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HomeMy WebLinkAbout08209Reception # 1845155 06/24/2010 03:01:36 PM Substituted Copy: June 14, 2010 ORDINANCE NO. 8209 AN ORDINANCE ANNEXING THE AREA COMMONLY KNOWN AS THE BLACK HILLS ANNEXATION PHASE 1 AND DESCRIBED AS EAST OF BACULITE MESA ROAD AND NORTH OF PETE JIMENEZ PARKWAY AND APPROVING AN ANNEXATION AGREEMENT RELATING THERETO WHEREAS, the City Planning and Zoning Commission has recommended that the area described in Section 1 hereof be annexed to the City of Pueblo; and WHEREAS, the City Council has heretofore found and determined by Resolution that the Petition for Annexation and the area described in Section 1 hereof to be in compliance with the notice and other applicable provisions of the Municipal Annexation Act of 1965 and C.R.S. §31 -12 -104, 105 and 107(1); and WHEREAS, the City Council has by Resolution found and determined that an election is not required under C.R.S. §31 -12 -107 (2) and no additional terms and conditions are to be imposed upon the area described in Section 1 other than those set forth in the Petition for Annexation and the Annexation Agreement; BE IT ORDAINED BY THE CITY COUNCIL OF PUEBLO, that: SECTION 1. The following described area situated in Pueblo County, Colorado, is hereby annexed to Pueblo, a Municipal Corporation, subject to the terms and conditions set forth in the Petition for Annexation and the Annexation Agreement, and the official map of the City shall be amended to show such annexation: AREA TO BE ANNEXED: A parcel of land, located in the SE 1/4 of the SE 1/4 of Section 10, Township 20 South, Range 64 West of the 6th P.M., County of Pueblo, State of Colorado, with all the bearings contained herein based upon a bearing of N88 °01'15 "E, as measured between the W 1/4 Corner of said Section 10, being marked on the ground by a 3 1/4" aluminum cap on #6 rebar, PLS 10372, 1989, found in place, and the E 1/4 Corner of said Section 10, being marked on the ground by an original axle, found in place, said parcel being more particularly described as follows: Beginning at the Southeast Corner of said Section 10, being marked on the ground by a 3 1/4" aluminum cap, PLS 31161, JR ENG LTD, 2000, 20' W.C. West, found in place; 1. thence along the South line of said SE 1/4 of Section 10, S88 °04'42 "W, a distance of 330.19 feet, to a point, from where the accepted location of the E 1/16 Corner of said Section 10 and Section 15, said Township and Range, bears S88 °04'42 "W, a distance of 969.08 feet; SECTION 4. The City Council of the City of Pueblo hereby finds, determines and declares that the health, safety and welfare of the People of Pueblo are dependent upon the attraction of new private enterprises; that incentives are often necessary to attract private enterprises; that providing such incentives stimulates economic development in the City of Pueblo and results in the creation and maintenance of new jobs; that the incentives offered to Petitioners Black Hills/ Colorado Electric Utility Company, LP and Black Hills Colorado IPP, LLC (collectively, "Petitioner") to annex their properties to the City of Pueblo, Colorado set forth and contained in the Annexation Agreement are in the best interest of the City of Pueblo and its citizens and will promote the public health, safety and welfare; that such incentives and annexation will increase the City's tax base, the availability of electric energy for use within the City, and the opportunities for employment for the citizens of the City of Pueblo; and that such incentives and annexation will further the economic development of the City of Pueblo and provide funding for much needed and required infrastructure within the City of Pueblo. SECTION 5. Pursuant to Article XX of the State Constitution and the Charter of the City of Pueblo, the City Council of the City of Pueblo hereby finds, determines and declares that the incentives, economic and otherwise, granted to Petitioners pursuant to and under the Annexation Agreement to be local matters and all provisions of statutes of the State of Colorado which might be in conflict with such incentives are hereby superseded to the extent of any such conflict, and to the extent such provisions of the statutes of the State of Colorado are not in conflict with such incentives, the City of Pueblo chooses to apply such provisions. SECTION 6. Within thirty (30) days after the effective date of the Ordinance, the City Clerk shall: (a) File one copy of the annexation map with the original of this Ordinance in the office of the City Clerk; (b) File for recording three certified copies of this Ordinance and annexation map with the Pueblo County Clerk and Recorder; (c) File one certified copy of the annexation map and this Ordinance with the Southeastern Colorado Water Conservancy District. SECTION 7. The officers of the City are hereby authorized and directed to take all other actions necessary or appropriate, on behalf of the City, to effectuate the provisions of this Ordinance and the Annexation Agreement. 2. thence parallel to the East line of said SE 1/4 of Section 10, N01°21'33'W, a distance of 660.03 feet; 3. thence parallel to said South line of the SE 1/4 of Section 10, N88 °04'42 "E, a distance of 330.19 feet, to a point on said East line of the SE 1/4 of Section 10, from where said E 1/4 Corner of Section 10 bears N01 °21'33' W, a distance of 2008.56 feet; 4. thence along said East line of the SE 1/4 of Section 10, S01 °21'33 "E, a distance of 660.03 feet, to the point of beginning. Said parcel contains 5.003 acres, more or Tess. PROPOSED NEW CITY LIMITS LINE: Beginning at a point on the South line of said SE 1/4 of Section 10, from where the Southeast Corner of said Section 10, being marked on the ground by a 3 1/4" aluminum cap, PLS 31161, JR ENG LTD, 2000, 20' W.C. West, found in place, bears N88 °04'42 "E, a distance of 330.19 feet; 1. thence parallel to the East line of said SE 1/4 of Section 10, N01°21'33'W, a distance of 660.03 feet; 2. thence parallel to said South line of the SE 1/4 of Section 10, N88 °04'42 "E, a distance of 330.19 feet, to a point on said East line of the SE 1/4 of Section 10, from where said E 1/4 Corner of Section 10 bears N01°21'33'W, a distance of 2008.56 feet; 3. thence along said East line of the SE 1/4 of Section 10, S01 °21'33 "E, a distance of 660.03 feet, to the point of terminus. SECTION 2. The owners of one hundred percent (100 %) of the property to be annexed have petitioned for such annexation. SECTION 3. The Annexation Agreement in the form and content presented to the City Council at this meeting is hereby authorized and approved. The President of the City Council is hereby directed and authorized to execute and deliver the Annexation Agreement in the name of the City and the City Clerk is directed to affix the seal of the City thereto and attest same. SECTION 8. If any provisions of this Ordinance or Annexation Agreement shall be held or deemed to be illegal, inoperative or unenforceable, the same shall not affect any other provisions or provisions of this Ordinance or Annexation Agreement or render the same invalid, inoperative or unenforceable, except as otherwise expressly provided in the Annexation Agreement. SECTION 9. The City Council hereby consents to the inclusion of the annexed area in the Southeastern Colorado Water Conservancy District pursuant to C.R.S. §37-45 -136 (3.6). SECTION 10. This Ordinance shall become effective immediately upon final passage, but shall not become effective unless a fully signed Annexation Agreement is deposited by Petitioner on or before June 15, 2010 with the City Clerk. The annexation shall be effective for ad valorem tax purposes on and after January 1, 2011. INTRODUCED: May 10, 2010 BY: Chris Kaufman /COUNCILPERSON PASSED AND APPROVED: June 14, 2010 Substituted Copy: June 14, 2010 Background Paper for Proposed ORDINANCE DATE: MAY 10, 2010AGENDA ITEM # R-1 DEPARTMENT: PLANNING AND COMMUNITY DEVELOPMENT JERRY M. PACHECO, DIRECTOR TITLE AN ORDINANCE ANNEXING THE AREA COMMONLY KNOWN AS THE BLACK HILLS ANNEXATION PHASE 1 AND DESCRIBED AS EAST OF BACULITE MESA ROAD AND NORTH OF PETE JIMENEZ PARKWAY AND APPROVING AN ANNEXATION AGREEMENT RELATING THERETO ISSUE Shall the City Council approve the proposed annexation of property that is located east of Baculite Mesa Road and north of Pete Jimenez Parkway? RECOMMENDATION The Planning and Zoning Commission, at their April 14, 2010 Regular Meeting, voted 6- 0to recommend approval. This Ordinance shall be approved upon final passage, but shall not become effective unless a fully signed Annexation Agreement is deposited on or before June 15, 2010. BACKGROUND Black Hills is requesting to annex a 257.32-acre site into the City to facilitate the construction of a new 380 megawatt natural gas power plant, which includes four gas fired turbines a switchyard and supporting facilities. The proposed annexation will be conducted in three-phases; Phase 1 will annex 5.003-acres. Black Hills currently purchases power from Xcel Energy; however their contract will end December 2011. Because of this the proposed power plant will provide power to service the Southern Colorado region. FINANCIAL IMPACT The City of Pueblo will be responsible for providing police and fire protection services to the property. In addition, the public roads will be maintained by the City of Pueblo once they have been constructed and accepted by the City. Reception # 1845154 06/24/2010 03:01:36 PM Final_Snhetinitad ANNEXATION AGREEMENT Case No. A-10-03 This Annexation Agreement entered into as of May 10, 2010, by and between the City of Pueblo, a Municipal Corporation (the "Cite and Black Hills /Colorado Electric Utility Company, LP, a Delaware limited partnership, and Black Hills Colorado IPP, LLC, a South Dakota limited liability company (each of them referred to as a `Petitionet' and collectively referred to as the "Petitioners. WITNES SETH WHEREAS, the Petitioners are the owners of the real property located in Pueblo County, Colorado, described in Exhibit "A' attached hereto and incorporated herein (the `Property); and WHEREAS, the Petitioners have submitted a petition for the annexation of the Property to the City in connection with the Petitioners' ownership and operation of the Facility (as defined in XIV of this Annexation Agreement) to provide energy and capacity to Black Hills /Colorado Electric Utility Company, LP, to serve customers in its certificated service territory (the "Stated Purpose; and WHEREAS, Petitioner Black Hills /Colorado Electric Utility Company, LP and Black Hilts Electric Generation, LLC and the City entered into a Pre - Annexation Agreement as of December 28, 2009, which Pre - Annexation Agreement was approved by Ordinance No. 8129 adopted and passed by the City Council of City (City Council) on December 28, 2009; and WHEREAS, Black Hills Electric Generation, LLC, a South Dakota limited company, has assigned its rights under the Pre - Annexation Agreement to Black Hills Colorado IPP, LLC, a South Dakota liability company, to which assignment the City has given its conditional consent in reliance upon the Guaranty made by Black Hills Electric Generation, LLC of even date herewith; and WHEREAS, by Ordinances Nos. 8165 and 8166 adopted and passed on March 22, 2010, the City annexed certain lands