SERVICES AGREEMENT
THIS SERVICES AGREEMENT (this "Agreement") is dated as of ____, 2005
(the "Effective Date"), between ALLEGHENY ENERGY SERVICE CORPORATION, a Maryland
corporation ("Contractor") and Mountaineer Gas Company, a West Virginia
corporation ("Company"; which, together with Contractor are referred to
individually as "Party" or collectively as "Parties"). For all purposes of this
Agreement, unless the context otherwise requires, except as otherwise defined
herein, all capitalized terms used in this Agreement (including the Recitals)
shall have the meanings set forth in Exhibit "A" attached hereto and the rules
of construction and interpretation for this Agreement shall be as set forth in
Exhibit "A" hereto.
RECITALS
WHEREAS, pursuant to the terms of that certain Acquisition Agreement
dated August 4, 2004 between Monongahela Power Company and Mountaineer Gas
Holdings Limited Partnership ("Acquisition Agreement"), Mountaineer Gas Holdings
Limited Partnership purchased all of the equity in the Company from an affiliate
of Contractor;
WHEREAS, the Contractor provided certain specific services relating to
the Gas System to the Company prior to the Effective Date;
WHEREAS, the Parties finther recognize that it is necessary and
desirable for the Company to receive such services from the Contractor for a
transitional period, following the Effective Date; and
WHEREAS, Contractor is willing to provide such support services and
transitional services to Company.
NOW, THEREFORE, in consideration of the premises and the covenants
and mutual agreements contained herein, the Parties agree as follows:
1. Scope of Services and Work
(a) Contractor shall perform for Company the Services included in the
scope of the Services as specified in Exhibit "A", and such other
services as the Parties may agree in writing to be provided by
Contractor under the terms of this Agreement, in accordance with Good
Utility Practices.
(b) Subject to Section 14, the Services to be provided hereunder shall be
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under the direction and control of, and at the discretion of, Company,
unless otherwise indicated in this Agreement.
(c) Contractor will arrange and assign any personnel necessary to
accomplish the Services under this Agreement. Such personnel shall be
qualified and
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either experienced or properly trained to perform the Services to which
they are assigned in accordance with Good Utility Practices.
2. Term of Agreement
(a) The initial term of this Agreement shall commence on the Effective
Date and expire on the date that the last of the Services is
terminated (the "Agreement Expiration Date") in accordance with this
Agreement.
(b) The Contractor's commitment to provide the Transition Services (other
than the Cash Processing services described in Exhibit "A") terminates
at the close of business on the date that is twelve (12) calendar
months after the Effective Date, unless earlier tenninated in
accordance with this Agreement. The Contractor's commitment to provide
the Cash Processing services described in Exhibit "A" and which are
provided as part of the Transition Services, shall terminate as of the
close of business on (i) the date which is sixty (60) days after the
Effective Date provided that the Effective Date occurs on the first
day of a calendar month, or (ii) the date which is sixty (60) days
after the first day of the first calendar month following the
Effective Date if the Effective Date does not occur on the first day
of a calendar month.
(c) The Contractor's commitment to provide the Contract Services, or any
portion thereof, shall continue for an initial tenn of one (1) year
from the Effective Date, and shall thereafter continue for succeeding
one (1) year terms in perpetuity unless earlier terminated by either
Party by written notice to the other Party, as herein provided.
Commencing on the date that is six (6) months after the Effective
Date, either Party shall have the right to give written notice of
termination with regard to the Contract Services, provided such notice
of termination shall not be effective until (i) in the case of the
Contractor, at least twelve (12) months after the date such notice is
delivered to the Company, and (ii) in the case of the Company, at
least six (6) months after the date such notice is delivered to the
Contractor.
(d) Subject to Section 24, upon the proper termination of this Agreement,
both Parties will be released from all obligations hereunder.
3. Price; Annual Services Budget
(a) Each month Company shall pay to the Contractor the amount calculated
in accordance with of Exhibit "B" for the Services performed during
such month.
(b) At least one hundred fifty (150) days prior to the second anniversary
date of the Effective Date and at least one hundred fifty (150) days
prior to each anniversary thereafter that this Agreement is in effect,
Contractor shall submit to the Company a proposed budget for the
Contract Services
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to be provided hereunder (the "Annual Services Budget") for the year
following such anniversary in substantially the form of Exhibit "C" or
in form and substance reasonably acceptable to the Company. Each
Annual Services Budget from year to year shall be based on the same
format and shall provide sufficient detail to permit a meaningful
comparison to previous years. The Annual Services Budget for the
Services to be provided during the twelve (12) month period commencing
on the Effective Date is attached hereto as Exhibit "C", and the
Parties agree that the budgeted amount for the Contract Services for
the first 12-month period, shall be continued for the second 12- month
period (subject to escalation as of the first day of January of each
contract year, as herein provided), and thereafter Contractor shall
submit a new proposed budget for the Contract Services, for each
subsequent renewal term, as herein provided.
(c) The Company shall promptly review Contractor's proposed Annual
Services Budget for Contract Services (commencing with the Annual
Services Budget to be delivered at least 150 days prior to the second
anniversary of the Effective Date) and may, by written notice, request
changes, additions, deletions and modifications. The Company and
Contractor will then meet and respectively use their commercially
reasonable best efforts to agree upon a final Annual Services Budget
for Contract Services no later than ninety (90) days prior to the
start of each renewal term, as applicable. If, by the start of any
renewal term (other than the first renewal term), the Parties are
unable to reach agreement concerning any portion of the Annual
Services Budget for the following year, the portion of the Annual
Services Budget for such year which is in dispute shall be resolved by
using the lesser of (i) the amount proposed by Contractor for such
disputed portion or (ii) one hundred and fifteen percent (115%) of the
portion of the prior year's Annual Services Budget for such item in
dispute, unless otherwise mutually agreed (and provided that in no
event shall the cumulative effect of using amounts determined by (i)
or (ii) above for disputed budget portions increase the aggregate
amount of the Annual Services Budget for such year by more than 5% of
the escalated aggregate amount of the previous year's Annual Services
Budget), until such time as the dispute is resolved. Any disputes
under this Section 3(c) shall, if unresolved pursuant to the
provisions of Section 20(a) below, be subject to the dispute
resolution procedures provided in Section 20(b) below. Subject to any
items in dispute, such final Annual Services Budget shall remain in
effect throughout the applicable twelve-month period, subject to such
other updating, revision and amendment as may be proposed by either
Party and consented to in writing by the other Party.
(d) Contractor shall use commercially reasonable efforts not to incur, or
cause to be incurred, any costs in connection with the performance of
the Services that will cause the Annual Services Budget to be exceeded
during any 12-month period. If at any time during the performance of
the
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Services, Contractor believes that actual expenses or costs will
exceed the aggregate amount of the Annual Services Budget during the
applicable 12-month period, Contractor shall notify Company of such
belief within ten (10) days of forming such belief and shall promptly
meet with Company to mutually agree upon future expenditures pursuant
to this Agreement. Until such time as Contractor and Company shall
mutually agree upon future expenditures, Contractor shall continue to
perform the Services according to the terms of the Agreement, provided
that (i) if (A) the Contractor's annual costs in respect of any line
item in the Annual Services Budget (as same may be escalated as of
January 1 of each year, as herein provided) are exceeded by 5% or less
and (B) the Contractor's aggregate annual costs do not exceed the
Annual Services Budget, as escalated, then Contractor shall be paid
such excess costs, and (ii) if either (A) the Contractor's costs in
respect of any line item in the Annual Services Budget, as escalated,
are exceeded by more than 5% or (B) the Contractor's aggregate annual
costs exceed the Annual Services Budget, as escalated, then for those
annual line item costs in excess of 5% or annual costs exceeding the
escalated Annual Services Budget, Contractor shall not be entitled to
additional compensation for such performance. Notwithstanding the
foregoing, each Annual Services Budget shall be based on the agreed
scope of the Services in Exhibit "A", as such scope may be increased
by mutual agreement of the Parties or decreased by either mutual
agreement or Company's election to terminate certain Transition
Services under Section 3.0 of Exhibit "B", and to the extent that
Contractor is required to perform additional services that are in
excess of the scope of the Services in Exhibit "A" (as amended in
writing), then Contractor may at any time request to change, increase
or modify an existing Annual Services Budget. Any such requested
increases in the budget shall be granted if the additional costs that
are the subject of the increase in the budget are material, and to the
extent that Contractor can reasonably demonstrate that such additional
costs were caused by or resulting from:
(i) changes to the scope of the Services requested by the Company or
work or services requested by the Company that is outside the
scope of the Services in Exhibit "A" (as amended);
(ii) actions or omissions of the Company which result in work or
services from Contractor that are outside the scope of the
Services in Exhibit "A" (as amended), and to the extent such
additional work or services were not caused by the actions or
omissions of Contractor; and
(iii) any Force Majeure Events or changes in any of the Applicable
Laws.
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(e) To the extent that Contractor believes that any service requested
by Company is outside the scope of the Services in Exhibit "A" (as
amended) and/or will result in a requested modification to an Annual
Services Budget in accordance with Section 3(d) above, Contractor
shall notify Company of such belief within ten (10) days of forming
such belief and shall promptly meet with Company to mutually agree
upon the impact of such requested services, or other change, on the
Annual Services Budget. Until such time as Contractor and Company
shall mutually agree in writing upon the impact, if any, of any
change resulting from a circumstance described by Section 3(d)(y)(i)
above, Contractor shall not be obligated to initiate or perform such
change. The Company may, however, direct Contractor to perform
additional or altered Services resulting from a circumstance
described by Section 3(d)(y)(ii) or Section 3(d)(y)(iii) above
notwithstanding a dispute between the Parties regarding the
appropriate impact of such circumstances, and the Contractor shall
perform such additional or altered Services pending the resolution of
such dispute. When Contractor and Company mutually agree on any change
to the scope of the Services, future expenditures in a proposed
budget or modifications to an existing Annual Services Budget,
that agreement shall be confirmed in writing, and such changes
shall then be part of this Agreement and/or the Annual Services
Budget, as appropriate. With regard to the Technology Services
described in Exhibit "A", the Parties have agreed upon the
maximum number of man-hours that should be required for the
basic form of data transfer and transition of the Technology
Systems to the Company, as currently contemplated by the Annual
Services Budget attached as Exhibit "C". Should more man-hours be
required, Contractor shall notify Company in writing and same
shall be deemed outside the scope of the Services in Exhibit "A"
and will entitle Contractor to modify the Annual Services Budget,
as herein provided. Contractor shall, in any event, take all
commercially reasonable steps to mitigate any costs resulting
from the performance of services in addition to or in excess of
the scope of the Services in Exhibit "A". Disputes between the
Parties arising under Sections 3(d) and 3(e) shall, if unresolved
pursuant to the dispute resolution provisions of Section 20(a)
below, be resolved pursuant to the dispute resolution provisions
in Section 20(b) below.
4. Terms of Payment
(a) Contractor shall submit monthly invoices to Company by the fifteenth
15th day of the subsequent calendar month, and Company shall pay
Contractor not later than the tenth 10th day following the receipt of
such invoice. The rate of interest on any amount not paid when due
shall be equal to the Interest Rate in effect at the time such amount
became due, except for any unpaid amounts that are disputed in good
faith, which shall accrue interest as provided in Section 4(b) below.
Interest on delinquent amounts shall be calculated from the due date
until the date of payment.
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When payments are made by a Party by mail, invoices shall be
considered as having been paid on the date of receipt of proper
payment by check or other means by the other Party.
