EXECUTION COPY

NEW COMMON FACILITIES OWNERSHIP AGREEMENT

among

ELM ROAD GENERATING STATION SUPERCRITICAL, LLC

and

MGE POWER ELM ROAD, LLC

and

WISCONSIN PUBLIC POWER INC.

Dated as of December 17, 2004

TABLE OF CONTENTS

PAGE

ARTICLE I:  DEFINITIONS; RULES OF INTERPRETATION

2

1.1

Definitions

2

1.2

Rules of Interpretation and Construction

13

ARTICLE II:  OWNERSHIP OF THE NEW COMMON FACILITIES

15

2.1

New Common Facilities Owners

15

2.2

Component Ownership Interests

15

2.3

Tenancies-in-Common

16

ARTICLE III: RIGHTS AND OBLIGATIONS OF THE PARTIES

16

3.1

Effectiveness of Rights and Obligations of the Parties

16

3.2

Rights and Obligations with Respect to Government Approvals

16

ARTICLE IV: CONDITIONS TO TRANSFERS OF COMPONENT

            OWNERSHIP INTERESTS

17

4.1.

Transfers of Component Ownership Interests

17

4.2

Closing Costs

19

4.3

Effectiveness of Rights and Obligations

20

4.4

Release

20

ARTICLE V:  APPOINTMENT OF NEW COMMON FACILITIES AGENT

20

ARTICLE VI:  PAYMENTS BY THE NEW COMMON FACILITIES OWNERS

20

ARTICLE VII:  TAXES

21

7.1

Tenants in Common

21

7.2

Liability and Compliance

21

7.3

Receipts, Records and Documentation

21

7.4

Tax Matters

22

ARTICLE VIII:  OTHER RIGHTS AND OBLIGATIONS OF THE

NEW COMMON FACILITIES OWNERS

23

8.1

Operation and Maintenance of the New Common Facilities

23

8.2

Capital Improvements to the New Common Facilities;
Payment of Capital Costs of Improvements

23

ARTICLE IX:  INSURANCE; EVENTS OF LOSS AND TOTAL LOSS

24

9.1

Insurance Coverage

24

9.2

Event of Loss and Event of Total Loss

24

9.3

Responsibility for Costs and Expenses

25

9.4

Allocation of Loss Proceeds and Condemnation Awards

26

ARTICLE X:  RETIREMENT OF COMPONENTS

26

10.1

Date of Retirement

26

10.2

Retirement Costs

27

10.3

Termination of Agreement

27

ARTICLE XI: NEW COMMON FACILITIES OWNER’S VOTING RIGHTS

27

11.1

Decision-Making

27

11.2

Voting Requirements

28

ARTICLE XII:  DEFAULTS; REMEDIES

28

12.1

Exclusive Remedies

28

12.2

Remedies for Material Breach

28

12.3

Limitation on Remedies for Breach of Representation and Warranties

28

12.4

Damage to the New Common Facilities

28

12.5

Waiver of Partition Rights

28

12.6

Disputes

29

ARTICLE XIII:  TRANSFER RESTRICTIONS

29

13.1

Prohibition on Transfers and Liens

29

13.2

Transfers to WEPCO

29

13.3

Transfers of Component Ownership Interests Upon Retirement of a New Unit

30

13.4

Collateral Assignments

30

ARTICLE XIV:  REPRESENTATIONS AND WARRANTIES

31

14.1

Due Organization

31

14.2

Due Authorization

31

14.3

Non-Contravention

31

14.4

Enforceability

31

14.5

Litigation

31

14.6

Government Approvals

32

14.7

No Breach

32

14.8

Disclaimer of Other Representations and Warranties

32

ARTICLE XV:  CONFIDENTIALITY

32

15.1

Non-Disclosure Obligations

32

15.2

Law

33

ARTICLE XVI:  INDEMNITY; LIMITATION ON LIABILITY

34

16.1

Indemnities

34

16.2

Cooperation Regarding Claims

34

16.3

Limitation on Liability

34

16.4

Disputes

35

ARTICLE XVII:  DISPUTE RESOLUTION

35

17.1

Exclusive Procedure

35

17.2

Dispute Notices

35

17.3

Informal Resolution of Disputes

36

17.4

Continued Performance

36

17.5

Consolidation of Proceedings

36

ARTICLE XVIII:  MISCELLANEOUS

37

18.1

Applicable Law

37

18.2

Jury Trial

37

18.3

Notices

37

18.4

Counterparts

37

18.5

Severability

37

18.6

Parties Bound

37

18.7

Third-Party Beneficiaries

38

18.8

Entire Agreement

38

18.9

Headings and Table of Contents

38

18.10

Schedules and Exhibits

38

18.11

Amendments and Waivers

38

18.12

No Joint Venture

38

18.13

Survival

38

18.14

Waiver of Immunity

38

18.15

Further Assurances

39

EXHIBITS:

Exhibit A

Description of Unit 1, Unit 2 and New Common Facilities

Exhibit B

Form of Bill of Sale

Exhibit C

Form of Assignment and Assumption Agreement

Exhibit D

Elm Road Ownership Computations

Exhibit E

Form of Consent and Agreement

SCHEDULES:

Schedule 7.4A

Tax Matters (Tax Exempt New Common Facilities Owner)

Schedule 7.4B

Tax Matters (New Common Facilities Owner)

Schedule 18.3

Notice Information

NEW COMMON FACILITIES OWNERSHIP AGREEMENT

This NEW COMMON FACILITIES OWNERSHIP AGREEMENT (this “Agreement”), dated as of
December 17, 2004, is entered into among ELM ROAD GENERATING STATION
SUPERCRITICAL, LLC, a Wisconsin limited liability company (“ERGS SC”), MGE POWER
ELM ROAD, LLC, a Wisconsin limited liability company (“MGE Power”), and
WISCONSIN PUBLIC POWER INC., a Wisconsin municipal electric company (“WPPI”).

RECITALS:

WHEREAS, as part of its Power The Future initiative, Wisconsin Energy
Corporation, a Wisconsin corporation (“WEC”), and its wholly owned subsidiary
W.E. Power LLC, a Wisconsin limited liability company (“WE Power”), have filed
an application with the Public Service Commission of Wisconsin (the “PSCW”) for
a certificate of public convenience and necessity (a “CPCN”) to construct and
own (i) an approximately 615 MW (net) supercritical pulverized coal electric
generating facility and related facilities (as further described in Exhibit A,
“Unit 1”), (ii) an approximately 615 MW (net) supercritical pulverized coal
electric generating facility and related facilities (as further described in
Exhibit A, “Unit 2”) and (iii) certain facilities utilized in common in the
operation and maintenance of the New Units and, where applicable, one or more of
the Existing Units (as further described in Exhibit A, the “New Common
Facilities”) to be located on property owned by Wisconsin Electric Power
Company, a Wisconsin corporation (“WEPCO”) and affiliate of WE Power;

WHEREAS, WE Power and ERGS SC, WE Power’s wholly-owned subsidiary, have been
actively engaged in the preliminary development, design and engineering of the
New Units and the New Common Facilities sufficient to support WEC’s and WE
Power’s CPCN application and other permitting approval processes related
thereto;

WHEREAS, if WEC and WE Power receive a satisfactory CPCN and certain other
material Government Approvals, then ERGS SC may, in ERGS SC’s sole discretion,
elect to proceed with the development, design, engineering, permitting,
construction and commissioning of one or both of the New Units and the New
Common Facilities in accordance with the Unit Ownership Agreements;

WHEREAS, if ERGS SC elects to proceed with one or both of the New Units and the
New Common Facilities pursuant to the applicable provisions of the Unit
Ownership Agreements, then each of MGE Power and WPPI may, in its sole
discretion, elect to purchase an undivided ownership interest in one or both of
the Unit 1 Facility and Unit 2; and

WHEREAS, ERGS SC, MGE Power and WPPI have set forth in this Agreement the terms
and conditions by which they shall jointly own the New Common Facilities should
MGE Power and/or WPPI become Unit Owners pursuant to one or both of the Unit
Ownership Agreements.

NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency
of which are hereby acknowledged, ERGS SC, MGE Power and WPPI agree as follows:

ARTICLE I: DEFINITIONS; RULES OF INTERPRETATION

 

1.1

Definitions.  Unless the context otherwise requires, the following capitalized
terms have the meanings given to them below:

“Active Owner” means ERGS or any other Person (other than MGE Power or WPPI)
that has an ownership interest in one or more non-retired Units at the Elm Road
Site that utilize one or more of the Components.

“Affiliate” means, with respect to any Person, (a) each entity that such Person
Controls, (b) each Person that Controls such Person, and (c) each entity that is
under common Control with such Person.

“Agreement” has the meaning given to such term in the Preamble to this
Agreement.

“Business Day” means any day on which commercial banks are not authorized or
required to close in Milwaukee, Wisconsin.

“Call Option Period” means, in respect of a given Retired Owner, the period of
time commencing on the date on which the last New Unit in which such Retired
Owner has a Unit Ownership Interest is retired pursuant to the applicable Unit
Ownership Agreement and ending on the earlier of: (a) the date on which such
Retired Owner elects to Transfer its Composite Component Ownership Interest
pursuant to Section 13.3(a) of this Agreement, or (b) the date on which all of
the Components in which such Retired Owner has a Component Ownership Interest
are retired pursuant to Article X of this Agreement.

“Capital Improvements” has the meaning given to such term in Section 8.2(a) of
this Agreement.

“Claims” means liabilities, obligations, damages, losses, demands, penalties,
interest, fines, claims, actions, suits, judgments, settlements, and reasonable
costs, fees, expenses and disbursements (including reasonable legal fees) and
expenses and costs of investigation whether any of the foregoing be founded or
unfounded, of any kind and nature whatsoever.

“Code” means the Internal Revenue Code of 1986.

“Commercial Operation Date” means the date on which Unit 1 or Unit 2 shall have
achieved Commercial Operation (as such term is defined in the respective ERGS SC
Facility Lease).

“Common Facilities O&M Agreement” means that certain Elm Road Generating Station
Common Facilities Operating and Maintenance Agreement, dated as of the date
hereof, among WEPCO, MGE and WPPI.

“Components” has the meaning given to such term in Exhibit A to this Agreement.

“Component Ownership Interest” means a Unit 1 Component Ownership Interest or a
Unit 2 Component Ownership Interest.

“Composite Component Ownership Interest” means, for any given New Common
Facilities Owner, such New Common Facilities Owner’s collective Total Component
Ownership Interest in each of the Components.

“Condemnation Award” means any monetary award that a New Common Facilities Owner
or Lessee/Owner Party receives, as a result of a taking of all or a portion of
the New Common Facilities (or any Component) by an exercise of eminent domain or
a similar right or power by a Governmental Authority, or as a result of a
Governmental Authority order that the New Common Facilities (or any Component)
cease to operate.

“Confidential Information” means, with respect to a Party, all proprietary and
confidential business information and data of such Party (including Trade
Secrets) that are not generally known by or readily ascertainable by or
available to, on a legal or authorized basis, the general public; and which (i)
has been expressly and clearly designated as confidential by the Party providing
the information, (ii) are within a category of information that the Parties have
designated as confidential, or (iii) the receiving Party would normally consider
and treat as confidential if the information were its own.  In addition,
“Confidential Information” shall include any information or data which was
treated as “Confidential Information” pursuant to one or both of the Mutual
Confidentiality Agreements.  For the avoidance of doubt, “Confidential
Information” shall not include any such information:  (a) which is already known
to the receiving Party; or (b) which (i) has become generally known to the
public through no wrongful act of the receiving Party or its Representatives,
(ii) has been received by the receiving Party from a third party without (to the
receiving Party’s knowledge) restriction on disclosure and without (to the
receiving Party’s knowledge) a breach by the third party of an obligation of
confidentiality, (iii) is independently developed by the receiving Party without
use of the Confidential Information received from a disclosing Party, or (iv)
when received by the receiving Party constituted Confidential Information but,
due to the passage of time, the factual predicate justifying treatment as
Confidential Information no longer applies.

“Construction Account” means a bank account over which no New Common Facilities
Owner or any of its Affiliates has control.

“Control” means the possession, directly or indirectly, through one or more
intermediaries, of the following:

(a) (i)

in the case of a corporation, 50% or more of the outstanding voting securities
thereof; (ii) in the case of a limited liability company, partnership, limited
partnership or venture, the right to 50% or more of the distributions therefrom
(including liquidating distributions); (iii) in the case of a trust or estate,
including a business trust, 50% or more of the beneficial interest therein; and
(iv) in the case of any other entity, 50% or more of the economic or beneficial
interest therein; and

(b)

in the case of any entity, the power or authority, through ownership of voting
securities, by contract or otherwise, to exercise a controlling influence over
the management of the entity.

“CPCN” has the meaning given to such term in the Recitals of this Agreement.

“Dispute” has the meaning given to such term in Section 17.1 of this Agreement.

“Dispute Notice” has the meaning given to such term in Section 17.2 of this
Agreement.

“Disputing Party” has the meaning given to such term in Section 17.2 of this
Agreement.

“Elm Road Documents” means, collectively, this Agreement, the Unit Ownership
Agreements, the Unit 1 O&M Agreement, the Unit 2 O&M Agreement, the Common
Facilities O&M Agreement, the Unit 1 Construction Agreements and the Unit 2
Construction Agreements.

“Elm Road I Project Documents” means, collectively, this Agreement, the Unit 1
Ownership Agreement, the Unit 1 Construction Agreements, the Unit 1 O&M
Agreement, the Common Facilities O&M Agreement, the ERGS SC Unit 1 Facility
Lease, the ERGS SC Unit 1 Ground Lease, the ERGS SC Unit 1 Ground Sublease, the
Unit 1 Property Rights Agreement and the MGE Power Unit 1 Facility Lease.

“Elm Road II Project Documents” means, collectively, this Agreement, the Unit 2
Ownership Agreement, the Unit 2 Construction Agreements, the Unit 2 O&M
Agreement, the Common Facilities O&M Agreement, the ERGS SC Unit 2 Facility
Lease, the ERGS SC Unit 2 Ground Lease, the ERGS SC Unit 2 Ground Sublease, the
Unit 2 Property Rights Agreement and the MGE Power Unit 2 Facility Lease.

“Elm Road Site” means the land upon which Unit 1, Unit 2 and the New Common
Facilities will be constructed, as described in greater detail in the ERGS SC
Unit 1 Ground Lease and the ERGS SC Unit 2 Ground Lease.  

“ERGS SC” has the meaning given to such term in the Preamble to this Agreement.

“ERGS SC Facility Leases” means, collectively, the ERGS SC Unit 1 Facility Lease
and the ERGS SC Unit 2 Facility Lease.

“ERGS SC Unit 1 Facility Lease” means that certain Elm Road I Facility Lease
Agreement, dated as of November 9, 2004, between WEPCO and ERGS SC.

“ERGS SC Unit 1 Ground Lease” means that certain Elm Road I Ground Lease and
Easement Agreement, dated as of November 9, 2004, between WEPCO and ERGS SC.

“ERGS SC Unit 1 Ground Sublease” means that certain Elm Road I Ground Sublease
Agreement, dated as of November 9, 2004, between WEPCO and ERGS SC.

“ERGS SC Unit 1 Lease Effective Date” has the meaning given to “Lease Effective
Date” in the ERGS SC Unit 1 Facility Lease; provided, however, that if the ERGS
SC Unit 1 Facility Lease has terminated or expired prior to such “Lease
Effective Date”, then “ERGS SC Unit 1 Lease Effective Date” shall mean the
Commercial Operation Date of Unit 1.

“ERGS SC Unit 2 Facility Lease” means that certain Elm Road II Facility Lease
Agreement, dated as of November 9, 2004, between WEPCO and ERGS SC.

“ERGS SC Unit 2 Ground Lease” means that certain Elm Road II Ground Lease and
Easement Agreement, dated as of November 9, 2004, between WEPCO and ERGS SC.

“ERGS SC Unit 2 Ground Sublease” means that certain Elm Road II Ground Sublease
Agreement, dated as of November 9, 2004, between WEPCO and ERGS SC.

“ERGS SC Unit 2 Lease Effective Date” has the meaning given to “Lease Effective
Date” in the ERGS SC Unit 2 Facility Lease; provided, however, that if the ERGS
SC Unit 2 Facility Lease has terminated or expired prior to such “Lease
Effective Date”, then “ERGS SC Unit 2 Lease Effective Date” shall mean the
Commercial Operation Date of Unit 2.

“Event of Loss” means any loss of, destruction or damage to, or taking of any
part of the New Common Facilities (or any Component).

“Event of Total Loss” means, with respect to the New Common Facilities (or any
Component): (a) all or substantially all of the New Common Facilities (or any
Component), shall be damaged to the extent of being completely or substantially
completely destroyed; (b) any damage to the New Common Facilities (or any
Component) that results in an insurance settlement with respect thereto on the
basis of a total loss or an agreed constructive or a compromised total loss of
the New Common Facilities (or any Component); or (c) all or substantially all of
or a material portion of the New Common Facilities (or any Component) has been
taken by exercise of eminent domain or a similar right or power by a
Governmental Authority, or a Governmental Authority shall order the New Common
Facilities (or any Component) to cease to operate permanently.

“Existing Common Facilities” means any and all facilities, components, equipment
and materials which are (a) utilized in support of the operation and maintenance
of the Existing Units and one or both New Units, (b) owned by WEPCO and located
on the Land (as such term is defined in the ERGS SC Unit 1 Ground Lease and the
ERGS SC Unit 2 Ground Lease) and (c) in-place and operational prior to the
initiation of construction of the Unit 1 Facility, as such facilities,
components, equipment and materials may be repaired from time to time.

 

“Existing Units” means WEPCO’s existing four coal-based electric generating
units and one oil-based electric generating unit and related facilities at its
Oak Creek generating facility, including any improvements thereto, other than
the Existing Common Facilities, and any replacement or additional units
installed on the site now occupied by the Existing Units, other than the New
Units.

“Financing Documents” means each agreement, document or instrument pursuant to
which a New Common Facilities Owner or one of its Affiliates is provided
construction and/or term debt financing and/or working capital and/or other
financing or refinancing in connection with the Project by one or more Lenders,
and each other agreement, document or instrument delivered in connection with
any of the foregoing.

“Government Approval” means any authorization, consent, approval, license,
lease, ruling, permit, tariff, rate, certification, exemption, variance, order,
judgment, decree, publication, declaration or registration issued by any
Governmental Authority.

“Governmental Authority” means any applicable federal, state, county, municipal
or other government, quasi-government or regulatory authority, agency, board,
body, commission, instrumentality, court or tribunal, or any political
subdivision of any thereof.

“Gross Negligence” shall be determined by reference to the Wisconsin common law
concept of gross negligence, provided that no Party shall use the absence of a
gross negligence concept under Wisconsin law as a defense to a claim alleging
Gross Negligence or as a basis to substitute a standard other than Gross
Negligence where provided for in this Agreement.

“Indemnified Party” has the meaning given to such term in Section 16.2 of this
Agreement.

“Indemnifying Party” has the meaning given to such term in Section 16.2 of this
Agreement.

“Law” means any statute, law, regulation, ordinance, rule, judgment, order,
decree, permit, concession, grant, franchise, license, agreement, directive,
guideline, policy, requirement, or other governmental restriction or any similar
form of decision of or determination by, or any interpretation or administration
of any of the foregoing by, any Governmental Authority or judicial or
administrative body, whether now or hereafter in effect.

“Lenders” means the banks, bond and commercial paper holders and/or financial
institutions (together with their administrative agents, collateral agents,
depositary banks and other agents) and/or other Persons which provide
construction and/or term debt financing and/or working capital and/or other
financing or refinancing to a New Common Facilities Owner or one of its
Affiliates in connection with the Project pursuant to one or more Financing
Documents.

“Lessee” means (a) in respect of ERGS SC, WEPCO as lessee under the ERGS SC Unit
1 Facility Lease and/or the ERGS SC Unit 2 Facility Lease, and (b) in respect of
MGE Power, MGE as lessee under the MGE Power Unit 1 Facility Lease and/or the
MGE Power Unit 2 Facility Lease.

“Lessee/Owner Parties” has the meaning given to such term in the Common
Facilities O&M Agreement.

“Lien” means, with respect to any property, any mortgage, lien, pledge, charge,
lease, easement, servitude, right of others, security interest or encumbrance of
any kind in respect of such property.  

“Loss Proceeds” means all proceeds (including insurance proceeds) payable by a
third-party (including an insurer or re-insurer) to any New Common Facilities
Owner or Lessee/Owner Party in respect of an Event of Loss or an Event of Total
Loss pursuant to insurance required to be maintained pursuant to Sections 9.1(a)
or 9.1(b) of this Agreement; provided that “Loss Proceeds” shall not include any
third-party liability insurance proceeds or other insurance proceeds payable
directly to a third party in accordance with the terms of such insurance policy.

“Measurement Basis” has the meaning given to such term in Exhibit D to this
Agreement.

“MGE” means Madison Gas & Electric Company, a Wisconsin corporation and an
Affiliate of MGE Power.

“MGE Power” has the meaning given to such term in the Preamble to this
Agreement.

“MGE Power Unit 1 Facility Lease” means that certain Elm Road I Facility Lease
Agreement in respect of Unit 1, to be entered into by MGE and MGE Power in the
form approved by the PSCW.

“MGE Power Unit 2 Facility Lease” means that certain Elm Road II Facility Lease
Agreement in respect of Unit 2, to be entered into by MGE and MGE Power in the
form approved by the PSCW.

“Mutual Confidentiality Agreements” means the Mutual Confidentiality Agreement,
dated as of July 12, 2002, between WEC and WPPI and the Mutual Confidentiality
Agreement, dated as of January 13, 2003, between WEC and MGE.  

“New Common Facilities” has the meaning given to such term in the Recitals to
this Agreement.

“New Common Facilities Owner” means any Person who owns a Component Ownership
Interest.

“New Common Facilities Service Costs” means 50% of all Service Costs (as such
term is defined in the Unit 1 Ownership Agreement) incurred and allocable to the
New Common Facilities in accordance with Exhibit D of the Unit 1 Ownership
Agreement, plus Carrying Costs (as such term is defined in the Unit 1 Ownership
Agreement and applying the percentage in clause (b)(i) of such definition).

“New Unit” means Unit 1 or Unit 2 and “New Units” means, collectively, Unit 1
and Unit 2.

“NPV of Retirement Costs” means, with respect to any Component at any time, the
net present value of the aggregate amount of costs and expenses which would be
incurred pursuant to Section 10.2 to retire permanently such Component from
service.  The aggregate costs and expenses to be present-valued shall be
determined by calculating the costs to retire the Component at the time the
calculation is being made, and escalating such figure to the expected time of
retirement of such Component.  The costs and expenses and the time of retirement
shall be determined by an independent appraiser mutually acceptable to the
Retiring Owner(s) and Active Owner(s).  For purposes of this definition, (a) the
net present value shall be determined using an annual discount rate equal to the
annual after-tax effective RRLF% from the ERGS SC Unit 1 Facility Lease and (b)
the escalation shall be determined using an annual percentage rate equal to the
average of the latest available GDP-IPD annual numbers provided by the
Department of Commerce, Bureau of Economic Analysis during the immediately
preceding ten years.

“Operating Agent” means the “Operating Agent” under the Unit 1 O&M Agreement,
the Unit 2 O&M Agreement or the Common Facilities O&M Agreement, as the context
may require.

“Organic Documents” means: (a) with respect to any Person that is a corporation,
its certificate of incorporation, its by-laws and all shareholder agreements,
voting trusts and similar arrangements applicable to any of its authorized
shares of capital stock; (b) with respect to any Person that is a limited
partnership, its certificate of limited partnership and partnership agreement;
(c) with respect to any Person that is a limited liability company, its
certificate of formation and its limited liability company agreement, and (d)
with respect to WPPI and/or any WPPI Member, the legislation enabling its
formation, its formation contracts and its by-laws, in each case, as amended,
supplemented, amended and restated, or otherwise modified and in effect from
time to time.

“Participation Agreements” means, collectively, (a) that certain Agreement
Granting Rights and Establishing Terms for Ownership Participation in Wisconsin
Energy Corporation’s Proposed Elm Road Generating Station, dated July 24, 2002,
between WEC and WPPI and (b) that certain Letter Agreement for Termination of
Option Agreement, dated January 31, 2003, between WEC and MGE.

“Party” or “Parties” means ERGS SC, MGE Power and WPPI.

“Permitted Encumbrances” means, in respect of any property:

(a)

Liens for Taxes, assessments or governmental charges not due and delinquent;

(b)

Liens for Taxes, assessments or governmental charges already due, but whose
validity or amount is being contested in good faith, by appropriate proceedings
initiated timely and diligently prosecuted, and for which adequate reserves in
accordance with generally accepted accounting principles are maintained against
any adverse determination of such contest or a bond in the full amount thereof
has been posted;

(c)

carrier’s, warehousemen’s, mechanics’, materialmen’s, repairmen’s or other like
Liens arising in the ordinary course of business or incident to the construction
or improvement of such property in respect of obligations which are not overdue
for a period of more than 30 days or which are being contested in good faith, by
appropriate proceedings initiated timely and diligently prosecuted, and for
which adequate reserves in accordance with generally accepted accounting
principles are maintained against any adverse determination of such contest or a
bond in the full amount thereof has been posted;

(d)

easements, rights of way, reservation, restrictions, covenants, party-wall
agreements, agreements for joint or common use, landlords’ rights of distraint
and other similar encumbrances affecting such property, granted in the ordinary
course of business, which in the aggregate are not material in amount and which
do not in the aggregate materially detract from the value of such property
subject thereto or impair the use of such property for the purposes for which it
is held;

(e)

court proceedings affecting such property, provided the execution or other
enforcement thereof is effectively stayed and the claims secured thereby are
being contested in good faith by appropriate proceedings initiated in a timely
manner and diligently prosecuted, and for which adequate reserves in accordance
with generally accepted accounting principles are maintained against any adverse
determination of such contest or a bond in the full amount thereof has been
posted;

(f)

minor defects and irregularities in title to such property, which do not in the
aggregate materially impair the value of such property or the use of such
property for the purposes for which it is held; and

(g)

Liens arising in connection with Liens pursuant to the Security Documents, if
any.

