JOINT PLANT AGREEMENT

EXHIBIT 10.19

CONFIDENTIAL TREATMENT HAS BEEN REQUESTED.
CONFIDENTIAL INFORMATION HAS BEEN DESIGNATED BY ***

JOINT PLANT AGREEMENT

between

Wisconsin Public Service Corporation

and

Dairyland Power Cooperative

 

    THIS AGREEMENT is made and entered into this 23rd day of November, 2004, by and between Wisconsin Public Service Corporation, a Wisconsin corporation (hereinafter called "WPSC"), and Dairyland Power Cooperative, a Wisconsin cooperative association (hereinafter called "DPC"), the parties hereinafter sometimes being collectively called the "Companies", and individually called a "Company".

    WHEREAS, each of the Companies owns electric facilities and is engaged in the generation, purchase and sale of electric power.

    WHEREAS, the Companies, for the purposes of obtaining economies of scale, making the most effective use of power generation, and assuring and supplying economical and reliable electric power to their respective customers, desire to share in the ownership of Weston 4, which is to be constructed at the Weston Generating Station (as those terms are defined below).

    NOW, THEREFORE, in consideration of the premises and of the mutual covenants herein set forth, the Companies agree as follows:

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   Section 1. Definitions .

    " A&G Facilities " shall mean those buildings, improvements, equipment, facilities and other assets, liabilities and property not located at the Weston Generating Station that will be used in the overall conduct of the business and affairs of WPSC, as more specifically described in Section 06 of the Joint Operating Manual, and all renewals, repairs and replacements thereof; provided , however , that the A&G Facilities shall not include the Legner Facility.

    " Affiliate " shall mean with respect to any entity, any other Person which directly or indirectly, through one or more intermediaries, Controls, is Controlled by, or is under common Control with such entity.

    " Applicable Laws " shall mean any and all laws, rules, regulations, ordinances, requirements, guidelines, permits, licenses, judgments, decrees and orders of any federal, state or local legislative body, agency, court or other governmental body having jurisdiction that apply to or affect the Weston Generating Station, Weston 4, the Common Facilities, the construction, operation or maintenance of Weston 4 or of the Common Facilities, or any other transaction contemplated hereby (including without limitation any of the foregoing which concern health, safety, environmental protection, non-discrimination or the payment of prevailing wages).

    " ATC " shall mean the American Transmission Company LLC.

    " Average Cost Basis " shall mean an allocation of all costs associated with all applicable activities that support overall operating Company operations to all users on an equitable basis. This contrasts with an incremental or marginal cost basis, which identifies as relevant only those additional costs incurred as a result of the addition of a facility (Weston 4 in this circumstance).

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

    " Common Facilities " shall mean, collectively, the Weston New Common Facilities, the Weston Existing Common Facilities and the A&G Facilities.

    " Confidentiality Agreement " shall mean that certain Confidentiality Agreement between WPSC and DPC described in Section 34.

    " Control " shall mean the possession, whether directly or indirectly, of the power to direct or cause the direction of the management and policies of a Person (whether through the ownership of securities, by agreement or otherwise).

    " DNR " shall mean the Wisconsin Department of Natural Resources, or any successor agency thereto.

    " DPC's Secured Lender(s) " shall mean the RUS and any other lender(s) providing interim or permanent financing to DPC, which financing is secured, in part, by DPC's interest in this Agreement, Weston 4 and the Weston New and Existing Common Facilities.

    " Easement " shall mean the easement between WPSC as grantor and DPC as grantee in the form of Attachment 1 hereto, to be entered into by the Companies on the Ownership Date.

    " Easement Property " shall mean the land owned by WPSC that will be subject to the Easement, as described in more detail in the Easement.

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    " EI Agreement " shall mean the Environmental Indemnity Agreement in the form of Attachment 2 hereto, to be entered into by the Companies on the Ownership Date.

    " Escrow Agent " shall mean a bank with trust powers and a Standard & Poor's credit rating of at least A that does not hold accounts of either WPSC or DPC that has been appointed as escrow agent pursuant to the Escrow Agreement.

    " Escrow Agreement " shall mean an escrow agreement to be entered into by the Companies with the Escrow Agent prior to the Ownership Date, or an escrow agreement entered into by the Companies with a successor escrow agent.

    " Existing Common Ownership Date " shall mean the date on which DPC has paid to WPSC its share (based upon DPC's Existing Common Ownership Share) of the *** Weston Existing Common Facilities and of WPSC's unrecovered costs associated with the retirement of assets due to the construction of Weston 4. The Existing Common Ownership Date shall be the first day of the month following the month in which the "first fire on coal" milestone in the Weston 4 construction process is achieved; the Existing Common Ownership Date is presently estimated to be October 1, 2007.

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*** Indicates that material has been omitted and confidential treatment has been requested therefore. All such omitted material has been filed separately with the Securities and Exchange Commission pursuant to Rule 24b-2.

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    " Existing Common Ownership Shares " shall mean, beginning on the Existing Common Ownership Date, the shares to be owned by the Companies as undivided interests as tenants in common in the Weston Existing Common Facilities, excluding any fee interest in the land appurtenant thereto, with undivided interests as follows: The shares to be owned by the Companies will differ depending upon the usage category of the facility. As described in more detail in the Joint Operating Manual, there will be different usage categories, based upon which generating unit(s) will be using the facility in common with Weston 4 and an equitable determination of Weston 4's projected use of the facility. The Existing Common Ownership Shares and the New Common Ownership Shares for each usage category of facilities will be identical. The Companies' respective Existing Common Ownership Shares in the various categories of Weston Existing Common Facilities are set forth in Appendix C to the Joint Operating Manual. These Shares are based upon the 2003 MAIN summer capacity ratings for the generating units currently located at the Weston Generating Station and (to the extent applicable) at WPSC's Pulliam Station, and upon Weston 4's estimated summer capacity rating of 531 MW. The Existing Common Ownership Shares are subject to adjustment pursuant to Sections 8(i) and 12, below.

    " Facility Lay-Up " shall mean the cessation of operations or the shutdown of a facility with the ability to return the facility to operations, but without there being a decision to return the facility to operations by a specific date or to permanently close or abandon the facility.

    " FFB " shall mean the Federal Financing Bank.

    " First Approval " shall have the meaning assigned to that term in Section 3(e) of the Agreement.

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    " Fixed Charges " shall mean, without limitation, charges for return, taxes other than income taxes, and depreciation on an investment or allocated portion thereof. The charges for return will be calculated at the WPSC Cost of Capital.

    " Force Majeure " shall mean in respect of any Person ("Excused Party") an event beyond the reasonable control of such Excused Party which prevents or delays, in whole or in part, such Excused Party from performing any of its obligations under this Agreement, the Joint Operating Manual, the Ground Lease or the Easement (except for the obligation to pay money when due) including, without limitation, war, hostilities, terrorist acts, civil disturbances, any kind of local or national emergency, riot, fire, flood, hurricane, blizzard, storm, earthquake, concealed or subterranean conditions at the Weston Generating Station unknown to WPSC's Environmental Department as of the date of this Agreement, power failure or power surge, epidemic, explosion, sabotage, act of God, acts or failures to act or delays in action by governmental authorities (including but not limited to failure to issue, delays in issuing, or revocation of permits or licenses, except to the extent any such failure, delay or revocation is due to the negligence or intentional misconduct of the Person claiming Force Majeure), transmission constraints, delays in finalizing and implementing the Interconnection Agreement, acts or failures to act of a third party (including, in the case of WPSC, failure of its Subcontractor(s) to perform or deliver on a timely basis, to the extent such failure is due to a force majeure condition (as defined herein) affecting the Subcontractor or any other cause beyond WPSC's reasonable control), strike, slowdown or other labor unrest or dispute (including, in the case of WPSC, strikes, slowdowns or other labor unrest or disputes of or by employees of WPSC, any Subcontractor or their respective affiliates), delay of carriers, failure of the usual modes of transportation, embargo, unavailability of necessary equipment, changes in Applicable Laws from those in effect on the 

