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

                                    Form 10-Q

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

   For the quarterly period ended September 30, 2001.

OR

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

       For the transition period from _______________ to _______________.

                        Commission File Number 333-52664

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

                                625 Ninth Street
                         Rapid City, South Dakota 57701

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

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

                                      NONE

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

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

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

           Class                               Outstanding at October 31, 2001

Common stock, $1.00 par value                           26,510,053 shares

                                       1

                             BLACK HILLS CORPORATION

                                TABLE OF CONTENTS

                                                                    Page
                                                                   Number

PART I.  FINANCIAL INFORMATION

Item 1.           Financial Statements

                  Consolidated Statements of Income-                  3
                    Three, Nine and Twelve Months
                    Ended September 30, 2001 and 2000

                  Consolidated Balance Sheets-                        4
                    September 30, 2001, December 31, 2000
                    and September 30, 2000

                  Consolidated Statements of Cash Flows-              5
                    Nine Months Ended September 30, 2001 and 2000

                  Notes to Consolidated Financial Statements          6-18

Item 2.           Management's Discussion and Analysis of             19-28
                    Financial Condition and Results of Operations

Item 3.           Quantitative and Qualitative Disclosures about      28
                    Market Risk

PART II. OTHER INFORMATION

Item 1.           Legal Proceedings                                   29

Item 2.           Changes in Securities and Use of Proceeds           29

Item 6.           Exhibits and Reports on Form 8-K                    29-30

Signatures                                                            31

Exhibit Index                                                         32

                                       2

PART 1 - FINANCIAL INFORMATION

ITEM 1.  FINANCIAL STATEMENTS

                             BLACK HILLS CORPORATION
                        CONSOLIDATED STATEMENTS OF INCOME
                                   (unaudited)

                                                        Three Months Ended          Nine Months Ended          Twelve Months Ended
                                                           September 30               September 30                 September 30
                                                        2001         2000          2001           2000         2001          2000
                                                        ----         ----          ----           ----         ----          ----
                                                                         (in thousands, except per share amounts)

Operating revenues                                     $ 302,398    $ 453,231   $1,283,140     $1,038,191    $1,868,869  $1,255,890
                                                       ---------    ---------   ----------     ----------    ----------  ----------

Operating expenses:
    Fuel and purchased power                             224,637      373,613      969,384        878,660     1,461,566   1,055,491
    Operations and maintenance                            15,252       13,859       43,051         31,483        59,538      40,221
    Administrative and general                            13,153       10,468       60,122         20,231        82,397      27,535
    Depreciation, depletion and amortization              14,261        8,978       38,785         22,465        49,208      28,092
    Taxes, other than income taxes                         5,656        3,794       16,637         10,678        20,860      14,442
                                                       ---------    ---------   ----------    -----------    ----------   ---------
                                                         272,959      410,712    1,127,979        963,517     1,673,569   1,165,781
                                                       ---------    ---------   ----------    -----------    ----------   ---------
Operating income                                          29,439       42,519      155,161         74,674       195,300      90,109
                                                       ---------    ---------   ----------    -----------    ----------   ---------
Other income (expense):
    Interest expense                                      (9,255)      (9,608)     (29,300)       (19,886)      (39,814)    (23,917)
    Interest income                                          725        1,681        1,810          5,685         3,179       6,851
    Other, net                                             5,453          578       10,026           (524)       13,397         573
                                                       ---------    ---------   ----------    -----------    ----------   ---------
                                                          (3,077)      (7,349)     (17,464)       (14,725)      (23,238)    (16,493)
                                                       ---------    ---------   ----------    -----------    ----------   ---------

Income before minority interest
  and income taxes                                        26,362       35,170      137,697         59,949       172,062      73,616
Minority interest                                            163      (10,276)      (4,408)       (10,211)       (5,470)     (9,255)
Income taxes                                             (10,159)      (8,572)     (49,978)       (16,294)      (64,042)    (20,364)
                                                       ---------   ----------   ----------      ---------     ---------   ---------

          Net income                                      16,366       16,322       83,311         33,444       102,550      43,997
Preferred stock dividends                                   (131)         (37)        (473)           (37)         (513)        (37)
                                                       ---------   ----------   ----------      ---------     ---------   ---------
Net income available for common stock                  $  16,235   $   16,285   $   82,838      $  33,407     $ 102,037   $  43,960
                                                       =========   ==========   ==========      =========     =========   =========

Weighted average common shares outstanding:
    Basic                                                 26,425       22,835       24,988         21,872        24,466      21,809
                                                       =========   ==========   ==========      =========     =========   =========
    Diluted                                               26,802       23,067       25,404         21,977        24,896      21,926
                                                       =========   ==========   ==========      =========     =========   =========

Earnings per share of common stock:
    Basic                                              $     0.61  $     0.71   $      3.32     $    1.53     $    4.17   $    2.02
                                                       ==========  ==========   ===========     =========     =========   =========
    Diluted                                            $     0.61  $     0.71   $      3.28     $    1.52     $    4.12   $    2.01
                                                       ==========  ==========   ===========     =========     =========   =========

Dividends paid per share of common stock               $     0.28  $     0.27   $      0.84     $    0.81     $    1.11   $    1.07
                                                       ==========  ==========   ===========     =========     =========   =========

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

                                       3

                             BLACK HILLS CORPORATION
                           CONSOLIDATED BALANCE SHEETS

                                                                         Unaudited                             Unaudited
                                                                        September 30       December 31       September 30
                                                                            2001              2000               2000
                                                                            ----              ----               ----
                                                                               (in thousands, except share amounts)
                               ASSETS
                                                                                                    
Current assets:
    Cash and cash equivalents                                          $     51,735       $    24,913        $    12,102
    Securities available-for-sale                                             3,770             2,113              3,493
    Receivables (net of allowance for doubtful accounts of $5,226,
         $3,631 and $412, respectively) -
      Customers                                                             115,981           278,436            174,167
      Other                                                                   7,069            21,283             11,585
    Materials, supplies and fuel                                             27,302            16,545             13,816
    Prepaid expenses                                                          9,848             7,428              6,570
    Derivatives at market value                                              67,287            68,292              5,158
                                                                       ------------       -----------        -----------
                                                                            282,992           419,010            226,891
                                                                       ------------       -----------        -----------
Investments                                                                  73,909            63,965            114,204
                                                                       ------------       -----------        -----------

Property and equipment                                                    1,501,231         1,072,129            878,044
    Less accumulated depreciation and depletion                            (312,178)         (277,848)          (265,226)
                                                                       ------------      ------------        -----------
                                                                          1,189,053           794,281            612,818
                                                                       ------------      ------------        -----------
Other assets:
    Derivatives at market value                                               1,752                 -                  -
    Other, principally goodwill and other intangibles                        99,062            43,064             36,771
                                                                       ------------      ------------        -----------
                                                                            100,814            43,064             36,771
                                                                       ------------      ------------        -----------
                                                                       $  1,646,768        $1,320,320        $   990,684
                                                                       ============      ============        ===========
                LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
    Current maturities of long-term debt                              $      20,513      $     13,960        $     7,052
    Notes payable                                                           320,037           211,679            170,775
    Accounts payable                                                        109,298           247,596            161,712
    Accrued liabilities                                                      55,850            49,661             29,736
    Derivatives at market value                                              68,175            65,960              5,158
                                                                      -------------      ------------        -----------
                                                                            573,873           588,856            374,433
                                                                      -------------      ------------        -----------

Long-term debt, net of current maturities                                   434,993           307,092            214,714
                                                                      -------------      ------------        -----------
Deferred credits and other liabilities:
    Derivatives at market value                                               1,636                 -                  -
    Investment tax credits                                                    2,168             2,530              2,653
    Federal income taxes                                                     64,629            62,679             56,961
    Reclamation and regulatory liability                                     22,520            22,340             22,588
    Other                                                                    15,002            16,516             12,583
                                                                      -------------      ------------       ------------
                                                                            105,955           104,065             94,785
                                                                      -------------      ------------       ------------
Minority interest in subsidiaries                                            25,940            37,961             35,463
                                                                      -------------      ------------       ------------
Stockholders' equity:
   Preferred stock - no par Series 2000-A; 21,500 shares authorized
      Issued and Outstanding: 5,177; 4,000 and 4,000 shares, respectively     5,549             4,000              4,000
                                                                      -------------      ------------       ------------
   Common stock equity-
    Common stock $1 par value; 100,000,000 shares authorized;
      Issued: 26,830,267; 23,302,111 and 23,294,018 shares, respectively     26,830            23,302             23,294
    Additional paid-in capital                                              238,506            73,442             73,276
    Retained earnings                                                       253,240           191,482            177,610
    Treasury stock                                                           (8,841)           (9,067)            (7,460)
    Accumulated other comprehensive income (loss)                            (9,277)             (813)               569
                                                                      -------------      ------------        -----------
                                                                            500,458           278,346            267,289
                                                                      -------------      ------------        -----------
    Total stockholders' equity                                              506,007           282,346            271,289
                                                                      -------------      ------------        -----------
                                                                         $1,646,768        $1,320,320        $   990,684
                                                                      =============      ============        ===========

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

                                       4

                             BLACK HILLS CORPORATION
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                                   (unaudited)

                                                                                                     Nine Months Ended
                                                                                                       September 30
                                                                                                  2001               2000
                                                                                                  ----               ----
                                                                                                      (in thousands)
                                                                                                              
Operating activities:
     Net income available for common stock                                                       $ 82,838           $ 33,407
     Principal non-cash items-
        Depreciation, depletion and amortization                                                   38,785             22,465
        Deferred income taxes and investment tax credits                                            1,588              1,309
        Undistributed earnings of affiliates                                                       (8,580)            (4,131)
        Minority interest                                                                           4,408             10,211
     Change in operating assets and liabilities-
        Accounts receivable and other current assets                                              161,755            (96,766)
        Accounts payable and other current liabilities                                           (132,109)            79,846
        Derivative fair value                                                                     (10,919)                 -
        Other, net                                                                                  2,896             (5,242)
                                                                                                ---------          ---------
                                                                                                  140,662             41,099
                                                                                                ---------          ---------

Investing activities:
     Property additions                                                                          (442,152)           (95,891)
     (Increase) decrease in investments                                                               374            (10,181)
     Payment for acquisition of net assets, net of cash acquired                                  (10,410)                 -
     Payment for intangible assets, including goodwill                                            (50,413)                 -
     Available-for-sale securities sold                                                                 -              7,587
                                                                                                ---------          ---------
                                                                                                 (502,601)           (98,485)
                                                                                                ---------          ---------

Financing activities:
     Dividends paid                                                                               (20,752)           (18,036)
     Treasury stock sold, net                                                                         226                570
     Common stock issued                                                                          167,980              3,680
     Increase in short-term borrowings                                                            108,358              8,507
     Long-term debt - issuance                                                                    145,649             61,075
     Long-term debt - repayments                                                                  (11,195)            (1,339)
     Subsidiary distributions to minority interests                                                (1,505)            (1,451)
                                                                                                ---------          ---------
                                                                                                  388,761             53,006
                                                                                                ---------          ---------

        Increase (decrease) in cash and cash equivalents                                           26,822             (4,380)

Cash and cash equivalents:
     Beginning of period                                                                           24,913             16,482
                                                                                                ---------          ---------
     End of period                                                                              $  51,735           $ 12,102
                                                                                                =========          =========

Supplemental disclosure of cash flow information:

     Cash paid during the period for-
        Interest                                                                                 $ 28,776            $20,927
        Income taxes                                                                             $ 34,800            $12,118

Non-cash net assets acquired through issuance of common and preferred stock                     $   3,628            $34,493

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

                                       5

                             BLACK HILLS CORPORATION

                   Notes to Consolidated Financial Statements
                                   (unaudited)
        (Reference is made to Notes to Consolidated Financial Statements
           included in the Company's 2000 Annual Report on Form 10-K)

(1)      MANAGEMENT'S STATEMENT

         The financial statements included herein have been prepared by Black
         Hills Corporation (the Company) without audit, pursuant to the rules
         and regulations of the Securities and Exchange Commission. Certain
         information and footnote disclosures normally included in financial
         statements prepared in accordance with accounting principles generally
         accepted in the United States have been condensed or omitted pursuant
         to such rules and regulations; however, the Company believes that the
         footnotes adequately disclose the information presented. These
         financial statements should be read in conjunction with the financial
         statements and the notes thereto, included in the Company's 2000 Annual
         Report on Form 10-K filed with the Securities and Exchange Commission.

         Accounting methods historically employed require certain estimates as
         of interim dates. The information furnished in the accompanying
         financial statements reflects all adjustments which are, in the opinion
         of management, necessary for a fair presentation of the September 30,
         2001, December 31, 2000 and September 30, 2000, financial information
         and are of a normal recurring nature. The results of operations for the
         three, nine and twelve months ended September 30, 2001, are not
         necessarily indicative of the results to be expected for the full year.

(2)      RECLASSIFICATIONS

         Certain 2000 amounts in the financial statements have been reclassified
         to conform to the 2001 presentation. These reclassifications did not
         have an effect on the Company's stockholders' equity or results of
         operations as previously reported.

(3)      NEW ACCOUNTING PRONOUNCEMENTS

         In July 2001, the Financial Accounting Standards Board (FASB) issued
         Statement of Financial Accounting Standards No. 141, "Business
         Combinations" (SFAS 141) and No. 142, "Goodwill and Other Intangible
         Assets" (SFAS 142). SFAS 141 requires all business combinations
         initiated after June 30, 2001 to be accounted for using the purchase
         method of accounting. Under SFAS 142, goodwill and intangible assets
         with indefinite lives are no longer amortized but are reviewed annually
         (or more frequently if impairment indicators arise) for impairment.
         Intangible assets with a defined life will continue to be amortized
         over their useful lives (but with no maximum life). The amortization
         provisions of SFAS 142 apply to goodwill and intangible assets acquired
         after June 30, 2001. With respect to goodwill and intangible assets
         acquired prior to July 1, 2001, the Company is required to adopt SFAS
         142 effective January 1, 2002. Management is currently evaluating the
         effect that adoption of the provisions of SFAS 142 that are effective
         January 1, 2002 will have on the Company's consolidated financial
         statements.

                                       6

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

         In August 2001, the FASB issued Statement of Financial Accounting
         Standards No. 144, "Accounting for the Impairment or Disposal of
         Long-Lived Assets" (SFAS No. 144).  SFAS No. 144 supersedes FASB
         Statement 121, "Accounting for the Impairment of Long-Lived Assets and
         for Long-Lived Assets to Be Disposed Of" (SFAS No. 121) and the
         accounting and reporting provisions of APB Opinion No. 30, "Reporting
         the Results of Operations - Reporting the Effects of Disposal of a
         Segment of a Business, and Extraordinary, Unusual and Infrequently
         Occurring Events and Transactions."  SFAS No. 144 establishes a single
         accounting model for long-lived assets to be disposed of by sale as
         well as resolve implementation issues related to SFAS No. 121.
         Management expects to adopt SFAS No. 144 effective January 1, 2002
         and is currently evaluating the effects adoption will have on the
         Company's consolidated financial statements.

(4)      CHANGE IN ACCOUNTING PRINCIPLE

         In June 1998, the FASB issued SFAS No. 133 (SFAS 133), "Accounting for
         Derivative Instruments and Hedging Activities." SFAS 133, as amended,
         establishes accounting and reporting standards requiring that every
         derivative instrument be recorded in the balance sheet as either an
         asset or liability measured at its fair value. SFAS 133 requires that
         changes in the derivative instrument's fair value be recognized
         currently in earnings unless specific hedge accounting criteria are
         met.

         SFAS 133 allows special hedge accounting for fair value and cash flow
         hedges. SFAS 133 provides that the gain or loss on a derivative
         instrument designated and qualifying as a fair value hedging instrument
         as well as the offsetting loss or gain on the hedged item attributable
         to the hedged risk be recognized currently in earnings in the same
         accounting period. SFAS 133 provides that the effective portion of the
         gain or loss on a derivative instrument designated and qualifying as a
         cash flow hedging instrument be reported as a component of other
         comprehensive income and be reclassified into earnings in the same
         period or periods during which the hedged forecasted transaction
         affects earnings. The remaining gain or loss on the derivative
         instrument, if any, must be recognized currently in earnings.

         SFAS 133 requires that on date of initial adoption, an entity shall
         recognize all freestanding derivative instruments in the balance sheet
         as either assets or liabilities and measure them at fair value. The
         difference between a derivative's previous carrying amount and its fair
         value shall be reported as a transition adjustment. The transition
         adjustment resulting from adopting this Statement shall be reported in
         net income or other comprehensive income, as appropriate, as the effect
         of a change in accounting principle in accordance with paragraph 20 of
         Accounting Principles Board Opinion No. 20 (APB 20), "Accounting
         Changes."

                                       7

         On January 1, 2001, the Company adopted SFAS 133. The Company had
         certain non-trading energy contracts and interest rate swaps documented
         as cash flow hedges, which upon adoption resulted in a decrease to
         accumulated other comprehensive income of $10.1 million.

         Upon adoption of SFAS 133, most of the Company's energy trading
         activities previously accounted for under Emerging Issues Task Force
         Issue No. 98-10, "Accounting for Energy Trading and Risk Management
         Activities" (EITF 98-10) fell under the purview of SFAS 133. The effect
         from this adoption on the energy trading companies and energy trading
         activities was not material because, unless otherwise noted, the
         trading companies do not designate their energy trading activities as
         hedge instruments. This "no hedge" designation results in these
         derivatives being measured at fair value and gains and losses
         recognized currently in earnings. This treatment under SFAS 133 is
         comparable to the accounting under EITF 98-10.

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

         Long-term Debt
         In conjunction with the closing of the Fountain Valley acquisition
         (Note 11), the Company issued long-term non-recourse project level
         financing. The debt matures July 1, 2006, has a floating interest rate
         (4.96 percent at September 30, 2001), and is collateralized by a
         mortgage on the project's land and facilities, leases and rights,
         including rights to receive payments under long-term purchase power
         contracts.

         Notes Payable
         During the second quarter of 2001, the Company used net proceeds from
         its common stock offering (Note 10) to pay down approximately $163
         million of its borrowings under short-term credit facilities. In
         addition, during the third quarter of 2001, the Company completed a
         $400 million revolving credit facility. The facility replaces the
         Company's previous short-term credit lines, which totaled $290 million.
         The credit facility was arranged by ABN Amro Bank N.V., US Bank, N.A.
         and Union Bank of California, N.A., with ten other banks participating.
         The facility consists of two $200 million tranches, one of which has a
         364-day term and the other a three-year term.

         Outstanding borrowings under the Company's short-term credit facilities
         have been used primarily to fund the acquisition and construction of
         the Las Vegas co-generation facility (Note 11), construction costs on
         other power generation projects and the continued network build-out in
         its communications segment.

         Other than the above transactions, the Company had no other material
         changes in its consolidated indebtedness, as reported in Notes 6 and 7
         of the Company's 2000 Annual Report on Form 10-K.

                                       8

(6)      COMPREHENSIVE INCOME

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

                                                          Three Months                Nine Months                Twelve Months
                                                              Ended                      Ended                       Ended
                                                          September 30                September 30               September 30
                                                        2001         2000          2001          2000         2001          2000
                                                        ----         ----          ----          ----         ----          ----
                                                                                     (in thousands)

Net income available for common stock                  $16,235       $16,285      $82,838       $33,407      $102,037      $43,960
Other comprehensive income:
   Unrealized gain (loss) on available-
    for-sale securities                                    507            81        1,657           569           275          569
   Initial impact of adoption of SFAS
    133, net of minority interest                            -             -       (7,518)            -        (7,518)           -
   Fair value adjustment on derivatives
    designated as cash flow hedges, net of
    minority interest                                    (5,173)           -       (2,603)            -        (2,603)           -
                                                       --------     --------     --------      --------      --------      -------
Comprehensive income                                    $11,569      $16,366      $74,374       $33,976       $92,191      $44,529
                                                       ========     ========     ========      ========      ========      =======

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

         The Company's reportable segments are those that are based on the
         Company's method of internal reporting, which generally segregates the
         strategic business groups due to differences in products, services and
         regulation. As of September 30, 2001, substantially all of the
         Company's operations and assets are located within the United States.
         The Company's operations are conducted through six business segments
         that include: Electric group and segment, which supplies electric
         utility service to western South Dakota, northeastern Wyoming and
         southeastern Montana; Independent Energy group consisting of the
         following segments: Mining, which engages in the mining and sale of
         coal from its mine near Gillette, Wyoming; Oil and Gas, which produces,
         explores and operates oil and gas interests located in the Rocky
         Mountain region, Texas, California and other states; Fuel Marketing,
         which markets natural gas, oil, coal and related services to customers
         in the East Coast, Midwest, Southwest, Rocky Mountain, West Coast and
         Northwest regions markets; Independent Power, which produces and sells
         electricity in a number of markets, with strong emphasis in the western
         United States; and Communications group and Others, which primarily
         markets communications and software development services.

         Segment information follows the same accounting policies as described
         in Note 1 of the Company's 2000 Annual Report on Form 10-K. In
         accordance with the provisions of SFAS No. 71, intercompany coal sales
         are not eliminated. Segment information included in the accompanying
         Consolidated Balance Sheets and Consolidated Statements of

                                       9

         Income is as follows (in thousands):

                                                External                  Inter-segment
                                           Operating Revenues          Operating Revenues         Net Income (loss)
Quarter to Date
September 30, 2001
                                                                                               
Electric                                         $ 43,057                     $   461                   $  7,914
Mining                                              4,023                       2,847                      3,779
Oil and gas                                         7,750                         746                      2,804
Fuel marketing                                    216,448                       3,262                      3,898
Independent power                                  23,119                           -                      1,246
Communications and others                           5,154                       1,090                     (3,275)
Intersegment eliminations                               -                      (5,559)                         -
                                                 --------                     -------                    -------

Total                                            $299,551                      $2,847                    $16,366
                                                 ========                      ======                    =======

                                                External                  Inter-segment
                                           Operating Revenues          Operating Revenues         Net Income (loss)
Quarter to Date
September 30, 2000

Electric                                         $ 48,607                      $    -                    $10,060
Mining                                              5,740                       2,796                      2,375
Oil and gas                                         5,259                           -                      1,634
Fuel marketing                                    361,111                           -                      2,319
Independent power                                  27,155                           -                      2,878
Communications and others                           2,563                         904                     (2,944)
Intersegment eliminations                               -                        (904)                         -
                                                 --------                      ------                    -------

Total                                            $450,435                      $2,796                    $16,322
                                                 ========                      ======                    =======

                                                External                  Inter-segment
                                           Operating Revenues          Operating Revenues         Net Income (loss)
Year to Date
September 30, 2001

Electric                                       $  174,915                    $    783                    $41,878
Mining                                             14,681                       8,333                      8,055
Oil and gas                                        24,583                       1,770                      8,723
Fuel marketing                                    980,828                      16,256                     31,252
Independent power                                  66,138                           -                      3,827
Communications and others                          13,662                       3,307                    (10,424)
Intersegment eliminations                               -                     (22,116)                         -
                                               ----------                    --------                    -------

Total                                          $1,274,807                    $  8,333                    $83,311
                                               ==========                    ========                    =======

                                       10

                                                External                  Inter-segment
                                           Operating Revenues          Operating Revenues         Net Income (loss)
Year to Date
September 30, 2000
                                                                                                
Electric                                       $  117,805                     $     -                    $24,352
Mining                                             14,800                       7,649                      6,179
Oil and gas                                        13,493                           -                      3,750
Fuel marketing                                    852,625                           -                      3,482
Independent power                                  27,397                           -                      3,008
Communications and others                           4,422                       2,762                     (7,327)
Intersegment eliminations                               -                      (2,762)                         -
                                               ----------                      ------                    -------

Total                                          $1,030,542                      $7,649                    $33,444
                                               ==========                      ======                    =======

                                                External                  Inter-segment
                                           Operating Revenues          Operating Revenues         Net Income (loss)
12 Months Ended
September 30, 2001

Electric                                       $  230,419                    $    783                  $  54,593
Mining                                             20,761                      10,334                      8,579
Oil and gas                                        30,274                       2,915                      9,953
Fuel marketing                                  1,481,994                      29,574                     41,625
Independent power                                  78,156                         329                      4,062
Communications and others                          16,929                       4,228                    (16,262)
Intersegment eliminations                               -                     (37,827)                         -
                                               ----------                     -------                   --------

Total                                          $1,858,533                     $10,336                   $102,550
                                               ==========                     =======                   ========

                                                External                  Inter-segment
                                           Operating Revenues          Operating Revenues         Net Income (loss)
12 Months Ended
September 30, 2000

Electric                                       $  150,796                      $    -                    $31,651
Mining                                             22,706                       8,006                      8,145
Oil and gas                                        17,148                           -                      4,797
Fuel marketing                                  1,025,137                           -                      4,553
Independent power                                  27,397                           -                      2,992
Communications and others                           4,700                       3,736                     (8,141)
Intersegment eliminations                               -                      (3,736)                         -
                                               ----------                      ------                    -------

Total                                          $1,247,884                      $8,006                    $43,997
                                               ==========                      ======                    =======

                                       11

         Other than the following transactions the Company had no other material
         changes in total assets of its reporting segments, as reported in Note
         13 of the Company's 2000 Annual Report on Form 10-K, beyond changes
         resulting from normal operating activities.

o             As part of the Company's reorganization plan associated with the
              new "holding company" structure effected in the fourth quarter of
              2000, the Company transferred ownership interest in Wyodak
              Resources Development Corp. between its wholly-owned subsidiaries
              Black Hills Power and Black Hills Energy Ventures. This
              transaction had the effect of reducing the "Electric" reporting
              segment's total assets by approximately $89.6 million. Black Hills
              Energy Ventures is an "intermediate level" holding company and is
              not included in a reporting segment.

o             As part of the Company obtaining a new corporate revolving
              line-of-credit (Note 5), certain segments' total assets were
              realigned as a result of certain intercompany short-term
              borrowings previously held at the subsidiary level now being held
              at the "holding company" level.

o             The Independent Power segment had additions to its power
              generation assets of approximately $430 million, primarily related
              to the acquisition and construction of the Fountain Valley and Las
              Vegas Co-generation facilities, expansion of the Valmont and
              Arapahoe facilities and construction of the Wyoming combustion
              turbine.

o             The Oil and Gas segment had additions to its oil and gas
              properties of approximately $22 million related to its acquisition
              of Stewart Petroleum and developmental drilling.

o             The Communications segment had additions to its communications
              plant of approximately $19 million related to its continued
              network build-out.

