Document:

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                                                                    Exhibit 10.9

                              RETENTION AGREEMENT
                                    BETWEEN
                                AQUASOURCE, INC.
                                      AND
                               FRANK A. HOFFMANN

     THIS AGREEMENT is by and between AquaSource, Inc., a Delaware corporation
(the "Company"), and Frank A. Hoffmann (the "Employee"), and is made effective
as of the 28/th/ day of February, 2002.

                              W I T N E S S E T H:

     WHEREAS, the Employee is President and a valuable employee of the Company,
an integral part of its executive management, and a key participant in the
decision-making process relative to short-term and long-term planning and policy
for the Company;

     WHEREAS, the Company is a direct subsidiary of DQE, Inc. ("DQE"), and the
Employee is an Executive Vice President of DQE; and

     WHEREAS, the Company wishes to encourage the Employee to continue his
career and services with the Company for the period during and after any actual
or threatened change in control that would substantively change his current
scope of responsibilities.

     NOW THEREFORE, it is hereby agreed by and between the parties hereto as
follows:

     1.  Definitions.

          a. "Affiliate" of any entity shall mean any parent or Subsidiary of
such entity.

          b. "Board" shall mean the Board of Directors of the Company.

          c. "Cause" shall mean either of the following that is materially and
demonstrably detrimental to the goodwill of the Company or materially damaging
to the relationships of the Company with its customers, suppliers or employees:
(i) conviction of the Employee of a felony involving moral turpitude or (ii)
negligence or willful misconduct by the Employee in the performance of his
duties.

          d. "Change in Control" shall mean any person or persons (as such term
is defined in Section 3(a)(9) of the Securities Exchange Act of 1934 (the
"Exchange Act") and as used in Sections 13(d)(3) and 14(d)(2) of the Exchange
Act ("Person")), other than DQE or an Affiliate thereof, is or becomes a
"beneficial owner" (as defined in Rule 13d-3 under the Exchange Act), directly
or indirectly, of securities of the Company collectively representing more than
50 percent of the combined voting power of the then outstanding securities
eligible to vote for the election of the Board of the Company, or a disposition
of all or substantially all of the Company's assets to any entity other than DQE
or an Affiliate thereof.
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          e. "Compensation" shall mean the sum of (i) the Employee's annual rate
of base salary in effect on the date of the Change in Control (the "Annual
Salary" currently set at $185,000 per year), (ii) an annual cash incentive
amount determined by multiplying (A) the Employee's Annual Salary, times (B) the
Employee's annual incentive bonus target percentage (currently set at 35%) for
the year in which the Change of Control would occur (such annual cash incentive,
as determined pursuant to this subsection (e), the "Annual Incentive"), and
(iii) $200,000. Any reduction in annual rate of base salary that would
constitute a Constructive Discharge hereunder shall be disregarded for purposes
of determining the Employee's Annual Salary; provided, further, that if at the
time of the Employee's termination of employment it is substantially certain
that an annual cash incentive will or, absent a termination of employment and/or
a Change in Control, would have been paid and the amount of such incentive is
greater than the Annual Incentive amount determined as provided above, then the
amount that it is substantially certain will be or would have been paid, rather
than the Annual Incentive as determined above, shall be considered the
Employee's Annual Incentive for purposes of this Agreement.

          f. "Competing Business" shall mean any person, corporation or other
entity engaged in the design, construction, operation and/or management of water
utilities and/or the design, construction, operation and/or management of
wastewater utilities wherever located in the continental United States.

          g. "Confidential Information" shall mean all information disclosed to
the Employee or known by the Employee as a consequence of or through the
Employee's employment, that is not generally known in the industry in which the
Company and/or an Affiliate of the Company is or may become engaged, about the
Company's or any such Affiliate's business, products, processes, and services,
including, but not limited to, proprietary information and trade secrets of the
Company and its Affiliates, and information relating to research, development,
inventions, computer program designs, flow charts, source and object codes,
products and services under development, pricing and pricing strategies,
marketing and selling strategies, power generating, servicing, purchasing,
accounting, engineering, costs and costing strategies, sources of supply,
customer lists, customer requirements, business methods or practices, training
and training programs, and the documentation thereof. It will be presumed that
information supplied to the Company and its Affiliates from outside sources is
Confidential Information unless and until it is designated otherwise.

          h. "Constructive Discharge" shall mean any of the following:

                    (i)   a change by the Company in the Employee's position
     that is so material and substantial that the Employee will lose substantial
     stature in the business community;

                    (ii)  any material failure by the Company to comply with any
     of the provisions of this Agreement;

                    (iii) the Company requiring the Employee to be based at any
office or location more than 35 miles from the location at which he performed
services immediately prior to the occurrence of the Change in Control;

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                    (iv)  a reduction in the Employee's rate of base pay, annual
     incentive opportunity, or long term incentive opportunity;

                    (v)   a reduction that is more than de minimis in the annual
                                                        -- -------
benefit accrual rate under DQE's qualified defined benefit pension plans;

                    (vi)  a reduction that is more than de minimis in the long-
                                                        -- -------
term disability and life insurance coverage provided to the Employee; or

                    (vii) failure of a successor or assign to assume and agree
to perform this Agreement pursuant to Section 13 hereof.

No such event described above shall constitute Constructive Discharge unless the
Employee has given written notice to the Company specifying the event relied
upon for such termination within one year after the occurrence of such event
(or, if earlier, prior to the end of the Coverage Period) and the Company has
not remedied such within 30 days of receipt of such notice.

The Company and the Employee, upon mutual written agreement, may agree that an
event that would otherwise constitute a Constructive Discharge under any of the
foregoing provisions shall not constitute a Constructive Discharge.

          i. "Coverage Period" shall mean the period of time which (A) begins on
the earlier of (i) the date on which the Company makes a public announcement of
its intention to complete a Change in Control transaction, (ii) the date on
which the Company's Board approves a Change in Control transaction, or (iii) the
date on which a Change in Control transaction occurs and (B) ends on the earlier
of (i) the date on which the Company announces to the Employee that the Company
is no longer actively pursuing a Change in Control transaction, (ii) the date on
which the Company announces to the Employee that the Company intends to abandon
a Change in Control transaction, or (iii) the date 36 full calendar months
following the date on which a Change in Control occurs.

          j. "Disability" shall mean an injury or illness that permanently
prevents the Employee from performing services for the Company and that
qualifies the Employee for payments under the long-term disability plan in which
the Employee participates.

          k. "Invention" shall mean discoveries, concepts, and ideas, whether
patentable or not, including, but not limited to, apparatus, processes, methods,
techniques, and formulae, as well as improvements thereof or know-how related
thereto, relating to any present or prospective activities of the Company and
its Affiliates.

          l. "Offer of DQE Employment" shall mean a written offer of employment
received by the Employee from DQE or an Affiliate thereof no later than 30 days
prior to the effective date of the Change of Control. The Offer of DQE
Employment shall have been approved by DQE's board of directors and shall
contain (a) a description of the scope of responsibilities for the offered
position and (b) an itemized listing of all components of compensation,
including but not limited to, Compensation as defined in (e) above and all
perquisites of the offered position.

