Exhibit B-3
Exhibit E to the Master Separation and Distribution
Agreement
TAX INDEMNIFICATION AGREEMENT
TAX INDEMNIFICATION AGREEMENT
BY AND AMONG
ALLEGHENY ENERGY, INC.
AND ITS AFFILIATED COMPANIES
AND
[SUPPLY HOLDCO]
AND ITS AFFILIATED COMPANIES
TABLE OF CONTENTS
ARTICLE 1
DEFINITIONS
ARTICLE 2
PREPARATION AND FILING OF TAX RETURNS
Section 2.1 In General. 7
Section 2.2 Information and Cooperation. 8
Section 2.3 Manner of Filing Tax Returns. 9
Section 2.4 Agent 11
ARTICLE 3
REPRESENTATIONS AND COVENANTS
Section 3.1 Supply Holdco Representations and Covenants 11
Section 3.2 Allegheny Representations and Covenants 12
ARTICLE 4
TAX ALLOCATION AND PAYMENTS
Section 4.1 In General 13
Section 4.2 Payments 13
ARTICLE 5
ALLOCATION OF CERTAIN TAX ITEMS
Section 5.1 Liability for Restructuring Taxes and Deconsolidation 13
Section 5.2 Carryforwards and Carrybacks. 14
Section 5.3 Refunds 14
Section 5.4 Allocation of Tax Items. 14
Section 5.5 Continuing Covenants 15
ARTICLE 6
INDEMNIFICATION AND CONTEST PROVISIONS
Section 6.1 General Indemnification. 15
Section 6.2 Spin-off Indemnification 16
Section 6.3 Indemnified Liability 17
Section 6.4 Amount of Indemnified Liability for Income Taxes 17
Section 6.5 Indemnity Amount 18
Section 6.6 Alternate Remedy 18
Section 6.7 Payments. 19
Section 6.8 Prompt Performance 19
Section 6.9 Interest 19
Section 6.10 Duplicative Payment Not Required 20
ARTICLE 7
AUDITS AND CONTEST RIGHTS
Section 7.1 In General 20
Section 7.2 Notice 20
Section 7.3 Contests. 21
Section 7.4 Judicial Appeals. 22
Section 7.5 Limitations. 23
Section 7.6 Failure to Notify 24
Section 7.7 Remedies 24
ARTICLE 8
STOCK OPTIONS
Section 8.1 In General 25
Section 8.2 Notices, Withholding, Reporting 25
Section 8.3 Adjustments 25
ARTICLE 9
MISCELLANEOUS
Section 9.1 Effectiveness 25
Section 9.2 Notices 25
Section 9.3 Changes in Law. 26
Section 9.4 Confidentiality 26
Section 9.5 Consent 27
Section 9.6 Successors 27
Section 9.7 Assignment 27
Section 9.8 Affiliated Companies 27
Section 9.9 Authorization, Etc 27
Section 9.10 Entire Agreement 27
Section 9.11 Governing Law; Jurisdiction 27
Section 9.12 Dispute Resolution 27
Section 9.13 28
Section 9.14 Counterparts 28
Section 9.15 Severability 28
Section 9.16 No Third Party Beneficiaries 28
Section 9.17 Waivers 29
Section 9.18 Setoff 29
Section 9.19 Amendments 29
Section 9.20 Title and Headings 29
TAX INDEMNIFICATION AGREEMENT
TAX INDEMNIFICATION AGREEMENT (this "Agreement"), dated
[______,2001], by and among Allegheny Energy, Inc.
("Allegheny"), a Maryland corporation and each other member
of the Allegheny Group (as defined below), and [ ] ("Supply
Holdco"), a Maryland corporation and currently a direct,
wholly owned subsidiary of Allegheny, and each other member
of the Supply Holdco Group (as defined below) is entered
into in connection with the Spin-off (as defined below).
RECITALS
WHEREAS, immediately before the date on which the
Distribution (as defined below) is effective (the
"Distribution Date") Allegheny will have been the common
parent of an affiliated group of corporations within the
meaning of Section 1504(a) of the Internal Revenue Code of
1986, as amended (the "Code"), which filed a consolidated
federal income tax return, and which, together with Supply
Holdco and other affiliated corporations, was party to the
Tax Allocation Agreement (as defined below);
WHEREAS, the Board of Directors of Allegheny has
determined that it is in the best interest of Allegheny and
its stockholders to separate Allegheny's existing businesses
into two independent businesses;
WHEREAS, pursuant to such determination, Allegheny and
Supply Holdco have entered into a Master Separation
Agreement (as defined below) which provides, among other
things, for the separation of Allegheny and Supply Holdco,
the transfer between Allegheny and Supply Holdco of certain
assets and liabilities, the initial public offering ("IPO")
of Supply Holdco common stock, the distribution of such
common stock and the execution and delivery of certain
agreements in order to facilitate the foregoing;
WHEREAS, Allegheny and Supply Holdco have determined
that in connection with the Distribution (as defined below),
the IPO of Supply Holdco will reduce Allegheny 's ownership
of Supply Holdco on a fully-diluted basis to not less than
80.1 percent;
WHEREAS, within 24 months following the IPO, Allegheny
will distribute to the holders of its common stock, by means
of a pro rata distribution, all of the voting securities of
Supply Holdco then owned by Allegheny, as more fully
described in the application and declaration filed by
Allegheny and AE Supply (as defined below) together with
other subsidiaries of Allegheny on Form U-1 on July 23, 2001
under the Public Utility Holding Company Act of 1935 (the
"Distribution");
WHEREAS, the Distribution is intended to qualify as a
tax free distribution under Sections 355 and 368(a)(1)(D) of
the Code;
WHEREAS, upon the Distribution, Supply Holdco and each
member of the Supply Holdco Group (as defined below) will
cease to be members of the Allegheny Group (as defined
below) for federal and state income tax purposes; and
WHEREAS, in connection with the foregoing, the parties
hereto have determined to enter into this Agreement, setting
forth their agreement with respect to certain Tax matters.
NOW THEREFORE, in consideration of the foregoing and
the covenants and agreements set forth below, Allegheny and
Supply Holdco agree as follows:
ARTICLE 1. DEFINITIONS
For purposes of this Agreement, the following
capitalized terms shall have the meanings specified herein.
Capitalized terms used in this Agreement and not otherwise
defined shall have the meanings for such terms set forth in
the Master Separation Agreement. The singular shall include
the plural, unless the context indicates otherwise.
"Adequate Assurances" means posting a bond or providing
a letter of credit reasonably acceptable to the Indemnitee;
provided, however, if the Indemnifying Party fails to post
such bond or provide such letter of credit, the Indemnifying
Party shall provide cash equal to the Indemnity Amount to
the Indemnitee not less than thirty (30) days prior to the
date on which such Tax would become due and payable by the
Indemnitee.
"AE Supply" means Allegheny Energy Supply Company, LLC.
"AE Supply Historic Group" means AE Supply, AGC and any
Affiliated Company of AE Supply in existence prior to the
creation and transfer of Supply Holdco.
"Affiliated Company" means any entity in which a common
parent holds 80% or more of the voting power and value of
such corporation within the meaning of Code Section 1504(a).
"AGC" means Allegheny Generating Company, Inc.
"Allegheny Group" means Allegheny, any Affiliated
Company of Allegheny or other entity of which Allegheny is
the common parent corporation, and any corporation or other
entity which may be, or may become a member of such group
from time to time.
"Allegheny Historic Group" means Allegheny or any
Affiliated Company of Allegheny (excluding any member of the
Supply Holdco Group and AE Supply Historic Group).
"Audit" includes any audit, assessment of Taxes, other
examination by any Tax Authority, proceeding, or appeal of
such a proceeding relating to Taxes, whether administrative
or judicial, including proceedings relating to competent
authority determinations.
"Combined State/Local Tax" means the state or local Tax
liability determined on a consolidated, combined, unitary or
similar basis reported on a Pre-Distribution Combined Return
which includes (a) any member of the Allegheny Historic
Group and (b) any member of the Supply Holdco Group.
"Combined State/Local Tax Allocation Statement" means
the statement setting forth the amount of the overpaid or
underpaid portion of the total Combined State/Local Tax
liability shown on the Preliminary Combined Return
attributable to (a) any member of the Allegheny Historic
Group or (b) any member of the Supply Holdco Group, as the
case may be.
"Consolidated Federal Tax" means the Federal Income Tax
(as defined below) liability of a Consolidated Group (as
defined below) determined on a consolidated basis.
"Consolidated Group" means a group of one or more
corporations connected through stock ownership with a common
parent in which the common parent owns at least 80% of the
total voting power and value of each such corporation and
that files a Consolidated Return.
"Consolidated Return" means any Tax Return with respect
to Federal Income Taxes filed on a consolidated basis
pursuant to Section 1501 of the Code.
"Consolidated Return Year" means any taxable year for
which a Consolidated Return is filed.