(8)      LEGAL PROCEEDINGS

         On April 3, 2001, the Company reached a settlement of ongoing
         litigation with PacifiCorp filed in the United States District Court,
         District of Wyoming, (File No. 00CV-155B). The litigation concerned the
         parties' rights and obligations under the Further Restated and Amended
         Coal Supply Agreement dated May 5, 1987, under which PacifiCorp
         purchased coal from the Company's coal mine to meet the coal
         requirements of the Wyodak Power Plant. The Settlement Agreement
         provided for the dismissal of the litigation, with prejudice, coupled
         with the execution of several new coal-related agreements between the
         parties discussed below. The Company believes the value of the
         Settlement Agreements is equal to the net present value of the
         litigated Further Restated and Amended Coal Supply Agreement.

         New Restated and Amended Coal Supply Agreement: Effective January 1,
         2001, the parties agreed to terminate the Further Restated and Amended
         Coal Supply Agreement, and replace it with the New Restated and Amended
         Coal Supply Agreement (New Agreement). The New Agreement begins on
         January 1, 2001, and extends to December 31, 2022. Under the New
         Agreement, the Company received an extension of sales beyond the June
         8, 2013 term of the former Coal Supply Agreement. PacifiCorp will
         receive a price reduction for each ton of coal purchased. The minimum
         purchase obligation under the New Agreement increased to 1,500,000 tons
         of coal for each calendar year of the contract term, subject to
         adjustment for planned outages. The New Agreement further provides for
         a special one-

                                       12

         time payment by PacifiCorp in the amount of $7.3 million,
         which was received in August, 2001. This payment primarily relates to
         disputed billings under the previous agreement and a value transfer
         premium. Of this payment, $5.6 million was recognized currently in
         non-operating income, $1.0 million was previously recognized in
         revenues and the remaining $0.7 million is being recognized as sales
         are made under the New Agreement.

         Coal Option Agreement: The term of this agreement began October 1,
         2001, and extends until December 31, 2010. The agreement provides that
         PacifiCorp shall purchase 1,400,000 tons of coal during the period of
         October 1, 2001 through December 31, 2002, and 1,000,000 tons of coal
         in 2003 at a fixed price. The agreement further provides the Company
         with a "put" option for 2002 and 2003 under which the Company may put
         to PacifiCorp up to 500,000 tons of coal from the Wyodak Mine at a
         market based price. For each calendar year from January 1, 2004 through
         2010, the put option is increased to a maximum of 1,000,000 tons at a
         market based price. The "put" tonnages will be reduced or offset for
         quantities of K-Fuel purchased by PacifiCorp under the KFx Facility
         Output Agreement. Additionally, for each calendar year during which the
         Company is selling to PacifiCorp K-Fuel under the KFx Facility Output
         Agreement described below, and in which the Company has not exercised
         its "put" option, PacifiCorp may elect to purchase an equal amount of
         tonnage from the Company's coal reserves to use in a 50/50 blend with
         the K-Fuel, up to 500,000 tons per year in 2002 through 2007 at a
         market based price with a fixed floor.

         Asset Option Agreement: This agreement provides PacifiCorp an option to
         purchase a 10% interest in the KFx facility or the legal entity that
         owns the KFx facility at a market based price.

         The agreement also provides PacifiCorp an option to sell to the Company
         PacifiCorp's interest in the "In Pit" conveyor system currently owned
         by PacifiCorp and utilized at the Wyodak Mine at a fixed price. If
         PacifiCorp exercises its option to sell to the Company the "In Pit"
         system, the Company has a corresponding right to put to PacifiCorp the
         "North Conveyor System," which serves as the backup coal delivery
         system for the Wyodak Power Plant at a fixed price. In October 2001
         both parties exercised their respective options.

         KFx Facility Output Agreement: The KFx plant is a coal enhancement
         facility the Company owns located near its Wyodak Coal Mine. The KFx
         plant was built to produce an enhanced coal known as "K-Fuel." Assuming
         the plant becomes operational, PacifiCorp agrees to purchase K-Fuel for
         a term beginning January 1, 2002, and extending to December 31, 2007.
         If the plant is not operational on or before December 31, 2003, the
         agreement will become void. Under this agreement, PacifiCorp agrees to
         purchase the output of K-Fuel from the KFx plant, up to a maximum of
         500,000 tons for each calendar year from 2002 through 2007 at fixed
         price with market based escalation. Wyodak reserves the right to sell
         up to a total of 100,000 tons from the output of the KFx plant to other
         customers during the same time period.

(9)      PRICE RISK MANAGEMENT

         The Company is exposed to market risk stemming from changes in
         commodity prices. These changes could cause fluctuations in the
         Company's earnings and cash flows. In the normal course of business,
         the Company actively manages its exposure to these market risks by
         entering into various hedging transactions. The hedging transactions
         are

                                       13

         authorized under the Company's Risk Management Policies and
         Procedures that place clear controls on these activities. Hedging
         transactions involve the use of a variety of derivative financial
         instruments.

         The Company accounts for all energy trading activities at fair value as
         of the balance sheet date and recognizes currently the net gains or
         losses resulting from the revaluation of these contracts to fair value
         in its results of operations. As a result, substantially all of the
         energy trading activities of the Company's gas marketing, crude oil
         marketing, and coal marketing operations are accounted for under fair
         value accounting methodology as prescribed in SFAS 133 or EITF 98-10.

         Energy Trading Activities

         The Company, through its independent energy business group, utilizes
         financial instruments for its fuel marketing services. These financial
         instruments include fixed-for-float swap financial instruments, basis
         swap financial instruments and costless collars traded in the
         over-the-counter financial markets.

         These derivatives are not held for speculative purposes but rather
         serve to hedge the Company's exposure related to commodity purchases or
         sales commitments. Under SFAS 133 and EITF 98-10, these transactions
         qualify as derivatives or energy trading activities that must be
         accounted for at fair value. As such, realized and unrealized gains and
         losses are recorded as a component of income. Because the Company does
         not, as a policy, permit speculation with "open" positions,
         substantially all of its trading activities are back-to-back positions
         where a commitment to buy/(sell) a commodity is matched with a
         committed sale/(buy) or financial instrument. The quantities and
         maximum terms of derivative financial instruments held for trading
         purposes at September 30, 2001, December 31, 2000 and September 30,
         2000 are as follows:

                                                                                   Max. Term
        September 30, 2001                             Volume Covered               (Years)
        ------------------                             --------------               -------
        (MMBtus)
                                                                              
        Natural gas basis swaps purchased                  17,449,482                  2
        Natural gas basis swaps sold                       18,940,000                  2
        Natural gas fixed-for-float swaps purchased        13,101,810                  1
        Natural gas fixed-for-float swaps sold             13,278,943                  1
        Natural gas swing swaps purchased                   2,635,000                  1
        Natural gas swing swaps sold                        3,410,000                  1

        (Tons)
        Coal tons sold                                        961,046                  1
        Coal tons purchased                                 1,074,046                  1

                                                                                   Max. Term
        September 30, 2000                             Volume Covered               (Years)
        ------------------                             --------------               -------
        (MMBtus)
        Natural gas basis swaps purchased                  33,644,595                  2
        Natural gas basis  swaps sold                      30,954,871                  2
        Natural gas fixed-for-float swaps purchased         8,379,581                  1
        Natural gas fixed-for-float swaps sold              9,817,438                  1

                                       14

                                                                                    Max. Term
        December 31, 2000                              Volume Covered                (Years)
        -----------------                              --------------               -------
        (MMBtus)
                                                                              
        Natural gas basis swaps purchased                  25,577,894                  2
        Natural gas basis swaps sold                       26,059,621                  2
        Natural gas fixed-for-float swaps purchased         6,476,222                  1
        Natural gas fixed-for-float swaps sold              7,360,560                  1

        (Tons)
        Coal tons sold                                        988,000                  1
        Coal tons purchased                                   896,000                  1

         As required under SFAS 133 and EITF 98-10, derivatives and energy
         trading activities were marked to fair value on September 30, 2001, and
         the gains and losses recognized in earnings. The amounts related to the
         accompanying consolidated balance sheet and income statement as of and
         for the three, nine and twelve month periods ended September 30, 2001
         are as follows (in thousands):

                                                                        Three            Nine             Twelve
                                                                        Month            Month             Month
Instrument                            Asset           Liability      Gain (Loss)       Gain (Loss)       Gain (Loss)
- ----------                            -----           ---------      ------------      -----------       -----------
                                                                                             
Natural gas basis swaps             $  9,849           $10,283          $3,130           $10,138            $2,345

Natural gas
fixed-for-float swaps                 20,517            26,738             120            (3,728)           (4,721)

Natural gas physical                  16,384             4,078          (2,854)           (1,657)            5,822

Coal transactions                      4,904             3,636            (587)              359             1,269

Crude oil transactions                 6,148             5,393              77               232               755
                                    --------           -------          ------           -------            ------

  Totals                             $57,802           $50,128          $ (114)          $ 5,344            $5,470
                                    ========           =======          ======           =======            ======

         There were no significant differences between the fair values of
         derivative assets and liabilities at September 30, 2000.

         Non-trading Energy Activities

         To reduce risk from fluctuations in the price of crude oil and natural
         gas, the Company enters into swaps and costless collar transactions.
         The transactions are used to hedge price risk from sales of the
         Company's forecasted crude oil and natural gas production. For such
         transactions, the Company elects hedge accounting as allowed under SFAS
         133.

         At September 30, 2001, the Company had fixed-for-float swaps and
         costless collars to hedge portions of its crude oil and natural gas
         production. These transactions were identified as cash flow hedges,
         properly documented, and effectiveness testing established. At
         quarter-end, the hedges met the effectiveness testing criteria and
         retained their cash flow hedge status. The crude oil hedges recorded
         ineffectiveness due to basis

                                       15

         risk and time value. The effective portion of the gain or loss on these
         derivatives is reported in other comprehensive income and the
         ineffective portion is reported in earnings.

         At September 30, 2001, the Company had fixed-for-float swaps for 17,000
         barrels of crude oil per month through December of 2001 with a net fair
         value of $0.1 million and 10,000 barrels of crude oil per month for
         January through September of 2002 with a net fair value of $0.2
         million. The Company had costless collars (purchased put - sold call)
         for 10,000 barrels of crude oil per month for 2001 with a net fair
         value of $0.1 million. In addition, the Company hedged a portion of its
         forecasted 2001 and 2002 natural gas production with fixed-for-float
         swaps. At September 30, 2001, these natural gas swaps were for
         1,676,000 MMBtus (4,232 MMBtus per day through October 2002) with a net
         fair value of $2.3 million.

         The effective portion of the gains and losses on these derivatives was
         recorded in other comprehensive income. At September 30, 2001,
         accumulated other comprehensive income for all non-trading energy swaps
         and options was $2.6 million.

         Derivative fair value gains and losses are recorded in other
         comprehensive income for the effective portion of the hedge and in
         earnings for the ineffective portion. The ineffective portion includes
         both time value and basis risk. The net gain recognized in earnings
         prior to actual cash settlement was immaterial.

         The Company acquired several fixed-for-float swaps as part of the Las
         Vegas Co-generation acquisition (Note 11) completed on August 31, 2001.
         These swaps fixed the price for an index price gas purchase agreement.
         The swaps hedge the natural gas purchase price for 5,000 Mmbtus per day
         through April 30, 2010. The fair value of these swaps at acquisition
         closing was $8.6 million.

         At acquisition closing, the swaps were designated as cash flow hedges,
         properly documented, and effectiveness testing established. The
         critical terms of the hedge match the critical terms of the hedged item
         so no ineffectiveness can be expected. At quarter-end, the hedges met
         effectiveness testing and retained their cash flow hedge status.

         At September 30, 2001, the change in fair value of the swaps was not
         significant. No adjustments were made to the fair value of the
         derivative instrument on the balance sheet, no adjustments were made to
         other comprehensive income, and no earnings impact was recorded.

         Financing Activities

         To reduce risk from fluctuations in interest rates, the Company enters
         into interest rate swap transactions. These transactions are used to
         hedge interest rate risk for variable rate debt financing. For such
         transactions, the Company elects hedge accounting as allowed under SFAS
         133. These transactions were identified as cash flow hedges, properly
         documented, and effectiveness testing established. At quarter-end,
         these hedges met effectiveness testing criteria and retained their cash
         flow hedge status. At September 30, 2001, the Company had interest rate
         swaps with an average balance notional amount of $381.1 million, having
         a maximum term of ten years and a fair value of $(16.9) million.
         Because these hedges are fully effective (no time value or basis risk),
         the entire derivative fair value is recorded in

                                       16

         accumulated other comprehensive income.

         At September 30, 2001, the Company had $618.0 million of outstanding,
         floating-rate debt of which $224.0 million was not offset with interest
         rate swap transactions that effectively convert the debt to a fixed
         rate.

         Credit Risk

         In addition to the risk associated with price movements, credit risk is
         also inherent in the Company's risk management activities. Credit risk
         relates to the risk of loss resulting from non-performance of
         contractual obligations by a counterparty. While the Company has not
         experienced significant losses due to the credit risk associated with
         these arrangements, the Company has off-balance sheet risk to the
         extent that the counterparties to these transactions may fail to
         perform as required by the terms of each such contract.

(10)     COMMON STOCK OFFERING

         During the first quarter of 2001, the Company announced the public
         offering of 3 million shares of common stock with an option for the
         underwriters to purchase 450,000 additional shares. Credit Suisse First
         Boston, Lehman Brothers, CIBC World Markets and UBS Warburg acted as
         the managers of the underwriting syndicate.

         Early in the second quarter of 2001 the Company announced the offering
         price was set at $52 per share and all 3 million shares were sold with
         the underwriters exercising their over-allotment option to purchase an
         additional 383,000 shares. Net proceeds were approximately $163 million
         after commissions and expenses. The proceeds were used to repay a
         portion of current indebtedness under revolving credit facilities, to
         fund various power plant construction costs and for general corporate
         purposes.

(11)     ACQUISITIONS

         In the second quarter of 2001, the Company's independent power
         subsidiary, Black Hills Energy Capital, closed on the purchase of the
         Fountain Valley facility, a 240 megawatt generation facility located
         near Colorado Springs, Colorado, featuring six LM-6000 simple-cycle,
         gas-fired turbines. The facility came on-line mid third quarter of
         2001. The facility was purchased from Enron Corporation. Total cost of
         the project is approximately $183 million and has been financed
         primarily with non-recourse financing from Union Bank of California.
         The Company has obtained an 11-year contract with Public Service of
         Colorado to utilize the facility for peaking purposes. The contract is
         a tolling arrangement in which the Company assumes no fuel risk.

         On August 31, 2001, Black Hills Energy Capital closed on the purchase
         of a 273 MW gas-fired co-generation power plant project located in
         North Las Vegas, Nevada from Enron North America, a wholly-owned
         subsidiary of Enron Corporation. The facility currently has a 51 MW
         co-generation power plant in operation. Most of the power from that
         facility is under a long-term contract expiring in 2024. The Company
         has sold 50% of this power plant to another party, however, under
         generally accepted accounting principles the Company is required to
         consolidate 100% of this plant. The project also has a 222 MW combined-
         cycle expansion under way, which is 100%-owned by the Company. The
         facility is scheduled to be fully operational in the third quarter of
         2002 and will utilize LM-6000

                                       17

         technology. The power of the expansion is also under a long-term
         contract which expires in 2017. This contract for the expansion
         requires the purchaser to provide fuel to the power plant when it is
         dispatched. The cost for the entire facility is expected to be
         approximately $330 million and the Company is in the process of
         obtaining long-term financing, which is expected to be primarily non-
         recourse project debt.

         The acquisition has been accounted for under the purchase method of
         accounting and, accordingly, the purchase price of approximately $205
         million has been allocated to the acquired assets and liabilities based
         on preliminary estimates of the fair values of the assets purchased and
         the liabilities assumed as of the date of acquisition. Fair values in
         the allocation include assets acquired of approximately $157 million
         (excluding goodwill and other intangibles) and liabilities assumed of
         approximately $2 million. The estimated purchase price allocations are
         subject to adjustment, generally within one year of the date of the
         acquisition. Should new or additional facts about the acquisitions
         become available within one year of the date of acquisition, any
         changes to the preliminary estimates will be reflected as an adjustment
         to goodwill. The purchase price and related acquisition costs exceeded
         the fair values assigned to net tangible assets by approximately $50
         million, which was recorded as long-lived intangible assets and
         goodwill. Operating activities of the acquired company have been
         included in the accompanying consolidated financial statements since
         the acquisition date.

                                       18

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

We are a growth oriented, diversified energy holding company operating
principally in the United States. Our regulated and unregulated businesses have
expanded significantly in recent years. Our independent energy group produces
and markets power and fuel. We produce and sell electricity in a number of
markets, with a strong emphasis in the western United States. We also produce
coal, natural gas and crude oil primarily in the Rocky Mountain region and
market fuel products nationwide. We also own Black Hills Power, Inc., an
electric utility serving approximately 59,400 customers in South Dakota, Wyoming
and Montana. Our communications group offers state-of-the-art broadband
communications services to residential and business customers in Rapid City and
the northern Black Hills region of South Dakota.

The following discussion should be read in conjunction with Item 7. -
Management's Discussion and Analysis of Financial Condition and Results of
Operations - included in our 2000 Annual Report on Form 10-K filed with the
Securities and Exchange Commission. Our business and industry outlooks as
disclosed in that filing continue to be consistent with management's current
expectations and assessments.

Unless the context otherwise requires, references in this Form 10-Q to the
"Company", "we", "us" and "our" refer to Black Hills Corporation and all of its
subsidiaries collectively.

                              Results of Operations
Consolidated Results

Consolidated earnings for the three month period ended September 30, 2001 were
$16.2 million or $0.61 per share compared to $16.3 million or $0.71 per share in
the same period of the prior year. Consolidated earnings for the nine month
periods ended September 30, 2001 and 2000 were $82.8 million or $3.28 per share
and $33.4 million, or $1.52 per share respectively, and consolidated earnings
for the twelve month period ended September 30, 2001 were $102.0 million or
$4.12 per share compared to $44.0 million or $2.01 per share for the same period
of the prior year.

Consolidated earnings were level for the three month period ended September 30,
2001 compared to the same period in 2000. Financial results reflect the
substantial price decreases and reduction in demand experienced in energy
markets over the summer of 2001. The Company experienced record natural gas and
oil production and strong natural gas marketing volumes sold during the third
quarter of 2001. In addition, coal production increased and independent power
capacity increased significantly. Earnings for the Independent Energy business
group increased 29 percent over the same period in 2000 offset by a decrease in
the electric utility's earnings related to a significant decrease in prices
received for off-system sales and continued losses in the Communications
business group. Independent Energy business group's earnings included a $3.4
million after-tax gain related to a coal contract settlement, partially offset
by additional liabilities accrued for mining expenses.

Increases in consolidated earnings for the nine and twelve month periods ended
September 30, 2001 were primarily driven by continued strong performance in our
wholesale natural gas marketing business and increased off-system wholesale
electricity sales. Strong results in our independent energy business group and
electric utility business group were partially offset by losses in our
Communications group.

                                       19

Unusual energy market conditions stemming primarily from gas and electricity
shortages in the West contributed to our strong financial performance in the
last half of 2000 and the first half of 2001. We estimated that approximately
$0.40 of the reported $2.37 earnings per share in calendar year 2000 (including
approximately $0.10 in the third quarter of 2000) and more than half of the
reported $2.71 earnings per share for the six months ended June 30, 2001 could
be attributed to high prices of natural gas and electricity and high gas trading
margins. Energy prices decreased substantially beginning in June 2001, which has
resulted in an earnings stream returning to a pattern which is more consistent
with our longer-term baseline growth performance. Certain energy markets in
which we are active have continued to experience extreme volatility. Our fuel
production, fuel marketing and power sales exposure in these markets is
primarily indirect through sales to credit-worthy counterparties, including
neighboring utilities and gas and power marketing firms.

Consolidated revenues for the three, nine and twelve month periods ended
September 30, 2001 were $302.4 million, $1.3 billion and $1.9 billion,
respectively. Revenues for the same periods ended September 30, 2000 were $453.2
million, $1.0 billion and $1.3 billion, respectively.

The growth in revenues for the nine and twelve month periods ended September 30,
2001 was a result of high energy commodity prices through May 2001 and increased
volumes of fuel marketed, primarily as a result of extreme price volatility in
the western markets, acquisitions and growth in the independent energy business
group and increases in off-system sales by our electric utility. The significant
decrease in energy commodity prices was the primary reason for the decline in
revenues for the quarter ended September 30, 2001 compared to the same quarter
in 2000.

Consolidated operating expenses decreased significantly during the three month
period ended September 30, 2001 compared to the same quarter in 2000 due to
significant decreases in purchased power costs and fuel costs related to the
operation of our combustion turbines.

Consolidated operating expenses have increased significantly during the nine and
twelve month periods ended September 30, 2001, primarily due to significant
increases in fuel costs associated with operation of our combustion turbines and
purchased power costs related to excess capacity being sold to western markets.
In addition, there were significant cost increases related to the operating
costs of acquired and expanded businesses, increased employee costs for growing
operations and higher commissions related to performance levels in our fuel
marketing and wholesale energy businesses.

Revenue and net income (loss) provided by each business group as a percentage of
our total revenue and net income were as follows:

                                           Three Months Ended              Nine Months Ended              Twelve Months Ended
                                              September 30                    September 30                    September 30
                                           2001           2000            2001            2000            2001            2000
                                           ----           ----            ----            ----            ----            ----
Revenues
                                                                                                        
Independent energy                            84%             89%            85%             88%             87%             88%
Electric utility                              14              11             14              12              12              12
Communications                                 2               -              1               -               1               -
                                             ----            ---            ---             ---             ---             ---
                                             100%            100%           100%            100%            100%            100%
                                             ===             ===            ===             ===             ===             ===

                                       20

Net Income/(Loss)
                                                                                                        
Independent energy                            72%             56%            62%             49%             63%             47%
Electric utility                              48              62             50              73              53              72
Communications and other                     (20)            (18)           (12)            (22)            (16)            (19)
                                             ---             ---            ---             ---             ---             ---
                                             100%            100%           100%            100%            100%            100%
                                             ===             ===            ===             ===             ===             ===

We expect that earnings growth from the independent energy group over the next
few years will be driven primarily by our continued expansion in the independent
power production segment. We also believe that strength in commodity prices and
increased volumes produced and marketed will provide the opportunity for strong
results in our fuel marketing and oil and gas production operations.

Our electric utility has continued to produce modest growth in revenue and
earnings from the retail business over the past two years. We believe that this
trend is stable and that, absent unplanned system outages, it will continue for
the next several years due to the extension of our electric utility's rate
freeze until January 1, 2005. The share of the utility's future earnings
generated from wholesale off-system sales will depend on many factors, including
native load growth, plant availability and commodity prices in available
markets.

Although our communications business continues to significantly increase
residential and business customers, losses are expected to continue as the group
proceeds with completing the network and increasing the customer base. Net
income is expected to be achieved by 2004. We estimate net losses in 2001 of
approximately $12 million.

The following business group and segment information does not include
intercompany eliminations:

Independent Energy Group

                                       Three Months Ended                  Nine Months Ended                 Twelve Months Ended
                                          September 30                       September 30                       September 30
                                     2001              2000             2001              2000              2001             2000
                                     ----              ----             ----              ----              ----             ----
                                                                            (in thousands)
                                                                                                        
Revenue                              $ 258,195         $ 402,061       $1,112,589         $915,964        $1,654,337      $1,100,394
Expenses                               239,972           375,323        1,018,886          878,798         1,536,752       1,059,044
                                     ---------         ---------       ----------         --------        ----------      ----------
Operating income                     $  18,223         $  26,738       $   93,703         $ 37,166        $  117,585      $   41,350
Net income                           $  11,901         $   9,206       $   52,030         $ 16,419        $   64,391      $   20,487
EBITDA*                              $  32,033         $  20,559       $  118,937         $ 33,843        $  149,774      $   40,495

*EBITDA represents earnings before interest, income taxes, depreciation and
amortization. EBITDA is used by management and some investors as an indicator of
a company's historical ability to service debt. Management believes that an
increase in EBITDA is an indicator of improved ability to service existing debt,
to sustain potential future increases in debt and to satisfy capital
requirements. However, EBITDA is not intended to represent cash flows for the
period, nor has it been presented as an alternative to either operating income,
or as an indicator of operating performance or cash flows from operating,
investing and financing activities, as determined by accounting principles
generally accepted in the United States. EBITDA as presented may not be
comparable to other similarly titled measures of other companies.

                                       21

The following table provides a summary of certain operating statistics of our
independent energy group:

                                        Three Months Ended                  Nine Months Ended                Twelve Months Ended
                                           September 30                       September 30                       September 30
                                       2001             2000             2001              2000             2001             2000
                                       ----             ----             ----              ----             ----             ----
                                                                                                         
Fuel production:
Tons of coal sold                      872,900           838,200         2,465,700        2,216,900         3,299,000      3,015,000
Mcf equivalent sales                 2,033,000         1,320,700         5,309,000        3,698,000         6,888,600      4,895,000
Average price per
  barrel of oil sold
  (including hedge
  transactions)                         $24.35            $22.53            $24.55           $21.35            $24.10         $20.17
Average price per Mcf
  of natural gas sold
  (including hedge
  transactions)                        $  3.28           $  2.76           $  4.48          $  2.44           $  4.29        $  2.38
Fuel marketing
average daily volumes:
Natural gas - MMBtus                 1,062,600           903,000           947,900          787,300           981,000        763,600
Crude oil - barrels                     35,100            45,000            37,000           45,000            38,400         33,300
Coal - tons                              5,600             2,700             6,000            4,400             5,500          4,300

Earnings from the Independent Energy business group increased from 2000 amounts
by $2.7 million, or $0.10 per share, and $35.6 million, or $1.40 per share, and
$43.9 million, or $1.76 per share, for the three, nine and twelve month periods
ended September 30, 2001, respectively. Natural gas volumes marketed increased
significantly for the three, nine and twelve month periods, compared to the same
periods of the previous year, while margins in the three month period returned
to levels approximating historical trends. Gas and oil production had
significant increases in volumes sold for the respective periods, and moderate
increases in natural gas and oil prices. Coal mining results increased due to a
recent coal contract settlement and increased tonnage sold, offset partially by
lower average prices. Independent power operations added over 300 MW in the
third quarter and has approximately 400 MW under construction. Independent power
operations were affected by lower power prices in the West and lower-than-normal
water flows at hydro power plants in New York.