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          m. "Offer of Successor Employment" shall mean a written offer of
employment received by the Employee from a successor to the Company in a Change
of Control. The Offer of Successor Employment shall have been approved by the
successor's board of directors and shall contain (a) a description of the scope
of responsibilities for the offered position and (b) an itemized listing of all
components of compensation and perquisites of the offered position. The annual
compensation for the offered position shall be valued at a minimum of $450,000,
of which no more than 31 percent shall be at-risk compensation.

          n. "Subsidiary" or "Subsidiaries" shall mean with respect to any
entity, any corporation, partnership, limited liability company or other entity
of which (i) if a corporation, fifty (50) percent or more of the total voting
power of shares of stock entitled (without regard to the occurrence of any
contingency) to vote in the election of directors thereof is at the time owned
or controlled, directly or indirectly, by such entity, one or more of the other
Subsidiaries of such entity or a combination thereof, or (ii) if a partnership,
limited liability company or other entity, fifty (50) percent or more of the
partnership, membership or other similar equity ownership interest thereof is at
the time owned or controlled, directly or indirectly, by such entity, one or
more of the other Subsidiaries of such entity or a combination thereof. For
purposes hereof, such entity and its Subsidiaries will be deemed to have fifty
(50) percent or more ownership interest in a partnership, limited liability
company or business entity if such entity and its Subsidiaries are allocated
fifty (50) percent or more of partnership, limited liability company or other
entity gains or losses or control the general partner, managing member or
similar managing body of such partnership, limited liability company or other
entity.

          o. "Works" shall mean, to the extent created by the Employee in the
course of or as a result of the Employee's employment by the Company, all
material and information fixed in a tangible medium of expression, including,
but not limited to, notes, drawings, memoranda, correspondence, documents,
records, notebooks, flow charts, computer programs and source and object codes.

     2.   Term

     This Agreement shall be effective as of the date first above written and,
unless otherwise terminated in accordance with the terms hereof, shall continue
thereafter until 36 full calendar months following the date of an occurrence of
a Change in Control or an extension of an Offer of DQE Employment which the
Employee accepts, whichever is earlier; provided, however, Section 11 shall
continue in effect beyond the Employee's termination of employment with the
Company; provided, further, that this Agreement shall in no event terminate
prior to satisfaction of all of the Company's or a successor's obligations
pursuant to this Agreement in connection with a termination of the Employee's
employment occurring within the Coverage Period.

     3.   Severance Benefit.

               a.     If, at any time during the Coverage Period, the Employee's
employment is terminated by the Company for any reason other than Cause, death
or Disability or the Employee's employment is terminated by the Employee because
of a Constructive Discharge (provided that for purposes of this Agreement, if
the Employee at any time accepts an Offer of DQE Employment, or, immediately
after or in connection with a Change of Control, the Employee receives an Offer
of Successor Employment, then the Employee shall not be deemed

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to have experienced a termination of employment solely by reason of such Change
in Control and/or change of employers; provided, further, that if, as described
above, the Employee accepts an Offer of DQE Employment or receives an Offer of
Successor Employment in connection with a Change in Control, Section 11 of this
Agreement and related definitions shall be deemed amended so that they apply in
all respects to the Employee's employer following such change of employment and
the Employee agrees to execute any documents necessary to memorialize such
amendments), then,

                    (i)  no later than the earlier of (A) five business days
after such termination or (B) immediately prior to the date of the consummation
of a transaction that constitutes a Change in Control if it is determined prior
to such date that the Employee's employment will be terminated by the Company
for a reason other than Cause, death or Disability, or that the Employee will
have experienced a Constructive Discharge and the effective date of the
termination of the Employee's employment will be on or before the consummation
of a transaction that constitutes a Change in Control, the Company shall pay to
the Employee (or, if the Employee dies after termination of employment but
before receiving all payments to which he has become entitled hereunder, to the
estate of the Employee)

                         (A) a lump sum cash payment of accrued but unpaid
salary and accrued but unused vacation;

                         (B) a lump sum cash payment of a prorated portion of
the Employee's Annual Incentive (unless the Employee receives his annual cash
incentive for the year of termination pursuant to another plan, policy or
arrangement), determined by calculating the product of (1) the amount of the
Employee's Annual Incentive, and (2) a fraction, the numerator of which is the
number of days worked in the year in which the termination of employment occurs
and the denominator of which is 365;

                         (C) Beginning on the next regularly scheduled payday
following the date of the termination of the Employee's employment, the Company
will pay to the Employee seventy-two (72) semi-monthly payments, the total of
all being an amount equal to three (3) times the Employee's Compensation
("Compensation Continuance).

                         (D) a lump sum cash payment equal to the remaining,
unpaid capital account balance associated with the Employee's previous
participation in the Equity Participation Plan of DQE Systems, Inc.;

                         (E) a lump sum cash payment of $28,800; and

                    (ii) in addition, benefits, of the same kind and at the same
cost to the Employee as if still employed by the Company, excluding continued
contributions to the 401(k), for the length of the Employee's Compensation
Continuance period; provided, however, that to the extent the Employee receives
life, medical, dental, hospitalization or long-term disability benefits from a
subsequent employer, such benefits provided by the Company under this Section
3a.(ii) shall be secondary to those received from the subsequent employer. If
and to the extent permitted by the applicable plan or plans and applicable law,
Employee qualified pension benefits and benefits under the PSSP will continue to
accrue during the Compensation Continuance period on that part of Compensation
that is Annual Salary and Annual Incentive.

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                     b. In the event of the Employee's death during the Coverage
Period, this Agreement shall terminate and the Company's only obligation under
this Agreement shall be to pay the Employee's estate or legal representative the
Employee's annual base salary provided herein to the extent earned by the
Employee prior to the Employee's death. The Company may, in its sole discretion,
pay the estate or legal representative a bonus that the Employee earned prior to
his death. The Company shall have no further obligations under this Agreement.
Nothing contained herein shall affect the Company's obligation(s) to provide
death benefits under any plan, policy, or arrangement other than this Agreement.

                     c. In the event of the termination of the Employee's
employment during the Coverage Period due to the Employee's Disability, the
Company's only obligation under this Agreement shall be to pay to the Employee
or his personal representative the Employee's annual base salary to the extent
earned by the Employee prior to the termination of employment. The Company shall
have no further obligations under this Agreement. Nothing contained herein shall
affect the Company's obligation(s) to provide disability benefits to the
Employee under any plan, policy, or arrangement other than this Agreement.

                     d. In the event that the Company terminates the Employee's
employment for Cause or the Employee terminates his employment without
experiencing a Constructive Discharge, the Company shall only be obligated to
pay to the Employee the Employee's annual base salary to the extent earned by
the Employee prior to the termination of employment. The Company shall have no
further obligations under this Agreement.

                     e. In the event of any termination of the Employee's
employment described in Sections 3a through 3d, the Employee shall be under no
obligation to seek other employment, and, except as provided in Section 3a(ii)
with respect to benefits, there shall be no offset against amounts due the
Employee under this Agreement on account of any remuneration attributable to any
subsequent employment.

                     f. It is intended that the payments and benefits provided
under this Agreement are in lieu of, and not in addition to, termination or
severance payments and benefits provided under DQE's or the Company's other
termination or severance plans or agreements ("Other Termination Benefits").
Other Termination Benefits the Employee receives, or is entitled to receive in
the future, shall reduce payments and benefits provided hereunder unless, either
the payments and benefits hereunder or the Other Termination Benefits are waived
by the Employee.

                     g. Notwithstanding any provision herein to the contrary,
the Company shall not have any obligation to pay any amount or provide any
benefit, as the case may be, under this Agreement, unless and until (i) the
Employee executes (A) a release of the Company and DQE and their Affiliates and
related parties, in such form as the Company may reasonably request, of all
claims against the Company and DQE and their Affiliates and related parties
relating to the Employee's employment and termination thereof, (B) a resignation
from all positions as an employee, officer, director and/or committee member of
the Company, DQE and their respective Affiliates and (C) an agreement to
continue to comply with, and be bound by, the provisions of Section 11 hereof,
and (ii) the expiration of any applicable waiting or revocation periods related
to such release and agreement.

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                     h. In no event shall a termination of the Employee's
employment that occurs before or after the Coverage Period, whether by the
Company or by the Employee, entitle the Employee to any benefits or payments
under this Agreement.

     4. Source of Payments.

       The Company shall not be required to establish a special or separate fund
or other segregation of assets to assure payments hereunder, and, if the Company
shall make any investments to aid it in meeting its obligations hereunder, the
Employee shall have no right, title or interest whatever in or to any such
investments except as may otherwise be expressly provided in a separate written
instrument relating to such investments.  Nothing contained in this Agreement,
and no action taken pursuant to its provisions, shall create or be construed to
create a trust of any kind or a fiduciary relationship between the Company and
the Employee or any other person.  To the extent that any person acquires a
right to receive payments from the Company such right shall be no greater than
the right of an unsecured creditor of the Company.