"Control" means stock representing at least 50% of the
total combined voting power of all classes of stock entitled
to vote or at least 50% of the total value of shares of all
classes of stock in a manner consistent with the principles
of Section 355(e) and the regulations thereunder.
"Federal Income Tax" means any Tax imposed under
Subtitle A of the Code (including the Taxes imposed by
Sections 11, 55, and 1201(a) of the Code), and any interest,
additions to Tax or penalties applicable or related thereto,
and any other income-based U.S. federal Tax which is
hereinafter imposed upon corporations.
"Filing Party" has the meaning set forth in
Section 2.3(b) of this Agreement.
"Final Determination" means with respect to any issue
(i) a decision, judgment, decree or other order by any court
of competent jurisdiction, which decision, judgment, decree
or other order has become final and not subject to further
appeal, (ii) a closing agreement (whether or not entered
into under Section 7121 of the Code) or any other binding
settlement agreement (whether or not with the Service)
entered into in connection with or in contemplation of an
administrative or judicial proceeding, or (iii) the
completion of the highest level of administrative
proceedings if a judicial contest is not or is no longer
available.
"Income Taxes" means (1) any tax based upon, measured
by, or calculated with respect to (A) net income or profits
(including any capital gains tax, minimum tax and any tax on
items of Tax preference, but not including sales, use, real
or personal property, gross or net receipts, transfer or
similar taxes) or (B) multiple bases if one or more of the
bases upon which such tax may be based, measured by, or
calculated with respect to, is described in clause (A)
above, or (2) any U.S., state or local franchise tax.
"Indemnified Liability" has the meaning set forth in
Section 6.3 of this Agreement.
"Indemnifying Party" has the meaning set forth in
Section 6.2(d) of this Agreement.
"Indemnitee" has the meaning set forth in
Section 6.2(d) of this Agreement.
"Indemnity Amount" has the meaning set forth in
Section 6.5 of this Agreement.
"Internal Spin-offs" mean the series of transactions
involving the transfer of certain electric power generation
and generation-related assets to AE Supply by West Penn
Power Company on November 18, 1999, The Potomac Edison
Company on August 1, 2000 and Monongahela Power Company on
June 1, 2001 and [date].
"Master Separation Agreement" means the Master
Separation and Distribution Agreement between Allegheny and
Supply Holdco.
"Non-Filing Parent" means either (1) Allegheny if the
State Parent (as defined below) is a member of the Supply
Holdco Group or (2) Supply Holdco if the State Parent is a
member of the Allegheny Historic Group.
"Non-Filing Party" has the meaning set forth in
Section 2.3(c) of this Agreement.
"Officer's Certificates" means the Officer's
Certificates rendered by Allegheny in connection with the
Internal Spin-offs of generation and generation-related
assets dated November 18, 1999, August 1, 2000 and June 1,
2001.
"Option" means an option to acquire common stock, or
other equity-based incentives the economic value of which is
designed to mirror that of an option, including non-
qualified stock options, discounted non-qualified stock
options, cliff options to the extent stock is issued or
issuable (as opposed to cash compensation), and tandem stock
options to the extent stock is issued or issuable (as
opposed to cash compensation).
"Post-Distribution Period" means any taxable period or
portion thereof beginning after the Distribution Date.
"Pre-Distribution Combined Returns" has the meaning set
forth in Section 2.3(e) of this Agreement.
"Pre-Distribution Period" means any taxable period or
portion thereof ending on or prior to the Distribution Date.
"Preliminary Combined Return" means any preliminary Pre-
Distribution Combined Return provided to either Allegheny or
Supply Holdco, as the case may be, pursuant to Section 2.3
of this Agreement.
"Preliminary Consolidated Return" means any preliminary
Pre-Distribution Combined Return provided to either
Allegheny or Supply Holdco, as the case may be, pursuant to
Section 2.3 of this Agreement.
"Private Letter Ruling" means Private Letter Ruling [ ]
issued by the Service (defined below) to Allegheny on [ ].
"Pro Forma Combined Return" means any pro forma Tax
Return setting forth that portion of the Combined
State/Local Tax shown on a Pre-Distribution Combined Return
that is attributable to either (1) any member of the
Allegheny Historic Group or (2) any member of the Supply
Holdco Group, as the case may be.
"Pro Forma Consolidated Return" means any pro forma Tax
Return setting forth that portion of the Consolidated
Federal Tax shown on a Pre-Distribution Consolidated Return
that is attributable to the Supply Holdco Group.
"Prohibited Act" has the meaning set forth in
Section 6.2(c) of this Agreement.
"Restricted Period" means the period beginning on the
date of this Agreement and ending on the date that is the
day after the second anniversary of the Distribution Date.
"Restructuring" means the transactions undertaken by
Allegheny, AE Supply and Supply Holdco (and their respective
Affiliated Companies) designed to accomplish the Spin-off.
"Restructuring Tax" means any Tax imposed as a direct
result of the transactions contemplated by the
Restructuring.
"Ruling Documents" means (1) the Private Letter Ruling,
including all materials submitted to the Service (defined
below) in connection with such ruling, or (2) any similar
filings submitted to, or rulings issued by, any other Tax
Authority in connection with the Spin-off.
"Separate Tax" means any Tax incurred by an entity that
is not a Federal Income Tax arising from the filing of the
Consolidated Return.
"Separate Return" means any Tax Return filed by any
entity that is not part of the Consolidated Tax Return.
"Service" means the Internal Revenue Service.
"Spin-off" means the separation of the Supply Holdco
Group from the Allegheny Group through the Distribution.
"State Parent" has the meaning set forth in Section
2.3(e) of this Agreement.
"Stock Option Plans" has the meaning set forth in the
Employee Matters Agreement between Allegheny and Supply
Holdco.
"Supply Holdco Consolidated Federal Tax Allocation
Statement" has the meaning set forth in Section 2.3(d) of
this Agreement.
"Supply Holdco Group" means Supply Holdco and any
Affiliated Company of Supply Holdco of which Supply Holdco
will be the common parent corporation after the
Distribution.
"Tax" shall mean any charges, fees, levies, imposts,
duties, or other assessments of a similar nature, including
income, alternative or add-on minimum, gross receipts,
profits, lease, service, service use, wage, wage
withholding, employment, workers compensation, business
occupation, occupation, premiums, environmental, estimated,
excise, employment, sales, use, transfer, license, payroll,
franchise, severance, stamp, occupation, windfall profits,
withholding, social security, unemployment, disability, ad
valorem, estimated, highway use, commercial rent, capital
stock, paid up capital, recording, registration, property,
real property gains, value added, business license, custom
duties, or other tax or governmental fee of any kind
whatsoever, imposed or required to be withheld by any Tax
Authority including any interest, additions to tax, or
penalties applicable or related thereto.
"Tax Allocation Agreement" means the Income Tax
Allocation Agreement entered into by and among Allegheny and
all the members of its Consolidated Group dated January 1,
2001, as amended, pursuant to which the parties agreed upon
the allocation of Tax Items relating to the Consolidated
Group and Consolidated Return of Allegheny.
"Tax Asset" means any carryover, deduction, refund,
credit or similar item that decreases the Tax liability of a
taxpayer.
"Tax Authority" means any governmental authority or any
subdivision, agency, commission or authority thereof or any
quasi-governmental or private body having jurisdiction over
the assessment, determination, collection or imposition of
any Tax (including the Service).
"Tax Benefit" means a reduction in the Tax liability or
an increase in carryforwards of a taxpayer (or of the
affiliated group of which it is a member) for any taxable
period including any refunds related to a carryback of any
loss, credit or similar item. Except as otherwise provided
in this Agreement, a Tax Benefit shall be deemed to have
been realized or received from a Tax Item in a taxable
period only if and to the extent that the Tax liability of
the taxpayer (or of the affiliated group of which it is a
member) for such period, after taking into account the
effect of the Tax Item on the Tax liability of such taxpayer
in the current period and all prior periods, is less than it
would have been if such Tax liability were determined
without regard to such Tax Item.
"Tax Detriment" means an increase in the Tax liability
or decrease in carryforwards of a taxpayer (or of the
affiliated group of which it is a member) for any taxable
period. Except as otherwise provided in this Agreement, a
Tax Detriment shall be deemed to have been realized or
received from a Tax Item in a taxable period only if and to
the extent that the Tax liability of the taxpayer (or of the
affiliated group of which it is a member) for such period,
after taking into account the effect of the Tax Item on the
Tax liability of such taxpayer in the current period and all
prior periods, is more than it would have been if such Tax
liability were determined without regard to such Tax Item.
"Tax Item" means any item of income, gain, loss,
deduction or credit, or other attribute that may have the
effect of increasing or decreasing any Tax.
"Tax Law" means any federal, state, local or foreign
law with respect to Taxes, including the Code and underlying
Treasury Regulations.