The group's non-operating income for the quarter increased over the previous
year due to a portion of the coal mining subsidiaries recent coal contract
settlement that was recorded in non-operating income and lower charges for
minority interest in consolidated subsidiaries as a result of decreased earnings
from these subsidiaries and the Company's buy-out of certain minority interest.

In addition, the increase in the twelve-month period was aided by the sale of
our ownership interest in a power fund management company, which resulted in a
$3.7 million pre-tax gain.

                                       22

Coal Mining Segment

                                  Three Months Ended                    Nine Months Ended                   Twelve Months Ended
                                     September 30                         September 30                         September 30
                                2001               2000             2001              2000              2001               2000
                                ----               ----             ----              ----              ----               ----
                                                                         (in thousands)

Revenue                        $6,870             $8,536          $23,014            $22,449           $31,095          $30,712
Operating income               $  830             $3,223          $ 5,664            $ 8,426           $ 6,033          $11,659
Net income                     $3,779             $2,375          $ 8,055            $ 6,179           $ 8,579          $ 8,145
EBITDA                         $7,184             $3,839          $13,891            $10,114           $14,792          $12,695

Earnings for the three, nine and twelve month periods increased over the prior
year's periods, primarily as a result of a $3.4 million after-tax gain related
to a coal contract settlement with PacifiCorp, partially offset by additional
liabilities accrued for mining expenses. In addition, lower average prices
received were partially offset by moderate increases in production volumes.

Oil and Gas Segment

                                  Three Months Ended                    Nine Months Ended                   Twelve Months Ended
                                     September 30                         September 30                         September 30
                                2001               2000               2001              2000              2001               2000
                                ----               ----               ----              ----              ----               ----
                                                                         (in thousands)
                                                                                                         
Revenue                        $8,496             $5,259            $26,353            $13,493          $33,189            $17,148
Operating income               $4,035             $2,396            $12,929            $ 5,448          $15,387            $ 7,106
Net income                     $2,804             $1,634            $ 8,723            $ 3,750          $ 9,953            $ 4,797
EBITDA                         $5,723             $3,197            $18,328            $ 7,717          $22,605            $ 9,739

Earnings of the oil and gas production business segment increased for the three,
nine and twelve month periods due to increases in gas volumes sold of 61
percent, 50 percent and 51 percent, respectively, while average gas prices
realized after hedged transactions were 19 percent, 84 percent and 80 percent
higher than the same periods in the prior year, respectively. Barrels of oil
sold increased 43 percent, 34 percent and 26 percent for the three, nine and
twelve month periods while average prices realized after hedged transactions
were 8 percent, 15 percent and 20 percent higher than the same periods in the
prior year, respectively.

The following is a summary of our estimated oil and gas reserves at September 30
determined using constant product prices at the end of the respective period.
Estimates of economically recoverable reserves are based on a number of
variables, which may differ from actual results.

                                               2001                      2000
                                               ----                      ----

     Barrels of oil (in millions)               4.2                       5.3
     Bcf of natural gas                        25.7                      18.8
     Total in Bcf equivalents                  50.9                      50.6

                                       23

During the first quarter we announced the acquisition of operating and
non-operating interests in 74 gas and oil wells from Stewart Petroleum for
approximately $10 million. The acquisition was closed early in the second
quarter of 2001 and increased our proved reserves by approximately 10 billion
cubic feet equivalent of which approximately 86 percent are natural gas.

Fuel Marketing Segment

                                   Three Months Ended                   Nine Months Ended                   Twelve Months Ended
                                      September 30                        September 30                         September 30
                                 2001             2000               2001               2000              2001               2000
                                 ----             ----               ----               ----              ----               ----
                                                                          (in thousands)
                                                                                                       
Revenue                         $219,710        $361,111           $997,084           $852,625        $1,511,568         $1,025,137
Operating income                $  5,606        $  3,320           $ 49,794           $  5,304        $   68,378         $    4,622
Net income                      $  3,898        $  2,319           $ 31,252           $  3,482        $   41,625         $    4,553
EBITDA                          $  6,146        $  4,049           $ 51,394           $  6,323        $   68,874         $    8,397

The significant increase in earnings for the nine and twelve month periods
resulted from high margins which can, in part, be attributed to the unusual
market conditions in the western markets, which primarily stem from the natural
gas and electricity shortages in California and may not recur in the future.
Margins in the third quarter 2001 returned to levels approximating historical
trends. In addition, natural gas volumes marketed increased 18 percent, 20
percent and 28 percent for the three, nine and twelve month periods compared to
the same periods of the previous year.

Independent Power Production Segment

                                  Three Months Ended                    Nine Months Ended                   Twelve Months Ended
                                     September 30                         September 30                         September 30
                                2001               2000              2001               2000              2001               2000
                                ----               ----              ----               ----              ----               ----
                                                                         (in thousands)

Revenue                         $23,119            $27,155          $66,138            $27,397           $78,485            $27,397
Operating income                $ 7,752            $17,799          $25,316            $17,988           $27,787            $17,963
Net income                      $ 1,246            $ 2,878          $ 3,827            $ 3,008           $ 4,062            $ 2,992
EBITDA                          $12,980            $ 9,474          $35,324            $ 9,689           $43,503            $ 9,664

Over 300 MW were added to operations mid third quarter 2001 and approximately
400 MW are currently under construction. Earnings from Independent power
operations were affected by lower power prices in the West and lower-than-normal
water flows at hydro plants in New York.

                                       24

Electric Utility Group

                                  Three Months Ended                    Nine Months Ended                   Twelve Months Ended
                                     September 30                         September 30                         September 30
                                2001               2000              2001               2000              2001               2000
                                ----               ----              ----               ----              ----               ----
                                                                         (in thousands)
                                                                                                        
Revenue                         $43,518           $48,607         $175,698           $117,805          $231,202           $150,796
Expenses                         28,272            29,994          102,477             72,567           135,011             92,289
                                -------           -------         --------           --------          --------           --------
Operating income                $15,246           $18,613         $ 73,221           $ 45,238          $ 96,191           $ 58,507
Net income                      $ 7,914           $10,060         $ 41,878           $ 24,352          $ 54,593           $ 31,651
EBITDA                          $18,692           $22,465         $ 85,038           $ 56,867          $111,465           $ 74,098

Earnings from the electric utility decreased $2.2 million, or $0.08 per share
and increased $17.5 million, or $0.69 per share, and $22.9 million, or $0.92 per
share for the three, nine and twelve month periods ended September 30, 2001,
respectively. The decrease in third quarter earnings resulted from a significant
decrease in wholesale electricity prices in response to changes in western
energy market conditions. Average prices received for off-system sales decreased
32 percent and increased 105 percent and 136 percent for the three, nine and
twelve month periods in 2001 compared to the same periods in 2000. In addition,
off-system megawatt hours sold decreased 11 percent for the three months due to
changes in market conditions and increased 64 percent and 67 percent for the
nine and twelve month periods ended September 30, 2001 compared to the same
periods in 2000, due to higher market prices and the 40 MW generating capacity
added in 2001. The Electric Utility continued to have modest gains in firm
residential and commercial electric sales. These nine and twelve month period
increases were partially offset by higher fuel and operating costs associated
with operation of the gas turbines and other power plant operations, and higher
purchased power costs. The following table provides certain operating
statistics.

                                             Three Months Ended                Nine Months Ended                Twelve Months Ended
                                                September 30                     September 30                       September 30
                                           2001            2000              2001             2000             2001           2000
                                           ----            ----              ----             ----             ----           ----
                                                                                                         
Firm (system) sales - MWh                537,000         519,000          1,527,000         1,477,000        2,024,000     1,950,000
Off-system sales - MWh                   211,000         237,000            761,000           465,000          980,000       588,000

Communications Group

                                   Three Months Ended                    Nine Months Ended                    Twelve Months Ended
                                      September 30                          September 30                          September 30
                                2001               2000             2001               2000               2001               2000
                                ----               ----             ----               ----               ----               ----
                                                                           (in thousands)
                                                                                                          
Revenue                       $ 5,154            $ 2,563           $13,717            $ 4,422           $ 16,984            $ 4,700
Expenses                        8,101              5,121            23,237             11,349             32,062             13,455
                              -------            -------           -------            -------           --------            -------
Operating loss                $(2,947)           $(2,558)          $(9,520)           $(6,927)          $(15,078)           $(8,755)
Net loss                      $(2,661)           $(2,842)          $(9,343)           $(6,974)          $(14,397)           $(7,785)
EBITDA                        $  (362)           $  (949)          $(2,135)           $(3,503)          $ (5,536)           $(4,082)

                                       25

Losses in Communications for the three, nine and twelve month periods ended
September 30, 2001 were $(2.7) million, or $(0.10) per share, $(9.3) million, or
$(0.37) per share and $(14.4) million, or $(0.58) per share, compared to $(2.8)
million, or $(0.12) per share, $(7.0) million or $(0.32) per share and $(7.8)
million or $(0.36) per share for the same periods in the prior year,
respectively. The customer base continues to grow with an increase of 17 percent
in the third quarter of 2001, compared to the second quarter of 2001. Losses for
the nine and twelve month periods in 2001 increased due to increases in certain
reserves for inventory and carrier billings and increased interest expense.
Losses are expected to continue as the group proceeds with completing the
network and increasing the customer base. Net income is expected to be achieved
by 2004. The following table provides certain operating statistics:

                                  September 30          June 30          March 31         December 31        September 30
                                      2001               2001              2001              2000                2000
                                      ----               ----              ----              ----                ----
                                                                                                 
Business customers                   1,940               1,440              980               650                 490
Residential customers               13,780              12,000           10,060             8,370               6,700

                         Liquidity and Capital Resources

During the three, nine and twelve month periods ended September 30, 2001, we
generated sufficient cash flow from operations to meet our operating needs, to
pay dividends on common and preferred stock, to pay long-term debt maturities
and substantially increase our cash position over September 30, 2000. We
continue to fund property and investment additions primarily related to
construction of additional electric generation facilities for our independent
energy business group through a combination of operating cash flow, increased
short-term debt and long-term non-recourse project financing. Investing and
financing activities increased primarily due to short and long-term borrowings
related to project financing.

During the first quarter of 2001, the Company announced the public offering of 3
million shares of common stock with an option for the underwriters to purchase
450,000 additional shares. Credit Suisse First Boston, Lehman Brothers, CIBC
World Markets and UBS Warburg acted as the managers of the underwriting
syndicate.

Early in the second quarter of 2001 the Company announced the offering price was
set at $52 per share and all 3 million shares were sold with the underwriters
exercising their over-allotment option to purchase an additional 383,000 shares.
Net proceeds were approximately $163 million after commissions and expenses. The
proceeds were used to repay a portion of current indebtedness under revolving
credit facilities, to fund various power plant construction projects and for
general corporate purposes.

In addition, during the third quarter of 2001, the Company completed a $400
million revolving credit facility. The facility replaces the Company's previous
short-term credit lines, which totaled $290 million. The credit facility was
arranged by ABN Amro Bank N.V., US Bank, N.A. and Union Bank of California,
N.A., with ten other banks participating. The facility consists of two $200
million tranches, one of which has a 364-day term and the other a three-year
term.

                                       26

Capital Requirements

During the third quarter 2001, we closed on the purchase of a gas-fired
generation complex in North Las Vegas, Nevada from Enron North America, a
wholly-owned subsidiary of Enron Corporation. We anticipate total acquisition
and construction costs for the 273 MW complex to be approximately $330 million.
The project is expected to be primarily financed with project-level non-recourse
debt. The capital necessary to fund this project was not included in our
forecasted capital requirements reported in our 2000 Annual Report on Form 10-K
filed with the Securities Exchange Commission.

There have been no additional material changes in our forecasted changes in
liquidity and capital requirements from those reported in Item 7 of our 2000
Annual Report on Form 10-K filed with the Securities Exchange Commission.

Forward Looking Statements

The above information includes "forward-looking statements" as defined by the
Securities and Exchange Commission. These statements concern the Company's
plans, expectations and objectives for future operations. All statements, other
than statements of historical facts, included above that address activities,
events or developments that the Company expects, believes or anticipates will or
may occur in the future are forward-looking statements. The words believe,
intend, anticipate, estimate, aim, project and similar expressions are also
intended to identify forward-looking statements. These forward-looking
statements may include, among others, such things as expansion and growth of the
Company's business and operations; future financial performance; future
acquisition and development of power plants; future production of coal, oil and
natural gas; reserve estimates; future communications customers; and business
strategy. These forward-looking statements are based on assumptions which the
Company believes are reasonable based on current expectations and projections
about future events and industry conditions and trends affecting the Company's
business. However, whether actual results and developments will conform to the
Company's expectations and predictions is subject to a number of risks and
uncertainties which could cause actual results to differ materially from those
contained in the forward-looking statements, including the following factors:
prevailing governmental policies and regulatory actions with respect to allowed
rates of return, industry and rate structure, acquisition and disposal of assets
and facilities, operation and construction of plant facilities, recovery of
purchased power and other capital investments, and present or prospective
wholesale and retail competition; changes in and compliance with environmental
and safety laws and policies; weather conditions; population growth and
demographic patterns; competition for retail and wholesale customers; pricing
and transportation of commodities; market demand, including structural market
changes; changes in tax rates or policies or in rates of inflation; changes in
project costs; unanticipated changes in operating expenses or capital
expenditures; capital market conditions; counterparty credit risk; technological
advances; competition for new energy development opportunities; legal and
administrative proceedings that influence the Company's business and
profitability; and unanticipated developments in the western power markets,
including unanticipated governmental intervention, deterioration in the
financial condition of counterparties, default on amounts due, adverse changes
in current or future litigation and adverse changes in the tariffs of the
California Independent System Operator Corporation. Any such forward-looking
statements should be considered in conjunction with Black Hills Corporation's
most recent annual report on Form 10-K and its interim quarterly reports on Form
10-Q on file with the Securities and Exchange Commission. New factors that could
cause actual results to differ materially from those described in
forward-looking statements

                                       27

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

ITEM 3.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Other than changes in price risk management activities as disclosed in Note 9 to
the Consolidated Financial Statements in this Form 10-Q, there have been no
material changes in market risk faced by the Company from those reported in the
Company's 2000 Annual Report on Form 10-K filed with the Securities Exchange
Commission. For more information on market risk, see Part II, Item 7 in the
Company's 2000 Annual Report on Form 10-K, and Notes to Consolidated Financial
Statements in this Form 10-Q.

                                       28

                             BLACK HILLS CORPORATION

                           Part II - Other Information

Item 1.       Legal Proceedings

              For information regarding legal proceedings, see Note 7 to the
              Consolidated Financial Statements in this Form 10-Q, the Company's
              2000 Annual Report on Form 10-K and the Company's quarterly
              reports on Form 10-Q for the quarters ended March 31, 2001 and
              June 30, 2001.

Item 2.       Changes In Securities and Use of Proceeds

              (c) On September 10, 2001, we issued the following unregistered
                  securities pursuant to the 2000 earn-out consideration agreed
                  to in the acquisition of Indeck Capital, Inc. on July 7, 2000.
                  The unregistered securities were issued under Rule 506 of
                  Regulation D of the Securities Act of 1933. Each of the
                  stockholders is an accredited investor.

                                                                                               Series 2000-A
                 Stockholder                              Common Shares Issued             Preferred Stock Issued

                 Gerald R. Forsythe                                7,029                              178
                 John W. Salyer                                    1,360                               34
                 Michelle R. Fawcett                                 736                               18
                 Marsha Fournier                                     736                               18
                 Monica Breslow                                      736                               18
                 Melissa S. Forsythe                                 736                               18

Item 6.       Exhibits and Reports of Form 8-K

              (a)  Exhibits

                   The following documents are included as exhibits to this
                   Form 10-Q:

                   Exhibit
                   Number  Description
                   ------  -----------

                    10.1 3-Year  Credit  Agreement  dated as of August 28,  2001
                         among  Black  Hills  Corporation,   as  Borrower,   The
                         Financial  Institutions  party,  hereto,  as Banks, ABN
                         AMRO BANK N.V., as Administrative  Agent, Union Bank of
                         California,   N.A.,  as  Syndication   Agent,  Bank  of
                         Montreal,  as Co-Syndication Agent, U.S. Bank, National
                         Association,  as  Documentation  Agent, and The Bank of
                         Nova Scotia, as Co-Documentation Agent.

                                       29

                    10.2 364-Day Credit Agreement dated as of August 28, 2001
                         among  Black  Hills  Corporation,   as  Borrower,   The
                         Financial  Institutions  party,  hereto,  as Banks, ABN
                         AMRO BANK N.V., as Administrative  Agent, Union Bank of
                         California,   N.A.,  as  Syndication   Agent,  Bank  of
                         Montreal,  as Co-Syndication Agent, U.S. Bank, National
                         Association,  as  Documentation  Agent, and The Bank of
                         Nova Scotia, as Co-Documentation Agent.

              (b)  Reports on Form 8-K

                   On September 18, 2001, the Company filed a Form 8-K dated
                   August 31, 2001 reporting "Item 5 - Other Events" related to
                   the acquisition of a 273 MW gas-fired co-generation power
                   plant project located northeast of Las Vegas, Nevada from
                   Enron North America, a wholly-owned subsidiary of Enron
                   Corporation.

                                       30

BLACK HILLS CORPORATION

Signatures

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

                                BLACK HILLS CORPORATION

                           By:  /s/ Roxann R. Basham
                                ---------------------------------------------
                                Roxann R. Basham, Vice President - Controller
                                Principal Accounting Officer)

                           By:  /s/ Mark T. Thies
                                ---------------------------------------------
                                Mark T. Thies, Senior VP & CFO
                                (Principal Financial Officer)

Dated:   November 14, 2001

                                       31

                                  EXHIBIT INDEX

Exhibit
Number                 Description

10.1 3-Year  Credit  Agreement  dated as of August 28,  2001 among  Black  Hills
     Corporation,  as Borrower,  The Financial  Institutions  party,  hereto, as
     Banks,  ABN  AMRO  BANK  N.V.,  as  Administrative  Agent,  Union  Bank  of
     California, N.A., as Syndication Agent, Bank of Montreal, as Co-Syndication
     Agent, U.S. Bank,  National  Association,  as Documentation  Agent, and The
     Bank of Nova Scotia, as Co-Documentation Agent.

10.2 364-Day  Credit  Agreement  dated as of August 28,  2001 among  Black Hills
     Corporation,  as Borrower,  The Financial  Institutions  party,  hereto, as
     Banks,  ABN  AMRO  BANK  N.V.,  as  Administrative  Agent,  Union  Bank  of
     California, N.A., as Syndication Agent, Bank of Montreal, as Co-Syndication
     Agent, U.S. Bank,  National  Association,  as Documentation  Agent, and The
     Bank of Nova Scotia, as Co-Documentation Agent.

Execution Copy

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

                                     3-YEAR
                                CREDIT AGREEMENT

                                   DATED AS OF

                                 AUGUST 28, 2001

                                      AMONG

                            BLACK HILLS CORPORATION,
                                  as Borrower,

                    THE FINANCIAL INSTITUTIONS PARTY HERETO,
                                    as Banks,

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

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

                                BANK OF MONTREAL,
                            as Co-Syndication Agent,

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

                                       and

                            THE BANK OF NOVA SCOTIA,
                            as Co-Documentation Agent

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

                                TABLE OF CONTENTS

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

                                                                                                                PAGE
SECTION 1         DEFINITIONS; INTERPRETATION.....................................................................1
         Section 1.1       Definitions............................................................................1
         Section 1.2       Interpretation........................................................................14
SECTION 2         THE CREDITS....................................................................................14
         Section 2.1       The Revolving Loan Commitment.........................................................14
         Section 2.2       Letters of Credit. (a)................................................................15
         Section 2.3       Applicable Interest Rates. (a) Base Rate Loans........................................17
         Section 2.4       Minimum Borrowing Amounts.............................................................19
         Section 2.5       Manner of Borrowing Loans and Designating Interest Rates Applicable
                  to Loans 19
         Section 2.6       Interest Periods......................................................................21
         Section 2.7       Maturity of Loans.....................................................................22
         Section 2.8       Prepayments...........................................................................22
         Section 2.9       Default Rate..........................................................................22
         Section 2.10      The Notes.............................................................................23
         Section 2.11      Funding Indemnity.....................................................................23
         Section 2.12      Commitments...........................................................................24
SECTION 3         FEES...........................................................................................24
         Section 3.1       Fees..................................................................................24
SECTION 4         PLACE AND APPLICATION OF PAYMENTS..............................................................26
         Section 4.1       Place and Application of Payments.....................................................26
SECTION 5         REPRESENTATIONS AND WARRANTIES.................................................................26
         Section 5.1       Corporate Organization and Authority..................................................26
         Section 5.2       Subsidiaries..........................................................................27
         Section 5.3       Corporate Authority and Validity of Obligations.......................................27
         Section 5.4       Financial Statements..................................................................27
         Section 5.5       No Litigation; No Labor Controversies.................................................28
         Section 5.6       Taxes.................................................................................28
         Section 5.7       Approvals.............................................................................28
         Section 5.8       ERISA.................................................................................28
         Section 5.9       Government Regulation.................................................................28
         Section 5.10      Margin Stock; Use of Proceeds.........................................................28
         Section 5.11      Licenses and Authorizations; Compliance with Laws.....................................29
         Section 5.12      Ownership of Property; Liens..........................................................29
         Section 5.13      No Burdensome Restrictions; Compliance with Agreements................................29
         Section 5.14      Full Disclosure.......................................................................30
         Section 5.15      Solvency..............................................................................30
SECTION 6         CONDITIONS PRECEDENT...........................................................................30
         Section 6.1       Initial Credit Event..................................................................30
         Section 6.2       All Credit Events.....................................................................31
SECTION 7         COVENANTS......................................................................................31
         Section 7.1       Corporate Existence; Subsidiaries.....................................................32

                                       i

                                                                                                        
         Section 7.2       Maintenance...........................................................................32
         Section 7.3       Taxes.................................................................................32
         Section 7.4       ERISA.................................................................................32
         Section 7.5       Insurance.............................................................................32
         Section 7.6       Financial Reports and Other Information...............................................33
         Section 7.7       Bank Inspection Rights................................................................34
         Section 7.8       Conduct of Business...................................................................35
         Section 7.9       Liens.................................................................................35
         Section 7.10      Use of Proceeds; Regulation U.........................................................37
         Section 7.11      Sales and Leasebacks..................................................................37
         Section 7.12      Mergers, Consolidations and Sales of Assets...........................................37
         Section 7.13      Use of Property and Facilities; Environmental and Health and Safety Laws..............38
         Section 7.14      Investments, Acquisitions, Loans, Advances and Guaranties.............................39
         Section 7.15      Restrictions on Indebtedness..........................................................41
         Section 7.16      Consolidated Net Worth................................................................42
         Section 7.17      Recourse Leverage Ratio...............................................................43
         Section 7.18      Interest Coverage Ratio...............................................................43
         Section 7.19      Dividends and Other Shareholder Distributions.........................................43
         Section 7.20      No Negative Pledge....................................................................43
         Section 7.21      Transactions with Affiliates..........................................................43
         Section 7.22      Compliance with Laws..................................................................43
         Section 7.23      Pari-Passu............................................................................44
         Section 7.24      Certain Subsidiaries..................................................................44
SECTION 8         EVENTS OF DEFAULT AND REMEDIES.................................................................44
         Section 8.1       Events of Default.....................................................................44
         Section 8.2       Non-Bankruptcy Defaults...............................................................46
         Section 8.3       Bankruptcy Defaults...................................................................46
         Section 8.4       Collateral for Outstanding Letters of Credit..........................................47
         Section 8.5       Expenses..............................................................................47
SECTION 9         CHANGE IN CIRCUMSTANCES........................................................................47
         Section 9.1       Change of Law.........................................................................47
         Section 9.2       Unavailability of Deposits or Inability to Ascertain, or
                 Inadequacy of, LIBOR............................................................................48
         Section 9.3       Increased Cost and Reduced Return.....................................................48
         Section 9.4       Lending Offices.......................................................................50
         Section 9.5       Discretion of Bank as to Manner of Funding............................................50
SECTION 10        THE AGENT......................................................................................50
         Section 10.1      Appointment and Authorization of Administrative Agent.................................50
         Section 10.2      Administrative Agent and its Affiliates...............................................50
         Section 10.3      Action by Administrative Agent........................................................51
         Section 10.4      Consultation with Experts.............................................................51
         Section 10.5      Liability of Administrative Agent; Credit Decision....................................51
         Section 10.6      Indemnity.............................................................................52
         Section 10.7      Resignation of Administrative Agent and Successor Administrative Agent................52
SECTION 11        MISCELLANEOUS..................................................................................52

                                       ii

                                                                                                       
         Section 11.1      Withholding Taxes.....................................................................52
         Section 11.2      No Waiver of Rights...................................................................54
         Section 11.3      Non-Business Day......................................................................54
         Section 11.4      Documentary Taxes.....................................................................54
         Section 11.5      Survival of Representations...........................................................54
         Section 11.6      Survival of Indemnities...............................................................54
         Section 11.7      Set-Off...............................................................................54
         Section 11.8      Notices...............................................................................55
         Section 11.9      Counterparts..........................................................................56
         Section 11.10     Successors and Assigns................................................................57
         Section 11.11     Participants and Note Assignees.......................................................57
         Section 11.12     Assignment of Commitments by Banks....................................................57
         Section 11.13     Amendments............................................................................58
         Section 11.14     Headings..............................................................................58
         Section 11.15     Legal Fees, Other Costs and Indemnification...........................................58
         Section 11.16     Entire Agreement......................................................................59
         Section 11.17     Construction..........................................................................59
         Section 11.18     Governing Law.........................................................................59
         Section 11.19     SUBMISSION TO JURISDICTION; WAIVER OF JURY TRIAL......................................59
         Section 11.20     Replacement of Bank...................................................................60
         Section 11.21     Confidentiality.......................................................................61
         Section 11.22     Rights and Liabilities of Documentation Agent and  Syndication Agent..................61

                                      iii

EXHIBITS **  The Exibits have been omitted but will be furnished to the SEC upon
- -----------  request.