“Person” means an individual, a corporation, a partnership, a limited liability
company, an association, a joint-stock company, a trust, an unincorporated
organization or any government or political subdivision thereof.

 

“Project” means, collectively, the development, design, engineering, permitting,
construction and commissioning of the New Common Facilities.

“Project Manager” means Elm Road Services LLC, a Wisconsin limited liability
company, in its capacity as “Project Manager” under the Unit Ownership
Agreements.

“Prudent Utility Practice” means any of the practices, methods and acts, which,
in the exercise of reasonable judgment in the light of the facts known at the
time the decision was made (including, but not limited to, the practices,
methods and acts engaged in or approved by a significant portion of the electric
generating power industry prior thereto), reasonably could have been expected to
accomplish the desired result consistent with reliability, safety, good business
practice and expediency.  Prudent Utility Practice is not intended to be limited
to the optimum practice, method or act to the exclusion of all others, but
rather is a spectrum of possible practices, methods or acts which reasonably
could have been expected to accomplish the desired result at a reasonable cost
consistent with reliability, safety, good business practice and expediency.
 Prudent Utility Practice includes due regard for manufacturers’ warranties,
environmental considerations, and the requirements of Governmental Authorities
that have jurisdiction.  In applying the standard of Prudent Utility Practice to
any matter under this Agreement, equitable consideration shall be given to the
circumstances, requirements and obligations of each of the Parties.

“PSCW” has the meaning given to such term in the Recitals to this Agreement.

“Purchase Price” has the meaning given to such term in Section 4.1(b)(ii) of
this Agreement.

“Put Option Period” means, in respect of a Retired Owner, a period of time
commencing on the date on which the last New Unit in which such Retired Owner
has a Unit Ownership Interest is retired pursuant to the applicable Unit
Ownership Agreement and ending on the earlier of: (a) the date on which one or
more Active Owner(s) elect to acquire the Composite Component Ownership Interest
of such Retired Owner pursuant to Section 13.3(b) of this Agreement, or (b) the
date on which all of the Components in which such Retired Owner has a Component
Ownership Interest are retired pursuant to Article X of this Agreement.

“Reconstruction Agent” has the meaning given to such term in Section
9.2(a)(ii)(B) of this Agreement.

“Representatives” means, in respect of a Person, the officers, directors,
employees, agents, advisors or representatives of such Person; provided,
however, that neither the Operating Agent, the Project Manager nor any agent
appointed pursuant to Article V shall be a Representative of any New Common
Facilities Owner for purposes of Section 12.4 and Article XVI of this Agreement.

“Retired Owner” means each of MGE Power and/or WPPI if and when each has no Unit
Ownership Interest in any New Unit that utilizes one or more of the Components,
but continues to have one or more Component Ownership Interests.

“Retirement Price” means, with respect to a given Component at any time, (a) the
net book value of such Component at such time (i.e., the depreciated cost of
such Component based upon the books maintained in accordance with this Agreement
and the Unit 1 Ownership Agreement), less (b) the NPV of Retirement Costs of
such Component pro-rated for the numbers of years such Component has been in
operation relative to the estimated useful life of such Component as determined
by the independent appraiser in connection with its determination of the NPV of
Retirement Costs for such Component.  For purposes of Section 4.1(b)(v) of this
Agreement, the “Retirement Price” of any Component determined above shall be pro
rated for each Retired Owner based on its Total Component Ownership Interest in
such Component.

“Retiring Owner(s)” has the meaning given to such term in Section 13.3(a) of
this Agreement.

“Security Documents” means with respect to a New Common Facilities Owner or one
of its Affiliates, all security agreements, pledges, consents and other security
documents, if any, granting Liens to its Lenders to secure its Secured
Obligations.

“Secured Obligations” means with respect to a New Common Facilities Owner or one
of its Affiliates, the obligations and liabilities of such New Common Facilities
Owner or Affiliate under its Financing Documents, if any.

“Taxes” and “Tax” means any and all fees (including documentation, recording,
license and registration fees), taxes (including income (whether net, gross or
adjusted gross), gross receipts, lease, sublease, sales, rental, use, turnover,
value-added, property, excise and stamp taxes), levies, imposts, duties,
charges, assessments or withholdings of any nature whatsoever, together with any
penalties, fines or interest thereon or additions thereto imposed by any
Governmental Authority.

“Tax Indemnifying Party” has the meaning given to such term in Section 7.2(b) of
this Agreement.

“Tax Indemnitee Party” has the meaning given to such term in Section 7.2(b) of
this Agreement.

“Total Component Ownership Interest” means, for any given New Common Facilities
Owner and any given Component, such New Common Facilities Owner’s combined Unit
1 Component Ownership Interest and Unit 2 Component Ownership Interest in such
Component.  

“Total New Common Facilities Weighted Ownership Percentage” has the meaning
given to such term in Exhibit D to this Agreement.

“Trade Secret” means, with respect to a Party, information of such Party,
including a formula, pattern, compilation, program, device, technique or
process, which (a) derives economic value, actual or potential, from not being
generally known to, and not being readily ascertainable by proper means by,
other Persons who can obtain economic value from its disclosure or use and (b)
is the subject of efforts to maintain its secrecy that are reasonable under the
circumstances.

“Transfer” has the meaning given to such term in Section 13.1(a) of this
Agreement.

“Transfer Date” has the meaning given to such term in Section 4.1(a) of this
Agreement.

“Transferee” has the meaning given to such term in Section 4.1(a) of this
Agreement.

“Transferor” has the meaning given to such term in Section 4.1(a) of this
Agreement.

“Unit Owner” means a Unit 1 Owner or a Unit 2 Owner.

“Unit Ownership Agreements” means the Unit 1 Ownership Agreement and the Unit 2
Ownership Agreement.

“Units” means the Existing Units and the New Units.

“Unit 1” has the meaning given to such term in the Recitals to this Agreement.

“Unit 1 Component Ownership Interest” has the meaning given to such term in
Section 2.2(a) of this Agreement.   

“Unit 1 Construction Agreements” has the meaning given to “Construction
Agreements” in the Unit 1 Ownership Agreement.

“Unit 1 Facility” means Unit 1 and, prior to the ERGS SC Unit 1 Lease Effective
Date, the New Common Facilities.

“Unit 1 Facility Ownership Interest” means, in respect of a Unit 1 Owner, the
Unit 1 Ownership Interest and, prior to the ERGS SC Unit 1 Lease Effective Date,
the Unit 1 Component Ownership Interest(s) of such Unit 1 Owner.

“Unit 1 O&M Agreement” means that certain Elm Road Generating Station Unit 1
Operating and Maintenance Agreement, dated as of the date hereof, among WEPCO,
MGE and WPPI.

“Unit 1 Owners” means ERGS SC and each other Person that becomes a Unit 1 Owner
in accordance with the terms and conditions of the Unit 1 Ownership Agreement.

“Unit 1 Ownership Agreement” means that certain Elm Road I Ownership Agreement,
dated as of the date hereof, among ERGS SC, MGE Power, WPPI, the Project Manager
and, solely for purposes of Section 18.16 therein, WE Power.

“Unit 1 Ownership Interest” has the meaning given to such term in the Unit 1
Ownership Agreement.

“Unit 1 Property Rights Agreement” means that certain Elm Road Generating
Station Unit 1 Easement and Indemnification Agreement, dated as of the date
hereof, among WEPCO, MGE Power and WPPI.

“Unit 2” has the meaning given to such term in the Recitals to this Agreement.

“Unit 2 Component Ownership Interest” has the meaning given to such term in
Section 2.2(b) of this Agreement.  

“Unit 2 Construction Agreements” has the meaning given to “Construction
Agreements” in the Unit 2 Ownership Agreement.

“Unit 2 O&M Agreement” means that certain Elm Road Generating Station Unit 2
Operating and Maintenance Agreement, dated as of the date hereof, among WEPCO,
MGE and WPPI.

“Unit 2 Owners” means ERGS SC and each other Person that becomes a Unit 2 Owner
in accordance with the terms and conditions of the Unit 2 Ownership Agreement.

“Unit 2 Ownership Agreement” means that certain Elm Road II Ownership Agreement,
dated as of the date hereof, among ERGS SC, MGE Power, WPPI, the Project Manager
and, solely for purposes of Section 18.16 therein, WE Power.

“Unit 2 Ownership Interest” has the meaning given to such term in the Unit 2
Ownership Agreement.

“Unit 2 Property Rights Agreement” means that certain Elm Road Generating
Station Unit 2 Easement and Indemnification Agreement, dated as of the date
hereof, among WEPCO, MGE Power and WPPI.

“Units” means the Existing Units and the New Units.

“WEC” has the meaning given to such term in the Recitals to this Agreement.

“WE Power” has the meaning given to such term in the Recitals to this Agreement.

“WEPCO” has the meaning given to such term in the Recitals to this Agreement.

“WPPI” has the meaning given to such term in the Preamble to this Agreement.

“WPPI Member” means a member of WPPI under its Organic Documents.

1.2

Rules of Interpretation and Construction.

(a)

Interpretation.  In this Agreement, unless a clear contrary intention appears:

(i)

the singular number includes the plural number and vice versa;

(ii)

reference to any Person includes such Person’s successors and assigns but, if
applicable, only if such successors and assigns are permitted by this Agreement,
and reference to a Person in a particular capacity excludes such Person in any
other capacity or individually;

(iii)

reference to either gender includes the other gender;

(iv)

reference to any agreement, document or instrument means such agreement,
document or instrument as amended or modified from time to time in accordance
with the terms thereof;

(v)

reference to any Law means such Law as amended, modified, codified, replaced or
reenacted, in whole or in part, and in effect from time to time, including rules
and regulations promulgated thereunder, and reference to any section or other
provision of any Law means that provision of such Law from time to time in
effect and constituting the substantive amendment, modification, codification,
replacement or re-enactment of such section or other provision;

(vi)

reference to any Preamble, Recital, Article, Section, Annex, Schedule or Exhibit
of this Agreement means such Article or Section thereof or Preamble, Recital,
Annex, Schedule or Exhibit thereto;

(vii)

“hereunder”, “hereof”, “hereto” and words of similar import shall be deemed
references to this document as a whole and not to any particular Article,
Section or other provision thereof;

(viii)

“including” (and with the correlative meaning “include”) means including without
limiting the generality of any description preceding such term; and

(ix)

with respect to any rights and obligations of the Parties under this Agreement,
all such rights and obligations shall be construed to the extent permitted by
applicable Law.

(b)

Computation of Time Periods.  For purposes of computation of periods of time
under this Agreement, the word “from” means “from and including” and the words
“to” and “until” each mean “to but excluding”.  If a Party is required to take
an action pursuant to this Agreement and the day on which such action becomes
due is not a Business Day, then such action shall be taken on the next day that
is a Business Day.

(c)

Accounting Terms and Determinations.  Unless otherwise specified in this
Agreement, all terms of an accounting character used herein shall be
interpreted, all accounting determinations hereunder shall be made, and any
financial statements required to be delivered hereunder shall be prepared, in
accordance with generally accepted accounting principles in the United States as
in effect from time to time applied on a consistent basis.

(d)

Coordination With Other Agreements.  If there is any conflict between this
Agreement and any of the other Elm Road Documents, this Agreement and the Elm
Road Document(s) shall be interpreted and construed, if possible, so as to avoid
or minimize such conflict.

(e)

Legal Representation of the Parties.  This Agreement was negotiated by the
Parties with the benefit of legal representation, and any rule of construction
or interpretation otherwise requiring this Agreement to be construed or
interpreted against any Party as the drafter shall not apply to any construction
or interpretation thereof.

(f)

Payments.  All payments permitted or required to be made by or on behalf of the
Parties under the terms of this Agreement shall be made to the account or
accounts designated by the Party to which the payment is owed, by wire transfer
(in immediately available funds in the lawful currency of the United States).

(g)

Computation of Component Ownership Interests and Total New Common Facilities
Weighted Ownership Interests.  Notwithstanding any provision to the contrary in
this Agreement, the Parties acknowledge and agree that for purposes of this
Agreement, each New Common Facilities Owner’s Component Ownership Interest in
each of the Components and Total New Common Facilities Weighted Ownership
Percentage shall be determined (i) after the ERGS SC Unit 1 Lease Effective Date
and prior to the date on which the first New Unit is retired in accordance with
Exhibit D, an electronic copy of which was distributed by ERGS SC to the other
Parties on the date hereof and is incorporated herein and (ii) after the first
New Unit is retired, in accordance with Sections 13.3, 4.1(b)(iv) and 4.1(b)(v).

ARTICLE II:  OWNERSHIP OF THE NEW COMMON FACILITIES

2.1

New Common Facilities Owners.  Each Party that owns a Unit 1 Component Ownership
Interest in accordance with the Unit 1 Ownership Agreement on the ERGS SC Unit 1
Lease Effective Date shall be a New Common Facilities Owner.

2.2

Component Ownership Interests.  

(a)

Unit 1 Component Ownership Interests.  Effective as of the ERGS SC Unit 1 Lease
Effective Date, each Party shall have the percentage undivided ownership
interest in each Component which is allocated to Unit 1 (each, a “Unit 1
Component Ownership Interest”) pursuant to the Unit 1 Ownership Agreement.  If
at any time after the ERGS SC Unit 1 Lease Effective Date, a New Common
Facilities Owner Transfers all or a portion of its Unit 1 Ownership Interest to
a transferee in accordance with the terms of the Unit 1 Ownership Agreement,
then, subject to satisfaction of the applicable conditions in Section 4.1, such
New Common Facilities Owner shall also Transfer to such transferee all of the
Unit 1 Component Ownership Interests which are allocated (in accordance with
Exhibit D) to the Unit 1 Ownership Interest being Transferred.  Effective upon
such Transfer, (i) the transferee shall become a New Common Facilities Owner, if
it is not already, and shall succeed to the Unit 1 Component Ownership Interests
Transferred and (ii) the transferor’s Unit 1 Component Ownership Interests shall
be reduced by the amount of Unit 1 Component Ownership Interests so Transferred.

(b)

Unit 2 Component Ownership Interests.  If MGE Power, WPPI and/or any other
Person becomes a Unit 2 Owner and acquires a Unit 2 Ownership Interest before
the ERGS SC Unit 2 Lease Effective Date in accordance with the terms of the Unit
2 Ownership Agreement, then, subject to satisfaction of the applicable
conditions in Section 4.1, effective upon the ERGS SC Unit 2 Lease Effective
Date (i) such Person shall become a New Common Facilities Owner, if it is not
already, (ii) such Person shall, in accordance with (iii) below, acquire from
the then existing New Common Facilities Owner(s), a percentage undivided
ownership interest in each Component which is allocated to Unit 2 in accordance
with Exhibit D (each, a “Unit 2 Component Ownership Interest”), and (iii) each
then existing New Common Facilities Owner(s) shall Transfer a portion of each of
its Unit 1 Component Ownership Interests to such Person such that, effective
upon such Transfer, the Unit 1 Component Ownership Interests, if any, and the
Unit 2 Component Ownership Interests, if any, of each of the New Common
Facilities Owners (including any Person(s) becoming a New Common Facilities
Owner pursuant to this sentence) shall be in accordance with Exhibit D;
provided, however, that in no event shall the provisions of Section 2.2(b)(i) –
(iii) apply to MGE Power or WPPI if on or before the ERGS SC Unit 2 Lease
Effective Date such Party has provided ERGS SC written notice pursuant to
Section 12.2(a) of the Unit 2 Ownership Agreement of its withdrawal from the
Unit 2 Ownership Agreement.  If at any time on or after the ERGS SC Unit 2 Lease
Effective Date, a New Common Facilities Owner Transfers all or a portion of its
Unit 2 Ownership Interest to a transferee in accordance with the terms of the
Unit 2 Ownership Agreement, then, subject to satisfaction of the applicable
conditions in Section 4.1, such New Common Facilities Owner shall also Transfer
to such transferee all of the Unit 2 Component Ownership Interests which are
allocated (in accordance with Exhibit D) to the Unit 2 Ownership Interest being
Transferred.  Effective upon such Transfer, (i) the transferee shall become a
New Common Facilities Owner, if it is not already, and shall succeed to the Unit
2 Component Ownership Interests Transferred and (ii) the transferor’s Unit 2
Component Ownership Interests shall be reduced by the amount of Unit 2 Component
Ownership Interests so Transferred.

(c)

Change in Measurement Basis.  Effective as of the ERGS SC Unit 1 Lease Effective
Date, Exhibit D to this Agreement shall automatically be amended to be
consistent with Exhibit D to the Unit 1 Ownership Agreement as in effect on the
ERGS SC Unit 1 Lease Effective Date.  The Parties acknowledge and agree that if
one or more of the Existing Units are retired, the Measurement Basis values
attributed to the retired Existing Units in computing Component Ownership
Interests in Exhibit D will not change.

2.3

Tenancies-in-Common.  The New Common Facilities Owners shall own their
respective Total Component Ownership Interests in each of the Components as
tenants-in-common.

ARTICLE III: RIGHTS AND OBLIGATIONS OF THE PARTIES

3.1

Effectiveness of Rights and Obligations of the Parties.  The Parties acknowledge
and agree that:

(a)

the rights and obligations of the Parties under this Agreement (other than this
Section 3.1 and Section 3.2 and Articles I, XII, XIII, XIV, XV, XVI, XVII and
XVIII) shall not be binding upon the Parties until the ERGS SC Unit 1 Lease
Effective Date, and shall, as appropriate, continue beyond the date on which any
such Parties become New Common Facilities Owners under this Agreement; and

(b)

the rights and obligations of the Parties under this Section 3.1 and Section 3.2
and Articles I, XII, XIII, XIV, XV, XVI, XVII and XVIII shall be binding upon
the Parties as of the date of this Agreement.

3.2

Rights and Obligations with Respect to Government Approvals.  Each Party shall
use commercially reasonable efforts:

(a)

to obtain any Government Approvals required to execute, deliver and perform its
obligations under this Agreement and to own any of its Component Ownership
Interests;

(b)

to actively and publicly support the efforts of the other Parties to obtain the
Government Approvals required to be obtained by them pursuant to Section 3.2(a);
and

(c)

if it participates in any proceedings relating to the Government Approvals
required to be obtained by the other Parties pursuant to Section 3.2(a), (i) to
support the issuance of all such Government Approvals that are consistent with
this Agreement and the other Elm Road Documents, and (ii) to oppose the efforts
of other Persons to adversely affect any Party’s rights under this Agreement or
the other Elm Road Documents.

ARTICLE IV: CONDITIONS TO TRANSFERS OF COMPONENT OWNERSHIP INTERESTS

4.1

Transfers of Component Ownership Interests.  Except as otherwise provided in
Section 2.2 and Article XIII:

(a)

Conditions Precedent to all Transfers.  In no event may a New Common Facilities
Owner (“Transferor”) Transfer any of its Component Ownership Interests to
another Person (“Transferee”) unless and until all of the following conditions
precedent to such Transfer have been satisfied or waived by the Party for whose
benefit such conditions exist as of the date of such Transfer (the “Transfer
Date”):

(i)

if Transferee is not already a New Common Facilities Owner, Transferee must
deliver to Transferor, with copies to each of the other New Common Facilities
Owners, an assignment and assumption agreement in respect of Transferee’s
assumption of Transferor’s rights and obligations under this Agreement in
respect of the Component Ownership Interests being Transferred, substantially in
the form of Exhibit C, duly executed by Transferee;

(ii)

either (A) Transferor must not be in default of any of its material obligations
under this Agreement on the Transfer Date or (B) such default must be cured on
or prior to the Transfer Date;

(iii)

where a Transferor seeks to Transfer all or a portion of its Unit 1 Ownership
Interest, then Transferor must Transfer to the same Transferee (A) Transferor’s
Unit 1 Ownership Interest in accordance with the applicable provisions of the
Unit 1 Ownership Agreement, including the conditions precedent to such Transfer
of the Unit 1 Ownership Interest set forth therein and (B) Transferor’s Unit 1
Component Ownership Interests allocated (in accordance with Exhibit D) to the
Unit 1 Ownership Interest being Transferred;

(iv)

where a Transferor seeks to Transfer all or a portion of its Unit 2 Ownership
Interest, then Transferor must Transfer to the same Transferee (A) Transferor’s
Unit 2 Ownership Interest in accordance with the applicable provisions of the
Unit 2 Ownership Agreement, including the conditions precedent to such Transfer
of the Unit 2 Ownership Interest set forth therein and (B) Transferor’s Unit 2
Component Ownership Interests allocated (in accordance with Exhibit D) to the
Unit 2 Ownership Interest being Transferred;

(v)

Transferor and Transferee must provide to the other New Common Facilities Owners
such other documents as the other New Common Facilities Owners may reasonably
request in connection with the Transfer of the Component Ownership Interests and
the assumption by Transferee of Transferor’s rights and obligations under this
Agreement in respect of the Component Ownership Interests being Transferred; and

(vi)

Transferor and Transferee must comply with all applicable Laws and Government
Approvals in connection with the Transfer, including any restrictions imposed on
Transferor and/or Transferee by the PSCW.

(b)

Conditions Precedent to Transfers of Component Ownership Interests Between
Existing New Common Facilities Owners.  In addition to the conditions precedent
set forth in Section 4.1(a), in no event may a Transferor Transfer any of its
Component Ownership Interests to a Transferee that is already a New Common
Facilities Owner unless and until all of the following conditions precedent to
such Transfer have been satisfied or waived by the Party for whose benefit such
conditions exist as of the Transfer Date:

 

(i)

Transferor must deliver to Transferee a bill of sale in respect of the Component
Ownership Interests being Transferred to Transferee substantially in the form of
Exhibit B, duly executed by Transferor;

(ii)

if the Transfer is in connection with a Transfer of a Unit 1 Component Ownership
Interest from a Unit 1 Owner to a Unit 2 Owner on the ERGS SC Unit 2 Lease
Effective Date in accordance with the first sentence of Section 2.2(b), then
Transferee (A) must pay to each Transferor an amount (the “Purchase Price”) in
respect of the Component Ownership Interests being Transferred by such
Transferor determined in accordance with Exhibit D and (B) must reimburse each
Transferor such Transferor’s pro rata share (calculated in accordance with
Exhibit D) of the New Common Facilities Service Costs;

(iii)

if the Transfer is in connection with a Transfer of a Unit 2 Ownership Interest
pursuant to Section 12.2(b) of the Unit 2 Ownership Agreement after the ERGS SC
Unit 2 Lease Effective Date, then each Transferee shall pay to Transferor such
Transferee’s pro rata share (based on the Unit 2 Component Ownership Interests
that it is purchasing from Transferor) of the Purchase Price and the New Common
Facilities Service Costs paid by Transferor pursuant to Section 4.1(b)(ii);  

(iv)

if the Transfer is pursuant to Section 13.3(a), then on the Transfer Date, the
Retired Owner shall pay to the Active Owner(s) an amount equal to the sum of the
pro rata amounts (based on the Retired Owner’s respective Total Component
Ownership Interests) of the NPV of Retirement Costs of each Component in which
the Retired Owner has a Component Ownership Interest which is being Transferred
to the Active Owner(s), provided that if there is more than one Active Owner,
then the Active Owners shall each be paid based on their respective Total
Component Ownership Interests;

(v)

if the Transfer is pursuant to Section 13.3(b), then on the Transfer Date, each
Active Owner shall pay to (or receive from, if the Retirement Price is negative)
each Retired Owner a pro rata amount (based on each Active Owner’s respective
Total Component Ownership Interests) of the Retirement Price of each Component
in which such Retired Owner has a Component Ownership Interest which is being
Transferred to the Active Owner(s);

(vi)

if (A) the Transfer is to ERGS SC in connection with a Transfer of a Unit 1
Ownership Interest or a Unit 2 Ownership Interest in accordance with the
provisions of Section 9.5 of the Unit 1 Ownership Agreement or the Unit 2
Ownership Agreement, respectively, and (B) Transferor received Loss Proceeds in
respect of the Component Ownership Interests being Transferred which Transferor
paid or caused to be paid to a Construction Account pursuant to Section 9.4(a),
then ERGS SC shall pay to Transferor an amount equal to the amount of Loss
Proceeds that would have been paid to Transferor pursuant to the insurance
coverage obtained for the New Common Facilities Owners pursuant to Section 9.1
if the Components in which Transferor is Transferring its Component Ownership
Interests were not repaired or reconstructed pursuant to Section 9.2;

(vii)

Transferor must deliver to Transferee evidence reasonably satisfactory to
Transferee that Transferor has good and marketable title to the Component
Ownership Interests being Transferred and that such Component Ownership
Interests are free and clear of all Liens other than those specified in
paragraphs (a) through (f) of the definition of Permitted Encumbrances;

(viii)

Transferor must deliver to Transferee executed releases from all holders of
Liens (other than those specified in paragraphs (a) through (f) of the
definition of Permitted Encumbrances) on the Component Ownership Interests,
releasing from such Liens the Component Ownership Interests being Transferred to
Transferee; and

(ix)

Transferor and Transferee must provide to one another such other documents as
they may reasonably request in connection with the Transfer of the Component
Ownership Interests and the assumption by Transferee of Transferor’s rights and
obligations under this Agreement in respect of the Component Ownership Interests
being Transferred.