owned by the City more specifically described in the Ordinances (Corridor Property) abutting part of the Property, which Corridor Property was acquired by the City by Warranty Deed and Right of Reversion dated March 3, 2010, recorded March 10, 2010 at Reception No. 1835397 (Warranty Deed and Right of Reversioe subject to the terms and conditions stated therein; and 1 Final Substituted C May 24 2010 WHEREAS, as a condition precedent to the annexation of the Property, the Petitioners and City have agreed to enter into a mutually acceptable annexation agreement setting forth certain terms and conditions with respect to such annexation. NOW, THEREFORE, in consideration of the foregoing, and the covenants and conditions set forth herein, the City and Petitioners agree as follows: I. REPRESENTATION AND WARRANTIES OF PETITIONERS Petitioners hereby represent and warrant to, and covenant with, the City as follows: (1) Petitioner Black Hills /Colorado Electric Utility Company, LP, is a Delaware limited partnership, and Petitioner Black Hills Colorado IPP, LLC, is a South Dakota limited liability company. Each Petitioner is qualified to conduct business in the State of Colorado. (2) The Petitioners have good and marketable fee simple title to the Property subject only to Permitted Encumbrances attached hereto as Exhibit`B'.' (3) Each Petitioner is authorized to, and has taken all action required by it (a) to annex the Property to the City, (b) to execute, deliver and perform its obligations under this Annexation Agreement, and (c) to carry out and consummate all of the transactions contemplated by this Annexation Agreement. (4) As of its effective date, this Annexation Agreement when executed and delivered, constitutes a valid and legally binding obligation of each Petitioner enforceable against each Petitioner according to its terms. (5) As to each Petitioner, neither the execution and delivery of this Annexation Agreement nor the fulfillment of or compliance with its terms and conditions, nor the consummation of the transactions contemplated hereby, conflicts with or results in a breach of the terms, conditions or provisions or any restriction or any agreement or instrument to which the Petitioner is bound, or constitutes a default under any of the foregoing. (6) As to each Petitioner, there is no litigation pending, or to the knowledge of Petitioner threatened, against the Petitioner or any person affecting the right of the Petitioner to execute this Annexation Agreement or to comply with the provisions hereof. (7) As to each Petitioner, the representations and warranties of that Petitioner contained herein will be true and correct in all material respects as of the date of recording the annexation plat and Ordinance of the City Council approving the annexation of the Property, as if made on the date of such recording. II. MASTER DEVELOPMENT PLAN 2 Final Substituted Copy May 24, 2010 The City and the Petitioners acknowledge and agree that the entire Property is to be included in a single subdivision consisting of not more than four lots, and Petitioners shall not be required to file a Master Development Plan for the Property under Section 12- 4 -5(a) of the Pueblo Municipal Code, unless Petitioner seeks to create more than four lots. Petitioners are required to submit and have submitted a Development Plan for the subdivision to comply with the special development area future land use classification of the Pueblo Regional Development Plan. III. ZONING AND SUBDIVISION (1) The Property is to be included in a single subdivision (Subdivision), and an application for such Subdivision has been submitted by the Petitioners. No subdivision of the Property shall be approved prior to the time the ordinance annexing the Property is approved on final presentation. Nothing in this Annexation Agreement shall be construed to be a commitment, contractual or otherwise, of the City or City Council to approve the Subdivision in accordance with the submitted application or any amendment thereto. (2) The Property shall be zoned Heavy Industrial District (I -3) (1 -3 Zone District), the land use classification most nearly corresponding to the land use classification into which the Property has been (or will be) classified under the Citys comprehensive plan (Zoning). The Property shall be subject to imposition of reasonable conditions in connection with the zoning to I -3, including conditions concerning sounds, vibration, obnoxious or noxious odors, dust, dirt or fly ash, noxious gases, glare or heat, and outdoor storage areas, and which do not prevent use of the Property for the Stated Purpose. (3) A petition to zone the Property has been filed by Petitioners. The Planning and Zoning Commission may hear the petition for rezoning and make its recommendations thereon prior to annexing the Property, but the proposed Zoning ordinance shall not be passed on final presentation prior to the date the ordinance annexing the Property is approved on final presentation. (4) Petitioners shall submit and file all applications and accompanying maps, engineering and other information required to accomplish and obtain approval of the Subdivision and Zoning as soon as possible after the date the Substantial Compliance Resolution is adopted by City Council and Petitioners shall thereafter diligently pursue such applications through final approval. (5) Petitioners acknowledge that as part of the consideration for annexation, they have each agreed, and do hereby agree, that the provisions of §29 -20 -108, C.R.S. (2009) and any similar statute hereafter enacted, shall not apply to the Facility as defined in Article XIV, nor shall same apply to or preempt Citys land use regulations applicable to the Property and the Facility; and as to the Property, Petitioners hereby waive all rights, timelines and other provisions and benefits of said statutes otherwise available to Petitioners under said statutory provisions. 3 Final Substituted Copy May 24, 2010 IV. PUBLIC FACILITIES (1) Petitioners shall construct and install, at the cost and expense of Petitioners, all on -site improvements reasonably required by the City as a condition of approval of the Zoning and Subdivision. All such improvements shall meet and comply with applicable City Ordinances in effect at the time of installation of such improvements. Petitioners shall enter into a detailed Subdivision Improvements Agreement setting forth the specific improvement requirements. (2) On or before January 1, 2012, Petitioners shall construct and install the following off -site improvements: (i) The westerly two lanes of a future four -lane divided roadway to serve as an extension of 27` Lane, as described and shown on Exhibit"D'attached hereto and made a part hereof, from Pete Jimenez Parkway to the southerly boundary of the Property, fully complying with the 'Standard Construction Specifications and Standard Details for City of Pueblo, Colorado, Revised March 28, 2005' (Standard Specificationg). The location of the roadway within the Corridor Property and construction requirements shall be as approved by the City's Director of Public Works, and are generally described in said Exhibit` D'. The roadway extension shall be made so that it provides sufficient right of way to serve four lanes, sidewalks, center medians and drainage facilities. (ii) A connecting water main to be constructed by Petitioner Black Hills /Colorado Electric Utility Company, LP in the East -West Corridor as described in the Warranty Deed and Right of Reversion ( Connecting Water Mairi), subject to the terms and conditions stated therein. (3) The Subdivision Plat of the Property identifies a road alignment for the future extension of North 27 Lane through the Property. The City shall notify Petitioners no sooner than commercial operation of the Facility and no later than year (1) year prior to the time that the City desires that North 27 Lane be extended through the Property. Promptly after receipt of such notice, Petitioners shall make application to modify the air permit boundary of the Property established by the Colorado Department of Public Health and Environment, Air Quality Control Division (`AQCD') air permit issued for the Facility (as defined below) to permit the bifurcation of the Property such that the right -of -way for the road alignment and portion of the Property to the West thereof is thereafter excluded from the air permit boundary. Petitioners shall be required to dedicate the land for the road alignment upon approval of such application. Petitioners shall dedicate a 150 foot wide right of way for the extension of North 27 Lane by amendment of the Subdivision Plat for the Property. If Petitioners or their successors re- subdivide the portion of the Property lying west of the road alignment, they shall also design, construct and install the road extension. 4 Final Substituted Copy May 24, 2010 (4) Prior to issuance of any certificate of occupancy for any building or structure on the Property, Petitioners shall dedicate and construct all on -site improvements, including roadways, drainage facilities, structures and other public improvements as required by the Subdivision. Except as provided in the Pre - Annexation Agreement or this Annexation Agreement, or required as conditions of the Zoning or Subdivision, or required by City ordinances, no other improvements nor dedication of park lands (or payment in lieu of such dedication) will be required of Petitioners; provided, however, that this provision may be subject to modification in the future pursuant to City's reasonable exercise of its police powers, or if required as a condition in connection with any future re- subdivision or rezoning of the Property. (5) Petitioners have no objection to and hereby consent, as provided by C.R.S. §31 - 25- 103(2)(1), to the inclusion of the Property in an urban renewal area established or sought to be established by City in accordance with law within three (3) years of the date of this Annexation Agreement, and, upon City's request, Petitioners agree to take all actions necessary or desirable to accomplish said inclusion, provided that the inclusion of the Property in an urban renewal area at the time the urban renewal area is established by the City Council is accomplished pursuant to C.R.S. §31- 25- 107(1)(c)(II)(D) and does not result in (i) the imposition of any taxes levied by any new governmental entity with the authority to levy taxes upon property within the area on Petitioners, (ii) create an obligation on the part of Petitioners to incur any expense, (iii) does not interfere with Petitioners' use of the property for the Stated Purpose and (iv) does not impair the incentives and credits available to Petitioners under Article XIV and any other incentive or credit arrangements entered into by Petitioners with Pueblo County or other taxing authorities. The phrase`Smposition of taxes levied by a new governmental entit)'does not include any general increase in taxes by any existing taxing entity, nor the diversion or reallocation of tax revenues from taxing entities to an urban renewal authority or other entity for or in connection with tax increment financing for an urban renewal project. The parties acknowledge that the inclusion of the Property within an urban renewal area may require payment of Property