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date of this Agreement, any condition at the Weston Generating Station that requires remediation under any Applicable Law related to the environment (except any such condition that constitutes a violation of Applicable Law of which WPSC's Environmental Department has knowledge on the date of this Agreement), or expropriation or confiscation of facilities. Force Majeure shall not, however, include events that would have been avoided by the claiming Person's following of Good Utility Practice, and if not completely so avoidable, the extent of Force Majeure relief shall be reduced to the extent that the consequences of the Force Majeure event would have been avoided or reduced by the following of Good Utility Practice. Force Majeure shall also include, in the case of WPSC, any event beyond the reasonable control of WPSC, such as a physical transmission constraint or limitation or the terms of a governmental permit, license or order, or an order of the Transmission Authority or market authority having jurisdiction, that has the effect of limiting the aggregate output or operation of Weston 4 and any one or more of the other units at the Weston Generating Station, in which case WPSC shall not be required to operate Weston 4 to the extent doing so would have a material adverse effect on WPSC's ability to operate its other unit(s) at the Weston Generating Station. In the event of such a constraint, limitation, permit, license or order that has the effect of limiting the aggregate output or operation of Weston 4 and any one or more of the other units at the Weston Generating Station, the Companies shall reduce the dispatch of their respective shares of the Weston Generating Station generation in accordance with Section 13 of the Joint Operating Manual, as it may be modified from time to time by the JPOC to reflect the then-current practices of the Transmission Authority or market authority having jurisdiction.

    " Fully-Loaded Direct Costs " shall mean those costs that are directly identifiable with activities associated with the construction, operation, fueling and maintenance of Weston 4 or the 

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Weston New Common Facilities or Weston Existing Common Facilities. These costs shall include, but are not limited to, productive labor costs loaded with benefits, payroll taxes and non-productive time, contracted costs, and materials and supplies, including the associated warehousing costs.

    " GDP-IPD " shall mean the Gross Domestic Product Implicit Price Deflator published by the Bureau of Economic Analysis, US Level, which is more specifically titled "NIPA: Implicit Price Deflator - GDP, Index 2000=100".

    " Good Utility Practice " shall mean any of those designs, practices, methods, acts and equipment, as may change from time to time, that are commonly used, engaged in or approved by prudent electric generation utilities to design, construct, install, operate and maintain their electric generating, transmission and distribution equipment lawfully and with safety, dependability, efficiency and economy, including but not limited to compliance with those standards developed by the American Society of Mechanical Engineers, the Institute of Electrical and Electronic Engineers and the American National Standards Institute that are applicable to activities and procedures at Weston 4 and the Weston New and Existing Common Facilities, and those applicable standards developed by other similar organizations conducting affairs that are relevant to activities and procedures at Weston 4 and the Weston New and Existing Common Facilities; and that are in accordance with or required by any Applicable Laws in effect as of the date hereof, and as such may be changed from time to time. "Good Utility Practice" is not intended to be limited to the optimum design, practice, method, act or equipment to the exclusion of all others, but rather to be designs, practices, methods, acts and equipment generally accepted in the electric utility industry.

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    " Ground Lease " shall mean the agreement between WPSC as landlord and DPC as tenant in the form of Attachment 3 hereto, to be entered into by the Companies on the Ownership Date.

    " Indirect Costs " shall mean those costs that represent normal, routine, recurring services, including without limitation administrative and general costs, which benefit multiple areas of the operating Company and may not be easily identified or directly charged to a facility, thus requiring an allocation methodology, as described in Section 06 of the Joint Operating Manual, including but not limited to SERVCO, GENCO, ES&C and A&G Facilities costs. This contrasts with direct costs, which can be specifically identified as being incurred for or in connection with the facility receiving the charge.

    " In-Service Date " shall mean the first date on which Weston 4 (i) is capable of being operated for the purpose of generating electricity in a safe and proper manner in accordance with all Applicable Laws, all applicable federal, state and local permits and licenses, and Good Utility Practice, and (ii) has commenced generating electricity for sale, excluding electricity generated during trial operation/test generation. The In-Service Date shall be determined by the Joint Plant Operating Committee.

 

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    " Joint Operating Manual " shall mean the detailed procedures document developed by the Companies for use in administering this Agreement, as such document may be amended or modified from time to time by the JPOC (it being understood that the JPOC's amendments and modifications may include, without limitation, adding or deleting sections or provisions to or from the Joint Operating Manual). The initial version of the Joint Operating Manual is attached hereto as Attachment 4. The Joint Operating Manual, as it may be amended from time to time by the JPOC, shall be binding upon the Companies. The Joint Operating Manual shall, to the greatest extent possible, be construed to be complementary to the terms of this Agreement, but in the event of any conflict between the terms of this Agreement and the provisions of the Joint Operating Manual, this Agreement shall control. Capitalized terms that are defined in this Agreement shall have the same meanings when used in the Joint Operating Manual.

    " Joint Plant Operating Committee " or " JPOC " shall mean a committee which shall include representatives of each of the Companies and which shall provide policy supervision and direction with respect to the design, engineering, procurement, construction, modification, operation, maintenance, repair, licensing, permitting, accounting matters, interconnection, fuel procurement and decommissioning of Weston 4 and the Weston New and Existing Common Facilities in accordance with the terms and conditions of this Agreement and the Joint Operating Manual.

 

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    " JPOC Threshold " shall mean individual projects exceeding $*** in capitalized expenditures or fuel contracts exceeding $*** in expenditures, or individual projects (excluding fuel contracts) exceeding $*** in expensed expenditures; these dollar amounts shall be subject to escalation on an annual basis beginning in 2005 in accordance with changes in the GDP-IPD during the preceding calendar year (for example, if the GDP-IPD increases by 1% during 2004, the JPOC Threshold amounts shall be $***, $*** and $***, respectively, during 2005, and if the GDP-IPD then increases by 2% during 2005, the JPOC Threshold amounts shall be $***, $*** and $***, respectively, during 2006, and so on).

    " Lead Lender " shall mean that one of DPC's Secured Lender(s) that has been designated by DPC's Secured Lender(s) as being responsible for forwarding communications received from WPSC under this Agreement to the other DPC's Secured Lender(s). Promptly after being designated by DPC's Secured Lender(s), the Lead Lender shall confirm to WPSC in writing that it is willing to serve in this capacity. If DPC notifies WPSC that there are only two DPC Secured Lender(s), then each of such DPC's Secured Lender(s) shall be deemed to be the Lead Lender for purposes of this Agreement.

    " Legner Facility " shall mean WPSC's Legner solid waste facility located in the Town of Knowlton, Marathon County, Wisconsin.

    " MAIN " shall mean the Mid-America Interconnected Network, Inc. or its successor organization.

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*** Indicates that material has been omitted and confidential treatment has been requested therefore. All such omitted material has been filed separately with the Securities and Exchange Commission pursuant to Rule 24b-2.

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    " Major Construction Decisions " shall have the meaning assigned to that term in Section 5 of this Agreement.

    " Major Operating Decisions " shall have the meaning assigned to that term in Section 12 of this Agreement.

    " MAPP " shall mean the Mid-Continent Area Power Pool or its successor reliability organization.

    " New Common Ownership Shares " shall mean, beginning on the Ownership Date, the shares to be owned by the Companies as undivided interests as tenants in common in the Weston New Common Facilities, excluding any fee interest in the land appurtenant thereto, with undivided interests as follows: The shares to be owned by the Companies will differ depending upon the usage category of the facility. As described in more detail in the Joint Operating Manual, there will be different usage categories, based upon which generating unit(s) will be using the facility in common with Weston 4 and an equitable determination of Weston 4's projected use of the facility. The Existing Common Ownership Shares and the New Common Ownership Shares for each usage category of facilities will be identical. The Companies' respective New Common Ownership Shares in the various categories of Weston New Common Facilities are set forth in Appendix C to the Joint Operating Manual. These Shares are based upon the 2003 MAIN summer capacity ratings for the generating units currently located at the Weston Generating Station and (to the extent applicable) at WPSC's Pulliam Station, and upon Weston 4's estimated summer capacity rating of 531 MW. The New Common Ownership Shares are subject to adjustment pursuant to Sections 8(i) and 12, below.