         A   -        Form of Note
         B   -        Form of Compliance Certificate

SCHEDULES**The Schedules have been omitted but will be furnished to the SEC upon
- ---------  request.

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

                                       iv

                             3 YEAR CREDIT AGREEMENT

         3 YEAR CREDIT AGREEMENT, dated as of August 28, 2001 among Black Hills
Corporation, a South Dakota corporation ("Borrower"), the financial institutions
from time to time party hereto (each a "Bank," and collectively the "Banks"),
U.S. Bank, National Association and The Bank of Nova Scotia, in their capacity
as documentation agents for the Banks hereunder (in such capacity,
"Documentation Agents"), Union Bank of California, N.A. and Bank of Montreal, in
their capacity as syndication agents for the Banks hereunder (in such capacity,
"Syndication Agents") and ABN AMRO Bank N.V. in its capacity as agent for the
Banks hereunder (in such capacity, the "Administrative Agent").

                                WITNESSETH THAT:

         WHEREAS, the Borrower desires to obtain the several commitments of the
Banks to make available a revolving credit for loans and letters of credit (the
"Revolving Credit"), as described herein; and

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

         NOW, THEREFORE, in consideration of the recitals set forth above and
for other good and valuable consideration, the receipt and adequacy of which are
hereby acknowledged, the parties hereto hereby agree as follows:

     SECTION 1     DEFINITIONS; INTERPRETATION.

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

         "ABN AMRO Credit Agreement" means that certain Credit Agreement by and
among the Borrower, BHP, ABN AMRO Bank N.V., as Administrative Agent and the
financial institutions from time to time party thereto dated as of December 29,
2000.

         "ABN AMRO Letter of Credit" means that certain letter of number S315879
in the face amount of $10,000,000 issued by ABN AMRO Bank N.V. with the Public
Service Company of Colorado as Beneficiary with an expiry date of August 31,
2001.

         "Account" is defined in Section 8.4(b) hereof.

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

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

"Affiliate" means, as to any Person, any other Person which directly or
indirectly controls, or is under common control with, or is controlled by, such
Person. As used in this definition, "control" (including, with their correlative
meanings, "controlled by" and "under common control with") means possession,
directly or indirectly, of power to direct or cause the

direction of management or policies of a Person (whether through  ownership
of  securities  or  partnership  or other  ownership  interests,  by contract or
otherwise), provided that, in any event for purposes of this definition: (i) any
Person which owns  directly or  indirectly  twenty  percent (20%) or more of the
securities  having  ordinary voting power for the election of directors or other
governing  body  of a  corporation  or  twenty  percent  (20%)  or  more  of the
partnership or other  ownership  interests of any other Person will be deemed to
control such  corporation or other Person;  and (ii) each director and executive
officer of Borrower or any  Subsidiary of Borrower  shall be deemed an Affiliate
of Borrower and each of its Subsidiaries.

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

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

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

         "Application" is defined in Section 2.2(b) hereof.

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

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

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

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

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

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

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

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

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

         "Borrowing" means the total of Loans of a single type advanced,
continued for an additional Interest Period, or converted from a different type
into such type by the Banks on a single date and for a single Interest Period.
Borrowings of Loans are made by and maintained ratably for each of the Banks
according to their Percentages. A Borrowing is "advanced" on the

                                       2

day  Banks  advance  funds  comprising  such  Borrowing  to  Borrower,   is
"continued"  on the  date a new  Interest  Period  for the  same  type of  Loans
commences for such Borrowing and is  "converted"  when such Borrowing is changed
from one type of Loan to the other,  all as  requested  by Borrower  pursuant to
Section 2.5(a).

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

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

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

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

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

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

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

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

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

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

                                       3

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

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

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

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

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

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

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

                                       4

         "Consolidating Interest Expense" means, with reference to any period of
the Borrower, the sum of (i) all interest charges (including imputed interest
charges with respect to Capitalized Lease Obligations and all amortization of
debt discount and expense and other deferred financing charges) of the Borrower
on a consolidating (i.e. stand-alone) basis for such period determined in
accordance with GAAP, other than interest charges relating to Non-Recourse
Indebtedness plus (ii) all fees payable in respect of the issuance of standby
letters of credit for the account of the Borrower.

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

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

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

         "Credit Event" means any Borrowing or the issuance of, or extension of
the expiration date or increase in the amount of, any Letter of Credit.

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

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

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

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

         "Effective Date" means August 28, 2001.

                                       5

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

         "ERISA" is defined in Section 5.8 hereof.

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

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

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

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

         "Existing Letters of Credit" means the ABN AMRO Letter of Credit, the
U.S. Bank Letter of Credit and the Wells Fargo Letter of Credit.

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

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

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

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

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

         "GAAP" means generally accepted accounting principles as in effect in
the United States from time to time, applied by Borrower and its Subsidiaries on
a basis consistent with the

                                       6

preparation of Borrower's  financial  statements  furnished to the Banks as
described in Section 5.4 hereof.

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

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

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

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

                                       7

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

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

         "Interest Period" is defined in Section 2.6 hereof.

         "Investments" is defined in Section 7.14.

         "Issuing Agents" means each of the Limited Issuing Agents, Union Bank
Of California, N.A., and U.S. Bank, National Association.

         "L/C Commitment" means an amount equal to the Commitments from time to
time in effect.

         "L/C Documents" means the Letters of Credit, any draft or other
document presented in connection with a drawing thereunder, the Applications and
this Agreement.

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

         "L/C Obligations" means the aggregate undrawn face amounts of all
outstanding Letters of Credit and all unpaid Reimbursement Obligations.

         "Lending Office" is defined in Section 9.4 hereof.

         "Letter of Credit" is defined in Section 2.2(a) hereof.

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

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

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

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

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

                                       8

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

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

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

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

         "Limited  Issuing  Agents"  means ABN AMRO Bank N.V., as issuer of the
ABN AMRO Letter of Credit and Wells Fargo Bank West N.A., as issuer of the Wells
Fargo Letter of Credit.

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

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

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

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

                                       9

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

         "Master Letter of Credit Agreement" is defined in Section 2.2(a)
hereof.

         "Material Adverse Effect" means a material adverse effect on (i) the
business, financial position or results of operations of Borrower or Borrower
and its Subsidiaries taken as a whole, (ii) the ability of Borrower to perform
its material obligations under the Credit Documents, (iii) the validity or
enforceability of the material obligations of Borrower under any Credit
Document, (iv) the rights and remedies of the Banks, the Issuing Agents or the
Administrative Agent against Borrower; or (v) the timely payment of the
principal of and interest on the Loans or other amounts payable by Borrower
hereunder.

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

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

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

                                       10

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

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

         "Participating Interest" is defined in Section 2.2(d) hereof.

         "Percentage" means, for each Bank, the percentage of the Commitments
represented by such Bank's Commitment or, if the Commitments have been
terminated, the percentage held by such Bank (including through participation
interests in L/C Obligations) of the aggregate principal amount of all
outstanding Obligations.

         "Permitted Derivative Obligations" means all Derivative Obligations as
to which the Derivative Arrangements giving rise to such Derivative Obligation
are entered into in the ordinary course of business to hedge interest rate risk,
currency risk, commodity price risk or the production of Borrower or its
Subsidiaries (and not for speculative purposes) and if such Derivative
Obligation is an obligation of Borrower, such Derivative Obligation ranks no
greater than pari passu to the Obligations.

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

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

         "PBGC" is defined in Section 5.8 hereof.

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

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

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

                                       11

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

         "Reimbursement Obligation" is defined in Section 2.2(c) hereof.

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

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

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

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

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

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

         "Subsidiary" means, as to Borrower, any corporation or other entity (i)
which is consolidated into the financial statements of such Borrower in
accordance with GAAP or (ii) of which more than fifty percent (50%) of the
outstanding stock or comparable equity interests having ordinary voting power
for the election of the Board of Directors of such corporation or similar
governing body in the case of a non-corporation (irrespective of whether or not,
at the time, stock or other equity interests of any other class or classes of
such corporation or other
                                       12

entity shall have or might have voting power by reason of the happening of any
contingency) is at the time directly or indirectly owned by such Borrower or by
one or more of its Subsidiaries.

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

         "Telerate Service" means the Dow Jones Telerate Service.

         "Termination Date" means August 27, 2004.

         "364 Day Credit Agreement" means that certain 364 Day Credit Agreement
dated as of the Effective Date among Borrower, ABN AMRO Bank, N.V., in its
capacity as administrative agent for the Banks thereunder, U.S. Bank, National
Association and The Bank of Nova Scotia, in their capacity as documentation
agents for the Banks thereunder, Union Bank of California, N.A. and Bank of
Montreal, in their capacity as syndication agents for the Banks thereunder and
the various financial institutions from time to time party thereto as Banks.

         "364 Day Commitments" shall mean "Commitments", as such term is defined
in the 364 Day Credit Agreement.

         "364 Day Credit Documents" shall mean "Credit Documents", as such term
is defined in the 364 Day Credit Agreement.

         "364 Day Loans" shall mean "Loans", as such term is defined in the 364
Day Credit Agreement.

         "Total Commitments" shall mean the sum of the Commitments and the 364
Day Commitments.

         "Total Loans" shall mean the sum of the Loans and the 364 Day Loans.

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

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

         "US Bank Credit Agreements" means (i) that certain unsecured Credit
Agreement dated as of August 31, 2000 by and among Borrower, BHC, Black Hills
Holding Corporation, a South Dakota corporation, the banks party thereto and
U.S. Bank National Association, as Agent, and (ii) that certain agreement dated
February 5,1999 between U S Bank National Association and Black Hills
Corporation.

         "U.S. Bank Letter of Credit" means that certain letter of credit number
SLCMMSP01047 in the face amount of $5,800,000 issued by U.S. Bank National
Association with the Public Service Company of Colorado as Beneficiary with an
expiry date of August 31, 2001.

                                       13

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

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

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

         "Wells Fargo Credit Agreement" means that certain unsecured Credit
Agreement by and among Borrower, BHC, Black Hills Holding Corporation, Wells
Fargo Bank West N.A. dated as of November 21, 2000.

         "Wells Fargo Letter of Credit" means that certain letter of credit
number NZS404769 in the face amount of $4,450,000 issued by Wells Fargo Bank
West N.A. with The Bank of Nova Scotia as Beneficiary with an expiry date of
August 30, 2001.

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

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

SECTION 2         THE CREDITS.

Section 2.1 The Revolving Loan Commitment. Subject to the terms and conditions
hereof (including Sections 6.1 and 6.2), each Bank, by its acceptance hereof,
severally agrees to make a loan or loans (individually a "Loan" and collectively
"Loans") to Borrower from time to time on a revolving basis in U.S. Dollars in
an aggregate outstanding amount up to the amount of its commitment set forth on
the applicable signature page hereof (such amount, as reduced pursuant to
Section 2.12(a), increased pursuant to Section 2.12(b), or changed as a result
of one or more assignments under Section 11.12, its "Commitment" and,
cumulatively for all the Banks, the "Commitments") before the Termination Date,
provided that the sum of the aggregate amount of Loans and of L/C Obligations at
any time outstanding shall not exceed the Commitments in effect at such time. On
the Termination Date the Commitments shall terminate. Each Borrowing of Loans
shall be made ratably from the Banks in proportion to their respective
Percentages. As provided in Section 2.5(a) hereof, Borrower may elect that each
Borrowing of Loans be either Base Rate Loans or Eurodollar Loans. Loans may be
repaid and the principal amount thereof reborrowed before the Termination Date,
subject to all the terms and conditions

                                       14

hereof.  Unless an earlier  maturity is provided for  hereunder,  all Loans
shall  mature and be due and payable on the  Termination  Date.  Notwithstanding
anything is this Agreement to the contrary,  no Eurodollar Loans may be advanced
during the LIBOR Loan Restriction Period.

Section 2.2 Letters of Credit. (a) (a)General Terms. Subject to the terms and
conditions hereof, as part of the Revolving Credit the Issuing Agents shall
issue standby letters of credit denominated in U.S. Dollars (each a "Letter of
Credit") for Borrower's account, provided that the aggregate L/C Obligations at
any time outstanding shall not exceed the lesser of (i) the difference between
the Commitments in effect at such time and the aggregate amount of Loans then
outstanding and (ii) the L/C Commitment. Each Letter of Credit shall be issued
by the applicable Issuing Agent, but each Bank shall be obligated to purchase an
undivided percentage participation interest of such Letter of Credit from the
applicable Issuing Agent pursuant to Section 2.2(d) hereof in an amount equal to
its Percentage of the amount of each drawing thereunder and, accordingly, the
undrawn face amount of each Letter of Credit shall constitute usage of the
Commitment of each Bank pro rata in accordance with each Bank's Percentage. The
Borrower shall execute a master letter of credit agreement with each Issuing
Agent (collectively, the "Master Letter of Credit Agreement") which shall
contain certain terms applicable to the Letters of Credit. To the extent any
provision of the Master Letter of Credit Agreement is inconsistent with the
terms of this Agreement, the terms of this Agreement shall control. Each
Existing Letter of Credit shall for all purposes be deemed to by a Letter of
Credit issued on the Effective Date under this Agreement. No extension of a
Existing Letter of Credit issued by a Limited Issuing Agent shall be requested
by the Borrower or granted by a Limited Issuing Agent. The Limited Issuing
Agents shall have no obligation to issue any additional Letters of Credit under
this Agreement. Once the Existing Letters of Credit have expired, the Limited
Issuing Agents shall cease to be Issuing Agents hereunder.

(b) Applications. At any time before thirty (30) days prior to the Termination
Date, a Issuing Agent shall, at the request of Borrower given to such Issuing
Agent at least three (3) Business Days prior to the requested date of issuance,
issue one or more Letters of Credit, in a form satisfactory to such Issuing
Agent, with expiration dates no later than five (5) Business Days prior to the
Termination Date, in an aggregate face amount as set forth above, upon the
receipt of a duly executed application for the relevant Letter of Credit in the
form customarily prescribed by such Issuing Agent for the type of Letter of
Credit, requested (each an "Application"). No Letter of Credit may contain an
clause which provides for the extension of the expiration date of such Letter of
Credit absent an affirmative request from Borrower to the such Issuing Agent and
the Administrative Agent requesting such extension. Notwithstanding anything
contained in any Application to the contrary (i) Borrower's obligation to pay
fees in connection with each Letter of Credit shall be as exclusively set forth
in Section 3.1(b) hereof, and (ii) if the applicable Issuing Agent is not timely
reimbursed for the amount of any drawing under a Letter of Credit on the date
such drawing is paid (it being understood that a drawing which is reimbursed
pursuant to, and in accordance with, the last sentence of Section 2.5(c) shall
be deemed to have been timely reimbursed), Borrower's obligation to reimburse
the applicable Issuing Agent for the amount of such drawing shall bear interest
(which Borrower hereby promises to pay on demand) from and after the date such
drawing is paid at a rate per annum equal to the sum of two percent (2%) plus
the Base Rate Margin plus the Base Rate from time to time in effect. The
applicable Issuing Agent will promptly notify the Banks of each issuance by it
of a Letter of Credit and any amendment or extension of a Letter of Credit.

                                       15

Each  Issuing  Agent  agrees to issue  amendments  to any Letters of Credit
issued by it increasing the amount, or extending the expiration date, thereof at
the request of Borrower  subject to the conditions  set forth herein  (including
the  conditions  set forth in Section  6.2 and the other  terms of this  Section
2.2).  Without  limiting the  generality  of the  foregoing,  a Issuing  Agent's
obligation to issue,  amend or extend the expiration  date of a Letter of Credit
is subject to the  conditions  set forth herein  (including  the  conditions set
forth in Section  6.2 and the other  terms of this  Section  2.2) and an Issuing
Agent  will not  issue,  amend or extend  the  expiration  date of any Letter of
Credit if any Bank  notifies  such  Issuing  Agent of any  failure to satisfy or
otherwise  comply with such  conditions and terms and directs such Issuing Agent
not to take such action.

(c) The Reimbursement Obligations. Subject to Section 2.2(b) hereof, the
obligation of Borrower to reimburse the applicable Issuing Agent for all
drawings under a Letter of Credit (a "Reimbursement Obligation") shall be
governed, to the extent not inconsistent with this Agreement, by the Master
Letter of Credit Agreement and the Application related to such Letter of Credit,
except that reimbursement of each drawing shall be made in immediately available
funds at the applicable Issuing Agent's principal office in New York, New York
by no later than 1:30 p.m. (New York time) on the date when such drawing is paid
or, if such drawing was paid after 1:30 p.m. (New York time), by the end of such
day. If Borrower does not make any such reimbursement payment on the date due
(whether through a deemed request for a Base Rate Loan pursuant to Section
2.5(c) or otherwise) and the Banks fund their participations therein in the
manner set forth in Section 2.2(d) below, then all payments thereafter received
by an Issuing Agent in discharge of any of the relevant Reimbursement
Obligations shall be distributed in accordance with Section 2.2(d) below. An
Issuing Agent shall notify Borrower promptly of its intent to pay, or payment
of, a drawing under a Letter of Credit.

(d) The Participating Interests. Each Bank, by its acceptance hereof, severally
agrees to purchase from each Issuing Agent, and each Issuing Agent hereby agrees
to sell to each such Bank, an undivided percentage participating interest (a
"Participating Interest"), to the extent of its Percentage, in each Letter of
Credit issued by, and each Reimbursement Obligation owed to, such Issuing Agent.
Upon any failure by Borrower to pay any Reimbursement Obligation at the time
required on the date the related drawing is paid, as set forth in Section 2.2(c)
above, or if an Issuing Agent is required at any time to return to Borrower or
to a trustee, receiver, liquidator, custodian or other Person any portion of any
payment of any Reimbursement Obligation, each Bank shall, not later than the
Business Day it receives a demand from such Issuing Agent to such effect, if
such demand is received before 2:00 p.m. (New York time), or not later than the
following Business Day, if such demand is received after such time, pay to such
Issuing Agent an amount equal to its Percentage of such unpaid or recaptured
Reimbursement Obligation together with interest on such amount accrued from the
date the related payment was made by such Issuing Agent to the date of such
payment by such Bank a rate per annum equal to (i) from the date the related
payment was made by such Issuing Agent to the date two (2) Business Days after
payment by such Bank is due hereunder, the Federal Funds Rate for each such day
and (ii) from the date two (2) Business Days after the date such payment is due
from such Bank to the date such payment is made by such Bank, the Base Rate in
effect for each such day. Each such Bank shall thereafter be entitled to receive
its Percentage of each payment received in respect of the relevant Reimbursement
Obligation and of interest paid thereon, with the applicable Issuing Agent
retaining its Percentage as a Bank hereunder.

                                       16

         The several obligations of the Banks to the Issuing Agents under this
Section 2.2 shall be absolute, irrevocable and unconditional under any and all
circumstances whatsoever and shall not be subject to any set-off, counterclaim
or defense to payment which any Bank may have or have had against Borrower, the
Administrative Agent, the Issuing Agents, any Bank or any other Person
whatsoever. Without limiting the generality of the foregoing, such obligations
shall not be affected by any Default or Event of Default or by any reduction or
termination of any Commitment of any Bank, and each payment by a Bank under this
Section 2.2 shall be made without any offset, abatement, withholding or
reduction whatsoever. The Issuing Agents and the Administrative Agent shall be
entitled to offset amounts received for the account of a Bank under the Credit
Documents against unpaid amounts due from such Bank to the applicable Issuing
Agent or the Administrative Agent, as applicable, hereunder (whether as fundings
of participations, indemnities or otherwise).

(e) Indemnification. The Banks shall, to the extent of their respective
Percentages, indemnify each Issuing Agent (to the extent not reimbursed by
Borrower) against any cost, expense (including reasonable counsel fees and
disbursements), claim, demand, action, loss or liability (except such as result
from such Issuing Agent's gross negligence or willful misconduct) that an
Issuing Agent may suffer or incur in connection with any Letter of Credit issued
by it. The Issuing Agents shall be entitled to all of the rights and protections
afforded the Administrative Agent under Section 10 hereof. The obligations of
the Banks under this Section 2.2(e) and all other parts of this Section 2.2
shall survive termination of this Agreement and of all other L/C Documents.

(f) Issuing Agents. Each Bank hereby appoints each of Union Bank Of California,
N.A., or U.S. Bank, National Association, as the Issuing Agents hereunder and
hereby authorizes each of the Issuing Agent to take such action as Issuing Agent
on its behalf and to exercise such powers under the Credit Documents as are
delegated to the Issuing Agents by the terms thereof, together with such powers
as are reasonably incidental thereto. The relationship between each of the
Issuing Agent and the Banks is and shall be that of agent and principal only,
and nothing contained in this Agreement or any other Credit Document shall be
construed to constitute either Issuing Agent as a trustee or fiduciary for any
Bank or the Borrower.

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

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

(i)      the rate of interest announced by ABN AMRO Bank N.V. from time to time
         as its prime rate, or equivalent, for U.S. Dollar loans within the
         United States as in

                                       17

         effect on such day, with any change in the Base Rate resulting from a
         change in said prime rate to be effective as of the date of the
         relevant change in said prime rate; and

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

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

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

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

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

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

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

         "Eurodollar Reserve Percentage" means for an Borrowing of Eurodollar
Loans from any Bank, the daily average for the applicable Interest Period of the
actual effective rate, expressed as a decimal, at which reserves (including,
without limitation, any supplemental, marginal and

                                       18

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

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

Section 2.4 Minimum Borrowing Amounts. Each Borrowing of Base Rate Loans and
Eurodollar Loans shall be in an amount not less than (i) if such Borrowing is
comprised of Borrowing of Base Rate Loans, $1,000,000 and integral multiples of
$500,000 in excess thereof, and (ii) if such Borrowing is comprised of Borrowing
of Eurodollar Loans, $2,000,000 and integral multiples of $1,000,000 in excess
thereof, provided that a Borrowing of Base Rate Loans applied to pay a
Reimbursement Obligation pursuant to Section 2.5(c) hereof shall be in an amount
equal to such Reimbursement Obligation.

Section 2.5 Manner of Borrowing Loans and Designating Interest Rates Applicable
to Loans. (a) Notice to the Administrative Agent. (a) The Borrower shall give
notice to the Administrative Agent by no later than 12:00 noon (New York time)
(i) at least three (3) Business Days before the date on which Borrower requests
the Banks to advance a Borrowing of Eurodollar Loans, or (ii) on the date on
which Borrower requests the Banks to advance a Borrowing of Base Rate Loans. The
Loans included in each Borrowing shall bear interest initially at the type of
rate specified in such notice of a new Borrowing. Thereafter, Borrower may from
time to time elect to change or continue the type of interest rate borne by each
Borrowing or, subject to Section 2.4's minimum amount requirement for each
outstanding Borrowing, a portion thereof, as follows: (i) if such Borrowing is
of Eurodollar Loans, on the last day of the Interest Period applicable thereto,
Borrower may continue part or all of such Borrowing as Eurodollar Loans for an
Interest Period or Interest Periods specified by Borrower or convert part or all
of such Borrowing into Base Rate Loans, and (ii) if such Borrowing is of Base
Rate Loans, on any Business Day, Borrower may convert all or part of such
Borrowing into Eurodollar Loans for an Interest Period or Interest Periods
specified by Borrower. Borrower shall give all such notices requesting, the
advance, continuation, or conversion of a Borrowing to the Administrative Agent
by telephone or telecopy (which notice shall be irrevocable once given and, if
by telephone, shall be promptly confirmed in writing). Notices of the
continuation of a Borrowing of Eurodollar Loans for an additional Interest
Period or of the conversion of part or all of a Borrowing of Eurodollar Loans
into Base Rate Loans or of Base Rate Loans into Eurodollar Loans must be given
by no later than 12:00 noon (New York time) at least three (3) Business Days
before the date of the requested continuation or conversion. All such notices
concerning the advance, continuation, or conversion of a

                                       19

Borrowing shall be irrevocable once given and shall specify the date of the
requested  advance,  continuation or conversion of a Borrowing (which shall be a
Business Day), the amount of the requested Borrowing to be advanced,  continued,
or  converted,  the type of Loans to comprise  such new,  continued or converted
Borrowing  and, if such  Borrowing is to be comprised of Eurodollar  Loans,  the
Interest Period  applicable  thereto.  Borrower  agrees that the  Administrative
Agent may rely on any such  telephonic or telecopy notice given by any person it
in good faith believes is an Authorized  Representative without the necessity of
independent  investigation,  and in the  event  any  such  notice  by  telephone
conflicts with any written confirmation,  such telephonic notice shall govern if
the  Administrative  Agent has acted in reliance  thereon.  There may be no more
than six different Interest Periods in effect at any one time, provided that for
purposes  of  determining  the number of  Interest  Periods in effect at any one
time,  all Base Rate  Loans  shall be  deemed to have one and the same  Interest
Period.

