Exhibit B
SERVICE AGREEMENT
BETWEEN
ALLEGHENY POWER SERVICE CORPORATION
AND
AYP ENERGY, INC.
THIS SERVICE AGREEMENT will be effective as of October 14, 1996,
between Allegheny Power Service Corporation, a corporation formed under the
laws of the State of Maryland, (the "Service Company") and AYP Energy, Inc., a
corporation formed under the laws of the State of Delaware ("AYP Energy").
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 nonutility
subsidiary companies (the "Nonutility Subsidiaries"); and
WHEREAS, the Service Company offers to provide a central
organization to furnish to the System, the Subsidiaries and the Nonutility
Subsidiaries certain advisory, supervisory and other services in accordance
with current practices and procedures; and
WHEREAS, AYP Energy 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 AYP Energy the
services detailed on Exhibit I attached hereto and made a part hereof.
2. For all services rendered to AYP Energy by the Service Company,
AYP Energy agrees to pay the cost thereof. For services rendered to one or
more Subsidiaries, Nonutility Subsidiaries and/or the System and/or AYP
Energy, the allocation will be based on the average of the prior three years'
direct costs charged by the Service Company to each Subsidiary, Nonutility
Subsidiary and AYP Energy. Until a three-year history for AYP Energy is
developed, AYP Energy'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 AYP Energy
is available, APSC will calculate an allocation percentage for AYP Energy. If
the difference between that allocation percentage and the one used for any of
AYP Energy's first three years is material, then APSC will recalculate all
allocation percentages for those years in which the difference was material
and AYP Energy, the Subsidiaries, the Nonutility 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, the Nonutility Subsidiaries and AYP Energy 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, Nonutility
Subsidiary, the System and AYP Energy shall pay its direct or fair
proportionate share.
4. Payment shall be made by AYP Energy 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 AYP Energy 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 AYP Energy 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
as of the date of signing. 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 AYP Energy may terminate such contract at any time
with or without notice for any cause deemed by it to be sufficient.
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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 commission or other regulatory body whose
approval is a legal prerequisite to its execution and delivery or performance.
ALLEGHENY POWER SERVICE CORPORATION
/s/ Xxxx X. Xxxx
By Xxxx X. Xxxx
President
Attest:
/s/ Xxxxxx X. Xxxx
Xxxxxx X. Xxxx
Secretary
AYP Energy, Inc.
/s/ Xxxx X. Xxxx
By Xxxx X. Xxxx
President
Attest:
/s/ Xxxxxx X. Xxxx
Xxxxxx X. Xxxx
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 as of October 14, 1996, Allegheny Power Service Corporation shall perform
for AYP Energy the following services as requested:
1. Provide technical support as needed to offer power marketing
services and to manage AYP Energy's interest in Fort Xxxxxx Unit
No. 1.
2. Planning and implementation of financial programs to raise the
funds required for AYP Energy, 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.
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 Allegheny
Power Service Corporation may be able to provide and/or AYP
Energy may require or request.