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    " Ownership Date " shall mean the first date on which all of the following have occurred: (a) the Financing Contingency and the Transmission Contingency have been waived; (b) WPSC and DPC have each received all Required Permits, and have executed the Ground Lease, Easement and EI Agreement, and all Required Permits are in full force and effect; (c) DPC has paid to WPSC (i) its share (based upon DPC's Ownership Share) of all costs incurred in connection with the design, engineering, procurement, licensing, permitting, pre-certification activities, administrative and general, interconnection, fueling, construction, operation and maintenance of Weston 4 on or prior to such date, plus a return on those costs at the WPSC Cost of Capital pursuant to Section 3(c), and (ii) its share (based upon DPC's New Common Ownership Share) of all costs incurred in connection with the design, engineering, procurement, licensing, permitting, pre-certification activities, administrative and general, interconnection, construction, operation and maintenance of the Weston New Common Facilities on or prior to such date, plus a return on those costs at the WPSC Cost of Capital pursuant to Section 3(c); and (iii) its share (based upon DPC's Existing Common Ownership Share) of all costs incurred on or prior to such date in connection with those modifications of the Weston Existing Common Facilities that are being made in conjunction with and as part of the Weston 4 project, plus a return on those costs at the WPSC Cost of Capital pursuant to Section 3(c); and (d) DPC has paid to WPSC an amount equal to the Fixed Charges associated with WPSC's investment in the Site and the Easement Property, calculated from the date construction begins on Weston 4 until the date the Companies execute the Ground Lease and the Easement.

    " Ownership Shares " shall mean, beginning on the Ownership Date, the shares to be owned by the Companies as undivided interests as tenants in common in Weston 4, excluding any fee interest in the land appurtenant thereto, with undivided interests as follows:

Wisconsin Public Service Corporation	70%
Dairyland Power Cooperative	30%

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    The Companies may change their respective Ownership Shares, or their respective New or Existing Common Ownership Shares, from time to time, but only as provided herein or otherwise upon their mutual written agreement and their receipt of any and all governmental and regulatory permits, licenses and approvals necessary to allow such a change. In the event of any such change in Ownership Shares, New Common Ownership Shares or Existing Common Ownership Shares, as the case may be, any and all rights and responsibilities of the Companies under this Agreement, the Joint Operating Manual, the Ground Lease, the EI Agreement and the Easement that are based upon Ownership Shares, New Common Ownership Shares or Existing Common Ownership Shares, as appropriate, shall, beginning effective on the effective date of the change, be changed in proportion to the change in Ownership Shares, New Common Ownership Shares or Existing Common Ownership Shares, as appropriate (but the Companies' respective rights and responsibilities for periods prior to the effective date of the change in Ownership Shares, New Common Ownership Shares or Existing Common Ownership Shares, as appropriate, shall not be affected).

    " Partial Taking " shall mean any Taking of the Site or the Easement Property, as the case may be, that is not either a Total Taking or a Substantial Taking.

    " Permitted Liens " shall mean (a) liens for current taxes and assessments not yet due and payable or being contested in good faith by appropriate procedures; (b) liens, easements, licenses, restrictions, covenants, rights-of-way and other encumbrances as reflected in title records relating to the Site or the Easement Property that exist as of the date of this Agreement and other such liens, easements, licenses, restrictions, covenants, rights-of-way and other encumbrances that have been disclosed to and accepted by DPC, other than the lien of the trustee under WPSC's First Mortgage and Deed of Trust and Supplemental Indentures; (c) liens (except liens securing borrowed money), easements, leases, licenses, restrictions, covenants, rights-of-way and other encumbrances arising or granted by WPSC after the date of this Agreement that do not materially interfere with the operation of Weston 4 or the Weston New or Existing 

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Common Facilities or with DPC's rights under this Agreement, the Ground Lease, the EI Agreement or the Easement, provided that any such liens, restrictions, covenants or encumbrances under this subsection (c) do not attach to DPC's ownership interest in Weston 4 itself or DPC's ownership interest in the Weston New or Existing Common Facilities (it being understood that DPC does not and will not have an ownership interest in the Site or the Easement Property); (d) liens of Subcontractors, contractors, carriers, warehousemen, processors, mechanics and materialmen, and similar liens arising by operation of law or pursuant to the terms of contracts in the ordinary course of business associated with the construction, modification, operation, maintenance or development of Weston 4 or the Weston New or Existing Common Facilities for amounts not yet due or not overdue for a period of more than thirty (30) calendar days; and (e) the terms and conditions of this Agreement, the Ground Lease, the Easement, the EI Agreement and the written releases to be provided by WPSC to DPC pursuant to Section 4(b).

    " Person " shall mean any individual, firm, company, association, general partnership, limited partnership, limited liability company, trust, business trust, corporation, cooperative, public body, or other legal entity.

    " PSCW " shall mean the Public Service Commission of Wisconsin, or any successor agency thereto.

    " Required Permits " shall mean those permits, licenses, orders and approvals that must be obtained from federal, state and local governmental or regulatory agencies or authorities in order to allow WPSC to lawfully transfer to DPC, and DPC to lawfully acquire from WPSC, DPC's Ownership Share in Weston 4, DPC's New Common Ownership Share in the Weston New Common Facilities and DPC's Existing Common Ownership Share in the Weston Existing Common Facilities, and to allow the Companies to enter into the Ground Lease, the EI 

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Agreement and the Easement, including but not limited to the Second Approval. The Required Permits as of the date of this Agreement are identified on Attachment 5 hereto.

    " RUS " shall mean the United States Rural Utilities Service, or any successor agency thereto.

    " Second Approval " shall have the meaning assigned to that term in Section 3(e) of this Agreement.

    " Site " shall mean the land in which a leasehold interest will be granted by WPSC to DPC under the Ground Lease; Weston 4 will be built on said land.

    " Subcontractor " shall mean every Person (other than employees of WPSC), of whatever tier, employed or engaged by WPSC to provide labor, materials, equipment, components or services of any kind in connection with the design, engineering, construction, modification, repair, licensing, permitting, interconnection, operation, maintenance or fuel procurement of Weston 4 or the Common Facilities. Upon mutual agreement of the Companies, DPC may serve as a Subcontractor in appropriate circumstances.

    " Substantial Taking " shall mean, with respect to the Site, the Taking of so much of the Site that the portion thereof not taken cannot reasonably be used for the efficient operation of Weston 4, and shall mean with respect to the Easement Property, the Taking of so much of the Easement Property that the portion thereof not taken cannot reasonably be used for the efficient operation of the Weston New and Existing Common Facilities, considered in the aggregate.

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    " Taking " shall mean the taking or damaging of the Site or the Easement Property, as the case may be, or any part or parts thereof, including severance damage, by eminent domain, by inverse condemnation, or for any public or quasi-public use under any statute.

    " Total Taking " shall mean, with respect to the Site, the taking of title to the entire Site, and shall mean, with respect to the Easement Property, the taking of title to the entire Easement Property.

    " Transmission Authority " shall mean the entity having responsibility for maintaining the integrity of the transmission system in the region in which the Weston Generating Station is located.

    " Treasury Regulations " shall mean the income tax regulations promulgated under the Code.

    " Variable Dispatch Cost " shall mean the actual incremental cost, determined hourly, of fuel plus chemicals and/or emission credits, necessary to comply with the then-in-effect emission requirements, for the requested energy schedule.

    " Weston Existing Common Facilities " shall mean those buildings, improvements, equipment, facilities and other property existing at the Weston Generating Station on the date of this Agreement that will be used in common by Weston 4 and one or more of the other generating units at the Weston Generating Station, as more specifically described in Exhibit I to the Joint Operating Manual, and all modifications, renewals, repairs and replacements thereof.

    " Weston 4 " shall mean the supercritical pulverized coal base load electric generating unit having a net nominal rating of approximately 500 MW, and all systems, equipment, structures 

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and facilities ancillary thereto, including but not limited to all systems, equipment, structures and facilities necessary to deliver the output of the generator to the high side(s) of the point(s) of interconnection between said unit and the ATC transmission system, that are existing or are proposed to be constructed at the Weston Generating Station (but excluding the land appurtenant thereto), as described in WPSC's Application for a Certificate of Public Convenience and Necessity ("CPCN"), PSCW Docket No. 6690-CE-187. The Companies acknowledge that the substation and other network transmission facilities to be built as part of the interconnection agreement between WPSC and ATC relating to Weston 4 dated December 22, 2003 (the "Interconnection Agreement"), if owned by a Person other than WPSC, shall not be deemed to be part of Weston 4. The Companies further acknowledge that the Interconnection Agreement is between ATC and WPSC in its capacity as operator of Weston 4, and not on behalf of the co-owners of Weston 4, and that WPSC is solely responsible for such Interconnection Agreement.