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

(c) Borrower' Failure to Notify. Any outstanding Borrowing of Base Rate Loans
shall, subject to Section 6.2 hereof, automatically be continued for an
additional Interest Period on the last day of its then current Interest Period
unless Borrower has notified the Administrative Agent within the period required
by Section 2.5(a) that it intends to convert such Borrowing into a Borrowing of
Eurodollar Loans or notifies the Administrative Agent within the period required
by Section 2.8(a) that it intends to prepay such Borrowing. If Borrower fails to
give notice pursuant to Section 2.5(a) above of the continuation or conversion
of any outstanding principal amount of a Borrowing of Eurodollar Loans before
the last day of its then current Interest Period within the period required by
Section 2.5(a) and has not notified the Administrative Agent within the period
required by Section 2.8(a) that it intends to prepay such Borrowing, such
Borrowing shall automatically be converted into a Borrowing of Base Rate Loans,
subject to Section 6.2 hereof. The Administrative Agent shall promptly notify
the Banks of Borrower's failure to so give a notice under Section 2.5(a). In the
event Borrower fails to give notice pursuant to Section 2.5(a) above of a
Borrowing equal to the amount of a Reimbursement Obligation and has not notified
the Administrative Agent by 12:00 noon (New York time) on the day such
Reimbursement Obligation becomes due that it intends to repay such Reimbursement
Obligation through funds not borrowed under this Agreement, Borrower shall be
deemed to have requested a Borrowing of Base Rate Loans on such day in the
amount of the Reimbursement Obligation then due, subject to Section 6.2 hereof,
which Borrowing shall be applied to pay the Reimbursement Obligation then due.

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

                                       20

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

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

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

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

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

(d)      for purposes of determining an Interest Period for a Borrowing of
         Eurodollar Loans, a month means a period starting on one day in a
         calendar month and ending on the numerically corresponding day in the
         next calendar month; provided,

                                       21

         however,  that if there  is no  numerically  corresponding  day in the
         month in which  such an  Interest  Period is to end or if such an
         Interest  Period  begins on the last  Business  Day of a calendar
         month,  then such Interest  Period shall end on the last Business
         Day of the  calendar  month in which such  Interest  Period is to end.

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

Section 2.8 Prepayments. (a) (a) Borrower may prepay without premium or penalty
and in whole or in part (but, if in part, then (i) in an amount not less than
$5,000,000 and integral multiples of $1,000,000 in excess thereof, and (ii) in
an amount such that the minimum amount required for a Borrowing pursuant to
Section 2.4 hereof remains outstanding) any Borrowing of Eurodollar Loans upon
three (3) Business Days' prior irrevocable notice to the Administrative Agent
or, in the case of a Borrowing of Base Rate Loans, irrevocable notice delivered
to the Administrative Agent no later than 12:00 noon (New York time) on the date
of prepayment, such prepayment to be made by the payment of the principal amount
to be prepaid and accrued interest thereon to the date fixed for prepayment. In
the case of Eurodollar Loans, any amounts owing under Section 2.11 hereof as a
result of such prepayment shall be paid contemporaneously with such prepayment.
The Administrative Agent will promptly advise each Bank of any such prepayment
notice it receives from Borrower. Any amount paid or prepaid before the
Termination Date may, subject to the terms and conditions of this Agreement, be
borrowed, repaid and borrowed again.

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

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

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

                                       22

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

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

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

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

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

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

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

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

                                       23

          expense) and the amounts shown on such  certificate  if  reasonably
          calculated  shall be prima facie evidence of the amount of such loss,
          cost or expense.

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

                  (b) The Borrower and the Administrative Agent may from time to
time add additional financial institutions as parties to this Agreement or, with
the written consent of an existing Bank, increase the Commitment (including a
pro rata increase of the L/C Commitment) of such existing Bank (any such
financial institution or existing Bank which is increasing its commitment being
referred to as an "Added Bank") pursuant to documentation satisfactory to the
Borrower and the Administrative Agent and any such Added Bank shall for all
purposes be considered a Bank for purposes of this Agreement and the other
Credit Documents with a Commitment as set forth in such documentation. Any such
Added Bank shall on the date it is deemed a party to this Agreement purchase
from the other Banks its Percentage (or the increase in its Percentage, in the
case of an Added Bank which is an existing Bank) of the Loans outstanding and
shall be deemed to purchase pursuant to Section 2.2(d) a Participating Interest
in all Letters of Credit and Reimbursement Obligations outstanding on such date
to the extent of its Percentage (or the increase in its Percentage, in the case
of an Added Bank which is an existing Bank). Notwithstanding anything contained
in this Section 2.12(b) to the contrary, the aggregate amount of Commitments may
not at any time exceed $200,000,000 without the consent of the Required Banks.

SECTION 3         FEES.

Section 3.1       Fees.

(a) Facility Fee. From and after the Effective Date, Borrower shall pay to the
Administrative Agent for the ratable account of the Banks in accordance with
their Percentages a facility fee accruing at a rate per annum equal to the
Facility Fee Rate on the average daily amount of the Commitments (whether used
or unused), or if the Commitments have expired or terminated, on the principal
amount of Loans and L/C Obligations then outstanding. Such facility fee is
payable in arrears on the last Business Day of each calendar quarter and on the
Termination Date, and if the Commitments are terminated in whole prior to the
Termination

                                       24

Date,  the  fee for  the  period  to but  not  including  the  date of such
termination shall be paid in whole on the date of such termination.

(b)      Letter of Credit Fees.

(i)      Borrower shall pay to the Administrative Agent for the account of each
         Bank letter of credit fees with respect to the Letters of Credit at a
         rate per annum equal to the L/C Fee Rate on the average daily maximum
         face amount of outstanding Letters of Credit (including any Letters of
         Credit outstanding after the termination of the Commitments), computed
         on a quarterly basis in arrears on the last Business Day of each
         calendar quarter and on the Termination Date.

(ii)     Borrower shall pay to the Administrative Agent for the benefit of each
         Issuing Agent, as issuer of each Letter of Credit issued by such
         Issuing Agent, for the sole account of such Issuing Agent, a letter of
         credit fronting fee for each outstanding Letter of Credit issued by
         such Issuing Agent at the rate per annum equal to 0.125% on the average
         daily maximum face amount of outstanding Letters of Credit (including
         any Letters of Credit outstanding after the termination of the
         Commitments), computed on the last Business Day of each calendar
         quarter and on the Termination Date.

(iii)    The letter of credit fees payable under Section 3.1(b)(i) and the
         fronting fees payable under Section 3.1(b)(ii) shall be due and payable
         quarterly in arrears on the last Business Day of each calendar quarter
         during which Letters of Credit are outstanding, commencing on the first
         such quarterly date to occur after the Effective Date, and on the
         Termination Date, and if the Commitments are terminated in whole on an
         earlier date, the fee for the period to but not including the date of
         such termination shall be paid in whole on the date of such
         termination.

(iv)     Borrower shall pay to each the Issuing Agent from time to time on
         demand the normal issuance, presentation, amendment and other
         processing fees, and other standard costs and charges, of such Issuing
         Agent relating to letters of credit as from time to time in effect.

(c) Utilization Fee. From and after the Effective Date, for any day on which (i)
the aggregate principal amount of Total Loans and L/C Obligations then
outstanding exceeds thirty three percent (33%) of the Total Commitments then in
effect or (ii) the Commitments have been terminated by the Administrative Agent
or the Lenders in accordance with this Agreement, Borrower shall pay to the
Administrative Agent for the ratable account of the Banks in accordance with
their Percentages a utilization fee accruing at a rate per annum equal to the
Utilization Fee Rate on the aggregate amount of Total Loans and L/C Obligations
outstanding on such date. Such fee is payable in arrears on the last Business
Day of each calendar quarter and on the Termination Date, and if the Commitments
are terminated in whole prior to the Termination Date, the fee for the period to
but not including the date of such termination shall be paid in whole on the
date of such termination. The utilization fee payable pursuant to this Section
3.2(c) shall be one and the same, and not in addition to, the utilization fee
payable by the Borrower under the 364-Day Credit Agreement and shall be divided
among this Agreement and the 364-Day Credit Agreement pro rata based on the
percentage which the amount of Loans and

                                       25

L/C  Obligations  outstanding  under  this  Agreement  on the date such fee
accrued  comprises of the  aggregate  amount of Total Loans and L/C  Obligations
outstanding on such date.

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

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

SECTION 4         PLACE AND APPLICATION OF PAYMENTS.

Section 4.1 Place and Application of Payments. All payments of principal of and
interest on the Loans, and of all other Obligations and other amounts payable by
Borrower under the Credit Documents, shall be made by Borrower in U.S. Dollars
to the Administrative Agent or the applicable Issuing Agent if such payment is
being made with respect to a Reimbursement Obligation, by no later than 2:00
p.m. (New York time) on the due date thereof at the principal office of the
Administrative Agent or the applicable Issuing Agent, as applicable, in New
York, New York pursuant to the payment instructions set forth on Part A of
Schedule 4 hereof (or such other location in the, United States as the
Administrative Agent or the applicable Issuing Agent, as applicable, may
designate to Borrower) or, if such payment is on a Reimbursement Obligation, no
later than provided by Section 2.2(c) hereof, in each case for the benefit of
the Person or Persons entitled thereto. Any payments received after such time
shall be deemed to have been received by the Administrative Agent or the Issuing
Agent on the next Business Day. All such payments shall be made free and clear
of, and without deduction for, any set-off, defense, counterclaim, levy, or any
other deduction of any kind in immediately available funds at the place of
payment. The Administrative Agent or the applicable Issuing Agent, as
applicable, will promptly thereafter cause to be distributed like funds relating
to the payment of principal or interest on Loans or applicable fees ratably to
the Banks and like funds relating to the payment of any other amount payable to
any Person to such Person, in each case to be applied in accordance with the
terms of this Agreement.

SECTION 5         REPRESENTATIONS AND WARRANTIES.

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

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

                                       26

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

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

Section 5.4 Financial Statements. All financial statements heretofore delivered
to the Banks showing historical performance of Borrower for Borrower's fiscal
years ending on or before December 31, 2000, have been prepared in accordance
generally accepted accounting principles applied on a basis consistent, except
as otherwise noted therein, with that of the previous fiscal year. The unaudited
financial statements for the fiscal period ended June 30, 2001 have been
prepared in accordance generally accepted accounting principles applicable to
interim financial statements applied on a basis consistent, except as otherwise
noted therein, with the previous same fiscal period of Borrower in the prior
fiscal year (subject to normal year-end adjustments). Each of such financial
statements fairly presents on a consolidated basis the financial condition of
Borrower and its Subsidiaries as of the dates thereof and the results of
operations for the periods covered thereby. Borrower and its Subsidiaries have
no material contingent liabilities other than those disclosed in such financial
statements referred to in this Section 5.4 or in comments or footnotes thereto,
or in any report supplementary thereto, heretofore furnished to the Banks. Since
December 31, 2000, there has been no event or series

                                       27

of events which has resulted in, or reasonably  could be expected to result
in, a Material Adverse Effect.

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

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

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

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

Section 5.8 ERISA. With respect to each Plan, Borrower and each other member of
the Controlled Group has fulfilled its obligations under the minimum funding
standards of and is in compliance in all material respects with the Employee
Retirement Income Security Act of 1974, as amended ("ERISA"), and with the Code
to the extent applicable to it and has not incurred any liability to the Pension
Benefit Guaranty Corporation ("PBGC") or a Plan under Title IV of ERISA other
than a liability to the PBGC for premiums under Section 4007 of ERISA. Neither
Borrower nor any Subsidiary of Borrower has any contingent liabilities for any
post-retirement benefits under a Welfare Plan, other than liability for
continuation coverage described in Part 6 of Title I of ERISA.

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

Section 5.10 Margin Stock; Use of Proceeds. Neither Borrower nor any Subsidiary
of Borrower is engaged principally, or as one of its primary activities, in the
business of extending

                                       28

credit for the purpose of  purchasing  or carrying  margin  stock  ("margin
stock"  to have the same  meaning  herein  as in  Regulation  U of the  Board of
Governors of the Federal Reserve System).  The proceeds of the Loans and Letters
of Credit are to be used solely (i) to provide  liquidity support for Borrower's
commercial  paper program,  (ii) to fund Borrower's  working capital needs,  and
(iii) for general  corporate  purposes of  Borrower.  Borrower  will not use the
proceeds of any Loan or Letter of Credit in a manner that violates any provision
of Regulation U or X of the Board of Governors of the Federal Reserve System.

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

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

(b) Except as set forth on Schedule 5.11 (as amended from time to time in
accordance with the provisions hereof), neither the Borrower nor any Subsidiary
of Borrower has given, nor is it required to give, nor has it received, any
notice, letter, citation, order, warning, complaint, inquiry, claim or demand to
or from any governmental entity or in connection with any court proceeding which
could reasonably have a Material Adverse Effect claiming that: (i) Borrower or
any Subsidiary of Borrower has violated, or is about to violate, any
Environmental and Health Law; (ii) there has been a release, or there is a
threat of release, of Hazardous Materials from Borrower's or any of its
Subsidiary's Property, facilities, equipment or vehicles; (iii) Borrower or any
of its Subsidiary may be or is liable, in whole or in part, for the costs of
cleaning up, remediating or responding to a release of Hazardous Materials; or
(iv) any of Borrower's or any of its Subsidiary's Property or assets are subject
to a Lien in favor of any governmental entity for any liability, costs or
damages, under any Environmental and Health Law arising from, or costs incurred
by such governmental entity in response to, a release of a Hazardous Materials.

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

Section 5.13 No Burdensome Restrictions; Compliance with Agreements. Neither
Borrower nor any Subsidiary of Borrower is (a) party or subject to any law,
regulation, rule or

                                       29

order,  or  any  Contractual  Obligation,  that  (individually  or  in  the
aggregate)  materially adversely affects the business,  operations,  Property or
financial or other condition of Borrower and its  Subsidiaries  (individually or
in  the  aggregate)  or  (b)  in  default  in  the  performance,  observance  or
fulfillment of any of the obligations,  covenants or conditions contained in any
agreement to which it is a party (including any Contractual  Obligation),  which
default could materially adversely affects the business, operations, Property or
financial or other condition of Borrower and its  Subsidiaries  (individually or
in the aggregate).

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

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

SECTION 6         CONDITIONS PRECEDENT.

         The obligation of each Bank to effect a Borrowing, or of an Issuing
Agent to issue, extend the expiration date of or increase the amount of any
Letter of Credit, shall be subject to the following conditions precedent:

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

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

(b)      The Administrative Agent shall have received for each Bank copies of
         Borrower's (i) Articles of Incorporation, together with all amendments
         and (ii) bylaws (or comparable constituent documents) and any
         amendments thereto, certified in each instance by its Secretary or an
         Assistant Secretary;

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

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

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

                                       30

(f)      All legal  matters  incident to the execution  and delivery of both the
         Credit Documents and the 364 Day Credit Documents shall be satisfactory
         to the Banks;

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

(h)      The Administrative Agent shall have received a duly executed Compliance
         Certificate  containing financial information as of June 30, 2001;

(i)      With the exception of the $140,000,000 Wygen synthetic lease
         transaction and the Guaranty issued in connection with the TLS
         Investors acquisition pursuant to which the Borrower has provided a
         Guaranty in the amount of $15,000,000, neither Borrower nor any of its
         Subsidiaries shall have, during the period from May 7, 2001 to the
         Effective Date, issued, incurred, assumed, created, become liable for,
         contingently or otherwise, any material Indebtedness;

(j)      The Borrower shall have provided a certificate stating that (i) the US
         Bank Credit Agreements, the Wells Fargo Credit Agreement, and the ABN
         AMRO Credit Agreement have been terminated, or will be terminated
         concurrently with the first Borrowing of Loans hereunder, and (ii) the
         conditions set forth precedent set forth in this Section 6.1 have been
         satisfied; and

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

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

(a)      In the case of a Borrowing, the Administrative Agent shall have
         received the notice required by Section 2.5 hereof, in the case of the
         issuance of any Letter of Credit, the applicable Issuing Agent shall
         have received the request for such Letter of Credit required by Section
         2.2(b) and a duly completed Application for a Letter of Credit and, in
         the case of an extension or increase in the amount of a Letter of
         Credit, the applicable Issuing Agent shall have received a written
         request therefor, in a form acceptable to such Issuing Agent;

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

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

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

SECTION 7         COVENANTS.

                                       31

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

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

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

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

Section 7.4 ERISA. Borrower will, and will cause each of its Subsidiaries to,
promptly pay and discharge all obligations and liabilities arising under ERISA
of a character which if unpaid or unperformed might result in the imposition of
a Lien against any of its properties or assets and will promptly notify the
Administrative Agent of (i) the occurrence of any reportable event (as defined
in ERISA) affecting a Plan, other than any such event of which the PBGC has
waived notice by regulation, (ii) receipt of any notice from PBGC of its
intention to seek termination of any Plan or appointment of a trustee therefor,
(iii) its or any of its Subsidiaries' intention to terminate or withdraw from
any Plan, and (iv) the occurrence of any event affecting any Plan which could
result in the incurrence by Borrower or any of its Subsidiaries of any material
liability, fine or penalty, or any material increase in the contingent liability
of Borrower or any of its Subsidiaries under any post-retirement Welfare Plan
benefit. The Administrative Agent will promptly distribute to each Bank any
notice it receives from Borrower pursuant to this Section 7.4.

Section 7.5 Insurance. Borrower will insure, and keep insured, and will cause
each of its Subsidiaries to insure, and keep insured, with good and responsible
insurance companies, all insurable Property owned by it of a character usually
insured by companies similarly situated and operating like Property. To the
extent usually insured by companies similarly situated and conducting similar
businesses, Borrower will also insure, and cause each of its Subsidiaries to

                                       32

insure, employers' and public and product liability risks with good and
responsible insurance companies. Borrower will, upon request of any Bank,
furnish to such Bank a summary setting forth the nature and extent of the
insurance maintained pursuant to this Section 7.5.

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

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

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

                                       33

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

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

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

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

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

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

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

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

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

Section 7.7 Bank Inspection Rights. For purposes of confirming compliance with
the Credit Documents or after the occurrence and during the continuance of an
Event of Default, upon reasonable notice from the Administrative Agent or the
Required Banks, Borrower will, at Borrower's expense, permit such Banks (and
such Persons as any Bank may designate) during normal business hours to visit
and inspect, under Borrower's guidance, any of the Properties of

                                       34

Borrower  or any of its  Subsidiaries,  to  examine  all of their  books of
account,  records,  reports  and  other  papers,  to make  copies  and  extracts
therefrom,  and to discuss their respective affairs,  finances and accounts with
their  respective   officers,   employees  and  with  their  independent  public
accountants  (and by this  provision  Borrower  authorizes  such  accountants to
discuss with the Banks (and such Persons as any Bank may designate) the finances
and affairs of Borrower and its  Subsidiaries)  all at such reasonable times and
as often as may be reasonably requested; provided, however, that except upon the
occurrence and during the  continuation of any Default or Event of Default,  not
more than one such visit and inspection may be conducted each calendar quarter.

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

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

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

(b)      Liens securing Non-Recourse Indebtedness of any Subsidiary of Borrower,
         provided that any such Lien is limited to the Property being financed
         or refinanced by such Indebtedness and the stock (or similar equity
         interest) of the Subsidiary which incurred such Non-Recourse
         Indebtedness;

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

(d)       Liens  arising  out of  judgments  or awards  against  Borrower or any
          Subsidiary of Borrower,  or in connection  with surety or appeal bonds
          in  connection  with  bonding such  judgments or awards,  the time for
          appeal from which or petition  for  rehearing  of which shall not have
          expired  or with  respect to which such  Borrower  or such

                                       35

          Subsidiary  shall be  prosecuting  an appeal or proceeding for review,
          and with  respect to which it shall have  obtained a stay of execution
          pending  such  appeal or  proceeding  for  review;  provided  that the
          aggregate amount of liabilities (including interest and penalties,  if
          any) of Borrower and its Subsidiaries  secured by such Liens shall not
          exceed $20,000,000 at any one time outstanding;

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

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

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

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

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

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

(k)      Liens on assets of the Marketing Subsidiaries granted in the ordinary
         course of business securing the reimbursement obligations of Marketing
         Subsidiaries with respect to letters of credit and any working capital
         facility of the Marketing Subsidiaries so long as the holder of such
         reimbursement obligation or provider of such

                                       36

          working  capital  facility  has  no  recourse  against  Borrower  or a
          Consolidated   Subsidiary  of  Borrower   other  than  such  Marketing
          Subsidiary or any of their other assets (whether  directly,  through a
          Guarantee or otherwise)  other than pursuant to a Guarantee  permitted
          pursuant to Section 7.15(f);

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

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

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

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

Section 7.11 Sales and Leasebacks. Borrower will not, nor will it permit any of
its Subsidiaries to, enter into any arrangement with any bank, insurance company
or other lender or investor providing for the leasing by Borrower or any
Subsidiary of Borrower of any Property theretofore owned by it and which has
been or is to be sold or transferred by such owner to such lender or investor if
the total amount of rent and other obligations of the Borrower and its
Subsidiaries under such lease, when combined with all rent and other obligations
of Borrower and its Subsidiaries under all such leases, would exceed $30,000,000
in the aggregate, provided that Borrower and its Subsidiaries may engage in
synthetic lease transactions so long as the Borrower's or such Subsidiary's, as
applicable, obligations under such synthetic leases are included as Indebtedness
for all purposes (including financial covenant calculations) under the Credit
Documents.

Section 7.12      Mergers, Consolidations and Sales of Assets.

(a)  Borrower will not, and will not permit any of its Material Subsidiaries to,
     (i) consolidate  with or be a party to merger with any other Person or (ii)
     sell,  lease or  otherwise  dispose of all or a  "substantial  part" of the
     assets of Borrower and its Subsidiaries;  provided,  however,  that (w) the
     foregoing  shall not prohibit any sale,  lease,  transfer or disposition to
     which  the  Required  Banks  have   consented,   such  consent  not  to

                                       37

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

     (1)  Borrower is the surviving entity,

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

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

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

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

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

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

(a)      Borrower will, and will cause each of its Subsidiaries to, comply in
         all material respects with the requirements of all Environmental and
         Health Laws applicable

                                       38

          to or pertaining to the Properties or business  operations of Borrower
          or  any  Subsidiary  of  Borrower.  Without  limiting  the  foregoing,
          Borrower  will not,  and will not  permit  any  Person  to,  except in
          accordance  with  applicable  law,  dispose of any Hazardous  Material
          into,  onto or upon any real property owned or operated by Borrower or
          any of its Subsidiaries.

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

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

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

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

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

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

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

                                       39

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

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

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

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

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

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

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

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

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

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

                                       40

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

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

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

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

(a)      the Obligations;

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

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

                                       41

(d)      other Indebtedness (excluding Indebtedness of the type described in
         (e), (f), and (g) below) which is unsecured and either junior in right
         of payment to the Obligations or pari passu to the Obligations or is
         equally and ratably secured with the Obligations, provided that
         Borrower shall promptly provide the Administrative Agent with a copy of
         any documentation evidencing such Indebtedness in excess of $25,000,000
         and any modification to such Indebtedness;

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

(f)      Indebtedness  consisting  of  Guaranties  of the  Indebtedness  of the
         Marketing Subsidiaries (including Long-Term Guaranties), provided that
         such Indebtedness  shall only be permitted to the extent the aggregate
         amount  of  such  Indebtedness,  when  added  to the  sum  of (i)  the
         aggregate  amount  of all  intercompany  loans  made to the  Marketing
         Subsidiaries  pursuant  to Section  7.15(e),  plus (ii) the  aggregate
         amount  of  all  other  Investments  made  in  Marketing  Subsidiaries
         pursuant to Section 7.14(o)(ii), does not exceed $10,000,000 (it being
         understood  that to the  extent  such  limit is  exceeded  solely as a
         result of an increase in the value of any such Investment attributable
         to the  undistributed net earnings of the Marketing  Subsidiaries,  it
         shall not be deemed a violation  of this  Section  7.15(f))  provided,
         further that Borrower shall promptly provide the Administrative  Agent
         with  a  copy  of  any  such  --------   -------   Guarantee  and  any
         modification to such Guarantee;

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

(h)      Permitted Derivative Obligations; and

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

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

Section 7.16 Consolidated Net Worth. Borrower will at the end of each fiscal
quarter maintain Consolidated Net Worth in an amount of not less than the sum of
(i) $375,000,000 and

                                       42

(ii) fifty percent (50%) of the aggregate Consolidated Net Income, if positive,
for the period beginning June 30, 2001 and ending on the last day of such fiscal
quarter.

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

Section 7.18 Interest Coverage Ratio. Borrower will maintain an Interest
Coverage Ratio of not less than 3.00 to 1.00, as determined at the end of each
fiscal quarter.

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

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

Section 7.20 No Negative Pledge. Except (i) as set forth on Schedule 7.19 and
(ii) in connection with Non-Recourse Indebtedness of a Project Finance
Subsidiary, the Borrower will not, and will not permit any of its Subsidiaries
(other than Project Finance Subsidiaries), directly or indirectly to enter into
or assume any agreement (other than customary non-assignment and no sub-letting
provisions in leases consistent with Borrower's past practices and the Credit
Documents and, solely with respect to the asset so financed, Capitalized Leases,
to the extent such Indebtedness is permitted herein) prohibiting the creation or
assumption of any Lien upon its properties or assets, whether now owned or
hereafter acquired.

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

Section 7.22 Compliance with Laws. Without limiting any of the other covenants
of Borrower in this Section 7, Borrower will, and will cause each of its
Subsidiaries to, conduct its business, and otherwise be, in compliance with all
applicable laws, regulations, ordinances and orders of any governmental or
judicial authorities; provided, however, that neither Borrower nor any
Subsidiary of Borrower shall be required to comply with any such law,
regulation, ordinance

                                       44

or order if the  failure  to  comply  therewith  could  not  reasonably  be
expected to have a Material Adverse Effect.

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

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

Section 7.25 Ratings. Borrower will obtain an S&P Rating within 90 days of the
Effective Date and will at all times this Agreement is in effect maintain a S&P
Rating (once obtained) and a Moody's Rating (or if one or both of such ratings
are unavailable, rating(s) from such other recognized national rating agency or
agencies as may be acceptable to the Administrative Agent and the Required
Banks).

SECTION 8         EVENTS OF DEFAULT AND REMEDIES.