Taxes (as defined in Section XIV (1)(a)) by Petitioners and refund to Petitioners of fifty percent (50 %) thereof by the Urban Renewal Authority of Pueblo f `URAP') instead of such refund being made by City pursuant to Section XIV (1) (e) of this Annexation Agreement, and such refund by URAP instead of by City shall not be considered an impairment of incentives and credits. In the event Petitioners fail or refuse to do so, City shall be entitled to seek specific performance of this requirement from a court of competent jurisdiction, and shall be entitled to recover its costs and attorney's fees in obtaining same. V. UTILITIES (1) Services. Except where a special use permit is issued as provided in Section 17- 4- 30(a)(1) of the Pueblo Municipal Code, all electric lines on the Property less than 30,000 volts shall be placed underground. Transformers, switching boxes, terminal boxes, meter cabinets, pedestals, ducts and other facilities necessarily appurtenant to such underground 5 Final Substituted Copy May 24, 2010 facilities may, with the approval of the Planning and Zoning Commission, be placed above ground. (2) Water Service. The City acknowledges that Petitioner Black Hills /Colorado Electric Utility Company, LP has entered into a separate agreement with the Board of Water Works of Pueblo, Colorado (Board) to provide potable water to the Property for the benefit of the Property, which agreement was approved by the Board on March 16, 2010 and executed on March 22, 2010 ( Water Agreement). The Parties agree that potable water service for the Property shall be carried out pursuant to the Water Agreement and the terms of this Annexation Agreement. (3) Other Utility Service and Connections. Petitioners, through their internal operations at the Property, will provide electricity service and individual sewage disposal system service to their proposed facilities at the Property (Utility Serviceg') in full compliance with law and applicable regulations. City agrees that, until such time as sewer mains exist within four hundred (400) feet of the boundary line of Property, Petitioners have the right, but not the obligation, to connect to the City's sanitary sewer system. In the event that Petitioners request to connect to City's sanitary sewer system, the Petitioners shall pay all connection fees and shall, at Petitioners' sole cost and expense, and in accordance with all permit and excavation requirements, acquire and dedicate any necessary right of way, and construct all sewer mains, lift stations and other sewer collection and transmission facilities from a point designated by City on the Citys existing system to the Property, as well as any system capacity improvements required to serve the Property. Thereafter, City will provide such sewer service subject to and in conformity with the City's ordinances, rules and regulations relating to its sanitary sewer system and services. Petitioners shall comply with all applicable City requirements for the installation of mains, lines, stations, and any other appurtenant sewer facilities in effect at the time of such request for sewer service. If, at any time, sewer mains are otherwise constructed so as to be located within four hundred (400) feet of the Property, Petitioners shall be required to comply with the provisions of Section 16 -7 -23 of the Pueblo Municipal Code or any similar ordinance or provision subsequently enacted. Petitioners will implement, operate and maintain a stormwater detention and drainage facility on the Property ( Stormwater Facility'). Petitioners shall (i) properly operate and maintain the Stormwater Facility on the Property as required by the Colorado Department of Health and Environment and the City of Pueblo, (ii) apply for, obtain and hold a stormwater discharge permit for the Stormwater Facility issued by the Colorado Department of Public Health and Environment and fully comply with the requirements of such permit, (iii) insure that the Stormwater Facility is not connected to or discharging stormwater into City owned or managed stormwater facilities, City streets or rights of way or sanitary sewers, and (iv) Petitioners promptly pay to City when due all monthly stormwater utility service charges. Petitioners shall not at any time violate the City's stormwater utility ordinances (Chapter 12, Title XVI of the Pueblo Municipal Code) as amended (Stormwater Ordinance. 6 Final Substituted Copy May 24, 2010 (4) Fire Protection. Petitioners and the City agree that the City shall provide fire protection, hazardous material response, and emergency medical services for the Property on the same general terms and conditions the rest of the City receives; provided, however, that due to the remote and distant location of the Property from City's existing fire stations, response times may be substantially longer. The City further agrees that, upon Petitioners making all required filings under City's Fire Code and payment of all fees to City under same, City will cause its Fire Department to participate in periodic, but not more frequent than once per year, training sessions at the Facility (as defined in Article XIV (1) (a)) so that the City's Fire Department is able to provide fire protection services at the Facility. (5) Waste Disposal. Petitioners shall apply for a Certificate of Designation in connection with a wastewater treatment facility to be constructed by Petitioners on the Property and shall not operate such facility until and unless authorized to do so pursuant to such Certificate of Designation issued by the City. Petitioners shall not construct nor operate any other separate solid waste disposal or treatment facility upon the Property until and unless authorized to do so by a Certificate of Designation issued by City. (6) No Disconnection. Petitioners stipulate and agree that they will not seek disconnection of the Property and waive their rights, if any, to do so under Section 31 -12 -119, C.R.S. based upon the City not providing (i) sanitary sewer services to the Property prior to Petitioners' request to tap into City's sanitary sewer system and Petitioners' extension of sewer mains to the Property, (ii) stormwater services to the Property prior to Petitioners' request to connect to City's stormwater system and Petitioners' extension of City's stormwater system to the Property, and (iii) repair and maintenance of 27th Lane until acceptance of same by the City and expiration of all applicable warranty periods. VI. COMPLIANCE WITH ORDINANCES Except as otherwise specifically provided in this Annexation Agreement to the contrary, the development, subdivision and zoning of the Property shall otherwise meet and comply with all applicable ordinances, resolutions, regulations, and standards of the City now existing or hereinafter enacted or amended. VII. BINDING EFFECT (1) The covenants, restrictions, and agreements herein set forth are covenants running with the Property, shall run with and bind the Property, and shall extend to and be binding upon the Petitioners and their successors, assigns and transferees. The Petitioners expressly accept and agree to the covenants, restrictions, and agreements set forth herein by execution of this Annexation Agreement and by the filing of its petition for annexation. (2) If Petitioners default in any of their obligations under this Annexation Agreement, including but not limited to any failure to make payment of all amounts constituting the Payment in Lieu, or default in any dedication or off -site improvement 7 Final Substituted Copy May 24, 2010 obligation hereunder or under the Subdivision Improvements Agreement, upon notice given to Petitioners specifying the default, City may withhold any or all subdivision, land use and other development approvals as well as building and occupancy permits for any building or structure upon the Property, until the default or defaults have been corrected to the reasonable satisfaction of the City. In addition thereto, the City may also pursue a remedy for specific performance, injunction or declaratory judgment. (3) If City defaults in any of its obligations under the Annexation Agreement, upon notice given to the City specifying the default and providing a reasonable opportunity to cure the alleged default, Petitioners may, at Petitionefs election, (i) pursue a remedy for specific performance, injunction or declaratory judgment, or (ii) seek to disconnect the Property under Article XII, The preceding remedies shall be exclusive and in lieu of all other remedies available at law or in equity, including, without limitation, the recovery of damages of any type or nature. (4) Venue in any and all actions and proceedings related to this Annexation Agreement shall be in the Pueblo County District Court, which court shall have personal and subject matter jurisdiction for such purpose, and the parties hereto irrevocably submit to the jurisdiction of such courts. The Court in any such action shall award to the prevailing party its costs and expenses of litigation, including reasonable attorney fees, which award shall become effective when the order of the Court is not appealed within the time allowed for such appeal or is affirmed by a final, non - appealable order or judgment To the extent permitted by law, City and Petitioners waive their right to jury trial. VIII. AMENDMENTS Amendments to this Annexation Agreement may only be made by a writing executed by Petitioners and City and following formal petition to and approval by Resolution of the City Council after such amendment has been submitted to and reviewed by the appropriate City Departments and such Departments have submitted their findings and recommendations to the City Council. IX. SEVERABILITY If any section, clause, or other provision of this Annexation Agreement is for any reason determined to be invalid or unenforceable by any court of competent jurisdiction, such determination shall not affect any of the remaining provisions of this Annexation Agreement. In the event a provision is determined to be unconstitutional, illegal, unenforceable or otherwise void, all other terms, covenants and conditions of this Annexation Agreement and their application not adversely affected thereby shall remain in force and effect; provided, however, that the Parties shall negotiate in good faith to attempt to implement a replacement provision or an equitable adjustment in the provisions of this Annexation Agreement with a view toward effecting the purposes of the provision by replacing the provision that is held 8 Final Substituted Copy May 24, 2010 invalid, illegal, or unenforceable with a valid provision the effect of which comes as close as possible to that of the provision that has been found to be invalid, illegal or unenforceable. X. VESTED PROPERTY RIGHTS (1) Since property rights may only be vested by the City pursuant to the provisions of Chapter 12, Title XVII of the Pueblo Municipal Code, Petitioners and the City hereby expressly acknowledge and agree that this Annexation Agreement does not (a) create or establish a vested property right in or for the benefit of the Petitioners or their successors or assigns, or with respect to the Property; or (b) constitute a site - specific development plan. The terms` vested property righf'and"site- specific development plari'shall have the same meaning