(b) In the event a portion of any invoice by Contractor is in dispute, the
undisputed amount shall be paid by Company when due, and the disputed
portion of the invoice, at Company's option, shall either be paid to
Contractor or retained by the Company, provided that (i) any dispute
over amounts retained by Company shall, if unresolved pursuant to the
dispute resolution provisions in Section 20(a) below, be subject to
the fast-track dispute resolution proceedings in Section 20(b), and
the Company shall diligently and in good-faith be pursuing such
proceedings to resolution in accordance with Section 20(b), and (ii)
in no event shall Company have the right to retain in excess of one
million, five hundred thousand dollars ($1,500,000) related to amounts
in dispute. Should Company retain in excess of $1,500,000, same shall
result in a material payment default by Company under Section 19(a)(i)
of this Agreement, unless such excess amount in dispute shall be
deposited with a Financial Institution to be designated by the
Company, pursuant to the terrns of an escrow agreement (which escrow
agreement shall be reasonably acceptable to both Parties and the
Financial Institution) within thirty (30) days after the original due
date of a payment from Company. The escrow agreement shall specify the
fee payable to the Financial Institution to serve as escrow agent and
other costs payable to the escrow agent, and shall contain investment
instructions to the escrow agent, to invest the escrowed funds. The
Company shall initially pay all of the out-of-pocket costs related to
such escrow arrangement, provided that if Contractor does not prevail
in any dispute resolution proceeding related to the escrowed funds (in
whole or in part), then Contractor shall reimburse the Company for
all, or its pro rata share (based upon the pro rata split of any award
of the escrowed funds), of such out-of-pocket costs related to such
escrow arrangement. When any such disputed amounts are released from
escrow, the Party entitled to receive such escrowed amounts shall be
entitled to receive the amount of interest accrued on the disputed
portion of such invoice, if any (as such interest or other return may
be earned, based on the approved investments made by the escrow
agent), and if Contractor is the receiving Party, then any such
interest paid shall be credited against the interest payable by
Company on the withheld amounts, applying the Interest Rate, as herein
provided.
5. Standard of Care; Limited Warranty; Indemnification
(a) Contractor's sole and exclusive standard of care for the performance
for the Services shall be it's obligation to perform such Services in
accordance with Good Utility Practices, consistent with any applicable
statute, code, regulation, rule, injunction, judgment, order, decree,
ruling, charge, or other enactment or similar action of any applicable
government authority
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with jurisdiction ("Applicable Laws") and, if applicable, in
accordance with the standards, practices, methods and procedures
employed by the Contractor in the provision of services to the Company
prior to the Effective Date. THE PRECEDING IS CONTRACTOR'S AND ITS
AFFILIATES'AND SUBCONTACTOR'S ONLY WARRANTY CONCERNING THE SERVICES
AND ANY RESULTS, WORK PRODUCT OR PRODUCTS OBTAINED FOR THE COMPANY,
AND IS MADE EXPRESSLY IN LIEU OF ALL OTHER WARRANTIES AND
REPRESENTATIONS, EXPRESSED OR IMPLIED, INCLUDING, WITHOUT LIMITATION,
THE WARRANTIES OF FITNESS FOR A PARTICULAR PURPOSE, OR
MERCHANTABILITY. COMPANY UNDERSTANDS, ACKNOWLEDGES AND AGREES THAT THE
LEVEL OF COMPENSATION CONTRACTOR HAS AGREED TO ACCEPT IS PREDICATED ON
THIS LIMITATION OF LIABILITY AND DISCLAIMER OF WARRANTIES. If
Contractor breaches its duties or warranty under this Agreement,
Company's exclusive remedies for such breach shall be, at Company's
election and to the extent herein provided and to the extent such
remedies are not overlapping, to (a) dispute any amounts invoiced for
Services that do not conform with the standard of care herein
provided, (b) receive renewed performance of the breached Service, at
Contractor's experise, (c) receive a refund of the fees paid to
Contractor by Company for the breached Service, (d) obtain
indemnification as provided below, (e) obtain injunctive relief as set
forth below and/or (f) hire a third party contractor to re-perform any
Service not properly performed by Contractor at Contractor's expense,
provided, however, that with respect to Company's remedies under this
sub-section (f), (i) Company shall give Contractor 30 days notice
before hiring any such third party contractor, (ii) Contractor shall
have the opportunity to re-perform the improperly performed Service
during such 30 day period, and (iii) Contractor's liability for the
costs of any third party contractor hired to re-perform a Service
pursuant to this Section 5(a) shall be limited to an amount equal to
200% of the amount that Contractor was paid or would have been paid to
perform the Service to be re-performed, as reflected in a line item or
otherwise included in the Annual Services Budget in respect of such
Service, subject to the global cap on Contractor's liability in
Section 5(b).
(b) IN NO EVENT SHALL ANY CONTRACTOR PARTY BE LIABLE TO COMPANY FOR ANY
CONSEQUENTIAL, INCIDENTAL, OR INDIRECT LOSSES, DAMAGES OR EXPENSES
(INCLUDING, WITHOUT LIMITATION, LOST DATA, PROFITS, REVENUES OR
SAVINGS) INCURRED BY COMPANY OR BY COMPANY TO ANY THIRD PARTY ARISING
FROM THIS AGREEMENT OR ANY BREACH THEREOF OR BREACH OF WARRANTY OR
ERROR IN THE PERFORMANCE OF THE SERVICES. EXCEPT TO THE EXTENT ANY
SUCH LIABILITIES RESULT FROM THE DELIBERATE BREACH OF THE TERMS OF
THIS AGREEMENT,
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ANY INDEMNIFICATION BY CONTRACTOR FOR A THIRD PARTY CLAIM OR THE GROSS
NEGLIGENCE OR WILLFUL MISCONDUCT OF ANY ONE OR MORE OF THE CONTRACTOR
PARTIES, COMPANY AGREES THAT CONTRACTOR'S AND ITS AFFILIATES'AGGREGATE
LIABILITY FOR CLAIMS ARISING FROM SERVICES SHALL BE LIMITED TO THE
AGGREGATE AMOUNT PAID BY COMPANY OR ITS AFFILIATES FOR THE SERVICES
GIVING RISE TO THE CLAIMS DURING THE TWELVE-MONTH PERIOD PRECEDING
SUCH CLAIM, PROVIDED THAT IF LESS THAN TWELVE MONTHS OF THE TERM OF
THIS AGREEMENT HAVE TRANSPIRED PRIOR TO SUCH CLAIM, THEN THE BUDGETED
AMOUNTS FOR THE NEXT SUCCEEDING MONTHS (TO AGGREGATE A TOTAL OF 12
MONTHS) SHALL BE AGGREGATED TO CALCULATE SUCH LIMIT. THIS LIMITATION
SHALL APPLY IN JURISDICTIONS THAT DO NOT RECOGNIZE A DISCLAIMER OF
LIABILITY FOR DAMAGES. COMPANY UNDERSTANDS, ACKNOWLEDGES AND AGREES
THAT THE LEVEL OF COMPENSATION CONTRACTOR HAS AGREED TO ACCEPT IS
PREDICATED ON THE EFFECTIVENESS OF THIS LIMITATION OF LIABILITY AND
DISCLAIMER OF WARRANTIES.
(c) IN NO EVENT SHALL ANY COMPANY PARTY BE LIABLE TO CONTRACTOR FOR ANY
CONSEQUENTIAL, INCIDENTAL, OR INDIRECT LOSSES, DAMAGES OR EXPENSES
(INCLUDING, WITHOUT LIMITATION, LOST DATA, PROFITS, REVENUES OR
SAVINGS) INCURRED BY CONTRACTOR OR BY CONTRACTOR TO ANY THIRD PARTY
ARISING FROM THIS AGREEMENT OR ANY BREACH THEREOF OR BREACH OF
WARRANTY. EXCEPT TO THE EXTENT ANY SUCH LIABILITIES RESULT FROM
NONPAYMENT BY COMPANY OF AMOUNTS DUE UNDER THIS AGREEMENT OR ANY OTHER
DELIBERATE BREACH OF THE TERMS OF THIS AGREEMENT, ANY INDEMNIFICATION
BY COMPANY FOR A THIRD PARTY CLAIM OR THE GROSS NEGLIGENCE OR WILLFUL
MISCONDUCT OF ANY ONE OR MORE OF THE COMPANY PARTIES, CONTRACTOR
AGREES THAT COMPANY'S AGGREGATE LIABILITY FOR CLAIMS ARISING UNDER THE
TERMS OF THIS AGREEMENT SHALL BE LIMITED TO THE AGGREGATE AMOUNT PAID
TO CONTRACTOR FOR THE SERVICES GIVING RISE TO THE CLAIM DURING THE
TWELVE-MONTH PERIOD PRECEDING SUCH CLAIM, PROVIDED THAT IF LESS THAN
TWELVE MONTHS OF THE TERM OF THIS AGREEMENT HAVE TRANSPIRED PRIOR TO
SUCH CLAIM, THEN THE BUDGETED AMOUNTS FOR THE NEXT SUCCEEDING MONTHS
(TO AGGREGATE A TOTAL OF 12 MONTHS) SHALL BE AGGREGATED TO CALCULATE
SUCH LIMIT. THIS LIMITATION SHALL APPLY IN JURISDICTIONS THAT DO NOT
RECOGNIZE A DISCLAIMER OF LIABILITY FOR
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DAMAGES. CONTRACTOR UNDERSTANDS, ACKNOWLEDGES AND AGREES THAT THE
LEVEL OF WARRANTIES AND PERFORMANCE THAT COMPANY HAS AGREED TO ACCEPT
IS PREDICATED ON THE EFFECTIVENESS OF THIS LIMITATION OF LIABILITY.
(d) Contractor agrees to protect, defend, indemnify, and hold harmless the
Company Parties, at Contractor's sole cost and expense, from and
against any and all claims, demands, actions, suits, causes of action,
proceedings (including any investigations, litigation or inquiries)
and, in connection therewith, all reasonable costs, losses,
liabilities, damages or expenses of any kind or nature whatsoever to
third parties, including but not limited to employees of independent
contractors, agents or representatives of the Company Parties, and
governmental entities (collectively, "Company Indemnity Matters") to
the extent arising out of (i) a breach of this Agreement by
Contractor, (ii) gross negligence or willful misconduct of the
Contractor Parties in the performance of the Services, whether by
action or inaction, relating to this Agreement, and (iii) any employee
benefit plans, programs, practices or arrangement in which Contractor,
its Affiliates or any of their employees participated, after the
Effective Date, EXCEPT TO THE EXTENT SUCH INDEMNITY MATTERS DIRECTLY
RESULT FROM THE GROSS NEGLIGENCE OR WILLFUL MISCONDUCT OF ONE OR MORE
OF THE COMPANY PARTIES.
(e) Company agrees to protect, defend, indemnify, and hold harmless the
Contractor Parties, at Company's sole cost and expense, from and
against any and all claims, demands, actions, suits, causes of action,
proceedings (including any investigations, litigation or inquiries)
and, in connection therewith, all reasonable costs, losses,
liabilities, damages or expenses of any kind or nature whatsoever to
third parties, including but not limited to employees of independent
contractors, agents or representatives of the Contractor Parties, and
governmental entities (collectively, "Contractor Indemnity Matters")
to the extent arising out of (i) a breach of this Agreement by
Company, (ii) gross negligence or willful misconduct of the Company
Parties, whether by action or inaction, relating to this Agreement,
and (iii) the operation following the Effective Date of any employee
benefit plans, programs, practices or arrangement in which Company,
its Affiliates or any of their employees participate, EXCEPT TO THE
EXTENT SUCH INDEMNITY MATTERS DIRECTLY RESULT FROM THE GROSS
NEGLIGENCE OR WILLFUL MISCONDUCT OF ONE OR MORE OF THE CONTRACTOR
PARTIES.
6. Conditions of Indemnification.
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(a) All claims for indemnification under this Agreement shall be asserted
and resolved as follows in this Section 6.
(b) A party claiming indemnification under this Agreement (an "Indemnified
Party") shall promptly (i) notify the Party from whom indemnification
is sought (the "Indemnifying Party") of any third-party claim or
claims asserted against the Indemnified Party ("Third Party Claim")
that could give rise to a right of indemnification under this
Agreement and (ii) transmit to the Indemnifying Party a written notice
("Claim Notice") describing in reasonable detail the nature of the
Third Party Claim, a copy of all papers served with respect to that
claim (if any), an estimate of the amount of damages attributable to
the Third Party Claim to the extent feasible (which estimate shall not
be conclusive of the final amount of that claim) and the basis for the
Indemnified Party's request for indemnification under this Agreement.
The failure to promptly deliver a Claim Notice shall not relieve the
Indemnifying Party of its obligations to the Indemnified Party with
respect to the related Third Party Claim except to the extent that the
resulting delay is materially prejudicial to the defense of that
claim. Within fifteen (15) days after receipt of any Claim Notice (the
"Election Period"), the Indemnifying Party shall notify the
Indemnified Party (i) whether the Indeninifying Party disputes its
potential liability to the Indemnified Party under this Agreement with
respect to that Third Party Claim or (ii) if the Indemnifying Party
does not dispute its potential liability to the Indemnified Party with
respect to that Third Party Claim, whether the Indemnifying Party
desires, at the sole cost and expense of the Indemnifying Party, to
defend the Indemnified Party against that Third Party Claim.