      5. Litigation Expenses: Arbitration.

          a. Full Settlement, Litigation Expenses; Arbitration. The Company's
obligation to make the payments provided for in this Agreement and otherwise to
perform its obligations hereunder shall not be affected by any set-off,
counterclaim, recoupment, defense or other claim, right or action which the
Company may have against the Employee or others. The Company agrees to pay, upon
written demand therefor by the Employee, all legal fees and expenses the
Employee reasonably incurs as a result of any dispute or contest (regardless of
the outcome thereof) by or with the Company or others regarding the validity or
enforceability of, or liability under, any provision of this Agreement, plus in
each case, interest at the applicable Federal rate provided for in Section
7872(f)(2) of the Code. The Employee agrees to repay to the Company any such
fees and expenses paid or advanced by the Company if and to the extent that the
Company or such others obtains a judgment or determination that the Employee's
claim was frivolous or was made in bad faith from the arbitrator or a court of
competent jurisdiction from which no appeal may be taken, whether because the
time to do so has expired or otherwise. Notwithstanding any provision hereof or
any other agreement, the Company may offset any other obligation it has to the
Employee by the amount of such repayment. In any such action brought by the
Employee for damages or to enforce any provisions of this Agreement, he shall be
entitled to seek both legal and equitable relief and remedies, including,
without limitation, specific performance of the Company's obligations hereunder,
in his sole discretion. The obligation of the Company and the Employee under
this Section 5 shall survive the termination for any reason of this Agreement
(whether such termination is by the Company, by the Employee, upon the
expiration of this Agreement or otherwise).

          b. Except for disputes involving the provisions of, or matters
addressed in, Section 11 hereof, in the event of any dispute or difference
between the Company and the Employee with respect to the subject matter of this
Agreement and the enforcement of rights hereunder, either the Employee or the
Company may, by written notice to the other, require such dispute or difference
to be submitted to arbitration. The arbitrator or arbitrators shall be selected
by agreement of the parties or, if they cannot agree on an arbitrator or
arbitrators within 30 days after the Employee has notified the Company of his
desire to have the question settled by arbitration, then the arbitrator or
arbitrators shall be selected by the American Arbitration

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Association (the "AAA") in Pittsburgh, Pennsylvania, upon the application of the
Employee. The determination reached in such arbitration shall be final and
binding on both parties without any right of appeal or further dispute.
Execution of the determination by such arbitrator may be sought in any court of
competent jurisdiction. The arbitrators shall not be bound by judicial
formalities and may abstain from following the strict rules of evidence and
shall interpret this Agreement as an honorable engagement and not merely as a
legal obligation. Unless otherwise agreed by the parties, any such arbitration
shall take place in Pittsburgh, Pennsylvania, and shall be conducted in
accordance with the Rules of the AAA. The Employee's expenses for such
proceeding shall be paid, or repaid to the Company, as the case may be, as
provided in Section (a) of this Section 5.

      6. Tax Withholding.

      The Company may withhold from any payments made under this Agreement all
federal, state or other taxes as shall be required pursuant to any law or
governmental regulation or ruling.

      7. Confidentiality Agreement.

      The Employee is a party to a Non-Competition and Confidentiality Agreement
dated as of August 17, 2000, as amended by Amendment No. 1 to Non-Competition
and Confidentiality Agreement dated as of __________, 2002, (as so amended, the
"Confidentiality Agreement"). In consideration of this Agreement and other good
and valuable consideration, the Employee and the Company agree that during the
Coverage Period, the provisions of the Confidentiality Agreement shall be
superseded by the terms of this Agreement; provided, however, if the Employee is
an employee of the Company, its successor or an Affiliate of either on the date
the Coverage Period ends, then beginning on such date the provisions of the
Confidentiality Agreement shall be reinstated in all respects.

      Employee acknowledges and agrees that, except as expressly set forth
above, the covenants, promises and agreements set forth in the Confidentiality
Agreement shall remain in full force and effect in accordance with its terms and
provisions, including but not limited to the restrictions on competition set
forth therein.

      8. Entire Understanding.

      This Agreement shall supersede any severance or termination agreements,
plans or policies entered into prior to the date first set forth above by and
between the Company and the Employee or otherwise applicable to the Employee
(other than the Confidentiality Agreement), and, upon expiration of the
revocation period set forth in Section 16 hereof, any such agreements, plans or
policies shall be cancelled and the parties hereto shall have no further rights
or obligations thereunder (other than the Confidentiality Agreement).

      9. Severability.

      If, for any reason, any one or more of the provisions or part of a
provision contained in this Agreement shall be held to be invalid, illegal or
unenforceable in any respect, such invalidity, illegality or unenforceability
shall not affect any other provision or part of a provision

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of this Agreement not held so invalid, illegal or unenforceable, and each other
provision or part of a provision shall to the full extent consistent with law
continue in full force and effect.

      10. Notices.

      All notices, requests, demands and other communications required or
permitted hereunder shall be given in writing and shall be deemed to have been
duly given if delivered or mailed, postage prepaid, first class as follows:

            a.     to the Company:                  With a copy to:
                   AquaSource, Inc.                 DQE, Inc.
                   200 Corporate Center Drive       411 Seventh Ave.
                   Suite 300                        Pittsburgh, PA 15219
                   Moon Township, PA 15108          Attention:  General Counsel
                   Attention:  General Counsel

            b.     to the Employee:
                   Frank A. Hoffmann
                   1050 Printers Place
                   Pittsburgh, PA 15237

or to such other address as either party shall have previously specified in
writing to the other.

      11. Confidentiality, Inventions, Works, Noncompete, Nonsolicitation, etc.

      The Employee acknowledges that the severance benefits provided hereunder
are substantial and are good and adequate consideration for the purposes of the
covenants, promises and agreements of this Section 11 and all other provisions
of this Agreement.

          a. The Employee acknowledges that all Confidential Information shall
at all times remain the property of the Company and its Affiliates. The Employee
will safeguard and maintain on the premises of the Company, to the extent
possible in the performance of the Employee's work for the Company or an
Affiliate of the Company, all documents and things that contain or embody
Confidential Information. Except as required as part of the Employee's duties to
the Company or as may otherwise be required by law or legal process, the
Employee will not, during his employment by the Company or an Affiliate of the
Company, or thereafter, directly or indirectly use, divulge, disseminate,
disclose, lecture upon, or publish any Confidential Information without having
first obtained written permission from the Company or such Affiliate, if
applicable.

          b. (i) All Inventions made or conceived by the Employee, either solely
or jointly with others, (A) during the Employee's employment by the Company and
(B) if the Employee voluntarily terminates his employment other than due to a
Constructive Discharge, for a period of one (1) year following such termination,
whether or not such Inventions are made or conceived during the hours of the
Employee's employment or with the use of the Company's or any of its Affiliates'
facilities, materials, or personnel, will be the property of the Company or its
nominees.