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

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

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

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

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

                                       44

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

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

(g)      a custodian, receiver, trustee, examiner, liquidator or similar
         official shall be appointed for Borrower or any Material Subsidiary, or
         any substantial part of any of their Property, or a proceeding
         described in Section 8.1(f)(iv) shall be instituted against Borrower or
         any Material Subsidiary, and such appointment continues undischarged or
         such proceeding continues undismissed or unstayed for a period of sixty
         (60) days;

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

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

                                       45

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

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

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

(m)      Borrower's S&P Rating (once obtained) ceases to be at least BBB- or its
         Moody's Rating ceases to be at least Baa3.

Section 8.2 Non-Bankruptcy Defaults. When any Event of Default other than those
described in subsections (f) or (g) of Section 8.1 hereof has occurred and is
continuing, the Administrative Agent shall, if so directed by the Required
Banks, by written notice to Borrower: (a) terminate the remaining Commitments
and all other obligations of the Banks hereunder on the date stated in such
notice (which may be the date thereof); (b) declare the principal of and the
accrued interest on all outstanding Notes to be forthwith due and payable and
thereupon all outstanding Notes, including both principal and interest thereon,
and all other Obligations, shall be and become immediately due and payable
together with all other amounts payable under the Credit Documents without
further demand, presentment, protest or notice of any kind; and (c) demand that
Borrower immediately pay to the Administrative Agent, subject to Section 8.4,
the full amount then available for drawing under each or any Letter of Credit,
and Borrower agrees to immediately make such payment and acknowledge and agrees
that the Banks would not have an adequate remedy at law for failure by Borrower
to honor any such demand and that the Administrative Agent, for the benefit of
the Banks, shall have the right to require Borrower to specifically perform such
undertaking whether or not any drawings or other demands for payment have been
made under any Letter of Credit. The Administrative Agent, after giving notice
to Borrower pursuant to Section 8.1(c) or this Section 8.2, shall also promptly
send a copy of such notice to the other Banks, but the failure to do so shall
not impair or annul the effect of such notice.

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

                                       46

Section 8.4 Collateral for Outstanding Letters of Credit. (a) (a) If the payment
or prepayment of the amount available for drawing under any or all outstanding
Letters of Credit is required under Section 2.2(b), Section 2.8(b) or under
Section 8.2 or 8.3 above, Borrower shall forthwith pay the amount required to be
so prepaid, to be held by the Administrative Agent as provided in subsection (b)
below.

(b) All amounts prepaid pursuant to subsection (a) above shall be held by the
Administrative Agent in a separate collateral account (such account, and the
credit balances, properties and any investments from time to time held therein,
and any substitutions for such account, any certificate of deposit or other
instrument evidencing any of the foregoing and all proceeds of and earnings on
any of the foregoing being collectively called the "Account") as security for,
and for application by the Administrative Agent (to the extent available) to,
the reimbursement of any payment under any Letter of Credit then or thereafter
made by the Issuing Agents, and to the payment of the unpaid balance of any
Loans and all other Obligations. The Account shall be held in the name of and
subject to the exclusive dominion and control of the Administrative Agent for
the benefit of the Administrative Agent, the Issuing Agents and the Banks, and
Borrower hereby grants to the Administrative Agent, for the benefit of the
Administrative Agent, the Issuing Agents and the Banks, a security interest in
all of Borrower's rights, title and interest in and to the Account and all
property (including investment property) contained therein or credited thereto.
So long as no Default or Event of Default has occurred, if and when requested by
Borrower, the Administrative Agent shall invest funds held in the Account from
time to time in direct obligations of, or obligations the principal of and
interest on which are unconditionally guaranteed by, the United States of
America with a remaining maturity of one year or less, provided, that the
Administrative Agent is irrevocably authorized to sell investments held in the
Account when and as required to make payments out of the Account for application
to amounts due and owing from Borrower to the Administrative Agent, the Issuing
Agents or Banks, and provided, further, that if a Default or Event of Default
has then occurred and is continuing, Borrower shall have no access to or right
to control the Account. If (i) Borrower shall have made payment of all such
obligations referred to in subsection (a) above, (ii) all relevant preference or
other disgorgement periods relating to the receipt of such payments have passed,
and (iii) no Letters of Credit, Commitments, Loans or other Obligations remain
outstanding hereunder, then the Administrative Agent shall repay to Borrower any
remaining amounts held in the Account.

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

SECTION 9         CHANGE IN CIRCUMSTANCES.

Section 9.1 Change of Law. Notwithstanding any other provisions of this
Agreement or any Note, if at any time after the date hereof any change in
applicable law or regulation or in the interpretation thereof makes it unlawful
for any Bank to make or continue to maintain Eurodollar Loans or to perform its
obligations as contemplated hereby, such Bank shall promptly

                                       47

give notice thereof to Borrower and such Bank's  obligations to make or maintain
Eurodollar  Loans under this  Agreement  shall  terminate  until it is no longer
unlawful  for such Bank to make or maintain  Eurodollar  Loans.  Borrower  shall
prepay  on  demand  the  outstanding  principal  amount  of  any  such  affected
Eurodollar Loans, together with all interest accrued thereon at a rate per annum
equal to the interest rate applicable to such Loan; provided,  however,  subject
to all of the terms and conditions of this Agreement, Borrower may then elect to
borrow the principal  amount of the affected  Eurodollar Loans from such Bank by
means of Base Rate Loans from such Bank, which Base Rate Loans shall not be made
ratably by the Banks but only from such affected Bank.

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

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

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

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

Section 9.3       Increased Cost and Reduced Return.

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

(i)      shall subject any Bank (or its Lending Office) to any tax, duty or
         other  charge with respect to its  Eurodollar  Loans,  its Notes,  its
         Letter(s)  of  Credit,  or  its  participation  in  any  thereof,  any
         Reimbursement  Obligations  owed  to  it or  its  obligation  to  make
         Eurodollar Loans, issue a Letter of Credit, or to participate therein,
         or shall  change the basis of taxation of payments to any Bank (or its
         Lending  Office) of the  principal  of or interest  on its  Eurodollar
         Loans,  Letter(s) of Credit,  or  participations  therein or any other
         amounts due under this Agreement in respect of its  Eurodollar  Loans,

                                       48

         Letter(s) of Credit,  or  participations  therein,  any  Reimbursement
         Obligations  owed to it, or its obligation to make  Eurodollar  Loans,
         issue a Letter of Credit,  or acquire  participations  therein (except
         for changes in the rate of tax on the overall net income or profits of
         such Bank or its Lending Office imposed by the  jurisdiction  in which
         such Bank or its lending office is  incorporated  in which such Bank's
         principal executive office or Lending Office is located); or

(ii)     shall  impose,  modify or deem  applicable  any reserve,  special
         deposit or similar requirement  (including,  without  limitation,  any
         such  requirement  imposed by the Board of  Governors  of the  Federal
         Reserve System, but excluding with respect to any Eurodollar Loans any
         such  requirement   included  in  an  applicable   Eurodollar  Reserve
         Percentage) against assets of, deposits with or for the account of, or
         credit  extended by, any Bank (or its Lending  Office) or shall impose
         on any Bank (or its  Lending  Office) or on the  interbank  market any
         other  condition  affecting  its  Eurodollar  Loans,  its  Notes,  its
         Letter(s)  of  Credit,  or  its  participation  in  any  thereof,  any
         Reimbursement  Obligation  owed  to it,  or  its  obligation  to  make
         Eurodollar  Loans,  to issue a Letter  of  Credit,  or to  participate
         therein;  and the result of any of the  foregoing  is to increase  the
         cost to such Bank (or its Lending Office) of making or maintaining any
         Eurodollar  Loan,  issuing  or  maintaining  a Letter  of  Credit,  or
         participating  therein, or to reduce the amount of any sum received or
         receivable by such Bank (or its Lending  Office) under this  Agreement
         or under its Notes with respect  thereto,  by an amount deemed by such
         Bank to be material,  then,  within  fifteen (15) days after demand by
         such Bank (with a copy to the Administrative Agent), Borrower shall be
         obligated  to pay to such Bank such  additional  amount or  amounts as
         will compensate such Bank for such increased cost or reduction. In the
         event any law, rule,  regulation or interpretation  described above is
         revoked,  declared invalid or inapplicable or is otherwise  rescinded,
         and as a result  thereof  a Bank is  determined  to be  entitled  to a
         refund from the  applicable  authority for any amount or amounts which
         were paid or reimbursed by Borrower to such Bank hereunder,  such Bank
         shall refund such amount or amounts to Borrower without interest.

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

                                       49

by such Bank to be material,  then from time to time,  within  fifteen (15) days
after demand by such Bank (with a copy to the  Administrative  Agent),  Borrower
shall pay to such Bank such additional amount or amounts as will compensate such
Bank for such reduction.

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

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

Section 9.5 Discretion of Bank as to Manner of Funding. Notwithstanding any
other provision of this Agreement, each Bank shall be entitled to fund and
maintain its funding of all or any part of its Loans in any manner it sees fit,
it being understood, however, that for the purposes of this Agreement all
determinations hereunder shall be made as if each Bank had actually funded and
maintained each Eurodollar Loan through the purchase of deposits in the
eurodollar interbank market having a maturity corresponding to such Loan's
Interest Period and bearing an interest rate equal to LIBOR for such Interest
Period.

SECTION 10        THE AGENT.

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

Section 10.2 Administrative Agent and its Affiliates. The Administrative Agent
shall have the same rights and powers under this Agreement and the other Credit
Documents as any

                                       50

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

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

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

Section 10.5 Liability of Administrative Agent; Credit Decision. Neither the
Administrative Agent nor any of its directors, officers, agents, or employees
shall be liable for any action taken or not taken by it in connection with the
Credit Documents (i) with the consent or at the request of the Required Banks or
(ii) in the absence of its own gross negligence or willful misconduct. Neither
the Administrative Agent nor any of its directors, officers, agents or employees
shall be responsible for or have any duty to ascertain, inquire into or verify
(i) any statement, warranty or representation made in connection with this
Agreement, any other Credit Document or any Credit Event; (ii) the performance
or observance of any of the covenants or agreements of Borrower or any other
party contained herein or in any other Credit Document; (iii) the satisfaction
of any condition specified in Section 6 hereof; or (iv) the validity,
effectiveness, genuineness, enforceability, perfection, value, worth or
collectibility hereof or of any other Credit Document or of any other documents
or writing furnished in connection with any Credit Document; and the
Administrative Agent makes no representation of any kind or character with
respect to any such matter mentioned in this sentence. The Administrative Agent
may execute any of its duties under any of the Credit Documents by or through
employees, agents, and attorneys-in-fact and shall not be answerable to the
Banks, Borrower, or any other Person for the default or misconduct of any such
agents or attorneys-in-fact selected with reasonable care. The Administrative
Agent shall not incur any liability by acting in reliance upon any notice,
consent, certificate, other document or statement (whether written or oral)

                                       51

believed by it to be genuine or to be sent by the proper party or parties. In
particular and without limiting any of the foregoing, the Administrative Agent
shall have no responsibility for confirming the accuracy of any Compliance
Certificate or other document or instrument received by it under the Credit
Documents. The Administrative Agent may treat the payee of any Note as the
holder thereof until written notice of transfer shall have been filed with the
Administrative Agent signed by such payee in form satisfactory to the
Administrative Agent. Each Bank acknowledges that it has independently and
without reliance on the Administrative Agent or any other Bank, and based upon
such information, investigations and inquiries as it deems appropriate, made its
own credit analysis and decision to extend credit to Borrower in the manner set
forth in the Credit Documents. It shall be the responsibility of each Bank to
keep itself informed as to the creditworthiness of Borrower and any other
relevant Person, and the Administrative Agent shall have no liability to any
Bank with respect thereto.

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

Section 10.7 Resignation of Administrative Agent and Successor Administrative
Agent. The Administrative Agent may resign at any time by giving written notice
thereof to the Banks and Borrower. Upon any such resignation of the
Administrative Agent, the Required Banks shall have the right to appoint a
successor Administrative Agent with the consent of Borrower. If no successor
Administrative Agent shall have been so appointed by the Required Banks, and
shall have accepted such appointment, within thirty (30) days after the retiring
Administrative Agent's giving of notice of resignation, then the retiring
Administrative Agent may, on behalf of the Banks, appoint a successor
Administrative Agent, which shall be any Bank hereunder or any commercial bank
organized under the laws of the United States of America or of any State thereof
and having a combined capital and surplus of at least $200,000,000. Upon the
acceptance of its appointment as the Administrative Agent hereunder, such
successor Administrative Agent shall thereupon succeed to and become vested with
all the rights and duties of the retiring or removed Administrative Agent under
the Credit Documents, and the retiring Administrative Agent shall be discharged
from its duties and obligations thereunder. After any retiring Administrative
Agent's resignation hereunder as Administrative Agent, the provisions of this
Section 10 and all protective provisions of the other Credit Documents shall
inure to its benefit as to any actions taken or omitted to be taken by it while
it was Administrative Agent.

SECTION 11        MISCELLANEOUS.

Section 11.1      Withholding Taxes.

(a)  Payments  Free of  Withholding.  Subject to Section  11.1 (b) hereof,  each
     payment by Borrower  under this  Agreement  or the other  Credit  Documents
     shall be made  without  withholding  for or on  account  of any  present or
     future taxes (other than overall

                                       52

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

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

(c)  Inability of Bank to Submit Forms. If any Bank  determines,  as a result of
     any change in  applicable  law,  regulation  or treaty,  or in any official
     application  or
                                       53

     interpretation thereof, that  it  is  unable  to  submit  to   Borrower or
     Administrative Agent any form or certificate that such Bank is obligated to
     submit pursuant to subsection (b) of this Section 11.1 or that such Bank is
     required  to  withdraw  or cancel any such form or  certificate  previously
     submitted or any such form or certificate  otherwise becomes ineffective or
     inaccurate,  such Bank shall promptly  notify  Borrower and  Administrative
     Agent of such fact and the Bank shall to that  extent not be  obligated  to
     provide  any such form or  certificate  and will be entitled to withdraw or
     cancel any affected form or certificate, as applicable.

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

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

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

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

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

Section 11.7 Set-Off. (a) (a) In addition to any rights now or hereafter granted
under applicable law and not by way of limitation of any such rights, upon the
occurrence of any Event of Default, each Bank and each subsequent holder of any
Note is hereby authorized by Borrower at any time or from time to time, without
notice to Borrower or to any other Person, any such notice being hereby
expressly waived, to set off and to appropriate and to apply any and all
deposits (general or special, including, but not limited to, Indebtedness
evidenced by certificates of deposit, whether matured or unmatured, and in
whatever currency denominated) and any other Indebtedness at any time held or
owing by that Bank or that subsequent holder to or for the credit

                                       55

or the account of Borrower,  whether or not  matured,  against and on account of
the  obligations  and  liabilities  of Borrower to that Bank or that  subsequent
holder under the Credit Documents,  including, but not limited to, all claims of
any nature or description arising out of or connected with the Credit Documents,
irrespective  of whether or not (a) that Bank or that  subsequent  holder  shall
have made any demand  hereunder  or (b) the  principal of or the interest on the
Loans or Notes and other amounts due hereunder shall have become due and payable
pursuant to Section 8 and although said obligations and  liabilities,  or any of
them, may be contingent or unmatured.

(b) Each Bank agrees with each other Bank a party hereto that if such Bank shall
receive and retain any payment, whether by set-off or application of deposit
balances or otherwise, on any of the Loans or Reimbursement Obligations in
excess of its ratable share of payments on all such obligations then outstanding
to the Banks, then such Bank shall purchase for cash at face value, but without
recourse, ratably from each of the other Banks such amount of the Loans or
Reimbursement Obligations, or participations therein, held by each such other
Banks (or interest therein) as shall be necessary to cause such Bank to share
such excess payment ratably with all the other Banks; provided, however, that if
any such purchase is made by any Bank, and if such excess payment or part
thereof is thereafter recovered from such purchasing Bank, the related purchases
from the other Banks shall be rescinded ratably and the purchase price restored
as to the portion of such excess payment so recovered, but without interest. For
purposes of this Section 11.7(b), amounts owed to or recovered by, an Issuing
Agent in connection with Reimbursement Obligations in which Banks have been
required to fund their participation shall be treated as amounts owed to or
recovered by such Issuing Agent as a Bank hereunder.

Section 11.8 Notices. Except as otherwise specified herein, all notices under
the Credit Documents shall be in writing (including facsimile or other
electronic communication) and shall be given to a party hereunder at its address
or facsimile number set forth below or such other address or facsimile number as
such party may hereafter specify by notice to the Administrative Agent and
Borrower, given by courier, by United States certified or registered mail, or by
other telecommunication device capable of creating a written record of such
notice and its receipt. Notices under the Credit Documents to the Banks shall be
addressed to their respective addresses, facsimile or telephone numbers set
forth on the signature pages hereof or in the assignment agreement which any
assignee bank executes pursuant to Section 11.12 hereof, and to Borrower and to
the Administrative Agent to:

                  If to Borrower:

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

                                       55

                  with copies to:

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

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

                  If to the Administrative Agent:

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

                  With copies of all such notices to:

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

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

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

                                       56

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

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

Section 11.12 Assignment of Commitments by Banks. Each Bank shall have the right
at any time, with the written consent of Administrative Agent and each Issuing
Agent, which consent shall not be unreasonably withheld, and, prior to the
occurrence of a Default or Event of Default, Borrower, to assign all or any part
of its Commitment (including the same percentage of its Note, outstanding Loans
and participations in Letter of Credit, and provided that the same percentage of
its commitment and loans outstanding under the 364-Day Credit Agreement are also
assigned) to one or more other Persons; provided that such assignment is in an
amount of at least $5,000,000 or the entire Commitment of such Bank, and if such
assignment is not for such Bank's entire Commitment then such Bank's Commitment
after giving effect to such assignment shall not be less than $5,000,000; and
provided further that neither the consent of Borrower nor the Administrative
Agent nor an Issuing Agent shall be required for any Bank to assign all or part
of its Commitment to any Affiliate of the assigning Bank so long as the same
percentage of such Bank's commitment under the 364-Day Credit Agreement are also
assigned to such Affiliate. Each such assignment shall set forth the assignees
address for notices to be given

                                       57

under Section 11.8 hereof  hereunder and its designated  Lending Office pursuant
to Section 9.4 hereof. Upon any such assignment,  delivery to the Administrative
Agent of an executed copy of such assignment agreement and the forms referred to
in Section 11.1 hereof, if applicable,  and the payment of a $3,500  recordation
fee to the Administrative Agent, the assignee shall become a Bank hereunder, all
Loans,  participations  in Letters of Credit and the Commitment it thereby holds
shall be governed by all the terms and  conditions  hereof and the Bank granting
such  assignment  shall have its  Commitment,  and its obligations and rights in
connection therewith, reduced by the amount of such assignment.

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

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

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

         Anything in this Agreement to the contrary notwithstanding, if at any
time when the conditions precedent set forth in Section 6.2 hereof to any Loan
hereunder are satisfied, any Bank shall fail to fulfill its obligations to make
such Loan or such Bank shall fail to fund its Participating Interest pursuant to
Section 2.2(d) (any such Bank, a "Defaulting Bank") then, for so long as such
failure shall continue, the Defaulting Bank shall (unless Borrower, the
Administrative Agent and the Required Banks (determined as if the Defaulting
Bank were not a Bank hereunder) shall otherwise consent in writing) be deemed
for all purposes related to amendments, modifications, waivers or consents under
this Agreement (other than amendments or waivers referred to in clause (i) and
(ii) above) to have no Loans or Commitments and shall not be treated as a Bank
hereunder when performing the computation of the Required Banks. To the extent
the Administrative Agent receives any payments or other amounts for the account
of a Defaulting Bank such Defaulting Bank shall be deemed to have requested that
the Administrative Agent use such payment or other amount first, to fund its
purchase of its Participating Interest pursuant to Section 2.2(d) and secondly,
to fulfill its obligations to make such Loan.

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

Section 11.15 Legal Fees, Other Costs and Indemnification. Borrower agrees to
pay all reasonable costs and expenses of the Arrangers in connection with the
preparation and negotiation of the Credit Documents (including past and future
reasonable out-of-pocket expenses incurred by the Arrangers in connection with
the syndication of the transaction), including without limitation, the
reasonable fees and disbursements of counsel to the Arrangers,

                                      58

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

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

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

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

Section 11.19 SUBMISSION TO JURISDICTION; WAIVER OF JURY TRIAL. BORROWER HEREBY
SUBMITS TO THE NONEXCLUSIVE JURISDICTION OF THE UNITED STATES DISTRICT COURT FOR
THE SOUTHERN DISTRICT OF NEW YORK AND OF ANY NEW YORK STATE COURT SITTING IN THE
CITY OF NEW YORK FOR PURPOSES OF ALL LEGAL PROCEEDINGS ARISING OUT OF OR
RELATING TO THIS AGREEMENT, THE OTHER CREDIT DOCUMENTS OR THE TRANSACTIONS
CONTEMPLATED HEREBY OR THEREBY. BORROWER IRREVOCABLY WAIVES, TO THE FULLEST
EXTENT PERMITTED BY LAW, ANY OBJECTION WHICH IT MAY NOW OR HEREAFTER HAVE TO THE
LAYING OF THE VENUE OF ANY SUCH PROCEEDING BROUGHT IN SUCH A COURT AND ANY CLAIM
THAT ANY SUCH PROCEEDING BROUGHT IN SUCH A COURT HAS BEEN BROUGHT IN AN
INCONVENIENT FORUM. BORROWER HEREBY

                                       59

IRREVOCABLY  WAIVES  ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL  PROCEEDING
ARISING  OUT  OF  OR  RELATING  TO  ANY  CREDIT  DOCUMENT  OR  THE  TRANSACTIONS
CONTEMPLATED THEREBY.

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

     i.   prior written notice to the Administrative Agent,

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

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

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

assign and delegate all its rights and obligations under this Agreement and any
other Credit Document to which it is a party (including its outstanding Loans)
to the Replacement Bank (such assignment to be made without recourse,
representation or warranty), and the Replacement Bank shall assume such rights
and obligations, whereupon the Replacement Bank shall in accordance with Section
11.12 become a party to each Credit Document to which the Affected Bank is a
party and shall have the rights and obligations of a Bank thereunder and the
Affected Bank shall be released from its obligations hereunder and each other
Credit Document to the extent of such assignment and delegation.

                                       60

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

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

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

                                       61

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

                                BLACK HILLS CORPORATION, a
                                South Dakota corporation

                                By:      _____________________________
                                Name:    _____________________________
                                Title:   _____________________________

                                       62

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

                                 By:      _____________________________
                                 Name:    _____________________________
                                 Title:   _____________________________

                                 By:      _____________________________
                                 Name:    _____________________________
                                 Title:   _____________________________

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

With copy to:

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

Lending Offices:              Same as above

Base Rate Loans:              Same as above

Eurocurrency Loans:           Same as above

Commitment: $____________   UNION BANK OF CALIFORNIA, N.A., in its individual
                            capacity as a Bank, as an Issuing Agent and as
                            Syndication Agent

                            By:      _____________________________
                            Name:    _____________________________
                            Title:   _____________________________

                            By:      _____________________________
                            Name:    _____________________________
                            Title:   _____________________________

Address for notices:
         Union Bank of California, N.A.
         445 South Figueroa Street
         Los Angeles, California 90071
         Chicago, Illinois 60603
         Attention: Mr. Robert Cole
         Facsimile: 213.236.4096
         Telephone: 213.236.6225

Lending Offices:              Same as above

Base Rate Loans:              Same as above

Eurocurrency Loans:           Same as above

Commitment: $____________   U.S. BANK, NATIONAL ASSOCIATION, in its individual
                            capacity as a Bank, as an Issuing Agent and as
                            Documentation Agent

                            By:      _____________________________
                            Name:    _____________________________
                            Title:   Managing Director

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

Lending Offices:              Same as above

Base Rate Loans:              Same as above

Eurocurrency Loans:           Same as above

Execution Copy

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

                                     364-DAY
                                CREDIT AGREEMENT

                                   DATED AS OF

                                 AUGUST 28, 2001

                                      AMONG

                            BLACK HILLS CORPORATION,
                                  as Borrower,

                    THE FINANCIAL INSTITUTIONS PARTY HERETO,
                                    as Banks,

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

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

                                BANK OF MONTREAL,
                            as Co-Syndication Agent,

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

                                       and

                            THE BANK OF NOVA SCOTIA,
                            as Co-Documentation Agent

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

                                TABLE OF CONTENTS

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

                                                                                                       

                                                                                                                PAGE
SECTION 1         DEFINITIONS; INTERPRETATION.....................................................................1
         Section 1.1       Definitions............................................................................1
         Section 1.2       Interpretation........................................................................13
SECTION 2         THE CREDITS....................................................................................13
         Section 2.1       The Revolving Loan Commitment.........................................................13
         Section 2.2       [Intentionally Omitted]. .............................................................14
         Section 2.3       Applicable Interest Rates. (a) Base Rate Loans........................................14
         Section 2.4       Minimum Borrowing Amounts.............................................................15
         Section 2.5       Manner of Borrowing Loans and Designating Interest Rates Applicable to Loans..........16
         Section 2.6       Interest Periods......................................................................17
         Section 2.7       Maturity of Loans.....................................................................18
         Section 2.8       Prepayments...........................................................................18
         Section 2.9       Default Rate..........................................................................19
         Section 2.10      The Notes.............................................................................19
         Section 2.11      Funding Indemnity.....................................................................19
         Section 2.12      Commitments...........................................................................20
SECTION 3         FEES AND EXTENSIONS............................................................................21
         Section 3.1       Fees..................................................................................21
         Section 3.2       Extensions............................................................................21
SECTION 4         PLACE AND APPLICATION OF PAYMENTS..............................................................22
         Section 4.1       Place and Application of Payments.....................................................22
SECTION 5         REPRESENTATIONS AND WARRANTIES.................................................................22
         Section 5.1       Corporate Organization and Authority..................................................23
         Section 5.2       Subsidiaries..........................................................................23
         Section 5.3       Corporate Authority and Validity of Obligations.......................................23
         Section 5.4       Financial Statements..................................................................23
         Section 5.5       No Litigation; No Labor Controversies.................................................24
         Section 5.6       Taxes.................................................................................24
         Section 5.7       Approvals.............................................................................24
         Section 5.8       ERISA.................................................................................24
         Section 5.9       Government Regulation.................................................................25
         Section 5.10      Margin Stock; Use of Proceeds.........................................................25
         Section 5.11      Licenses and Authorizations; Compliance with Laws.....................................25
         Section 5.12      Ownership of Property; Liens..........................................................26
         Section 5.13      No Burdensome Restrictions; Compliance with Agreements................................26
         Section 5.14      Full Disclosure.......................................................................26
         Section 5.15      Solvency..............................................................................26
SECTION 6         CONDITIONS PRECEDENT...........................................................................26
         Section 6.1       Initial Credit Event..................................................................26
         Section 6.2       All Credit Events.....................................................................27
SECTION 7         COVENANTS......................................................................................28