as set forth in Section 17 -12 -2 of the Pueblo Municipal Code and§24 -68 -101, et seq., C.R.S. (2) Notwithstanding the provisions of section (1) above, City expressly agrees that Petitioners and their successors and assigns shall have the vested property right to undertake and complete the development and use of the Property under the terms and conditions set forth below only upon and after approval and issuance thereof by the City in compliance with Citys ordinances, including, but not limited to, Chapter 12, Title XVII of the Pueblo Municipal Code, of the following, to -wit: (i) Zoning, and (ii) Subdivision, all of which shall collectively constitute a site specific development plan. (3) In light of all relevant circumstances, including, but not limited to, the long- term nature of the use of the Property and the extended periods involved in the tax credits and exemptions with respect to the Property and Facility provided in Article XIV below, City agrees to an extension of the vesting period for the vested property right granted in section (2) above to a period of five (5) years after the date the Facility becomes Operational. (4) The establishment of such vested property right shall not, however, preclude the application of ordinances or regulations which are general in nature and are applicable to all property subject to land use regulations by the City, including, but not limited to, building, fire, plumbing, electrical, mechanical, water and sewer codes or ordinances. The absence of any language from this Annexation Agreement concerning City's rights or authority under law is not intended, and shall not be construed as, any waiver or relinquishment of , or estoppel against enforcement of, requirements imposed or authorized, or which may be imposed or authorized in the future, under any of City's subdivision or land use ordinances, or other ordinances or codes enacted pursuant to City's police power. XI. BUILDING PERMITS All construction of improvements upon the Property shall be subject to and comply with the City's building codes including the requirements for obtaining permits and payment of all plan review and permit fees. Because such codes are administered by the Pueblo Regional Building Department building permit applications, processing fees or requirements for building permits shall be submitted by Petitioners to the Pueblo Regional Building 9 Final Substituted Copy May 24, 2010 Department, except that permits and approvals under the International Fire Code shall be to the Fire Chief. XII. DISCONNECTION (1) Petitioners acknowledge and agree that upon annexation of the Property into the City, the Property shall become subject to this Annexation Agreement, the Charter, ordinances and rules and regulations of the City. In the event that (i) after application by Petitioners and Petitioners' diligent effort to obtain same, Petitioners do not obtain the Approvals listed on Exhibit C hereto, on terms and conditions that will not materially and substantially impair the ability of Petitioners to utilize the Property for the Stated Purpose within six (6) months after the effective date of this Annexation Agreement; (ii) the vested property right granted by Section 2 of Article X or any material provision of Section 1 of Article XIV is determined to be invalid or unenforceable by a final decision of a court of competent jurisdiction; (iii) the City takes any final action in violation of any material provision regarding vested rights as provided in Sections (2) and (3) of Article X; (iv) the City takes any final action inconsistent with any material provision of Sections (1), (3) or (4) of Article XIV or fails to take any action required of it under any material provision of Sections (1), (3) or (4) of Article XIV; or (v) the Water Agreement terminates or is terminated as provided therein, then it is agreed that Petitioners shall have the right to disconnect the Property from the City subject only to the following: Petitioners shall file a verified written petition with the City Clerk which states that one or more of the above conditions exist; promptly upon receipt of such petition, the City shall have ninety (90) days to correct, remedy or remove any condition claimed to exist. If the City disputes the existence of the claimed condition, or fails or refuses to correct, remedy or remove same, then the City Council of City shall thereafter schedule and provide notice to Petitioners of a public hearing before the City Council; and, upon a determination by the City Council that Petitioners have shown by competent evidence at the public hearing that any of the above conditions in fact exist, the City shall within one hundred twenty (120) days after such determination enact all measures necessary to accomplish such disconnection. Petitioners shall have the right to seek judicial review under C.R.C.P. 106(a)(4) of any decision of the City Council determining that none of the above conditions in fact exist and in the event Petitioners prevail in such appeal, the City shall within one hundred twenty (120) days of a final judicial determination reconsider the matter and take action in accordance with the decision of the Court. For purposes of this Section (1), an action of the City shall be "final'thirty (30) days after the vote of the City Council of City thereon. (2) Except as otherwise provided in Section 6 of Article V, nothing in section (1) above shall waive or limit the right of Petitioners to exercise any other right it may have to disconnect the Property from the City pursuant to the provisions of Section 31 -12 -119, C.R.S., or any other statute or ordinance applicable to Petitioners and the City which now exists or may hereafter be enacted which authorizes disconnection from a home rule municipality. 10 Final Substituted Copy May 24, 2010 (3) Upon disconnection of the Property, whether pursuant to Ordinance of the City under section (1) above, or judgment from a court pursuant to section (2) above, the parties expressly acknowledge and agree that from and after the effective date of the disconnection, all zoning, permits, subdivisions, and other land use restrictions imposed upon the Property by, through or under the City shall thereafter be immediately null and void, water service to the Property by the Board of Water Works shall terminate and cease and the parties shall be released and discharged from all future obligations and liabilities under this Annexation Agreement, except that if disconnection is due to Petitioners' failure or inability to obtain all approvals as provided in Section XII (1) (i) above, the obligation to refund the Payment in Lieu as provided in Section XIV (1)(h) of this Annexation Agreement shall survive. XIII. CONTRACTUAL NATURE OF ANNEXATION AGREEMENT The terms, conditions and obligations of this Annexation Agreement are and shall be construed to be purely contractual in nature, as terms, conditions and obligations voluntarily agreed to by City and Petitioners prior to annexation of the Property to the City. The terms, conditions and obligations imposed on Petitioners and the Property by this Annexation Agreement are not nor shall they individually or cumulatively be construed to be conditions upon granting land -use approvals within the meaning of sections 29 -20 -201 to 29 -20 -204, C.R.S. XIV. SPECIAL PROVISIONS (1) Taxes, Incentives and Credits. In accordance with Colorado Constitution; the Pueblo Municipal Code; the Pueblo City Charter; and the Colorado Revised Statutes, the parties agree as follows: (a) Definitions. The following terms shall have the following meaning as utilized in this Article XIV and, except as otherwise limited below, throughout the balance of the Annexation Agreement: `FacilitT shall mean the real and personal property comprising up to two 90- megawatt LMS 100 natural gas fired power plants, up to two 100 megawatt natural gas fired combined cycle power plants, a 115 KV switchyard, public improvements and supporting facilities located upon the Property and the extension of 27 Lane to the Property. The water main and public improvements constructed off- site from the Property, other than the said extension of 27 lane, shall not be considered part of the Facility. Prior to the date the Facility becomes Operational, as that term is defined below, the purchase or rental of personal property, including but not limited to, equipment, supplies and other materials used in constructing the Facility or incorporated therein shall be considered part of the Facility. Following the date the Facility becomes Operational, the purchase or rental of personal property, 11 Final Substituted Co May 24 2010 equipment, supplies and other materials shall not be considered as part of the Facility. The City and Petitioners have agreed to the provisions of this Article XIV under the good faith belief that the Facility is a`new business facility' within the meaning of Sections 31 -15 -903 and 39 -30 -105, C.R.S. and that the Facility is located within an "enterprise zone' as such term is used in Title 39, Article 30 of the Colorado Revised Statutes. `Operational' shall mean the date that Petitioners have received from a qualified independent third party consulting firm a certificate that any two natural gas fired power plants comprising part of the Facility are ready for commercial operation, or Petitioners have received notice from any regulatory agency with appropriate jurisdiction that any two natural gas fired power plants comprising part of the Facility may be placed into commercial operation pursuant to standards published by the Federal Energy Regulatory Commission and the Financial Accounting Standard Board applicable to electric power generation facilities. Petitioners shall notify the City in writing within twenty (20) calendar days after the Facility becomes Operational. `Property Taxes'shall equal the City's mill levy multiplied by the assessed valuation of the real and personal property for the Facility (Property Taxes). (b) Property Taxes during Construction of the Facility. Subject to the provision of subparagraph (d) below, for the period from the effective date of this Annexation Agreement through the property tax year in which the Facility becomes Operational or through the 2012 property tax year (Property Tax Year meaning the year in which property taxes are payable for the prior assessment year), whichever occurs first (Construction Period), the City shall provide Petitioners with an annual incentive Property Tax credit equal to 100 percent (100.0 %) of the Property Taxes. (c) Property Taxes after Construction of the Facility. Subject to the provision of subparagraph (d) below, commencing with the Property Tax Year following the Construction Period, City will provide an annual incentive Property Tax credit equal to fifty percent (50.0 %) of the Property Taxes for a period of five (5) consecutive years. (d) Annual Property Tax Credit. The obligation to provide the annual incentive Property Tax credit set forth in subparagraphs (b) and (c) above is subject to the following: (i) approval of each annual tax credit by the City Council of City (without any liability to the City for failure to do so, except, that such failure, together with a failure to issue a refund under subsection (f) below, shall allow Petitioners to disconnect