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                    (ii) The Employee will, without royalty or any other
additional consideration:

                         (A) inform the Company promptly and fully of such
Inventions by written report, setting forth in detail a description, the
operation and the results achieved;

                         (B) assign to the Company all the Employee's right,
title, and interest in and to such Inventions, any applications for United
States and foreign Letters Patent, any continuations, divisions,
continuations-in-part, reissues, extensions or additions thereof filed for upon
such Inventions and any United States and foreign Letters Patent;

                         (C) assist the Company or its nominees, at the expense
of the Company, to obtain, maintain and enforce such United States and foreign
Letters Patent for such Inventions as the Company may elect; and

                         (D) execute, acknowledge, and deliver to the Company at
its expense such written documents and instruments, and do such other acts, such
as giving testimony in support of the Employee's inventorship and invention, as
may be necessary in the opinion of the Company to obtain, maintain or enforce
the United States and foreign Letters Patent upon such Inventions and to vest
the entire right and title thereto in the Company and to confirm the complete
ownership by the Company of such Inventions.

          c. All Works created by the Employee during his employment by the
Company or an Affiliate of the Company will be and remain exclusively the
property of the Company or such Affiliate. Each such Work is a "work for hire"
and the Company may file applications to register copyright as author thereof.
The Employee will take whatever steps and do whatever acts the Company
reasonably requests, including, but not limited to, placement of the Company's
proper copyright notice on such Works to secure or aid in securing copyright
protection and will assist the Company or its nominees in filing applications to
register claims of copyright in such works. The Employee will not reproduce,
distribute, display publicly, or perform publicly, alone or in combination with
any data processing or network system, any Works of the Company without the
written permission from the Company.

          d. The Employee covenants and agrees that, during the period of his
employment by the Company or an Affiliate of the Company, and, if he voluntarily
terminates his employment other than due to a Constructive Discharge, for a
period of one (1) year following such termination, he shall not engage, directly
or indirectly, whether as principal or as agent, officer, director, employee,
consultant, shareholder, or otherwise, alone or in association with any other
person, corporation or other entity, in any Competing Business; provided,
however, that he shall have the right to accept employment with a Competing
Business whose business is diversified (the "Diversified Business"), if the
employment is with a part of the Diversified Business which is not a Competing
Business and if, prior to accepting such employment, he furnishes written
assurances reasonably satisfactory to the Company from the Diversified Business
and from the Employee that the Employee will not render services directly or
indirectly in connection with any Competing Business. The Employee recognizes
that the Company and its Affiliates conduct or intend to conduct business within
the geographic area set forth herein, and therefore, the Employee agrees that
this restriction is reasonable and necessary to protect the Company's and its
Affiliates' business.

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          e. The Employee agrees that, if he voluntarily terminates his
employment other than due to a Constructive Discharge, for a period of two (2)
years following such termination, he shall not, directly or indirectly, solicit
the business of, or do business with, any customer, supplier, or prospective
customer or supplier of the Company or an Affiliate of the Company with whom he
had direct or indirect contact or about whom he may have acquired any knowledge
while employed by the Company.

          f. The Employee agrees that, if he voluntarily terminates his
employment other than due to a Constructive Discharge, for a period of two (2)
years following such termination, he shall not, directly or indirectly, solicit
or induce, or attempt to solicit or induce, any employee of the Company or an
Affiliate of the Company to leave the Company or such Affiliate for any reason
whatsoever, or hire or solicit the services of any employee of the Company or an
Affiliate of the Company.

          g. The Employee understands and agrees that any violation of this
Agreement shall be deemed material to continuing employment and could result in
disciplinary action up to and including termination. The Employee acknowledges
that the legal remedy available to the Company and its Affiliates for any breach
of covenants on the part of the Employee may be inadequate, and, therefore, in
the event of any threatened or actual breach of this Agreement, the Company or
an Affiliate of the Company shall be entitled to specific enforcement of this
Agreement through injunctive or other equitable relief in a court with
appropriate jurisdiction. The existence of any claim or cause of action by the
Employee or other against the Company or an Affiliate of the Company, whether
predicated on this Agreement or otherwise, shall not constitute a defense to
enforcement by the Company or an Affiliate of the Company of this Agreement.
Unless otherwise agreed to in writing by the parties, Section 5(b) of this
Agreement shall not apply or otherwise limit the parties' rights with respect to
any cause of action (or portion of any cause of action) involving the provisions
or subject matter of this Section 11.

          h. Termination of the Employee's employment, whether voluntary or
involuntary, whether for Cause or without Cause, shall not impair or relieve the
Employee of any the Employee's obligations under Sections 11(a) or 11(c) above.
In addition, upon termination of the Employee's employment, for whatever reason,
or upon request by the Company, the Employee will deliver to the Company the
originals and all copies of notes, sketches, drawings, specifications,
memoranda, correspondence, documents, records, notebooks, computer disks and
computer tapes and other repositories of Confidential Information and inventions
then in the Employee's possession or under Employee's control, whether prepared
by the Employee or by others. Upon termination of the Employee's employment, for
whatever reason, or upon request by the Company, the Employee will deliver to
the Company the originals and all copies of Works then in the Employee's
possession or under the Employee's control.

      12. No Attachment.

      Except as required by law, no right to receive payments under this
Agreement shall be subject to anticipation, commutation, alienation, sale,
assignment, encumbrance, charge, pledge or hypothecation or to execution,
attachment, levy or similar process or assignment by operation of law, and any
attempt, voluntary or involuntary, to effect any such action shall be null, void
and of no effect.

                                       11
<PAGE>

      13. Binding Agreement.

      This Agreement shall be binding upon, and shall inure to the benefit of,
the Employee and the Company and their respective permitted successors and
assigns. In the case of any transaction in which a successor would not by the
foregoing provision or by operation of law be bound by this Agreement, the
Company shall require such successor (whether direct or indirect, by purchase,
merger, consolidation, or otherwise) expressly and unconditionally to assume and
agree to perform the Company's obligations under this Agreement in the same
manner and to the same extent that the Company would be required to perform if
no such succession had taken place. As used in this Agreement, the term
"Company" shall mean the Company as previously defined and any successor that
assumes and agrees (or is otherwise required) to perform the Agreement.

      14. Modification and Waiver.

      This Agreement may be terminated, modified or amended by action of a
majority of the members of the Company's board of directors at any time after
the date on which an announcement is made to Employee by the Company that (i) it
is no longer actively pursuing a Change in Control transaction or (ii) it
intends to abandon a Change in Control transaction. After a Change in Control,
except as expressly provided in Section 3(a) of this Agreement, this Agreement
may not be terminated, modified or amended except by an instrument in writing
signed by the parties hereto. No term or condition of this Agreement shall be
deemed to have been waived, nor shall there be any estoppel against the
enforcement of any provision of this Agreement, except by written instrument
signed by the party charged with such waiver or estoppel. No such written waiver
shall be deemed a continuing waiver unless specifically stated therein, and each
such waiver shall operate only as to the specific term or condition waived and
shall not constitute a waiver of such term or condition for the future or as to
any act other than that specifically waived.

      15. Headings of No Effect.

      The Section headings contained in this Agreement are included solely for
convenience of reference and shall not in any way affect the meaning or
interpretation of any of the provisions of this Agreement.

      16. Revocation, Employee Acknowledgments, and Effective Date.

      The Employee shall have seven (7) calendar days after signing the
Agreement to revoke it. Such revocation shall be in writing to the Company at
the address set forth in Section 10. The Employee acknowledges that he has read
and understands the provisions of this Agreement. The Employee further
acknowledges that he has been given an opportunity for his legal counsel to
review this Agreement (or is given the opportunity to do so prior to the end of
the revocation period hereunder) and that the provisions of this Agreement are
reasonable and that he has received a copy of this Agreement. The Employee shall
have 21 days after receiving this Agreement to countersign and return it to the
Company pursuant to Section 10 hereof. Any countersignature and/or return that
is not made in accordance with the preceding sentence shall not constitute a
valid agreement by the Employee to the terms of this Agreement, and, in such
case, this Agreement shall be deemed null and void.

                                       12
<PAGE>

      17. Governing Law.

      This Agreement and its validity, interpretation, performance, and
enforcement shall be governed by the laws of the Commonwealth of Pennsylvania.

      IN WITNESS WHEREOF, the Company through its officers duly authorized, and
the Employee both intending to be legally bound have duly executed and delivered
this Agreement, to be effective as of the date first set forth above.

                                     AQUASOURCE, INC.

                                     By: /s/Jon E. Evans
                                         ----------------------------
                                         Its Vice President and General Counsel

                                     EMPLOYEE

                                     /s/Frank A. Hoffmann
                                     --------------------------------

                                       13<PAGE>

                                                                   Exhibit 10.10

                            DQE ENERGY SERVICES, INC.
                            EQUITY PARTICIPATION PLAN

                                    Article I

                           Purpose and Effective Date
                           --------------------------

          The purpose of this Plan is to promote the short-term and long-term
growth and profitability of DQE Energy Services, Inc. by providing Participants
with a financial interest in such growth and profitability and a financial
incentive to achieve pre-established minimum individual and company performance
goals. This Plan is effective as of January 1, 1999. Attached to this Plan as
Appendix A is a hypothetical example showing how certain features of the Plan
are intended to operate. This example is for illustration purposes only and
shall not be construed as predicting or assuring any particular financial result
or Plan benefit.