4.2

Closing Costs.  In addition to the obligations of the respective Parties set
forth in Section 4.1, if Transferor is Transferring any of its Component
Ownership Interests to a Transferee that is already a New Common Facilities
Owner, each Party shall bear its own closing costs, including any Taxes (other
than transfer Taxes) and fees imposed by Law upon it in connection the
acquisition and transfer of the Component Ownership Interests contemplated in
this Article IV.  Notwithstanding any provision in this Agreement to the
contrary, any and all transfer Taxes which arise as a result of a Transfer of
any Component Ownership Interests pursuant to Section 4.1(b) shall be borne
equally by Transferor and Transferee.

4.3

Effectiveness of Rights and Obligations.  

(a)

MGE Power and WPPI shall be subject to all of the obligations and liabilities of
the New Common Facilities Owners and shall enjoy all of the rights and benefits
of the New Common Facilities Owners to the extent of their respective Component
Ownership Interests, in each case, as provided for in this Agreement effective
as of the date each such Party becomes a New Common Facilities Owner in
accordance with the terms and conditions of Articles II and IV.

(b)

Each Transferee (who is not already a New Common Facilities Owner) shall be
subject to all of the obligations and liabilities of the New Common Facilities
Owners and shall enjoy all of the rights and benefits of the New Common
Facilities Owners to the extent of its Transferred Component Ownership
Interests, in each case, as provided for in this Agreement, effective as of the
date each such Transferee becomes a New Common Facilities Owner in accordance
with the terms and conditions of Articles II and IV.

4.4

Release.  If a Transferor Transfers all, but not less than all, of its Composite
Component Ownership Interest in accordance with this Article IV, then effective
as of the date of the Transfer, such Transferor shall cease to be a party to
this Agreement and shall be released from all of its obligations under this
Agreement other than those obligations arising prior to the date of the Transfer
and those obligations which survive termination of this Agreement pursuant to
Section 18.13.

ARTICLE V:  APPOINTMENT OF NEW COMMON FACILITIES AGENT

If two or more of the New Common Facilities Owners determine that they require
an agent to act on their behalf in connection with the performance of their
obligations and the exercise of their rights under this Agreement, then the New
Common Facilities Owners shall enter into an agreement with the Project Manager
or such other Person as the New Common Facilities Owners may select by a vote of
the New Common Facilities Owners pursuant to Article XI to serve as their agent
on terms substantially similar to the terms by which the Project Manager serves
as the agent to the Unit 1 Owners and the Unit 2 Owners under the respective
Unit Ownership Agreements.

ARTICLE VI:  PAYMENTS BY THE NEW COMMON FACILITIES OWNERS

If a New Common Facilities Owner reasonably believes that it will incur, or has
incurred, costs or expenses on behalf of one or more of the other New Common
Facilities Owners, then such New Common Facilities Owner shall provide written
notice thereof to the other New Common Facilities Owners.  The New Common
Facilities Owners shall meet and negotiate in good faith to reach agreement on
whether such costs and expenses are being prudently incurred on behalf of the
New Common Facilities Owners and, if so, an equitable basis on which such costs
and expenses should be shared by the affected New Common Facilities Owners.     

ARTICLE VII:  TAXES

7.1

Tenants in Common.  It is the intent of the Parties that each New Common
Facilities Owner shall be treated as the owner of the New Common Facilities to
the extent of its Composite Component Ownership Interest, and that the Parties
shall not be treated as partners, for federal, state or local income tax
purposes.  Each Party agrees and covenants that it shall not take or omit to
take any action or reporting position with any Governmental Authority contrary
to this Section 7.1.  Furthermore, each Party agrees that to the extent
permitted by Section 761 of the Code and the Treasury Regulations thereunder, it
will, in a timely manner, cooperate in ERGS SC’s filing of the election provided
for in Section 1.761-2(b) of the Treasury Regulations to elect out of the
provisions of Subchapter K of the Code.

7.2

Liability and Compliance.  

(a)

Except as provided in Section 4.2, to the extent possible, each New Common
Facilities Owner shall, or shall cause its Lessee (if any) to, separately
report, and to promptly and timely file returns, reports or statements with
respect to, and be responsible for and pay to each applicable Governmental
Authority any Taxes, however imposed, relating to:

(i)

its Composite Component Ownership Interest (including any Taxes imposed on or
with respect to the New Common Facilities but only to the extent attributable to
its Composite Component Ownership Interest);

(ii)

the acquisition, manufacture, purchase, ownership, delivery, non-delivery,
redelivery, transport, location, lease, sublease, hire, assignment, alteration,
improvement, possession, repossession, presence, use, replacement, substitution,
operation, insurance, installation, modification, rebuilding, overhaul,
condition, storage, maintenance, repair, acceptance, sale, return, abandonment,
preparation, transfer of title, or other disposition of its Composite Component
Ownership Interest; or

(iii)

the execution, delivery or performance of any agreements entered into by it with
respect to (A) its Composite Component Ownership Interest, (B) the Elm Road I
Project Documents or the Elm Road II Project Documents or (C) any of the
transactions contemplated thereby, or any proceeds or payments or amounts
payable under any thereof (including any agreements entered into between it and
a Lessee, if any).

(b)

Subject to Article 3 of Schedule 7.4A and Article 5 of Schedule 7.4B, from and
after the ERGS SC Unit 1 Lease Effective Date each New Common Facilities Owner
(the “Tax Indemnifying Party”) shall indemnify and hold harmless each other New
Common Facilities Owner (the “Tax Indemnitee Party”), on an After-Tax Basis
(which, for purposes of this Section 7.2, shall be defined, in the case of a Tax
Exempt New Common Facilities Owner, by Schedule 7.4A, and in the case of any
other New Common Facilities Owner, by Schedule 7.4B), from and against any Taxes
imposed on such Tax Indemnitee Party or the New Common Facilities or any part
thereof, to the extent such Taxes are the responsibility of the Tax Indemnifying
Party pursuant to this Section 7.2.  Furthermore, if (i) a Tax is imposed,
directly or indirectly, on or against the New Common Facilities or any part
thereof by any Governmental Authority, (ii) a New Common Facilities Owner has
not provided each Tax Indemnitee Party notice of timely payment of its share of
such Taxes to the appropriate Governmental Authority, and (iii) a Tax Indemnitee
Party reasonably determines that the payment of such Tax is required to avoid a
loss or forfeiture of the New Common Facilities, such Tax Indemnitee Party shall
have the right to take all steps necessary to ensure that such Tax is paid to
the appropriate Governmental Authority, including the payment of such Tax
directly to the appropriate Governmental Authority.  In such event, the Tax
Indemnifying Party shall indemnify and hold harmless such Tax Indemnitee Party,
on an After-Tax Basis (but without duplication of payments made by it pursuant
to the first sentence of this Section 7.2(b)), from and against the amount of
such Tax and all costs and expenses incurred by such Tax Indemnitee Party
associated with the payment of such Tax (including reasonable attorney’s fees,
penalties and interest).

(c)

Each New Common Facilities Owner will provide each other New Common Facilities
Owner a copy of any invoice, notice or levy for Taxes described in this Section
7.2 and, if applicable, request payment pursuant to such invoice, notice or levy
as provided for in this Section 7.2.

7.3

Receipts, Records and Documentation.  Within a reasonable time after a Party
notifies another Party of a written request for specified information or copies
of specified records reasonably necessary to enable the notifying Party to
fulfill its Tax filing, Tax audit or other Tax obligations or to contest Taxes
imposed upon it, which information or records are not within the notifying
Party’s possession or control, such receiving Party shall provide such
information or copies of such records to the notifying Party if such information
is within its possession or control.  Notwithstanding the foregoing, no Party
shall be obligated to provide copies of its Tax returns or work papers.  If
requested by a Party, each Party receiving the request also agrees to provide,
or cause its Lessee, if any, to provide, any certification, documentation or
other evidence as may be required for the allowance of a reduction in, exemption
from or reduced rate of Tax, at the cost and expense of the requesting Party,
if, in the case of the receiving Party, such Party is eligible to comply with
such request and has determined in good faith that compliance with such request
would not have a material adverse effect on such Party or any of its Affiliates.

7.4

Tax Matters.  Except as provided in this Article VII, each New Common Facilities
Owner agrees that:

(a)

any tax matter between a New Common Facilities Owner and a New Common Facilities
Owner that is a political subdivision of a State within the meaning of Section
115 of the Code that is exempt from federal, state and local taxes as a result
thereof (“Tax Exempt New Common Facilities Owner”) or attributable to the
Composite Component Ownership Interest of a Tax Exempt New Common Facilities
Owner shall be governed by and in accordance with Schedule 7.4A; and

(b)

any tax matter between two or more New Common Facilities Owners (none of which
is a Tax Exempt New Common Facilities Owner) or attributable to the Composite
Component Ownership Interest of a New Common Facilities Owner (which is not a
Tax Exempt New Common Facilities Owner), shall be governed by and in accordance
with Schedule 7.4B.

ARTICLE VIII:  OTHER RIGHTS AND OBLIGATIONS OF

THE NEW COMMON FACILITIES OWNERS

8.1

Operation and Maintenance of the New Common Facilities.  

(a)

The New Common Facilities Owners acknowledge and agree that, following the ERGS
SC Unit 1 Lease Effective Date, the New Common Facilities shall be operated and
maintained by the Operating Agent under the Common Facilities O&M Agreement, in
accordance with the terms and conditions of the Common Facilities O&M Agreement.
 

(b)

The New Common Facilities Owners agree that if the Common Facilities O&M
Agreement expires or is terminated for any reason and both ERGS SC Facility
Leases expire or are terminated for any reason, then the New Common Facilities
Owners (or, in MGE Power’s case, its Lessee, if applicable) shall use
commercially reasonable efforts to enter into a replacement “Common Facilities
O&M Agreement” on terms and conditions that, as amongst the New Common
Facilities Owners or Lessee, if applicable, are neither materially more nor
materially less favorable than existed as amongst the Lessee/Owner Parties
pursuant to the Common Facilities O&M Agreement, as the same was in effect
immediately prior to its expiration or termination (except where all of the New
Common Facilities Owners agree otherwise).  

8.2

Capital Improvements to the New Common Facilities; Payment of Capital Costs of
Improvements.

(a)

The New Common Facilities Owners acknowledge and agree that for so long as the
Common Facilities O&M Agreement is in full force and effect, all decisions to
make, and responsibility for the payment of, capital improvements, replacements,
additions and renewals (collectively, “Capital Improvements”) to the New Common
Facilities (or any Component) after the ERGS SC Unit 1 Lease Effective Date
shall rest with the parties to the Common Facilities O&M Agreement in accordance
with the terms and conditions therein.  

(b)

The New Common Facilities Owners agree that if the Common Facilities O&M
Agreement and both ERGS SC Facility Leases expire or are terminated for any
reason and the Common Facilities O&M Agreement is not replaced with a
replacement “Common Facilities O&M Agreement” that governs decisions concerning,
and funding of, Capital Improvements, then the New Common Facilities Owners
shall determine what Capital Improvements to the New Common Facilities (or any
Component) should be made in accordance with this Section 8.2(b) and Section
11.2.  Any such determination by the New Common Facilities Owners must be
consistent with and not in contravention of (i) the terms and conditions of the
ERGS SC Facility Leases and the Common Facilities O&M Agreement with respect to
Capital Improvements, in each case, as the same were in effect immediately prior
to their expiration or termination, and (ii) applicable Laws and Government
Approvals.  Each of the New Common Facilities Owners agrees that it shall be
responsible for, and shall pay its pro rata share (based on its Total Component
Ownership Interest) of any costs and expenses incurred to make any Capital
Improvements to any Component approved by the New Common Facilities Owners
pursuant to this Section 8.2(b) and Section 11.2.

ARTICLE IX:  INSURANCE; EVENTS OF LOSS AND TOTAL LOSS

9.1

Insurance Coverage.  

(a)

On or After the ERGS SC Unit 1 Lease Effective Date.  If at any time on or after
the ERGS SC Unit 1 Lease Effective Date, the Common Facilities O&M Agreement
expires or is terminated for any reason and is not replaced with a replacement
“Common Facilities O&M Agreement” and both ERGS SC Facility Leases expire or are
terminated for any reason, then the New Common Facilities Owners shall meet and
make arrangements for insurance in respect of the New Common Facilities to be
carried and maintained; provided, that such insurance shall have the minimum
coverages and otherwise satisfy the requirements of Schedule 13.2 to the ERGS SC
Facility Leases (as in effect immediately prior to expiration or termination)
applicable to insurance during the Lease Term (as defined in the ERGS SC
Facility Leases).  The Parties acknowledge and agree that the insurance
requirements in this Section 9.1 may be satisfied by insurance coverage obtained
by the Operating Agent under one or more of the Unit 1 O&M Agreement, the Unit 2
O&M Agreement and the Common Facilities O&M Agreement or by insurance coverage
obtained by the Project Manager under one or both of the Unit Ownership
Agreements.

(b)

Terms of Insurance Coverages.  Notwithstanding anything to the contrary
contained in Schedule 13.2 to the ERGS SC Facility Leases, the New Common
Facilities Owners shall use commercially reasonable efforts to ensure that all
insurance coverages obtained pursuant to Section 9.1(a) provide that:  (i) each
New Common Facilities Owner is a named insured in respect of its Composite
Component Ownership Interest and that its Lenders are named as additional
insureds or loss payees in respect of its Composite Component Ownership
Interest; (ii) each New Common Facilities Owner will receive at least 30 days
written notice from the insurer prior to the cancellation or termination of or
any material change in any such insurance coverages; and (iii) one of the New
Common Facilities Owners (selected by vote of the New Common Facilities Owners
pursuant to Article XI) or an agent selected pursuant to Article V, on behalf of
the New Common Facilities Owners and any other named or additional insureds or
loss payees, shall be solely responsible for pursuing claims and/or negotiating
settlements in respect of claims under such insurance coverages.  In addition,
each of the New Common Facilities Owners agrees that its respective Lenders, if
any, shall not be mortgagees under any insurance coverages obtained pursuant to
Section 9.1(a).  

9.2 

Event of Loss and Event of Total Loss.  

(a)

Decision to Repair or Reconstruct New Common Facilities.  If at any time after
the ERGS SC Unit 1 Lease Effective Date, an Event of Loss or an Event of Total
Loss occurs with respect to the New Common Facilities and one or more Units
which utilize such New Common Facilities is operating or is being repaired or
reconstructed pursuant to the terms of the applicable Unit Ownership Agreement,
Unit 1 O&M Agreement or Unit 2 O&M Agreement, then such New Common Facilities
shall be repaired or reconstructed based on the needs of the Units which will
utilize such New Common Facilities as follows:

(i)

if one or both of the ERGS SC Facility Leases are in full force and effect, the
New Common Facilities Owners acknowledge and agree that:

(A)

if the Common Facilities O&M Agreement is then in effect, then the Operating
Agent under the Common Facilities O&M Agreement shall be responsible for
repairing or reconstructing the New Common Facilities in accordance with the
Common Facilities O&M Agreement and the ERGS SC Facility Leases which are then
in effect; and

(B)

if the Common Facilities O&M Agreement has expired or terminated and has not
been replaced with a replacement “Common Facilities O&M Agreement,” then WEPCO
shall be responsible for repairing or reconstructing the New Common Facilities
in accordance with the ERGS SC Facility Leases which are then in effect; and

(ii)

if both of the ERGS SC Facility Leases have expired or terminated, the New
Common Facilities Owners acknowledge and agree that:

(A)

if the Common Facilities O&M Agreement is then in effect, then the Operating
Agent under the Common Facilities O&M Agreement shall be responsible for
repairing or reconstructing the New Common Facilities in accordance with the
Common Facilities O&M Agreement; and

(B)

if the Common Facilities O&M Agreement has expired or terminated, then the New
Common Facilities Owners shall, by a vote of such New Common Facilities Owners
pursuant to Article XI, select a Person to act as their agent (the
“Reconstruction Agent”) who shall be responsible for the oversight and
management of the repair or reconstruction of such New Common Facilities in
accordance with provisions substantially similar to those governing the Project
Manager under the Unit Ownership Agreements; provided, that if either or both of
Unit 1 and/or Unit 2 are concurrently being repaired or reconstructed, then the
New Common Facilities Owners agree that they shall select as their
Reconstruction Agent the Person selected by the Unit Owners to act as their
“Reconstruction Agent” in accordance with the applicable Unit Ownership
Agreement(s).  If repair or reconstruction is to occur pursuant to this Article
IX, the Reconstruction Agent shall prepare or cause to be prepared and shall
promptly deliver to the New Common Facilities Owners (1) a good faith estimate
of the total costs and expenses to be incurred by or on behalf of the
Reconstruction Agent pursuant to this Section 9.2(a)(ii)(B) and (2) a schedule
for completion of such repair or reconstruction of the New Common Facilities.

(b)

Retirement of New Common  Facilities.  If the New Common Facilities are not
being repaired or reconstructed pursuant to Section 9.2(a), then such New Common
Facilities may be retired by the New Common Facilities Owners in accordance with
Article X.

9.3

Responsibility for Costs and Expenses.  The Reconstruction Agent shall, from
time to time, prepare and deliver to each New Common Facilities Owner a billing
statement setting forth in reasonable detail the aggregate amount and each New
Common Facilities Owner’s pro rata share (based on its applicable Total
Component Ownership Interest with respect to each Component being repaired or
reconstructed) of all reasonable and prudently incurred costs and expenses, if
any, which the Reconstruction Agent has incurred or reasonably expects to incur
in the succeeding month in connection with the Reconstruction Agent’s
obligations pursuant to this Section 9.2(a)(ii)(B).  All costs and expenses
incurred by or on behalf of the Reconstruction Agent pursuant to Section
9.2(a)(ii)(B) shall be borne by each New Common Facilities Owner in proportion
to its respective Total Component Ownership Interest with respect to each
Component being repaired or reconstructed.  

9.4

Allocation of Loss Proceeds and Condemnation Awards.

(a)                  If the New Common Facilities are to be repaired or
reconstructed following an Event of Loss or an Event of Total Loss pursuant to
Section 9.2(a)(ii)(B), then each of the New Common Facilities Owners agrees that
it shall pay, or cause to be paid, to a Construction Account any Loss Proceeds
received by such New Common Facilities Owner in connection with such Event of
Loss or Event of Total Loss for use by the Reconstruction Agent in connection
with the repair or reconstruction of the New Common Facilities pursuant to
Section 9.2(a)(ii)(B).

(b)                If the New Common Facilities are not repaired or
reconstructed following an Event of Loss or an Event of Total Loss pursuant to
Section 9.2(a), then any Loss Proceeds received by the New Common Facilities
Owners in connection with such Event of Loss or Event of Total Loss shall be
paid to, or retained by, each of the New Common Facilities Owners consistent
with its insured interest in the New Common Facilities.  Each of the New Common
Facilities Owners agrees that it shall pay, or cause to be paid, consistent with
this Section 9.4(b), to one or more of the other New Common Facilities Owners
any Loss Proceeds received by it pursuant to insurance required to be obtained
pursuant to Section 9.1 which are in excess of its insured interest in the New
Common Facilities.

(c)

Each of the New Common Facilities Owners shall be entitled to retain any
Condemnation Awards received by it in respect of its Composite Component
Ownership Interest as a result of an Event of Loss or Event of Total Loss.

(d)

The Parties acknowledge that events and circumstances giving rise to an Event of
Loss or Event of Total Loss under this Agreement may also give rise to an “Event
of Loss” or “Event of Total Loss” under the Unit 1 Ownership Agreement and/or
the Unit 2 Ownership Agreement and that all or a portion of any Loss Proceeds
received by the New Common Facilities Owners pursuant to this Agreement may also
constitute “Loss Proceeds” subject to the Unit 1 Ownership Agreement and/or the
Unit 2 Ownership Agreement.  The Parties further acknowledge and agree that if
and to the extent that there is any conflict between the insurance provisions
(including any provisions with respect to the receipt, payment, control and use
of Loss Proceeds) in this Agreement and in the Unit 1 Ownership Agreement and/or
the Unit 2 Ownership Agreement, that all such insurance provisions shall be
interpreted and construed, if possible, so as to avoid or minimize any such
conflict.

ARTICLE X:  RETIREMENT OF COMPONENTS

10.1

Date of Retirement.  The New Common Facilities Owners shall determine the date
on which to retire permanently each Component by a vote of the New Common
Facilities Owners pursuant to Article XI, provided, however, that in no event
shall a Component be retired pursuant to this Section 10.1 unless all of the
Units that utilize such Component have also been retired.  

10.2

Retirement Costs.  Each of the New Common Facilities Owners shall be responsible
for paying its pro rata share (based on its Total Component Ownership Interest
in each Component being retired) of the aggregate amount of all costs and
expenses prudently incurred to retire permanently each Component from service,
including decommissioning, dismantling, demolishing and removal of equipment,
facilities and structures, security, maintenance, disposing of debris,
abandonment and all other costs and expenses prudently incurred to retire
permanently each Component from service, net of any amounts recovered in
connection with the sale of any retired equipment, facilities and structures.

10.3

Termination of Agreement.  Effective as of the date five Business Days after the
successful completion of the permanent retirement of all of the Components in
accordance with the terms and conditions of this Article X, this Agreement shall
automatically terminate and each of the Parties shall be released from all of
its obligations under this Agreement other than those obligations arising prior
to such termination and those obligations which survive termination of this
Agreement pursuant to Section 18.13.

ARTICLE XI:  NEW COMMON FACILITIES OWNERS’ VOTING RIGHTS

11.1

Decision-Making.  

(a)

The Parties acknowledge and agree that before the ERGS SC Unit 1 Lease Effective
Date, the Unit 1 Ownership Agreement shall control as to all decisions
concerning the development, design, engineering, permitting, construction and
commissioning of the New Common Facilities.

(b)

The New Common Facilities Owners recognize the importance of developing and
maintaining a cooperative working relationship in connection with the ownership
of the New Common Facilities.  Accordingly, the New Common Facilities Owners
shall make commercially reasonable efforts to reach consensus on all actions and
approvals to be made by the New Common Facilities Owners pursuant to this
Agreement.  If consensus cannot be reached, then decisions shall be made by a
vote of the New Common Facilities Owners.  Each New Common Facilities Owner
shall have a voting right equal to its Total New Common Facilities Weighted
Ownership Percentage.  Actions and approvals made by the New Common Facilities
Owners pursuant to this Agreement shall not be unreasonable or contrary to
Prudent Utility Practice or otherwise contravene any material terms of this
Agreement or either of the ERGS SC Facility Leases.  For purposes of this
Article XI, a decision shall be deemed reasonable if it is required by this
Agreement or either of the ERGS SC Facility Leases.

(c)

If, after the ERGS SC Unit 1 Lease Effective Date, the Common Facilities O&M
Agreement expires or is terminated for any reason and is not replaced with a
replacement “Common Facilities O&M Agreement” and both of the ERGS SC Facility
Leases expire or are terminated for any reason, then the New Common Facilities
Owners agree to establish an ownership committee, which will vote in accordance
with Sections 11.1(b) and 11.2, to facilitate communication and decision making
by the New Common Facilities Owners under this Agreement with respect to the
operation and maintenance of the New Common Facilities.

11.2

Voting Requirements.  The affirmative vote of one or more New Common Facilities
Owners collectively with greater than 50% of the voting rights in the New Common
Facilities (i.e., one or more New Common Facilities Owners whose collective
Total New Common Facilities Weighted Average Ownership Percentage(s) is greater
than 50%) shall be required for any action or approval of the New Common
Facilities Owners under this Agreement.

ARTICLE XII:  DEFAULTS; REMEDIES

12.1

Exclusive Remedies.  Except as provided in this Article XII and Article XVI, no
Party shall be liable to any other Party for breach or default of any of its
respective obligations, covenants or representations and warranties under this
Agreement.  The Parties acknowledge and agree that the rights and remedies set
forth in this Article XII and Article XVI are the sole and exclusive rights and
remedies of the Parties in respect of any breach or default of any obligation,
covenant or representation and warranty under this Agreement, and are in lieu
of, and each Party hereby expressly waives, any and all other rights and
remedies of whatever nature or kind that it may have at law or in equity or
otherwise.

12.2

Remedies for Material Breach.  If a Party fails to perform or breaches any of
its material obligations under this Agreement, then each non-defaulting Party
shall be entitled to exercise all remedies available to it at law or in equity.
 The Parties acknowledge and agree that monetary damages may not be an adequate
remedy at law for the failure of a Party to perform certain material obligations
under this Agreement (including the failure of a Party to sell or to acquire
Component Ownership Interests), and under such circumstances, a non-defaulting
Party shall have the right to specific performance by the defaulting Party of
such obligations under this Agreement.  