"Tax Return" means any return, report, certificate,
form or similar statement or document (including, any
related or supporting information or schedule attached
thereto and any information return, amended Tax return,
claim for refund or declaration of estimated Tax) required
to be supplied to, or filed with, a Tax Authority in
connection with the determination, assessment or collection
of any Tax or the administration of any laws, regulations or
administrative requirements relating to any Tax.
"Treasury Regulations" means the final, temporary and
proposed income Tax regulations promulgated under the Code,
as such regulations may be amended from time to time
(including corresponding provisions of succeeding
regulations).
ARTICLE 2. PREPARATION AND FILING OF TAX RETURNS.
Section 2.1 In General.
(a) During the Pre-Distribution Period, Allegheny
shall timely file or cause to be filed all Tax Returns that
are filed on a consolidated, combined or unitary basis and
include any member of the Supply Holdco Group or Allegheny
Historic Group as provided in the Tax Allocation Agreement.
(b) Allegheny shall timely file or cause to be filed
any Tax Return related to the Allegheny Group for any Post-
Distribution Period. Supply Holdco shall timely file or
cause to be filed any Tax Return related to the Supply
Holdco Group for any Post-Distribution Period.
(c) Allegheny shall timely file or cause to be filed
all Separate Returns that are required to be filed (i) on or
prior to the Distribution Date by any member of the
Allegheny Group on or prior to the Distribution Date and
(ii) after the Distribution Date by any member of the
Allegheny Group after the Distribution Date. Supply Holdco
shall timely file or cause to be filed all Separate Returns
that are required to be filed after the Distribution Date by
any member of the Supply Holdco Group after the Distribution
Date.
Section 2.2 Information and Cooperation.
(a) Allegheny and Supply Holdco shall cooperate and
provide each other all documents and information, and make
available employees and officers of Allegheny and Supply
Holdco, as reasonably requested by the other party, on a
mutually convenient basis during normal business hours, to
aid the other party in preparing any Tax Return described in
Section 2.1 of this Agreement, to the extent that such Tax
Return relates to any Pre-Distribution Period, or to contest
any Audit of any such Tax Return. Such cooperation shall
include, without limitation:
(i) the retention and provision on reasonable request
of any and all information including all books, records,
documentation or other information, any necessary
explanations of information, and access to personnel, until
the expiration of the applicable statute of limitation for
additional assessments of Tax for the Tax period for which
such document or other information arises (giving effect to
any extension, waiver, or mitigation thereof);
(ii) within the limits otherwise set forth herein, the
execution by such party of any document that is relevant and
may be necessary or helpful in connection with any Tax
Return or in connection with any Audit, proceeding, suit or
action; and
(iii) the use of the parties' reasonable best efforts to
obtain any documentation from a governmental authority or a
third party that may be necessary or helpful in connection
with the foregoing.
(b) In the case of any Tax Return for a Pre-
Distribution Period described in Section 2.1 of this
Agreement, Allegheny will provide Supply Holdco with a copy
of that portion of each such Tax Return to the extent it
relates to Supply Holdco or any Affiliated Company of Supply
Holdco, together with all related tax accounting work
papers, not later than five (5) days after the receipt of a
written request therefor. In addition, Allegheny will
provide to employees of Supply Holdco responsible for
preparing its Tax Returns access to any private letter
rulings, together with any requests therefor and related
documents and any other relevant information, as it relates
to Allegheny for any period prior to the Distribution Date,
and will provide Supply Holdco with a copy of such rulings
or documents to the extent that the issues discussed therein
are relevant to Supply Holdco or a Affiliated Company of
Supply Holdco, not later than five (5) days after the
receipt of a written request therefor.
(c) Subject to Section 2.3(b), Allegheny and Supply
Holdco shall advise and consult with each other with respect
to any Tax election or the Tax treatment of any item
(including the treatment of any item that would be affected
by a proposed Tax adjustment relating to a Consolidated
Return which is the subject of an Audit or investigation or
is the subject of any proceeding or litigation) which could
affect any Tax attribute of the other party or an Affiliated
Company thereof (including, but not limited to, basis in an
asset or the amount of earnings and profits).
(d) Notwithstanding any other provision of this
Agreement, neither Allegheny nor any Affiliated Company of
Allegheny shall be required to provide Supply Holdco or any
Affiliated Company of Supply Holdco access to or copies of
any information that relate to Allegheny or any Affiliated
Company of Allegheny unless it also relates to Supply
Holdco, or a Affiliated Company of Supply Holdco. In
addition, in the event that Allegheny determines that the
provision of any information to Supply Holdco or any
Affiliated Company of Supply Holdco could be commercially
detrimental, violate any law or agreement or waive any
privilege that may be asserted under applicable law,
including any privilege arising under or relating to the
attorney-client relationship (including the attorney-client
and work product privileges), the accountant-client
privilege, and any privilege relating to internal evaluation
processes, the parties shall take all reasonable measures to
permit the compliance with such obligations in a manner that
avoids any such harm or consequence. In the event that
Supply Holdco determines that the provision of any
information to Allegheny or any Affiliated Company of
Allegheny could be commercially detrimental, violate any law
or agreement or waive any privilege that may be asserted
under applicable law including, any privilege arising under
or relating to the attorney-client relationship (including
the attorney-client and work product privileges), the
accountant-client privilege, and any privilege relating to
internal evaluation processes, the parties shall take all
reasonable measures to permit the compliance with such
obligations in a manner that avoids any such harm or
consequence.
Section 2.3 Manner of Filing Tax Returns.
(a) Allegheny (for itself and the Allegheny Affiliated
Companies) and Supply Holdco (for itself and the Supply
Holdco Affiliated Companies) agree to file all Tax Returns
for any Pre-Distribution Period, and to take all other
actions in a manner consistent with the position that Supply
Holdco and the Supply Holdco Affiliated Companies are part
of the Allegheny Consolidated Group for all periods through
and including the Distribution Date.
(b) Except as otherwise provided in this Section 2.3
of this Agreement, the party that is required to file a
return under Section 2.1 of this Agreement (the "Filing
Party") shall have the exclusive right to determine (1) the
manner in which such Tax Return shall be prepared and filed,
including the elections, methods of accounting, positions,
conventions and principles of taxation to be used and the
manner in which any Tax Item shall be reported, (2) whether
any extensions may be requested, (3) the elections that will
be made in such Tax Return, (4) whether any amended Tax
Returns shall be filed, (5) whether any claims for refund
shall be made, (6) whether any refunds shall be paid by way
of refund or credited against any liability for the related
Tax, and (7) whether to retain outside specialists to
prepare such Tax Return, whom to retain for such purpose and
the scope of any such retainer. Notwithstanding the
foregoing, if the other party (the "Non-Filing Party")
requests the Filing Party to make a particular determination
under this Section 2.3(b) with respect to a Tax Return of
the Non-Filing Party or an Affiliated Company, the Filing
Party shall not unreasonably withhold its consent to such
request. In the event of disagreement over whether consent
is required or is being unreasonably withheld, the parties
shall resolve their disagreement in accordance with
Section 9.12 of this Agreement.
(c) Any Tax Return described in Section 2.1(a) of this
Agreement (but only with respect to Tax Items of Supply
Holdco or a Affiliated Company of Supply Holdco), which Tax
Return is filed or amended after the date of this Agreement,
shall be prepared on a basis consistent with the elections,
methods of accounting, positions, conventions and principles
of taxation and the manner in which any Tax Item or other
information is reported as reflected on the most recently
filed prior Tax Returns involving similar matters. The
preceding sentence shall not apply if the Filing Party
obtains the prior written consent (which consent shall not
be unreasonably withheld) of the Non-Filing Party.
(d) Pre-Distribution Consolidated Returns.
(i) Allegheny and Supply Holdco shall jointly prepare
and Allegheny shall timely file the Consolidated Return for
the 2001 Consolidated Return Year and any other tax period
beginning before or ending on the Distribution Date, if not
already filed as of the date hereof. Supply Holdco shall
control the decisions in the preparation of such
Consolidated Returns for which it has liability hereunder
and Allegheny shall control the decisions in the preparation
of such Consolidated Returns for which it has liability
hereunder. Such Consolidated Returns shall be prepared and
filed in compliance with applicable Tax Laws and on a basis
that is consistent with Allegheny's prior Consolidated
Returns. Allegheny shall also determine any Consolidated
Return Tax Items specified under Treasury Regulation
Section 1.1502-11 (excluding any separate taxable income of
Supply Holdco or any Affiliated Company of Supply Holdco as
specified under Treasury Regulation Section 1.1502-11(a)(1))
necessary to prepare the Consolidated Return. Supply Holdco
shall determine any Separate Return Tax Items specified
under Treasury Regulation Section 1.1502-11(a) for any
Affiliated Company of Supply Holdco. Any disagreement
between Supply Holdco and Allegheny concerning the
Consolidated Return Tax Items shall be resolved pursuant to
Section 9.12 of this Agreement.