                                   Article II

                                   Definitions
                                   -----------

          Section 2.1 Allocation Percentage shall mean, with respect to any
                      ---------------------
Participant, the percentage of the Annual Company Value Increase allocated to
such Participant under Section 5.2 (a), as recommended by the President and
approved by the Committee. The Allocation Percentages of all Participants and
the Allocation Percentage, if any, reserved by the Committee pursuant to Section
5.4, may total 10% or less.

          Section 2.2 Annual Company Value Change for a Fiscal Year shall mean
                      ---------------------------
the dollar value increase or decrease of the Company Value, determined by
comparing the Company Value as of the last day of such Fiscal Year with (i) for
the initial Fiscal Year of a Participant's participation in the Plan: (which
shall be Fiscal Year 1999 for the initial Participants), the Base Company Value,
and (ii) for subsequent Fiscal Years, the Company Value as of the last day of
the immediately preceding Fiscal Year, and then subtracting from such increase
or decrease the
<PAGE>

cost attributable to the Capital Deposits for such Fiscal Year as determined by
the Board of Directors in its sole discretion. Appendix B sets forth the cost of
capital that will be used for this purpose. Appendix B may be amended from time
to time by the Board of Directors in its sole and absolute discretion.

          Section 2.3 Annual Incentive Allocation shall mean, with respect to a
                      ---------------------------
Participant for a Fiscal Year, the amount determined by multiplying such
Participant's Allocation Percentage by the dollar value of the Annual Company
Value Change for such Fiscal Year.

          Section 2.4 Annual Payment Amount shall be the amount, if any, of a
                      ---------------------
Participant's Capital Account that is payable to the Participant for a
particular Fiscal Year, as determined in accordance with Section 5.3.

          Section 2.5 Base Company Value shall mean (i) with respect to all
                      ------------------
Participants who are first eligible for the plan for Fiscal Year 1999, the
Capital Deposits at December 31,1998, and (ii) with respect to all other
Participants, the Company Value as of the last day of the Fiscal Year
immediately preceding the Fiscal Year for which participation of such
Participant begins.

          Section 2.6 Board of Directors shall mean the Board of Directors of
                      ------------------
the Company.

          Section 2.7 Capital Account shall mean a bookkeeping account
                      ---------------
established by the Company on behalf of a Participant to record the aggregate
amount of such Participant's Annual Incentive Allocations pursuant to Sections
5.2(c). The amount credited to a Participant's Capital Account shall be reduced
by the amount of all distributions and payments made to the Participant pursuant
to Section 5.3 and Article VI.

          Section 2.8 Capital Deposits shall mean the total book value of the
                      ----------------
capital provided to the Company by DQE and its other affiliates or otherwise
raised by the Company, including without limitation, equity investments, loans,
working capital and capital expenditures.

                                       2
<PAGE>

The Capital Deposits with respect to any particular Fiscal Year shall be the
average of the Capital Deposits as of the last day of each month within such
Fiscal Year.

          Section 2.9 Cause shall mean any of the following that is demonstrably
                      -----
and materially injurious to the interest, property, operations, business or
reputation of the Company or any of its affiliates:

          (a) the Participant's breach of the Guidelines for Ethical Conduct of
     DQE and its Family of Companies, as in effect from time to time;

          (b) the Participant's theft or embezzlement, or attempted theft or
     embezzlement, of money or property of the Company or its affiliates; the
     Participant's perpetration or attempted perpetration of fraud, or his
     participation in a fraud or attempted fraud, on the Company or its
     affiliates; or the Participant's unauthorized appropriation of, or his
     intentional attempt to misappropriate, any tangible or intangible assets or
     property of the Company or its affiliates; or

          (c) any act or acts of disloyalty, misconduct, or moral turpitude by
     the Participant or the Participant's conviction of a crime.

          Section 2.10 Change in Control shall mean the occurrence of any of the
                       -----------------
following:

          (a) any transaction that results in DQE and its subsidiaries (which
     shall include any corporation in an unbroken chain of corporations
     beginning with DQE if each of the corporations other than the last
     corporation in the unbroken chain owns stock possessing at least fifty
     percent (50%) of the total combined voting power of all classes of stock in
     one of the other corporations in the chain) (collectively, the "DQE Group")
     no longer being the beneficial owner (as defined in Rules 13d-3 and 13d-5
     under the Securities Exchange Act of 1934, as amended, which shall in any
     event include having the power to vote (or cause to be voted at the
     direction of any member of the DQE

                                       3
<PAGE>

     Group) pursuant to contract, irrevocable proxy or otherwise) of stock
     possessing more than fifty percent (50%) of the combined voting power of
     the issued and outstanding shares of all classes of the Company's stock
     entitled to vote generally in the election of directors, whether as a
     result of the issuance of securities of the Company, any direct or indirect
     transfer of securities of the Company, or otherwise, provided, however,
     that a Change in Control shall not be deemed to have occurred solely as a
     result of a public offering of securities by the Company, regardless of the
     level of the DQE Group's ownership of the Company's stock following such
     offering; or

          (b) consummation of a reorganization, merger or consolidation
involving the Company, unless, following such reorganization, merger or
consolidation involving the Company, the DQE Group beneficially owns, directly
or indirectly, stock possessing more than fifty percent (50%) of the total
combined voting power of the issued and outstanding shares of all classes or
voting stock of the corporation resulting from such reorganization, merger or
consolidation; or

          (c) a complete liquidation or dissolution of the Company; or

          (d) the sale or other disposition of all or substantially all of the
assets of the Company other than to a corporation with respect to which,
following such sale or disposition, the DQE Group beneficially owns, directly or
indirectly, stock possessing at least fifty percent (50%) of the total combined
voting power of the issued and outstanding shares of all classes of voting
stock; or

          (e) As a result of a business transaction (i) individuals who were
members of the Board of Directors of DQE immediately prior to the transaction
cease for any reason to constitute at least 50% of the Board of Directors of the
surviving entity or (ii) the shares of DQE Common Stock cease to be publicly
traded.

          Section 2.11 Committee shall mean the Compensation Committee of the
                       ---------
Board of Directors.

                                       4
<PAGE>

          Section 2.12 Company shall mean DQE Energy Services, Inc., a
                       -------
Pennsylvania corporation, and its successors.

          Section 2.13 Company Value shall mean the total value of the Company
                       -------------
as determined in accordance with Section 5.1.

          Section 2.14 Determination Date shall mean December 31, 2003 for the
                       ------------------
President and December 31, 2004 for all other Participants; provided, however,
that the President may, by written notice given to the Committee prior to
December 31, 2003, elect to extend the Determination Date for the President
unti1 December 31, 2004 in which event the Determination Date for all other
Participants shall be extended until December 31, 2005; provided further,
however, that the occurrence of the Determination Date may be accelerated upon a
termination or curtailment of the Plan, as set forth in Article VII.

          Section 2.15 DQE shall mean DQE, Inc., a Pennsylvania corporation, and
                       ---
its successors.

          Section 2.16 Disability shall mean a Total and Permanent Disability,
                       ----------
as such term is defined in the Retirement Plan for Employees of Duquesne Light
Company and the Supplemental Retirement Plan for Non-Represented Employees of
Duquesne Light Company.

          Section 2.17 Effective Date shall mean January 1, 1999.
                       --------------

          Section 2.18 Fiscal Year shall mean a fiscal year of the Company that
                       -----------
ends after January 1, 1999 and on or before the Determination Date.

          Section 2.19 Final Award shall mean the amount payable to a
                       -----------
Participant in accordance with Section 6.1.