pursuant to Article XII above), and (ii) the annual credit shall be structured, granted and implemented in such a manner that the credit and the amount thereof shall not be or be construed to be City's fiscal year spending or revenue or a multiple - fiscal 12 Final Substituted Co May 24, 2010 year direct or indirect City debt or other financial obligation whatsoever under the provisions of Article X, Section 20 of the Colorado Constitution. In each year the City Council approves the credit described in (b) or (c) above, the City Council of the City will transmit written notice of its approval of such credit as part of its annual certification of its mill levy to the Board of County Commissioners of Pueblo County, Colorado. Petitioners shall annually comply with Section 39 -4 -103, C.R.S. and thereafter the actual value as determined by the administrator shall be apportioned pursuant to Section 39 -4 -106, C.R.S. After apportionment, City and Petitioners agree to cooperate in good faith with the Pueblo County Assessor and/or the Pueblo County Treasurer to structure, grant and implement the annual property tax credit and the amount thereof so that the credit and amount thereof shall not be or be construed to be City's fiscal year spending or revenue under the provisions of Article X, Section 20 of the Colorado Constitution. (e) Refund In Lieu of Annual Property Tax Credit. If the annual incentive property tax credit cannot be structured, granted and implemented as set forth in (d) above, and City receives the full amount of Property Taxes without deduction for the annual property tax credits described in (b) or (c) above, City, subject to the provisions of subparagraph (f) below, will annually refund to Petitioners an amount equal to the annual property tax credit described in (b) and (c) above, which amount shall be refunded before December 31 of the Property Tax Year. (f) Annual Refund. The obligation of the City to pay or make any annual refund described in (e) above is subject to the following: (i) Citys receipt of the full amount of Property Taxes without deduction for the annual property tax credit described in (b) or (c) above for the year of refund, (ii) funds being annually appropriated and budgeted by the City Council of City for purposes of each refund (without any liability to the City for failure to do so, except that such failure shall allow Petitioners to disconnect pursuant to Article XII above), and (iii) each annual refund and the amount thereof is intended to be a refund of property tax revenue generated by or attributable to the Facility. If City has excess revenue in any fiscal year under the provisions of Article X, Section 20 of the Colorado Constitution identified and attributable to property tax revenue or other revenue generated by the Facility and received by City in such fiscal year ( Facility Excess Revenud), that portion or all of the refund for such fiscal year in an amount not to exceed the Facility Excess Revenue shall be and be construed to be a refund of Facility Excess Revenue under Article X, Section 20 of the Colorado Constitution for that fiscal year. The parties stipulate and agree that the refunds provided for herein and in (e) above do not create nor constitute a multiple- fiscal year direct or indirect City debt or other financial obligation whatsoever under Article X, Section 20 of the Colorado Constitution. (g) Payment In Lieu of Sales and Use Tax. Petitioners, in such proportion as they shall determine, shall pay to City in lieu of sales and use taxes related to the 13 Final Substituted Copy May 24, 2010 construction, installation, acquisition and equipping of the Facility the amount of U.S $7.5 Million (the "Payment in Lieu "). The Payment in Lieu shall be made in two separate installments as follows: (i) U.S $4.6 Million previously paid by Petitioners to City pursuant to the Pre - Annexation Agreement, which City acknowledges was timely paid by Petitioners in the proper amount ( "Partial Payment "); and (ii) U.S. $2.9 Million to be paid in cash or certified funds on or before October 1, 2010 ( "Balance Payment "); provided, however, that at the request of the City, in City's sole and absolute discretion, the Balance Payment shall be postponed until January 2, 2011. If not paid when due the Balance Payment shall accrue interest at the rate of eight (8) percent per annum until paid in full. (h) Refund of Payment in Lieu. Upon notification to the City by Petitioners that, despite Petitioners' diligent filing of appropriate applications and supporting documents therefor and payment of all applicable fees : (A) Petitioners are unable to obtain one or more Approvals identified on Exhibit C required to construct and install any substantial part or all of the Facility on terms and conditions that will not materially and substantially impair the ability of Petitioners to utilize the Property for the Stated Purpose or materially and substantially increase Petitioners' cost to so utilize the Property, (B) Petitioners are legally prohibited from constructing the Facility by injunction or other court order ( "Order ") that is not appealed within the time allowed for such appeal or is affirmed by a final, non - appealable order or judgment or (C) City fails to adopt Ordinance No. 8187, City shall promptly refund the Partial Payment, less $100,000.00 thereof as compensation to the City for its legal, technical, and administrative expenses and staff time, and, if the Balance Payment has been made at such time of notification, the Balance Payment ( "Refund "). If the City fails to take any lawful action reasonably required and necessary to effect such Refund within eighteen (18) months, Petitioners shall be entitled to a remedy for specific performance or declaratory judgment to effect or obtain such Refund, but not to obtain recovery of any other damages of any type or nature, with each party to pay its own costs and attorney's fees. Except as provided above, the Payment in Lieu shall be irrevocable and nonrefundable for any cause or reason and shall be kept and retained by the City notwithstanding the disconnection of the Property or any other provision of this Annexation Agreement to the contrary. (i) Sales and Use Tax Exemption. (A) The City hereby acknowledges that the adoption of Ordinance No. 8187 amending Chapter 4 of Title XIV of the Pueblo Municipal Code (the 14 Final Substituted Copy May 24, 2010 "Ordinance ") granting: an exemption from sales and use tax on tangible personal property purchased, stored, used, or consumed by Petitioners, their vendors, suppliers, contractors, sub - suppliers and sub - contractors in the initial construction and equipping of a new electric power generation facility of up to 380 megawatts constructed on or after June 1, 2010 and before January 1, 2012 ( "electric power generation facility "), is a material factor in the decision by Petitioners to annex the Property into the City. As such, City hereby covenants and agrees that so long as the Property remains annexed to the City it will not prior to the time the Facility becomes Operational, or the 2012 Property Tax Year, whichever comes first, undertake any action to amend, modify or repeal the exemption granted under the Ordinance to the detriment of Petitioners as they apply to the Facility. Petitioners acknowledge that the exemption does not apply to the water main, and public improvements constructed off- site from the Property. (B) Within thirty (30) days after the effective date of the Ordinance or this Annexation Agreement, the City will issue an exemption certification that Petitioners may provide to all contractors, subcontractors, vendors, suppliers, sub - suppliers and other agents employed or working in connection with the construction, operation or maintenance of the Facility to ensure that no sales or use taxes are collected or paid on tangible personal property purchased, stored, used, or consumed for the Facility contrary to the exemption granted under the Ordinance. (j) Exemption from Sales and Use Taxes for Natural Gas, Steam, and Water. The City hereby acknowledges and agrees that in accordance with Section 14- 4- 77(7), Pueblo Municipal Code, the purchase and sale of natural gas, steam and water for use in electric power generation at or from the Facility are and will be considered exempt from City sales and use taxes; except that natural gas, metered electricity, steam or water used for lighting or space heating and other utilities in the Facility shall not be exempt. (k) Consistent with Article XVI(3) of this Annexation Agreement, the tax credits /tax exemptions provided to Petitioners by this Annexation Agreement shall also inure to the benefit of any of Petitioners' assigns. (2) Environmental Acknowledgment. Petitioners will comply with all applicable federal and state environmental laws, rules and regulations in the operation of the Facility. (3) Noise. The City has adopted noise regulations, currently codified as Sec. 11 -1- 607 of the Pueblo Municipal Code (as now or hereafter adopted the "City Noise Ordinance "). The Facility is also regulated by state noise regulations, currently codified as Section 25 -12- 103, C.R.S. (as now or hereafter adopted the "State Noise Statute ") Petitioners agree that the 15 Substituted Page 6 14, 2010 Facility, and all elements thereof shall comply with both the State Noise Statute and the City Noise Ordinance, whichever is most restrictive. (4) Contractors and Labor All work on the Property and the Facility shall be performed by qualified union contractors who have entered into enforceable collective bargaining agreements with trade unions, as more fully set forth in and subject to the terms of that certain Memorandum of Understanding dated June 10, 2010 ( "MOU ") executed by Black Hills Electric Generation, LLC ("BHEG"), the subsidiary of Black Hills Corporation responsible for the construction of the Facility, as attached hereto as Exhibit "E" and incorporated herein by reference. Petitioners shall ensure that BHEG performs in accordance with the MOU. BHEG has the right to perform the general contractor services itself or to hire a third -party general contractor selected by a competitive solicitation process, which third -party general contractor need not be a union contractor. XV. EFFECTIVE DATE. This Annexation Agreement shall become effective on the date City Council of City approves by ordinance the annexation of the Property to the City. or such later date as if provided by law. XVI. MISCELLANEOUS. (1) Notice. All notices or other communications hereunder shall be sufficiently given and shall be deemed given when personally delivered, or mailed or registered or certified mail, postage prepaid, addressed as follows: [Remainder of page left blank intentionally.] 