(ii) No later than the due date of any Pre-Distribution
Consolidated Return (including any extensions), Allegheny
shall pay to Supply Holdco or Supply Holdco shall pay to
Allegheny the overpayment or underpayment, respectively, of
the Supply Holdco Group allocation shown on a statement
setting forth the amount of the unpaid or overpaid portion
of the Supply Holdco Group's allocable share of the total
Consolidated Federal Tax liability, if any, (the "Supply
Holdco Consolidated Federal Tax Allocation Statement")
taking into account any applicable Federal Income Tax
payments made by Supply Holdco or any other member of the
Supply Holdco Group to any member of the Allegheny Group or
the Service.
(iii) Allegheny shall not file or cause to be filed any
amended Pre-Distribution Consolidated Return if such return
results in an increase in the Tax liability attributable to
any member of the Supply Holdco Group for any taxable period
without the prior written consent of Supply Holdco (which
consent shall not be unreasonably withheld). In the event of
disagreement over whether consent is required or is being
unreasonably withheld, the parties shall resolve their
disagreement in accordance with Section 9.12 of this
Agreement
(iv) Allegheny shall upon receipt of a written request
by Supply Holdco file an amended Pre-Distribution
Consolidated Return if such return results in a decrease in
the Tax liability attributable to any member of the Supply
Holdco Group for any taxable period and does not result in
an increase in the Tax liability attributable to any member
of the Allegheny Group for any taxable period (other than an
increase for which it would be unreasonable to withhold
consent). In the event of disagreement over whether consent
is required or is being unreasonably withheld, the parties
shall resolve their disagreement in accordance with
Section 9.12 of this Agreement.
(e) In the event that any member of the Allegheny
Group is required to prepare, file and/or be included in a
Combined Return filed with a state or local Tax Authority
relating to a Pre-Distribution Period (a "Pre-Distribution
Combined Return"), the entity that is required to file such
Pre-Distribution Combined Return (the "State Parent") shall
prepare and file such Tax Return and the Non-Filing Parent
shall prepare the Pro Forma Combined Return, in each case,
in accordance with the principles set forth in Sections 2.1,
2.2 and 2.3 hereof (and the parties shall make payments in
accordance with the same principles as set forth in
Section 2.4) substituting where appropriate the terms State
Parent, Non-Filing Parent, Combined State/Local Tax, Pro
Forma Combined Return, Preliminary Combined Return and
Combined State/Local Tax Allocation Statement for the terms
Allegheny, Supply Holdco, Consolidated Federal Tax
Liability, Pro Forma Consolidated Return, Preliminary
Consolidated Return and Supply Holdco Consolidated Federal
Tax Allocation Statement, respectively. Where possible, the
Pro Forma Combined Return or the Preliminary Combined Return
shall be prepared making the elections and using the methods
of accounting that are consistent with those made or used by
the Allegheny Consolidated Group on the Consolidated Return
most recently filed with respect to a Tax period ending
prior to the Distribution Date unless the parties consent to
make or use some other elections or methods of accounting
(which consent shall not be unreasonably withheld). In the
event of disagreement over whether consent is required or is
being unreasonably withheld, the parties shall resolve their
disagreement in accordance with Section 9.12 of this
Agreement.
Section 2.4 Agent. Supply Holdco hereby irrevocably
designates, and agrees to cause each Affiliated Company of
Supply Holdco to so designate, Allegheny as its sole and
exclusive agent and attorney-in-fact to take such action
(including execution of documents) as Allegheny, in its
reasonable discretion, may deem appropriate in any and all
matters (including Audits) relating to any Consolidated
Return described in Section 2.1(a) of this Agreement;
provided, however, that Allegheny shall not exercise its
rights as agent and attorney-in-fact in any manner that is
inconsistent with the rights granted to Supply Holdco under
this Agreement, and nothing in this Section 2.4 shall limit
the rights granted to Supply Holdco under this Agreement.
ARTICLE 3. REPRESENTATIONS AND COVENANTS.
SECTION 3.1 Supply Holdco Representations and Covenants.
Supply Holdco, for itself and the Affiliated Companies of
Supply Holdco, hereby represents, warrants and covenants
that:
(a) Supply Holdco has reviewed the information and
representations made in the Ruling Documents submitted to
the Service prior to the date of this Agreement and the
information and representations made in the Officer's
Certificates and, to Supply Holdco's knowledge, all of such
information or representations that relate to Supply Holdco
or any Affiliated Company of Supply Holdco, or the business
or operations of either, are true, correct and complete in
all material respects.
(b) Supply Holdco will not, and will cause each
Affiliated Company of Supply Holdco not to, take any action,
or fail or omit to take any action, that would cause any of
the information or representations made in the Ruling
Documents that relate to Supply Holdco, the AE Supply
Historic Group, or any Affiliated Company of Supply Holdco
or the business or operations of each, to be untrue,
regardless of whether such information or representations
were included in the Private Letter Ruling (or any
supplemental ruling), provided, however, that
notwithstanding the foregoing, Supply Holdco or each
Affiliated Company of Supply Holdco may take any action, or
fail or omit to take any action concerning any information
or representations made in the Ruling Documents that clearly
were not relied upon by the Service in issuing the Private
Letter Ruling. Supply Holdco will not, and will cause each
Affiliated Company of Supply Holdco not to, take any action,
or fail or omit to take any action, that would cause any of
the information or representations made in the Officer's
Certificates that relate to Supply Holdco, the AE Supply
Historic Group, or any Affiliated Company of Supply Holdco
or the business or operations of each, to be untrue.
Section 3.2 Allegheny Representations and Covenants.
Allegheny, for itself and the Affiliated Companies of
Allegheny, hereby represents, warrants and covenants that:
(a) Allegheny has reviewed the information and
representations made in the Ruling Documents submitted to
the Service prior to the date of this Agreement and the
Officer's Certificates and, to its knowledge, all of such
information or representations that relate to Allegheny or
any Affiliated Company of Allegheny or the business or
operations of either, are true, correct and complete in all
material respects.
(b) Allegheny will not, and will cause each Affiliated
Company of Allegheny not to, take any action, or fail or
omit to take any action, that would cause any of the
information or representations made in the Ruling Documents
to be untrue, regardless of whether such information or
representations were included in the Private Letter Ruling
(or any supplemental ruling), provided, however, that
notwithstanding the foregoing, Allegheny or each Affiliated
Company of Allegheny may take any action, or fail or omit to
take any action concerning any information or
representations made in the Ruling Documents that clearly
were not relied upon by the Service in issuing the Private
Letter Ruling. Allegheny will not, and will cause each
Affiliated Company of Allegheny not to, take any action, or
fail to omit to take any action, that would cause any of the
information or representations made in the Officer's
Certificates that relate to Allegheny, the AE Supply
Historic Group, or any Affiliated Company of Allegheny or
the business or operations of each, to be untrue.
ARTICLE 4. TAX ALLOCATION AND PAYMENTS.
SECTION 4.1 In General. Except to the extent
specifically modified or supplemented herein, the Tax
Allocation Agreement shall continue in full force and
effect. Notwithstanding any other provision of this
Agreement, the Tax Allocation Agreement shall not apply to
any Post-Distribution Period of Supply Holdco and the Supply
Holdco Group, except as provided in Section 5.2(b) of this
Agreement.
(a) Supply Holdco shall be responsible for, and shall
indemnify and hold harmless Allegheny against, any and all
Taxes incurred by Supply Holdco, the Supply Holdco Group, or
the AE Supply Historic Group (except as provided below) for
any Pre-Distribution Period in accordance with past
practices and the principles set forth in the Tax Allocation
Agreement, other than any Restructuring Taxes for which
Allegheny or any Affiliated Company of Allegheny is liable
under Section 5 of this Agreement. Allegheny shall be
responsible for, and shall indemnify and hold harmless
Supply Holdco against, any and all Taxes incurred by
Allegheny or any Affiliated Company of Allegheny (other than
Taxes attributable to Supply Holdco or any Affiliated
Company of Supply Holdco) for any Pre-Distribution Period
(except as provided below) in accordance with past practices
and the principles set forth in the Tax Allocation
Agreement, other than any Restructuring Taxes for which
Supply Holdco or any Affiliated Company of Supply Holdco is
liable under Section 5 of this Agreement.
(b) Supply Holdco shall be responsible for all Taxes
that relate to the Supply Holdco Group with respect to any
Post-Distribution Period. Allegheny shall be responsible for
all Taxes that relate to the Allegheny Group with respect to
any Post-Distribution Period.
Section 4.2 Payments
(a) Federal Income Taxes. Allegheny shall pay (or
cause to paid) to the Service all Federal Income Taxes, if
any, shown on (i) any Consolidated Return due and payable
for all Pre-Distribution Periods and (ii) any Consolidated
Return of the Allegheny Group due and payable for all Post-
Distribution Periods. Supply Holdco shall pay (or cause to
be paid) to the Service all federal Income Taxes, if any,
shown on any Consolidated Return of the Supply Holdco Group
due and payable for all Post-Distribution Periods.