12.3

Limitation on Remedies for Breach of Representation and Warranties.
 Notwithstanding any provision to the contrary contained in this Agreement, the
Parties acknowledge and agree that no Party shall be liable for monetary damages
to any other Party arising from or in connection with (a) any breach of such
Party’s representations and warranties provided to such other Party in this
Agreement or in any certificate delivered pursuant to this Agreement or (b) any
reports, notices, certificates, documents, information or data of any kind or
nature (whether or not prepared by or on behalf of such Party) provided to such
other Party pursuant to or in connection with this Agreement.

12.4

Damage to the New Common Facilities.  Each Party shall be liable for any loss or
damage (including any deductible under applicable insurance, if any) to the New
Common Facilities arising as a result of the acts of such Party or its
Representatives on or about the Elm Road Site.

12.5

Waiver of Partition Rights.  The Parties acknowledge that any exercise of the
remedy of partition (whether at law or in equity) of the New Common Facilities
(or any of the Components) would be impracticable in view of the purposes and
requirements of this Agreement and the Project, would violate the spirit and
intent of this Agreement and the Project, and would defeat the Parties’
intentions and reasonable expectations as well as the consideration upon which
each Party entered into this Agreement.  Accordingly, each Party agrees that
during the term of this Agreement it (a) will not commence, maintain, support or
join in any action or proceedings of any kind to partition the New Common
Facilities (or any of the Components), and (b) waives, after consultation with
its qualified legal counsel, any and all rights that it may have under this
Agreement or applicable Law (whether at law or in equity) or otherwise to
commence, maintain, support or join in any such action or proceeding.  Each
Party acknowledges that all Parties have entered into and will perform the terms
of this Agreement in reliance upon all other Parties’ agreement and adherence to
the terms of this Section 12.5, and would not have entered into this Agreement
but for such reliance; and that it would be unjust and inequitable for any Party
to violate or to seek relief from any provision of this Section 12.5.

12.6

Disputes.  Any Dispute between or among the Parties under this Article XII shall
be resolved pursuant to Article XVII.

ARTICLE XIII:  TRANSFER RESTRICTIONS  

13.1

Prohibition on Transfers and Liens.  

(a)

Except as otherwise provided in Section 2.2 and this Article XIII, no Party may
sell, lease, assign, transfer, convey or otherwise dispose of in any manner,
directly or indirectly (collectively, “Transfer”) all or any part of its rights,
obligations, benefits, advantages, titles and interest in this Agreement or the
New Common Facilities (or any Component), and any such Transfer in contravention
of this Article XIII shall be null and void ab initio. Notwithstanding the
foregoing, the Parties agree that (i) each of ERGS SC’s lease of its Component
Ownership Interests to WEPCO pursuant to the ERGS SC Facility Leases and MGE
Power’s lease of its Component Ownership Interests to MGE pursuant to the MGE
Power Unit 1 Facility Lease and the MGE Power Unit 2 Facility Lease and (ii) any
New Common Facilities Owner’s lease of its Component Ownership Interests to a
Permitted Lessee (as such term is defined in the ERGS SC Facility Leases) shall
not constitute a “Transfer” or a “Lien” for purposes of this Agreement.

(b)

Except as otherwise provided in this Article XIII, no Party may create or permit
to exist a Lien in respect of any of its Composite Component Ownership Interest
(other than a Permitted Encumbrance) without the prior written consent of the
other Parties, such consent not to be unreasonably withheld or delayed.  In no
event may any Party take any action that would cause or permit a Lien to exist
on any of any other Party’s Composite Component Ownership Interest.

13.2

Transfers to WEPCO.  If either of the ERGS SC Facility Leases expires or is
terminated and WEPCO does not acquire ERGS SC’s respective Unit 1 Ownership
Interest or Unit 2 Ownership Interest, but does elect to acquire a pro rata
share of ERGS SC’s Component Ownership Interests, then ERGS SC may Transfer such
pro rata share of its Component Ownership Interests to WEPCO in accordance with
the respective ERGS SC Facility Lease, provided that ERGS SC and WEPCO comply
with the requirements of Sections 4.1(a)(i), 4.1(a)(v) and 4.1(vi).

13.3

Transfers of Component Ownership Interests Upon Retirement of A New Unit.  

(a)

At any time during its respective Put Option Period, each Retired Owner shall
have an option to transfer all (but not less than all) of its Composite
Component Ownership Interest to the Active Owner(s).  In order to exercise such
option, a Retired Owner must provide written notice to the Active Owner(s).  On
the 60th day after such notice is provided, the Retired Owner shall (i) Transfer
all (but not less than all) of its Composite Component Ownership Interest to the
Active Owner(s) and (ii) pay the Active Owners in accordance with Section
4.1(b)(iv).  If there is more than one Active Owner, the Retired Owner shall
Transfer its Composite Component Ownership Interest to the Active Owners pro
rata according to their respective Total Component Ownership Interests.

(b)

At any time during a Call Option Period, the Active Owner(s) shall each
individually have an option to acquire all (but not less than all) of the
Composite Component Ownership Interest of each Retired Owner.  In order to
exercise such call option, an Active Owner must provide simultaneous written
notice to all Retired Owners and all other Active Owners, if any, of its
election to purchase the Composite Component Ownership Interest of each Retired
Owner.  The other Active Owners, if any, shall have 30 days in which to notify
the electing Active Owner and the other Retired Owner(s) whether or not they
elect to participate in the purchase of the Composite Component Ownership
Interests of the Retired Owner(s).  Sixty days following the issuance of the
initial call option notice, the Active Owner(s) electing to participate in such
option in accordance with this Section 13.3(b) shall (i) acquire all (but not
less than all) of the Composite Component Ownership Interest of each Retired
Owner and (ii) pay each Retired Owner in accordance with Section 4.1(b)(v).  If
there is more than one Active Owner, each Retired Owner shall Transfer its
Composite Component Ownership Interest to the Active Owners pro rata according
to their respective Total Component Ownership Interests.

13.4

Collateral Assignments.  Notwithstanding any provision to the contrary contained
in this Article XIII, each Party may, at any time, without the prior written
consent of the other Parties, assign to its Lenders as collateral security for
the prompt payment in full when due (whether at stated maturity, by acceleration
or otherwise) of its Secured Obligations, all or any portion of its Composite
Component Ownership Interest and its rights and obligations under this
Agreement.  Any assignment provided for in this Section 13.4, however, shall not
relieve such Party of any of its obligations under this Agreement.  If the
Lenders exercise their remedies under the applicable Security Documents and
foreclose on all or any portion of such Party’s Composite Component Ownership
Interest, then the Lenders shall, except to the extent otherwise agreed by the
Parties in writing, be bound by the terms and conditions of this Agreement.
 Each Party hereby irrevocably consents to any such assignment and to the
creation of any such security interest in favor of the Lenders, in each case,
pursuant to the applicable Security Documents.  Each Party hereby agrees, in
connection with any collateral assignment by any other Party of all or any
portion of its Composite Component Ownership Interest and/or its rights and
obligations under this Agreement to its Lenders, to enter into a consent to
assignment containing terms and conditions substantially similar to those
provided in the form attached as Exhibit E and such other commercially
reasonable terms and conditions as such Lenders may reasonably require.

ARTICLE XIV: REPRESENTATIONS AND WARRANTIES

 

Each Party represents and warrants to each other Party, as of the date hereof,
as follows:

 

14.1

Due Organization.

(a)

It is duly formed, validly existing and in good standing under the Laws of the
State of Wisconsin.

(b)

It has all requisite limited liability company or municipal electric company
power necessary to own its assets and carry on its business as now being
conducted or as proposed to be conducted under this Agreement.

14.2

Due Authorization.  It has all necessary limited liability company or municipal
electric company power and authority to execute, deliver and perform its
obligations under this Agreement, and the execution, delivery and performance by
it of this Agreement have been duly authorized by all necessary limited
liability company or municipal electric company action on its part.

 

14.3

Non-Contravention.  The execution, delivery and performance by it of this
Agreement do not and shall not:

 

 

(a)

violate its Organic Documents;

 

(b)

violate any Law or Government Approval applicable to it or its property;

 

(c)

result in a breach of or constitute a default of any of the Elm Road I Project
Documents or Elm Road II Project Documents to which it is a party or any other
material agreement to which it is a party; or

 

(d)

result in, or require the creation or imposition of, any Lien (other than a
Permitted Encumbrance) on any of its properties.

14.4

Enforceability.  Assuming the due authorization, execution and delivery of this
Agreement by the other Parties, this Agreement constitutes its legal, valid and
binding obligation enforceable against it in accordance with its terms, except
as the same may be limited by bankruptcy, insolvency or other similar Laws
affecting creditors’ rights generally and by general principles of equity.

14.5

Litigation.  Except as disclosed in writing to the other Parties, there is no
action, suit or proceeding at law or in equity or by or before any Governmental
Authority now pending or, to its knowledge, threatened in writing against or
affecting it or any of its properties, rights or assets which could reasonably
be expected to have a material adverse effect on its ability to perform its
obligations under this Agreement or the validity or enforceability of this
Agreement. 

 

14.6

Government Approvals.  Except as disclosed in writing to the other Parties, all
material Government Approvals required by applicable Law to have been obtained
by it prior to the date of this representation and warranty in connection with
(a) owning its assets and carrying on its business as now being conducted or as
proposed to be conducted under this Agreement and (b) the due execution and
delivery of, and performance by it of its obligations and the exercise of its
rights under, this Agreement have been duly obtained or made and are in full
force and effect, are held in its name and are free from conditions or
requirements (i) compliance with which could reasonably be expected to have a
material adverse effect on its ability to perform its obligations under this
Agreement or the validity or enforceability of this Agreement or (ii) which it
does not reasonably expect to be able to satisfy.

 

14.7

No Breach.  It is not in breach of any material obligation under this Agreement
or any other Elm Road I Project Document or Elm Road II Project Document to
which it is a party.

14.8

Disclaimer of Other Representations and Warranties.  Each Party acknowledges and
agrees that except as expressly set forth in this Agreement, no Party makes any
representation or warranty, written or oral, statutory, express or implied, at
law or in equity or otherwise, with respect to:

(a)

the New Common Facilities (or any Component Ownership Interest) or the Project,
including with respect to (i) the merchantability, usage, suitability or fitness
for any particular purpose of the New Common Facilities (or any Component
Ownership Interest) or the workmanship thereof or the absence of defects
therein, whether latent or patent, (ii) the business, financial condition,
prospects (financial or otherwise), liabilities or risks of the New Common
Facilities (or any Component Ownership Interest) or the Project, or (iii) the
physical condition, quality or value of the New Common Facilities (or any
Component Ownership Interest) or the Project, and any such other representation
or warranty is hereby expressly disclaimed; or

(b)

the accuracy or completeness of the reports, notices, documents, information or
data of whatever kind or nature heretofore, now or hereafter made available to
any Party in connection with this Agreement.

ARTICLE XV:  CONFIDENTIALITY

15.1

Non-Disclosure Obligations. 

(a)

Each Party agrees that it and its Affiliates and their respective
Representatives will use any Confidential Information and Trade Secrets of
another Party solely for the purpose of performing its obligations and
exercising its rights under this Agreement and the other Elm Road I Project
Documents and Elm Road II Project Documents to which it is party.  Each Party
further agrees that a receiving Party may disclose Confidential Information or
Trade Secrets only to the receiving Party’s Representatives who are involved in
performing the obligations and exercising the rights of the receiving Party
under this Agreement and the other Elm Road I Project Documents and Elm Road II
Project Documents to which it is a party, and then only on a need-to-know basis.
 

 

(b)

Subject to Section 15.1(c), each Party agrees that it will not (and each Party
shall take full responsibility for ensuring that all of its Affiliates and all
of its and its Affiliates’ respective Representatives do not) in any way
disclose, communicate, transfer or use (other than as permitted by this Section
15.1) any Confidential Information or Trade Secrets of another Party, without
the prior written consent in each instance of such other Party.  With respect to
Trade Secrets, the provisions in this Section 15.1(b) shall apply for as long as
the underlying information or data remains a Trade Secret; and with respect to
Confidential Information, the provisions in this Section 15.1(b) shall apply for
two years after the expiration or termination of this Agreement as to such Party
or Parties.

(c)

Notwithstanding Section 15.1(b), each Party shall have the right to disclose
Confidential Information or Trade Secrets without the consent of the other
Parties to its Lenders and to any Person (and its Representatives) contemplating
a purchase, directly or indirectly, of all or an interest in such Party or such
Party’s Component Ownership Interests, provided that such Lender or Person
agrees in writing that it (and its Representatives) will maintain such
Confidential Information and Trade Secrets in accordance with the terms and
conditions of this Article XV.  

(d)

Notwithstanding any other provision of this Agreement to the contrary, if a
Party seeks to use information in a court or regulatory proceeding as part of
its implementation or enforcement of this Agreement, the fact that such
information has been deemed Confidential Information hereunder shall not
foreclose the Party from attempting to establish that, under the circumstances
present at the time of the proceeding, the information need not be subject to a
protective order or similar confidential treatment in such proceeding.

(e)

Notwithstanding anything in this Agreement to the contrary, any Party (and its
Representatives) may disclose to any and all Persons, without limitation of any
kind, the tax treatment and tax structure of the transactions contemplated by
this Agreement and all materials of any kind (including opinions or other tax
analyses) that are provided to it relating to such tax treatment and tax
structure.  In addition, each Party acknowledges that it has no proprietary or
exclusive rights to the tax treatment or tax structure of the transactions
contemplated by this Agreement or any tax matter or tax idea related to such
transactions.  However, each Party (and its Representatives) shall keep
confidential any such information relating to the tax treatment or tax structure
of the transactions contemplated by this Agreement that is required to be kept
confidential to the extent necessary to comply with any applicable federal or
state securities laws.

15.2

Law.  Each Party agrees that if it becomes subject to a subpoena or other Law to
disclose any of the Confidential Information or Trade Secrets of one of the
other Parties, it will provide such other Party with prompt notice so that such
other Party may seek a protective order or other appropriate remedy.  If such
protective order or other appropriate remedy is denied or otherwise not
obtained, the Party required to furnish the information shall furnish only that
portion of the Confidential Information and/or Trade Secrets which is, in the
opinion of its counsel, legally compelled, and will cooperate with the other
Party and its counsel to enable the other Party to attempt to obtain a
protective order or other reliable assurance that confidential treatment will be
accorded the Confidential Information and/or Trade Secrets to be disclosed.

ARTICLE XVI:  INDEMNITY; LIMITATION ON LIABILITY

16.1

Indemnities.  Each Party shall indemnify, defend and hold harmless each other
Party and its Representatives from and against any and all third party Claims
arising (i) under or in connection with this Agreement or (ii) in connection
with the acts or omissions of such Party or its Representatives on or about the
Elm Road Site, in each case, which are asserted against, imposed upon or
incurred by such other Party and its Representatives, by reason of such Party’s
or its Representatives’ Gross Negligence or willful misconduct.

16.2

Cooperation Regarding Claims.  If any Party (an “Indemnified Party”) receives
notice or has knowledge of any Claim that may result in a claim for
indemnification by such Indemnified Party or its Representatives against any
other Party (an “Indemnifying Party”) pursuant to this Article XVI, such
Indemnified Party shall as promptly as possible give the Indemnifying Party
notice of such Claim, including a reasonably detailed description of the facts
and circumstances relating to such Claim, a complete copy of all notices,
pleadings and other papers related thereto, and in reasonable detail the basis
for its claim for indemnification with respect thereto.  Failure to promptly
give such notice or to provide such information and documents shall not relieve
the Indemnifying Party from the obligation hereunder to respond to or defend the
Indemnified Party or its Representatives against such Claim unless such failure
shall materially diminish the ability of the Indemnifying Party to respond to or
to defend the Indemnified Party or its Representatives against such Claim.  The
Indemnifying Party, upon its acknowledgment in writing of its obligation to
indemnify the Indemnified Party or its Representatives in accordance with this
Article XVI, shall be entitled to assume the defense or to represent the
interest of the Indemnified Party or its Representatives with respect to such
Claim, which shall include the right to select and direct legal counsel and
other consultants, appear in proceedings on behalf of such Indemnified Party or
its Representatives and to propose, accept or reject offers of settlement, all
at its sole cost.  If and to the extent that any such settlement is reasonably
likely to involve injunctive, equitable or prospective relief or materially and
adversely affect the Indemnified Party’s or its Representatives’ business or
operations other than as a result of money damages or other money payments, then
such settlement will be subject to the reasonable approval of the Indemnified
Party or its Representatives.  Nothing herein shall prevent an Indemnified Party
or its Representatives from retaining its own legal counsel and other
consultants and participating in its own defense at its own cost and expense.
 The Parties shall cooperate with each other in any notification to insurers.

16.3

Limitation on Liability.  

(a)

Notwithstanding any provision in this Agreement to the contrary, no Party nor
any of its respective Representatives shall be liable under this Agreement for
any exemplary or punitive damages or consequential or indirect loss or damage,
including loss of profit, cost of capital, loss of goodwill, replacement power,
loss of revenue from the sale of capacity or energy or any other special or
incidental damages.

(b)

The Parties acknowledge and agree that (i) this Agreement is executed and
delivered by the member(s) of ERGS SC and MGE Power, not individually or
personally but solely as the members of such Party; (ii) each of the
representations, undertakings and agreements herein made on the part of ERGS SC
and MGE Power is made not as a personal representation, undertaking and
agreement by the member(s) of such Party, but is made and intended for the
purpose of binding only ERGS SC and MGE Power; (iii) nothing herein contained
shall be construed as creating any liability on the member(s) of ERGS SC or MGE
Power, individually or personally, to perform any covenants, either expressly
contained or implied herein, and all such liability, if any, is hereby expressly
waived by the Parties and by any Person claiming by, through or under the
Parties; and (iv) under no circumstances shall the member(s) of ERGS SC or MGE
Power be personally liable for the payment of any indebtedness or expenses of
ERGS SC or MGE Power, respectively, or for the breach or failure of any
obligation, representation, warranty or covenant made or undertaken under this
Agreement by ERGS SC or MGE Power, respectively.  

(c)

The Parties acknowledge and agree that (i) each of the representations,
undertakings and agreements herein made on the part of the Parties is made not
as a personal representation, undertaking and agreement by the Representative of
such Party, but is made and intended for the purpose of binding only the Party;
(ii) nothing herein contained shall be construed as creating any liability on
the Representatives of the Parties, individually or personally, to perform any
covenants, either expressly contained or implied herein, and all such liability,
if any, is hereby expressly waived by the Parties and by any Person claiming by,
through or under the Parties; and (iii) under no circumstances shall the
Representatives of the Parties be personally liable for the payment of any
indebtedness or expenses of such Parties, respectively, or for the breach or
failure of any obligation, representation, warranty or covenant made or
undertaken under this Agreement by such Parties, respectively.  

16.4

Disputes.  All issues of liability as between and among the Parties arising
under this Agreement shall constitute Disputes to be resolved pursuant to the
provisions of Article XVII.

ARTICLE XVII:  DISPUTE RESOLUTION

17.1

Exclusive Procedure.  Any controversy, claim or dispute of whatsoever nature or
kind between or among the Parties arising out of or in connection with this
Agreement or its validity or interpretation (each a “Dispute”) shall be resolved
pursuant to the procedures of this Article XVII.

 

17.2

Dispute Notices.  If a Dispute arises between or among the Parties, then any
Party to such Dispute may provide written notice thereof to the other Parties,
including a detailed description of the subject matter of the Dispute (the
“Dispute Notice”).  The Dispute Notice shall identify the Party or Parties to
the Dispute, which shall participate in the Dispute resolution process.  Each
other Party in receipt of a Dispute Notice shall inform the other Parties in
writing whether it will participate in the Dispute resolution process.  If a
Party in receipt of a Dispute Notice believes that it has counterclaims arising
out of the same set of facts as the Dispute, it shall promptly notify the other
Parties of such counterclaims no later than two Business Days before the first
meeting of the senior executives required pursuant to Section 17.3(b).  The
Party providing the Dispute Notice, each other Party identified in the Dispute
Notice as a Party to the Dispute and each other Party electing to participate in
the Dispute shall be referred to as a “Disputing Party”.

 

17.3

Informal Resolution of Disputes.  

(a)

Upon the issuance or receipt of a Dispute Notice, the representatives of each
Disputing Party shall in good faith attempt to resolve such Dispute by informal
negotiations within ten Business Days from the date of receipt of such Dispute
Notice.

(b)

If the Dispute is not resolved within ten Business Days following receipt of the
Dispute Notice or such later date as the Disputing Parties may mutually agree,
then each Disputing Party shall promptly designate its most senior executive
responsible for the subject matter of the Dispute who shall have authority to
resolve the Dispute.  The senior executives shall obtain such information as may
be necessary to inform themselves of the substance and particulars of the
Dispute and shall meet within 20 Business Days, at a time and place mutually
acceptable to the senior executives.

(c)

If the senior executives are unable to resolve the Dispute within 20 Business
Days of their first meeting or such later date as the senior executives may
mutually agree, then the Dispute shall, subject to Section 17.3(d), be resolved
solely and exclusively by the state courts situated in Milwaukee County,
Wisconsin or the United States District Court for the Eastern District of
Wisconsin (the “Approved Courts”).  

(d)

Notwithstanding anything to the contrary in Section 17.3(c), the Parties
acknowledge and agree that a Dispute over which a Governmental Authority has
exclusive jurisdiction shall, in the first instance, be brought before and
resolved by such Governmental Authority.

(e)

Each Party consents to and accepts for itself and in respect of its property,
generally and unconditionally, but subject to Section 17.3(d), the exclusive
jurisdiction of the Approved Courts and appellate courts from any appeal
thereof, and irrevocably waives any objection which it may now or hereafter have
to the jurisdiction of the Approved Courts.  Each Party further irrevocably
waives any objection that it may now or hereafter have to the laying of venue of
any suit, proceeding or other action brought pursuant to this Section 17.3 in
any of the Approved Courts, and irrevocably waives and agrees not to plead or
claim in any such Approved Court that any suit, proceeding or other action
brought therein has been brought in an inconvenient forum.  

17.4

Continued Performance.  During the pendency of any Dispute, each Party shall
continue to perform all of its respective obligations under this Agreement.

17.5

Consolidation of Proceedings.  If (a) a Dispute under this Agreement and one or
more disputes under one of the other Elm Road Documents involves common issues
of fact or law, (b) consolidating the disputes into one proceeding would be more
efficient than separate proceedings and (c) no party to any of the disputes
would be prejudiced as a result of such consolidation through undue delay or
otherwise, then the Parties to the Dispute shall use commercially reasonable
efforts to consolidate such disputes into one proceeding to facilitate the
comprehensive resolution of the disputes.

ARTICLE XVIII:  MISCELLANEOUS

18.1

Applicable Law.  The rights and obligations of the Parties under this Agreement
shall be governed by, and construed and interpreted in accordance with, the laws
of the State of Wisconsin, without regard to conflicts of law doctrines.

18.2

Jury Trial.  EACH OF THE PARTIES WAIVES TO THE FULLEST EXTENT PERMITTED BY LAW
ANY RIGHT TO A TRIAL BY JURY IN ANY ACTION OR PROCEEDING TO ENFORCE OR DEFEND
ANY RIGHTS UNDER THIS AGREEMENT OR UNDER ANY AMENDMENT, INSTRUMENT, DOCUMENT OR
AGREEMENT DELIVERED OR WHICH MAY IN THE FUTURE BE DELIVERED IN CONNECTION WITH
THIS AGREEMENT AND AGREES THAT ANY SUCH ACTION OR PROCEEDING SHALL BE TRIED
BEFORE A COURT AND NOT BEFORE A JURY.

18.3

Notices.  Unless otherwise expressly provided for in this Agreement, all
communications and notices to a Party in connection with this Agreement shall be
in writing, by facsimile or by email, and any such notice shall become effective
(a) upon personal delivery thereof, including, by overnight mail or next
Business Day or courier service, (b) in the case of notice by United States
mail, certified or registered, postage prepaid, return receipt requested, upon
receipt thereof, (c) in the case of notice by facsimile, upon transmission
thereof, provided that in addition to such transmission a confirmation copy of
the notice is also provided promptly by either of the methods set forth in
clause (a) or (b) above, or (d) in the case of email, upon transmission thereof,
provided that in addition to such transmission a confirmation copy of the notice
is also provided by either of the methods set forth in clause (a) or (b) above.
 All notices provided by the means described in clauses (a), (b), (c) or (d)
above shall be addressed as provided in Schedule 18.3, or to such other address
as any Party may designate by written notice to the other Parties.

18.4

Counterparts.  This Agreement may be executed in one or more counterparts, each
of which shall be an original and all of which together shall constitute one and
the same instrument.  

18.5

Severability.  Whenever possible, each provision of this Agreement shall be
interpreted in such manner as to be effective and valid under applicable Law;
but if any provision of this Agreement shall be prohibited by or deemed invalid
under any applicable 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 Agreement.

18.6

Parties Bound.  This Agreement shall be binding upon the Parties and their
respective successors and permitted assigns.  

18.7

Third-Party Beneficiaries.  Except as expressly provided herein, none of the
provisions of this Agreement are intended for the benefit of any Person other
than the Parties, their respective successors and permitted assigns.  

