the amount of one-twelfth of the product
of (i) the Participant's Average Earnings as of the Calculation Date times
(ii)(a) 25 percent if the Participant's Average Earnings as of the Calculation
Date is less than twice the Social Security Wage Base; or (b) 30 percent if the


                                       4
<PAGE>


Participant's Average Earnings equals or exceeds twice the Social Security Wage
Base; times (iii) the applicable vesting percentages provided in paragraph 8.

         6.       COMMENCEMENT OF PAYMENT OF PEP BENEFITS.
                  ---------------------------------------
         PEP Benefit payments shall be paid commencing at the earliest of (i)
the time the Participant is 62 years of age or more and is no longer an employee
of the Company or the applicable Affiliate; or (ii) upon the death of the
Participant. PEP Benefits shall be paid to the Participant or, if deceased, to
the Participant's designated beneficiary, or, if none, to his or her estate. If
the Participant's death occurs after commencement of PEP Benefit payments to the
Participant under the Plan, the Participant's designated beneficiary or estate
will continue to receive the balance of the payments due the Participant under
the Plan.
         Notwithstanding the above, a Participant with vested PEP Benefits who
is 55 years of age or more and no longer an Employee of the Company or the
applicable Affiliate may elect in writing to be paid PEP Benefits beginning at
age 55 or older, subject to a discount of such PEP Benefits according to
Schedule 1, attached hereto and incorporated herein by this reference. Once a
Participant has elected discounted PEP Benefits under this paragraph, and has
received the first of such discounted PEP Benefit payments, the election shall
be irrevocable.
         7.       DESIGNATION OF BENEFICIARY.
                  --------------------------
         A Participant may designate a beneficiary or beneficiaries for PEP
Benefits which shall be effective upon filing written notice with the Committee
on the form provided for that purpose. If more than one beneficiary designation
has been filed, the beneficiary or beneficiaries designated in the notice


                                       5
<PAGE>


bearing the most recent date will be deemed the valid beneficiary or
beneficiaries.

         8.       VESTING OF PEP BENEFITS.
                  -----------------------
         PEP Benefits payable under the Plan will vest at the following rate:


         Years of Plan Participation                   Percent of Benefit
                                                             Vested

         Less than 3 years                                     0
         3 years but less than 4                              20
         4 years but less than 5                              35
         5 years but less than 6                              50
         6 years but less than 7                              65
         7 years but less than 8                              80
         8 or more years                                     100

         No credit for service with the Company or the applicable Affiliate
prior to January 1, 1990 shall be given. The provisions for vesting set forth in
this paragraph are not intended to give any Participants any rights or claim to
any specific assets of the Company.

         9.       PENSION RESTORATION BENEFITS.
                  ----------------------------
         In the event that a Participant's benefit under the Company's tax
qualified defined benefit plan ("Pension Plan") is reduced, or is required to be
reduced, because of (i) the Annual Compensation Limitation; (ii) the Section 415
Benefit Limitation; or (iii) the Participant's deferral of salaries, bonus, or
other compensation under the Company's Nonqualified Deferred Compensation Plan,
then the Participant shall be entitled to receive an additional benefit
("Pension Restoration Benefit"), which shall be measured by the difference
between (x) the monthly benefit which would have been provided to the
Participant under the Pension Plan

                                       6
<PAGE>


without regard to the reduction in the Pension Plan benefit caused by any of
the foregoing limitations (i), (ii), and (iii) and (y) the actual monthly
benefit to be provided to the Participant under the Pension Plan. The Pension
Restoration Benefit shall be determined using the same factors, actuarial or
otherwise, as used in determining the Participant's Pension Plan benefit and
shall be payable at like times and in like manner as the Pension Plan benefit.
         Notwithstanding anything contained above, in the event that a
Participant hereunder is not a participant in or eligible to participate in the
Company Pension Plan, then such Participant shall have no right to any Pension
Restoration Benefit under this paragraph, and nothing contained herein shall be
deemed to provide for or suggest the right in any Participant hereunder to be a
participant or be eligible to participate in the Company Pension Plan.

         10.      LOSS OF BENEFITS.
                  ----------------
         Notwithstanding any other provisions in this Plan, if a Participant is
terminated on account of misconduct or dishonesty, the Participant shall forfeit
all right to any benefits payable under this Plan, including vested accrued
benefits.
         11.      FUNDING OF PLAN.
                  ---------------
         All benefit payments under the Plan will be made from the general
assets of the Company. Participants and their beneficiaries who are entitled to
be paid benefits under this Plan are unsecured general creditors of the Company.
The Company may, but shall not be required to, invest corporate assets in life
insurance or annuity contracts to assure that the Company will have a source of
funds for the payment of benefits required to be paid under this Plan. Any such


                                       7
<PAGE>


insurance or annuity contract shall constitute assets of the Company and the
Participant shall have no right, title or interest in any such insurance or
annuity contract. The Company reserves the right to refuse participation in the
plan to any Participant who, if requested to do so, declines to supply
information or to otherwise cooperate as necessary to allow the Company to
obtain insurance on the Participant's life.