16 Final Substituted Copy May 24, 2010 (a) if to the City: Department of Public Works - City of Pueblo 211 East "D" Street Pueblo, Colorado 81003 Attention: Director of Public Works with a copy to: City Attorney 503 N. Main Street, Suite 203 Pueblo, Colorado 81003 (b) if to the Petitioner: Black Hills /Colorado Electric Utility Company, LP 1515 Wynkoop Street Suite 500 Denver, Colorado 80202 with a copy to: General Counsel Black Hills Corporation 625 Ninth Street Rapid City, SD 57709 (c) if to the Petitioner: Black Hills Colorado IPP, LLC 1515 Wynkoop Street Suite 500 Denver, Colorado 80202 with a copy to: General Counsel Black Hills Corporation 625 Ninth Street Rapid City, SD 57709 or to such other address as either party by written notice given hereunder may designate. (2) Governing Law. This Annexation Agreement shall be governed and construed in accordance with the laws of the State of Colorado, without regard to conflict of law principles. (3) No Third Party Beneficiaries. Nothing in this Annexation Agreement expressed or implied is intended to or shall be construed to confer upon, or to give to, any person other than the City and the Petitioners and their respective successors and assigns any right, remedy or claim under or by reason of this Annexation Agreement or any covenant, condition or stipulation hereof; and all the covenants, agreements and stipulations in this Annexation Agreement contained by and on behalf of the City or the Petitioners shall be for the exclusive benefit of the City and the Petitioners and their respective successors and assigns, including parties to whom a Petitioner assigns certain of the rights and benefits set forth in this Annexation Agreement. No assignment of any interest in this Annexation Agreement by Petitioner shall relieve Petitioner of any of its obligations hereunder. 17 Final Substituted Copy May 24, 2010 (4) Singular, Plural. Unless the context requires otherwise, words denoting the singular may be construed as denoting the plural. Words of the plural may be construed as denoting the singular. Words of one gender may be construed as denoting the other gender, if applicable. (5) Entire Agreement. All prior discussions, representations, understandings and agreements, whether oral or written, between the parties with respect to the subject matter of this Annexation Agreement are merged in this Annexation Agreement, which constitutes the entire agreement between the parties. (6) Confirmation Statements. Upon written request from Petitioners accompanied by payment in advance of City's estimated technical and legal expenses and payment for City staff time involved for investigation, research and preparation, the City will provide to Petitioners, or Petitioners' designee, a certificate or other written statement (in form sufficient for recording) evidencing that Petitioners have, to the best of City's knowledge at that time, performed their obligations under this Annexation Agreement or identifying those items which remain outstanding under this Annexation Agreement. (7) Assignment. Petitioners shall not assign this Annexation Agreement or any of their respective rights and obligations hereunder without the written consent of the City In order to obtain such consent, the assigning Petitioner shall provide to City with the request for consent sufficient information showing that the proposed assignee has the technical and financial ability to perform the obligations of that Petitioner under this Annexation Agreement. Consent may be denied by City if, based upon the information provided, it reasonably determines that the assignee appears either not technically or financially qualified or able to perform the obligations of that Petitioner under this Annexation Agreement. This Annexation Agreement is executed effective as set forth in Article XV. [ S E‘ A ] PUEBLO, a Municipal Corporation j Attest: _ �''�ik `f . By Or . -- -City Ae lerk - 'resident of the City Council APPROVED AS TO FORM: . r City Attorney Black Hills/ Colorado Electric Utility Compa ` , , LP By: _� ►s :s If Title: EdlitagSar <r 18 Final Substituted Copy May 24, 2010 Black Hills Colorado IPP, LLC By: �1 Title: uP' STATE OF Colorado ) ) ss. COUNTY OF Pueblo ) The foregoing instrument was acknowledged before me this 14th day of June , 2010 , Lawrence W. Arpnri n , as President of City Council and Gina Dutcher as City Clerk of Pueblo, a Municipal Corporation. '''''S''''' ' : fitness my hand and official seal. N,OTi R), mmission expires: & /'7/// ,^_.rte JL4 ---. • =•�� • y Public '.'•' E OF COLORADO ) ) ss. COUNTY OF PUEBLO ) The foregoing instrument was acknowledged before me this 14th day of June , 20 10 , b Stuart Wevik as Vice President of Electric Utilities - Black Hills /Colorado.Electric Utility Company, LP Witness my hand and official seal My commission expires: August 18, 2011 [SEAL] Nota Public STATE OF COLORADO ) ) ss. COUNTY OF PUEBLO ) 19 Final Substituted Copy May 24, 2010 The foregoing instrument was acknowledged before me this 14th day of June , 20 10 , by Mark Lux as Vice President of Power Delivery — Black Hills /Colorado Electric Utility Company, LE Witness my hand and official seal. My commission expires: August 18, 2011 [SEAL] - 1 11111. Notar 'ublic Final Substituted Copy May 24, 2010 EXHIBIT A TO ANNEXATION AGREEMENT LEGAL DESCRIPTION All of the SW 1/4 of Section 11, Township 20 South, Range 64 West of the 6th P.M., and The N 1/2 of the N 1/2 of the NW 1/4 of the SE 1/4 and all of the E 1/2 of the SE 1/4 of Section 10, Township 20 South, Range 64 West of the 6th P.M., all in the County of Pueblo, State of Colorado. Further described as follows: A parcel of land, located in the N'/zof the N 1/2 of the NW 1/4 of the SE 1/4, and all of the E 1/2 of the SE 1/4 of Section 10, and the SW 1/4 of Section 11, thereof, all being located in Township 20 South, Range 64 West of the 6th P.M., County of Pueblo, State of Colorado, with all the bearings contained herein based upon a bearing of N88 "E, as measured between the C 1/4 Corner of said Section 10, being marked on the ground by a 3 1/4" aluminum cap on #6 rebar, PLS 10372, 1991, found in place, and the E 1/4 Corner of said Section 10, being marked on the ground by an original axel, found in place, said parcel being more particularly described as follows: Beginning at said E 1/4 of Section 10; thence along the East -West centerline of said Section 11, N8908'58 "E, a distance of 2746.60 feet, to the C 1/4 Corner of said Section 11; thence along the North -South centerline of said Section 11, S0(P30'09 "E, a distance of 2656.10 feet to the S 1/4 of said Section 11; thence along the South line of the SW 1/4 of said Section 11, S88'53'11 "W, a distance of 2706.81 feet, to the SE Corner of said Section 10, being marked on the ground by a 3 1/4" aluminum cap on #6 rebar, JR ENG LTD, PLS 31161, 2000, 20' Witness Corner (West), found in place; thence along the South line of the SE 1/4 of said Section 10, S88'04'42 "W, a distance of 1299.26 feet, to the E 1/16 Corner of said Section 10 and Section 15, said Township and Range, being marked on the ground by and original axel, found in place; thence along the West line of the E 1/2 of the SE 1/4 of said Section 10, N01°25'38 "W, a distance of 2333.84 feet, to the C- N -N -SE 1/256 Corner of said Section 10; thence along the South line of the N 1/2 of the N 1/2 of the NW 1/4 of the SE 1/4 of said Section 10, 588°01'41 "W, a distance of 1302.05 feet, to the N -N -S 1/256 Corner of said Section 10; thence along the North -South centerline of said Section 10, N01°29'44 "W, a distance of 333.24 feet, to said C 1/4 Corner of Section 10; thence along the East -West centerline of said Section 10, N88 "E, a distance of 2604.89 feet, to the point of beginning. Said parcel contains 256.282 acres, more or less. 21 Final Substituted Copy May 24, 2010 EXHIBIT B EXCEPTIONS The Policy or policies to be insured will contain exceptions to the following unless the same are disposed of to the satisfaction of the Company. 1. Rights or claims of parties in possession, not shown by the public records. 2. Easements or claims of easements, not shown by the public records. 3. Discrepancies, conflicts in boundary lines, shortage in area, encroachments, or any facts, which a correct survey and inspection of the premises would disclose, and which are not shown by the public records. 4. Any lien, or right to a lien, for services, labor or material heretofore or hereafter furnished, imposed by laws and not shown by the public records. 5. Defects, liens, encumbrances, adverse claims or other matters, if any, created first appearing the public records or attaching subsequent to the effective date hereof; but prior to the date the proposed insured acquires of record for value the estate or interest or mortgage thereon covered by this commitment. 6. Unpatented mining claims, reservations or exceptions in patents, or an act authorizing the issuance thereof; water rights, claims or title to water. 7. Payment of all taxes and assessments currently due and payable, if any. 8. Easements for public utilities, drainage, access, and other purposes, as shown on the recorded subdivision plat. 9. Title to all minerals within and underlying the premises, together with all mining and drilling rights and other rights, privileges and other immunities relating thereto. 10. Any and all existing roads, highways, ditches, canals, reservoirs, wells, railroad tracks , pipelines, water lines, power lines, telephone lines, and any and all rights of way or easements therefore. 11. Any and all leases and tenancies. 22 Final Substituted Co May 24, 2010 EXHIBIT C LIST OF REQUIRED PERMITS AND APPROVALS Payment of all annexation fees and costs to City. Final, fully executed (by all parties thereto), and uncontested agreement with the Board of Water Works of Pueblo, Colorado for the supply of potable water to the Property; The final and uncontested Zoning of the Property in accordance with Article III(2) of this Annexation Agreement; Final and uncontested passage of an ordinance approving a Subdivision of the Property in accordance with Article III (1) of this Annexation Agreement; A final and uncontested Special Area Plan in accordance with Article III(2) of this Annexation Agreement; The final and uncontested State Department of Public Health and Environment, Air Quality Control Division air permit. Army Corp of Engineers permit to cross waters of the United States State Stormwater Construction Permit The foregoing are collectively referred to as the "Approvals" The term` uncontested'as used herein means that no appeal, action, lawsuit or other claim (collectively, a "Clairri) has been asserted or filed in a court of competent jurisdiction or with any body with appropriate jurisdiction within the applicable appeal period after the occurrence or granting of any such Approval but in no event later than one hundred eighty (180) days thereafter. Notwithstanding the foregoing, if a Claim has been timely filed or asserted, then the Approval shall only be considered"uncontested'when such Claim is dismissed or resolved to uphold the Approval sought by or previously granted to Petitioner by a final, non - appealable order or judgment issued in such litigation or proceeding, or the dismissal of the litigation or proceeding, with no further right of appeal. 23 Final Substituted Copy May 24, 2010 EXHIBIT D TO ANNEXATION AGREEMENT (General Description of Roadway Improvements and Location) 24 'g f, - P 3 g g g i Ti � ' 1 m "22 08 N ' oli a $ in o o t o 4 , N � C t M v a E 8 1 w ° fi a. 13 m' N 2 ; N ='z nL p N � a El m rn E E ,� i -I i$ t E ..!7. t I ` �- a a o rn k • m U c To E la € `o • TO W • {3 G.1 le 1111.i ijh . } Q 0 0� g!•• O 7 .g2-5.0.-Qt G W \ I c y , a� ocol�'aSWx` . � t� 15 118 c c 1 st� E _o . 2 .4`o I w • tai ei- v ui 8 z g . w m s. 11 1 '`, s ¢ \ ; 4t g 1 • • a 8 b+ i ". _ . . , : . :. gi i .. 