18.8

Entire Agreement.  This Agreement states the rights of the Parties with respect
to the transactions contemplated by this Agreement and supersedes all prior
agreements, oral or written, with respect thereto, including the Participation
Agreements and the Mutual Confidentiality Agreements, but excluding the Phase II
Confidentiality Agreement, dated as of May, 2003, between WEC and WPPI and the
Phase II Confidentiality Agreement, dated as of May, 2003, between WEC and MGE.

 

18.9

Headings and Table of Contents.  Section headings and the table of contents used
in this Agreement (including headings used in the Schedules, Annexes and
Exhibits attached hereto) are for convenience of reference only and shall not
affect the construction of this Agreement.

18.10

Schedules and Exhibits.  The Schedules and Exhibits together with all
attachments referenced therein, are incorporated herein by reference and made a
part hereof.

18.11

Amendments and Waivers.  

(a)

This Agreement may not be amended, supplemented or otherwise modified, other
than pursuant to an instrument or instruments in writing executed by the
Parties.  

(b)

No waiver by any Party of any one or more defaults by any other Party or Parties
in the performance of any of the provisions of this Agreement shall be construed
as a waiver of any other default or defaults whether of a like kind or different
nature.  Any delay, less than any applicable statutory period of limitations, in
asserting or enforcing any rights under this Agreement shall not be deemed a
waiver of such rights.  Failure of any Party to enforce any provisions hereof
shall not be construed to waive such provision, or to affect the validity of
this Agreement or any part thereof, or the right of any Party thereafter to
enforce each and every provision thereof.

18.12

No Joint Venture.  Any intention to create a joint venture or partnership
relation between or among the Parties is hereby expressly waived.

18.13

Survival.  Except for Articles I, VI, VII, XII, XV, XVI, XVII and XVIII and
Sections 2.3, 3.2(b), 3.2(c), 4.2, 4.4, 9.4(a), 9.4(b) and 10.3 which shall
survive termination of this Agreement and except as otherwise expressly provided
in this Agreement, the representations, warranties and obligations of each Party
contained in this Agreement or in any certificate delivered by a Party pursuant
to the terms of this Agreement shall not survive the termination of this
Agreement either in its entirety or as to a particular Party in accordance with
its terms.

18.14

Waiver of Immunity.  WPPI agrees that in response to any Dispute to which WPPI
is a party or any suit, proceeding or other action against WPPI under this
Agreement, WPPI will not assert, and hereby waives, (a) the rights and
protections that it or its assets may have, (b) any limitation on a Party to
bring a suit, proceeding or other action, or to recover or enforce a judgment
against WPPI or any of its assets under this Agreement and (c) any limitation on
the amount of recovery or award of damages under this Agreement, in each case,
only to the extent that such rights, protections, and limitations arise from
immunity (including immunity under Sections 66.0825(7) or 893.80, Wisconsin
Statutes) which WPPI or its assets enjoy as a consequence of WPPI’s status as a
public body politic and corporate of the State of Wisconsin.

18.15

Further Assurances.  Each Party shall promptly and duly execute and deliver such
further documents and assurances for and take such further actions reasonably
requested by the other Parties, all as may be reasonably necessary to carry out
the purposes of this Agreement.

[SIGNATURES FOLLOW ON NEXT PAGE]

IN WITNESS WHEREOF, each of the Parties has caused its duly authorized officer
to execute this New Common Facilities Ownership Agreement as of the date first
above written.

ERGS SC

ELM ROAD GENERATING STATION

SUPERCRITICAL, LLC

By: /s/ Tom Metcalfe

Title: Vice President

MGE POWER

MGE POWER ELM ROAD, LLC

By:  /s/ Gary J. Wolter

Title:  Manager

WPPI

WISCONSIN PUBLIC POWER INC.

By:  /s/ J. Leroy Thilly

Title:  President and CEO

PROJECT MANAGER

ELM ROAD SERVICES, LLC,

as agent for the Unit 1 Owners

By:  /s/ Robert P. Tutkowski

Title:  Vice President

Signing solely for purposes of Section 18.16 of the Elm Road I Ownership
Agreement:

WE POWER

W.E. POWER LLC

By:  /s/ Tom Metcalfe

Title:  Vice President

 

EXHIBIT A

Description of Unit 1, Unit 2 and the New Common Facilities

1.1

Description of Unit 1.  Unit 1 shall consist of the following:

(a)

an approximately 615 MW (net) supercritical pulverized coal electric generating
facility and related facilities (including all facilities, components, equipment
and materials that make up Unit 1), as further described in the EPC Agreement;
and

 

(b)

All Capital Improvements (as such term is defined in the Unit 1 Ownership
Agreement) to Unit 1 that may be made from time to time.

 

“Unit 1” shall not include the Existing Units, Unit 2, the transmission
facilities of the American Transmission Company LLC, all real property rights to
a fee or leasehold interest in the Elm Road Site (including ERGS SC’s leasehold
interests in the Elm Road Site), the New Common Facilities, the Existing Common
Facilities, all facilities, equipment, materials, improvements and property the
costs of which are Project Costs (as such term is defined in the Unit 1
Ownership Agreement), but which by their nature or otherwise are to be owned by
third parties (e.g., transmission equipment, railroad infrastructure, road
improvements, accommodations to land-owners, etc.), and all other facilities,
equipment, improvements and property owned by WEPCO and located at the Elm Road
Site.

1.2

Description of Unit 2.  Unit 2 shall consist of the following:

(a)

an approximately 615 MW (net) supercritical pulverized coal electric generating
facility and related facilities (including all facilities, components, equipment
and materials that make up Unit 2), as further described in the EPC Agreement;
and

 

(b)

All Capital Improvements (as such term is defined in the Unit 2 Ownership
Agreement) to Unit 2 that may be made from time to time.

 

“Unit 2” shall not include the Existing Units, Unit 1, the transmission
facilities of the American Transmission Company LLC, all real property rights to
a fee or leasehold interest in the Elm Road Site (including ERGS SC’s leasehold
interests in the Elm Road Site), the New Common Facilities, the Existing Common
Facilities, all facilities, equipment, materials, improvements and property the
costs of which are Project Costs (as such term is defined in the Unit 2
Ownership Agreement), but which by their nature or otherwise are to be owned by
third parties (e.g., transmission equipment, railroad infrastructure, road
improvements, accommodations to land-owners, etc.), and all other facilities,
equipment, improvements and property owned by WEPCO and located at the Elm Road
Site.

1.3

Description of New Common Facilities.  The New Common Facilities shall consist
of the following components (collectively, the “Components”):

(a)

a circulating water system, including water intake structure, central
distribution system, pumps and all facilities, components, equipment and
materials that make up the circulating water system (as further described in the
EPC Agreement, “Component 1”);

(b)

fuel delivery and handling systems, including railroad infrastructure, central
coal unloading, central storage, central conveying systems and all facilities,
components, equipment and materials that make up the fuel delivery and handling
systems (as further described in the EPC Agreement, “Component 2”);

(c)

common operating systems for Unit 1 and Unit 2, including control room,
administration building, limestone/gypsum delivery, storage and handling systems
and all facilities, components, equipment and materials that make up the common
operating systems (as further described in the EPC Agreement, “Component 3”);

(d)

balance of site-wide common facilities and systems, including roads,
training/visitors center, security systems and all facilities, components,
equipment and materials that constitute a part of such site-wide common systems
(as further described in the EPC Agreement, “Component 4”); and

(e)

All Capital Improvements to the Components that may be made from time to time.

 

“New Common Facilities” shall not include the Existing Units, the New Units, the
transmission facilities of the American Transmission Company LLC, all real
property rights to a fee or leasehold interest in the Elm Road Site (including
ERGS SC’s leasehold interests in the Elm Road Site), the Existing Common
Facilities, all facilities, equipment, materials, improvements and property the
costs of which are Project Costs (as such term is defined in the Unit 1
Ownership Agreement), but which by their nature or otherwise are to be owned by
third parties (e.g., transmission equipment, railroad infrastructure, road
improvements, accommodations to land-owners, etc.), and all other facilities,
equipment, improvements and property owned by WEPCO and located at the Elm Road
Site.

EXHIBIT B

Form of Bill of Sale

THIS BILL OF SALE (this “Bill of Sale”) is made as of the [__] day of [_____],
20[__] by [_______________], a [_______________] (“Seller”), for the benefit of
[_______________], a [_______________] (“Buyer”).

W I T N E S S E T H:

WHEREAS, pursuant to that certain New Common Facilities Ownership Agreement,
dated as of December 17, 2004 (as amended, supplemented or otherwise modified
from time to time, the “Ownership Agreement”), among Seller, Buyer and [Elm Road
Generating Station Supercritical, LLC][MGE Power Elm Road, LLC][Wisconsin Public
Power Inc.], Seller has agreed to sell, assign, convey, transfer and deliver to
Buyer, and Buyer has agreed to purchase, assume and acquire from Seller, [all][a
portion] of Seller’s [Unit 1 Component Ownership Interests] [and] [Unit 2
Component Ownership Interests]; and

WHEREAS, pursuant to the Ownership Agreement, Seller has entered into this Bill
of Sale to evidence such conveyance to Buyer.

NOW, THEREFORE, in consideration of the foregoing premises and for other good
and valuable consideration, the receipt and adequacy of which is hereby
acknowledged, Seller hereby agrees as follows:

1.

Defined Terms.  Capitalized terms which are used but not defined in this Bill of
Sale shall have the meaning ascribed to such terms in the Ownership Agreement.

2.

Assignment.  Seller does hereby sell, assign, convey, transfer and deliver to
Buyer, and Buyer does hereby purchase, assume and acquire from Seller:

(a)

All of Seller’s right, title and interest in and to [a [___]%1 Unit 1 Component
Ownership Interest in Component 1] [and] [a [___]%1 Unit 2 Component Ownership
Interest in Component 1];

(b)

All of Seller’s right, title and interest in and to [a [___]%1 Unit 1 Component
Ownership Interest in Component 2] [and] [a [___]%1 Unit 2 Component Ownership
Interest in Component 2];

(c)

All of Seller’s right, title and interest in and to [a [___]%1 Unit 1 Component
Ownership Interest in Component 3] [and] [a [___]%1 Unit 2 Component Ownership
Interest in Component 3]; and

(d)

All of Seller’s right, title and interest in and to [a [___]%1 Unit 1 Component
Ownership Interest in Component 4] [and] [a [___]%1 Unit 2 Component Ownership
Interest in Component 4].

(collectively, the “Transferred New Common Facilities Ownership Interest”)

3.

No Liens.  Seller represents and warrants to Buyer that (a) it is duly
authorized to execute and deliver this Bill of Sale and (b) it has good and
marketable title to the Transferred New Common Facilities Ownership Interest,
free and clear of all Liens other than those specified in paragraphs (a) through
(f) of the definition of Permitted Encumbrances.

4.

Disclaimers.  EXCEPT FOR THE REPRESENTATIONS AND WARRANTIES IN SECTION 3 OF THIS
BILL OF SALE AND THOSE SET FORTH IN THE OWNERSHIP AGREEMENT OR IN CERTIFICATES
DELIVERED BY SELLER PURSUANT THERETO, THE TRANSFERRED NEW COMMON FACILITIES
OWNERSHIP INTEREST IS BEING SOLD AND TRANSFERRED “AS IS, WHERE IS”, AND SELLER
MAKES NO REPRESENTATION OR WARRANTY, WRITTEN OR ORAL, STATUTORY, EXPRESS OR
IMPLIED, AT LAW OR IN EQUITY OR OTHERWISE, WITH RESPECT TO THE NEW COMMON
FACILITIES OR THE TRANSFERRED NEW COMMON FACILITIES OWNERSHIP INTEREST (OR ANY
COMPONENT OWNERSHIP INTEREST) OR THE PROJECT, INCLUDING WITH RESPECT TO (A) THE
MERCHANTABILITY, USAGE, SUITABILITY OR FITNESS FOR ANY PARTICULAR PURPOSE OF THE
NEW COMMON FACILITIES OR THE TRANSFERRED NEW COMMON FACILITIES OWNERSHIP
INTEREST (OR ANY COMPONENT OWNERSHIP INTEREST) OR THE WORKMANSHIP THEREOF OR THE
ABSENCE OF DEFECTS THEREIN, WHETHER LATENT OR PATENT, (B) THE BUSINESS,
FINANCIAL CONDITION, PROSPECTS (FINANCIAL OR OTHERWISE), LIABILITIES OR RISKS OF
THE NEW COMMON FACILITIES OR THE TRANSFERRED NEW COMMON FACILITIES OWNERSHIP
INTEREST (OR ANY COMPONENT OWNERSHIP INTEREST) OR THE PROJECT, OR (C) THE
PHYSICAL CONDITION, QUALITY OR VALUE OF THE NEW COMMON FACILITIES OR THE
TRANSFERRED NEW COMMON FACILITIES OWNERSHIP INTEREST (OR ANY COMPONENT OWNERSHIP
INTEREST) OR THE PROJECT, AND ANY SUCH OTHER REPRESENTATION OR WARRANTY IS
HEREBY EXPRESSLY DISCLAIMED.

5.

Binding Effect; Assignment.  This Bill of Sale and all of the provisions hereof
shall be binding upon Seller and its successors and permitted assigns and shall
inure to the benefit of Buyer and its successors and permitted assigns.

6.

No Third Party Beneficiary.  Nothing in this Bill of Sale is intended to confer
upon any other person except Buyer and Seller any rights or remedies hereunder
or shall create any third party beneficiary rights in any person.

7.

Governing Law.  This Bill of Sale shall be governed by, and construed and
interpreted in accordance with, the laws of the State of Wisconsin.

8.

Construction.  This Bill of Sale is delivered pursuant to Section 4.1(b)(i) of
the Ownership Agreement and is subject to the terms of the Ownership Agreement.
 In the event of any conflict or ambiguity between the terms of the Ownership
Agreement and the terms of this Bill of Sale, the terms of the Ownership
Agreement shall control.

9.

Counterparts.  This Bill of Sale may be executed in counterparts, each of which
shall be deemed an original, but all of which together shall constitute one and
the same instrument.

IN WITNESS WHEREOF, this Bill of Sale has been duly executed and delivered by
Seller as of the date first above written.

SELLER

[_______________________]

By:

Name:

Title:

ACCEPTED AND AGREED TO

THIS [_____] DAY OF [__________], 20[__]:

BUYER

[_______________________]

By:

Name:

Title:

EXHIBIT C

Form of Assignment and Assumption Agreement

THIS ASSIGNMENT AND ASSUMPTION AGREEMENT (this “Agreement”) dated as of
[__________], 20[__], is between [insert name of New Common Facilities Owner
Assignor], a [_______________] (“Assignor”), and [__________], a
[_______________] (“Assignee”).  Assignor and Assignee are referred to
individually as a “Party,” and collectively as the “Parties.”

W I T N E S S E T H:

WHEREAS, Assignor has agreed to Transfer [insert description of Assignor’s
Component Ownership Interests to be Transferred] (the “Transferred New Common
Facilities Ownership Interest”) to Assignee in accordance with Article IV of
that certain New Common Facilities Ownership Agreement, dated as of December 17,
2004 (as amended, supplemented or otherwise modified from time to time, the
“Ownership Agreement”), among Elm Road Generating Station Supercritical, LLC,
MGE Power Elm Road, LLC and Wisconsin Public Power Inc.; and

WHEREAS, in connection with the Transfer, Assignor desires to sell, assign,
convey, transfer and deliver to Assignee, and Assignee desires to purchase and
assume from Assignor, all of Assignor’s right, benefits, obligations and
liabilities under the Ownership Agreement in respect of the Transferred New
Common Facilities Ownership Interest.

NOW, THEREFORE, in consideration of the foregoing premises and for other good
and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the Parties hereby agree as follows:

1.

Capitalized Terms.  Capitalized terms which are used but not defined in this
Agreement shall have the meaning ascribed to such terms in the Ownership
Agreement.

2.  

Assignment and Assumption.  Assignor hereby sells, assigns, conveys, transfers
and delivers to Assignee, and Assignee hereby purchases and assumes from
Assignor, all of the rights, benefits, obligations and liabilities that Assignor
has in the Ownership Agreement in respect of the Transferred New Common
Facilities Ownership Interest.

3.

Waiver and Release.  Other than Assignee becoming a party to the Ownership
Agreement pursuant to this Agreement, neither the making nor the acceptance of
this Agreement shall enlarge, restrict or otherwise modify the terms of the
Ownership Agreement or constitute a waiver or release by either Party of any
liabilities, duties or obligations imposed upon either of them by the terms of
the Ownership Agreement.

4.

Bound By Ownership Agreement.  Assignee acknowledges that it has received a copy
of the Ownership Agreement and agrees that it will be bound by and perform in
accordance with its terms all of the obligations which by the terms of the
Ownership Agreement are required to be performed by it as a New Common
Facilities Owner.  [In addition, Assignee agrees to be bound by and perform all
of the obligations in Annex A attached hereto.]2

5.

Representations and Warranties.  

(a)

Assignee Representations and Warranties.  Assignee represents and warrants to
Assignor and to each other New Common Facilities Owner, as of the date hereof,
as follows:

 

(i)

Due Organization.

(A)

It is duly formed, validly existing and in good standing under the Laws of the
State of [__________]3.

(B)

It has all requisite power necessary to own its assets and carry on its business
as now being conducted or as proposed to be conducted under each of this
Agreement and the Ownership Agreement.

(ii)

Due Authorization.  It has all necessary corporate power and authority to
execute, deliver and perform its obligations under each of this Agreement and
the Ownership Agreement, and the execution, delivery and performance by it of
each of this Agreement and the Ownership Agreement have been duly authorized by
all necessary corporate action on its part.

(iii)

Non-Contravention.  The execution, delivery and performance by it of each of
this Agreement and the Ownership Agreement do not and shall not:

(A)

violate its Organic Documents;

(B)

violate any Law or Government Approval applicable to it or its property;

(C)

result in a breach of or constitute a default of any of the Elm Road I Project
Documents or Elm Road II Project Documents to which it is a party or any other
material agreement to which it is a party; or

 

(D)

result in, or require the creation or imposition of, any Lien (other than a
Permitted Encumbrance) on any of its properties.

(iv)

Enforceability.  Assuming the due authorization, execution and delivery of each
of this Agreement and the Ownership Agreement by the other parties hereto and
thereto, each of this Agreement and the Ownership Agreement constitutes its
legal, valid and binding obligation enforceable against it in accordance with
its terms, except as the same may be limited by bankruptcy, insolvency or other
similar Laws affecting creditors’ rights generally and by general principles of
equity.

(v)

Litigation.  Except as disclosed in writing to Assignor and the other New Common
Facilities Owner, there is no action, suit or proceeding at law or in equity or
by or before any Governmental Authority now pending or, to its knowledge,
threatened in writing against or affecting it or any of its properties, rights
or assets which could reasonably be expected to have a material adverse effect
on its ability to perform its obligations under each of this Agreement and the
Ownership Agreement or the validity or enforceability of each of this Agreement
or the Ownership Agreement. 

 

(vi)

Government Approvals.  Except as disclosed in writing to Assignor and the other
New Common Facilities Owners, all material Government Approvals required by
applicable Law to have been obtained by it prior to the date of this
representation and warranty in connection with (A) owning its assets and
carrying on its business as now being conducted or as proposed to be conducted
under each of this Agreement and the Ownership Agreement and (B) the due
execution and delivery of, and performance by it of its obligations and the
exercise of its rights under, each of this Agreement and the other Elm Road I
Project Documents and Elm Road II Project Documents to which it is a party have
been duly obtained or made and are in full force and effect, are held in its
name and are free from conditions or requirements (i) compliance with which
could reasonably be expected to have a material adverse effect on its ability to
perform its obligations under each of this Agreement and the Ownership Agreement
or the validity or enforceability of each of this Agreement or the Ownership
Agreement or (ii) which it does not reasonably expect to be able to satisfy.

 

(vii)

No Breach.  It is not in breach of any material obligation under each of this
Agreement and the Ownership Agreement or any other Elm Road I Project Document
or Elm Road II Project Document to which it is a party.

(b)

Assignor Representations and Warranties.  Assignor represents and warrants to
Assignee as of the date hereof, as follows:

 

(i)

Due Organization.

(A)

It is duly formed, validly existing and in good standing under the Laws of the
State of [__________]4.

(B)

It has all requisite power necessary to own its assets and carry on its business
as now being conducted or as proposed to be conducted under this Agreement.

(ii)

Due Authorization.  It has all necessary corporate power and authority to
execute, deliver and perform its obligations under this Agreement, and the
execution, delivery and performance by it of this Agreement have been duly
authorized by all necessary corporate action on its part.

(iii)

Non-Contravention.  The execution, delivery and performance by it of this
Agreement do not and shall not:

(A)

violate its Organic Documents;

(B)

violate any Law or Government Approval applicable to it or its property;

(C)

result in a breach of or constitute a default of any of the Elm Road I Project
Documents or Elm Road II Project Documents to which it is a party or any other
material agreement to which it is a party; or

 

(D)

result in, or require the creation or imposition of, any Lien (other than a
Permitted Encumbrance) on any of its properties.

(iv)

Enforceability.  Assuming the due authorization, execution and delivery of this
Agreement by the other parties hereto and thereto, this Agreement constitutes
its legal, valid and binding obligation enforceable against it in accordance
with its terms, except as the same may be limited by bankruptcy, insolvency or
other similar Laws affecting creditors’ rights generally and by general
principles of equity.

(v)

Litigation.  Except as disclosed in writing to Assignee, there is no action,
suit or proceeding at law or in equity or by or before any Governmental
Authority now pending or, to its knowledge, threatened in writing against or
affecting it or any of its properties, rights or assets which could reasonably
be expected to have a material adverse effect on its ability to perform its
obligations under this Agreement or the validity or enforceability of this
Agreement. 

 

(vi)

Government Approvals.  Except as disclosed in writing to Assignee, all material
Government Approvals required by applicable Law to have been obtained by it
prior to the date of this representation and warranty in connection with (A)
owning its assets and carrying on its business as now being conducted or as
proposed to be conducted under this Agreement and (B) the due execution and
delivery of, and performance by it of its obligations and the exercise of its
rights under this Agreement have been duly obtained or made and are in full
force and effect, are held in its name and are free from conditions or
requirements (i) compliance with which could reasonably be expected to have a
material adverse effect on its ability to perform its obligations under this
Agreement or the validity or enforceability of this Agreement or (ii) which it
does not reasonably expect to be able to satisfy.

 

(vii)

No Breach.  It is not in breach of any material obligation under each of this
Agreement and the Ownership Agreement or any other Elm Road I Project Document
or Elm Road II Project Document to which it is a party.

6.

Effectiveness.  This Agreement shall be effective as of the date hereof5.

7.  

Conflicts with Ownership Agreement.  If any provision of this Agreement shall be
construed to conflict with a provision in the Ownership Agreement, the provision
in the Ownership Agreement shall control.

8.  

Successors and Assigns.  This Agreement shall bind and shall inure to the
benefit of the Parties and their respective successors and permitted assigns.

9.  

Third Party Beneficiaries.  Except as provided below, nothing in this Agreement
is intended to confer upon any other Person except Assignor and Assignee any
rights or remedies hereunder or shall create any third party beneficiary rights
in any person.  The New Common Facilities Owners under the Ownership Agreement
are intended third-party beneficiaries of this Agreement.

10.  

Governing Law.  The rights and the obligations of the Parties under this
Agreement shall be governed by, and construed and interpreted in accordance
with, the laws of the State of Wisconsin.

11.  

Counterparts.  This Agreement may be executed in counterparts, each of which
shall be deemed an original, but all of which together will constitute one and
the same instrument.

IN WITNESS WHEREOF, this Assignment and Assumption Agreement has been duly
executed and delivered by the Parties as of the date first above written.

ASSIGNOR

[_____________________________]

By:

Name:

Title:

ASSIGNEE

[_____________________________]

By:

Name:

Title:

ANNEX A to EXHIBIT C

Bankruptcy Remoteness Obligations

Assignee agrees to be bound by and perform the following covenants:

1.

Change in Business.  It shall not engage in any business other than business
relating to the development, design, engineering, procuring, permitting,
constructing, commissioning, owning, leasing and financing of one or both of the
New Units, the New Common Facilities and any electric generating unit that uses
some or all of the New Common Facilities (“Future Unit”), as contemplated by the
Ownership Agreement, the other Elm Road  Documents and any other agreements
relating to the Future Unit, in each case, to which it is a party and activities
incidental thereto.

2.

Ownership of Assets.  It shall not acquire any assets other than those relating
to the development, design, engineering, procuring, permitting, constructing,
commissioning, owning, leasing and financing of one or both of the New Units and
the Future Unit and the New Common Facilities, as contemplated by the Ownership
Agreement, the other Elm Road Documents and any other agreements relating to the
Future Unit, in each case, to which it is a party and activities incidental
thereto.

3.

No Subsidiaries.  It shall not have any subsidiaries and shall not beneficially
own the whole or any part of the issued share capital or other ownership
interest of any Person.

4.

Other Indebtedness.  It shall not incur any indebtedness other than that
permitted or required by the Ownership Agreement, the other Elm Road Documents
and any other agreements relating to the Future Unit, in each case, to which it
is a party or otherwise incurred in the ordinary course of business relating to
the development, design, engineering, procuring, permitting, constructing,
commissioning, owning, leasing and financing of one or both of the New Units and
the Future Unit and the New Common Facilities.  It shall not assume or guarantee
or become obligated for the debts of any other Person other than as required or
permitted by the Ownership Agreement, the other Elm Road Documents or any other
agreements relating to the Future Unit, in each case, to which it is a party.