                                       5
<PAGE>

          Section 2.20 Participant shall mean the President and any other
                       -----------
employee of the Company who is designated as eligible to participate in the Plan
pursuant to Article IV hereof.

          Section 2.21 Participation Notice shall mean a written notice from the
                       --------------------
Company to a Participant which shall set forth the Participant's Allocation
Percentage, provisions with regard to distributions, an other terms and
conditions and supplemental provisions as shall be applicable to the
Participant. The terms and conditions set forth in a Participation Notice shall
be incorporated by reference into, and shall become a part of, this Plan as it
applies to such Participant.

          Section 2.22 Performance Goals shall mean, with respect to a
                       -----------------
Participant for a Fiscal Year, the individual and/or corporate performance goals
established for such Participant for such Fiscal Year by the Committee. The
President shall, prior to or as soon as practicable after the beginning of a
Fiscal Year, notify each Participant in writing of the Performance Goals
established for such Participant for such Fiscal Year. Notwithstanding the
foregoing, the President shall notify each Participant of the Performance Goals
established for the Fiscal Year beginning January 1, 1999 as soon as practicable
after this Plan is adopted. The Committee shall have the sole discretion to
determine the extent to which a Participant's Performance Goals have been
achieved (i.e. the Participant's Performance Percentage).

          Section 2.23 Performance Percentage shall mean, for each Fiscal Year,
                       ----------------------
the percentage of a Participant's Performance Goals that is determined by the
Committee to have been achieved.

          Section 2.24 Plan shall mean this DQE Energy Services, Inc. Equity
                       ----
Participation Plan, as the same may be amended from time to time.

          Section 2.25 President shall mean, as of any particular date, the
                       ---------
person serving as the President of the Company on such date.

                                       6
<PAGE>

          Section 2.26 Resignation for Good Reason shall mean the resignation
                       ---------------------------
from employment by a Participant following a Change in Control if such
resignation occurs within thirty (30) days after anyone of the following events:

          (a)  a reduction of such Participant's Allocation Percentage; or

          (b)  a reduction of such Participant's base salary .

                                   Article III

                                 Administration
                                 ---------------

          Except as otherwise expressly provided herein, this Plan shall be
administered by the Committee, which shall have the full power, authority and
discretion to construe and interpret the Plan (including, without limitation,
Plan provisions relating to the eligibility of individual employees of the
Company to participate in or receive benefits under the Plan), to make all
financial and other determinations required under the Plan (except for the
determination of Company Value pursuant to Section 5.1, which shall be made by
the Board of Directors), to establish and amend administrative regulations
hereunder, to recommend to the Board of Directors substantive modifications to
the Plan and to take such other actions as it may deem necessary or appropriate
to further the purposes of the Plan. In carrying out its functions under the
Plan, the Committee shall be under no obligation to treat Participants
uniformly, and may treat any Participant or group of Participants differently
from any other Participant or group of Participants. The Committee may delegate
all or any portion of its administrative responsibilities under the Plan to one
or more other employees of the Company or of DQE or its affiliates. All
decisions, actions or interpretations of the Committee and its designees shall
be final, binding and conclusive upon all persons. No person shall be liable for
any action taken or determination made in good faith in the administration of
this Plan. All persons acting in good faith to administer the Plan shall be
fully indemnified for, and held harmless against, any liability arising out of
the administration of the Plan.

                                   Article IV

                                  Participation
                                  -------------

                                       7
<PAGE>

          The Participants shall be the President and each other key employee of
the Company who is recommended for participation by the President and approved
by the Committee. The President shall also recommend, subject to Committee
approval, the Allocation Percentages of the Participants other than the
President. Each Participant shall be given a timely Participation Notice for
each Fiscal Year. Once an employee is designated as a Participant, he or she
shall continue as such for each succeeding Fiscal Year during the term of this
Plan; provided, however, that no employee shall be eligible to participate in
the Plan for any Fiscal Year beginning after the date of such employee's
termination of employment with the Company; and provided further, however, that
the Committee may adjust or reduce to zero the Allocation Percentages of one or
more Participants for future Fiscal Years upon written notice to the
Participant(s) prior to or as soon as practicable after the beginning of the
first Fiscal Year to which such change is to apply. As a condition to his or her
participation under this Plan, each Participant shall be required to enter into
a Non-Compete and Confidentiality Agreement with the Company, which Agreement
shall be in form and substance satisfactory to the Committee, and execute such
other documents and agreements as the Committee may request from time to time.

                                    Article V

          Determination and Disposition of Annual Incentive Allocations
          --------------------------------------------------------------

          Section 5.1 Determination of Company Value. Except as otherwise
                      ------------------------------
provided in Section 6.1(c), Company Value shall be determined in accordance with
this Section 5.1. As soon as administratively practicable after the end of each
Fiscal Year, the Board of Directors of the Company shall determine, in its sole
and absolute discretion, the Company Value as of the last day of such Fiscal
Year. Such Company Value shall equal the sum of (a) the fair market value of the
Company as of such date, and (b) the cumulative dollar value of any dividends or
other distributions paid by the Company to its shareholder(s) after the
Effective Date and on or before the applicable valuation date, less the Capital
Deposits as of the applicable valuation date. The Company Value shall be based
on a valuation, paid for by the Company, by an appraisal firm selected by the
Committee, using such assumptions and methodologies as the Committee shall
approve from time to time in good faith; provided, however, that if the

                                       8
<PAGE>

Common Stock of the Company is actively traded on an established securities
market, the public trading price of such Common Stock will be used to establish
the Company Value. Such determination of Company Value shall take into account
and fully reflect the cost to the Company of administering and providing the
benefits contemplated by this Plan. Notwithstanding the foregoing, in the event
there is a contemporaneous sale of all of a portion of the Company or its assets
that the Board of Directors believes, in its sole discretion, establishes an
appropriate standard for Company Value, then that transaction price shall be
used in determining Company Value. It is understood that by giving notice to the
President within a reasonable period of time prior to the Determination Date,
the Board of Directors may direct the Company to sell certain of its assets
prior to the Determination Date if the Board deems such sale(s) to be necessary
or appropriate to establish the Company Value. It is further understood that the
Board of Directors in its sole discretion, acting in good faith, shall make such
adjustments as it determines to be appropriate to reflect the effect on Company
Value of any restructuring within DQE's affiliated group which involves the
Company or any of its assets.

          Section 5.2 Annual Incentive Allocations.
                      -----------------------------

          (a) Determination of Amounts. After determining the Company Value for
              ------------------------
     a Fiscal Year in accordance with Section 5.1, but subject to the employment
     requirement set forth in Section 5.2(b), the Committee shall determine the
     Annual Incentive Allocation of each Participant by multiplying the
     aggregate Annual Company Value Change by such Participant's Allocation
     Percentage.

          (b) Employment Requirement. A Participant generally must be employed
              ----------------------
     by the Company on the last day of a Fiscal Year in order to receive an
     Annual Incentive Allocation for such Fiscal Year; provided, however, that
     (i) in the event of a Participant's death or Disability during a Fiscal
     Year, such Participant shall be entitled to an Annual Incentive Allocation
     for such Fiscal Year equal to the Annual Incentive Allocation determined
     pursuant to Section 5.2(a) above multiplied by a fraction, the numerator of
     which is the number of days in such Fiscal Year preceding such
     Participant's death or Disability and the denominator of which is the total
     number of days in such Fiscal Year

                                       9
<PAGE>

     and (ii) in the event of the termination of the Participant's employment by
     the Company without Cause (A) during a Fiscal Year with respect to which
     the Annual Company Value Change is a negative amount, such Participant
     shall receive a full Annual Incentive Allocation for such Fiscal Year, and
     (B) during a Fiscal Year with respect to which the Annual Company Value
     Change is a positive amount, such Participant shall be entitled to an
     Annual Incentive Allocation for such Fiscal Year equal to the Annual
     Incentive Allocation determined pursuant to Section 5.2(a) above multiplied
     by a fraction, the numerator of which is the number of days in such Fiscal
     Year preceding such Participant's date of termination and the denominator
     of which is the total number of days in such Fiscal Year. In addition, the
     Committee may, but shall not be required to, make an exception to the
     requirement of employment on the last day of a Fiscal Year in the event of
     a Participant's termination of employment with the Company for any other
     reason. Any Annual Incentive Allocation credited to a Participant pursuant
     to this Section 5.2(b) shall be the final Annual Incentive Allocation for
     which such Participant shall be eligible.