1 .7 . ■-, P tr. iti 1 • e! rr L t co; \ �i coa \ a MEMORANDUM OF UNDERSTANDING This: memorandum of understanding ("MOU") is entered into this 10 day ofiune, 2010, by and between Black Hills Electric Generation, LLC ( "BHEG"), the subsidiary of Black Hills Corporation responsible for the construction of the Facility described below and the following Pueblo, Colorado companies: K.R. Swerdfeger Construction, ine.,'Vision Mechanical, 1 Vitiouston Constriction company, Pueblo BlecMos, MSSM Company, and Industrial Constructors/Managers Inc. (collectively, the "Contractor Consortium"). WHEREAS, BUG is responsible for the construction of two 90- megawatt LMS 100 natural gas fired power plants -which will be owned by Black Hills/Colorado Electric Utility Company, LP and up to two 100 megawatt natural gas fired combined cycle power plants which will be owned by Black Hills Colorado IPP, LLC (collectively, the "Facility") and proposes to construct the Facility on certain real property currently not located within the city limits of Pueblo, Colorado (the "Site"), and WHEREAS, Black Hills/Colorado Electric Utility Company, LP and Black Hills Electric Generation, LLC ("Petitioners") and the City of Pueblo, Colorado ("City") entered into a Pre - Annexation Agreement as of December 28, 2009, which Pre- Annexation Agreement was approved by Ordinance No. 8129 adopted and passed by the City Council on December 28, 2009; and WHEREAS, annexation to the City is required in order lbr the Pueblo Water Board, a City enterprise, to provide water to the Site, and WHEREAS, Petitioners submitted a petition for the annexation of the Site to the City; and WNF,REAS, BHEO assigned its rights as a Petitioner wader �h Annexation g guarantee to Black Hills Colorado IPP, LLC and the City accepted such assignment subject. of BHEG, and WHEREAS, as required by the Pre- Annexation Agreement, annexation is conditioned on the negotiation and execution of an acceptable Annexation Agreement by ibe Petitioners and the City, and WHEREAS, the City and Petitioners are at an impasse with the City Council concerning Article XIV(4)(b) of the Annexation Agreement which, over the objection of the Petitioners, requires Petitioners to require each major contractor to enter into a project lather agreement with the Colorado Building Trades Council providing for fair and living wages and benefits to be paid to workers involved in the construction and commissioning of the Facility, and WHEREAS, the City Council took pubilo testimony from organized labor and others at its meeting on May 24, 2010, but, •es a result of the impasse, the City Council declined to vote on the annexation ordinances and encouraged the Petitioners to find a compromise position with organized labor, and WHEREAS, the Contractor Consortium is concerned that a PLA will not guarantee that local Pueblo union contractors and union laborers will be able to work on the Site and the Facility and desire the opportunity to competitively bid to work on the Site and the Facility, and WHEREAS, the Contractor Consortium contacted BHEG and proposed an alternative to a PLA that would increase the opportunity for local union contractors and laborers to work on the site and the Facility, and WHEREAS, BHEG and the Contractor Consortium desire to document this alternative proposal and to work together to present and support this alternative proposal to the Pueblo City Council. NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the parties agree as follows: 1. The Contractor Consortium members represent and warrant to BHEG that they each have labor agreements with their unions that include (i) no strike, no walkout clauses, (ii) no subsistence and travel provisions, (iii) right to call provisions that allow them to select the workers assigned to a project, (iv) and other terms and conditions which the Contractor Consortium believe will allow them to provide competitive bids utilizing local union labor. 2. The Contractor Consortium members acknowledge and agree they have not built any gas turbine power plants and do not have the experience or capability to serve as the general contractor for the construction of the Facility on the Site. They further agree that BHEG has the right to perform the general contractor services itself or to hire a third -party general contractor selected by a competitive solicitation process. 3. BHEG agrees that if the City Council approves the annexation (i) conditioned on all work on the Site and Facility being performed by qualified union contractors, and (ii) on terms and conditions otherwise acceptable to Petitioners, all work on the Site and the Facility shall be performed by qualified union contractors subject to availability of union contractors within the State of Colorado. BHEG shall require its general contractor, if any, to utilize only qualified union contractors for all work on the Site and the Facility. 4. The Contractor Consortium acknowledges and agrees that a competitive solicitation process will be used to select the qualified union contractors who work on the Site and the Facility. There will be separate competitive solicitations for separate components of the work (i.e., civil, mechanical, engineering, etc.). Each member of the Contractor Consortium acknowledges and agrees that it must participate in such competitive solicitation process if it wants to work on the Site or Facility and is not guaranteed to be a winning bidder. Each member of the Contractor Consortium further acknowledges and agrees that in order to be able to bid, it must be able to comply with all bidder qualification requirements including, but not limited to, • 2 bonding requirements. KO t rccs to rrcqualify the member of the Conpaclor Consortium by conduoting such due diligence as necessary to determine whether cad to whatextent each membergtialiflca;lo bid and will advise..eaok. nber BIIEG'sdetcrrninatiott_asto that member as promptly as rcasnnabty posst e. S. • The Contractor:Cou$ortium will supportthis Memorondum.of Understandiag ea. cernprptruse alternative position 10 a' A. and . will use:rts best sffarts to a8 the Pctitioncrs **got apFovrd.oif the .tuutexatlon,on th terms and conditions set f'otth;in this Meniorandum of Understandinga ld without a PLA rcgwxerncait. Hach member'of the.Corttractor Consortium w41 nlso use its bet : eforts 10 support'thls Memoranduul of undcirettutdulg rn iieu of a MA :to the Coolorado Building Trades Couttcll and •wty ather.organized tabor orother groups or snstihitronc opposing any alternative other than PLA, Finally, each member oftlle Coutractar Consurtrtrm will support Black. 111s/Colorado Electric in..conndaiioin Wilt the : pending vote on its. Ftinehiinwith the: City of Pueblo, fs. TWs Mwpbraiidgrtr oyUndt:.txtand'utg is sttbJccc:ta i'ctitioners obtaining approval of tbe annexation from the City Councd on terms and eoadrttons accept0l0.10 Petitioners.. In. ihc: event .Petitioners:do not obtain such" ppt'ova1, this MannratiditM of Understanding sha]l null and void. f.�- go►�a{ -- 0/..Z .0.Ontraotee;-ifntr ' Vision'Mc'ch "e r./. . % • • Date: /tnip . HW Houston Construction Co. • sy: xIU Title: ;VT Date: 6.•' • / //Q _.._. Industrial Constructors/Managers, inc. • y: Title: irr . _. Date: / r _ -- 3 Swenifsgor Cimsittmotion, Ino. /1 a et . 1100; NO; 4 mesm compoy By: Thiel Zialle e t Dale: • Le- 't • Pueblo Clot:trios- By: Mug / 42/ Black Hills BIecttic Ocnoration, , 114444 e . V 1 0 " g fUte: • 4 GUARANTY AGREEMENT This Guaranty Agreement (this "Guaranty ") is made by BLACK HILLS ELECTRIC GENERATION, LLC, a South Dakota limited liability company ( "Guarantor "), in favor of the City of Pueblo, a Colorado municipal corporation ( "Counterparty "). RECITALS A. Black Hills Colorado IPP, LLC, a South Dakota limited liability company ( "Debtor ") and Counterparty are or may become parties to a Pre - Annexation Agreement dated December 28, 2009 and an Annexation Agreement dated May 10, 2010 (collectively, the "Agreement "). B. Debtor is wholly -owned by Guarantor and will receive substantial and direct benefits from the transactions contemplated by the Agreement(s) and has agreed to enter into this Guaranty to provide assurance for the payment obligations of Debtor in connection with the Agreement(s) and to induce Counterparty to enter into the Agreement(s). NOW, THEREFORE, in consideration of good and valuable consideration, the adequacy, receipt and sufficiency of which are hereby acknowledged, Guarantor hereby agrees as follows: 1. Guaranty. Guarantor hereby unconditionally, irrevocably and absolutely guarantees the punctual payment when due (subject to written demand in accordance with Paragraph 6 below) of Debtor's payment obligations arising under any Agreement, as such Agreement may be amended or modified by agreement between Debtor and Counterparty from time to time (collectively, the "Guaranteed Obligations "); provided, however, that the total liability of Guarantor hereunder, regardless of any amendment or modification to any Agreement, is limited to the lesser of (a) the Guaranteed Obligations under all Agreements or (b) $10,000,000, plus all interest, reasonable attorneys' fees, and /or costs of collection, if any, required by such Agreement to be paid by Debtor in the collection of Guaranteed Obligations. In addition, subject to the limitations above, Guarantor shall reimburse Counterparty for all sums paid to Counterparty by Debtor with respect to such Guaranteed Obligations that Counterparty is subsequently required to return to Debtor or a representative of Debtor's creditors as a result of Debtor's bankruptcy, insolvency, reorganization, liquidation, receivership, or similar proceeding. Guarantor's obligations and liability under this Guaranty shall be limited to payment obligations only and Guarantor shall have no obligation to perform under any Agreement, including, without limitation, to sell, deliver, supply or transport gas, electricity or any other commodity. If all or a part of any payment made by Guarantor to Counterparty hereunder is later determined to have been improper because such amount was not actually owed by Debtor to Counterparty under the Agreement, or such payment was otherwise unjustified, Counterparty shall repay such amount to Guarantor within ten (10) business days after written demand by Guarantor together with any interest, if any, required by the Agreement to be paid by Counterparty in the collection of such amount. 