(c) If the Indemnifying Party does not dispute its potential liability to
the Indemnified Party and notifies the Indemnified Party within the
Election Period that the Indemnifying Party elects to assume the
defense of the Third Party Claim, then the Indemnifying Party shall
have the right to defend, at its sole cost and expense, that Third
Party Claim by all appropriate proceedings, which proceedings shall be
prosecuted diligently by the Indemnifying Party to a final conclusion
or settled at the discretion of the Indemnifying Party in accordance
with this Section 6(c), and the Indemnified Party will furnish the
Indemnifying Party with all information in its possession with respect
to that Third Party Claim and otherwise cooperate with the
Indemnifying Party in the defense of that Third Party Claim; provided,
however, that the Indemnifying Party shall not enter into any
settlement with respect to any Third Party Claim that purports to
limit the activities of, or otherwise restrict in any way, any
Indemnified Party or any Affiliate of any Indemnified Party without
the prior consent of that Indemnified Party (which consent may not be
unreasonably withheld by the Indemnified Party). The Indemnified Party
is hereby authorized, with the right to receive reimbursement of
reasonable costs and expenses, including reasonable attorney's fees,
incurred thereby from the
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Indemnifying Party, to file, during the Election Period, any motion,
answer or other pleadings that the Indemnified Party shall deem
reasonably necessary or appropriate to protect its interests or those
of the Indemnifying Party. The Indemnified Party may participate in,
but not control, any defense or settlement of any Third Party Claim
controlled by the Indemnifying Party pursuant to this Section 6(c) and
will bear its own costs and expenses with respect to that
participation; provided, however, that if the named parties to any
such action (including any impleaded parties) include both the
Indemnifying Party and the Indemnified Party, and the Indemnified
Party has been advised by counsel that there may be one or more legal
defenses available to it which are different from or additional to
those available to the Indemnifying Party, then the Indemnified Party
may employ separate counsel with the right to reimbursement for the
reasonable costs and expense, including reasonable attorney's fees,
incurred thereby from the Indemnifying Party, and, on its written
notification of that employment, the Indemnifying Party shall not have
the right to assume or continue the defense of such action on behalf
of the Indemnified Party.
(d) If the Indemnifying Party (i) within the Election Period (A) disputes
its potential liability to the Indemnified Party under Section 6(b),
(B) elects not to defend the Indemnified Party pursuant to Section
6(b) or (C) fails to notify the Indemnified Party that the
Indemnifying Party elects to defend the Indemnified Party pursuant to
Section 6(b) or (ii) elects to defend the Indemnified Party pursuant
to Section 6(b) but fails diligently and promptly to prosecute or
settle the Third Party Claim, then the Indemnified Party shall have
the right to defend, at the sole cost and expense of the Indemnifying
Party (if the Indemnified Party is entitled to indemnification
hereunder), the Third Party Claim by all appropriate proceedings,
which proceedings shall be promptly and vigorously prosecuted by the
Indemnified Party to a final conclusion or settled. The Indemnified
Party shall have full control of such defense and proceedings.
Notwithstanding the foregoing, if the Indemnifying Party has delivered
a written notice to the Indemnified Party to the effect that the
Indemnifying Party disputes its potential liability to the Indemnified
Party under Section 6(b) and if that dispute is resolved in favor of
the Indemnifying Party, the Indemnifying Party shall not be required
to bear the costs and expenses of the Indemnified Party's defense
pursuant to this Section 6 or of the Indemnifying Party's
participation therein at the Indemnified Party's request, and the
Indemnified Party shall reimburse the Indemnifying Party in full for
all reasonable costs and expenses, including reasonable attorney's
fees, of such litigation. The Indemnifying Party may participate in,
but not control, any defense or settlement controlled by the
Indemnified Party pursuant to this Section 6, and the Indemnifying
Party shall bear its own costs and expenses with respect to that
participation.
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(e) Payments of all amounts owing by an Indemnifying Party pursuant to
this Agreement relating to a Third Party Claim shall be made within
thirty (30) days after the latest of (i) the settlement of that Third
Party Claim, (ii) the expiration of the period for appeal of a final
adjudication of that Third Party Claim or (iii) the expiration of the
period for appeal of a final adjudication of the Indemnifying Party's
liability to the Indemnified Party under this Agreement in respect of
that Third Party Claim.
(f) It is agreed with respect to any legal limitations now or hereafter in
effect and affecting the validity or enforceability of the
indemnification obligations under this Agreement, such legal
limitations are made a part of the indemnification obligations and
shall operate to amend the indemnification obligations to the minimum
extent necessary to bring the provisions into conformity with the
requirements of such limitations, and as so modified, the
indemnification obligations shall continue in full force and effect.
7. Representations and Warranties
(a) Contractor represents and warrants to Company, as of the Effective
Date and during the term of this Agreement, that:
(i) Contractor is a corporation duly organized, validly existing and
in good standing under the laws of the State of Maryland and is
duly qualified to do business in and is in good standing in each
other jurisdiction, including West Virginia, in which such
qualification is necessary for the Contractor to perform the
Services hereunder. Contractor has the corporate power and
authority to execute and deliver this Agreement and perform its
obligation hereunder.
(ii) This Agreement constitutes the legal, valid and binding
obligation of Contractor, except as enforceability may be
limited by (i) applicable bankruptcy, insolvency,
reorganization, moratorium or similar laws affecting the rights
of creditors generally and (ii) general principles of equity.
(iii) The execution, delivery and performance of this Agreement by
Contractor has been duly authorized by all requisite action and
will not violate or conflict with any provisions of any law, or
any agreement or instrument to which it is a party or by which
it, its property or assets may be bound or affected.
(iv) Contractor is not in violation of any applicable laws or any
judgment entered by any federal, state or local Government
Entity which violations, individually or in the aggregate,
would affect in any material respect Contractor's ability to
perform its obligations under this Agreement.
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(v) Contractor is not a party or, to the best of Contractor's
knowledge, threatened with, any legal, administrative, arbitral,
investigatorial, or other proceeding or controversy that would
materially and adversely affect Contractor's ability to perform
its obligations under this Agreement.
(vi) Contractor has (A) examined this Agreement thoroughly and has
become familiar with its terms and (B) has the experience and
qualifications necessary to perform the Services.
(vii) Contractor is financially solvent, able to pay its debts as
they mature and possessed of sufficient working capital to
perform its obligations under this Agreement.
(b) Company represents and warrants to the Contractor, as of the Effective
Date and during the term of this Agreement, that:
(i) Company is a limited liability company duly organized, validly
existing and in good standing under the laws of the state of
West Virginia and is duly qualified to do business in and is in
good standing in each other jurisdiction, including West
Virginia, in which such qualification is necessary for the
Company to perform its obligations hereunder. Company has the
corporate power and authority to execute and deliver this
Agreement and perform its obligation hereunder.
(ii) This Agreement constitutes the legal, valid and binding
obligation of Company, except as enforceability may be limited
by (i) applicable bankruptcy, insolvency, reorganization,
moratorium or similar laws affecting the rights of creditors
generally and (ii) general principles of equity.
(iii) The execution, delivery and performance of this Agreement by
Company has been duly authorized by all requisite action and
will not violate or conflict with any provisions of any law, or
any agreement or instrument to which it is a party or by which
it, its property or assets may be bound or affected.
(iv) Company is not in violation of any applicable laws or any
judgment entered by any federal, state or local Government
Entity which violations, individually or in the aggregate,
would affect in any material respect Contractor's ability to
perform its obligations under this Agreement.
(v) Company is not a party or, to the best of Company's knowledge,
threatened with, any legal, administrative, arbitral,
investigatorial, or other proceeding or controversy that would
materially and
E-13
adversely affect Contractor's ability to perform its obligations
under this Agreement.
(vi) Company has examined this Agreement thoroughly and has become
familiar with its terms.
8. Force Majeure
(a) If either Party is rendered unable, wholly or in part, by a Force
Majeure Event, to carry out its obligations under this Agreement,
then, during the continuance of such inability, the obligations of
such Party shall be suspended to the extent such Party is rendered
unable to carry out its obligations hereunder (the "Suspended
Obligations"), and the other Party shall not be required to make any
payments hereunder with respect to unperformed Suspended Obligations.
The Party relying on a Force Majeure Event shall give written notice
of such Force Majeure Event to the other Party as soon as practicable
after such event occurs, but in any case before the later to occur of
(i) 24 hours after Contractor is aware of the occurrence of such
event, or (ii) the close of the next business day following
Contractor's awareness of the occurrence of such event. Upon the
conclusion of such Force Majeure Event, the Party heretofore relying
on such Force Majeure Event shall, with all reasonable dispatch, take
all necessary steps to resume the obligation previously suspended.
(b) Any Party's obligation to make payments already owing shall not be
suspended by a Force Majeure Event. Notwithstanding the provisions of
this Section 8, no Party shall be relieved of liability for failure to
perform its obligations hereunder to the extent that such failure is
due to causes arising out of its own negligence. To the extent
commercially reasonable, an affected Party shall attempt to mitigate
the effects of any Force Majeure Event on the other Party. Further, to
the extent that a remedy or a cure is within a Party's control and is
available on commercially reasonable terms and conditions, then such
Party shall not be relieved of liability for failure to perform its
obligations hereunder to the extent due to its failure to rectify or
cure such a Force Majeure Event, within a reasonable period of time,
as applicable.
9. Taxes
Any amounts payable to Contractor by Company for the Services are exclusive
of federal, state, county, municipal, or local property, license, sales, use,
excise, stamp or similar tax with respect to the items covered hereby, and any
future gross receipts tax with respect to the foregoing. If Contractor is
required by Applicable Laws to pay or collect any tax or if any such taxes are
assessed against Contractor, no matter when such assessment is made, then such
amount of tax or taxes shall be paid by Company to Contractor in addition to the
prices provided for herein; provided that Company shall have the right to
contest such taxes and Contractor shall provide reasonable cooperation
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to Company in connection with any such contest. Notwithstanding the foregoing,
the amounts payable by Company to Contractor shall not be grossed-up for any
state or federal income taxes payable by Contractor.
10. Company's Obligations
In addition to Company's obligation to pay the contract price and all other
sums when due under the terms of this Agreement, Company shall be obligated to
perform the following in a reasonable manner, as not to hinder or delay
Contractor in the performance of the Services:
(a) Coordinate with Contractor in the drafting of specifications for the
Services, as appropriate, including specifications for products,
material and equipment. Such specifications shall be consistent with
the general scope of the Services as provided in Exhibit "A", and
shall be drafted in reasonable scope and detail to enable Contractor
to perform the Services.
(b) To the extent that a work site is owned or controlled by Company,
provide a safe and proper work site for Contractor and its personnel,
agents or subcontractors to perform the Services. The conditions at
said work site shall at all times comply in with Applicable Laws.
(c) Provide to Contractor and to its personnel, agents or subcontractors
access to the Gas System, to the extent necessary to perform the
Services in accordance with the Standards of Conduct.
(d) Coordinate its operations of the Gas System with Contractor in order
to schedule the Services to be provided by Contractor.
(e) Provide to Contractor and its personnel, agents or subcontractors, all
operational spare parts and any special equipment or special tools
necessary to perform the Services as reasonably requested in advance
by Contractor and then only to the extent reasonably available.
None of the foregoing obligations of Company shall restrict Company's
operational control of the Gas System, and subject to the limitations of the
Standards of Conduct, Company shall have the right to delay or defer the
performance of the Services, if, in the exercise of Company's reasonable
discretion, Company believes that the Services will interfere with its operation
of the Gas System. Notwithstanding the foregoing, to the extent that Contractor
is hindered or delayed in the performance of the Services by Company's failure
or delay to provide access or to perform any of its other obligations under this
Agreement, Contractor may, subject to Section 19(c), immediately suspend the
Services thereby affected for the period such Services are affected by such
failure or delay. In no event shall Contractor be liable for any delay or
non-performance, or the consequences of any delay or non-performance, arising
out of any breach by Company of its obligations under this Agreement or
resulting from Contractor's compliance with Company's directive to delay or not
perform any of the Services, and, to
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the extent any costs and expenses are not payable under any other provision of
this Agreement, Company shall be responsible for such costs and expenses that
would not have otherwise been incurred by the Contractor but for such breach or
directive by the Company, including, as applicable, any additional mobilization
or re-mobilization costs on a cost-plus basis as provided in Exhibit "B",
cancellation fees, rescheduling costs and other similar costs.