          (c) Adjustment of Capital Account. Each Participant's Annual Incentive
              -----------------------------
     Allocation for a Fiscal Year shall be credited (or debited) to the
     Participant's Capital Account. If the Annual Incentive Allocation is a
     positive amount for such Fiscal Year, the Capital Account of the
     Participant shall be increased by his or her Annual Incentive Allocation
     for such Fiscal Year. If the Annual Incentive Allocation is a negative
     amount for such Fiscal Year, the Capital Account of the Participant shall
     be decreased by his or her Annual Incentive Allocation for such Fiscal
     Year.

          Section 5.3 Annual Payment. If a Participant's Capital Account is a
                      --------------
positive number, and if the Participant attained all or a portion of his or her
Performance Goals for the Fiscal Year, then as soon as administratively
practicable after the determination of each Participant's Annual Incentive
Allocation for a Fiscal Year and the corresponding adjustment of Capital
Accounts pursuant to Section 5.2(c), the Company shall distribute to each
eligible Participant his or her Annual Payment Amount, which shall be equal to
the excess of (a) the net cumulative amount of the Annual Incentive Allocations
credited or debited to the Participant's

                                       10
<PAGE>

Capital Account for all Fiscal Years to and including the most recently
completed Fiscal Year times one-third (1/3) times the Participant's Performance
Percentage for the Fiscal Year over (b) the total Annual Payment Amounts
previously paid to the Participant under this Section 5.3. provided, however,
that each Participant's Annual Payment Amount shall be proportionately reduced
(but not below zero) to the extent that for any Fiscal Year for which the
Company's after-tax return on average capital employed, as determined by the
Committee in its sole discretion, is less than 8%. A Participant's Annual
Payment Amount shall be paid in cash or in such other form as the Committee
shall determine.

          Section 5.4 Reserve Allocations. Notwithstanding any other provision
                      -------------------
of this Plan to the contrary, the Committee may for any Fiscal Year hold an
Allocation Percentage in reserve, and the value associated with such reserved
Allocation Percentage shall not be allocated to any Participant unless the
Committee determines otherwise.

                                   Article VI

                               Final Distributions
                               --------------------

          Section 6.1 Determination and Distributions of Final Awards.
                      -----------------------------------------------

          (a) Distribution Following Determination Date. Subject to Section
              -----------------------------------------
     6.1(c), after the Determination Date, the Committee shall determine the
     Final Award of each Participant who is then an employee of the Company,
     which shall be the aggregate amount credited to each Participant's Capital
     Account as of the Determination Date. Such Final Awards shall be paid to
     the Participants in cash, marketable securities or such other form as may
     be set forth in such Participant's Participation Notice. If all or
     substantially all of the Company or its assets is sold within six months
     after the date the amount of the Final Awards is determined and the value
     received results in a higher valuation determination for the Company than
     the final Company Value used in calculating such Final Awards, then the
     amount of the Final Awards shall be increased to reflect such higher
     valuation. Except as otherwise provided in Section 6.1(c), any

                                       11
<PAGE>

     transactions occurring after the close of such six-month period shall have
     no effect on the Final Awards hereunder.

          (b)  Effect of Certain Events Before Determination Date.
               ---------------------------------------------------

               (i) Death, Disability or Certain Terminations Following a Change
                   -------------------------------------------------------------
          in Control. Subject to Section 6.1(c), if a Participant's termination
          ----------
          of employment with the Company occurs prior to the Determination Date
          by reason of the Participant's death or Disability, or under the
          circumstances described in Section 6.2(a), and if upon such
          termination, the Participant's Capital Account has a positive balance,
          such Participant, or his or her heirs or estate, shall receive a
          distribution of a Final Award consisting of such Capital Account
          balance as soon as administratively practicable following the
          determination of the final Annual Incentive Allocation of the
          Participant pursuant to Section 5.2(b) for the Fiscal Year in which
          such event occurs. Such Final Award shall be paid to the Participant
          in cash or in such other form as the Committee shall determine. If, at
          such time, the Participant's Capital Account balance is negative, all
          rights of the Participant, and/or his or her heirs or estate, in the
          Participant's Capital Account shall be forfeited immediately.

               (ii) Retirement, Resignation, Termination by Company for Cause or
                    ------------------------------------------------------------
          Breach of Obligations. If a Participant's termination of employment
          ---------------------
          with the Company occurs prior to the Determination Date by reason of
          the Participant's retirement or resignation from employment (other
          than a resignation described in Section 6.2(a)) or the discharge of
          the Participant from employment by the Company for Cause, or if a
          Participant breaches the Non-Compete and Confidentiality Agreement
          referred to in Article IV, all rights of the Participant, and/or his
          or her heirs or estate, in the Participant's Capital Account shall be
          forfeited immediately.

                                       12
<PAGE>

               (iii) Termination by Company Without Cause or Other Termination
                     ---------------------------------------------------------
          of Employment Subject to Section 6.1(c), if a Participant's employment
          -------------
          terminates prior to the Determination Date by reason of discharge from
          employment by the Company without Cause (other than a discharge
          described in Section 6.2(a)) or for any other reason except those
          described in Section 6.1(b)(i) or (ii), and if upon such termination,
          the Participant's Capital Account has a positive balance, such
          Participant, or his or her heirs or estate, shall receive after the
          Determination Date a distribution of a Final Award, consisting of the
          Participant's Capital Account balance on the last day of the Fiscal
          Year in which such event occurs (reflecting any final allocation to
          which the Participant may be entitled under Section 5.2(b)). Such
          Final Award shall be paid at the same time as Final Awards are payable
          pursuant to Section 6.1(a), in cash or in such other form as the
          Committee shall determine.

          (c) Delay Pending Company Sale. Notwithstanding the provisions of
              --------------------------
     Section 6.1(a) and (b), the Board of Directors may notify the President in
     writing at least 90 days before the Determination Date of its election to
     have the final Company Value determined by a sale to a third party or an
     initial public offering by a good faith notice of such intent including a
     reasonable estimate of the timing of such event. In the event that a
     binding commitment with respect to such a third party sale is not obtained,
     or such a public offering is not consummated, within the period of time
     estimated in such written notice, the amount of such Final Awards shall be
     determined retroactively as of the Determination Date under subsections (a)
     and (b) of this Section 6.1, as appropriate, and without regard to the
     foregoing provisions of this subsection (c).

          Section 6.2 Change in Control. This Section 6.2 shall have no force or
                      -----------------
effect prior to the occurrence of a Change in Control and only be applicable if
a Change in Control shall occur prior to the payment of all amounts due to all
Participants under the Plan.

          (a) If a Change in Control occurs before the Determination Date, and
     if after such Change in Control and before the Determination Date has
     otherwise occurred such

                                       13
<PAGE>

     Participant's employment with the Company terminates by reason of a
     discharge by the Company without Cause or Resignation for Good Reason, then
     the Participant shall be entitled to a distribution pursuant to Section
     6.1(b)(i).

          (b) Following a Change in Control, the Company shall pay, upon written
     demand therefor by a Participant, all legal fees and expenses the
     Participant reasonably incurs as a result of any dispute or contest
     (regardless of the outcome thereof) by or with the Company or others
     regarding the validity or enforceability of, or liability under, any
     provision of this Plan, plus in each case, interest at the applicable
     Federal rate provided for in Section 7872(f)(2) of the Internal Revenue
     Code. The Participant agrees to repay to the Company any such fees and
     expenses paid or advanced by the Company if and to the extent that the
     Company or such others obtains a judgment or determination that the
     Participant's claim was frivolous or was without merit from the arbitrator
     or a court of competent jurisdiction from which no appeal may be taken,
     whether because the time to do so has expired or otherwise. Notwithstanding
     any provision hereof or any other agreement, the Company may offset any
     other obligation it has to the Participant by the amount of such repayment.
     The obligation of the Company and a Participant under this Section 6.3(b)
     shall survive the termination for any reason of this Plan.