(b) Separate Taxes. Allegheny shall pay (or cause to
be paid) to the appropriate Tax Authorities all Separate
Taxes, if any, that relate to Allegheny, the Allegheny
Historic Group, or the Allegheny Group. Supply Holdco shall
pay (or cause to be paid) to the appropriate Tax Authorities
all Separate Taxes, if any, that relate to Supply Holdco,
the AE Supply Historic Group or the Supply Holdco Group.
ARTICLE 5. ALLOCATION OF CERTAIN TAX ITEMS.
SECTION 5.1 Liability for Restructuring Taxes and
Deconsolidation.
Except as otherwise provided by this Agreement, all
Restructuring Taxes shall be the obligation of the entity
that is liable for such Restructuring Taxes under applicable
Tax Law.
Section 5.2 Carryforwards and Carrybacks.
(a) Allegheny shall notify Supply Holdco after the
Distribution Date of any consolidated carryover item which
may be partially or totally attributed to and carried over
by any member of the Supply Holdco Group and will notify
Supply Holdco of subsequent adjustments which may affect
such carryover item.
(b) Notwithstanding any other provision of this
Agreement, Supply Holdco shall not be required to make any
election under Section 172(b)(3) of the Code and, to the
extent feasible, any similar provision of any state or local
Tax Law, to relinquish any right to carryback net operating
losses. Upon a request by Supply Holdco, Allegheny shall be
required to include on an amended Consolidated Return any
net operating losses of Supply Holdco arising in a Post-
Distribution Period to the extent allowed under the Code;
provided, that if Allegheny incurs a Tax Detriment related
to the inclusion of such net operating losses on the
Consolidated Return, Supply Holdco shall indemnify Allegheny
for the amount of such Tax Detriment; and, provided further,
that all reasonable out of pocket costs and expenses
incurred by Allegheny, including reasonable outside
attorneys' accountants' and investigatory fees and
disbursements shall be the responsibility of Supply Holdco.
Section 5.3 Refunds. Any refund of Taxes received in a
Pre-Distribution Period will be allocated in a manner
consistent with the existing Tax Allocation Agreement. Any
refund of Taxes received in a Post-Distribution Period
resulting from an adjustment made to a Tax Return filed for
a Pre-Distribution Period will be allocated to the party
whose Return resulted in such refund, including any refund
relating to the carryback of a net operating loss pursuant
to Section 5.2(b).
Section 5.4 Allocation of Tax Items.
(a) All Tax computations (1) ending on the
Distribution Date and (2) the immediately following Tax
period of Supply Holdco or any Affiliated Company of Supply
Holdco, shall be made pursuant to the principles of
Section 1.1502-76(b) of the Treasury Regulations or of a
corresponding provision under the laws of other
jurisdictions, as determined by Allegheny, taking into
account all reasonable suggestions made by Supply Holdco
with respect thereto. Any disputes between the parties with
respect thereto shall be resolved in accordance with the
provisions of Section 9.12 of this Agreement.
(b) Earnings and Profits. Allegheny will advise Supply
Holdco in writing of the allocation in Allegheny earnings
and profits between Allegheny and Supply Holdco as a result
of the Spin-Off as provided in Section 312(h) of the Code
and Treasury Regulation Sections 1.312-10(a) and 1.1502-33
not later than 90 days following the Spin-Off.
Section 5.5 Continuing Covenants. Without the prior
written consent of the other party (which consent shall not
be unreasonably withheld), Allegheny (for itself and each
Affiliated Company of Allegheny) and Supply Holdco (for
itself and each Affiliated Company of Supply Holdco) agree
(1) not to take any action reasonably expected to result in
an increased Tax Detriment to the other party or a reduction
in a Tax Benefit of the other party under this Agreement,
and (2) to take any action reasonably requested by the other
party that would reasonably be expected to result in a Tax
Benefit or avoid a Tax Detriment to the other party,
provided that such action does not result in any additional
cost not fully compensated for by the requesting party. The
parties hereby acknowledge that the preceding sentence is
not intended to limit, and therefore shall not apply to, the
rights of the parties with respect to matters otherwise
covered by this Agreement.
ARTICLE 6. INDEMNIFICATION AND CONTEST PROVISIONS.
SECTION 6.1 General Indemnification.
(a) In General. Supply Holdco and each Affiliated
Company of Supply Holdco shall jointly and severally
indemnify Allegheny, each Affiliated Company of Allegheny
and their respective directors, officers and employees, and
hold them harmless from and against any and all Taxes for
which Supply Holdco or any Affiliated Company of Supply
Holdco is liable under this Agreement and any loss, cost,
damage or expense, including reasonable attorneys' fees and
costs, that is attributable to, or results from, the failure
of Supply Holdco, any Affiliated Company of Supply Holdco or
any director, officer, or employee to make any payment
required to be made under this Agreement.
(b) Allegheny and each Affiliated Company of Allegheny
shall jointly and severally indemnify Supply Holdco, each
Affiliated Company of Supply Holdco and their respective
directors, officers and employees, and hold them harmless
from and against any and all Taxes for which Allegheny or
any Affiliated Company of Allegheny is liable under this
Agreement and any loss, cost, damage or expense, including
reasonable attorneys' fees and costs, that is attributable
to, or results from the failure of Allegheny, any Affiliated
Company of Allegheny or any director, officer or employee to
make any payment required to be made under this Agreement.
(c) Inaccurate or Incomplete Information. Supply
Holdco and each Affiliated Company of Supply Holdco shall
jointly and severally indemnify Allegheny, each Affiliated
Company of Allegheny and their respective directors,
officers and employees, and hold them harmless from and
against any cost, fine, penalty, or other expenses of any
kind (except Taxes) attributable to the negligence of Supply
Holdco or any Affiliated Company of Supply Holdco in
supplying Allegheny or any Affiliated Company of Allegheny
with inaccurate or incomplete information, in connection
with the preparation of any Tax Return. Allegheny and each
Affiliated Company of Allegheny shall jointly and severally
indemnify Supply Holdco, each Affiliated Company of Supply
Holdco and their respective directors, officers and
employees, and hold them harmless from and against any cost,
fine, penalty, or other expense of any kind (except Taxes)
attributable to the negligence of Allegheny or any
Affiliated Company of Allegheny in supplying Supply Holdco
or any Affiliated Company of Supply Holdco with inaccurate
or incomplete information, in connection with the
preparation of any Tax Return.
Section 6.2 Spin-off Indemnification
(a) In General. Notwithstanding anything herein or in
the Tax Allocation Agreement to the contrary, the provisions
of this Section 6 shall govern all matters among the parties
hereto related to an Indemnified Liability (as defined in
Section 6.3 below) and an Indemnity Amount (as defined in
Section 6.5 below).
(b) Continued Conduct of Business/Change of Control.
During the Restricted Period each of Allegheny and Supply
Holdco agrees that it will not cease, and will not permit
any Affiliated Company thereof to cease, the active conduct
of any trades or businesses (within the meaning of Section
355(b) of the Code) used to qualify the Spin-off or Internal
Spin-offs under Section 355 of the Code nor cause, or permit
to be caused, a change in Control (other than the
Distribution).
(c) Requirements for Major Transactions Undertaken by
Allegheny and Supply Holdco during the Restricted Period.
During the Restricted Period, Allegheny and Supply Holdco
will not enter into, agree, plan, have an understanding or
have substantial negotiations to enter into any of the
following transactions, or enter into, agree, plan, have an
understanding or have substantial negotiations to enter into
any other transactions, in either case which, by itself or
in the aggregate, may cause a risk that the Distribution to
be treated as part of a plan or series of transactions
pursuant to which one or more persons acquire directly or
indirectly stock representing Control of Allegheny or Supply
Holdco, as the case may be, within the meaning of Code
Section 355(e):
(i) merge or consolidate with or into any other
corporation;
(ii) liquidate or partially liquidate (within the
meaning of such terms as defined in Section 346 and
Section 302, respectively, of the Code);
(iii) sell or transfer all or substantially all its
assets (within the meaning of Rev. Proc. 77-37, 1977 - 2
C.B. 568) in a single transaction or series of related
transactions;
(iv) redeem or otherwise repurchase any of Allegheny or
Supply Holdco's capital stock;
(v) make any change in its equity structure
(including, without limitation, stock issuances, pursuant to
the exercise of options or otherwise, option grants, the
adoption of, or authorization of shares under a stock option
plan (in each case other than pursuant to the Stock Option
Plans), capital contributions or acquisitions but not
including the Distribution); or
(vi) enter into or permit any proposed acquisition
transaction occurring pursuant to any of the following
actions by the Boards of Directors of Allegheny or Supply
Holdco:
(1) the redemption of rights under a stockholders' rights
plan;
(2) the determination that a tender offer is a permitted
offer or similar permitted acquisition under any such
plan or otherwise causing any such plan to be
inapplicable or neutralized with respect to any
proposed transaction; or
(3) the approval of any proposed transaction or
transactions involving the acquisition of Supply
Holdco or the acquisition of another corporation by
Supply Holdco
(actions (i), (ii), (iii), (iv), (v) and (vi) are referred
to as the "Prohibited Acts") unless Allegheny or Supply
Holdco first obtains, and permits the other party to review,
a supplemental ruling from the Service or a written opinion
of a nationally recognized tax attorney, or a tax accountant
that is a member of a nationally recognized law firm or
accounting firm, that such transaction, and any transaction
related thereto, will not affect the qualification of the
Spin-off or Internal Spin-offs as tax-free distributions
under Section 355 (including Section 355(e)) of the Code.