5.

Amendments to Constituent Documents.  It shall not amend or permit to be amended
its constituent documents or the rights attaching to membership interests in it
if such amendment could reasonably be expected to have a material adverse effect
on its ability to perform its obligations under the Ownership Agreement, the
other Elm Road Documents or any other agreements relating to the Future Unit, in
each case, to which it is a party or the validity or enforceability of the
Ownership Agreement, the other Elm Road Documents or any other agreements
relating to the Future Unit, in each case, to which it is party.

6.

Maintenance of Accounts; Maintenance of Records; Commingling of Funds;
Arms-Length Transactions.

(a)

It shall maintain its accounts, books and records separate from any other Person
and in accordance with GAAP.

(b)

It shall not commingle its funds or assets with those of any other Person and
will hold its assets and conduct business in its own name.

(c)

It shall not enter into or be party to any transactions or agreements with its
members, partners or Affiliates (other than the Elm Road Documents or any other
agreements relating to the Future Unit, in each case, to which it is a party)
and those agreements contemplated thereby) except in the ordinary course of its
business and on terms that are reasonably fair and are no less favorable to it
than would be obtained in a comparable arm’s length transaction with an
unrelated third party.

7.

Independent Director.  It shall ensure that its constituent documents require
the favorable vote of one independent director or independent member, as the
case may be, before it can take any of the following voluntary actions in
anticipation of insolvency or bankruptcy:

(a)

apply for or consent to the appointment of a receiver, trustee or liquidator of
it or of all or a substantial part of its assets;

(b)

file a voluntary petition in bankruptcy, or admit in writing its inability to
pay its debts as they come due;

(c)

make a general assignment for the benefit of its creditors;

(d)

file a petition or an answer seeking reorganization or arrangement with its
creditors or take advantage of any insolvency Law;

(e)

file an answer admitting the material allegations of, or consent to, or default
in answering, a petition filed against it in any bankruptcy, reorganization or
insolvency proceedings; or

(f)

agree to be the subject of an order, judgment or decree entered by any court of
competent jurisdiction, approving a petition seeking reorganization of it or
appointing a receiver, trustee or liquidator of it or of all or a substantial
part of its assets.

EXHIBIT D

Elm Road Ownership Computations

[A hard copy printout will be included here of the electronic version of this
Exhibit D which will be distributed by ERGS SC to the other Parties on the
execution date of this Agreement.]

EXHIBIT E

Form of Consent and Agreement

This CONSENT AND AGREEMENT (this “Consent”), dated as of [__________], 200[_],
among [_______________], a [_______________]6 (“Consenting Party” or “[ERGS
SC][MGE Power][WPPI]”), [_______________], a [_______________]1 (“Borrower” or
“[ERGS SC][MGE Power][WPPI]”), and [_______________], in its capacity as
[__________]7 Agent (together with its successors in such capacity, the “Agent”)
for the financial institutions which are or from time to time may become a party
to the Credit Agreement (as defined below) (the “Lenders”).8

RECITALS

WHEREAS, Consenting Party, Borrower and [_______________], a [_______________]1
(“[ERGS SC][MGE Power][WPPI]”), have entered into that certain New Common
Facilities Ownership Agreement, dated as of December 17, 2004 (as amended,
restated, modified or otherwise supplemented from time to time in accordance
with the terms thereof and hereof, the “New Common Facilities Ownership
Agreement”; also referred to herein as the “Assigned Agreement”);

WHEREAS, ERGS SC has elected to proceed with the development, design,
engineering, permitting, construction and commissioning of (i) an approximately
615 MW (net) supercritical pulverized coal electric generating facility and
related facilities (“Unit 1”)9, (ii) an approximately 615 MW (net) supercritical
pulverized coal electric generating facility and related facilities (“Unit 2”)10
and (iii) certain facilities utilized in the operation and maintenance of Unit 1
and Unit 25,6 (the “New Common Facilities”) to be located on property owned by
Wisconsin Electric Power Company, a Wisconsin corporation and affiliate of ERGS
SC;

WHEREAS, the New Common Facilities Ownership Agreement provides for the terms
and conditions by which Consenting Party, Borrower and [[ERGS SC][MGE
Power][WPPI]]1 shall jointly own the New Common Facilities after completion of
construction;

WHEREAS, Borrower, the Agent and the Lenders have entered into a Credit
Agreement, dated as of [__________], 200[_] (as amended, restated, modified or
otherwise supplemented from time to time, the “Credit Agreement”), pursuant to
which the Lenders will make loans to Borrower for the purpose of financing
Borrower’s share of the cost of developing, designing, engineering, permitting,
constructing and commissioning the New Common Facilities, and certain related
expenses (the “Loans”);

WHEREAS, as security for the Loans and all other obligations of Borrower under
the Credit Agreement, Borrower has assigned all of its right, title and interest
in, to and under, and granted a security interest in, the Assigned Agreement to
the Agent pursuant to the Security Agreement, dated as of [__________], 200[_],
between Borrower and the Agent (as amended, restated, modified or otherwise
supplemented from time to time in accordance with the terms thereof, the
“Security Agreement”); and

WHEREAS, it is a condition precedent to the Lenders' obligations to make the
Loans under the Credit Agreement that Consenting Party execute and deliver this
Consent.

NOW, THEREFORE, as an inducement for the Lenders to make the Loans, and for
other good and valuable consideration, the receipt and adequacy of which is
hereby acknowledged, and intending to be legally bound, the parties hereto
hereby agree as follows:

SECTION 1.  DEFINITIONS AND RULES OF INTERPRETATION.  

1.1

Definitions.  Each capitalized term used in this Consent shall have the
following meaning:

“Agent” has the meaning given to such term in the Preamble to this Consent.

“Assigned Agreement” has the meaning given to such term in the Recitals to this
Consent.

“Assigned Interest” has the meaning given to such term in Section 2.1 of this
Consent.

“Borrower” has the meaning given to such term in the Preamble to this Consent.

“Consent” has the meaning given to such term in the Preamble to this Consent.

“Consenting Party” has the meaning given to such term in the Preamble to this
Consent.

“Control” means the possession, directly or indirectly, through one or more
intermediaries, of the following:

(a) (i)

in the case of a corporation, 50% or more of the outstanding voting securities
thereof; (ii) in the case of a limited liability company, partnership, limited
partnership or venture, the right to 50% or more of the distributions therefrom
(including liquidating distributions); (iii) in the case of a trust or estate,
including a business trust, 50% or more of the beneficial interest therein; and
(iv) in the case of any other entity, 50% or more of the economic or beneficial
interest therein; and

(b)

in the case of any entity, the power or authority, through ownership of voting
securities, by contract or otherwise, to exercise a controlling influence over
the management of the entity.

“Credit Agreement” has the meaning given to such term in the Recitals to this
Consent.

“Lenders” has the meaning given to such term in the Preamble to this Consent.

“Loans” has the meaning given to such term in the Recitals to this Consent.

“New Common Facilities” has the meaning given to such term in the Recitals to
this Consent.

“New Common Facilities Ownership Agreement” has the meaning given to such term
in the Recitals to this Consent.

“Parent” means, with respect to any Person, the Person that Controls such Person
and that is not itself Controlled by any other Person.

“Person” shall mean an individual, a corporation, a partnership, a limited
liability company, an association, a joint-stock company, a trust, an
unincorporated organization and any government or political subdivision thereof.

“Security Agreement” has the meaning given to such term in the Recitals to this
Consent.

“Substitute Owner” means any Person (a) who is the transferee of the Assigned
Interest from the Agent or Borrower or who is a purchaser of the Assigned
Interest in a judicial or nonjudicial foreclosure sale, (b)(i) whose senior
unsecured long-term debt is rated at least “A-” by Standard and Poor’s Rating
Services or its successor or “A3” by Moody’s Investors Service or its successor
or (ii) whose Parent’s senior unsecured long-term debt is rated at least “A-” by
Standard and Poor’s Rating Services or its successor or “A3” by Moody’s
Investors Service or its successor and whose Parent guarantees such Person’s
obligations under the Assigned Agreement, (c) who has at least five years
experience in the United States electric generating power industry and (d) who
assumes all obligations of Borrower under the Assigned Agreement in an
instrument in form and substance reasonably satisfactory to Consenting Party.11

“Unit 1” has the meaning given to such term in the Recitals to this Consent.

1.2

Rules of Interpretation and Construction.

(a)

Interpretation.  In this Consent, unless a clear contrary intention appears:

(i)

the singular number includes the plural number and vice versa;

(ii)

reference to any Person includes such Person’s successors and assigns but, if
applicable, only if such successors and assigns are permitted by this Consent,
and reference to a Person in a particular capacity excludes such Person in any
other capacity or individually;

(iii)

reference to either gender includes the other gender;

(iv)

reference to any agreement, document or instrument means such agreement,
document or instrument as amended or modified and in effect from time to time in
accordance with the terms thereof;

(v)

reference to any law means such law as amended, modified, codified, replaced or
reenacted, in whole or in part, and in effect from time to time, including rules
and regulations promulgated thereunder, and reference to any section or other
provision of any law means that provision of such law from time to time in
effect and constituting the substantive amendment, modification, codification,
replacement or re-enactment of such section or other provision;

(vi)

reference to any Preamble, Recital, Article, Section or Exhibit herein means
such Article or Section of this Consent or Preamble, Recital or Exhibit to this
Consent;

(vii)

“hereunder”, “hereof”, “hereto” and words of similar import shall be deemed
references to this Consent as a whole and not to any particular Article, Section
or other provision of this Consent;

(viii)

“including” (and with the correlative meaning “include”) means including without
limiting the generality of any description preceding such term; and

(ix)

with respect to any rights and obligations of the parties under this Consent,
all such rights and obligations shall be construed to the extent permitted by
applicable law.

(b)

Computation of Time Periods.  For purposes of computation of periods of time
under this Consent, the word “from” means “from and including” and the words
“to” and “until” each mean “to but excluding”.  

(c)

Accounting Terms and Determinations.  Unless otherwise specified in this
Consent, all terms of an accounting character used therein shall be interpreted,
all accounting determinations thereunder shall be made, and any financial
statements required to be delivered thereunder shall be prepared, in accordance
with generally accepted accounting principles in the United States as in effect
from time to time applied on a consistent basis.

(d)

Legal Representation of the Parties.  This Consent was negotiated by the parties
with the benefit of legal representation, and any rule of construction or
interpretation otherwise requiring this Consent to be construed or interpreted
against any party as the drafter shall not apply to any construction or
interpretation thereof.

(e)

Payments.  All payments permitted or required to be made by or on behalf of the
parties under the terms of this Consent shall be made to the account or accounts
designated by the party to which the payment is owned, by wire transfer (in
immediately available funds in the lawful currency of the United States).

SECTION 2.  CONSENT TO ASSIGNMENT

2.1

Consent to Assignment.  Consenting Party (a) acknowledges that the Lenders are
entering into the Credit Agreement and extending credit to Borrower in reliance
upon the execution and delivery by Consenting Party of this Consent, (b)
consents in all respects to the pledge and assignment to the Agent pursuant to
the Security Agreement of all of Borrower’s right, title and interest in, to and
under the Assigned Agreement including all of Borrower’s rights to receive
payment under or with respect to the Assigned Agreement and all payments due and
to become due to Borrower under or with respect to the Assigned Agreement,
whether as contractual obligations, damages, indemnity payments or otherwise
(the “Assigned Interest”), and (c) acknowledges the right, but not the
obligation, of the Agent or any designee of the Agent, in the exercise of the
Agent’s rights and remedies under the Security Agreement, to make all demands,
give all notices, take all actions and exercise all rights of Borrower under the
Assigned Agreement, and agrees that in such event Consenting Party shall
continue to perform its obligations under the Assigned Agreement in accordance
with the terms of the Assigned Agreement; provided, however, that nothing in
this Section 2.1 shall limit the ability of Consenting Party to exercise or
enforce its rights under the Assigned Agreement, subject to Section 2.3.  The
parties hereto acknowledge and agree that Consenting Party shall be entitled to
assume that any exercise or purported exercise by the Agent or any of its
designees of any rights or remedies of Borrower under the Assigned Agreement is
authorized or permitted by Borrower and the Credit Agreement.

2.2  

Substitute Owner.  

(a)

Consenting Party agrees that if the Agent shall notify Consenting Party that an
event of default under the Credit Agreement has occurred and is continuing and
that the Agent has elected to exercise its rights and remedies set forth in the
Security Agreement, then (i) the Agent or a Substitute Owner shall be
substituted for Borrower under the Assigned Agreement upon prior written notice
to such effect to Consenting Party, and (ii) Consenting Party will recognize the
Agent or Substitute Owner, as the case may be, and will continue to perform its
obligations under the Assigned Agreement in favor of the Agent or Substitute
Owner, as the case may be, in accordance with the terms of the Assigned
Agreement; provided, however, that nothing in this Section 2.2(a) shall limit
the ability of Consenting Party to exercise or enforce its rights under the
Assigned Agreement, subject to Section 2.3.

(b)

The Agent, individually and on behalf of the Lenders, agrees that following
substitution pursuant to Section 2.2(a), the Agent shall become bound by the
terms and conditions of the Assigned Agreement and shall be subject to the
obligations of Borrower thereunder.

(c)

If the Agent or any Substitute Owner is substituted for Borrower under the
Assigned Agreement pursuant to Section 2.2(a), then the Agent or any such
Substitute Owner, as the case may be, shall be liable under the Assigned
Agreement for any unperformed payment obligations (including damages previously
reduced to a payment obligation) existing as of the date of substitution and for
performance of the obligations of Borrower to be performed after the date of
such substitution, but only to the extent of the Agent’s or such Substitute
Owner’s interest in the New Common Facilities and all revenues and proceeds
derived therefrom.   

2.3  

Right to Cure.  In the event of a default or breach by Borrower in the
performance of any of its obligations under the Assigned Agreement, or upon the
occurrence or non-occurrence of any event or condition under the Assigned
Agreement which would immediately or with the passage of any applicable grace
period or the giving of notice, or both, enable Consenting Party to terminate
the Assigned Agreement (each such default or breach,  a “default”), Consenting
Party will not terminate the Assigned Agreement until it first gives prompt
written notice of such default to the Agent and affords the Agent the greater of
(a) the periods provided for in the Assigned Agreement to cure such default or
(b) a period of at least 60 days in respect of a non-payment default and at
least 10 days with respect to a payment default to cure such default; provided,
however, that with respect to any default other than a payment default, if such
default cannot reasonably be cured during such 60 day period, Consenting Party
will not terminate such Assigned Agreement for a period not to exceed 180 days
so long as the Agent or its designee has commenced action reasonably designed to
cure such default and diligently continues to pursue such action until such
default is cured; provided, further, that if the Agent or its designee is
prohibited from curing any such default by any process, stay or injunction
issued by any governmental authority or pursuant to any bankruptcy or insolvency
proceeding or similar proceeding involving Borrower, then the time period
specified herein for curing a default shall be extended for the period of such
prohibition.  Any curing of or attempt to cure any of Borrower's defaults under
the Assigned Agreement shall not be construed as an assumption by the Agent or
any of the Lenders of any covenants, agreements or obligations of Borrower under
the Assigned Agreement.

2.4  

Replacement Agreement.  If the Assigned Agreement is terminated as a result of
any bankruptcy or insolvency proceeding or other similar proceeding affecting
Borrower, then Consenting Party will, at the option of the Agent, enter into a
new agreement with the Agent or its transferee or nominee having terms
substantially the same as the terms of the terminated Assigned Agreement for the
performance of all obligations and services to be performed or provided under
the Assigned Agreement after such termination, subject to the obtainment of any
required approvals.

2.5  

No Liability.  Consenting Party acknowledges and agrees that neither the Agent,
its designees nor the Lenders shall have any liability or obligation under the
Assigned Agreement as a result of this Consent or the Security Agreement, nor
shall the Agent, its designees or the Lenders be obligated or required (a) to
perform any of Borrower’s obligations under the Assigned Agreement, or (b) to
take any action to collect or enforce any claim for payment assigned under the
Security Agreement.

2.6  

Delivery of Notices.  Consenting Party shall deliver to the Agent, concurrently
with the delivery thereof to Borrower, a copy of any written notice given by
Consenting Party to Borrower regarding a breach or default pursuant to the
Assigned Agreement.

SECTION 3.  PAYMENTS UNDER THE ASSIGNED AGREEMENT

3.1  

Payments.  Notwithstanding anything in the Assigned Agreement to the contrary,
until all Loans and other obligations under the Credit Agreement have been
indefeasibly satisfied in full in cash or cash equivalents, Consenting Party
will pay all amounts payable by it to Borrower under the Assigned Agreement in
the manner and as and when required by the Assigned Agreement directly into the
appropriate account specified on Exhibit A, or to such other person or account
as shall be specified from time to time by the Agent to Consenting Party in
writing.  Borrower hereby authorizes and directs Consenting Party to make such
payments as aforesaid during the term of this Consent.

3.2  

No Offset.  All payments required to be made by Consenting Party under the
Assigned Agreement shall be made without any offset, recoupment, abatement,
withholding, reduction or defense whatsoever, other than that expressly allowed
by the terms of the Assigned Agreement.

SECTION 4.  REPRESENTATIONS AND WARRANTIES OF CONSENTING PARTY

Consenting Party hereby represents and warrants to the Agent and the Lenders, as
of the date hereof, that:

4.1  

Organization.  Consenting Party is a [Wisconsin limited liability
company/Wisconsin municipal electric company] duly organized and validly
existing under the laws of the state of its formation and has all requisite
power and authority to enter into and to perform its obligations hereunder and
under the Assigned Agreement, and to carry out the terms hereof and thereof and
the transactions contemplated hereby and thereby.

4.2  

Authorization.  The execution, delivery and performance by Consenting Party of
this Consent and the Assigned Agreement have been duly authorized by all
necessary action on the part of Consenting Party and do not require any approval
or consent of any holder (or any trustee for any holder) of any indebtedness or
other obligation of (a) Consenting Party or (b) any other person or entity,
except approvals or consents which have previously been obtained.

4.3  

Execution and Delivery; Binding Agreements.  As of the date hereof, each of this
Consent and the Assigned Agreement has been duly executed and delivered on
behalf of Consenting Party by the appropriate officers of Consenting Party, and
constitutes the legal, valid and binding obligation of Consenting Party,
enforceable against Consenting Party in accordance with its terms except as
enforceability may be limited by (a) applicable bankruptcy, insolvency,
moratorium or other similar laws affecting the enforcement of creditors' rights
generally and (b) the application of general principles of law (regardless of
whether such enforceability is considered in a proceeding at law or in equity).

4.4  

Litigation.  There is no litigation, action, suit, proceeding or investigation
pending or, to Consenting Party’s knowledge, threatened against Consenting Party
before or by any court, administrative agency, arbitrator or governmental
authority, body or agency which, if adversely determined, individually or in the
aggregate, (a) could reasonably be expected to have a material adverse effect on
the performance by Consenting Party of its obligations hereunder or under the
Assigned Agreement, or (b) questions the validity, binding effect or
enforceability hereof or of the Assigned Agreement, any action taken or to be
taken pursuant hereto or thereto or any of the transactions contemplated hereby
or thereby.

4.5  

Compliance with Other Instruments.  The execution, delivery and performance by
Consenting Party of this Consent and the Assigned Agreement and the consummation
of the transactions contemplated hereby and thereby will not conflict with or
result in any violation of, breach of or default under any term of its formation
or governance documents, or of any contract or agreement to which it is a party
or by which it or its property is bound, or of any license, permit, franchise,
judgment, writ, injunction, decree, order, charter, law, ordinance, rule or
regulation applicable to it, except for any such violations which, individually
or in the aggregate, could not reasonably be expected to have a material adverse
effect on the performance by Consenting Party of its obligations under this
Consent and the Assigned Agreement.

4.6  

Government Consent.  No consent, order, authorization, waiver, approval or any
other action, or registration, declaration or filing with, any person, board or
body, public or private (collectively, the “Approvals”), is required to be
obtained by Consenting Party in connection with the execution, delivery or
performance of this Consent or the Assigned Agreement or the consummation of the
transactions contemplated hereunder or thereunder, except as listed on Exhibit
B.  All such Approvals listed on Exhibit B, except for those set forth in Part
II thereof (the “Deferred Approvals”), are Final (as defined below).  An
Approval shall be “Final” if it has been validly issued, is in full force and
effect, is not subject to any condition precedent to its effectiveness (other
than compliance with the terms thereof), does not impose restrictions or
requirements inconsistent with the terms of the Assigned Agreement, and is final
and not subject to any appeal.  Consenting Party reasonably believes that each
Deferred Approval will be obtained in the ordinary course of business prior to
the time when such Deferred Approval is required to be Final.  

4.7  

No Default or Amendment.  Neither Consenting Party nor, to Consenting Party’s
knowledge, any other party to either Assigned Agreement is in default of any of
its obligations thereunder.  To Consenting Party’s knowledge, no event or
condition exists which would either immediately or with the passage of any
applicable grace period or giving of notice, or both, enable either Consenting
Party or Borrower to terminate or suspend its obligations under either Assigned
Agreement.  The Assigned Agreement has not been amended, modified or
supplemented in any manner.  This Consent and the Assigned Agreement, and any
other agreement specifically contemplated herein or therein, constitute and
include all agreements entered into by Consenting Party and Borrower relating
to, and required for the consummation of, the transaction contemplated by the
Assigned Agreement.

4.8  

No Previous Assignments.  Consenting Party has no notice of, and has not
consented to, any previous assignment by Borrower of all or any part of its
rights under either Assigned Agreement.

SECTION 5.  TRANSFER RESTRICTIONS

Consenting Party hereby agrees and covenants that it shall not sell, lease,
assign, transfer, convey or otherwise dispose of in any manner, directly or
indirectly, all or any part of its rights, obligations, benefits, advantages,
titles and interest in the Assigned Agreement or the New Common Facilities in
any manner prohibited by the Assigned Agreement.

SECTION 6.  MISCELLANEOUS

6.1  

Notices.  All notices and other communications hereunder shall be in writing,
shall be deemed given upon receipt thereof by the party or parties to whom such
notice is addressed, shall refer on their face to the Assigned Agreement, as
relevant (although failure to so refer shall not render any such notice of
communication ineffective), shall be sent by first class mail, by personal
delivery or by a nationally recognized courier service, and shall be directed as
provided in Exhibit C, or to such other address or addressee as any such party
may designate by written notice given pursuant hereto.

6.2  

Governing Law; Submission to Jurisdiction.  

(a)

THIS CONSENT AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES HEREUNDER SHALL BE
CONSTRUED IN ACCORDANCE WITH AND BE GOVERNED BY THE LAWS OF THE STATE OF
WISCONSIN (WITHOUT GIVING EFFECT TO THE PRINCIPLES THEREOF RELATING TO CONFLICTS
OF LAW).

(b)

Any legal action or proceeding with respect to this Consent and any action for
enforcement of any judgment in respect thereof may be brought in the state
courts situated in Milwaukee County, Wisconsin or the United States District
Court for the Eastern District of Wisconsin.  By execution and delivery of this
Consent, each of the parties hereto accept for itself and in respect of its
property, generally and unconditionally, the non-exclusive jurisdiction of the
aforesaid courts and appellate courts from any appeal thereof, and irrevocably
waives any objection which it may now or hereafter have to the jurisdiction of
the aforementioned courts.  Each party hereto further irrevocably waives any
objection which it may now or hereafter have to the laying of venue of any suit,
proceeding or other action brought pursuant to this Section 6.2 in any of the
aforementioned courts, and irrevocably waives and agrees not to plead or claim
in any such court that any suit, proceeding or other action brought in such
court has been brought in an inconvenient forum.  

6.3  

Counterparts.  This Consent may be executed in any number of counterparts and by
the different parties hereto on separate counterparts, each of which when so
executed and delivered shall be an original, but all of which shall together
constitute one and the same instrument.

6.4  

Headings Descriptive.  The headings of the several sections and subsections of
this Consent are inserted for convenience only and shall not in any way affect
the meaning or construction of any provision of this Consent.

6.5  

Severability.  In case any provision in or obligation under this Consent shall
be invalid, illegal or unenforceable in any jurisdiction, the validity, legality
and enforceability of the remaining provisions or obligations, or of such
provision or obligation in any other jurisdiction, shall not in any way be
affected or impaired thereby.

6.6  

Amendment, Waiver.  Neither this Consent nor any of the terms hereof may be
terminated, amended, supplemented, waived or modified except by an instrument in
writing signed by the parties hereto.  Any waiver under this Consent shall be
effective only for the specified purpose for which it is given.

6.7  

Termination.

(a)

Consenting Party’s obligations hereunder are absolute and unconditional, and
Consenting Party has no right, and shall have no right, to terminate this
Consent or to be released, relieved or discharged from any obligation or
liability hereunder until all Loans and other obligations under the Credit
Agreement have been indefeasibly satisfied in full in cash or cash equivalents.
 The Agent shall notify Consenting Party in writing when all such obligations
have been satisfied (the “Termination Notice”).