          (c) In the event that following a Change in Control any dispute or
     difference arises between the Company and a Participant with respect to the
     subject matter of this Plan and the enforcement of rights hereunder, either
     the Participant or the Company may, by written notice to the other, require
     such dispute or difference to be submitted to arbitration. The arbitrator
     or arbitrators shall be selected by agreement of the parties or, if they
     cannot agree on an arbitrator or arbitrators within 30 days after one party
     has notified the other of his, her or its desire to have the question
     settled by arbitration, then the arbitrator or arbitrators shall be
     selected by the American Arbitration Association (the "AAA") in Pittsburgh,
     Pennsylvania, upon the application of the Participant. The determination
     reached in such arbitration shall be final and binding on all parties
     without any right of appeal or further dispute. Execution of the
     determination by such arbitrator may be sought in any court of competent
     jurisdiction. The arbitrators shall not be bound

                                       14
<PAGE>

     by judicial formalities and may abstain from following the strict rules of
     evidence and shall interpret this Plan as an honorable engagement and not
     merely as a legal obligation. Unless otherwise agreed by the parties, any
     such arbitration shall take place in Pittsburgh, Pennsylvania, and shall be
     conducted in accordance with the Rules of the AAA. The Participant's
     expenses for such proceeding shall be paid, or repaid to the Company, as
     the case may be, as provided in subsection (b) above.

          Section 6.3 Repayment of Benefits in Certain Circumstances. If a
                      ----------------------------------------------
Participant breaches the Non-Compete and Confidentiality Agreement referred to
in Article IV at any time following the receipt of any payment or distribution
under this Plan, other than a payment received more than two years after the
termination of the Participant's employment with the Company, such payment or
distribution may be rescinded by the Company by notice given to the Participant
within two years after the date the payment is made. In the event of any such
rescission, the Participant shall pay to the Company the amount of any payment
or distribution received in such manner and on such terms and conditions as may
be required, and the Company shall be entitled to set-off against the amount of
any such payment or distribution any amount owed to the Participant by the
Company.

                                   Article VII

                            Amendment and Termination
                            -------------------------

          The Committee shall have the power and authority to amend or terminate
this Plan at any time and for any reason as it deems necessary or appropriate;
provided, however, that no such amendment or termination shall, without the
Participant's consent, adversely affect any benefit after the date it is earned
in accordance with the terms of this Plan. If the Plan is terminated or
substantially curtailed, the Company shall pay to all Participants a Final Award
determined in accordance with Section 6.1, using as the Determination Date the
effective date of such termination or curtailment. For purposes of the
foregoing, a termination or substantial curtailment shall not be deemed to have
occurred solely because of a reduction or elimination of a Participant's
Allocation Percentage.

                                       15
<PAGE>

                                  Article VIII

                                  Miscellaneous
                                  -------------

          Section 8.1 Limitations on Transfer. Except as the Committee may
                      -----------------------
otherwise determine, the rights and interest of a Participant under this Plan
may not be assigned or transferred other than by will or the laws of descent and
distribution, during the lifetime of a Participant, only the Participant
personally may exercise rights under this Plan.

          Section 8.2 Taxes. The Company shall be entitled to withhold (or
                      -----
secure payment from the Participant in lieu of withholding) the amount of any
withholding or other tax required by law to be withheld or paid by the Company
with respect to any cash payment under this Plan, and the Company may defer the
payment of cash hereunder unless and until indemnified to its satisfaction
against any liability for such tax. The amount of such withholding or tax
payment shall be determined by the Company.

          Section 8.3 No Right to Award; No Right to Employment. No employee or
                      -----------------------------------------
other person shall have any claim of right to be permitted to participate in or
be granted an award under this Plan. Neither the Plan nor any action taken
hereunder shall be construed as giving any employee any right to be retained in
the employ of the Company or any affiliate thereof.

          Section 8.4 Governing Law. The Plan and all determinations made and
                      -------------
actions taken pursuant to the Plan shall be governed by the laws of the
Commonwealth of Pennsylvania other than the conflict of laws provisions of such
laws, and shall be construed in accordance therewith.

          Section 8.5 Consent to Jurisdiction and Service of Process. The
                      ----------------------------------------------
Company and, as a condition to his or her participation under this Plan, each of
the Participants shall be deemed to have expressly agreed and consented to the
personal jurisdiction of the Court of Common Pleas for Allegheny County,
Pennsylvania and/or the United States District Court for the Western District of
Pennsylvania with respect to any dispute or controversy related to, arising
under or in connection with this Plan, and that such courts, and only such
courts, shall have

                                       16
<PAGE>

exclusive jurisdiction to determine any controversy or dispute related to,
arising under or in connection with this Plan. The Company and each of the
Participants shall also be deemed to have expressly agreed that such courts are
convenient forums for the parties to any such controversy or dispute and for any
potential witnesses and that process issued out of any such court or in
accordance with the rules of practice of such court may be served by mail or
other forms of substituted service to the Company at the address of its
principal executive office and to a Participant at his or her last known address
as reflected in the Company's records.

          Section 8.6 No Strict Construction. No rule of strict construction
                      ----------------------
shall be implied against the Company, the Committee or any other person in the
interpretation of any of the terms of the Plan, any award granted under the Plan
or any rule or procedure established by the Committee.

          Section 8.7 Captions. The captions (i.e., all Article, Section and
                      --------
subsection headings) used in the Plan are for convenience only, do not
constitute a part of the Plan, and shall not be deemed to limit, characterize,
or affect in any way the provisions of the Plan, and all provisions of the Plan
shall be construed as if no captions had been used in the Plan.

          Section 8.8 Severability. Whenever possible, each provision in the
                      ------------
Plan shall be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of the Plan shall be held to be prohibited
by or invalid under applicable law, then (i) such provision shall be deemed
amended to accomplish the objectives of the provision as originally written to
the fullest extent permitted by law and (ii) all other provisions of the Plan
shall remain in full force and effect.

          Section 8.9 Company Liability; Unfunded Plan. This Plan is a
                      --------------------------------
contractual obligation solely of the Company, and neither DQE nor any of its
affiliates other than the Company shall have any direct or indirect liability or
obligation to pay any amount due under this Plan to a Participant or any other
person. The Plan shall at all times be an unfunded obligation of the Company
payable from its general assets and no provision shall be at any time be made to
segregate assets of the Company for payment of any amount under this Plan. No
Plan

                                       17
<PAGE>

or other person shall have any interest in any particular assets of the Company
by reason of the amounts payable under this Plan and all Participants and other
persons shall have only the rights of a general unsecured creditor of the
Company with respect to any amounts payable under the Plan.

          Section 8.10 No Guarantees; No Limitation on Transactions. The Company
                       --------------------------------------------
has made no guarantees, representations, warranties or covenants to any
Participant or any other person with respect to the Company's future business
operations, the amount, nature or timing of future capital contributions to the
Company or the value of future benefits under this Plan. Nothing in this Plan
shall be construed as limiting the right or ability of DQE and its affiliates to
engage in any Change in Control transaction or any other transaction affecting
their respective interests or investments in the Company.

          Section 8.11 No Effect on Benefit Plans. Amounts paid to Participants
                       --------------------------
under this Plan shall not be taken into account for purposes of determining
benefits under any other employee benefit plan, program or policy of the Company
or any of its affiliates unless such plan, program or policy provides otherwise.

                                   Article IX

                                    Execution
                                    ---------

          WITNESS the due execution hereof this 27th day of May, 1999.

                                           DQE ENERGY SERVICES, INC.

                                           By:  /s/ David D. Marshall
                                                --------------------------------
                                                    David D. Marshall
                                                    Chairman of the Board

                                       18

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