    " Weston Generating Station " shall mean all power plant and generator interconnection facilities located or to be located at the site owned by WPSC along Business Highway 51 in the villages of Rothschild and Kronenwetter in Marathon County, Wisconsin, presently including three coal units (Weston 1, Weston 2 and Weston 3) and two smaller natural gas-fired turbines (W31 and W32), and which will include Weston 4, and which may include other unit(s) in the future, and all related facilities (including but not limited to the Weston Existing and New Common Facilities). The Weston Generating Station is more particularly described in Attachment 6 to this Agreement.

    " Weston New Common Facilities " shall mean those buildings, improvements, equipment, facilities and other property proposed to be constructed at the Weston Generating Station in conjunction with the construction of Weston 4 that will be used in common by Weston 4 and one or more of the other generating units at the Weston Generating Station, as more specifically described in Exhibit I to the Joint Operating Manual, and all modifications, renewals, repairs and replacements thereof. The term Weston New Common Facilities shall also include those 

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buildings, improvements, equipment, facilities and other property constructed at the Weston Generating Station after the construction of Weston 4 that will be used in common by Weston 4 and one or more of the other generating units at the Weston Generating Station, and all modifications, renewals, repairs and replacements thereof.

    " WPSC Cost of Capital " shall mean WPSC's pre-tax overall cost of capital that is in effect from time to time, as reflected in the then-most recent rate order issued by the PSCW (referred to in those orders as the "economic cost of capital").

    Section 2. Scope . Weston 4 shall be unit train served and fossil-fueled, and shall have a net nominal rating of approximately 500 MW. Weston 4 shall be designed and constructed at the Weston Generating Station as described in this Agreement, and operated and maintained in accordance with this Agreement and the Joint Operating Manual.

    Section 3. Contingencies . (a) DPC shall use its best efforts to obtain permanent financing for its share of Weston 4 costs through the RUS, and interim financing for its share of such costs through a lender that may require a DPC/RUS mortgage lien accommodation. If, despite DPC's best efforts, DPC has not obtained by January 16, 2006 RUS approval of DPC's participation in Weston 4 and an unconditional RUS commitment to guarantee long-term FFB financing of 100% of the DPC participation in Weston 4 for a term of at least 35 years at rate(s) of interest no greater than the then-current long-term FFB rates plus one-eighth of one percent, and with financial performance covenants not materially more onerous than those contained in DPC's RUS mortgages existing on the date of this Agreement (as supplemented), DPC may terminate this Agreement by providing written notice of termination to WPSC by no later than January 16, 2006 (the "Financing Contingency"). For purposes of this section, such an

 

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"unconditional RUS commitment" shall mean a commitment the execution of which is conditioned solely on execution of the usual and customary RUS-guaranteed FFB loan documentation and closing requirements. If DPC terminates this Agreement pursuant to the Financing Contingency, DPC's obligation to contribute to the costs of Weston 4 shall be cancelled, and DPC shall thereafter have the right (which right must be exercised on or before ***, 2006  or be conclusively deemed waived) to elect the Partial Requirements Service PPA alternative, as described in more detail in Attachment 7 hereto. If DPC wishes to elect the Partial Requirements Service PPA alternative, it must notify WPSC of its election in writing by no later than ***, 2006. If, on the other hand, DPC obtains the RUS approval and the unconditional commitment described above on or before January 16, 2006, DPC shall promptly notify WPSC thereof in writing and thereby waive the Financing Contingency. DPC in its discretion may also waive the Financing Contingency by written notice to WPSC on or before January 16, 2006, even if it has not received the RUS approval and unconditional commitment described above. Any waiver of the Financing Contingency shall, once made or given, be irrevocable. If DPC does not provide WPSC with notice of termination as described above on or prior to January 16, 2006, and if DPC has not waived the Financing Contingency in writing on or before January 16, 2006, this Agreement shall be deemed to have been terminated by DPC pursuant to the Financing Contingency, effective on January 16, 2006.

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*** Indicates that material has been omitted and confidential treatment has been requested therefore. All such omitted material has been filed separately with the Securities and Exchange Commission pursuant to Rule 24b-2.

 

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    (b) DPC shall use efforts consistent with Good Utility Practice to obtain transmission service and MAPP accreditation for firm delivery of DPC's share of the energy to be generated at Weston 4 to the DPC transmission network at commercially reasonable cost and risk. If despite such efforts, DPC determines in its sole discretion that it cannot obtain transmission service and/or accreditation at commercially reasonable cost and risk, DPC shall have the right to terminate this Agreement by providing written notice of termination to WPSC on or before January 16, 2006 (the "Transmission Contingency"). DPC's commercially reasonable cost and risk of transmission shall include consideration of, among other things, the likelihood and cost of additions or improvements to the ATC, DPC, or other transmission systems required to provide firm delivery to the DPC transmission network, and the cost and availability of firm transmission service, including reservation charges, anticipated transmission congestion relief costs and the associated cost to DPC, if any, to obtain financial transmission rights and/or redispatch services to offset such costs. If DPC exercises the Transmission Contingency and terminates this Agreement, it shall disclose to WPSC in writing the steps DPC has taken to obtain transmission service and accreditation and the factors in its decision. If DPC terminates this Agreement pursuant to the Transmission Contingency, DPC's obligation to contribute to the costs of Weston 4 shall be cancelled. The Transmission Contingency may be waived by DPC on or prior to January 16, 2006 by providing written notice of waiver to WPSC; if DPC obtains transmission service and MAPP accreditation at what DPC deems to be commercially reasonable cost and risk as described above, it shall promptly notify WPSC thereof in writing and thereby waive the Transmission Contingency. Any waiver of the Transmission Contingency shall, once made or given, be irrevocable. If DPC does not provide either a written notice of termination or a written notice of waiver of the Transmission Contingency to WPSC by January 16, 2006, this Agreement shall be deemed to have been terminated by DPC pursuant to the Transmission Contingency, effective on January 16, 2006. WPSC shall reasonably cooperate with DPC (at 

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DPC's expense) and provide DPC with such testing data and other information as DPC shall reasonably request in order for DPC to obtain the transmission service and MAPP accreditation for DPC's share of capacity and energy from Weston 4.

    (c) Notwithstanding anything to the contrary herein, assuming the Financing and Transmission Contingencies have been waived and this Agreement has not been terminated pursuant to Section 3(e) below, DPC's payment of its share of Weston 4 and Weston New Common Facilities costs and Weston Existing Common Facilities modification costs may be delayed in whole or in part until the earlier of (i) the date DPC has closed on its interim or permanent financing, or (ii) ***. Assuming the Financing and Transmission Contingencies have been waived and this Agreement has not been terminated pursuant to Section 3(e) below, WPSC shall finance DPC's unpaid Weston 4 and Weston New Common Facilities costs, and DPC's share of the costs of those modifications of the Weston Existing Common Facilities that are being made in conjunction with and as part of the Weston 4 project, until DPC has closed on its interim or permanent financing and DPC has paid its share of Weston 4 and Weston New Common Facilities costs and Weston Existing Common Facilities modification costs; provided , however , that DPC must pay its share of the Weston 4 and Weston New Common Facilities costs and Weston Existing Common Facilities modification costs by no later than ***. WPSC shall earn the WPSC Cost of Capital in effect in each of the time periods covered by expenditures made by WPSC prior to the initial billing on the financing provided to DPC hereunder, and DPC shall pay the amount accrued at the WPSC Cost of Capital, together with its share of the Weston 4 and Weston New Common Facilities costs and Weston Existing Common Facilities

_______________

*** Indicates that material has been omitted and confidential treatment has been requested therefore. All such omitted material has been filed separately with the Securities and Exchange Commission pursuant to Rule 24b-2.