11. Insurance
Each Party agrees to procure and maintain insurance coverage with reputable
insurers with an A.M. Best rating of A- VII or better in the kinds and amounts
as set forth below:
(a) Company agrees to maintain, at its own cost and expense, the following
insurance coverages for the life of this Agreement in the manner and
amounts, at a minimum, as set forth below:
(i) Workers' compensation insurance in accordance with all
applicable state law;
(ii) Employer's liability insurance in the amount of One Million
Dollars ($1,000,000) per accident;
(iii) Commercial general liability and/or excess liability insurance
in the amount of Twenty Five Million Dollars ($25,000,000) per
occurrence; and
(iv) Business Automobile liability insurance for all owned, non-owned
and hired vehicles in the amount of Two Million Dollars
($2,000,000) each accident.
(b) Contractor agrees to maintain, at its own cost and expense, and to
require each of its subcontractors (to the extent herein provided)
performing any work or services under this Agreement to maintain, the
following insurance coverages for the life of this Agreement in the
manner and amounts, at a minimum, as set forth below:
(i) Workers' compensation insurance in accordance with all
applicable state law;
(ii) Employer's liability insurance in the amount of One Million
Dollars ($1,000,000) per accident;
(iii) Commercial general liability and/or excess liability insurance
in the amount of Twenty Five Million Dollars ($25,000,000) per
occurrence; and
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(iv) Business Automobile liability insurance for all owned, non-owned
and hired vehicles in the amount of Two Million Dollars
($2,000,000) per each accident.
Notwithstanding the foregoing, subcontractors shall only be required
to maintain Business Automobile liability insurance for all owned,
non-owned and hired vehicles in the amount of One Million Dollars ($
1,000,000) per each accident, and to the extent that Contractor's
insurance is available to cover excess liability, each of the
subcontractors shall only be required to maintain commercial general
liability and/or excess liability insurance in the amount of Three
Million Dollars ($3,000,000) per occurrence.
(c) Each Party may, at its option, be an approved self-insurer for all
insurance to be provided; provided that (i) the rating in effect by
S&P or ▇▇▇▇▇'▇ for the long term senior unsecured non-credit enhanced
debt of such Party is higher than both BB+ and Bal, respectively and
(ii) the approval of the State of West Virginia may be required for
the insurances required of Company in Section 1l(a). Each Party will
maintain such Deductibles and/or retentions as applicable, as are
maintained by other similarly situated companies engaged in a similar
business. The Parties agree that all amounts of self-insurance,
retentions and/or Deductibles are the responsibility of, and shall be
borne by, the Party maintaining such insurance.
(d) Except with respect to ▇▇▇▇▇▇▇'▇ compensation, employer's liability
and permanent property insurance, the insurance to be procured and
maintained shall name the other Party as an additional insured on the
insurance procured pursuant to this Section 11.
(e) To the extent permitted by applicable law, each Party hereby waives
subrogation rights by the insurers in favor of the other Party and
each of its assignees, affiliates, agents, officers, directors,
employees, contractors, subcontractors, insurers or policy issuers,
whether by endorsement or otherwise, in respect of any type of
liability of any of the persons insured under any and all such
policies listed above. To the extent that Company is not able to
obtain a waiver of subrogation with regard to its permanent property
insurance on its property, then Company shall secure substitute
insurance for Contractor covering any loss to Company property caused
by Contractor, its subcontractors and Affiliates.
(f) IT IS UNDERSTOOD AND AGREED THAT THE INSURANCE REQUIREMENTS SET FORTH
IN THIS SECTION SHALL IN NO WAY LIMIT EACH PARTIES' LIABILITY UNDER
THIS AGREEMENT, NOR SHALL THEY BE CONSTRUED TO BE THE ULTIMATE TYPES
AND AMOUNTS OF INSURANCE EACH
E-17
PARTY SHOULD MAINTAIN TO ADEQUATELY COVER ITSELF FROM THE HAZARDS OF
ITS OCCUPATION.
(g) It is expressly agreed by each Party that any and all premiums,
insurance taxes thereon in West Virginia, deductibles and/or any other
charges due with respect to such policies of insurance shall be
assumed by, for the account of, and at each Parties' respective sole
risk.
(h) Within fifteen (15) days of the Effective Date and thereafter when
requested, in writing, but not more than once every twelve (12)
months, during the term of this Agreement (including any renewals)
each Party shall provide to the other Party properly executed and
current certificates of insurance or evidence of approved
self-insurance status with respect to all insurance required to be
maintained by such Party under this Agreement. Certificates of
insurance shall provide the following information:
(i) Name of insurance company, policy number and expiration date;
(ii) The coverage maintained and the limits on each, including the
amount of deductibles or retentions, which shall be for the
account of the Party maintaining such policy; and
(iii) The insurance company shall provide thirty (30) days prior
written notice of cancellation to the certificate holder (ten
(10) days for non-payment of premium).
(i) Before permitting any Subcontractor to perform any Services,
Contractor shall obtain a certificate of insurance from such
Subcontractor evidencing that (i) such Subcontractor has obtained
insurance in such amounts and against such risks as is required by
Section 11(b) and that (ii) both Contractor and Company have been
named as additional insureds on Subcontractors' liability coverage.
12. Audit and Records
Upon notice in writing to Contractor, Company will have the right, during
normal business hours, to audit Contractor's accounts and records relating to
costs charged to the account of Company for Services (which accounts shall be
maintained in accordance with generally accepted accounting principles and
Applicable Law) within the eighteen (18) month period following the date of
invoice for such Services. Company will make reasonable efforts to conduct
audits in a manner which will result in a minimum of inconvenience to
Contractor. Contractor will bear no portion of such audit cost unless such audit
reveals that the amount, if any, overcharged to the account of Company for
Services during the eighteen (18) month period prior to the beginning date of
such audit is more than One Hundred and Fifty Thousand Dollars ($150,000). In
such case, Contractor shall reimburse Company for all out-of-pocket costs
related to such audit. In all cases, Contractor shall, as applicable, (i) submit
an invoice to Company for the
E-18
amount undercharged, if any, which amount Company shall pay to Contractor not
later than the twentieth (20th) day following the receipt of such invoice, or
(ii) reimburse Company for the amount overcharged, if any, within twenty (20)
days after demand by Company. Contractor will not dispose of or destroy any
records pertaining to Services prior to the expiration of the eighteen (18)
month period following the date of invoice for such Services.
13. Assignment
(a) This Agreement shall inure to the benefit of and be binding upon the
successors and permitted assigns of the respective Parties. This
Agreement shall not be assigned, transferred or otherwise alienated by
either Party without the other Party's prior written consent, which
consent shall not unreasonably be withheld or delayed; provided that
any assignee shall expressly assume the assignor's obligations
hereunder and, unless expressly agreed to by the other Party, no
assignment shall relieve the assignor of its obligations hereunder in
the event its assignee fails to perform. Any attempted assignment,
transfer or other alienation without such consent shall be void and
not merely voidable.
(b) Notwithstanding the above:
(i) Either Party may assign this Agreement to a bank or other
Financial Institution as security for indebtedness, and the
non-assigning Party will provide reasonable and customary
cooperation with such assignment, provided that in the case of a
financial assignment by Contractor, such assignment shall be
limited to a pledge of Contractor's receivables under this
Agreement, and any pledge or financial assignment covering more
than Contractor's payment or income stream from this Agreement
shall require the prior written consent of Company, not to be
unreasonably withheld or delayed; and
(ii) Either Party may assign this Agreement to any Affiliate of the
assigning Party; provided that such Affiliate is of equal or
greater financial strength of the assigning Party and such
Affiliate expressly assumes the assignor's obligations
hereunder, provided that in the event of an assigninent to an
Affiliate of Contractor, such Affiliate shall reasonably
demonstrate to Company that it possesses adequate skill and
experience to perform the Services in accordance with this
Agreement, and any approval by Company of such skill or
experience by Contractor's Affiliate shall not be unreasonably
withheld or delayed.
(c) Contractor may elect to have any part of the Services performed by
Subcontractors pursuant to written subcontracts between Contractor and
such Subcontractors provided that the creation of any subcontract
shall not
E-19
relieve Contractor of any of its obligations under this Agreement and
no Subcontractor is intended to be or shall be deemed a third party
beneficiary of this Agreement. Only those subcontracts of Services
that are unique to the Services in this Agreement (and not part of a
broader subcontract, affecting all or substantially all of the other
affected regulated utility Affiliates of Contractor, receiving similar
services) shall require Company's prior written consent, which consent
shall not unreasonably be withheld or delayed.
14. Independent Contractor Relationship; Limitation of Contractor Authority
(a) In the performance of the Services, Contractor shall be an independent
contractor and shall be free to exercise its discretion and
independent judgment as to the means, methods, techniques, sequences
and procedures of the perfortnance of the Services provided. Nothing
in this Agreement shall be deemed or construed by the Parties or any
third-party as creating the relationship of principal and agent,
employer and employee, partnership or joint venture between the
Parties. No employee of either Contractor or Company who renders any
Service shall be deemed or considered to be an employee of the other
Party hereto as a result thereof.
(b) Notwithstanding any other provision of this Agreement to the contrary,
Contractor will not without prior written consent of the Company:
(i) make, enter into, execute or otherwise approve any amendments,
supplements or modifications to any contract or agreement on
behalf of, or in the name of, Company;
(ii) sell, lease, pledge, mortgage, convey, license, exchange or make
any other transfer or disposition of any property or assets of
Company, including any tangible personal property acquired by
Contractor for Company under this Agreement;
(iii) borrow any money on behalf of or in the name of Company,
utilizing Company's property as security for any loans,
obligating Company as guarantor, endorser, surety or
accommodation party, or otherwise pledging the credit of Company
in any way other than the incurring of trade accounts in the
ordinary course of performing the Services;
(iv) lend any money, or extend any credit, on Company's behalf or in
Company's name, except for the extending of trade credit in the
ordinary course of performing the Services;
(v) take any discretionary actions under any other agreement to
which Company is a party, including (i) exercising or waiving
any remedy of Company or taking any non-routine action on
behalf of Company in the event of a default or threatened
default under any
E-20
such agreement; (ii) assess or settle any claim for damages on
behalf of Company; or (iii) assert or make any claim for
indemnification or insurance coverage on behalf of Company under
any such agreement; or
(vi) settle, compromise, assign, pledge, transfer, release or consent
to do the same, of any claim, suit, debt, demand or judgment
against, or due from or by Company, or submitting any such
claim, dispute, or controversy to arbitration or judicial
process, or stipulate in respect thereof to a judgment or
consent to do the same or take any such action with respect to
a claim, suit, debt, demand or judgment against or due by
Contractor if Contractor intends to seek reimbursement of such
cost from Company.
15. Amendments; Waivers
The terms of this Agreement shall not be amended or modified, except in
writing signed by both Parties. No provision hereof may be waived except in
writing by the Party against whom enforcement of such waiver is sought.
16. Headings
The Section headings in this Agreement are included for reference only.
They are not a part of this Agreement and shall not affect the interpretation
and construction of this Agreement.
17. Entire Agreement
With respect to the subject matter hereof, this Agreement supersedes all
previous representations, understandings, negotiations, and agreements, either
written or oral, between the Parties or their representatives and constitutes
the entire contract between the Parties. No part of any purchase order, request
for proposal or other document issued by one Party in connection with the
Services shall be binding upon the other Party or affect such other Party's
rights or obligations hereunder unless this Agreement is amended to incorporate
and include any provision of any such purchase order, request for proposal or
other document issued by a Party in connection with the Services which amends or
modifies a Party's rights or obligations under this Agreement, and such
amendment is signed by a duly authorized representative of each Party.
18. Governing Law
This Agreement shall be governed by and construed in accordance with the
laws of the State of New York, except for the provisions of such laws dealing
with conflicts of law. This Agreement is intended for the benefit of the Parties
and does not grant any rights to any third-parties unless otherwise specifically
stated herein.