         12.      PLAN MAY BE MODIFIED OR DISCONTINUED.
                  ------------------------------------
         The Company reserves the right to amend, modify or discontinue the Plan
at any time. Any modification or discontinuance of benefits shall not reduce
accrued benefits which become vested prior thereto.


         13.      WITHHOLDING.
                  -----------
         There shall be deducted from all benefits paid under this Plan the
amount of any taxes required to be withheld by any federal, state or local
government. The Participants and their beneficiaries, distributees and personal
representatives will bear any and all federal, foreign, state, local or other
income or other taxes imposed on amounts paid under this Plan.


         14.      ASSIGNABILITY.
                  -------------
         No right to receive payments under this Plan shall be subject to
voluntary or involuntary alienation, assignment or transfer.


                                       8
<PAGE>

         15.      ADMINISTRATION OF THE PLAN.
                  --------------------------
         The Plan shall be administered by the Committee. The Committee shall
conclusively interpret the provisions of the Plan, decide all claims, and shall
make all determinations under the Plan. The Committee shall act by vote or
written consent of a majority of its members.

         16.      CLAIMS PROCEDURE.
                  ----------------
         All claims for benefits under the Plan shall be made to the Committee.
If the Committee denies a claim, the Committee shall provide notice to the
Participant or beneficiary, in writing, within 90 days after the claim is filed
unless special circumstances require an extension of time for processing the
claim, not to exceed an additional 90 days. If the Committee does not notify the
Participant or beneficiary of the denial of the claim within the time period
specified above, then the claim shall be deemed denied. The notice of a denial
of a claim shall be written in a manner calculated to be understood by the
claimant and shall set forth (1) the specific reason or reasons for the claim
denial; (2) specific references to the pertinent Plan provisions on which the
denial is based; (3) a description of any additional material or information
necessary for the claimant to perfect the claim and an explanation as to why
such information is necessary; and (4) a description of the Plan's review
procedures, including any time limits for such procedures.
         Within 60 days after receipt of the above material, the claimant shall
have a reasonable opportunity to appeal the claim denial to the Committee for a
full and fair review. The claimant or his duly authorized representative may (1)
request a review within the foregoing sixty- (60-) day period upon written
notice to the Committee; (2) upon request and free of charge, have reasonable
access to, and copies of, all documents, records, and other information relevant
to the claim; and (3) submit written comments, documents, records, and other

                                       9
<PAGE>


information relating to the claim for benefits. The foregoing review shall take
into account all comments, documents, records, and other information submitted
by the claimant relating to the claim, without regard to whether such
information was submitted or considered in the initial benefit determination.
         A decision on the review by the Committee will be made not later than
60 days after receipt of a request for review, unless special circumstances
require an extension of time for processing (such as the need to hold a
hearing), in which case a decision shall be rendered as soon as possible, but
not later than 120 days after receipt of a request for review. The decision on
review shall be in writing and shall include (1) the specific reason or reasons
for the determination on review; (2) reference to the specific plan provisions
on which the benefit determination is based; and (3) a statement that the
claimant is entitled to receive, upon request and free of charge, reasonable
access to, and copies of, all documents, records, and other information relevant
to the claimant's claim for benefits.


         17.      GOVERNING LAW.
                  -------------
         This agreement shall be governed by and construed in accordance with
the laws of the state of South Dakota, to the extent not preempted by federal
law.
         18.      NO EMPLOYMENT CONTRACT.
                  ----------------------
         Neither the action taken by the Company in establishing the Plan or any
action taken by it or by the Committee under the provisions hereof or any
provision of the Plan shall be construed as giving to any eligible Participant
the right to be retained in the employment of the Company.


                                       10
<PAGE>


         19.      NON QUALIFIED AND UNFUNDED PLAN.
                  -------------------------------
         Notwithstanding anything contained herein, it is intended that this
Plan be treated as "nonqualified" and unfunded for tax purposes and for purposes
of Title I of ERISA.

                                            BLACK HILLS CORPORATION



                                            By /s/ Daniel P. Landguth
                                               Its Chairman and CEO


                                       11
<PAGE>




                                   SCHEDULE 1

                    DISCOUNT APPLICABLE TO EARLY PEP BENEFITS


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

    Age at Start of Payments       Percentage of PEP Benefit Payable
---------------------------------- -------------------------------------------
---------------------------------- -------------------------------------------

               61                                    93.0%
---------------------------------- -------------------------------------------
---------------------------------- -------------------------------------------

               60                                    86.5%
---------------------------------- -------------------------------------------
---------------------------------- -------------------------------------------

               59                                    80.5%
---------------------------------- -------------------------------------------
---------------------------------- -------------------------------------------

               58                                    74.9%
---------------------------------- -------------------------------------------
---------------------------------- -------------------------------------------

               57                                    69.7%
---------------------------------- -------------------------------------------
---------------------------------- -------------------------------------------

               56                                    64.8%
---------------------------------- -------------------------------------------
---------------------------------- -------------------------------------------

               55                                    60.3%
---------------------------------- -------------------------------------------
---------------------------------- -------------------------------------------




                                       1-1
<PAGE>