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modification costs that have accrued through the date on which the Companies close on the transfer by WPSC to DPC of DPC's interest in Weston 4 and in the Weston New Common Facilities. The Companies shall close on the transfer by WPSC to DPC of DPC's interest in Weston 4 and in the Weston New Common Facilities as soon as reasonably possible. Notwithstanding anything to the contrary herein, DPC shall not have any ownership interest in Weston 4 or in any of the Weston New Common Facilities until the Ownership Date.

    (d) The Companies acknowledge and agree that time is of the essence with respect to the January 16, 2006 deadline in connection with the Financing and Transmission Contingencies, and in connection with the provisions of Section ***, and with respect to the *** 2006 deadlines in connection with the provisions of Sections 3(e)(iv) and (v). The Companies specifically agree that, if and when the Financing Contingency and the Transmission Contingency have both been waived, and if this Agreement has not been terminated pursuant to Section 3(e) on or before *** 2006, then DPC shall have an unconditional obligation to pay for its share of all Weston 4 and Weston New Common Facilities costs, and Weston Existing Common Facilities modification costs, then accrued by no later than ***, regardless of whether or not DPC has closed on its interim or permanent financing by said date, and regardless of any action or failure to act on the part of RUS, the FFB, DPC's Secured Lender(s), any other DPC lender, or any other Person having jurisdiction over or affiliated with DPC. In such case, if DPC has not paid for its share of Weston 4 and Weston New Common Facilities costs, and Weston Existing Common Facilities modification costs then accrued on or before *** (for any reason other than the failure of WPSC to comply with condition(s) to one or more of the Required Permits such that said Required Permit(s) are not in full force and effect on ***), then DPC shall be in material breach of this Agreement and beginning on ***, WPSC in its sole discretion shall be entitled to terminate this

_______________

*** Indicates that material has been omitted and confidential treatment has been requested therefore. All such omitted material has been filed separately with the Securities and Exchange Commission pursuant to Rule 24b-2.

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Agreement upon written notice to DPC and hold DPC liable for any and all damages incurred by WPSC as a result of DPC's breach (subject to the limitation of liability set forth in Section 13). If DPC has not paid for its share of Weston 4 and Weston New Common Facilities costs and Weston Existing Common Facilities modification costs then accrued on or before ***, due to the failure of WPSC to comply with condition(s) to one or more of the Required Permits such that said Required Permit(s) are not in full force and effect on ***, then WPSC in its sole discretion shall be entitled to terminate this Agreement upon written notice to DPC, but DPC shall not in this instance be liable for damages incurred by WPSC. A "failure of WPSC to comply with condition(s) to one or more of the Required Permits" for purposes of the immediately preceding two sentences, however, shall not be deemed to include any such failure that is caused by DPC's acts or omissions.

    e) On October 7, 2004, WPSC received a CPCN (PSCW Docket No. 6690-CE-187) from the PSCW to allow the construction of Weston 4 (the "First Approval"). As soon as reasonably practicable after the date of this Agreement, DPC and WPSC shall submit to the PSCW all materials necessary to obtain PSCW approval to allow WPSC to transfer a 30% interest in Weston 4 to DPC and to allow DPC to acquire said interest (this PSCW approval to be sought by WPSC and DPC is referred to herein as the "Second Approval"). The Companies shall use reasonable best efforts to obtain, and shall cooperate to facilitate and expedite receipt of, the Second Approval and all other Required Permits associated with the Weston 4 project, including without limitation by coordination with the RUS, the PSCW, the DNR and other federal, state and local agencies for compliance with all Applicable Laws, including but not

_______________

*** Indicates that material has been omitted and confidential treatment has been requested therefore. All such omitted material has been filed separately with the Securities and Exchange Commission pursuant to Rule 24b-2.

 

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limited to the National Environmental Policy Act and the Wisconsin Environmental Policy Act. The costs of obtaining the Second Approval shall be shared by the Companies in accordance with their respective Ownership Shares. WPSC shall consult with DPC before making any commitments, entering into any voluntary agreements, or agreeing to any permit or approval condition that would have the effect of materially increasing DPC's costs or regulatory obligations with regard to DPC's other generation units or utility system.

    Notwithstanding anything to the contrary herein (but subject to the last sentence of this Section 3(e) dealing with expiration of termination rights): (i) if WPSC has not received on or before *** the necessary air permit for Weston 4 from the DNR or any other material governmental or regulatory permit, license, order or approval that is reasonably necessary for the construction, operation or maintenance of Weston 4 or the Weston New Common Facilities, or if the First Approval or any such air permit and/or other permit, license, order or approval has been received by such date but has been suspended, withdrawn or revoked, or is subject to restriction(s), condition(s) or qualification(s) that, in the sole discretion of either WPSC or DPC, have or may have a material adverse impact upon the Weston 4 project or its usefulness or value to WPSC or DPC, as the case may be, then either DPC or WPSC, in its sole discretion, shall be entitled to terminate this Agreement upon written notice to the other Company, so long as such notice is received by no later than ***; (ii) if the Companies have not received the Second Approval on or before ***, or if the Second Approval has been received by such date but has been suspended, withdrawn or revoked or is subject to restriction(s), condition(s) or qualification(s) that, in the sole discretion of either of the Companies, have or may have a material adverse impact upon the Weston 4 project or its usefulness or value to such Company, then either such Company, in its sole discretion, shall be entitled to terminate this Agreement

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*** Indicates that material has been omitted and confidential treatment has been requested therefore. All such omitted material has been filed separately with the Securities and Exchange Commission pursuant to Rule 24b-2.

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upon written notice to the other Company, so long as such notice is received by no later than ***; (iii) if all Required Permits have not been received on or before *** 2006, or if one or more of the Required Permits has been received on or before *** 2006 but has been suspended, withdrawn or revoked, this Agreement shall automatically terminate effective on said date unless the Companies have mutually agreed in writing to waive this subsection (iii) prior to *** 2006; (iv) if all Required Permits have been received, but one or more of them has been suspended, withdrawn or revoked or is subject to restriction(s), condition(s) or qualification(s) that, in the sole discretion of either of the Companies, have or may have a material adverse impact upon the Weston 4 project or its usefulness or value to such Company, or if the Second Approval or any other Required Permit is being challenged before the PSCW or in a court of competent jurisdiction, and such challenge is determined by either Company in its sole discretion to have a material adverse impact upon the Weston 4 project or its usefulness or value to such Company, then either Company, in its sole discretion, shall be entitled to terminate this Agreement upon written notice to the other Company, so long as such notice is received by *** 2006; (v) if the First Approval, the necessary air permit for Weston 4 from the DNR, or any other material governmental or regulatory permit, license, order or approval that is reasonably necessary for the construction, operation or maintenance of Weston 4 or the Weston New Common Facilities is being challenged before the DNR or the PSCW or in a court of competent jurisdiction, and such challenge is determined by either Company in its sole discretion to have a material adverse impact upon the Weston 4 project or its usefulness or value to such Company, then either Company, in its sole discretion, shall be entitled to terminate this Agreement upon written notice to the other Company, so long as such notice is received by *** 2006 (it being understood that WPSC may terminate this Agreement under this subsection (v) only if it also abandons the

_______________

*** Indicates that material has been omitted and confidential treatment has been requested therefore. All such omitted material has been filed separately with the Securities and Exchange Commission pursuant to Rule 24b-2.

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Weston 4 project); and (vi) WPSC, in its sole discretion, shall be entitled to terminate this Agreement upon written notice to DPC at any time prior to the Ownership Date if WPSC decides not to proceed with the Weston 4 project. If WPSC intends to exercise its termination right under subsection (vi) of this Section 3(e), and WPSC's exercise of such termination right will occur more than 30 calendar days after the date the Second Approval is obtained, and WPSC has decided to pursue an alternative generation resource or resources instead of Weston 4, then before WPSC may exercise its termination right under subsection (vi) of this Section 3(e), WPSC will notify DPC of such intended termination and consult with DPC concerning the possibility of DPC participating in such alternative resource(s); provided , however , that any such DPC participation shall be subject to the Companies reaching mutual agreement with respect thereto. The termination rights identified in Sections 3(e)(i) through (vi) shall each expire automatically if and when the Ownership Date has occurred.