19. Breach, Default and Remedy
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(a) A breach of this Agreement ("Breach") shall include:
(i) The failure to pay any amount due hereunder;
(ii) The failure to comply with any material term or condition of
this Agreement, including any material breach of a
representation, warranty or covenant made in this Agreement;
(iii) If a Party: (i) becomes insolvent; (ii) files a voluntary
petition in bankruptcy under any provision of any federal or
state bankruptcy law or shall consent to the filing of any
bankruptcy or reorganization petition against it under any
similar law; (iii) has an involuntary petition in bankruptcy
filed against it under any such law and such petition has not
been dismissed within one hundred twenty (120) days; (iv) makes
a general assignment for the benefit of its creditors; or (v)
consents to the appointment of a receiver, trustee or
liquidator;
(iv) Assigninent of this Agreement in a manner inconsistent with the
terms of Section 13; and
(v) Failure of Company to provide access rights, or Company's
attempt to revoke or terminate such access rights, as provided
under this Agreement except to the extent that Company delays
or defers the performance of the services because, in the
reasonable exercise of Company's discretion, Company believes
that the Services will interfere with its operation of the Gas
System.
(b) A default of this Agreement ("Default") shall occur upon the failure
of a Party in Breach of this Agreement ("Breaching Party") to cure
such Breach in accordance with this Section 19(b). Upon the occurrence
of a Breach (other than a Breach described in Sections 19(a)(i) or
19(a)(iii) above), the non-Breaching Party, when it becomes aware of
such Breach, shall give written of the Breach to the Breaching Party.
Upon receiving such notice hereunder, the Breaching Party shall have
thirty (30) days to cure such Breach. If a Breach is such that it
cannot be cured within thirty (30) days and the Breaching Party is
taking all steps as are reasonable and appropriate to cure such Breach
then such period may be extended for an additional period not to
exceed thirty (30) days. Except with respect to a Breach described in
Section 19(a)(i) or 19(a)(iii) above, in the event the Breaching Party
fails to cure the Breach within thirty (30) days of becoming aware
thereof (as such period may be extended by the provisions of the
previous sentence) the non-Breaching Party may (i) commence an action
to require the Breaching Party to remedy such Breach and specifically
perform its duties and obligations hereunder in accordance with the
terms and conditions hereof and/or (ii) exercise such other rights and
remedies as it may have in equity or at law (including, but
E-22
not limited to, termination of this Agreement). Upon five (5) Business
Days' prior notice to a Breaching Party of the occurrence of a Breach
described in Section 19(a)(i) above and if such Breach is continuing,
and immediately upon the occurrence of a Breach described in Section
19(a)(i); or Section 19(a)(iii), the non-Breaching Party may (x)
commence an action to require the Breaching Party to remedy such
Breach and perform its duties and obligations hereunder in
accordance with the terms and conditions hereof and/or (y) exercise
such other rights and remedies as it may have in equity or at law
(including, but not limited to, termination of this Agreement).
(c) In the event of any Default by either Party, pending any termination
of this Agreement by the non-defaulting Party, the Parties shall
continue to operate and maintain, as applicable, the Gas System in a
safe and reliable manner. Further, upon a tennination of this
Agreement by Contractor, Contractor may continue to provide such
minimal Services for the Gas System as Contractor and Company agree
are necessary to maintain the safe and reliable operation of the Gas
System until such time as Company (i) elects to self-provide such
services, (ii) contracts for such services with a third party, or
(iii) advises Contractor in writing that such Services are otherwise
no longer required. In such event, notwithstanding the termination of
this Agreement, Company shall be liable to pay all of Contractor's
costs and other expenses in providing such minimal services in
accordance with Exhibit "B" and the provisions of Section 6 shall
survive and apply to such Services.
20. Dispute Resolution
(a) In the event a dispute arises between Company and Contractor regarding
the application or interpretation of, or in any way relating to, this
Agreement, the Parties agree to attempt to resolve all disputes
arising hereunder promptly and in a good faith manner. If the Parties
shall have failed to resolve the dispute within the ten (10) days
after any written notice of the dispute has been sent to a Party, then
either Party may elect to refer the dispute to the respective senior
management of the Parties by notice in writing to the other Party, and
the respective senior officers of the Parties shall meet within the
five (5) Business Days after the date of the receipt of the notice, to
resolve the dispute. If the dispute remains unresolved within three
(3) Business Days after such a meeting has commenced (or within ten
(10) days after the date of the letter referring the matter to senior
management, whichever comes sooner), then either Party may at any time
thereafter seek resolution of the dispute in accordance with the
provisions of Sections 20(a), 20(b) or 20(d) below as applicable.
(b) Within five days following the Effective Date, the Parties shall agree
on three engineers and three independent accountants to be identified
on
E-23
Exhibit D hereto. If, as of the date which is five days following the
Effective Date, the Parties are unable to agree on such engineers and
accountants, either Party may request the AAA to prepare a list of
three unbiased, neutral individuals who are qualified to act as the
Third Party Engineer and three unbiased, neutral individuals who are
qualified to act as the Third Party Accountant who shall, in each
case, be identified on Exhibit D hereto. If the Parties agree in
writing that any dispute hereunder involves technical issues or if a
dispute arises under Sections 3(d) or 3(e) above, then the Parties
shall submit such dispute to arbitration by a single independent
engineer chosen from the three engineers identified in Exhibit D
hereto (the "Third Party Engineer") and if the Parties agree that any
dispute hereunder involves financial issues or if a dispute arises
under Section 4(b) above, then the Parties shall submit such dispute
to arbitration by a single independent accountant chosen from the
three accountants identified in Exhibit D hereto (the "Third Party
Accountant") in each case for resolution in an expedited manner
pursuant to the Expedited Arbitration Rules (the "Rules") of the
American Arbitration Association ("AAA") then in effect, except as
modified herein.. If, at the time a dispute arises, the Third Party
Engineer or Third Party Accountant is not available to sit as an
arbitrator, either Party may request the AAA to prepare a list of five
(5) unbiased, neutral individuals who are qualified to act as the
Third Party Engineer or Third Party Accountant, as applicable, within
five (5) Business Days after receipt of such request and an arbitrator
shall be appointed from such list in accordance with the Rules. The
Parties intend that the Third Party Engineer or Third Party
Accountant, as applicable, shall render a written determination on the
matter in dispute to each of the Parties as soon as practicable, but
no later than thirty (30) days after the Third Party Engineer or Third
Party Accountant's acceptance of the appointment. The time period for
rendering the decision may be extended by the consent of the Parties
or by the Third Party Engineer or Third Party Accountant for good
cause shown. The decision of the Third-Party Engineer or Third Party
Accountant shall be final and binding on the Parties and may be
entered and enforced in any court having jurisdiction. Contractor and
Company shall each bear one-half (1/2) of the fees and expenses of
the arbitrator and the AAA for any technical dispute resolution under
this Section.
(c) Notwithstanding the foregoing provisions of this Section 20, except
with respect to disputes arising under Sections 3(d), 3(e) and 4(b),
neither Party shall be precluded hereby from at any time seeking from
the courts as provided in Section 20(d) herein, temporary provisional
or equitable remedies, including without limitation, temporary
restraining orders and preliminary or permanent injunctions, and none
of the time periods in this Section 20 shall be deemed an impediment
to immediately initiate an action seeking equitable remedies. Either
Party may seek temporary equitable relief, in its sole discretion, and
any petitions for equitable relief under this Agreement shall be
deemed ripe for judicial intervention.
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(d) Subject to sections 20(a)-(c) herein, each Party unconditionally and
irrevocably agrees to submit to the exclusive jurisdiction of the
state and federal courts located in New York, New York (the "New York
Courts") for the purpose of any proceedings arising out of or relating
to this Agreement, except that an interim or final arbitral award or
an interim or final judgment obtained from any New York Court may be
enforced in any court having jurisdiction over a Party or its assets.
Each Party unconditionally and irrevocably waives any objections which
they may have now or in the future to the jurisdiction of the New York
Courts including without limitation objections by reason of lack of
personal jurisdiction, improper venue, or inconvenient forum.
21. Notices
All notices, requests, demands and other communications required or
permitted hereunder shall be in writing and shall be deemed to have been duly
given upon receipt by: hand delivery (which shall not include delivery by the
U.S. Mail); certified or registered U.S. Mail, return receipt requested;
telecopy transmission with electronic confirmation of receipt or delivery; or
e-mail transmission with electronic confirmation of receipt or delivery:
(a) If to Contractor, to:
with a copy to, which will not constitute notice:
(b) If to Company, to:
Such names and addresses may be changed by written notice as provided in
this Section to each person listed above.
22. Confidentiality
(a) Each Party will hold in confidence any and all information obtained
from the other Party ("Confidential Information") as provided in this
Section 22 unless (i) subject to Section 22(d), such Party is compel-
led to disclose such information by judicial or administrative pro-
cess, Applicable Law or as otherwise provided for in this Agreement,
or (ii) to meet obligations imposed by a governmental authority.
Information required to be disclosed under (a)(i) or (a)(ii) above,
does not, by itself, cause any information provided by a Party to the
other Party to lose its confidentiality. To the extent it is necessary
for either Party to release or disclose Confidential Information to a
third party in order to perform that Party's obligations herein, such
Party shall advise said third party of the confidentiality provisions
of this Agreement and use its best efforts to require said third party
to agree in writing to comply with such provisions. A Party may dis-
close Confidential Information to its Affiliates, contractors and
E-25
subcontractors performing any obligations under this Agreement on
behalf of such Party, provided that such Affiliates, contractors or
subcontractors agree to be bound by the confidentiality provisions of
this Agreement.
(b) During the term of this Agreement, and for a period of three (3) years
after the expiration or termination of this Agreement, except as
otherwise provided in this Section 22, each Party shall hold in
confidence and shall not disclose to any Confidential Information.
(c) During the term of this Agreement, and for a period of three (3) years
after the expiration or termination of this Agreement, each Party
shall use at least the same standard of care to protect Confidential
Information it receives as that it uses to protect its own
Confidential Information from unauthorized disclosure, publication or
dissemination.
(d) If a Governmental Authority with the right, power, and apparent
authority to do so requests or requires either Party, by subpoena,
oral deposition, interrogatories, requests for production of
documents, administrative order, or otherwise, to disclose
Confidential Information, that Party shall provide the other Party
with prompt notice of such request(s) or requirement(s) so that the
other Party may seek an appropriate protective order or waive
compliance with the terms of this Agreement. The notifying Party shall
have no obligation to oppose or object to any attempt to obtain such
production except to the extent requested to do so by the notified
Party and at the notified Party's expense. If either Party desires to
object or oppose such production, it must do so at its own expense.
The disclosing Party may request a protective order to prevent any
Confidential Information from being made public. Notwithstanding the
absence of a protective order or waiver, the Party may disclose such
Confidential Information that, in the opinion of its counsel, the
Party is legally compelled to disclose. Each Party will use reasonable
effort to obtain reliable assurance that confidential treatment will
be accorded any Confidential Information so fumished.
(e) Each Party may utilize information or documentation furnished by the
disclosing Party, subject to Section 22(a), in any proceeding or in an
administrative agency or court of competent jurisdiction addressing
any dispute arising under this Agreement, subject to a confidentiality
agreement with all participants or a protective order.
(f) The Parties agree that monetary damages by themselves will be
inadequate to compensate a Party for the other Party's breach of its
obligations under this article. Each Party accordingly agrees that the
other Party is entitled to equitable relief, by way of injunction or
otherwise, if it breaches or threatens to breach its obligations under
this Section 22.
23. Execution in Counterparts
E-26
This Agreement may be executed in any number of counterparts, and each such
counterpart shall be deemed to be an original document, but all such
counterparts together shall constitute for all purposes one agreement.
Signatures hereon sent by facsimile may be treated as original signatures.
24. Survival
Any obligations incurred by the Parties under this Agreement to make
payments due or remit costs, as agreed to prior to the termination hereof, shall
survive the termination of this Agreement, together with any other provision
expressly providing for such survival, including but not limited to the
obligations under Section 6. In addition, the applicable provisions of this
Agreement shall continue in effect after expiration, cancellation or termination
hereof to the extent necessary to provide for (a) final ▇▇▇▇▇▇▇▇ and billing
adjustments, including audit rights and the obligation to retain sufficient
records for such purpose, (b) the determination and enforcement of liability and
indemnification obligations arising from acts or events that occurred while this
Agreement was in effect, including warranty obligations and dispute mechanisms,
and (c) the obligations of the Parties to hold in confidence, not disclose and
protect Confidential Information.
25. Effectiveness
The effectiveness of this Agreement is expressly conditioned on the
approval of the West Virginia Public Service Commission and the Securities and
Exchange Commission.
By execution of this Agreement, the Parties agree to be bound by the terms
hereof, effective as of the Effective Date hereof.