(d) Indemnification. If Allegheny or Supply Holdco
breaches any representations set forth in Section 3 of this
Agreement or takes any action or enters into any agreement
to take any action, including, without limitation, any
breach of Sections 6.2(b) and (c), and the Spin-Off or
Internal Spin-offs shall fail to qualify under Section 355
or 368(a)(1)(D) of the Code as a result of such action or
actions, then such party (the "Indemnifying Party") shall
indemnify and hold harmless the other party against any and
all federal, state and local taxes, interest, penalties and
additions to Tax imposed upon or incurred by Allegheny, the
Allegheny Group, Supply Holdco or the Supply Holdco Group,
as the case may be, (each such party an "Indemnitee") as a
result of the failure of the Spin-Off of Internal Spin-offs
to so qualify to the extent provided herein.
Section 6.3 Indemnified Liability. For purposes of this
Agreement, the term "Indemnified Liability" means any
liability imposed upon or incurred by (1) Allegheny or any
member of the Allegheny Group for which Allegheny, or any
other member of the Allegheny Group is indemnified and held
harmless under this Section 6, or (2) Supply Holdco or any
member of the Supply Holdco Group, for which Supply Holdco
or any other member of the Supply Holdco Group is
indemnified and held harmless under this Section 6, but
shall not refer to the amount of such liability.
Section 6.4 Amount of Indemnified Liability for Income
Taxes. The amount of an Indemnified Liability for a federal
or state Tax incurred by an Indemnitee based on or
determined with reference to income shall be deemed to be
the amount of Tax computed by multiplying (i) the taxing
jurisdiction's highest effective Tax rate applicable to
Indemnitee of the character subject to Tax as a result of
the failure of the Spin-off or Internal Spin-offs to qualify
as tax-free distributions under Section 355 of the Code for
the taxable period in which the Spin-off or Internal Spin-
offs occur, times (ii) the gain or income of Indemnitee
which is subject to Tax in the taxing jurisdiction as a
result of the failure of the Spin-off or Internal Spin-offs
to qualify under Section 355 of the Code, and (iii) in the
case of a state, times the percentage representing the
extent to which such gain or income is apportioned or
allocated to such state; provided, however, that in the case
of a state Tax determined as a percentage of Federal Income
Tax liability, the amount of Indemnified Liability shall be
deemed to be the amount of Tax computed by multiplying (i)
that state's highest effective rate applicable to Indemnitee
of the character subject to Tax as a result of the failure
of the Spin-off or Internal Spin-offs to qualify as tax-free
distributions under Section 355 of the Code for taxable
period in which the Spin-off or Internal Spin-offs occur,
times (ii) the amount of deemed Federal Income Tax (whether
or not incurred) imposed upon Indemnitee from the failure of
the Spin-off or Internal Spin-offs to qualify under
Section 355 of the Code computed in accordance with this
Section 6.4, times (iii) the percentage representing the
extent to which the gain or income required to be recognized
on the Spin-off or Internal Spin-offs is apportioned to such
state.
Section 6.5 Indemnity Amount. With respect to any
Indemnified Liability, the amount which the Indemnifying
Party shall pay to Indemnitee as indemnification (the
"Indemnity Amount") shall be the sum of (i) the amount of
the Indemnified Liability, as determined under Section 6.4,
(ii) any penalties and interest imposed with respect to the
Indemnified Liability and (iii) an amount such that when the
sum of the amounts set forth in clauses (i), (ii) and this
clause (iii) of this Section 6.5 are reduced by all Taxes
imposed as a result of the receipt of such sum, (taking into
account any related Tax Benefits receivable by the
Indemnitee or any of its Affiliated Companies under any law
or governmental authority) the reduced amount is equal to
the sum of the amounts set forth in clauses (i) and (ii) of
this Section 6.5.
(a) If any increase in Tax for any period for which
indemnification is provided under Section 6 gives rise to a
Tax Asset to an indemnified party or its Affiliated Company,
the Indemnity Amount shall be reduced by the present value
of such Tax Asset computed as of the end of the Tax year
with respect to which the Indemnified Liability arises. For
this purpose, the present value of the Tax Asset shall be
computed by (i) treating the Tax Asset as utilized as and to
the extent it first becomes available (e.g., as any increase
in Tax basis could be depreciated or amortized) to reduce
tax at the maximum rate applicable for that Tax for the Tax
year with respect to which the indemnified Tax arises and
then (ii) discounting the resulting Tax savings to present
value using a discount rate of the higher of the prime rate
as published in The Wall Street Journal or the interest rate
applicable to deficiencies at the end of the Tax year with
respect to which the Indemnified Liability arises.
Section 6.6 Alternate Remedy. Allegheny and Supply
Holdco, respectively, recognize that any failure by it or
any Affiliated Company to comply with their obligations
under this Section 6 may result in additional Taxes which
could cause irreparable harm to Allegheny and its
shareholders, the Allegheny Affiliated Companies, and/or
Supply Holdco and the Supply Holdco Affiliated Companies,
and that such entities may be inadequately compensated by
monetary damages for such failure. Accordingly, if (A) (1)
either party shall fail to comply with any obligation under
this Section 6 which would be reasonably foreseeable to
result in any additional Taxes, and (2) such party shall
fail to provide the other party with a written opinion of a
nationally recognized tax attorney, or a tax accountant that
is a member of a nationally recognized law firm or
accounting firm, that the failure to comply with such
obligation will not result in any increase in Taxes of
Allegheny and its shareholders, any Affiliated Company of
Allegheny, Supply Holdco or any Affiliated Company of Supply
Holdco, as the case may be, which opinion shall have been
provided to such party for its review and approval, such
approval will not be unreasonably withheld, or (B) if it is
probable that the failure by such party to comply with any
such obligation under this Section 6 will result in an
Indemnified Liability under this Agreement and the
Indemnifying Party fails to provide Adequate Assurances to
the Indemnitee of its ability to pay the Indemnity Amount
under this Agreement, then Allegheny or Supply Holdco, as
the case may be, shall be entitled to injunctive relief in
addition to all other remedies.
Section 6.7 Payments.
(a) In General. Except as otherwise provided under
this Agreement, to the extent that the Indemnifying Party
has an indemnification or payment obligation to the
Indemnitee pursuant to this Agreement, the Indemnitee shall
provide the Indemnifying Party with its calculation of the
amount of such indemnification payment. Such calculation
shall provide sufficient detail to permit the Indemnifying
Party to reasonably understand the calculations. All
indemnification payments shall be made to the Indemnitee or
to the appropriate Tax Authority as specified by the
Indemnitee within the time prescribed for payment in this
Agreement, or if no period is prescribed, within thirty (30)
days after delivery by the Indemnitee to the Indemnifying
Party of written notice of a payment or if such liability is
contested pursuant to Section 7.3 of this Agreement, within
thirty (30) days of the incurrence of such an amount based
on a Final Determination, together with a computation of the
amounts due. Any disputes with respect to indemnification
payments shall be resolved in accordance with Section 9.12
of this Agreement.
(b) Electronic Payments. Any payment required under
this Agreement in an amount in excess of one million dollars
($1,000,000.00) shall be made by electronic funds transfer
of immediately available funds.
Section 6.8 Prompt Performance. All actions required to
be taken by any party under this Agreement shall be
performed within the time prescribed for performance in this
Agreement, or if no period is prescribed, such actions shall
be performed promptly.
Section 6.9 Interest. Payments pursuant to this
Agreement that are not made within the period prescribed in
Section 6.7(a) shall bear interest for the period from and
including the date immediately following the last date of
the period through and including the date of payment at a
per annum rate equal to the prime rate as published in The
Wall Street Journal on the date of determination, plus two
percent (2%). Such interest will be payable at the same time
as the payment to which it relates and shall be calculated
on the basis of a year of 365 days and the actual number of
days for which due.
Section 6.10 Duplicative Payment Not Required.