    Section 4. Title to Property and Rights of Use; Risk of Loss; Condemnation .

    (a) Effective on the Ownership Date, DPC and WPSC shall be tenants in common (as undivided interests) in Weston 4 and in the Weston New Common Facilities (excluding any interest in the land underlying the same other than the rights created by the Ground Lease and the Easement), with undivided interests in Weston 4 in proportion to their respective Ownership Shares, and undivided interests in the Weston New Common Facilities in proportion to their respective applicable New Common Ownership Shares. WPSC shall solely own and continue to own the A&G Facilities, and any and all buildings, improvements, equipment, facilities and other property at the Weston Generating Station that are not used in common by Weston 4 and one or more of the other generating units at the Weston Generating Station. The Site shall be owned solely by WPSC, subject to the Ground Lease, with DPC as tenant in proportion to DPC's Ownership Share in Weston 4. The Easement Property shall be owned solely by WPSC, subject to the Easement. Effective on the Existing Common Ownership Date, DPC and WPSC shall be tenants in common (as undivided interests) in the Weston Existing Common Facilities (excluding 

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any interest in the land underlying the same other than the rights created by the Easement), with undivided interests in the Weston Existing Common Facilities in proportion to their respective applicable Existing Common Ownership Shares. All titles and interests of the Companies as tenants in common as described above shall be subject to the provisions of Section 17 of this Agreement. The Companies agree that the Common Facilities will be made reasonably available to carry out the purposes and intent of this Agreement.

    (b) WPSC shall transfer to DPC its share of ownership in Weston 4, the Weston New Common Facilities and the Weston Existing Common Facilities by bill of sale or other documents of transfer reasonably satisfactory to DPC's counsel and the RUS, with warranties of title, free and clear of liens or encumbrances other than Permitted Liens. On or before the Ownership Date, WPSC shall also provide to DPC a written release from those indenture trustees holding liens on Weston 4, the Weston New Common Facilities, the Site and the Easement Property, substantially in the form of the Partial Release of Mortgage attached as Schedule II to the Ground Lease, or such other form as is reasonably acceptable to WPSC and DPC. On or before the Existing Common Ownership Date, WPSC shall also provide to DPC a written release or consent from the indenture trustees holding liens on the Weston Existing Common Facilities, analogous in form to the Partial Release of Mortgage attached as Schedule II to the Ground Lease, or such other form as is reasonably acceptable to WPSC and DPC.

    (c) Risk of loss of Weston 4, the Weston New Common Facilities and the Weston Existing Common Facilities (including but not limited to any risk of loss or other liability or cost associated with any governmental or regulatory permit, license, approval or order necessary for the construction, creation, operation or maintenance of Weston 4 or the Weston New or Existing Common Facilities, or necessary in connection with the Ground Lease or the Easement, or otherwise related to compliance with Applicable Laws or obtaining approvals as contemplated 

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by Section 25) shall be shared by WPSC and DPC in proportion to their respective Ownership Shares, New Common Ownership Shares or Existing Common Ownership Shares, as the case may be. Loss of or damage to A&G Facilities will, under normal circumstances, involve a retirement and a replacement of the equipment as a capital expenditure. In these circumstances, WPSC and DPC will share in the premature retirement of the damaged facilities through depreciation expense as certified by the PSCW. If for some reason WPSC is required to record a book loss on such facilities, or to the extent a loss results in an expenditure that is expensed, such loss will be shared by DPC and WPSC as provided in the Joint Operating Manual.

    (d) In the event of a Total Taking or a Substantial Taking of the Site, the term of the Ground Lease shall terminate as of the date of said Total or Substantial Taking; DPC shall pay rent under the Ground Lease up to such date, with an appropriate refund by WPSC of such rent as may have been paid in advance for any period subsequent to such date; and that portion of the award or other compensation relating to the Site (the portion of the award or compensation relating to Weston 4 itself is addressed below), whether pursuant to judgment or by agreement or otherwise, with respect to such Total or Substantial Taking shall be paid directly to WPSC and be WPSC's sole property. In the event of a Total Taking or Substantial Taking of the Easement Property, the Easement shall terminate as of the date of said Total or Substantial Taking; and that portion of the award or other compensation relating to the Easement Property (the portion of the award or compensation relating to the Weston New or Existing Common Facilities themselves is addressed below), whether pursuant to judgment or by agreement or otherwise, with respect to such Total or Substantial Taking shall be paid directly to WPSC and be WPSC's sole property. In the event of a Partial Taking of the Site or the Easement Property, WPSC shall, unless the Companies agree otherwise in writing, within six (6) months restore the Site or the Easement Property, as the case may be, to a condition reasonably equivalent to that existing prior to such Partial Taking; the award or other compensation relating to the Site or the Easement Property, as the case may be, whether pursuant to judgment or by agreement or otherwise, with respect to 

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such Partial Taking shall be paid to WPSC and be WPSC's sole property; provided , however , that such award or compensation shall first be applied, if necessary, toward any costs incurred for such restoration. The award or other compensation arising from any Taking relating to Weston 4 (exclusive of all land comprising the Site itself and value relating solely to such land), if any, shall belong to DPC and WPSC, in accordance with their then-respective Ownership Shares in Weston 4. The award or other compensation arising from any Taking relating to the Weston New or Existing Common Facilities (exclusive of all land comprising the Easement Property itself and value relating solely to such land), if any, shall belong to DPC and WPSC, in accordance with their then-respective applicable New Common Ownership Shares or Existing Common Ownership Shares, as the case may be. Nothing herein shall prevent WPSC or DPC from pursuing a claim against the condemning authority for relocation costs.

    Section 5. Construction . WPSC shall, in accordance with Good Utility Practice and subject to the decisions of the JPOC, have sole responsibility for the design, licensing, procurement, installation, construction, interconnection, administration and commissioning of Weston 4 and the Weston New Common Facilities, including the other new and modified facilities associated with such construction, and any modification or replacements thereof or additions thereto, and for the modifications to the Weston Existing Common Facilities. These tasks may be performed directly by WPSC employees or by Subcontractors with which WPSC, directly or indirectly, has entered into contracts. WPSC shall use all commercially reasonable efforts to complete construction of Weston 4, such that the In-Service Date occurs by June 1, 2008, subject to the effects of Force Majeure. Throughout the construction phase, WPSC shall provide DPC with a copy of each monthly project status report for the Weston 4 project promptly after such report is completed.

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    Beginning on the Ownership Date, WPSC shall also provide DPC with reasonable access to the "Expedition" and "PowerTrak" software tools used by WPSC in connection with the management of the Weston 4 project. To the extent not accessible through such software, WPSC will also upon request arrange for DPC to obtain copies of any critical path schedules and other schedules provided by Weston 4 construction Subcontractors showing their planned construction schedule to meet the estimated In-Service Date, the WPSC internally-prepared schedules that monitor the progress of Weston 4 construction, and copies of materials provided to WPSC by its prime Weston 4 construction Subcontractors or other Subcontractors and suppliers to document invoices presented to WPSC for payment. Also beginning on the Ownership Date, WPSC will provide to DPC reasonably promptly copies of verification/approval reports issued by Black & Veatch and the Washington Group International with respect to invoices from equipment and construction Subcontractors. WPSC will also use commercially reasonable efforts to respond to questions reasonably posed by DPC with respect to information and materials provided pursuant to this section. WPSC shall also provide DPC with such information in WPSC's possession as DPC may reasonably request to permit DPC to determine the status of work on the Weston New and Existing Common Facilities, start-up and commissioning, training, permitting, interconnections, project budgets and construction budgets (including change orders). DPC shall be responsible for any increased costs incurred by WPSC in providing DPC access to software tools, reports, schedules and other information pursuant to this section.

    WPSC shall notify DPC if and when WPSC has actual knowledge that suggests the In-Service Date of Weston 4 will be delayed beyond June 1, 2008. If WPSC notifies DPC that it expects such a delay to occur, then WPSC shall inform DPC in writing of the remedial steps to be taken to minimize the delay, and provide DPC with copies of any remedial action plans 

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obtained from WPSC's Subcontractors, including reasonable forecasts of when all necessary work can be completed to allow the In-Service Date to occur.