CONTRACTOR: COMPANY:
ALLEGHENY ENERGY MOUNTAINEER GAS COMPANY
SERVICE CORPORATION
By ---------------------------- By --------------------------------
Name -------------------------- Name -------------------------------
Title ------------------------- Title ------------------------------
E-27
EXHIBIT E
EXHIBIT A
TO
SERVICES AGREEMENT
1.0 Rules of Construction; Definitions.
(a) In this Agreement in the computation of periods of time from a
specified date to a later specified date, the word "from" means "from and
including" and the words "to" and "until" each means "to but excluding". Unless
otherwise indicated, all references to a particular time are references to New
York City time.
(b) All accounting terms not specifically defined herein shall be
construed in accordance with United States generally accepted accounting
principles and policies consistently applied.
(c) The words "hereof," "herein" and "hereunder" and words of similar
import when used in this Agreement shall refer to this Agreement as a whole and
not to any particular provision of this Agreement, and Article, Section,
Schedule and Exhibit references are to Articles and Sections of and Schedules
and Exhibits to this Agreement, unless otherwise specified. The term "including"
shall mean "including, without limitation," and the term "include" shall mean
"include, without limitation."
(d) The definitions set forth below shall control for the purposes of the
Agreement, and shall have the respective meanings set forth below, unless a
different meaning shall be expressly stated in the Agreement:
"AAA" has the meaning ascribed to such term in Section 20 of the
---
Agreement.
"Affiliates" has the meaning set forth in Rule 12b-2 under the Exchange
----------
Act.
"Applicable Laws" is defined in Section 5(a) of the Agreement.
---------------
"Agreement" means the Services Agreement to which this Exhibit "A" is
---------
attached, as more particularly defined in the preamble to the Services
Agreement.
"Agreement Expiration Date" has the meaning ascribed to such term in
-------------------------
Section 2 of the Agreement.
"Acquisition Agreement" is defined in the Recitals of the Agreement.
---------------------
"Annual Services Budget" is defined in Section 3(b) of the Agreement.
----------------------
"Breach" has the meaning ascribed to such term in Section 19(a) of the
------
Agreement.
"Breaching Party" is defined in Section 19(b) of the Agreement.
---------------
E-1
"Claim Notice" is defined in Section 6(b) of the Agreement.
------------
"Company Indemnity Matters" is defined in Section 5(d) of the Agreement.
-------------------------
"Company" is defined in the preamble of the Agreement.
-------
"Company Parties" means Company and its Affiliates, and each officer,
---------------
director, employee, agent, legal representative, successor and permitted assign
of Company and/or any of its Affiliates.
"Confidential Information" is defined in Section 22 of the Agreement.
------------------------
"Contract Services" is defined in Section 1.1 of Exhibit "A" to the
-----------------
Agreement.
"Contractor" has the meaning ascribed to such term in the preamble to the
----------
Agreement.
"Contractor Indemnity Matters" is defined in Section 5(c) of the Agreement.
----------------------------
"Contractor Parties" means Contractor and its Affiliates, and each officer,
------------------
director, employee, agent, legal representative, successor and permitted assign
of Contractor and/or any of its Affiliates.
"Deductible" means, with respect to an insured loss with respect to
----------
insurance required to be provided under Section 11, the amount of the insured
loss to be borne by the insured Party before reimbursement for the insured loss
will be provided by an insurance carrier.
"Default" has the meaning ascribed to such term in Section 19(b) of the
-------
Agreement.
"Exchange Act" means the Securities Exchange Act of 1934, as amended, and
------------
the rules and regulations promulgated thereunder.
"Effective Date" has the meaning ascribed to such term in the preamble to
--------------
the Agreement.
"Election Period" is defined in Section 6(b) of the Agreement.
---------------
"Financial Institution" means (i) a depository institution as defined in
---------------------
Section 3(c) of the Federal Deposit Insurance Act (12 U.S.C. ss. 1813(c)); or
(ii) any benefit association, insurance company or safe deposit company
authorized to conduct business in West Virginia with which the Company currently
keeps an account and excluding, in any event, any Affiliates of the Company.
E-29
"Force Majeure" or "Force Majeure Event" means acts of God; strikes,
------------- -------------------
lockouts or industrial disputes or disturbances; civil disturbances; arrests
and restraints from rulers of people; interruptions by government,
administrative agency or court orders other than as a result of a failure to
comply with Applicable Laws; acts of the public enemy; wars; riots; blockades;
insurrections; inability to secure labor or inability to secure materials,
including inability to secure materials by reason of allocations promulgated by
authorized governmental agencies; epidemics; landslides; lightening;
earthquakes; fire; storms; hurricane s; tornados; floods and washouts and
events of a nature analogous to the foregoing which, in each case, are not
within the reasonable control of, or the result of the negligence of the
claiming Party and which the claiming Party is unable to avoid or cause to be
avoided by the exercise of due diligence. Notwithstanding the foregoing,
bankruptcy-related decisions or court orders shall not be considered force
majeure events.
"Good Utility Practices" means the level of skill, diligence and care, and
----------------------
the standards, practices, methods and procedures, as the same may change from
time to time, as are commonly employed by a majority of the public utility
companies in the region where the facilities are located, in providing the same
or similar services for facilities of a type and size similar to the gas
distribution facilities of the Company, which in the exercise of reasonable
business judgment and in light of the facts and circumstances known at the time
the decision was made, are considered good, safe and prudent practices,
provided that Good Utility Practices are not intended to be limited to the
optimum standards, practices, methods or procedures to the exclusion of all
others, but rather the acceptable standards, practices, methods or procedures
generally accepted in the region.
"Governmental Authority" means a governmental or regulatory authority,
----------------------
agency, commission, body or other governmental entity or any foreign, federal,
state or local taxing authority.
"Governmental Requirement" means any requirement, rule or Applicable Law
------------------------
of a governmental or regulatory authority, agency, commission, body or other
governmental entity, other than the Internal Revenue Service, or any foreign,
state or local taxing authority.
"Gas System" means the following assets owned by Company as of the
----------
Effective Date or transferred to Company or its Affiliates under the
Acquisition Agreement:
(i) the natural gas intrastate pipeline and distribution system;
(ii) all associated metering and part or all of the billing systems
required to operate the Gas System,
(iii) natural gas exploration and production assets and related
gathering and compressor facilities that are part of the West
Virginia Gas Distribution System and the Related Assets (as such
terms are defined by the Acquisition Agreement).
"Indemnified Party" is defined in Section 6 of the Agreement.
-----------------
E-30
"Indemnifying Party" is defined in Section 6 of the Agreement.
------------------
"Interest Rate" is the rate of interest announced by ▇. ▇. ▇▇▇▇▇▇ ▇▇▇▇▇
-------------
Bank, N.A. from time to time as its prime lending rate with the rate of
interest, to change when and as said prime lending rate changes.
"Moody's" means ▇▇▇▇▇'▇ Investor Service, Inc., or its successor.
-------
"Parties" and "Party" are defined in the first paragraph of this Agreement.
------- -----
"Percentage Basis" means, when allocating costs between Company and
----------------
Contractor, a percentage to be determined monthly in proportion to the Company
and the Contractor's respective monthly usage.
"Services" is defined in Section 1.1 of Exhibit "A" to the Agreement.
--------
"S&P" means Standard & Poor's Ratings Group (a division of McGraw Hill,
---
Inc.), or its successor.
"Suspended Obligations" is defined in Section 8(a) of the Agreement.
---------------------
"Third Party Claim" is defined in Section 6(b) of the Agreement.
-----------------
"Third Party Engineer." is defined in Section 20(b) of the Agreement.
--------------------
"Transition Services" is defined in Section 1. 1 of Exhibit "A" to the
-------------------
Agreement.
Description of Services
1.1 Overview. Services shall be provided for the purpose of assisting
--------
Company in maintaining the continued commercial operation of the Gas System
from the Effective Date through the Agreement Expiration Date. "Services" shall
be comprised of the following with the nature and scope of the Services
diminishing over time, as applicable, from time to time, as herein provided:
(a) "Transition Services":
(i) Financial Accounting Services, as defined in Section 1.2 of
this Exhibit "A"; and
(ii) Technology Services, as defined in Section 1.3 of this
Exhibit "A".
(b) "Contract Services", which shall mean the Call Center and Billing
Services as defined in Section 1.4 of this Exhibit "A".
The performance of Services shall be the sole responsibility of Contractor
through the Agreement Expiration Date, unless any of such Services are earlier
terminated under
E-31
the terms of this Agreement. The performance of the Transition Services shall be
the sole responsibility of the Company after the date such Transition Services
are no longer covered by the Agreement and the performance of the Contract
Services shall be the sole responsibility of the Company after the Agreement
Expiration Date. From the Effective Date through the Agreement Expiration Date,
Contractor shall work with Company to transfer to Company such information,
records and contracts associated with the Gas System as may be required to
enable Company to perform the Services, from and after the date that such
Services are no longer covered under the scope of the Agreement.
1.2 "Financial Accounting Services" shall be comprised of the following:
-----------------------------
(a) Asset (Plant) Accounting (including depreciation accounting):
Contractor will provide this service in compliance with all existing
state and federal regulatory requirements. Contractor will process
asset accounting data using its existing asset accounting systems,
procedures, and methodology, without modification. Existing asset
accounting systems, procedures, and methodology will dictate:
(i) Capital versus maintenance accounting;
(ii) Capital work order processing (AFUDC rates to be provided by
Company);
(iii) Calculation of depreciation/depletion expense;
(iv) Analysis/unitization of capital work orders;
(v) Maintenance of capital ledgers;
(vi) Property billing support;
(vii) Asset valuation; and
(viii) Financial reporting schedules.
(b) Regulated Accounting (including gas net revenue accounting) and
Financial Report Preparation:
(i) Contractor will provide Regulated Accounting services, which
will include preparation and processing of manual journal
entries related to Company revenues, accounts receivable, and
uncollectible accounts expense; gas commodity purchases/storage/
usage; purchased gas clause (PGA) adjustments; operating
reserve adjustments; and other routine/non-routine manual
journal entries necessary to achieve a thorough monthly
accounting close of the Company books.
E-32
(ii) Regulated Accounting will perform high-level oversight to
ensure Company books are complete as to recognition of all gas
business transactions, historically consistent as to ledger
activity, and prepared in accordance with generally accepted
accounting principles of the United States of America (GAAP).
Regulated Accounting will make estimates that affect the
reported amounts of assets, liabilities, revenues, expenses,
and any disclosure of contingencies during the transition
period consistent with past accepted practices. The existing
Contractor PeopleSoft Accounting System will continue to be
used.
(iii) Regulated Accounting will input into PeopleSoft other manual
journal entries for Company activity beyond the scope of these
noted Financial Accounting Services (such as payroll activity;
allocated corporate services expense; integration costs; etc.)
as directed by and based on information provided by the Company.
(iv) Regulated Accounting will provide all manual journal entries
input to the Company.
(v) The monthly accounting close will take place no later than the
10th business day of the succeeding month. At that time,
Regulated Accounting will provide a monthly Trial Balance of
all ledger accounts. That Trial Balance will also be used to
generate monthly, unaudited Income Statements and Balance
Sheets in the existing Contractor format. If the Company wishes
for an Income Statement and Balance Sheet in a different
format, Company will be responsible for converting the supplied
Trial Balance into desired format.
(vi) Company will be responsible for preparation and filing
(monthly, quarterly, annually) of regulatory financial reports
(FERC, SEC, Note-holders, etc.) and for obtaining external
audit of financials, if applicable.
(vii) Regulated Accounting will ensure FERC reporting financials agree
to natural account financials.
(c) Miscellaneous, Non-Complex Billing: Contractor will provide
Miscellaneous, Non-Complex Billing services, which will include
preparation and processing of manual invoices issued to external
parties related to Company activity including:
(i) Customer requested work;
(ii) Property damages;
(iii) Relocations;
E-33
(iv) Rentals;
(v) Contributions in Aid of construction; and
(vi) Monitoring of aged billed receivables and recognizing potential
uncollectibles expense in the ledger. Contractor shall provide
copies of all invoices issued on behalf of the Company. The
existing Platinum Billing system will continue to be used in
this service. The Platinum Billing system interfaces monthly
with the PeopleSoft Accounting System.
(d) Tax Accounting (for books):
(i) Contractor will provide income tax accounting journal entries
computed and prepared for current and deferred taxes based on
information in the Trial Balances provided and based on tax
elections, adjustments, asset basis and other necessary
information provided by the Tax Compliance provider.