(b)

If the Agent delivers the Termination Notice to Consenting Party pursuant to
this Section 6.7, this Consent shall terminate for all purposes as to the Agent
and the Credit Agreement, and the Agent and the Lenders shall have no further
rights or obligations under this Consent; provided, however, that Consenting
Party agrees that this Consent shall continue to apply for the benefit of
Borrower and the providers of new credit facilities to replace the Credit
Agreement (the "New Lender") provided that (i) within five (5) days following
delivery by the Agent to Consenting Party of the Termination Notice pursuant to
this Section 6.7, the New Lender or agent, trustee or other representative of
the New Lender, shall have notified Consenting Party that it agrees to be bound
by the terms and conditions of this Consent and provides Consenting Party the
information for Section 6.1 and new payment instructions (countersigned on
behalf of Borrower) for Exhibit A, (ii) the amount of the new credit facilities
does not exceed the original amount of commitment by the Lenders to make Loans
under the original Credit Agreement, (iii) the replacement of the Credit
Agreement occurs on a date not later than thirty (30) years after the date the
New Common Facilities become available for commercial operation, and (iv)
thereafter (A) the term "Loans" in this Consent shall be deemed to refer to the
new credit facilities, (B) the term "Agent" or "Lenders" in this Consent shall
be deemed to refer to the New Lender or any agent or trustee for the New Lender,
(C) the term "Credit Agreement" in this Consent shall be deemed to refer to the
credit agreement, indenture or other instrument providing for the new credit
facilities and (D) the term "Security Agreement" in this Consent shall be deemed
to refer to the security agreement under which the Assigned Agreement is
assigned as collateral to secure performance of the obligations by Borrower
under the new credit facilities.

6.8  

Successors and Assigns.  This Consent shall be binding upon Consenting Party and
its permitted successors and assigns and shall inure to the benefit of the Agent
and the Lenders, its designees and their respective successors and assigns.

6.9  

Further Assurances.  Consenting Party hereby agrees to execute and deliver all
such instruments and take all such action as may be necessary to effectuate
fully the purposes of this Consent.

6.10

Waiver of Trial by Jury.  TO THE EXTENT PERMITTED BY APPLICABLE LAW, CONSENTING
PARTY, BORROWER AND THE AGENT HEREBY IRREVOCABLY WAIVE ALL RIGHT OF TRIAL BY
JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM ARISING OUT OF OR IN CONNECTION
WITH THIS CONSENT OR ANY MATTER ARISING HEREUNDER.

6.11  

Survival.  All agreements, statements, representations and warranties made by
Consenting Party herein shall be considered to have been relied upon by the
Agent and the Lenders and shall survive the execution and delivery of this
Consent.

6.12  

Entire Agreement.   This Consent embodies the complete agreement between the
parties hereto with respect to the subject matter hereof and supersedes all
other oral or written understandings or agreements.

[Signatures follow on the next page]

IN WITNESS WHEREOF, each of the parties hereto has caused this Consent and
Agreement to be duly executed and delivered by its duly authorized officer as of
the date first above written.

[CONSENTING PARTY]

By:

________________________

   

Name:

   

Title:

[AGENT],

as Agent

By:

_________________________

  

Name:

   

Title:

ACKNOWLEDGED AND AGREED TO BY:

[BORROWER]

By:

________________________

   

Name:

Title:

Exhibit A to

Consent and Agreement

[INSERT PAYMENT INSTRUCTIONS FOR APPROPRIATE ACCOUNT(S)]

Exhibit B to

Consent and Agreement

Approvals

Part I:

Existing Final Approvals

[INSERT APPROVALS, IF ANY]

Part II:

Deferred Approvals

Deferred Approval       

Date Required to be Final

[INSERT DEFERRED APPROVALS, IF ANY]

Exhibit C to

Consent and Agreement

Notice Information

If to Consenting Party:

[Consenting Party]

[________________________]

[________________________]

Attention:  [_______________]

Telephone: [_______________]

Facsimile: [________________]

If to Borrower:

[Borrower]

[________________________]

[________________________]

Attention:  [_______________]

Telephone: [_______________]

Facsimile: [________________]

If to Agent:

[Agent]

[________________________]

[________________________]

Attention:  [_______________]

Telephone: [_______________]

Facsimile: [________________]

SCHEDULE 7.4A

Tax Matters (Tax Exempt New Common Facilities Owner)

ARTICLE 1:  DEFINITIONS

Capitalized words and phrases used in this Schedule 7.4A and not otherwise
defined in this Article 1 shall have the meaning set forth in Article I of the
New Common Facilities Ownership Agreement (the “Ownership Agreement”).  The
rules of interpretation and construction set forth in Section 1.2 of the
Ownership Agreement are incorporated by reference herein.

1.1

“Affiliate” shall mean with respect to any Person, (a) each entity that such
Person Controls, (b) each Person that Controls such Person, and (c) each entity
that is under common Control with such Person.  For the purposes of this
Schedule 7.4A, an Affiliate of a Person shall include any entity that is
required to report the income, gains, losses, or deductions of such Person for
federal or state income tax purposes and any member of an affiliated group of
corporations of which such Person is or shall become a member if consolidated
returns are or will be filed for such affiliated group for U.S. federal income
tax purposes.

1.2

“After Tax Basis” shall mean on a basis such that any payment to be received or
receivable actually, or constructively, or accrued by an Indemnitee is
supplemented by a further payment or payments to such Indemnitee so that the sum
of all such payments, after deducting all Taxes payable by such Indemnitee in
respect of the receipt or accrual of such amount under any Law or Governmental
Authority, is equal to the payment due to such Indemnitee pursuant to this
Schedule 7.4A or Section 7.2 of the Ownership Agreement.  In making such
calculations, it shall be assumed that the recipient is fully taxable for all
income tax purposes at the highest marginal rate applicable to corporations at
the time such amount is received or accrued.

1.3

“Controlling Party” shall have the meaning set forth in Section 3.2(d) hereof.

1.4

“Noncontrolling Party” shall have the meaning set forth in Section 3.2(d)
hereof.

1.5

“Tax Indemnitee” shall mean a New Common Facilities Owner (other than a Tax
Exempt New Common Facilities Owner) or any Affiliate thereof.

ARTICLE 2:  TAX LIABILITY AND TRANSFERS

2.1

Liability for Taxes.

Subject to Article 3 hereof, each Tax Exempt New Common Facilities Owner shall
indemnify and hold harmless each Tax Indemnitee, on an After-Tax Basis, from and
against any Taxes imposed on such Tax Indemnitee, the New Common Facilities or
any part thereof resulting from a breach or inaccuracy by such Tax Exempt New
Common Facilities Owner of any covenant, representation or warranty under the
Elm Road I Project Documents.  

All calculations with respect to the amount of any indemnity payable hereunder
shall be made initially by such Tax Indemnitee, and such Tax Indemnitee shall
set forth any such amount or adjustment in a statement furnished to the Tax
Exempt New Common Facilities Owner.  

2.2

Tax Exempt New Common Facilities Owner as Primary Obligor.  A Tax Exempt New
Common Facilities Owner’s obligations under this Schedule 7.4A are those of a
primary obligor and each Tax Indemnitee may proceed directly against such Tax
Exempt New Common Facilities Owner without first seeking to enforce any other
right of indemnification or reimbursement.  All amounts payable by a Tax Exempt
New Common Facilities Owner pursuant to this Schedule 7.4A shall be treated as
obligations of such Tax Exempt New Common Facilities Owner.

ARTICLE 3:  CONTESTS AND DISPUTES

3.1

Notice.  If a Tax Indemnitee receives a formal written notice of a claim or, if
at the conclusion of an audit by the Internal Revenue Service or other
Governmental Authority, there is Tax imposed on the New Common Facilities or any
part thereof or a proposed adjustment in any item of income, deduction or credit
of such Tax Indemnitee which if agreed to or accepted by such Tax Indemnitee
would result in a Tax for which such Tax Indemnitee would seek reimbursement
from a Tax Exempt New Common Facilities Owner pursuant to this Schedule 7.4A or
Section 7.2 of the Ownership Agreement, then such Tax Indemnitee shall, (a)
within 30 days prior to the date on which such Tax Indemnitee is required to act
or (b) promptly after the conclusion of an audit, notify such Tax Exempt New
Common Facilities Owner thereof in writing.  

3.2

Contests.

(a)

Control.  If requested by a Tax Exempt New Common Facilities Owner in writing,
within 30 days of receipt of the notice described in Section 3.1 hereof, the Tax
Indemnitee, if permitted by applicable Law either (i) in the case of any Tax
that may be procedurally segregated and contested independently from any Tax
that is not subject to indemnification by such Tax Exempt New Common Facilities
Owner, unless an adverse determination of such contest would, in such Tax
Indemnitee’s good faith judgment, have an adverse effect on such Tax
Indemnitee’s tax liability arising out of transactions unrelated to this
transaction, shall permit such Tax Exempt New Common Facilities Owner to contest
(such contest to be conducted in the name of such Tax Exempt New Common
Facilities Owner, if permitted by Law, or, otherwise, in the name of such Tax
Indemnitee, provided, that, if such Tax Indemnitee determines at any time, in
its sole discretion, that permitting such Tax Exempt New Common Facilities Owner
to conduct or continue to conduct such contest is reasonably likely to have
adverse business or other consequences to such Tax Indemnitee, such Tax
Indemnitee shall have the right to control (or reassert control over) such
contest) or (ii) in the case of a Tax which cannot be procedurally segregated
and contested independently from Taxes not subject to indemnification by such
Tax Exempt New Common Facilities Owner, shall itself, contest at the expense of
such Tax Exempt New Common Facilities Owner (or shall request such Tax Exempt
New Common Facilities Owner to contest) in good faith (including, without
limitation, by pursuit of judicial appeals and administrative procedures), the
validity, applicability or amount of such Taxes by (A) resisting payment
thereof, (B) not paying the same except under protest if protest shall be
necessary and proper or (C) if payment shall be made, seeking a refund thereof
in appropriate administrative and/or judicial proceedings; provided, however,
that in no event shall such contest be required or permitted or continued
unless:

(1)

the amount at issue (taking into account all similar and logically related
issues) exceeds $50,000;

(2)

prior to taking such action, such Tax Exempt New Common Facilities Owner shall
have agreed in writing to pay such Tax Indemnitee, and shall pay on demand, all
reasonable costs and expenses that such Tax Indemnitee shall incur in connection
with contesting such claim (including, without limitation, all legal,
investigatory and accounting fees and disbursements);

(3)

in the good faith judgment of such Tax Indemnitee, the action to be taken will
not result in any danger of sale, forfeiture or loss of its Composite Component
Ownership Interest, the New Common Facilities or any part or interest therein or
the creation of any Lien (except for Permitted Encumbrances) on the Composite
Component Ownership Interest, the New Common Facilities or any part or interest
therein;

(4)

with respect to the action to be taken, there is no risk of criminal liability
or criminal penalties or fines that may be imposed with respect to such Tax
Indemnitee;

(5)

if such contest is to be initiated by the payment of, and the claiming of a
refund for, such Taxes, such Tax Exempt New Common Facilities Owner shall
advance the amount thereof plus interest, penalties and additions to Tax with
respect thereto to such Tax Indemnitee on an interest-free basis with no
additional net after-tax cost to such Tax Indemnitee to make such payment and
shall indemnify such Tax Indemnitee in form and substance satisfactory to such
Tax Indemnitee against any adverse tax consequences arising from such advance;

(6)

independent tax counsel selected by such Tax Exempt New Common Facilities Owner
and reasonably acceptable to such Tax Indemnitee shall have furnished such Tax
Indemnitee (unless waived in writing by such Tax Indemnitee) with an opinion
prepared at such Tax Exempt New Common Facilities Owner’s expense, to the effect
that there is a reasonable basis under Code Section 6662 and the Treasury
Regulations thereunder to contest such claim);

(7)

such Tax Exempt New Common Facilities Owner shall have acknowledged in writing
its obligation to indemnify such Tax Indemnitee in respect of such contested Tax
in the event such contest is unsuccessful; provided, that such Tax Exempt New
Common Facilities Owner shall not be bound by such acknowledgment if and to the
extent that there is a final resolution of the contest from which it can be
established that such Tax Exempt New Common Facilities Owner would not be liable
for such Tax in the absence of such acknowledgment; and

(8)

in no event shall a Tax Indemnitee be required, or a Tax Exempt New Common
Facilities Owner be permitted, to appeal an adverse judicial determination to
the United States Supreme Court.

(b)

Waiver and Conditions to Contest.  Notwithstanding anything contained herein to
the contrary, (i) a Tax Indemnitee will not be required to contest (and such Tax
Exempt New Common Facilities Owner shall not be permitted to contest) a claim
with respect to the imposition of any Tax if such Tax Indemnitee waives its
right to indemnification under this Schedule 7.4A or Section 7.2 of the
Ownership Agreement, as applicable, with respect to such claim and repays such
Tax Exempt New Common Facilities Owner any amounts advanced to, or on behalf of,
such Tax Indemnitee pursuant to Section 3.2(a)(5) hereof (relating to amounts
advanced to pay such Taxes), by such Tax Exempt New Common Facilities Owner with
respect to such claim and (ii) such Tax Indemnitee will not be required to
contest any claim if the subject matter thereof shall be of a continuing nature
and the relevant legal issue shall have previously been decided adversely unless
such Tax Exempt New Common Facilities Owner shall have delivered an opinion of
tax counsel selected by such Tax Indemnitee and reasonably acceptable to such
Tax Exempt New Common Facilities Owner that based on a change in Law after such
previous decision, and taking into account such previous decision, it is more
likely than not that such Tax Indemnitee will prevail on such claim.

(c)

Failure to Comply with Contest Provisions.  If such Tax Indemnitee fails to
perform its obligations pursuant to this Section 3.2, such failure shall not
diminish or relieve a Tax Exempt New Common Facilities Owner of any liability
for indemnification except to the extent the contest of a claim is effectively
precluded as a result of such failure.

(d)

Conduct.  The party conducting a contest pursuant to Section 3.2 hereof
(“Controlling Party”) shall consult in good faith with the other party
(“Noncontrolling Party”) and its counsel with respect to the contest of such
claim for Taxes (or claim for refund) and shall provide copies of all material
documents (or the relevant excerpts thereof) or notices received from the
relevant Governmental Authority to the extent relating to the contest of a claim
hereunder, but the decisions regarding any actions to be taken shall be made by
the Controlling Party in its good faith judgment.  The Noncontrolling Party
shall be permitted, to the extent practicable, to review and comment on any
material written submissions made by the Controlling Party, but solely to the
extent relating to such claim for Taxes.  The Controlling Party shall have the
right to select counsel to conduct the contest subject to the reasonable consent
of the Noncontrolling Party, provided, however that the rights of the
Controlling Party pursuant to this Section 3.2(d) shall not be subject to the
reasonable consent of the Noncontrolling Party in an income tax contest.

3.3

Disputes.  If a Dispute arises between a Tax Exempt New Common Facilities Owner
and a Tax Indemnitee or between Tax Indemnitees regarding the application of any
provision of this Schedule 7.4A (excluding any dispute that is governed by
Section 3.2 hereof), such Dispute shall be governed by Article XVII of the
Ownership Agreement.

SCHEDULE 7.4B

Tax Matters (New Common Facilities Owner)

ARTICLE 1:  DEFINITIONS

Capitalized words and phrases used in this Schedule 7.4B and not otherwise
defined in this Article 1 shall have the meaning set forth in Article I of the
New Common Facilities Ownership Agreement (the “Ownership Agreement”).  The
rules of interpretation and construction set forth in Section 1.2 of the
Ownership Agreement are incorporated by reference herein.

1.1

“ABA Standards” shall have the meaning set forth in Section 3.2(b) hereof.

1.2

“Adjustment Notice” shall have the meaning set forth in Section 5.1 hereof.

1.3

“Affiliate” shall mean (i) any member of an affiliated group of corporations of
which WEC or MGE is or shall become a member if consolidated returns are or will
be filed for such affiliated group for U.S. federal income tax purposes and (ii)
any Person that a member of such consolidated group is required to report the
income, gains, losses or deductions of for federal or state income tax purposes
(i.e., any disregarded entity subsidiaries); provided, however, that for the
purpose of calculating any indemnity payment under Section 3.2 hereof, the Taxes
attributable to any Affiliate shall be determined on a non-consolidated basis.

1.4

“After Tax Basis” shall mean on a basis such that any payment to be received or
receivable, actually or constructively, or accrued by a Tax Indemnitee is
supplemented by a further payment or payments (such further payment or payments,
the “Gross-Up” as defined in Section 4.2(a) hereof) to such Tax Indemnitee so
that the sum of all such payments, after deducting all Taxes (based on the Tax
Assumptions and taking into account any related current credits or current
deductions) payable by such Tax Indemnitee in respect of the receipt or accrual
of such amount under any Law or Governmental Authority, is equal to the payment
due to such Tax Indemnitee (based on the Tax Assumptions).  

1.5

“Applied Amount” shall have the meaning set forth in Section 5.4 hereof.

1.6

“Assignment” shall have the meaning set forth in Section 5.7 hereof.

1.7

“Code” shall mean the Internal Revenue Code of 1986, as amended.

1.8

“Final Determination” shall mean: (a) a decision, judgment, decree or other
order by any court of competent jurisdiction, which decision, judgment, decree
or other order has become final after all allowable appeals (other than appeals
to the U.S. Supreme Court) by either party to the action have been exhausted or
the time for filing such appeals has expired; (b) a closing agreement entered
into in connection with an administrative or judicial proceeding and with the
consent of a Tax Indemnifying Party or as permitted by Section 5.3 hereof; (c)
the expiration of the time for instituting suit with respect to the claimed
deficiency; (d) the expiration of the time for instituting a claim for refund,
or if such a claim was filed, the expiration of the time for instituting suit
with respect thereto; or (e) in any case where judicial review shall at the time
be unavailable because the proposed adjustment involves a decrease in net
operating loss carry forward or business credit carry forward, a declaratory
judgment, decree of other order of an administrative official or agency of
competent jurisdiction, which decision, judgment, decree or other order has
become final.

1.9

“Gross-up” shall have the meaning set forth in Section 4.2(a) hereof.

1.10

“Inclusion” shall have the meaning set forth in Section 3.2(a) hereof.

1.11

“Inclusion Event” shall have the meaning set forth in Section 3.2 hereof.

1.12

“Lessee” shall mean any lessee or sublessee, if any, of an Owner whether or not
such lessee is properly characterized as a lessee for U.S. federal income tax
purposes.

1.13

“Owners” shall mean a New Common Facilities Owner other than a Tax Exempt New
Common Facilities Owner.

1.14

“Reasonable Basis” shall have the meaning set forth in Section 3.2(b) hereof.

1.15

“Tax Assumptions” shall have the meaning set forth in Article 2 hereof.

1.16

“Tax Indemnifying Party” shall have the meaning set forth in Sections 3.1
hereof.

1.17

“Tax Indemnifying Party Act” shall have the meaning set forth in Section 3.1
hereof.

1.18

“Tax Indemnitee” shall have the meaning set forth in Sections 3.1 hereof.

1.19

“Tax Savings” shall have the meaning set forth in Section 4.2(c) hereof.

ARTICLE 2:  ASSUMPTIONS AND COVENANTS

The transactions contemplated by the Elm Road I Project Documents have been
entered into on the basis of the following tax assumptions for both U.S. federal
and state tax purposes (the “Tax Assumptions”):

2.1

Corporate Status.  For the purposes of this Schedule 7.4B, it is assumed that
each Owner: (a) except as provided in Section 2.1(b) hereof, is subject to tax
at the highest marginal federal and state rate applicable to Subchapter C
corporations in effect at the time an obligation arises under this Schedule
7.4B; and (b) any Owner, or entity that is treated as the “owner” of the Owner’s
interest in the New Common Facilities for U.S. federal income tax purposes, that
is exempt from tax under the Code shall be deemed to be exempt from U.S. federal
and state income tax for all purposes of this Schedule 7.4B.  

2.2

Method of Accounting.  Each Owner is a calendar-year taxpayer and will report
all items of income, gain, loss, deduction, or credit relating to the
transactions effected by the Elm Road I Project Documents using the accrual
method of accounting.

2.3

Tax Reporting Status.  No Owner will be subject to any minimum tax or
alternative minimum tax imposed under the Code.

ARTICLE 3:  TAX INDEMNITY

3.1

Tax Indemnity.  Except with respect to Taxes indemnified pursuant to Section 3.2
hereof (which shall not also be subject to indemnification pursuant to this
Section 3.1), and subject to the exceptions described in Section 3.3 hereof,
each Owner (a “Tax Indemnifying Party”) shall indemnify and hold harmless each
other Owner and its respective Affiliates (each, a “Tax Indemnitee”) on an
After-Tax Basis from and against, any and all Taxes, however imposed, whether
levied or imposed upon such Tax Indemnitee, a lessee, the New Common Facilities
or any part thereof, by any Governmental Authority, or otherwise paid by any of
the foregoing, to the extent such Taxes are attributable to:

(a)

the inaccuracy or breach by such Tax Indemnifying Party of any of its covenants,
representations or warranties under the Elm Road I Project Documents;

(b)

any act or omission of such Tax Indemnifying Party (other than an act required
or expressly permitted by the Elm Road I Project Documents) or such Tax
Indemnifying Party’s Lessee;

(c)

any failure by such Tax Indemnifying Party to take any action expressly required
to be taken under the Elm Road I Project Documents;

(d)

the Gross Negligence or willful misconduct of such Tax Indemnifying Party (other
than Gross Negligence imputed to a Tax Indemnifying Party solely by reason of
its interest in the New Common Facilities) or such Tax Indemnifying Party’s
Lessee;

(e)

the payment of any warranties, refunds, insurance proceeds or similar items or
requisition, condemnation or similar proceeds attributable to such Tax
Indemnifying Party to the extent not retained by, or applied for the benefit of
such Tax Indemnitee in accordance with its Composite Component Ownership
Interest; or

(f)

any destruction, damage, loss, condemnation, non-use or requisition of the New
Common Facilities or any part thereof, to the extent attributable to such Tax
Indemnifying Party or such Tax Indemnifying Party’s Lessee,

each such event described in (a) - (f), an “Tax Indemnifying Party Act”.

3.2

Income Tax Indemnity.  Subject to Section 3.3 hereof, if, as a result of an Tax
Indemnifying Party Act, a Tax Indemnitee,

(a)

is required by any Governmental Authority to include any amount in gross income
for income tax purposes in connection with its Composite Component Ownership
Interest (an “Inclusion”), or

(b)

(i) is unable to exclude an Inclusion from its gross income for income tax
purposes (based upon the receipt by such Tax Indemnitee not later than the
filing date of the related tax return of such Tax Indemnitee of an opinion of
independent tax counsel selected by such Tax Indemnitee to the effect that there
is no reasonable basis under the standards set forth in ABA Formal Opinion
85-352 or successor thereto (the “ABA Standards”) or, in the case of a U.S.
 federal income tax, a reasonable basis under Code Section 6662 and the Treasury
Regulations thereunder (such a basis a “Reasonable Basis”) for excluding such
Inclusion (which opinion shall set forth in reasonable detail the basis for the
conclusions set forth therein)) or (ii) such claim would be inconsistent with a
prior Final Determination of a contest and there has been no change in Law or
interpretation thereof after such Final Determination, such Tax Indemnitee shall
have suffered an “Inclusion Event” and Tax Indemnifying Party shall pay to such
Tax Indemnitee, as an indemnity a lump-sum amount which, after giving effect to
the Gross-Up, shall be sufficient to ensure that such Tax Indemnitee is in the
same tax position that it would have been in had no such Inclusion Event
occurred  (such indemnity to be computed in accordance with the Tax
Assumptions).