    Subject to the terms, conditions and restrictions of the Confidentiality Agreement, DPC may provide any of the above information (including without limitation reasonable access to the software tools described above) to its authorized representative, including the engineering consultant for DPC's Secured Lender(s). DPC shall be responsible for any increased costs incurred by WPSC in connection with the provision of such information and software access to DPC's authorized representative.

    During the construction phase, WPSC shall maintain an owner-controlled insurance program that will provide workers' compensation and general liability coverage for incidents occurring at the Weston 4 site, or will make arrangements for comparable coverages. WPSC also shall maintain a builder's risk policy applicable to loss of property that occurs at the Weston 4 site during construction, or will make arrangements for comparable coverage. The cost of these insurance coverages shall be shared by the Companies as provided in this Agreement and the Joint Operating Manual.

    Notwithstanding anything to the contrary contained in this Section 5 or elsewhere in this Agreement, none of the following actions (which shall be referred to herein as "Major Construction Decisions") may be taken on or after the Ownership Date without the unanimous approval of the Joint Plant Operating Committee: (i) abandonment of the Weston 4 project or the Facility Lay-Up of Weston 4 prior to the In-Service Date; (ii) any modification to the Weston 4 project occurring prior to the In-Service Date that would reduce the rated megawatt capability of Weston 4 by more than 30 MW (specifically excluding expected variations due to normal operating constraints, seasonal variations, and other temporary unit deratings); or (iii) a voluntary decision by WPSC to delay the In-Service Date by an aggregate period of more than 60 calendar 

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days, due to circumstances within the control of WPSC, and specifically not including any delays arising from Force Majeure events.

    Prior to and after the Ownership Date, DPC may elect, at its sole cost and responsibility, to have DPC staff member(s) or representative engineer(s) on-site during the design and construction phase for Weston 4 to observe and provide WPSC with input on project management and administration. WPSC shall consider any such input in good faith, but shall not be required to act upon such input unless it determines in its reasonable discretion and in accordance with Good Utility Practice that it is appropriate to do so. Also prior to and after the Ownership Date, DPC staff members or representative engineers may upon mutual agreement of the Companies perform work associated with the design and construction of Weston 4.

    Section 6. Contracts and Authorizations . In general, WPSC as the operating co-owner shall have responsibility for the construction, operation and maintenance of Weston 4. Subject to the provisions in this Agreement dealing with Major Construction Decisions and Major Operating Decisions, WPSC was, is and on an ongoing basis shall be authorized to act for the co-owners of Weston 4 and the Weston New and Existing Common Facilities, in accordance with Good Utility Practice and subject to the general oversight of the JPOC, by negotiating and entering into (i) contracts related to the design, engineering, procurement, licensing, permitting, interconnection, administration or construction of Weston 4 or the Weston New or Existing Common Facilities, or to the replacement of, addition to, modification of, or repair or refurbishment of, any items of property of or associated with Weston 4 or with the Weston New or Existing Common Facilities, or to transportation or fuel procurement for Weston 4, and contracts for operation, maintenance and modification services for Weston 4 or for the Weston New or Existing Common Facilities, and amendments to all such contracts, and (ii) settlements of and judgments related to any asserted rights, claims, demands, actions or penalties of any third Person associated with the design, engineering, procurement, licensing, permitting, interconnection, administration, construction, operation, maintenance, modification, repair, 

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transportation or fuel procurement of Weston 4 or of the Weston New or Existing Common Facilities, so long as the estimated cost of any such contract (as amended), judgment or settlement entered into on or after the date of this Agreement is less than the JPOC Threshold. Effective on and after the Ownership Date, DPC's cost responsibility under this Agreement shall reflect the terms and conditions of, and DPC shall be responsible under this Agreement for the costs and liabilities arising from, all such contracts (as amended), judgments and settlements (whether entered into before, on or after the Ownership Date (or, with respect to the Weston Existing Common Facilities, the Existing Common Ownership Date)) in proportion to DPC's Ownership Share, New Common Ownership Share or Existing Common Ownership Share, as the case may be. The Companies further acknowledge and confirm that, effective on the Ownership Date, DPC's cost responsibility under this Agreement shall reflect the terms and conditions of, and DPC shall be responsible under this Agreement for the costs and liabilities arising from, all such contracts (as amended), judgments and settlements entered into by WPSC prior to the date of this Agreement, in proportion to DPC's Ownership Share, New Common Ownership Share or Existing Common Ownership Share, as the case may be, whether the estimated cost of any such contract, amendment, judgment or settlement is below, at or above the JPOC Threshold. WPSC also is and on an ongoing basis shall be authorized to act for the co-owners of Weston 4 and the Weston New and Existing Common Facilities, in accordance with Good Utility Practice, by negotiating and entering into contracts, amendments, judgments and settlements associated with the design, engineering, procurement, licensing, permitting, interconnection, administration, construction, modification, repair, operation, maintenance, transportation or fuel procurement of Weston 4 or of the Weston New or Existing Common Facilities as provided in Sections 7 or 12 below. Consistent with the scope of WPSC's authority to act for the co-owners of Weston 4 and the Weston New and Existing Common Facilities under this Agreement, at WPSC's request DPC shall confirm in writing to WPSC and to Subcontractors engaged on work for Weston 4 or the Weston New or Existing Common Facilities, or other third Persons as appropriate, that as a co-owner of Weston 4 and the Weston New and Existing 

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Common Facilities, DPC will not assert any claims with regard to or in connection with contracts or settlements entered into by WPSC as authorized or confirmed by this Agreement that are inconsistent with or foreclosed by the terms and conditions of those contracts or settlements. In appropriate circumstances involving significant or longer-term contracts, WPSC may request that DPC contract directly with a third-party vendor or other third Person, or that DPC authorize WPSC to bind DPC directly to said vendor or Person, for DPC's proportionate share of responsibility under a contract, judgment or settlement, and DPC shall do as reasonably requested, subject, however, to receiving any required approval from RUS for such authorization or such contract. DPC shall otherwise not be authorized to enter into any contract, judgment or settlement associated with the design, engineering, procurement, licensing, permitting, interconnection, administration, construction, modification, repair, operation, maintenance, transportation or fuel procurement of Weston 4 or of the Weston New or Existing Common Facilities without the express, prior written approval of the JPOC. Contracts for the purchase of materials or services that will exceed the sum of $1,500,000 shall contain clauses that allow compliance with RUS mandates for "Buy American" requirements, debarment certification and equal opportunity requirements, so as to facilitate approval for DPC's RUS financing for its share of the costs of such contracts. Any charges for goods or services from Affiliates of WPSC that are not regulated by the PSCW shall not exceed the lesser of the actual cost to the Affiliate or the fair market value of such goods or services (based upon the PSCW's affiliated interest policies and practices in effect on the date of this Agreement).

    The Companies agree that, subject to the provisions of this Agreement dealing with the Required Permits and the Financing Contingency, WPSC shall have the sole right and responsibility to apply for such governmental permits, licenses, orders and approvals, and to conduct such regulatory proceedings, and to make such filings, as may be required in connection with the design, engineering, procurement, licensing, permitting, interconnection, administration, construction, modification, repair, operation, maintenance, transportation or fuel procurement of

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 Weston 4 or of the Weston New or Existing Common Facilities. DPC shall cooperate fully with all such efforts by WPSC; provided that WPSC shall consult with DPC before making any commitments, entering into voluntary agreements, or agreeing to any permit or approval condition that would have the effect of materially increasing DPC's costs or regulatory obligations with regard to DPC's other generation units or utility system.

    Within thirty (30) calendar days after entry into any contract, amendment, cancellation, judgment or settlement in its capacity as the operating co-owner of Weston 4 that meets or exceeds the JPOC Threshold, WPSC shall give notice thereof to DPC and shall provide such copies or summaries as may be necessary for the accounting and other records of the Companies. In addition, to facilitate DPC's applications for regulatory and financing approvals, WPSC shall provide to DPC a listing of all contracts, amendments, cancellations, judgments or settlements relating to Weston 4, and copies or summaries as may be reasonably necessary for such applications and approvals.