(ii) Year-end footnote information can be supplied, in compliance
with FAS 109 requirements for inclusion in Company's annual
financial report, if necessary.
(iii) Non-income tax journal entries, including non-income tax
accruals as necessary, will be provided based on information
provided by the Tax Compliance provider and input into the
PeopleSoft Accounting System by Tax Accounting.
(iv) Contractor will not provide tax compliance work effort (filing
of tax returns with taxing authorities).
(e) Disbursements (Accounts Payable) Accounting: Contractor will
provide Disbursements (Accounts Payable) (AP) services consistent
with existing Contractor practices and procedures. Accounts Payable
services will include:
(i) Processing vendor invoices with accounting provided by the
Company;
(ii) Distributing payment checks daily twice a week;
(iii) Providing manual checks on an "as needed" basis Interfacing AP
system activity into the PeopleSoft Accounting System;
(iv) Passing AP information to an (if requested); and
(v) Providing expenditure accrual information.
E-34
Accounts Payable services will not include establishing an Company
payment approval process, submission of Form 1099 to vendors, filing
of Form 1096 with the IRS, or invoice/documentation imaging.
(f) Cash Processing:
(i) Contractor will provide Cash Processing services, which will
include processing and posting of all Company cash receipts,
including those related to customer usage ▇▇▇▇▇▇▇▇, manual
invoices issued to external parties, and other remittances/
monies received.
(ii) Cash Processing will, depending on the type of payment and
based upon written protocols to be developed by the Parties,
either (i) deposit such cash collections daily into the
Company's designated bank account or (ii) deposit such cash
collections daily into a Contractor bank account for subsequent
transfer to the Company's designated bank account within 24
hours, as applicable, except for payments by powerpay and
electronic ▇▇▇▇ pay, in which case such cash collection will be
transferred to the Company's designated bank account within 48
hours.
(iii) The existing Cash Remittance System will continue to be used
for this service. This system will interface with the PeopleSoft
Accounting System on a monthly basis.
(iv) Other than detail provided through the ledger interface process,
Cash Processing will not prepare any detailed or summarized
reports as to cash flows and will not prepare cash flow
forecasts and/or budgets.
(v) Cash Processing services will not include cash management
related tasks, which include cash investment and borrowing
decisions.
(g) Operations Accounting (Stores, Work Management, etc.): Contractor
will provide operating accounting services, in compliance with all
state and federal regulatory requirements. Contractor will process
Stores (Materials Management System - MMS) accounting data using its
existing accounting systems, procedures, and methodology and will
include the following services:
(i) Material Management System Reports;
(ii) Interfacing MMS transactions to the PeopleSoft Accounting
System;
(iii) Reconciling raw transactional files to PeopleSoft natural
accounts;
E-35
(iv) Providing operating accounting support to service centers and
field personnel; and
(v) Maintaining overhead rates used within MMS.
(h) Vehicle Management Accounting according to existing Contractor
programs and processes:
(i) Vehicle rate and hour calculations;
(ii) Vehicle maintenance accounting;
(iii) Evaluating/maintaining vehicle/transportation accounts in the
ledger;
(iv) Maintaining the interface between the Vehicle Management
system and the PeopleSoft Accounting System;
(v) Providing accounting support to service centers and field
personnel; and
(vi) Maintaining vehicle lease documentation/files.
(i) Work Management Accounting in compliance with all state and federal
regulatory requirements. Contractor will process Work Management
accounting data using its existing accounting systems, procedures,
and methodology, without modification. The Work Management system
(STORMS) allows creating, locating, and tracking all work requests
from initiation through completion and closing and includes the
following steps:
(i) The initiation phase is used to create new Work Requests in
STORMS. A Work Request is created, searched for, and assigned
to a specific operator or work queue.
(ii) The Design phase is used to add CUs (completed units) to the
Work Request. CUs are building blocks for a work request.
Details used for informing the crew of the work to be done as
well as accounting information is derived from the CUs.
(iii) The Scheduling phase is utilized to schedule crews, employees,
and vehicles, to a specific work request. The work request is
allocated to a crew or crews in order for the work to be
completed.
(iv) The Reporting phase occurs when the work request is completed.
The crew must report certain information pertaining to the
completed CU's with the Work Request.
E-36
(v) The final phase of the Work Request cycle is the Closing phase.
Closing allows marking a work request as closed with the
status 90.
(j) Benefits Accounting: Contractor will not be responsible for
employee Benefits Accounting except to process manual journal entries
related to such expense. The information below will be needed to
properly account for and recognize employee benefits expense:
(i) FASB 87 valuation - providing retirement plan expense to be
recorded;
(ii) FASB 106 valuation - providing postretirement benefits expense
to be recorded;
(iii) FASB 112 valuation -providing expense associated with current
long-term disability participants (post employment benefits);
(iv) Workers compensation reserve amounts for injured employees;
(v) General Liability (Injuries and Damages) amounts;
(vi) Incurred But Not Reported liability amounts for Workers
Compensation and for General Liability;
(vii) Funding valuation to determine future funding requirements of
the pension plan; and
(viii) Funding valuation related to the funded status of the deferred
compensation plan for Mountaineer Gas ex-presidents.
(k) Reliance by Contractor: Contractor will not make critical accounting
decisions, perform any budgeting work or comparisons of actual
results to budget or perform or contract for any internal or
external auditing work, and will rely upon Company authorization and
interaction with regard to generation of monthly results.
(l) Reporting: Contractor will prepare routine, standard accounting
reports based upon Contractor's current transaction account key
coding. Such reports will not be customized solely to report Company's
results. The Financial Accounting Services detailed above do not
include any Services for audits, such as testing internal controls,
transaction testing, and documentation preparation.
1.3 "Technology Services", shall be comprised of the following:
-------------------
(a) "Support Services", means Services to support and assist Company in
----------------
operating and maintaining (i) Contractor's technology systems provided
as part of the Transition Services as of the Effective Date and (ii)
technology
E-37
systems acquired from Contractor on the Effective Date (collectively,
the "Technology Systems"), in each case including computer programming
reasonably required to maintain the normal function of such
Technology Systems.
(b) "Project Services", means those special Services that Company may
----------------
request after the Effective Date to effect changes and enhancements to
the Technology Systems, as well as to transition the Technology
Systems to the Company, subject to the following:
(i) Contractor will provide reasonable consideration to all such
changes requested by Company in writing.
(ii) Contractor will prioritize any Company system change requests
against all other internal requests for system changes and
enhancements.
(iii) Reasonable efforts will be made to meet timelines to which
Contractor agrees.
(iv) Contractor reserves the right to reject any Company system
change request that adversely effects the ability of said
system to provide the primary system function to other users,
including Contractor and its Affiliates.
(c) The scope of "Support Services" and "Project Services" includes
equipment, materials, and services necessary to operate the
Technology Systems until the earlier of (i) the date that Company
establishes the ability to independently operate such systems, or
(ii) the Agreement Expiration Date. This includes the following
services:
(i) Support Center - central help desk for providing end-user
technology support and problem resolution,
(ii) Hardware - workstation, server, printer, and network equipment
and associated support,
(iii) Contracts - administration of technology contracts and
licenses and assistance transferring contracts and licenses
to Company where applicable,
(iv) Application systems, provided that:
(1) For application systems that do not transfer to the
Company, Support Services and Project Services include
ongoing support as well as assistance mapping the data in
Contractor's applications with data required by Company's
E-38
applications and creating data extractions in a mutually
agreeable format,
(2) For application systems that transfer to the Company,
Support Services and Project Services include providing
assistance by application support personnel and
assistance transferring application systems to Company,
(v) Access to and support of Contractor's connection to the
internet,
(vi) Reasonable security protection from unauthorized use and
associated support,
(vii) Support of local and wide area networks and assistance
separating from Contractor's network,
(viii) Support of voice telecommunications systems and equipment,
removal of tie lines, and assistance transferring contracts
and billing for services, cell phones, pagers, and the like to
Company,
(ix) Support for radio systems and equipment, assistance
separating from Contractor's radio system, and assistance
transferring Federal Communications Commission radio licenses
to Company.
(d) Company will establish the technology necessary to connect with
Contractor's Technology Systems and to comply with Contractor's
security policies, including but not limited to networks, application
systems, radio system, and telecommunication systems, as well as
procuring and implementing hardware and software necessary to operate
independently from Contractor.
(e) Within 90 days after the Effective Date, Company shall provide
Contractor with a detailed project plan for the conversion of the
application systems, data, services, telecommunications, and other
information technology from Contractor to Company.
1.4 "Call Center and Billing Services", shall be comprised of the following:
--------------------------------
(a) Telephone Communication:
-----------------------
(i) Company will use reasonable efforts to obtain a separate,
toll-free telephone number, billed directly to Company. If,
notwithstanding such reasonable efforts, Company does not ob-
tain such number before the Effective Date and requests Con-
tractor in writing to supply one of Contractor's existing toll-
free numbers to Company, then the Contractor may, in its sole
discretion, provide such number, subject to long distance
carrier rules and Contractor's existing agreements. If such
number is owned by Contractor,
E-39
Contractor will use reasonable efforts to transfer such number
to Company.
(ii) Other telephone services such as local phone service,
voice mail, fax, maintenance, will be provided by the
facility in Fairmont (the "Call Center" existing Contractor
systems and resources as they pertain to the call center
only.
(iii) Contractor will arrange for a separate Interactive
Voice Response System ("IVR") application to identify the
Company and provide automation, messaging and call routing.
The number of Contractor's IVR ports made available for
Company's use will be at the discretion of Contractor and
subject to existing resource availability. If the Company
requests and Contractor agrees to make changes that create
the need for more ports, Company shall pay for such
additional ports on a cost-plus basis.
(iv) Contractor will initially provide sufficient redundancy
of IVR ports to provide a reasonably high degree of port
availability.
(v) Outbound trunks and volumetric charges will be shared
with Contractor and other users with cost allocation
calculated on a Percentage Basis. The Company will bear 100%
of the additional costs from any separated outbound trunks.
(vi) Telephone, fax and network communications to the
service centers from the Call Center will require
telecommunications infrastructure which must be provided by
the Company.
(vii) If requested by Company, call overflow arrangements
may be made where peak call volumes may be permitted to
overflow between gas and electric. Cost allocation will be
made based on the number and duration of calls handled plus
any cost related to additional training.
(viii) Company acknowledges and agrees that if Company and
Contractor share capacity on the inbound T1 trunk then
during certain times of the year inbound availability for
Company could be limited due to a widespread electricity
outage, causing an abnormally high volume of calls related
to the electric outage. If requested by Company, Contractor
will provide a separate, dedicated inbound line at Company's
cost (on a cost-plus basis).
(b) Call Center Reporting:
---------------------
(i) Contractor will provide standard Call Center reports to
Company with similar format and detail as currently
provided, including Standard CSR and telephone performance
reports and reports
E-40
related to collections, billing, field collections and meter
reading activities.
(ii) Costs for Telephone system/ACD/CTI/standard reports will be
allocated to Company on a Percentage Basis.
(iii) Contractor will not provide real time access to call queue
information. If requested, Contractor agrees to use reasonable
efforts to make the changes necessary to provide real time
access at Company's expense.
(c) Staffing/Training:
-----------------
(i) Contractor will create a separate team of Call Center
employees to answer the phones for Company at the Call Center.
This team will consist of approximately 30-34 Call Center
employees, 2 lead Call Center employees, and 1 or 2 managers.
Contractor may provide services with a team of "dual" trained
employees (i.e., qualified responders on both gas and electric
business lines), if Contractor believes that the use of such
a team is more cost efficient or will entail less employee
upheaval.
(ii) Calls will be randomly recorded and reviewed to assure
quality. Company may review samples of recorded calls at the
Call Center.
(iii) Costs for Call Center employee hiring, training, supervision,
coaching, developing, and other activities will be allocated
by employee count or actual cost depending on the hiring
initiative.
(iv) Standard Operating Procedures ("SOP") for gas and electric are
currently integrated. Contractor will pay for costs relating
to creating an electric-only SOP and Company will pay for
costs relating to a gas-only SOP. On or before the Effective
Date, Contractor will furnish to Company an initial draft of
SOP at Contractor's cost. Company will bear the costs of
future modifications/revisions to gas SOP.