Notwithstanding any other provision of this Agreement, no
payment of an Indemnified Liability shall be required under
Section 6 to the extent it is duplicative of (i) any payment
made pursuant to any other provision of this Agreement, or
(ii) any explicit Tax indemnity provided in the Tax
Allocation Agreement, and any such payment(s) shall be made
as required by such other provisions or agreements.
ARTICLE 7. AUDITS AND CONTEST RIGHTS.
Section 7.1 In General. (a) Upon the termination of
Supply Holdco and the Supply Holdco Group as members of the
Allegheny Consolidated Group, the Tax Allocation Agreement
shall apply with respect to any period in which the income
of the terminating member is included in the Consolidated
Return. The terminating member shall remain liable to
Allegheny for payments required under the Tax Allocation
Agreement, including, but not limited to, payments of Tax
and estimated Tax for periods in which the member's income
is included in the Allegheny Consolidated Return. Subject to
Section 2.2 of this Agreement, the terminating member shall
cooperate and provide reasonable access to books, records
and other information needed in connection with Audits,
administrative proceedings, litigation and other similar
matters related to periods in which the member was a member
of the Allegheny Consolidated Group. Notwithstanding the
foregoing, Supply Holdco and the Supply Holdco Group will
not be required under the Tax Allocation Agreement to pay
more on a combined or consolidated basis than they would
have been required to pay had Supply Holdco or a member of
the Supply Holdco Group filed a separate Federal Income Tax
Return.
(b) Except as otherwise provided in this Agreement, the
respective Filing Party shall have the right to control,
contest, and represent the interests of Allegheny, any
Affiliated Company of Allegheny, Supply Holdco or any
Affiliated Company of Supply Holdco in any Audit relating to
any Tax Return that the Filing Party is responsible for
filing under Section 2.1 of this Agreement and to resolve,
settle or agree to any deficiency, claim or adjustment
proposed, asserted or assessed in connection with or as a
result of any such Audit. The Filing Party's rights shall
extend to any matter pertaining to the management and
control of an Audit, including execution of waivers, choice
of forum, scheduling of conferences and the resolution of
any Tax Item.
Section 7.2 Notice. If, after the date of this
Agreement, Allegheny (or any Affiliated Company of
Allegheny) or Supply Holdco (or any Affiliated Company of
Supply Holdco) receives written notice of, or relating to,
an Audit from a Tax Authority that asserts, proposes or
recommends a deficiency, claim or adjustment that, if
sustained, could result in Taxes for which another party is
responsible under this Agreement, then the party receiving
such notice shall provide a copy of such notice to such
other party within ten (10) days of receipt thereof. Each
party shall forward or cause to be forwarded to the other
party relevant portions of any reports or other
communications which relate to such matters.
Section 7.3 Contests.
(a) Prior to the Distribution Date, Allegheny shall
control any Audit or claim for refund involving any asserted
Tax liability which would give rise to an Indemnification
Liability under Section 6 (any such Audit or claim for
refund relating to an asserted Tax liability are referred to
herein collectively as a "Contest").
(b) Except as otherwise provided in this Agreement,
the respective Filing Party shall have the right to control,
contest, and represent the interest of any member of the
Allegheny Group or any member of the Supply Holdco Group in
any Contest relating to any Tax Return described in
Section 2.1 of this Agreement (other than a Tax Return
described in Section 7.2(c) or (d) below) and, subject to
Section 7.5(b), to resolve, settle or agree to any
deficiency, claim or adjustment proposed, asserted or
assessed in connection with or as a result of any such
Contest. The Filing Party's rights shall extend to any
matter pertaining to the management and control of an Audit,
including execution of waivers, choice of forum, scheduling
of conferences and the resolution of any Tax Item.
(c) Except as otherwise provided herein, after the
Distribution Date, in the case of a Contest that relates to
a Pre-Distribution Period Tax Return (or any item relating
thereto or reported thereon) which would give rise to an
Indemnified Liability under Section 6 of an Indemnifying
Party that is not the Filing Party with respect to such Tax
Return, the Indemnifying Party shall have the right at its
expense to participate in and control the conduct of such
Contest. If the Indemnifying Party does not assume the
defense of any such Contest for a Pre-Distribution Period,
the Filing Party may defend the same in such manner as it
may deem appropriate, including, but not limited to,
settling such Contest after giving five (5) days' prior
written notice to the Indemnifying Party setting forth the
terms and conditions of settlement. In the event of a
Contest covered by the first sentence of this paragraph,
that involves issues (i) relating to a potential adjustment
for which the Indemnifying Party has liability and (ii) that
are required to be dealt with in a proceeding that also
involves separate issues relating to a potential adjustment
for which any Indemnitee would be liable, the Indemnitee
shall have the right at its expense to control the Contest
but only with respect to the latter issues.
(d) With respect to a Contest involving an issue for
which both (i) any member of the Allegheny Group and (ii)
any member of the Supply Holdco Group could be liable, each
party may participate in the Contest, and the Contest may be
controlled by that party which would bear the burden of the
greater portion of the sum of the adjustment and any
corresponding adjustments that may reasonably be anticipated
for future taxable periods. The principle set forth in the
immediately preceding sentence shall govern also for
purposes of deciding any issue that must be decided jointly
(including, without limitation, choice of judicial forum) in
situations in which separate issues are otherwise controlled
under this Section 7.3 by Allegheny and Supply Holdco.
(e) In the case of any Contest, the party that is
controlling the Contest pursuant to Sections 7.3(c) and (d)
(the "Controlling Party"):
(i) in the case of any material correspondence or
filing submitted to the Tax Authority or any judicial
authority that relates to the merits of such deficiency,
claim or adjustment (A) reasonably in advance of such
submission, but subject to applicable time constraints
imposed by such Tax Authority or judicial authority, provide
the other party (the "Non-Controlling Party") with a draft
copy of the portion of such correspondence for filing that
relates to such deficiency, claim or adjustment, (B)
incorporate, subject to applicable time constraints imposed
by such Tax Authority or judicial authority, the Non-
Controlling Party's comments and changes on such draft copy
of such correspondence or filing, and (C) provide the Non-
Controlling Party with a final copy of the portion of such
correspondence or filing that relates to such deficiency,
claim or adjustment; and
(ii) provide the Non-Controlling Party with notice
reasonably in advance of, and the Non-Controlling Party
shall have the right to attend, any meetings with the Tax
Authority (including meetings with examiners) or hearings or
proceedings before any judicial authority to the extent they
relate to such deficiency, claim or adjustment.
Section 7.4 Judicial Appeals.
In the event that a judgment of the United States Tax
Court or other court of competent jurisdiction results in an
adverse determination with respect to a matter described in
Section 7.3(c) and (d) then, subject to Section 7.5(b):
(a) In the case of an appeal of an adverse
determination, which involves no material issues other than
matters for which the Non-Filing Party would be the
Indemnifying Party pursuant to Section 6, the Non-Filing
Party shall have the right to cause the Filing Party to
appeal from such adverse determination.
(b) In the case of an appeal of any other adverse
determination which involves material issues other than
those for which the Non-Filing Party would be the
Indemnifying Party pursuant to Section 6, the Non-Filing
Party shall have the right to cause the Filing Party to
appeal from such adverse determination if the Non-Filing
Party delivers to the Filing Party an opinion from an
independent tax counsel selected by the Non-Filing Party and
reasonably acceptable to the Filing Party that it is more
likely than not that such appeal will succeed and the amount
in controversy exceeds $100,000.
(c) In the case of an adverse determination which
involves matters for which the Filing Party would be the
Indemnifying Party pursuant to Section 6 and within such
determination material matters for which the Non-Filing
Party would be the Indemnifying Party pursuant to Section 6
were favorably disposed, the Non-Filing Party shall have the
right to prevent the Filing Party from appealing from such
adverse determination unless the filing Party delivers to
the Non-Filing Party an opinion from an independent tax
counsel selected by the Filing Party and reasonably
acceptable to the Non-Filing Party that it is more likely
than not that such appeal will succeed.
(d) If the Non-Filing Party causes the Filing Party to
appeal any adverse determination pursuant to this
Section 7.4, the Non-Filing Party shall pay the reasonable
costs, including legal fees, of the Filing Party incurred in
such appeal.
Section 7.5 Limitations.