3.3

Exclusions.  Notwithstanding Sections 3.1 or 3.2 hereof, no Tax Indemnifying
Party shall be obligated to indemnify any Tax Indemnitee for any Taxes or
Inclusion Events pursuant to either Sections 3.1 or 3.2 hereof, to the extent
such amounts are attributable to any of the following events or circumstances:

(a)

with respect to any period following the later of (i) the expiration or earlier
termination of the Tax Indemnifying Party’s obligations under the Elm Road I
Project Documents, or (ii) the payment by a Tax Indemnifying Party of all
amounts due and payable under the Elm Road I Project Documents;

(b)

a breach or inaccuracy by such Tax Indemnitee of any of its covenants,
representations or warranties under the Elm Road I Project Documents;

(c)

such Tax Indemnitee’s transfer or other disposition of (i) all or a portion of
its interest in the Elm Road I Project Documents, the New Common Facilities or
any part thereof, or (ii) any interest in such Tax Indemnitee;

(d)

the Gross Negligence, fraud or willful misconduct of such Tax Indemnitee (other
than Gross Negligence imputed to such Tax Indemnitee solely by reason of its
Composite Component Ownership Interest) or such Tax Indemnitee’s Lessee;

(e)

any event whereby such Tax Indemnitee’s Lessee is required pursuant to the
Operating Agreement to indemnify or otherwise reimburse such Tax Indemnitee or
any other events pursuant to which such Tax Indemnitee is otherwise reimbursed
or made whole;

(f)

the failure of such Tax Indemnitee or such Tax Indemnitee’s Lessee to provide
any certification, documentation, or other evidence required as a condition to
the allowance of a reduction of a Tax or Inclusion which, if properly complied
with, would have resulted in an exemption from, or a reduced rate of such Tax,
or a smaller Inclusion but, in the case of a Tax Indemnitee, only if such Tax
Indemnitee was eligible to comply with such requirement and such Tax Indemnitee
has determined in good faith that compliance with such requirements would not
have a materially adverse effect on such Tax Indemnitee;

(g)

interest, penalties, or additions to tax imposed on such Tax Indemnitee as a
result of a failure of such Tax Indemnitee or such Tax Indemnitee’s Lessee to
file any return, tax report or statement properly or timely, unless such failure
is caused by such Tax Indemnifying Party’s or such Tax Indemnifying Party
Lessee’s failure to fulfill its obligations, if any, to provide such information
required under Section 3.4 hereof or Section 7.3 of the Ownership Agreement;

(h)

the failure of such Tax Indemnitee to contest a claim in accordance with the
contest provisions herein to the extent such Tax Indemnifying Party’s or such
Tax Indemnifying Party Lessee’s ability to contest a claim is adversely affected
in any material respect;

(i)

the failure of such Tax Indemnitee (or Transferee thereof) to be a “United
States person” (as defined in Code Section  7701(a)(30));

(j)

any amendment or modification to the Elm Road I Project Documents that is not
requested or consented to by Tax Indemnifying Party or is not required by the
Elm Road I Project Documents;

(k)

Taxes payable pursuant to Section 3.1 hereof to the extent such Taxes are
imposed as a result of the situs of organization or incorporation, place of
management or control, a place of business, or a permanent establishment of such
Tax Indemnitee or such Tax Indemnitee’s Lessee or caused by a connection between
such Tax Indemnitee or such Tax Indemnitee’s Lessee and the taxing jurisdiction;

(l)

Taxes to the extent liability for such Tax could have been reduced or provided
through “prudent” action, as defined by Wisconsin Public Service Corp. v. Public
Serv. Comm., 156 Wis. 2nd 611 (Ct. App. 1990), and as may be interpreted from
time to time;

(m)

Taxes imposed on any Transferee of the interests held by such Tax Indemnitee (or
of the direct or indirect interests of such Tax Indemnitee) (i) if such Tax
would not have been imposed on the original Tax Indemnitee, or (ii) to the
extent such Tax exceeds the amount of Tax that would have been imposed on the
original Tax Indemnitee;

(n)

Taxes imposed as a result of such Tax Indemnitee’s transfer of its Composite
Component Ownership Interest;

(o)

any change in such Tax Indemnitee’s taxable year or method of accounting or the
application of the short taxable year provisions of the Code;

(p)

Taxes to the extent such Tax Indemnifying Party separately pays such Taxes to
the applicable Governmental Authority, or otherwise reimburses such Tax
Indemnitee for Taxes pursuant to Section 3.1 hereof;

(q)

the application of Code Sections 55, 59A, 183, 291, 465, 469, 501, 542, 552,
593, 851, 856, 1272, 1361, 4975, the provisions of Subchapter K of the Code or
the Treasury Regulations thereunder or the imposition of any Taxes imposed
pursuant to ERISA;

(r)

the sale of any interest in the New Common Facilities pursuant to Article XIII
of the Ownership Agreement;

(s)

such Tax Indemnitee’s failure to properly exclude income unless such Tax
Indemnitee shall have received a written opinion of its independent tax counsel
that no Reasonable Basis exists for excluding such income (and for this purpose,
such counsel may take into account the failure of such Tax Indemnifying Party,
or such Tax Indemnifying Party Lessee, to provide necessary information
requested in writing by such Tax Indemnitee to the extent such Tax Indemnifying
Party or such Tax Indemnifying Party’s Lessee is required to provide such
information pursuant to this Schedule 7.4B or Section 7.3 of the Ownership
Agreement) or there has been a Final Determination with respect to such items;
or

(t)

Taxes payable pursuant to Section 3.1 hereof to the extent such Taxes are
imposed on such Tax Indemnitee by withholding or otherwise, based upon, measured
by or with respect to net or gross income, net or gross receipts, minimum and/or
alternative minimum tax, capital, franchise, net worth, excess profits, value
added or conduct of business, accumulated earnings Taxes or any capital gains,
personal holding company, estate or succession Taxes or other similar Taxes of
any Tax Indemnitee imposed by the United States or by any state, local or
foreign jurisdiction (other than sales, use, license, ad valorem, or property
Taxes, and other than value-added Taxes to the extent such value-added Taxes are
not imposed in direct and clear substitution for an income Tax).

3.4

Receipts and Records.  Each Tax Indemnitee shall use reasonable efforts to
obtain official receipts indicating the payment of all Taxes that are subject to
indemnification under Section 3.1 hereof and that are paid by such Tax
Indemnitee, and shall promptly on request send to each Tax Indemnifying Party
each such receipt or other such reasonably available evidence of payment as is
reasonably acceptable to Tax Indemnifying Party.  

ARTICLE 4:  PAYMENTS AND GROSS-UPS

4.1

Payment Terms.

(a)

General.  Payments pursuant to this Schedule 7.4B or Section 7.2 of the
Ownership Agreement shall be made in immediately available funds and in United
States dollars at such bank or to such account as specified by the payee in
written directives at least five Business Days prior to the due date thereof to
the payor, or, if no such direction is given, by check of the payor payable to
the order of the payee and mailed to the payee by certified mail, postage
prepaid at its address as set forth in Schedule 15.3 to the Ownership Agreement.

(b)

Time of Payment by Tax Indemnifying Party.  Any indemnity payment due under this
Schedule 7.4B or Section 7.2 of the Ownership Agreement to a Tax Indemnitee
shall be paid by Tax Indemnifying Party within 30 days after receipt of a
written demand therefor from the Tax Indemnitee, provided, however, a Tax
Indemnifying Party shall not be required to make such payment earlier than (a)
in the case of a Tax that is not being contested pursuant to Article 5 herein,
five Business Days prior to the date that (i) such Tax Indemnitee files with the
applicable Governmental Authority its income tax return, estimated or final as
the case may be, which would first properly reflect the additional income tax
that would become due as a result of an Inclusion, or in another case, the time
such Tax is due, or (b) in the case of an Inclusion or other Tax that is being
contested pursuant to Article 5 hereof, 30 days after the date of the Final
Determination of such contest.

(c)

Time of Payment by Tax Indemnitee.  Any payment due by Tax Indemnitee to a Tax
Indemnifying Party shall be paid within 30 days after the date on which such Tax
Indemnitee files with the applicable Governmental Authority its income tax
return, estimated or final as the case may be, on which the credits, deductions,
or other tax benefits giving rise to such payment could first properly be
reflected, or in the case of a Tax other than an income tax, within 30 days of
receipt or accrual of such refund, credit or other tax benefit.  Any payment due
hereunder from such Tax Indemnitee to a Tax Indemnifying Party on account of the
receipt of any refund of tax shall be paid within 30 days after the receipt of
such refund.

4.2

Calculations of Payments and Gross-Ups.  All payments and calculations made
under this Section 4.2 shall be made taking into account the Tax Assumptions.

(a)  Gross-Up.  Each payment and indemnity under Article 3 hereof shall be made
on an After-Tax Basis.  For the purposes of this Section 4.2(a) and the
definition of “After-Tax Basis”, “Gross-Up” means the portion of any payment due
from a Tax Indemnifying Party to a Tax Indemnitee pursuant to Sections 3.1 and
3.2 hereof that is calculated to indemnify such Tax Indemnitee, or the portion
of any reverse payment from such Tax Indemnitee to such Tax Indemnifying Party,
on an After-Tax Basis.  As such, the amount payable to a Tax Indemnitee pursuant
to Sections 3.1 and 3.2 hereof shall be an amount determined after (i) giving
effect to any interest, penalties, or additions to tax attributable to the Tax
or Inclusion Event (except for any penalties and additions to Tax excluded under
Section 3.3(g) hereof); and (ii) taking into account any tax detriments and
benefits reasonably expected to be realized by the Tax Indemnitee by reason of
the corrections or adjustments giving rise to such Tax or Inclusion Event as
applicable, (the net effect of items (i) and (ii), the “Gross-Up”).  

(b)

Calculations.  The amount of any indemnity payable by a Tax Indemnifying Party
to a Tax Indemnitee pursuant to Article 3 hereof and any Gross-Up shall be
calculated on the basis of the tax detriments and benefits incurred or to be
incurred (for the purposes of Section 3.2 hereof as a result the same event
giving rise to the Inclusion Event) by such Tax Indemnitee and such amounts
shall be computed in accordance with the rates assumed in Section 2.1 hereof and
the other Tax Assumptions.  Any Tax or Inclusion Event which does not result in
an increase in such Tax Indemnitee’s U.S. federal, state and local income tax
liability (or a decrease in such Tax Indemnitee’s refund of such income taxes)
in the year of such Tax or Inclusion Event but which reduces any net operating
loss, business credit, foreign tax credit carryover or other tax attribute of
such Tax Indemnitee shall be treated as giving rise to an increase in U.S.
federal, state or local income tax liability in the year for which such tax
attribute if not reduced thereby would have given rise to an increase in such
Tax Indemnitee’s U.S. federal, state or local tax liability.  Subject to Section
7.1 hereof, all calculations with respect to the amount of any indemnity payable
hereunder (whether by lump-sum payment or otherwise) shall be made initially by
such Tax Indemnitee, and such Tax Indemnitee shall set forth any such amount or
adjustment in a statement furnished to Tax Indemnifying Party.  Such a statement
shall accompany any notice furnished to, or demand made upon, Tax Indemnifying
Party by such Tax Indemnitee pursuant to this Schedule 7.4B.

(c)

Reverse Indemnity.  If, as a result of a Tax or Inclusion Event indemnified
hereunder, such Tax Indemnitee for any taxable year actually realizes any
credits, deductions, or other tax benefits ("Tax Savings") not otherwise taken
into account in computing any payment or indemnity by a Tax Indemnifying Party
hereunder (or as a result thereof such Tax Indemnitee shall be entitled to a
refund of income tax (or an offset, against other tax liability not indemnified
hereunder) or interest on such refund (or offset) taking into account the rates
assumed in Section 2.1 hereof and the other Tax Assumptions, then the Tax
Indemnitee shall pay to Tax Indemnifying Party the amount by which such Tax
Savings reduce the U.S. federal, state or local taxes of such Tax Indemnitee
(and the amount of any such refund, offset, or interest to which such Tax
Indemnitee is entitled), plus a “gross-up” for any additional U.S. federal,
state or local income tax savings such Tax Indemnitee realizes as a result of
such payment (including such “gross-up”).  The amount of any Tax Savings with
respect to a Tax or Inclusion Event indemnified hereunder shall be computed on
the basis of the tax benefits actually realized by such Tax Indemnitee, the
rates assumed in Section 2.1 hereof and the other Tax Assumptions.  A Tax
Indemnitee shall not be obligated to make any payment pursuant to this Section
4.2(c) to the extent that the amount of such payment would exceed (i) the
aggregate amount of all prior payments by Tax Indemnifying Party to such Tax
Indemnitee pursuant to this Schedule 7.4B, less (ii) the aggregate amount of all
prior payments by such Tax Indemnitee to such Tax Indemnifying Party under this
Section 4.2(c), but any such excess shall be carried forward and reduce such Tax
Indemnifying Party’s obligations to make subsequent payments to such Tax
Indemnitee pursuant to this Schedule 7.4B.  Any subsequent disallowance or loss
of all or any portion of a reduction in such Tax Indemnitee’s tax liability
which reduction was taken into account under this Section 4.2(c) (as a result of
a redetermination of the claim giving rise to such payment by such Tax
Indemnitee to a Tax Indemnifying Party by any taxing authority or as a result of
a judicial proceeding with respect to such claim) shall be treated as a loss
subject to indemnification under this Schedule 7.4B without regard to Section
3.3 hereof.

4.3

Tax Indemnifying Party a Primary Obligor.  A Tax Indemnifying Party’s
obligations under this Schedule 7.4B are those of a primary obligor and each Tax
Indemnitee seeking payment, reimbursement or indemnification from a Tax
Indemnifying Party may proceed directly against such Tax Indemnifying Party
without first seeking to enforce any other right of indemnification or
reimbursement.  All amounts payable by a Tax Indemnifying Party pursuant to this
Schedule 7.4B shall be treated as obligations of such Tax Indemnifying Party.

ARTICLE 5:  CONTEST PROVISIONS

5.1

Notice.  If a Tax Indemnitee receives a formal written notice of a claim or, if
at the conclusion of an audit by the Internal Revenue Service or other
Governmental Authority, there is a proposed adjustment in any item of income,
deduction or credit of such Tax Indemnitee which if agreed to or accepted by
such Tax Indemnitee would result in a Tax or an Inclusion Event for which such
Tax Indemnitee would seek reimbursement or indemnification from a Tax
Indemnifying Party pursuant to this Schedule 7.4B or Section 7.2 of the
Ownership Agreement, then such Tax Indemnitee shall, (a) within 15 days prior to
the date on which such Tax Indemnitee is required to act or (b) promptly after
the conclusion of an audit, notify Tax Indemnifying Party thereof in writing
(“Adjustment Notice”), provided, that the failure to so notify Tax Indemnifying
Party or provide such materials to Tax Indemnifying Party shall not relieve Tax
Indemnifying Party of its indemnity obligations hereunder except to the extent
that such failure materially and adversely affects Tax Indemnifying Party’s
ability to conduct a contest in any material respect.

5.2

Contest Provisions.  If requested by a Tax Indemnifying Party within 30 days
after receipt of the Adjustment Notice, such Tax Indemnitee shall in good faith
contest, or (if desired by such Tax Indemnitee) permit a Tax Indemnifying Party
to contest the validity, applicability, and amount of any proposed adjustment
that would give rise to a Tax or Inclusion Event by (a) not making payment
thereof for at least 30 days after providing the Adjustment Notice, unless
otherwise required by applicable Law, (b) not paying same except under protest,
if protest is necessary and proper, or (c) if payment is made, using reasonable
efforts to obtain a refund thereof in appropriate administrative and judicial
proceedings; provided, that (i) in the case of an income tax contest, as a
condition to the commencement of such contest, such Tax Indemnitee shall have
received a written opinion of its independent tax counsel selected by such Tax
Indemnitee and reasonably acceptable to Tax Indemnifying Party to the effect
that there is a Reasonable Basis for contesting such proposed adjustment, (ii)
such Tax Indemnitee shall not be required to contest such proposed adjustment if
the aggregate amount of the indemnity, on a before-tax basis, together with the
amounts payable with respect to any future related claim, would be less than
$100,000 in the case of an administrative contest or less than $250,000 in the
case of a judicial contest, (iii) Tax Indemnifying Party shall have agreed in
writing to pay to such Tax Indemnitee, on demand, all reasonable out-of-pocket
costs and expenses which such Tax Indemnitee incurs in connection with and
reasonably allocable to contesting such adjustment, including all reasonable
legal, accountants’, and investigatory fees and disbursements; (iv) the Tax
Indemnitee has determined, in good faith, that the contest will not result in a
material risk of the loss or forfeiture of its Composite Component Ownership
Interest (unless Tax Indemnifying Party has provided to such Tax Indemnitee a
bond or other sufficient protection against such risk of loss or forfeiture
reasonably satisfactory to such Tax Indemnitee) or the imposition of criminal
penalties; (v) if such contest is to be initiated by the payment of, and the
claiming of a refund for such Taxes, Tax Indemnifying Party shall advance the
amount thereof plus, interest, penalties and additions to Tax with respect
thereof to such Tax Indemnitee on an interest free basis with no additional
after-tax cost to such Tax Indemnitee to make such payment and shall indemnify
such Tax Indemnitee against any adverse tax consequences arriving from such
advance (and if such contest is finally determined adversely, the amount of such
loan shall be applied against Tax Indemnifying Party’s obligation to indemnify
such Tax Indemnitee for a Tax which was the subject of such contest), and (vi)
in the case of an income tax contest, Tax Indemnifying Party shall have
acknowledged in writing its liability to indemnify the Tax Indemnitee in respect
of such contested Tax in the event such contest is unsuccessful; provided, that
Tax Indemnifying Party shall not be bound by such acknowledgment to the extent
there is a Final Determination of the contest which clearly demonstrates that
the Tax Indemnitee is not liable for such Tax.

If requested by Tax Indemnifying Party in writing, such Tax Indemnitee will
appeal (or, if desired by such Tax Indemnitee, permit Tax Indemnifying Party to
appeal) any adverse judicial determination, provided that such Tax Indemnitee
shall receive an opinion of its independent tax counsel selected by such Tax
Indemnitee and reasonably acceptable to such Tax Indemnifying Party to the
effect that it is more likely than not under the ABA Standards and within the
meaning of Code Section 6662 that a favorable result will result from such
appeal.  A Tax Indemnitee shall not be required to appeal any adverse judicial
determination to the United States Supreme Court.

5.3

Compromise or Settlement.  A Tax Indemnitee shall have the right to settle or
compromise a contest if such Tax Indemnitee has provided Tax Indemnifying Party
with a reasonable opportunity to review a copy of that portion of the settlement
or compromise proposal which relates to the claim for which such Tax Indemnitee
is seeking indemnification hereunder; provided that if (a) such Tax Indemnitee
fails to provide such Tax Indemnifying Party such a reasonable opportunity to
review such portion of such proposal, or (b) after such reasonable opportunity
to review such proposal such Tax Indemnifying Party in writing reasonably
withholds its consent to all or part of such settlement or compromise proposal,
then Tax Indemnifying Party shall not be obligated to indemnify such Tax
Indemnitee hereunder to the extent of the amount attributable to the Tax or
Inclusion Event to which such settlement or compromise relates as to which such
Tax Indemnifying Party has reasonably withheld its consent, or with respect to
any other Tax or Inclusion Event for which a successful contest is foreclosed
because of such settlement or compromise as to which such Tax Indemnifying Party
has reasonably withheld its consent.  

5.4

Refunds.  If such Tax Indemnitee receives a repayment or a refund of all or any
part of any amount paid with respect which a Tax Indemnifying Party has
indemnified such Tax Indemnitee pursuant to this Schedule 7.4B (or if an amount
which otherwise would have been a refund was used to offset another liability of
such Tax Indemnitee (an “Applied Amount”)), then such Tax Indemnitee shall pay
to Tax Indemnifying Party an amount equal to the sum of the amount of such
repayment or refund (or Amount), plus any interest received on such repayment or
refund (or that would have been received if such Applied Amount had been
refunded to such Tax Indemnitee) attributable to any taxes paid by Tax
Indemnifying Party to or for such Tax Indemnitee net of any taxes incurred on
such refund or Applied Amount (plus any tax benefit received or that would have
been received by such Tax Indemnitee on account of such payment, as determined
under Section 4.2(c) hereof).  If such Tax Indemnitee receives an award of
attorneys’ fees in a contest for which Tax Indemnifying Party has paid an
allocable portion of the contest expenses, such Tax Indemnitee shall pay to Tax
Indemnifying Party the same proportion of the amount of such award as the amount
of such Tax Indemnitee’s attorneys’ fees paid or reimbursed by such Tax
Indemnifying Party bears to the total amount of attorneys’ fees actually
incurred by such Tax Indemnitee in conducting such contest, up to the amount of
attorneys’ fees paid or borne by such Tax Indemnifying Party in connection with
such contest.  Any subsequent disallowance or loss of such refund (as a result
of a redetermination of the claim giving rise to such payment by such Tax
Indemnitee to a Tax Indemnifying Party by any taxing authority or as a result of
a judicial proceeding with respect to such claim) shall be treated as a loss
subject to indemnification under this Schedule 7.4B without regard to Section
3.3 hereof.

5.5

Failure to Contest.  Notwithstanding anything to the contrary contained in this
Article 5 and subject to the exclusion contained in Section 3.3(h) hereof such
Tax Indemnitee may at any time decline to take any further action with respect
to a proposed adjustment by notifying Tax Indemnifying Party in writing that it
has waived its right to any indemnity payment that would otherwise be payable by
such Tax Indemnifying Party pursuant to this Schedule 7.4B in respect of such
adjustment and with respect to any other amount for which a successful contest
is foreclosed because of such failure to contest (if such failure adversely
affects a contest in any material respect) or to permit a contest.  If such Tax
Indemnitee fails to contest or to permit a contest hereunder, such Tax
Indemnitee will not be required to pay over to a Tax Indemnifying Party any
amount representing tax benefits which result from any amount as to which such
Tax Indemnitee has been deemed to have waived its right to any indemnity payment
hereunder.

5.6

Disputes.  If a Dispute arises between a Tax Indemnitee and a Tax Indemnifying
Party regarding the application of any provision of this Schedule 7.4B
(excluding any dispute that is governed by Sections 5.1, 5.2, and 5.3 hereof),
such Dispute shall be governed by Article XVII of the Ownership Agreement.  

5.7

Assignment of Rights.  Upon written notice to a Tax Indemnitee, the rights of a
Tax Indemnifying Party under this Schedule 7.4B shall be assigned to a Tax
Indemnifying Party Lessee (the “Assignment”).  Upon receipt of a notice of
Assignment, any obligation of the Tax Indemnitee to Tax Indemnifying Party shall
become an obligation of the Tax Indemnitee to Tax Indemnifying Party Lessee.

5.8

Previously Contested Matters.  Notwithstanding the foregoing, a Tax Indemnitee
shall not be required to contest any claim if the subject matter thereof shall
be of a continuing nature and shall have previously been the subject of a Final
Determination pursuant to the contest provisions of this Article 5, unless there
shall have been a change in the relevant circumstances or in the Law (including,
without limitation, amendments to statutes or regulations, administrative
rulings and court decisions) after such Final Determination and as a result of
such change in circumstances or in the Law, it is more likely than not within
the meaning of the ABA Standards and Code Section 6662 that the claim would be
resolved in favor of Tax Indemnifying Party, as evidenced by an opinion of
independent counsel, selected by Tax Indemnifying Party and reasonably
acceptable to the Tax Indemnitee.

ARTICLE 6:  [INTENTIONALLY OMITTED]

ARTICLE 7:  RECOMPUTATIONS

7.1

Verification of Calculations.  At a Tax Indemnifying Party’s request, the
accuracy of any calculation of amount(s) payable pursuant to this Schedule 7.4B
shall be verified by independent public accountants selected by the Tax
Indemnitee and reasonably satisfactory to Tax Indemnifying Party and such
verification shall bind such Tax Indemnitee and such Tax Indemnifying Party.  In
order, and to the extent necessary, to enable such independent accountants to
verify such amounts, such Tax Indemnitee shall provide to such independent
accountants (for their confidential use and not to be disclosed to a Tax
Indemnifying Party or any other person) all information (other than its tax
returns and workpapers) reasonably necessary for such verification, including
any computer program, related files, or reports used by such Tax Indemnitee in
originally determining a Tax or Inclusion.  Verification shall be at the expense
of Tax Indemnifying Party, unless, as the result of such verification, the Tax
Indemnitee’s calculation of the applicable amount payable is adjusted by 3% or
more in favor of Tax Indemnifying Party, in which case the expense shall be
borne by such Tax Indemnitee.

               SCHEDULE 18.3

Notice Information

If to ERGS SC:

Elm Road Generating Station Supercritical, LLC

c/o W.E. Power LLC

301 W. Wisconsin Avenue, Suite 600

Milwaukee, Wisconsin 53203

Attention: Vice President and Project Director, Tom Metcalfe

Telephone:  (414) 274-4442

Facsimile:  (414) 274-4495

Email: tom.metcalfe@wepowerllc.com

If to MGE Power:

MGE Power-Elm Road LLC
P.O. Box 1231
133 South Blair Street 53703
Madison, WI

Attention:  Manager

Telephone: 608-252-7149

Facsimile: 608-252-4794

E-mail:  jnewman@mge.com

  keuclide@mge.com

If to WPPI:

Wisconsin Public Power Inc.

1425 Corporate Center Drive

Sun Prairie, WI 53590-9109

Attention:   Senior Vice President - Legal & Regulatory

       Senior Vice President - Power Supply

       

Telephone: (608) 834-4500

Facsimile: (608) 837-0274

E-mail:  mstuart@wppisys.org

  psteitz@wppisys.org

FOOTNOTES

1

Insert applicable percentage determined pursuant to Ownership Agreement.

2

This sentence and Annex A attached hereto are only applicable when Assignee is
an Acceptable Assignee (as such term is defined in the Unit Ownership
Agreements) and not an Affiliate or an Acceptable Assignee that is a WPPI
Member, or a Person Controlled by WPPI or one or more WPPI Members.

3

Insert state in which Assignee is organized.

4

Insert state in which Assignor is organized.

5

This assumes that Assignor and Assignee have satisfied or waived all of the
conditions to Transfer of the Transferred New Common Facilities Ownership
Interest in accordance with Article IV of the Ownership Agreement.

6

Insert applicable name of party to the New Common Facilities Ownership
Agreement.

7

Insert applicable name of Agent under the Credit Agreement.

8

References to “Lenders” and “Credit Agreement” herein and the Recitals may be
modified as appropriate to reflect credit arrangements which are not loan
facilities.

9

This recital assumes that ERGS SC has elected to proceed with the construction
of Unit 1 and the New Common Facilities pursuant Section 2.3(a) of the Elm Road
I Ownership Agreement; otherwise there would be no basis for any party to enter
into this Consent.

10

This recital assumes that ERGS SC has elected to proceed with the construction
of Unit 2 pursuant to Section 2.3(a) of the Elm Road II Ownership Agreement.

11

For purposes of applying this definition in respect of WPPI, “unsecured
long-term debt” shall mean “long-term debt which is not secured by a lien on any
tangible assets”.