2. Guaranty Absolute. The liability of Guarantor under this Guaranty shall be absolute, irrevocable and unconditional, irrespective of: (a) any defect or deficiency in any Agreement or any other documents executed in connection with any Agreement; (b) any modification, extension or waiver of any of the terms of any Agreement; (c) any change in the time, manner, terms or place of payment of or in any other term of, all or any of the Guaranteed Obligations, or any other amendment or waiver of or any consent to departure from any Agreement or any other agreement or instrument executed in connection therewith; (d) any sale, exchange, release or non - perfection of any property standing as security for the liabilities hereby guaranteed or any liabilities incurred directly or indirectly hereunder or any setoff against any of said liabilities, or any release or amendment or waiver of or consent to departure from any other guaranty, for all or any of the Guaranteed Obligations; (e) except as to applicable statutes of limitation, failure, omission, delay, waiver or refusal by Counterparty to exercise, in whole or in part, any right or remedy held by Counterparty with respect to any Agreement or any transaction under any Agreement; or (f) any change in the existence, structure or ownership of Guarantor or Debtor, or any bankruptcy, insolvency, reorganization, liquidation, receivership or similar proceeding affecting Debtor or its assets. The obligations of Guarantor hereunder are several and not joint with Debtor or any other person, and are primary obligations for which Guarantor is the principal obligor. There are no conditions precedent to the enforcement of this Guaranty, except as expressly contained herein. It shall not be necessary for Counterparty, in order to enforce payment by Guarantor under this Guaranty, to exhaust its remedies against Debtor, any collateral pledged by Debtor, any other guarantor, or any other person liable for the payment or performance of the Guaranteed Obligations. This Guaranty is one of payment and not of collection and shall apply regardless of whether recovery of all such Guaranteed Obligations may be discharged, or uncollectible in any bankruptcy, insolvency, reorganization, liquidation, receivership or similar proceeding affecting Debtor or its assets. Without limiting Guarantor's own defenses and rights hereunder, Guarantor reserves to itself all rights, setoffs, counterclaims and other defenses to which Debtor is or may be entitled to arising from or out of the Agreements or otherwise, except as limited herein and except for defenses arising out of the bankruptcy, insolvency, reorganization, liquidation, receivership or similar proceeding affecting Debtor or its assets. 2 • 3. Waiver. Guarantor hereby waives: (a) notice of acceptance of this Guaranty, notice of the creation or existence of any of the Guaranteed Obligations and notice of any action by Counterparty in reliance hereon or in connection herewith; (b) notice of the entry into any Agreement between Debtor and Counterparty and notice of any amendments, supplements or modifications thereto; or any waiver of consent under any Agreement, including waivers of the payment and performance of the obligations thereunder; (c) notice of any increase, reduction or rearrangement of Debtor's obligations under any Agreement or notice of any extension of time for the payment of any sums due and payable to Counterparty under any Agreement; (d) except as expressly set forth herein, presentment, demand for payment, notice of dishonor or nonpayment, protest and notice of protest or any other notice of any other kind with respect to the Guaranteed Obligations; and (e) any requirement that suit be brought against, or any other action by Counterparty be taken against, or any notice of default or other notice be given to, or any demand be made on, Debtor or any other person, or that any other action be taken or not taken as a condition to Guarantor's liability for the Guaranteed Obligations under this Guaranty or as a condition to the enforcement of this Guaranty against Guarantor. 4. Subrogation. Guarantor shall be subrogated to all rights of Counterparty against Debtor in respect of any amounts paid by Guarantor pursuant to the Guaranty, provided that Guarantor waives any rights it may acquire by way of subrogation under this Guaranty, by any payment made hereunder or otherwise (including, without limitation, any statutory rights of subrogation under Section 509 of the Bankruptcy Code, 11 U.S.C. § 509, or otherwise), reimbursement, exoneration, contribution, indemnification or any right to participate in any claim or remedy of Counterparty against Debtor or any collateral that Counterparty now has or acquires, until all of the Guaranteed Obligations shall have been irrevocably paid to Counterparty in full. If (a) Guarantor shall perform and shall make payment to Counterparty of all or any part of the Guaranteed Obligations and (b) all the Guaranteed Obligations shall have been paid in full, Counterparty shall, at Guarantor's request, execute and deliver to Guarantor appropriate documents necessary to evidence the transfer by subrogation to Guarantor of any interest in the Guaranteed Obligations resulting from such payment by Guarantor. 5. Notices. All demands, notices and other communications provided for hereunder shall, unless otherwise specifically provided herein, (a) be in writing addressed to the party receiving the notice at the address set forth below or at such other address as may be designated by written notice, from time to time, to the other party, and (b) be effective upon delivery, when mailed by U.S. mail, registered or certified, return receipt requested, postage prepaid, or personally delivered. Notices shall be sent to the following addresses: 3 If to Counterparty: City of Pueblo Attn: City Manager 1 City Hall Place Pueblo, Colorado 81003 With a copy, that shall not constitute notice, to: City Attorney 503 N. Main Street Suite 203 Pueblo, Colorado 81003 If to Guarantor: Black Hills Electric Generation Attn: Mark L. Lux Vice President -Power Generation 1515 Wynkoop Suite 500 Denver, Colorado 80202 With a copy, that shall not constitute notice, to: Black Hills Corporation Attn: General Counsel 625 Ninth Street Rapid City, South Dakota 57701 6. Demand and Payment. Counterparty is not entitled to make demand upon Guarantor until a default occurs in payment of any Guaranteed Obligations by Debtor to Counterparty. Any demand by Counterparty for payment hereunder shall be in writing, reference this Guaranty, reference the Guaranteed Obligations, and signed by a duly authorized representative of Counterparty and delivered to Guarantor pursuant to Section 5 hereof. There are no other requirements of notice, presentment or demand. Guarantor shall pay, or cause to be paid, such Guaranteed Obligations within ten (10) business days of receipt of such demand. 7. No Waiver; Remedies. Except as to applicable statutes of limitation, no failure on the part of Counterparty to exercise, and no delay in exercising, any right hereunder shall operate as a waiver thereof, nor shall any single or partial exercise of any right hereunder preclude any other or further exercise thereof or the exercise of any other right. The remedies herein provided are cumulative and not exclusive of any remedies provided by law. 4 t 8. Term; Termination. This Guaranty shall continue in full force and effect from the Effective Date until (i) a refund is required to be made by the counterparty pursuant to paragraph 5 of the Pre - Annexation Agreement, (ii) a refund of the Payment in lieu is required to be made by the Counterparty pursuant to Section XIV(1)(h) of the Annexation Agreement, or (iii) the on -site and off -site public improvements described in the Annexation Agreement (except for the construction of the extension of 27 Lane within the Property as defined in the Annexation Agreement) have been accepted by the Counterparty, whichever occurs first (the "Termination Date "); provided, however, that the termination of this Guaranty shall not affect Guarantor's obligations hereunder with respect to any transaction entered into prior to such Termination Date, and this Guaranty shall remain in full force and effect until all Guaranteed Obligations arising with respect to such transactions have been fully satisfied. 9. Assignment; Successors and Assigns. Guarantor and Counterparty shall not assign their rights hereunder without the prior written consent of the other party, and any assignment without such prior written consent shall be null and void and of no force or effect. This Guaranty shall be binding upon and inure to the benefit of the each party hereto and their respective successors and permitted assigns. 10. Amendments; Miscellaneous. Subject to Guarantor's right to terminate this Guaranty pursuant to Paragraph 8, no amendment of this Guaranty shall be effective unless in writing and signed by Guarantor and Counterparty. No waiver of any provision of this Guaranty or consent to any departure by Guarantor therefrom shall in any event be effective unless such waiver shall be in writing and signed by Counterparty. Any such waiver shall be effective only in the specific instance and for the specific purpose for which it was given. 11. Caption. The captions in this Guaranty have been inserted for convenience only and shall be given no substantive meaning or significance whatsoever in construing the terms and provisions of this Guaranty. 12. Representation and Warranties. Guarantor represents and warrants as follows: (a) Guarantor is duly organized, validly existing and in good standing under the laws of the jurisdiction of its incorporation and has full corporate power to execute, deliver and perform this Guaranty. (b) The execution, delivery and performance of this Guaranty have been and remain duly authorized by all necessary corporate action and do not contravene Guarantor's constitutional documents or any contractual restriction binding on Guarantor or its assets. (c) This Guaranty constitutes the legal, valid and binding obligation of Guarantor enforceable against Guarantor in accordance with its terms, subject, as to enforcement, to bankruptcy, insolvency, reorganization and other laws of general 5 • applicability relating to or affecting creditor's rights and to general equity principles. 13. Foreign Currency Obligations. Subject to the limitation of Guarantor's total liability set forth in Paragraph 1 hereof, the Guarantor shall make payment in the currency in which the Company is required to pay its payment obligations (the "Original Currency "). For the purposes of calculating Guarantor's total liability hereunder and applying the limitation on Guarantor's total liability, the value of the payment obligation in the Original Currency shall be converted to U.S. Dollars by the Guarantor at the rate equal to the applicable spot exchange rate of a large commercial bank located in Canada or the United States on the date that payment is made by the Guarantor. 14. Governing Law. This Guaranty shall be governed by, and construed in accordance with, the laws of the State of Colorado without regard or reference to the conflict of laws principles of any jurisdiction. However, if any provision of this Guaranty shall be prohibited by or invalid under such law, such provision shall be ineffective to the extent of such prohibition or invalidity without invalidating the remainder of such provision or the remaining provisions of this Guaranty. 15. Entire Agreement. This Guaranty constitutes the entire agreement and understanding between Guarantor and Counterparty with respect to the Guaranteed Obligations and supersedes and replaces in its entirety any and all guaranties previously issued by Guarantor to Counterparty with respect to the Guaranteed Obligations, or any part of them. IN WITNESS WHEREOF, Guarantor has caused this Guaranty to be duly executed and delivered by its duly authorized representative effective as of this 10 day of May, 2010 ( "Effective Date "). BLACK HILLS ELECTRIC GENERATION, LLC By: ZXV Naive: Garner M. A derson Title: VP, Treasurer and Chief Risk Officer 6