FORM OF PROPOSED
SERVICE AGREEMENT
BETWEEN THE
ALLEGHENY POWER SERVICE CORPORATION
AND
SUBSIDIARIES OF DQE, INC.
EXCEPT DUQUESNE LIGHT COMPANY
THE SERVICE AGREEMENT, effective upon the consummation of the
merger between DQE, Inc. and AYP Sub, Inc., between Allegheny Power Service
Corporation, a corporation formed under the laws of the State of Maryland (the
"Service Company"), and __________, a corporation formed under the laws of the
State of __________ (the "Company").
WITNESSETH:
WHEREAS, the Service Company was created to perform certain
management duties on behalf of Allegheny Power System, Inc. (the "System"), its
utility subsidiary companies (the "Subsidiaries") and its non-utility subsidiary
company; and
WHEREAS, the Service Company offers to provide a central
organization to furnish to the System, the Subsidiaries and the Company certain
advisory, supervisory and other services in accordance with current practices
and procedures; and
WHEREAS, the Company wishes to accept the offer proposed by the
Service Company;
NOW, THEREFORE, in consideration of the mutual covenants and
agreements herein contained, and for other good and valuable consideration, the
receipt of which is hereby acknowledged, the parties hereto, intending to be
reasonably bound, hereby agree as follows:
1. The Service Company hereby offers to furnish to the Company the
services detailed on Exhibit I attached hereto and made a part hereof.
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2. For all services rendered for the Company by the Service the
Company agrees to pay the cost thereof. For services rendered to one or more
Subsidiaries and/or the System and/or the Company, the allocation will be based
on the average of the prior three years' direct costs charged by the Service
Company to each Subsidiary and the Company. Until a three-year history for the
Company is developed, the Company's costs will be deemed to be the same as the
average of the System's prior three years' direct costs, thereby reducing each
Subsidiary's share proportionately. Once a three-year history for the Company is
available, APSC will calculate an allocation percentage for the Company. If the
difference between that allocation percentage and the one used for any of the
Company's first three years is material, then APSC will recalculate all
allocation percentages for those years in which the difference was material and
the Company, the Subsidiaries or the System will each either pay an additional
amount or receive a refund of a particular amount for that year.
3. The payment for services rendered by the Service Company to the
System, the Subsidiaries and the Company shall cover all the costs and expenses
of its doing business, excluding only a return for the use of equity capital,
and that each Subsidiary, the System and the Company shall pay its direct or
fair proportionate share.
4. Payment shall be made by the Company to the Service Company on
a monthly basis on or before the 20th day of the succeeding month, upon receipt
of a statement showing the amount due. Certain charges billed by the Service
Company to the Company may not be due immediately and will be so indicated on
the statement of billing. Monthly charges may be made on an estimated basis, but
adjustments will be made at the end of each calendar year so that all charges
for the calendar year will be in accordance with the foregoing.
5. Nothing herein shall be construed to release the officers and
directors of the Company from the performance of their respective duties or
limit the exercise of their powers as prescribed by law or otherwise.
6. The offer set forth herein shall become a contract effective
upon the consummation of the merger between DQE, Inc. and AYP Sub, Inc. Such
Service Agreement shall continue in full force and effect from year to year but
may be terminated by either party upon 60 days' prior notice, and the Company
may terminate such contract at any time with or without notice for any cause
deemed by it to be sufficient.
7. The Service Agreement will be subject to termination or
modification at any time to the extent its performance may conflict with the
provisions of the Public Utility Holding Company Act of 1935, as amended, or
with any rule, regulation or order of the Securities and Exchange Commission
adopted before or after the making of this Service Agreement and shall be
subject to the approval of any state
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commission or other regulatory body whose approval is a legal prerequisite to
its execution and delivery or performance.
If the Company desires to accept this offer, please cause it to be
executed in the space provided below by your duly authorized officers.
Very truly yours,
ALLEGHENY POWER SERVICE CORPORATION
By_________________________________
President
Attest:
__________________
Secretary
Pursuant to authorization of the Board of Directors of this Company, we hereby
accept the above offer this ___ day of __________, 1994.
__________
By_________________________________
President
Attest:
___________________
Secretary
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Exhibit I
Allegheny Power Service Corporation Principal Functions
In accordance with the terms and conditions of the Service
Agreement dated __________, 1997, the Service Company shall perform for the
Company the following services:
1. Provide technical support as needed to evaluate, implement,
and develop unregulated opportunities related to the System's
electric business (including, but not limited to, any
engineering, construction, management and/or operating
activities associated with the development of bulk power
supply opportunities).
2. Planning and implementation of financial programs to raise
the funds required for the Company, including handling
arrangements for bank borrowings and sales of securities and
relationships with investors and analysts.
3. Counsel on corporate, legal and regulatory matters and on
important contractual relationships.
4. Provide general and administrative services including, but
not limited to, the following:
a) Purchasing.
b) Customer billing and accounting.
c) Information services, including computer applications
and programming and electronic data processing.
d) Preparation of consolidated financial statements and
cost, statistical, and financial data, as required.
e) Assistance with respect to certain personnel matters,
including, but not limited to, employee benefit matters.
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Exhibit I
f) Preparation and filing of consolidated income tax
returns and following developments in federal and
state taxation regulations.
g) Administration of insurance.
h) Internal auditing.
i) Corporate security.
5. Certain other services in addition to the above as the Service
Company may be able to provide and/or the Company may require
or request.
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