    Section 7. Joint Plant Operating Committee . The JPOC will be formed upon the execution of this Agreement. Both Companies shall be represented on the Joint Plant Operating Committee. The names and contact information of the initial members of the JPOC, and the procedures by which the Companies may replace their respective JPOC members, are set forth in the Joint Operating Manual. Each Company shall have voting rights on the JPOC in proportion to its respective Ownership Share in Weston 4; provided , however , that while the DPC members may participate in the meetings and discussions of the JPOC prior to the Ownership Date, DPC shall not be entitled to vote on any matter being considered by the JPOC until the Ownership Date; and provided , further , that on and after the Ownership Date, Major Construction Decisions and Major Operating Decisions may be implemented only upon the unanimous vote of the WPSC and DPC members of the JPOC (except for certain Major Operating Decisions described in clauses (iii), (iv) and (v) of Section 12, which may be implemented in the absence of 

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unanimity under the circumstances described in Section 12). The Companies will exercise their JPOC voting rights timely and in accordance with Good Utility Practice.

    The JPOC shall meet on a quarterly basis, or more frequently if requested by one or both of the Companies, and it shall serve as a means of direct exchange and reporting of items of mutual interest between the Companies in the operating, accounting and budget areas. The JPOC shall have the authority to form subcommittees as and when the JPOC deems necessary or appropriate, it being understood that the JPOC may not confer upon any such subcommittee any right or authority that the JPOC itself does not possess. The JPOC shall establish and modify the membership, duties and responsibilities of any such subcommittee from time to time; the JPOC shall have the authority to dissolve any such subcommittee if and when it deems it appropriate to do so. The JPOC shall review operating, maintenance, environmental compliance, training and safety issues, among others, and it shall establish general policies for the operation and maintenance of Weston 4. The JPOC shall have the power to amend or modify the Joint Operating Manual from time to time in its discretion; provided , however , that those provisions of the Joint Operating Manual that are expressly stated to be subject to modification only upon the unanimous vote of the WPSC and DPC members of the JPOC may not be amended except by a unanimous vote of the JPOC. The Joint Plant Operating Committee shall establish the details of the cost accounting for Weston 4 utilizing general accounting, property accounting, and tax accounting support; such details shall be included in the Joint Operating Manual. The JPOC will accommodate the reasonable requests of the Companies for accounting information to enable each Company to comply with its respective required uniform systems of accounts. Other rights, tasks and duties of the JPOC are set forth in the Joint Operating Manual. JPOC members will have access to all information relevant to Weston 4 operations and performance (except for any attorney-client privileged information) at all reasonable times.

    With respect to all contracts (and amendments thereto), judgments and settlements associated with the design, engineering, procurement, licensing, permitting, interconnection, 

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construction, administration, modification, repair, operation, maintenance, transportation or fuel procurement of Weston 4 or of the Weston New or Existing Common Facilities the estimated cost of which is at or above the JPOC Threshold, and with respect to all other matters that are within the scope of the JPOC's authority pursuant to this Agreement or the Joint Operating Manual, the Joint Plant Operating Committee will consider and vote on such contracts, amendments, judgments, settlements and matters and, except as provided expressly herein with respect to Major Construction Decisions and Major Operating Decisions, in the event the vote is not unanimous, the vote of the Company that holds the majority of Ownership Shares shall prevail; provided , however , that prior to the Ownership Date, WPSC is and on an ongoing basis shall be authorized to act for the co-owners of Weston 4 and the Weston New and Existing Common Facilities, in accordance with Good Utility Practice, by negotiating and entering into any such contract, amendment, judgment or settlement the estimated cost of which is at or above the JPOC Threshold without a vote by the JPOC, so long as it notifies all JPOC members of its action within a reasonable time thereafter. Effective on and after the Ownership Date, DPC's cost responsibility under this Agreement shall reflect the terms and conditions of, and DPC shall be responsible under this Agreement for the costs and liabilities arising from, all contracts, amendments, judgments and settlements entered into by WPSC either in accordance with the prevailing vote of the JPOC, or without a JPOC vote (but only to the extent authorized in this paragraph), whether entered into before, on or after the Ownership Date (or in the case of the Weston Existing Common Facilities, the Existing Common Ownership Date), in proportion to DPC's Ownership Share, New Common Ownership Share or Existing Common Ownership Share, as the case may be, and the Companies shall similarly be bound by the decisions of the JPOC on all other matters, whether made before, on or after the Ownership Date. WPSC will provide reasonable advance notice of any planned, non-emergency construction, operation or maintenance contracts and commitments if WPSC reasonably expects the value of such contracts and commitments to exceed $25,000,000 in the aggregate in any particular calendar year, to enable DPC to obtain financing for its share of such costs. The dollar amount identified in the 

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immediately preceding sentence shall be subject to escalation on an annual basis beginning in 2005 in accordance with changes in the GDP-IPD during the preceding calendar year (for example, if the GDP-IPD increases by 1% during 2004, said dollar amount shall be $25,250,000 in 2005).

    If a multi-year contract, the estimated costs of which meet or exceed the JPOC Threshold, is approved by the JPOC, the annual renewals of such contract shall be subject to JPOC review or approval to the extent the costs of such renewals exceed the JPOC Threshold. Notwithstanding anything to the contrary herein, the JPOC Threshold concept shall not apply to labor contracts between WPSC and its employees who will be employed in the design, engineering, procurement, licensing, permitting, interconnection, construction, administration, modification, repair, operation, maintenance, transportation or fuel procurement of Weston 4 or the Weston New or Existing Common Facilities; WPSC shall have the sole right and discretion to negotiate and enter into all such labor contracts; and WPSC shall be solely responsible for supervising, directing and controlling the activities of all such employees and the details of their work.

    Section 8. Payment of Costs . The intent of this Agreement is to create a cost-sharing mechanism that fairly allocates the costs of Weston 4 and related Common Facilities among the Companies. DPC will pay its proportionate share of the Fully-Loaded Direct Costs incurred by WPSC to construct, operate, fuel and maintain Weston 4 and related Common Facilities. DPC shall pay a fair allocation of WPSC's Indirect Costs, including but not limited to administrative and general costs, related to the construction, modification, repair, operation, fueling and maintenance of Weston 4 and related Common Facilities ***. Costs that are not specifically

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*** Indicates that material has been omitted and confidential treatment has been requested therefore. All such omitted material has been filed separately with the Securities and Exchange Commission pursuant to Rule 24b-2.

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identifiable to the Weston 4 unit but are fairly chargeable to its ownership or operation shall be allocated on an Average Cost Basis, as opposed to a marginal or incremental cost basis. The Companies acknowledge that the Joint Operating Manual in effect on the date of this Agreement, a copy of which is attached hereto as Attachment 4, represents a full and fair allocation of costs, and incorporates Average Cost Basis allocation methodologies that, as of the date of this Agreement, are commercially reasonable within the electric utility industry and do not result in a disproportionate allocation of costs to DPC; these allocation methodologies are intended to establish a precedent for future evaluation of proposed new allocation methodologies or methodology changes.

        (a) General . Costs will be paid in the manner described in this Section 8 depending upon the nature of the facilities. All costs shall be determined in accordance with the Uniform System of Accounts prescribed by the PSCW. "All costs" as used herein is meant to be broadly construed, and it shall include, without limitation, the Fully-Loaded Direct Costs and Indirect Costs of the design, engineering, procurement, licensing, permitting, interconnection, construction, fueling, modification, repair, administrative and general, operation and maintenance (including without limitation pre-In-Service Date operation and maintenance) of Weston 4, the new facilities to be used exclusively by Weston 4, and the Common Facilities, and it shall also include taxes and pre-certification expenses, and costs associated with or arising out of the negligence, errors or omissions of Subcontractors or the employees and agents of either of the Companies who are involved in the design, engineering, procurement, licensing, permitting, interconnection, construction, modification, repair, administrative and general, operation, fueling or maintenance of Weston 4 or the Common Facilities. Fully-Loaded Direct Costs and Indirect Costs include labor costs with loadings which shall include labor costs for such tasks as recording costs and invoicing DPC, the costs of materials and supplies, return of and on the cost of property employed, and payments to Subcontractors and contractors, plus all overheads directly associated with any and all of these costs. Any charges for goods or services from non-

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regulated Affiliates of WPSC, however, shall not exceed the lesser