                                       i

                                                                                                       
         Section 7.1       Corporate Existence; Subsidiaries.....................................................28
         Section 7.2       Maintenance...........................................................................28
         Section 7.3       Taxes.................................................................................28
         Section 7.4       ERISA.................................................................................28
         Section 7.5       Insurance.............................................................................29
         Section 7.6       Financial Reports and Other Information...............................................29
         Section 7.7       Bank Inspection Rights................................................................31
         Section 7.8       Conduct of Business...................................................................31
         Section 7.9       Liens.................................................................................31
         Section 7.10      Use of Proceeds; Regulation U.........................................................33
         Section 7.11      Sales and Leasebacks..................................................................33
         Section 7.12      Mergers, Consolidations and Sales of Assets...........................................33
         Section 7.13      Use of Property and Facilities; Environmental and Health and Safety Laws..............35
         Section 7.14      Investments, Acquisitions, Loans, Advances and Guaranties.............................35
         Section 7.15      Restrictions on Indebtedness..........................................................37
         Section 7.16      Consolidated Net Worth................................................................39
         Section 7.17      Recourse Leverage Ratio...............................................................39
         Section 7.18      Interest Coverage Ratio...............................................................39
         Section 7.19      Dividends and Other Shareholder Distributions.........................................39
         Section 7.20      No Negative Pledge....................................................................39
         Section 7.21      Transactions with Affiliates..........................................................39
         Section 7.22      Compliance with Laws..................................................................40
         Section 7.23      Pari-Passu............................................................................40
         Section 7.24      Certain Subsidiaries..................................................................40
         Section 7.25      Ratings...............................................................................40
SECTION 8         EVENTS OF DEFAULT AND REMEDIES.................................................................40
         Section 8.1       Events of Default.....................................................................40
         Section 8.2       Non-Bankruptcy Defaults...............................................................42
         Section 8.3       Bankruptcy Defaults...................................................................42
         Section 8.4       [Intentionally Omitted].  ............................................................42
         Section 8.5       Expenses..............................................................................43
SECTION 9         CHANGE IN CIRCUMSTANCES........................................................................43
         Section 9.1       Change of Law.........................................................................43
         Section 9.2       Unavailability of Deposits or Inability to Ascertain, or Inadequacy of, LIBOR.........43
         Section 9.3       Increased Cost and Reduced Return.....................................................43
         Section 9.4       Lending Offices.......................................................................45
         Section 9.5       Discretion of Bank as to Manner of Funding............................................45
SECTION 10        THE AGENT......................................................................................45
         Section 10.1      Appointment and Authorization of Administrative Agent.................................45
         Section 10.2      Administrative Agent and its Affiliates...............................................46
         Section 10.3      Action by Administrative Agent........................................................46
         Section 10.4      Consultation with Experts.............................................................46
         Section 10.5      Liability of Administrative Agent; Credit Decision....................................46
         Section 10.6      Indemnity.............................................................................47
         Section 10.7      Resignation of Administrative Agent and Successor Administrative Agent................47

                                       ii

                                                                                                       
SECTION 11        MISCELLANEOUS..................................................................................47
         Section 11.1      Withholding Taxes.....................................................................47
         Section 11.2      No Waiver of Rights...................................................................49
         Section 11.3      Non-Business Day......................................................................49
         Section 11.4      Documentary Taxes.....................................................................49
         Section 11.5      Survival of Representations...........................................................49
         Section 11.6      Survival of Indemnities...............................................................49
         Section 11.7      Set-Off...............................................................................49
         Section 11.8      Notices...............................................................................50
         Section 11.9      Counterparts..........................................................................51
         Section 11.10     Successors and Assigns................................................................52
         Section 11.11     Participants and Note Assignees.......................................................52
         Section 11.12     Assignment of Commitments by Banks....................................................52
         Section 11.13     Amendments............................................................................53
         Section 11.14     Headings..............................................................................53
         Section 11.15     Legal Fees, Other Costs and Indemnification...........................................53
         Section 11.16     Entire Agreement......................................................................54
         Section 11.17     Construction..........................................................................54
         Section 11.18     Governing Law.........................................................................54
         Section 11.19     SUBMISSION TO JURISDICTION; WAIVER OF JURY TRIAL......................................54
         Section 11.20     Replacement of Bank...................................................................55
         Section 11.21     Confidentiality.......................................................................55
         Section 11.22     Rights and Liabilities of Documentation Agent and  Syndication Agent..................56

                                      iii

EXHIBITS ** The exhibits have been omitted but will be furnished to the SEC upon
request.

         A        -                 Form of Note
         B        -                 Form of Compliance Certificate

SCHEDULES ** The schedules have been omitted but will be furnished to the SEC
upon request.

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

                                       iv

                            364-DAY CREDIT AGREEMENT

         364-DAY CREDIT AGREEMENT, dated as of August 28, 2001 among Black Hills
Corporation, a South Dakota corporation ("Borrower"), the financial institutions
from time to time party hereto (each a "Bank," and collectively the "Banks"),
U.S. Bank, National Association, and The Bank of Nova Scotia, in their capacity
as documentation agents for the Banks hereunder (in such capacity,
"Documentation Agents"), Union Bank of California, N.A., and Bank of Montreal,
in their capacity as syndication agents for the Banks hereunder (in such
capacity, "Syndication Agents") and ABN AMRO Bank N.V. in its capacity as agent
for the Banks hereunder (in such capacity, the "Administrative Agent").

                                WITNESSETH THAT:

         WHEREAS, the Borrower desires to obtain the several commitments of the
Banks to make available a revolving credit for loans and letters of credit (the
"Revolving Credit"), as described herein; and

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

         NOW, THEREFORE, in consideration of the recitals set forth above and
for other good and valuable consideration, the receipt and adequacy of which are
hereby acknowledged, the parties hereto hereby agree as follows:

SECTION 1         DEFINITIONS; INTERPRETATION.

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

         "ABN AMRO Credit Agreement" means that certain Credit Agreement by and
among the Borrower, BHP, ABN AMRO Bank N.V., as Administrative Agent and the
financial institutions from time to time party thereto dated as of December 29,
2000.

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

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

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

Person;  and (ii)  each  director  and  executive  officer  of  Borrower  or any
Subsidiary of Borrower  shall be deemed an Affiliate of Borrower and each of its
Subsidiaries.

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

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

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

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

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

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

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

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

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

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

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

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

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

         "Business Day" means any day other than a Saturday or Sunday on which
Banks are not authorized or required to close in New York, New York, Chicago,
Illinois or Rapid City, South

                                       2

Dakota and, if the  applicable  Business Day relates to the borrowing or payment
of a  Eurodollar  Loan,  on which  banks  are  dealing  in U.S.  Dollars  in the
interbank market in London, England.

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

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

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

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

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

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

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

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

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

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

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

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

                                       3

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

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

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

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

         "Consolidating Interest Expense" means, with reference to any period of
the Borrower, the sum of (i) all interest charges (including imputed interest
charges with respect to Capitalized Lease Obligations and all amortization of
debt discount and expense and other deferred financing charges) of the Borrower
on a consolidating (i.e. stand-alone) basis for such period determined in
accordance with GAAP, other than interest charges relating to Non-Recourse
Indebtedness plus (ii) all fees payable in respect of the issuance of standby
letters of credit for the account of the Borrower.

                                       4

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

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

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

         "Credit Event" means any Borrowing.

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

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

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

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

         "Effective Date" means August 28, 2001.

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

                                       5

         "ERISA" is defined in Section 5.8 hereof.

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

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

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

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

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

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

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

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

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

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

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

         "Hazardous Material" means any substance or material which is hazardous
or toxic, and includes, without limitation, (a) asbestos, polychlorinated
biphenyls, dioxins and petroleum or its

                                       6

by-products or derivatives (including crude oil or any fraction thereof) and (b)
any other  material or  substance  classified  or regulated  as  "hazardous"  or
"toxic" pursuant to any Environmental and Health Law.

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

         "Indebtedness" means, as to any Person, without duplication: (i) all
obligations of such Person for borrowed money or evidenced by bonds, debentures,
notes or similar instruments; (ii) all obligations of such Person for the
deferred purchase price of property or services (other than in respect of trade
accounts payable arising in the ordinary course of business which are not
past-due); (iii) all Capitalized Lease Obligations of such Person; (iv) all
Indebtedness of others secured by a Lien on any properties, assets or revenues
of such Person (other than stock, partnership interests or other equity
interests of Borrower or any Subsidiary of Borrower in other entities) to the
extent of the lesser of the value of the property subject to such Lien or the
amount of such Indebtedness; (v) all Indebtedness of others Guaranteed by such
Person provided that Long-Term Guaranties shall not be deemed "Indebtedness" for
purposes of calculating Borrower's compliance with the financial covenants set
forth herein; (vi) all obligations of such Person, contingent or otherwise, in
respect of any letters or credit (whether commercial or standby) or bankers'
acceptances, (vii) all Derivative Obligations of such Person, provided that for
purposes of determining Borrower's compliance with the financial covenants set
forth herein, only Borrower's Derivative Obligations under Derivative
Arrangements which must be marked-to-market in accordance with GAAP shall be
included as Indebtedness of Borrower, and (viii) all obligations of such Person
under synthetic (and similar type) lease arrangements, provided that for
purposes of calculating such Person's Indebtedness under such synthetic (or
similar type) lease arrangements, such lease arrangement shall be treated as if
it were a Capitalized Lease.

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

         "Interest Period" is defined in Section 2.6 hereof.

         "Investments" is defined in Section 7.14.

                                       7

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

         "Lending Office" is defined in Section 9.4 hereof.

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

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

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

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

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

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

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

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

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

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

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

                                       8

respect to such reclamation bonds (so long as such reclamation bonds have not
been called upon).

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

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

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

         "Material Adverse Effect" means a material adverse effect on (i) the
business, financial position or results of operations of Borrower or Borrower
and its Subsidiaries taken as a whole, (ii) the ability of Borrower to perform
its material obligations under the Credit Documents, (iii) the validity or
enforceability of the material obligations of Borrower under any Credit
Document, (iv) the rights and remedies of the Banks or the Administrative Agent
against Borrower; or (v) the timely payment of the principal of and interest on
the Loans or other amounts payable by Borrower hereunder.

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

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

         "Non-Recourse Indebtedness" means, without duplication, all
Indebtedness of Borrower and its Consolidated Subsidiaries determined on a
consolidated basis in accordance with GAAP incurred in connection with project
financings (including project financings of existing assets the

                                       9

proceeds of which are used to  refinance  such assets) as to which the holder of
such Indebtedness has recourse solely against the assets which were purchased or
refinanced with, or leased in connection with, such Indebtedness and not against
Borrower or a Consolidated  Subsidiary of Borrower other than a Project  Finance
Subsidiary or any of their other assets (whether  directly,  through a Guarantee
or otherwise),  other than the pledge of the stock (or similar equity  interest)
of the Project Finance Subsidiary which incurred such Indebtedness. For purposes
of clarification,  any Indebtedness of a Project Finance  Subsidiary which would
otherwise  constitute  Non-Recourse  Indebtedness  but for the  issuance  by the
Borrower or a  Consolidated  Subsidiary  of the Borrower of a Guarantee or other
document  which  provides  recourse  with  respect  to such  Indebtedness,  such
Indebtedness  shall for all purposes of this  Agreement  be deemed  Non-Recourse
Indebtedness  so long as (i) the  Borrower's or such  Consolidated  Subsidiary's
obligations  under such Guarantee or other document are treated for all purposes
as Recourse  Indebtedness  hereunder,  (ii) such  Recourse  Indebtedness  of the
Borrower or such Consolidated Subsidiary is unsecured and is otherwise permitted
by this Agreement,  and (iii) such Recourse Indebtedness of the Borrower or such
Consolidated Subsidiary does not in the aggregate exceed $100,000,000 at any one
time outstanding.

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

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

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

         "Permitted Derivative Obligations" means all Derivative Obligations as
to which the Derivative Arrangements giving rise to such Derivative Obligation
are entered into in the ordinary course of business to hedge interest rate risk,
currency risk, commodity price risk or the production of Borrower or its
Subsidiaries (and not for speculative purposes) and if such Derivative
Obligation is an obligation of Borrower, such Derivative Obligation ranks no
greater than pari passu to the Obligations.

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

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

         "PBGC" is defined in Section 5.8 hereof.

                                       10

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

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

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

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

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

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

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

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

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

                                       11

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

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

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

         "Telerate Service" means the Dow Jones Telerate Service.

         "Termination Date" means August 27, 2002, as extended from time to time
pursuant to Section 3.2.

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

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

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

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

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

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

         "Unfunded Vested Liabilities" means, with respect to any Plan at any
time, the amount (if any) by which (i) the present value of all vested
nonforfeitable accrued benefits under such Plan exceeds (ii) the fair market
value of all Plan assets allocable to such benefits, all determined as of the
then most recent valuation date for such Plan, but only to the extent that such
excess

                                       12

represents a potential liability of a member of the Controlled Group to
the PBGC or the Plan under Title IV of ERISA.

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

         "US Bank Credit Agreements" means (i) that certain unsecured Credit
Agreement dated as of August 31, 2000 by and among Borrower, BHC, Black Hills
Holding Corporation, a South Dakota corporation, the banks party thereto and
U.S. Bank National Association, as Agent, and (ii) that certain agreement dated
February 5,1999 between U S Bank National Association and Black Hills
Corporation.

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

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

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

         "Wells Fargo Credit Agreement" means that certain unsecured Credit
Agreement by and among Borrower, BHC, Black Hills Holding Corporation, Wells
Fargo Bank West N.A. dated as of November 21, 2000.

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

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

SECTION 2         THE CREDITS.

Section 2.1 The Revolving Loan Commitment. Subject to the terms and conditions
hereof (including Sections 6.1 and 6.2), each Bank, by its acceptance hereof,
severally agrees to make a loan or loans (individually a "Loan" and collectively
"Loans") to Borrower from time to time on a revolving basis in U.S. Dollars in
an aggregate outstanding amount up to the amount of its commitment set forth on
the applicable signature page hereof (such amount, as reduced pursuant to
Section 2.12(a), increased pursuant to Section 2.12(b), or changed as a result
of one or more assignments under Section 11.12, its "Commitment" and,
cumulatively for all the

                                       13

Banks,  the  "Commitments")  before  the  Termination  Date,  provided  that the
aggregate  amount  of  Loans  at any  time  outstanding  shall  not  exceed  the
Commitments  in effect at such time.  On the  Termination  Date the  Commitments
shall terminate. Each Borrowing of Loans shall be made ratably from the Banks in
proportion  to their  respective  Percentages.  As  provided  in Section  2.5(a)
hereof,  Borrower  may elect that each  Borrowing  of Loans be either  Base Rate
Loans or Eurodollar Loans.  Loans may be repaid and the principal amount thereof
reborrowed before the Termination Date,  subject to all the terms and conditions
hereof.  Unless an earlier  maturity is provided for hereunder,  all Loans shall
mature and be due and payable on the Termination Date.  Notwithstanding anything
is this Agreement to the contrary,  no Eurodollar  Loans may be advanced  during
the LIBOR Loan Restriction Period.

Section 2.2       [Intentionally Omitted].

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

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

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

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

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

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

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

                                       14

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

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

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

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

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

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

                                       15

and (ii) if such  Borrowing  is comprised  of  Borrowing  of  Eurodollar  Loans,
$2,000,000 and integral multiples of $1,000,000 in excess thereof.

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

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

(c) Borrower' Failure to Notify. Any outstanding Borrowing of Base Rate Loans
shall, subject to Section 6.2 hereof, automatically be continued for an
additional Interest Period on the last day of its then current Interest Period
unless Borrower has notified the Administrative

                                       16

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

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

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

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

                                       17

in which such Borrowing is advanced,  continued, or created by conversion (or on
the  last  day of the  following  calendar  quarter  if such  Loan is  advanced,
continued  or  created  by  conversion  on the last  Business  Day of a calendar
quarter),  and  (b) in the  case of  Eurodollar  Loans,  1,  2,  3, or 6  months
thereafter; provided, however, that:

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

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

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

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

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

Section 2.8 Prepayments. (a) (a) Borrower may prepay without premium or penalty
and in whole or in part (but, if in part, then (i) in an amount not less than
$5,000,000 and integral multiples of $1,000,000 in excess thereof, and (ii) in
an amount such that the minimum amount required for a Borrowing pursuant to
Section 2.4 hereof remains outstanding) any Borrowing of Eurodollar Loans upon
three (3) Business Days' prior irrevocable notice to the Administrative Agent
or, in the case of a Borrowing of Base Rate Loans, irrevocable notice delivered
to the Administrative Agent no later than 12:00 noon (New York time) on the date
of prepayment, such prepayment to be made by the payment of the principal amount
to be prepaid and accrued interest thereon to the date fixed for prepayment. In
the case of Eurodollar Loans, any amounts owing under Section 2.11 hereof as a
result of such prepayment shall be paid contemporaneously with such prepayment.
The Administrative Agent will promptly advise each Bank of any such prepayment
notice it receives from Borrower. Any amount paid or prepaid before the
Termination Date may, subject to the terms and conditions of this Agreement, be
borrowed, repaid and borrowed again.

                                       18

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

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

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

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

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

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

Section 2.11 Funding Indemnity. If any Bank shall incur any loss, cost or
expense (including, without limitation, any loss, cost or expense (excluding
loss of margin) incurred by

                                       19

reason of the liquidation or  re-employment  of deposits or other funds acquired
by such  Bank to  fund or  maintain  any  Eurodollar  Loan or the  relending  or
reinvesting  of such  deposits  or  amounts  paid or  prepaid to such Bank) as a
result of:

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

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

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

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

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

                  (b) The Borrower and the Administrative Agent may from time to
time add additional financial institutions as parties to this Agreement or, with
the written consent of an existing Bank, increase the Commitment of such
existing Bank (any such financial institution or existing Bank which is
increasing its commitment being referred to as an "Added Bank") pursuant to
documentation satisfactory to the Borrower and the Administrative Agent and any
such Added Bank shall for all purposes be considered a Bank for purposes of this
Agreement and the other Credit Documents with a Commitment as set forth in such
documentation. Any such Added Bank shall on the date it is deemed a party to
this Agreement purchase from the other Banks its Percentage (or the increase in
its Percentage, in the case of an Added Bank which is an existing Bank) of the
Loans outstanding. Notwithstanding anything contained in this Section 2.12(b) to
the contrary, the aggregate amount of Commitments may not at any time exceed
$200,000,000 without the consent of the Required Banks.

                                       20

SECTION 3         FEES AND EXTENSIONS.

Section 3.1       Fees.

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

(b)      [Intentionally Omitted].

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

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

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

Section 3.2 Extensions. The Borrower may request that each Bank's Commitment be
renewed by providing notice of such requests to the Administrative Agent no
earlier than 45 days but no later than 30 days prior to the then existing
Termination Date (the "Existing Termination Date") applicable to such Banks. If
a Bank agrees, in its individual and sole discretion, to renew its Commitment,
such Bank (a "Renewing Bank") will notify the Administrative Agent, in

                                       21

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

SECTION 4         PLACE AND APPLICATION OF PAYMENTS.

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

SECTION 5         REPRESENTATIONS AND WARRANTIES.

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

                                       22

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

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

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

Section 5.4 Financial Statements. All financial statements heretofore delivered
to the Banks showing historical performance of Borrower for Borrower's fiscal
years ending on or before December 31, 2000, have been prepared in accordance
generally accepted accounting principles applied on a basis consistent, except
as otherwise noted therein, with that of the previous fiscal year. The unaudited
financial statements for the fiscal period ended June 30, 2001 have been
prepared in accordance generally accepted accounting principles applicable to

                                       23

interim financial statements applied on a basis consistent, except as otherwise
noted therein, with the previous same fiscal period of Borrower in the prior
fiscal year (subject to normal year-end adjustments). Each of such financial
statements fairly presents on a consolidated basis the financial condition of
Borrower and its Subsidiaries as of the dates thereof and the results of
operations for the periods covered thereby. Borrower and its Subsidiaries have
no material contingent liabilities other than those disclosed in such financial
statements referred to in this Section 5.4 or in comments or footnotes thereto,
or in any report supplementary thereto, heretofore furnished to the Banks. Since
December 31, 2000, there has been no event or series of events which has
resulted in, or reasonably could be expected to result in, a Material Adverse
Effect.

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

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

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

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

Section 5.8 ERISA. With respect to each Plan, Borrower and each other member of
the Controlled Group has fulfilled its obligations under the minimum funding
standards of and is in compliance in all material respects with the Employee
Retirement Income Security Act of 1974, as amended ("ERISA"), and with the Code
to the extent applicable to it and has not incurred any liability to the Pension
Benefit Guaranty Corporation ("PBGC") or a Plan under Title IV of ERISA other
than a liability to the PBGC for premiums under Section 4007 of ERISA. Neither
Borrower nor any Subsidiary of Borrower has any contingent liabilities for any
post-retirement benefits under a Welfare Plan, other than liability for
continuation coverage described in Part 6 of Title I of ERISA.

                                       24

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

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

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

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

(b) Except as set forth on Schedule 5.11 (as amended from time to time in
accordance with the provisions hereof), neither the Borrower nor any Subsidiary
of Borrower has given, nor is it required to give, nor has it received, any
notice, letter, citation, order, warning, complaint, inquiry, claim or demand to
or from any governmental entity or in connection with any court proceeding which
could reasonably have a Material Adverse Effect claiming that: (i) Borrower or
any Subsidiary of Borrower has violated, or is about to violate, any
Environmental and Health Law; (ii) there has been a release, or there is a
threat of release, of Hazardous Materials from Borrower's or any of its
Subsidiary's Property, facilities, equipment or vehicles; (iii) Borrower or any
of its Subsidiary may be or is liable, in whole or in part, for the costs of
cleaning up, remediating or responding to a release of Hazardous Materials; or
(iv) any of Borrower's or any of its Subsidiary's Property or assets are subject
to a Lien in favor of any governmental entity for any liability, costs or
damages, under any Environmental and Health

                                       25

Law arising from, or costs incurred by such governmental  entity in response to,
a release of a Hazardous Materials.

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

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

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

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

SECTION 6         CONDITIONS PRECEDENT.

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

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

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

(b)      The Administrative Agent shall have received for each Bank copies of
         Borrower's (i) Articles of Incorporation, together with all amendments
         and (ii) bylaws (or comparable constituent documents) and any
         amendments thereto, certified in each instance by its Secretary or an
         Assistant Secretary;

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

                                       26

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

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

(f)      All legal matters  incident to the execution and delivery of both the
         Credit  Documents and the 3-Year Credit  Documents shall
         be satisfactory to the Banks;

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

(h)      The Administrative Agent shall have received a duly executed Compliance
         Certificate  containing  financial  information as of June 30, 2001;

(i)      With the exception of the $140,000,000 Wygen synthetic lease
         transactionand the Guaranty issued in connection with the TLS Investors
         acquisition pursuant to which the Borrower has provided a Guaranty in
         the amount of $15,000,000, neither Borrower nor any of its Subsidiaries
         shall have, during the period from May 7, 2001 to the Effective Date,
         issued, incurred, assumed, created, become liable for, contingently or
         otherwise, any material Indebtedness;

(j)      The Borrower shall have provided a certificate stating that (i) the US
         Bank Credit Agreements, the Wells Fargo Credit Agreement and the ABN
         AMRO Credit Agreement have been terminated, or will be terminated
         concurrently with the first Borrowing of Loans hereunder, and (ii) the
         conditions set forth precedent set forth in this Section 6.1 have been
         satisfied; and

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

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

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

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

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

                                       27

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

SECTION 7         COVENANTS.

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

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

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

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

Section 7.4 ERISA. Borrower will, and will cause each of its Subsidiaries to,
promptly pay and discharge all obligations and liabilities arising under ERISA
of a character which if unpaid or unperformed might result in the imposition of
a Lien against any of its properties or assets and will promptly notify the
Administrative Agent of (i) the occurrence of any reportable event (as defined
in ERISA) affecting a Plan, other than any such event of which the PBGC has
waived notice by regulation, (ii) receipt of any notice from PBGC of its
intention to seek termination of any Plan or appointment of a trustee therefor,
(iii) its or any of its Subsidiaries' intention to terminate or withdraw from
any Plan, and (iv) the occurrence of any event affecting any Plan which could
result in the incurrence by Borrower or any of its Subsidiaries of any material
liability, fine or penalty, or any material increase in the contingent liability
of Borrower or any of its Subsidiaries under any post-retirement Welfare Plan
benefit. The Administrative Agent will promptly distribute to each Bank any
notice it receives from Borrower pursuant to this Section 7.4.