(v) Only Company's authorized Call Center personnel may use the
Contractor's office space, cafeteria, workstations, PCs,
servers, data storage.
(vi) Contractor will schedule the employee shifts based on
call history. Company acknowledges that some systems may be
unavailable during certain hours of the evening for night
processing.
(vii) Contractor will manage the staffing, vacation requests and
similar functions for all Call Center employees.
E-41
(viii) Gas Call Center employees will follow the same rules and
guidelines as the electric Call Center employees.
(xi) Company will pay for costs to replace and train gas
call-center employees needed due to turnover.
(x) Gas Call Center employees on the Effective Date will be
eligible for promotions to other positions with Contractor
and its Affiliates. Subsequent gas Call Center employees
will be eligible for promotions with Contractor and its
Affiliates only after 12 months of service.
(d) Call Center Technologies:
------------------------
(i) Several systems used by the Call Center for Company may accrue
license fees which will be billed to Company, including but
not limited to Imaging, QUEST (Mitem component), and TACS Cold.
(ii) If license agreements limit the use by Company of forms used
and archived by Contractor, alternate arrangements must be
made at the Company's expense.
(e) Billing and Collections:
-----------------------
(i) Contractor will print and mail bills.
(ii) Contractor will review and process ▇▇▇▇ exceptions, returned
mail, white mail, and other customer correspondence
(iii) Contractor will enter and process meter dial cards for
customer supplied readings
(iv) Company is responsible for investigating and resolving
no-access problems, which prevent regular meter readings.
(v) If requested in writing, Contractor will contract with a
credit service to perform positive ID and credit screening
for Company's customers.
(vi) If requested in writing, Contractor will purchase billing and
other print forms for use in rendering bills and other
correspondence. Company may provide to Contractor such forms
if it meets the technical specifications for processing by
Contractor's existing equipment and postal service
requirements.
(vii) If requested in writing Contractor will provide payment-
processing services. If the Company elects to provide their
own payment-processing network, Company would be responsible
for costs to
E-42
interface the payments received with Contractor's customer
information system ("CIS") for updating billing data.
(viii) Company, with assistance from Contractor (as Company may
request), will arrange for PowerPay, Check-by-phone, credit
card, and debit card payment system to be revised for payments
by customers of the Company, at Company's expense.
(ix) Company acknowledges and agrees that it must contract with any
businesses or agencies within the service territory which
Company would authorize to accept payment by Company's
customers.
(x) All Call Center work related to field collections is outside
the scope of the Agreement and Call Center employees shall
forward any work orders related to collections including field
contacts for notice delivery and shut-offs, directly to
Company.
(xi) Contractor will make outbound collections calls but the
Company would be responsible for timely field collections.
(xii) Contractor will incorporate and test any rate and billing
changes into CIS.
(xiii) Contractor will do ▇▇▇▇ inserts (i.e., special notices,
messages and similar inserts) as requested by the Company to
the extent Contractor is able to accommodate such requests, in
Contractor's sole discretion. Company is responsible for the
form and content of any such ▇▇▇▇ inserts. Company shall
request additional services related to ▇▇▇▇ insert not less
than twenty (20) days in advance of the scheduled posting
date, and to the extent Contractor agrees to do such ▇▇▇▇
inserts, Contractor will coordinate printing of inserts or
Company could supply, at their option based on size, shape
and form limits. Any extra postage will be paid by Company.
(xiv) Contractor will make ▇▇▇▇ and form changes to reflect the
company's new name, all as Company may reasonably request.
(xv) Company shall be responsible to make all communications
reasonably necessary to notify customers of the ownership
change.
(xvi) Company will operate the gas 'specialty billing' system
(Onesys) for the large gas accounts and gas transportation
accounts.
(f) Call Center - General:
---------------------
(i) Company will determine and communicate the West Virginia
Public Service Commission ("PSC") rules interpretations,
changes that require changes in the Call Center's processes.
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(ii) Company will handle all PSC communications including
communications regarding complaints, hearings and other PSC
matters.
(iii) Company will be responsible for performing any external
customer satisfaction surveys for customer satisfaction
relating to the Call Center.
(g) Following are the Call Center systems which Contractor will provide
if requested in writing by the Company:
(i) Call Center Technology Infrastructure:
(1) Computers/network/servers/SAN;
(2) Phones;
(3) Data backup;
(4) Business continuance; and
(5) System Security.
(ii) Call Center Support Systems:
(1) Interactive Voice Response;
(2) Predictive Dialer;
(3) Computer Telephony Integration (CTI);
(4) Envision call observation system;
(5) Aspect workforce management;
(6) Signboard Application;
(7) PBX;
(8) ACD/MTE;
(9) Robohelp;
(10) Infosource;
(11) Jetforms; and
(12) Rightfax.
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(iii) Credit and Collection:
(1) Customer Collection system
(iv) Customer Relationship Management:
(1) TASC cold;
(2) QUEST;
(3) Contact Management System;
(4) Mitem;
(5) Imaging; and
(6) (QUEST) Credit Bureau Interface.
(v) Back Office support:
(1) Account Transaction Order system; and
(2) ▇▇▇▇ Calculation Error System
(vi) Billing Parameters:
(1) Rate Entry System; and
(2) Tax Entry System
(vii) ▇▇▇▇ Production and distribution:
(1) CSF/mailing software;
(2) Mailers Choice;
(3) Finalist; and
(4) Insert Scheduling System.
(viii) CIS Billing:
(1) Reject System;
(2) Online CIS System; and
(3) Batch CIS System.
(ix) Electronic Payment Solutions:
E-45
(1) Power Pay.
(x) Meter Reading:
(1) Meter Reading Entry Application.
(h) Following are Systems which Contractor will not provide to Company:
(i) Marketing Systems:
(1) Avenue;
(2) ACT;
(3) Marketing Data Warehouse; and
(4) Allegheny Home Advantage.
(ii) Web based customer service pages:
(1) CIS Account inforination;
(2) Product and Services applications; and
(3) CIS data entry (eg. Meter readings etc).
(iii) Commodity Managements:
(1) Load Forecasting; and
(2) Lodestar Load Profile Scheduling and Settlement System.
(iv) Meter Reading Systems:
(1) Automated meter reading systems;
(2) FieldNet; and
(3) MV90 Translator.
(v) Service/Emergency and dispatching Systems:
(1) STORMS Work Management System (WMS); and
(2) Outage Management System (OMS).
(vi) Third Party Relationship Systems:
(1) Generation Suppliers.
E-46
(vii) Meter Inventory and Testing:
(1) Electric Meter Test System (MTS).
(viii) Electronic Payment Solutions:
(1) Easy Pay Electronic ▇▇▇▇ Payment and Presentment.
(ix) Complex and Specialty billing:
(1) Lodestar/billing Expert; and
(2) ▇▇▇▇ Recalculation/Refund system.
(x) Financial and Accounting Systems (CIS interfaced):
(1) FIRST;
(2) Accounts Payable;
(3) Energy Transaction Accounting; and
(4) Lodestar Revenue Forecasting/Rate analysis.
(xi) Universal Service Management:
(1) Low Income Usage Reduction Program System (LIURP);
(2) CARES;
(3) Universal Services (USS); and
(4) Energy Assistance Agencies system.
E-47
EXHIBIT B
TO
SERVICES AGREEMENT
PRICING OF SERVICES
1.0 Cost for Services shall include direct labor and material costs adjusted
with loadings for paid absence, incentive compensation, enployee benefits,
payroll taxes, training, garage, supervision and clerical support, general
administration (including corporate overhead not to exceed 10% of direct labor
and material costs), buildings, systems, software and equipment. Allocation will
be based on historical cost data to the extent the staffing and services are the
same, and, as applicable, standard Contractor allocation procedures will
continue for activity provided across both gas and non-gas operations.
2.0 Contractor shall have the right at all times to pay directly to any
subcontractor of Contractor all amounts due such subcontractor for work,
services or supplies provided by such subcontractor on behalf of Contractor
under this Agreement and include such payments in the costs.
3.0 To the extent that Company requests and Contractor agrees at its sole
discretion to perform any services not included in the original scope of the
Services in this Exhibit "A", then the Parties agree to amend the Agreement to
include such services as part of the Services, and unless otherwise agreed by
the Parties in such amendment to the Agreement, such services shall be performed
on a cost plus basis as provided herein. Notwithstanding anything in this
Agreement or any Annual Services Budget to the contrary, Company may direct
Contractor to cease performing any Transition Services included in this Exhibit
"A" at any time upon thirty (30) days prior written notice and, upon the
delivery of such a direction, Company shall have no further liability for
Contractor's costs or fees associated with the performance of such Transition
Services.
4.0 The pricing of the Contract Services being provided under the terms of
this Agreement shall be subject to escalation on January 1 of each calendar
year, and the Parties agree that such escalation shall be fixed in the amount
of three percent (3%). Accordingly, on January 1, 2005, and on each January 1
thereafter occurring during the term of this Agreement, the prices or rates
for all Contract Services shall be escalated by 3%, and each budget for
Contract Services in an Annual Services Budget shall be deemed automatically
increased by 3%, as of the first day of January of each calendar year during
the term of this Agreement.
E-48
EXHIBIT C
TO
SERVICES AGREEMENT
INITIAL ANNUAL SERVICES BUDGET
E-49
EXHIBIT C
------------------------------------------------------------------------------------------------------
CONTRACT SERVICES (aka Evergreen) Annual Charge One Time Charges
------------------------------------------------------------------------------------------------------
Actual 2003 gas costs from FERC Form 2
------------------------------------------------------------------------------------------------------
Billing and ▇▇▇▇ Processing $2,215,400
------------------------------------------------------------------------------------------------------
Call Center Services $2,563,000
------------------------------------------------------------------------------------------------------
Modifications to systems where we are providing services
------------------------------------------------------------------------------------------------------
Relicensing necessary to continue to provide service $0 $ 100,000
------------------------------------------------------------------------------------------------------
Labor costs to modify systems to continue to provide service $0 $ 32,450
------------------------------------------------------------------------------------------------------
SUBTOTAL $4,778,400
------------------------------------------------------------------------------------------------------
TRANSITION SERVICES (Financial Reporting, IT Support)
------------------------------------------------------------------------------------------------------
Actual 2003 gas costs from FERC Form 2
------------------------------------------------------------------------------------------------------
Financial Reporting $1,036,110
------------------------------------------------------------------------------------------------------
IT, Technology
------------------------------------------------------------------------------------------------------
Support $2,555,440
------------------------------------------------------------------------------------------------------
Projects $0
------------------------------------------------------------------------------------------------------
Modifications to systems where we are providing services
------------------------------------------------------------------------------------------------------
Relicensing necessary to continue to provide service $0 $ 160,000
------------------------------------------------------------------------------------------------------
Labor costs to modify systems to continue to provide service $0 $ 77,220
------------------------------------------------------------------------------------------------------
SUBTOTAL $3,591,550 $ 369,670
------------------------------------------------------------------------------------------------------
TOTAL Monthly Budget $8,369,950
------------------------------------------------------------------------------------------------------
TOTAL FIRST YEAR BUDGET $8,739,620.00
------------------------------------------------------------------------------------------------------
Assumes Company is prepared to provide all services not requested of Contractor
by Day One
For additional work per Section 3 (d) (i, ii, and iii) will be based on the
rates below.
Estimated hourly rates for services beyond scope Charges will be actual with an
overhead.
Sr. IT $63.25
Entry IT $48.33
Acct. Prof $55.58
Acct. Technician $38.66
Customer Service Rep $25.77
Customer Service Prof./Mgr $48.33
The below services are included in the above budget.
CONTRACT SERVICES
------------------------------------------------------------------------------------------------------
Basic transfer of data and systems at end of transition support N/A 285 Hours
------------------------------------------------------------------------------------------------------
Anticipated costs above basic transfer N/A $ 99,302
------------------------------------------------------------------------------------------------------
TRANSITION SERVICES
------------------------------------------------------------------------------------------------------
Basic transfer of data & systems at end of transition support 473 Hours
------------------------------------------------------------------------------------------------------
Anticipated costs above basic transfer $111,734 N/A
------------------------------------------------------------------------------------------------------
TRANSFER OF PURCHASED SYSTEMS (including data)
------------------------------------------------------------------------------------------------------
Basic transfer of data and systems 120 Hours N/A
------------------------------------------------------------------------------------------------------
Anticipated costs above basic transfer $ 72,450 N/A
------------------------------------------------------------------------------------------------------
E-50