                                       28

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

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

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

(ii) within 60 days after the end of each of the first  three  quarterly  fiscal
     periods of Borrower, a consolidated unaudited balance sheet of Borrower and
     its  Subsidiaries,  and the related  statements of income and statements of
     cash flow, as of the close of such period, all of the foregoing prepared by
     Borrower in  reasonable  detail in  accordance  with GAAP and  certified by
     Borrower's  chief  financial  officer  or  corporate  controller  as fairly
     presenting the financial  condition as at the dates thereof and the results
     of operations for the periods  covered  thereby,  provided that if Borrower
     files a Form 10-Q for the applicable  quarterly period,  and such quarterly
     report  contains the  financial  statements  and  certifications  described
     above, the Borrower may satisfy the requirements

                                       29

     of this Section 7.6(a)(ii) by delivering a copy of such quarterly report to
     each Bank.  Together with such  information  the Borrower  shall provide to
     each Bank such consolidating  information as may be necessary for the Banks
     to determine the Borrower's compliance with Section 7.17 hereof;

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

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

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

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

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

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

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

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

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

                                       30

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

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

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

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

(b)      Liens securing Non-Recourse Indebtedness of any Subsidiary of Borrower,
         provided that any such Lien is limited to the Property being financed
         or refinanced by such Indebtedness and the stock (or similar equity
         interest) of the Subsidiary which incurred such Non-Recourse
         Indebtedness;

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

                                       31

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

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

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

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

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

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

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

                                       32

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

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

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

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

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

Section 7.11 Sales and Leasebacks. Borrower will not, nor will it permit any of
its Subsidiaries to, enter into any arrangement with any bank, insurance company
or other lender or investor providing for the leasing by Borrower or any
Subsidiary of Borrower of any Property theretofore owned by it and which has
been or is to be sold or transferred by such owner to such lender or investor if
the total amount of rent and other obligations of the Borrower and its
Subsidiaries under such lease, when combined with all rent and other obligations
of Borrower and its Subsidiaries under all such leases, would exceed $30,000,000
in the aggregate, provided that Borrower and its Subsidiaries may engage in
synthetic lease transactions so long as the Borrower's or such Subsidiary's, as
applicable, obligations under such synthetic leases are included as Indebtedness
for all purposes (including financial covenant calculations) under the Credit
Documents.

Section 7.12      Mergers, Consolidations and Sales of Assets.

                                       33

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

(1)      Borrower is the surviving entity,

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

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

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

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

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

                                       34

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

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

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

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

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

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

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

(d)      investments in repurchase obligations with a term of not more than
         seven (7) days for underlying securities of the types described in
         subsection (a) above entered into with any bank meeting the
         qualifications specified in subsection (c) above, provided

                                       35

          all  such  agreements  require  physical  delivery  of the  securities
          securing such repurchase agreement, except those delivered through the
          Federal Reserve Book Entry System;

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

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

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

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

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

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

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

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

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

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

(o)      (i) Investments in Marketing  Subsidiaries  (other than Investments in
         Marketing  Subsidiaries  consisting of Guaranties of  Indebtedness  of
         Marketing  Subsidiaries)  existing on the Effective Date and listed on
         Schedule  7.14  and  (ii)  Investments  consisting  of  Guaranties  of
         Indebtedness  of Marketing  Subsidiaries in existence on the Effective
         Date  and  Investments  in  Marketing   Subsidiaries  made  after  the
         Effective Date  (including  through  Guaranties  (including  Long-Term
         Guaranties))  provided,  that  the  aggregate  amount  of  Investments
         permitted  by this  clause  (ii)  when

                                       36

         combined  with  the  amount  of  intercompany  Indebtedness  owing  by
         Marketing  Subsidiaries  permitted  pursuant  to Section  7.15(e)(iii)
         shall not in the aggregate exceed $10,000,000  outstanding at any time
         (it  being  understood  that  any  increase  in the  value of any such
         Investment  attributable  to the  undistributed  net  earnings  of the
         Marketing Subsidiaries shall not be deemed a violation of this Section
         7.14(o)); and

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

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

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

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

(a)      the Obligations;

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

(c)      secured Indebtedness  (excluding Indebtedness of the type described in
         (e),  (f), and (g) below but  including the pledge of stock or similar
         equity  interest of any Project  Finance  Subsidiary or any Subsidiary
         which is a special  purpose  entity  whose sole  purpose is to own the
         stock or similar equity interest of a Project Finance  Subsidiary) (A)
         set  forth  on  Schedule  7.15(b)  hereto,  and (B)  (i) of BHP,  (ii)
         evidencing the deferred  purchase price of newly acquired  property or
         incurred  to finance  the  acquisition  of  personal  property  of the
         Borrower or a Subsidiary of the Borrower  used in the ordinary  course
         of  business  of  the  Borrower  or  Subsidiary,   (iii)  constituting
         Capitalized Lease Obligations or with respect to synthetic (or similar
         type) lease  arrangements,  or (iv)  incurred in  connection  with the
         performance of tenders,  statutory obligations,  bids, leases or other
         similar  obligations  (other than for borrowed  money) entered into in
         the  ordinary   course  of  business  or  to  secure   obligations  on
         performance bonds; provided, that the aggregate amount of Indebtedness
         permitted by this clause (B) at any time outstanding

                                       37

          shall not exceed 5% of  Consolidated  Assets as  reflected on the most
          recent  balance  sheet  delivered by the Borrower  pursuant to Section
          7.6, provided that Borrower shall promptly provide the  Administrative
          Agent with a copy of any documentation evidencing such Indebtedness in
          excess of $25,000,000 and any modification to such Indebtedness;

(d)      other Indebtedness (excluding Indebtedness of the type described in
         (e), (f), and (g) below) which is unsecured and either junior in right
         of payment to the Obligations or pari passu to the Obligations or is
         equally and ratably secured with the Obligations, provided that
         Borrower shall promptly provide the Administrative Agent with a copy of
         any documentation evidencing such Indebtedness in excess of $25,000,000
         and any modification to such Indebtedness;

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

(f)      Indebtedness  consisting  of  Guaranties  of the  Indebtedness  of the
         Marketing Subsidiaries (including Long-Term Guaranties), provided that
         such Indebtedness  shall only be permitted to the extent the aggregate
         amount  of  such  Indebtedness,  when  added  to the  sum  of (i)  the
         aggregate  amount  of all  intercompany  loans  made to the  Marketing
         Subsidiaries  pursuant  to Section  7.15(e),  plus (ii) the  aggregate
         amount  of  all  other  Investments  made  in  Marketing  Subsidiaries
         pursuant to Section 7.14(o)(ii), does not exceed $10,000,000 (it being
         understood  that to the  extent  such  limit is  exceeded  solely as a
         result of an increase in the value of any such Investment attributable
         to the  undistributed net earnings of the Marketing  Subsidiaries,  it
         shall not be deemed a violation  of this  Section  7.15(f))  provided,
         further that Borrower  shall  promptly  --------  -------  provide the
         Administrative  Agent  with  a copy  of any  such  Guarantee  and  any
         modification to such Guarantee;

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

(h)      Permitted Derivative Obligations; and

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

Indebtedness shall only be permitted under (e), (f), (h), and (i) above
to the extent such

                                       38

Indebtedness  will have a priority of payment with the Obligations which is
no greater than pari passu.

Section 7.16 Consolidated Net Worth. Borrower will at the end of each fiscal
quarter maintain Consolidated Net Worth in an amount of not less than the sum of
(i) $375,000,000 and (ii) fifty percent (50%) of the aggregate Consolidated Net
Income, if positive, for the period beginning June 30, 2001 and ending on the
last day of such fiscal quarter.

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

Section 7.18 Interest Coverage Ratio. Borrower will maintain an Interest
Coverage Ratio of not less than 3.00 to 1.00, as determined at the end of each
fiscal quarter.

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

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

Section 7.20 No Negative Pledge. Except (i) as set forth on Schedule 7.19 and
(ii) in connection with Non-Recourse Indebtedness of a Project Finance
Subsidiary, the Borrower will not, and will not permit any of its Subsidiaries
(other than Project Finance Subsidiaries), directly or indirectly to enter into
or assume any agreement (other than customary non-assignment and no sub-letting
provisions in leases consistent with Borrower's past practices and the Credit
Documents and, solely with respect to the asset so financed, Capitalized Leases,
to the extent such Indebtedness is permitted herein) prohibiting the creation or
assumption of any Lien upon its properties or assets, whether now owned or
hereafter acquired.

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

                                       39

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

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

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

Section 7.25 Ratings. Borrower will obtain an S&P Rating within 90 days of the
Effective Date and will at all times this Agreement is in effect maintain a S&P
Rating (once obtained) and a Moody's Rating (or if one or both of such ratings
are unavailable, rating(s) from such other recognized national rating agency or
agencies as may be acceptable to the Administrative Agent and the Required
Banks).

SECTION 8         EVENTS OF DEFAULT AND REMEDIES.

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

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

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

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

(d)      (i) failure to pay when due Indebtedness in an aggregate principal
         amount of (x) $10,000,000 or more of Borrower or any Material
         Subsidiary, or (ii) default shall occur under one or more indentures,
         agreements or other instruments under which any Indebtedness of
         Borrower or any of its Material Subsidiary in an aggregate principal
         amount of $10,000,000 or more may be issued or created and such default
         shall continue

                                       40

         for a period of time sufficient to permit the holder or
         beneficiary of such Indebtedness or a trustee therefor to cause the
         acceleration of the maturity of any such Indebtedness or any mandatory
         unscheduled prepayment, purchase or funding thereof, or (iii) a default
         shall occur under the US Bank Credit Agreement or the Wells Fargo
         Credit Agreement;

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

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

(g)      a custodian, receiver, trustee, examiner, liquidator or similar
         official shall be appointed for Borrower or any Material Subsidiary, or
         any substantial part of any of their Property, or a proceeding
         described in Section 8.1(f)(iv) shall be instituted against Borrower or
         any Material Subsidiary, and such appointment continues undischarged or
         such proceeding continues undismissed or unstayed for a period of sixty
         (60) days;

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

(i)      Borrower or any other member of the Controlled Group shall fail to pay
         when due an amount or amounts  which it shall have become  liable,  to
         pay to the PBGC or to a Plan  under  Title IV of  ERISA;  or notice of
         intent to terminate a Plan or Plans having  aggregate  Unfunded Vested
         Liabilities in excess of $10,000,000 (collectively, a "Material Plan")
         shall be filed under  Title IV of ERISA by Borrower or any  Subsidiary
         of  Borrower or any other  member of the  Controlled  Group,  any plan
         administrator  or any combination of the foregoing;  or the PBGC shall
         institute proceedings under Title IV of ERISA to terminate or to cause
         a  trustee  to be  appointed  to  administer  any  Material  Plan or a
         proceeding  shall be  instituted  by a fiduciary of any Material  Plan
         against  Borrower

                                       41

         or any other member of the Controlled  Group to enforce Section 515 or
         4219(c)(5) of ERISA and such proceeding  shall not have been dismissed
         within  thirty (30) days  thereafter;  or a  condition  shall exist by
         reason  of  which  the  PBGC  would  be  entitled  to  obtain a decree
         adjudicating that any Material Plan must be terminated;

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

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

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

(m) Borrower's S&P Rating (once obtained) ceases to be at least BBB- or its
Moody's Rating ceases to be at least Baa3.

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

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

Section 8.4       [Intentionally Omitted].

                                       42

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

SECTION 9         CHANGE IN CIRCUMSTANCES.

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

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

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

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

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

Section 9.3       Increased Cost and Reduced Return.

(a)      If, on or after the date hereof, the adoption of any applicable law,
         rule or regulation, or any change therein, or any change in the
         interpretation or administration

                                       43

         thereof by any  governmental  authority,  central  bank or  comparable
         agency charged with the interpretation or administration  thereof,  or
         compliance  by any Bank (or its  Lending  Office)  with any request or
         directive  (whether  or not having the force of law but, if not having
         the force of law,  compliance  with which is customary in the relevant
         jurisdiction)  of any  such  authority,  central  bank  or  comparable
         agency:

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

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

and the result of any of the foregoing is to increase the cost to such Bank (or
its Lending Office) of making or maintaining any Eurodollar Loan or to reduce
the amount of any sum received or receivable by such Bank (or its Lending
Office) under this Agreement or under its Notes with respect thereto, by an
amount deemed by such Bank to be material, then, within fifteen (15) days after
demand by such Bank (with a copy to the Administrative Agent), Borrower shall be
obligated to pay to such Bank such additional amount or amounts as will
compensate such Bank for such increased cost or reduction. In the event any law,
rule, regulation or interpretation described above is revoked, declared invalid
or inapplicable or is otherwise rescinded, and as a result thereof a Bank is
determined to be entitled to a refund from the applicable authority for any
amount or amounts which were paid or reimbursed by Borrower to such Bank
hereunder, such Bank shall refund such amount or amounts to Borrower without
interest.

(b) If, after the date hereof, any Bank or the Administrative Agent shall have
determined that the adoption of any applicable law, rule or regulation regarding
capital adequacy, or any change therein (including, without limitation, any
revision in the Final Risk-Based Capital Guidelines of the Board of Governors of
the Federal Reserve System (12 CFR Part 208, Appendix A; 12 CFR Part 225,
Appendix A) or of the Office of the Comptroller of the Currency (12 CFR Part 3,
Appendix A), or in any other applicable capital rules heretofore adopted and
issued by any governmental authority), or any change in the interpretation or
administration thereof by any governmental authority, central bank or comparable
agency charged with the interpretation or administration thereof, or compliance
by any Bank (or its Lending Office) with any request or directive regarding
capital adequacy (whether or not having the force of law but, if not having the
force of law, compliance with which is customary in the

                                       44

applicable  jurisdiction)  of any such  authority,  central  bank or  comparable
agency,  has or would  have the  effect of  reducing  the rate of return on such
Bank's capital, or on the capital of any corporation controlling such Bank, as a
consequence of its  obligations  hereunder to a level below that which such Bank
could have achieved but for such  adoption,  change or  compliance  (taking into
consideration  such Bank's  policies  with  respect to capital  adequacy)  by an
amount  deemed by such  Bank to be  material,  then  from  time to time,  within
fifteen (15) days after  demand by such Bank (with a copy to the  Administrative
Agent),  Borrower  shall pay to such Bank such  additional  amount or amounts as
will compensate such Bank for such reduction.

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

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

Section 9.5 Discretion of Bank as to Manner of Funding. Notwithstanding any
other provision of this Agreement, each Bank shall be entitled to fund and
maintain its funding of all or any part of its Loans in any manner it sees fit,
it being understood, however, that for the purposes of this Agreement all
determinations hereunder shall be made as if each Bank had actually funded and
maintained each Eurodollar Loan through the purchase of deposits in the
eurodollar interbank market having a maturity corresponding to such Loan's
Interest Period and bearing an interest rate equal to LIBOR for such Interest
Period.

SECTION 10        THE AGENT.

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

                                       45

construed as to impose upon the Administrative  Agent any obligations in respect
of this  Agreement or any other Credit  Document  except as expressly  set forth
herein or therein.

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

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

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

Section 10.5 Liability of Administrative Agent; Credit Decision. Neither the
Administrative Agent nor any of its directors, officers, agents, or employees
shall be liable for any action taken or not taken by it in connection with the
Credit Documents (i) with the consent or at the request of the Required Banks or
(ii) in the absence of its own gross negligence or willful misconduct. Neither
the Administrative Agent nor any of its directors, officers, agents or employees
shall be responsible for or have any duty to ascertain, inquire into or verify
(i) any statement, warranty or representation made in connection with this
Agreement, any other Credit Document or any Credit Event; (ii) the performance
or observance of any of the covenants or agreements of Borrower or any other
party contained herein or in any other Credit Document; (iii) the satisfaction
of any condition specified in Section 6 hereof; or (iv) the validity,
effectiveness, genuineness, enforceability, perfection, value, worth or
collectibility hereof or of any other Credit Document or of any other documents
or writing furnished in connection with any Credit Document; and the
Administrative Agent makes no representation of any kind or character with
respect to any such matter mentioned in this sentence. The Administrative Agent
may execute any of its duties under any of the Credit Documents by or through
employees,

                                       46

agents,  and  attorneys-in-fact  and  shall  not be  answerable  to  the  Banks,
Borrower,  or any other Person for the default or  misconduct of any such agents
or  attorneys-in-fact  selected with reasonable care. The  Administrative  Agent
shall not incur any  liability by acting in reliance  upon any notice,  consent,
certificate,  other document or statement  (whether written or oral) believed by
it to be genuine or to be sent by the proper party or parties. In particular and
without limiting any of the foregoing,  the  Administrative  Agent shall have no
responsibility  for  confirming  the accuracy of any  Compliance  Certificate or
other  document or  instrument  received by it under the Credit  Documents.  The
Administrative Agent may treat the payee of any Note as the holder thereof until
written notice of transfer shall have been filed with the  Administrative  Agent
signed by such payee in form satisfactory to the Administrative Agent. Each Bank
acknowledges   that  it  has   independently   and   without   reliance  on  the
Administrative  Agent or any  other  Bank,  and  based  upon  such  information,
investigations  and  inquiries  as it deems  appropriate,  made  its own  credit
analysis  and  decision to extend  credit to Borrower in the manner set forth in
the Credit Documents. It shall be the responsibility of each Bank to keep itself
informed as to the  creditworthiness  of Borrower and any other relevant Person,
and the  Administrative  Agent shall have no  liability to any Bank with respect
thereto.

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

Section 10.7 Resignation of Administrative Agent and Successor Administrative
Agent. The Administrative Agent may resign at any time by giving written notice
thereof to the Banks and Borrower. Upon any such resignation of the
Administrative Agent, the Required Banks shall have the right to appoint a
successor Administrative Agent with the consent of Borrower. If no successor
Administrative Agent shall have been so appointed by the Required Banks, and
shall have accepted such appointment, within thirty (30) days after the retiring
Administrative Agent's giving of notice of resignation, then the retiring
Administrative Agent may, on behalf of the Banks, appoint a successor
Administrative Agent, which shall be any Bank hereunder or any commercial bank
organized under the laws of the United States of America or of any State thereof
and having a combined capital and surplus of at least $200,000,000. Upon the
acceptance of its appointment as the Administrative Agent hereunder, such
successor Administrative Agent shall thereupon succeed to and become vested with
all the rights and duties of the retiring or removed Administrative Agent under
the Credit Documents, and the retiring Administrative Agent shall be discharged
from its duties and obligations thereunder. After any retiring Administrative
Agent's resignation hereunder as Administrative Agent, the provisions of this
Section 10 and all protective provisions of the other Credit Documents shall
inure to its benefit as to any actions taken or omitted to be taken by it while
it was Administrative Agent.

SECTION 11        MISCELLANEOUS.

Section 11.1      Withholding Taxes.

                                       47

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

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

                                       48

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

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

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

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

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

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

Section 11.7 Set-Off. (a) (a) In addition to any rights now or hereafter granted
under applicable law and not by way of limitation of any such rights, upon the
occurrence of any Event of Default, each Bank and each subsequent holder of any
Note is hereby authorized by Borrower at any time or from time to time, without
notice to Borrower or to any other Person, any such notice being hereby
expressly waived, to set off and to appropriate and to apply any and all
deposits (general or special, including, but not limited to, Indebtedness
evidenced by certificates

                                       49

of deposit,  whether matured or unmatured, and in whatever currency denominated)
and any  other  Indebtedness  at any time  held or  owing  by that  Bank or that
subsequent  holder to or for the credit or the account of  Borrower,  whether or
not  matured,  against  and on account of the  obligations  and  liabilities  of
Borrower  to that Bank or that  subsequent  holder  under the Credit  Documents,
including,  but not limited to, all claims of any nature or description  arising
out of or connected with the Credit  Documents,  irrespective  of whether or not
(a) that Bank or that subsequent  holder shall have made any demand hereunder or
(b) the principal of or the interest on the Loans or Notes and other amounts due
hereunder  shall have become due and payable  pursuant to Section 8 and although
said  obligations  and  liabilities,  or  any of  them,  may  be  contingent  or
unmatured.

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

Section 11.8 Notices. Except as otherwise specified herein, all notices under
the Credit Documents shall be in writing (including facsimile or other
electronic communication) and shall be given to a party hereunder at its address
or facsimile number set forth below or such other address or facsimile number as
such party may hereafter specify by notice to the Administrative Agent and
Borrower, given by courier, by United States certified or registered mail, or by
other telecommunication device capable of creating a written record of such
notice and its receipt. Notices under the Credit Documents to the Banks shall be
addressed to their respective addresses, facsimile or telephone numbers set
forth on the signature pages hereof or in the assignment agreement which any
assignee bank executes pursuant to Section 11.12 hereof, and to Borrower and to
the Administrative Agent to:

                  If to Borrower:

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

                                       50

                  with copies to:

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

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

                  If to the Administrative Agent:

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

                  With copies of all such notices to:

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

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

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

                                       51

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

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

Section 11.12 Assignment of Commitments by Banks. Each Bank shall have the right
at any time, with the written consent of Administrative Agent, which consent
shall not be unreasonably withheld, and, prior to the occurrence of a Default or
Event of Default, Borrower, to assign all or any part of its Commitment
(including the same percentage of its Note and outstanding Loanst, and provided
that the same percentage of its commitment and loans outstanding under the
3-Year Credit Agreement are also assigned) to one or more other Persons;
provided that such assignment is in an amount of at least $5,000,000 or the
entire Commitment of such Bank, and if such assignment is not for such Bank's
entire Commitment then such Bank's Commitment after giving effect to such
assignment shall not be less than $5,000,000; and provided further that neither
the consent of Borrower nor the Administrative Agent shall be required for any
Bank to assign all or part of its Commitment to any Affiliate of the assigning
Bank so long as the same percentage of such Bank's commitment under the 3-Year
Credit Agreement are also assigned to such Affiliate. Each such assignment shall
set forth the assignees address for notices to be given under Section 11.8
hereof hereunder and its designated Lending

                                       52

Office pursuant to Section 9.4 hereof. Upon any such assignment, delivery to the
Administrative  Agent of an executed copy of such  assignment  agreement and the
forms referred to in Section 11.1 hereof,  if  applicable,  and the payment of a
$3,500 recordation fee to the Administrative  Agent, the assignee shall become a
Bank  hereunder,  all  Loans,  participations  in  Letters  of  Credit  and  the
Commitment  it thereby  holds shall be governed by all the terms and  conditions
hereof and the Bank granting such assignment shall have its Commitment,  and its
obligations  and rights in connection  therewith,  reduced by the amount of such
assignment.

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

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

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

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

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

Section 11.15 Legal Fees, Other Costs and Indemnification. Borrower agrees to
pay all reasonable costs and expenses of the Arrangers in connection with the
preparation and negotiation of the Credit Documents (including past and future
reasonable out-of-pocket expenses incurred by the Arrangers in connection with
the syndication of the transaction), including without limitation, the
reasonable fees and disbursements of counsel to the Arrangers, in connection
with the preparation and execution of the Credit Documents, and any amendment,
waiver or consent related hereto, whether or not the transactions contemplated
herein are consummated. Borrower further agrees to indemnify each Bank, the
Administrative Agent, and

                                       53

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

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

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

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

Section 11.19 SUBMISSION TO JURISDICTION; WAIVER OF JURY TRIAL. BORROWER HEREBY
SUBMITS TO THE NONEXCLUSIVE JURISDICTION OF THE UNITED STATES DISTRICT COURT FOR
THE SOUTHERN DISTRICT OF NEW YORK AND OF ANY NEW YORK STATE COURT SITTING IN THE
CITY OF NEW YORK FOR PURPOSES OF ALL LEGAL PROCEEDINGS ARISING OUT OF OR
RELATING TO THIS AGREEMENT, THE OTHER CREDIT DOCUMENTS OR THE TRANSACTIONS
CONTEMPLATED HEREBY OR THEREBY. BORROWER IRREVOCABLY WAIVES, TO THE FULLEST
EXTENT PERMITTED BY LAW, ANY OBJECTION WHICH IT MAY NOW OR HEREAFTER HAVE TO THE
LAYING OF THE VENUE OF ANY SUCH PROCEEDING BROUGHT IN SUCH A COURT AND ANY CLAIM
THAT ANY SUCH PROCEEDING BROUGHT IN SUCH A COURT HAS BEEN BROUGHT IN AN
INCONVENIENT FORUM. BORROWER HEREBY IRREVOCABLY WAIVES ANY AND ALL RIGHT TO
TRIAL BY JURY IN ANY LEGAL PROCEEDING ARISING OUT OF OR RELATING TO ANY CREDIT
DOCUMENT OR THE TRANSACTIONS CONTEMPLATED THEREBY.

                                       54

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

i.   prior written notice to the Administrative Agent,

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

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

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

assign and delegate all its rights and obligations under this Agreement and any
other Credit Document to which it is a party (including its outstanding Loans)
to the Replacement Bank (such assignment to be made without recourse,
representation or warranty), and the Replacement Bank shall assume such rights
and obligations, whereupon the Replacement Bank shall in accordance with Section
11.12 become a party to each Credit Document to which the Affected Bank is a
party and shall have the rights and obligations of a Bank thereunder and the
Affected Bank shall be released from its obligations hereunder and each other
Credit Document to the extent of such assignment and delegation.

Section 11.21 Confidentiality. The Administrative Agent and the Banks shall hold
all non-public information provided to them by Borrower pursuant to or in
connection with this Agreement in accordance with their customary procedures for
handling confidential information of this nature, but may make disclosure to any
of their examiners, regulators, Affiliates, outside auditors, counsel and other
professional advisors in connection with this Agreement or any other

                                       55

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

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

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

                                       56

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

                         BLACK HILLS CORPORATION, a South Dakota corporation

                         By:      _____________________________
                         Name:    _____________________________
                         Title:   _____________________________

                                       57

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

                                  By:      _____________________________
                                  Name:    _____________________________
                                  Title:   _____________________________

                                  By:      _____________________________
                                  Name:    _____________________________
                                  Title:   _____________________________

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

With copy to:

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

Lending Offices:              Same as above

Base Rate Loans:              Same as above

Eurocurrency Loans:           Same as above

Commitment: $____________        UNION BANK OF CALIFORNIA, N.A.,
                                 in its individual capacity as a Bank and as
                                 Syndication Agent

                                 By:      _____________________________
                                 Name:    _____________________________
                                 Title:   _____________________________

                                 By:      _____________________________
                                 Name:    _____________________________
                                 Title:   _____________________________

Address for notices:
         Union Bank of California, N.A.
         445 South Figueroa Street
         Los Angeles, California 90071
         Chicago, Illinois 60603
         Attention: Mr. Robert Cole
         Facsimile:   213.236.4096
         Telephone: 213.236.6225

Lending Offices:              Same as above

Base Rate Loans:              Same as above

Eurocurrency Loans:           Same as above

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

                                 By:      _____________________________
                                 Name:    _____________________________
                                 Title:   Managing Director

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

Lending Offices:              Same as above

Base Rate Loans:              Same as above

Eurocurrency Loans:           Same as above