(a) In General. The Filing Party shall have no
obligation to contest, or to continue to contest, any
deficiency, claim or adjustment in accordance with
Section 7.3, and the Non-Filing Party shall have no right to
control or participate under Section 7.3 of this Agreement
unless:
(i) within thirty (30) days of a reasonable request by
the Filing Party, the Non-Filing Party shall deliver to the
Filing Party a written opinion of a nationally recognized
tax attorney or tax accountant that is a member of a
recognized law firm or accounting firm, to the effect that
the Non-Filing Party's position with respect to such
deficiency, claim or adjustment is supported by a reasonable
basis (within the meaning of Treasury Regulations
Section 1.6662-3(b)(3));
(ii) the Non-Filing Party shall have agreed to be bound
by a Final Determination of such deficiency, claim or
adjustment;
(iii) the Non-Filing Party shall have agreed to pay, and
shall be currently paying, all reasonable out of pocket
costs and expenses incurred by the Filing Party to contest
such deficiency, claim or assessment including reasonable
outside attorneys', accountants' and investigatory fees and
disbursements;
(iv) the Non-Filing Party shall have advanced to the
Filing Party, on an interest-free basis (and with no
additional net after-tax cost to the Filing Party), the
amount of Tax in controversy (but not in excess of the
lesser of (A) the amount of Tax for which the Non-Filing
Party could be liable under this Agreement or (B) the
amounts actually expended by the Filing Party for this item)
to the extent necessary for the contest to proceed in the
forum selected by the Filing Party;
(v) the Non-Filing Party shall have provided to the
Filing Party all documents and information, and shall have
made available employees and officers of the Non-Filing
Party, as may be necessary, useful or reasonably required by
the Filing Party in contesting such deficiency, claim or
adjustment; and
(vi) the contest of such deficiency, claim or
adjustment shall involve no material danger of the sale,
forfeiture or loss of, or the creation of any lien on, any
asset of the Filing Party (except if the Non-Filing Party
shall have adequately bonded such lien or otherwise made
provision to protect the interests of the Filing Party in a
manner reasonably satisfactory to the Filing Party).
(b) Settlement. Notwithstanding Section 7.5(a), the
Filing Party may resolve, settle or agree to any deficiency,
claim or adjustment proposed, asserted or assessed in
connection with any Audit of any Tax Return that it is
responsible for filing under Section 2.1 of this Agreement
if the Filing Party has provided the Non-Filing Party with a
reasonable opportunity to review a copy of that portion of
the settlement or compromise proposal which relates to the
claim for which the Filing Party is seeking indemnification
hereunder; provided, that if (a) the Filing Party fails to
provide the Non-Filing Party such a reasonable opportunity
to review such portion of such proposal, or (b) after such
reasonable opportunity to review such proposal the Non-
Filing Party in writing reasonably withholds its consent to
all or part of such settlement or compromise proposal, then,
unless the Filing Party was not required to continue the
applicable contest under the terms of Section 7.5(a), the
Non-Filing Party shall not be obligated to indemnify the
Filing Party hereunder to the extent of the amount
attributable to the loss to which such settlement or
compromise relates as to which the Non-Filing Party has
reasonably withheld its consent, or with respect to any
other loss for which a successful contest is foreclosed
because of such settlement or compromise as to which the Non-
Filing Party has reasonably withheld its consent. If the
Filing Party effects a settlement or compromise of such
contest, notwithstanding that the Non-Filing Party has
reasonably withheld its consent thereto, the Filing Party
shall repay to the Non-Filing Party such amounts that the
Non-Filing Party advanced pursuant to clause (a)(4) of this
Section 7.5 hereof as relate to such claim, to the extent
that the Non-Filing Party has reasonably withheld its
consent to the settlement or compromise thereof (together
with interest at the prime rate as published in the Wall
Street Journal on any such amount paid by the Non-Filing
Party from the date paid by the Non-Filing Party to the date
repaid by the Filing Party).
(c) Waiver. Notwithstanding any other provision of
this Section 7.5, the Filing Party may resolve, settle, or
agree to any deficiency, claim or adjustment for any taxable
period if the Filing Party waives its right to indemnity
with respect to such Tax Item. In such event, the Filing
Party shall promptly reimburse the Non-Filing Party for all
amounts previously advanced by the Non-Filing Party to the
Filing Party in connection with such deficiency, claim or
adjustment under Section 7.5(a)(4) of this Agreement. In
addition, the Filing Party shall reimburse the Non-Filing
Party for any Tax Detriment that directly results from the
settlement of such deficiency, claim or adjustment. No
waiver by the Filing Party under this Section 7.5(c) with
respect to any deficiency, claim or adjustment relating to
any single Tax Item, position, issue or transaction or
relating to any single Tax for any one taxable period shall
operate as a waiver with respect to any other deficiency,
claim or adjustment.
Section 7.6 Failure to Notify. The failure of the Filing
Party promptly to notify the Non-Filing Party of any matter
relating to a particular Tax for a taxable period or to take
any action specified in Section 7.3 of this Agreement shall
not relieve the Non-Filing Party of any liability and/or
obligation which it may have to the Filing Party under this
Agreement with respect to such Tax for such taxable period
except to the extent that the Non-Filing Party's rights
hereunder are materially prejudiced by such failure, and in
no event shall such failure relieve the Non-Filing Party of
any other liability and/or obligation which it may have to
the Filing Party.
Section 7.7 Remedies. Except as otherwise provided in
this Agreement, the parties hereby agree that the sole and
exclusive remedy for a breach by the Filing Party of the
Filing Party's obligations to the Non-Filing Party with
respect to a deficiency, claim or adjustment relating to the
redetermination of a Tax Item of the Non-Filing Party for a
taxable period shall first be a reduction in the amount that
would otherwise be payable by the Non-Filing Party for such
taxable period and then an increase in amount that would
otherwise be payable by the Filing Party for such taxable
period, in either case because of the breach. The parties
further agree that no claim against the Filing Party and no
defense to the Non-Filing Party's liabilities to the Filing
Party under this Agreement shall arise from the resolution
by the Filing Party of any deficiency, claim or adjustment
relating to the redetermination of any Tax Item of the
Filing Party.
ARTICLE 8. STOCK OPTIONS.
Section 8.1 In General. The parties hereto agree that
Allegheny shall be entitled to any Tax Benefit arising by
reason of exercises of Options to purchase shares of
Allegheny stock, and that Supply Holdco shall be entitled to
any Tax Benefit arising by reason of exercises of Options to
purchase shares of Supply Holdco stock. The parties hereto
agree to report all Tax deductions with respect to stock
options and other equity issued to their employees
consistently with this Section 8.1, to the extent permitted
by the Tax Law.
Section 8.2 Notices, Withholding, Reporting. Allegheny
shall promptly notify Supply Holdco of any Post-Separation
Date event giving rise to income to any Supply Holdco Group
employees or former employees in connection with exercises
of options to purchase shares of Allegheny stock. If
required by the Tax Law, Supply Holdco shall withhold
applicable Taxes and satisfy applicable Tax reporting
obligations in connection therewith.
Section 8.3 Adjustments. If Supply Holdco or any
Affiliated Company of Supply Holdco receives any Tax Benefit
to which Allegheny is entitled under Section 8.1 of this
Agreement, Supply Holdco shall pay the amount of such Tax
Benefit to Allegheny. If Allegheny or any Affiliated Company
of Allegheny receives any Tax Benefit to which Supply Holdco
is entitled under Section 8.1 of this Agreement, Allegheny
shall pay the amount of such Tax Benefit to Supply Holdco.
ARTICLE 9. MISCELLANEOUS
Section 9.1 Effectiveness. This Agreement shall become
effective upon execution by the parties hereto.
Section 9.2 Notices. Any notice, request, instruction or
other document to be given or delivered under this Agreement
by any party to another party shall be in writing and shall
be deemed to have been duly given or delivered when (a)
delivered in person, (b) deposited in the United States
mail, postage prepaid and sent certified mail, return
receipt requested, (c) delivered to Federal Express or
similar service for overnight delivery, or (d) sent by any
means of electronic message transmission with delivery
confirmed (by voice or otherwise), to the parties at the
following addresses:
if to Allegheny or any Affiliated Company of Allegheny:
Allegheny Energy, Inc.
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Attention: General Counsel
if to Supply Holdco or any Affiliated Company of Supply
Holdco:
[____________]
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▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: General Counsel
Any party may, by written notice to the other parties,
change the address or the party to which any notice,
request, instruction or other document is to be delivered.
Section 9.3 Changes in Law.
(a) Any reference to a provision of the Code or a law
of another jurisdiction shall include a reference to any
applicable successor provision or law.
(b) If, due to any change in applicable law or
regulations or their interpretation by any court of law or
other governing body having jurisdiction subsequent to the
date of this Agreement, performance of any provision of this
Agreement or any transaction contemplated thereby shall
become impracticable or impossible, the parties hereto shall
use their commercially reasonable efforts to find and employ
an alternative means to achieve the same or substantially
the same result as that contemplated by such provision.
Section 9.4 Confidentiality. For a period of three
years, commencing on the date of this Agreement, each party
shall hold and cause its directors, officers, employees,
advisors and consultants to hold in strict confidence,
unless compelled to disclose by judicial or administrative
process or, in the opinion of its counsel, by other
requirements of law, all information (other than any such
information relating solely to the business or affairs of
such party) concerning the other parties hereto furnished it
by such other party or its representatives pursuant to this
Agreement (except to the extent that such information can be
shown to have been (a) in the public domain through no fault
of such party or (b) later lawfully acquired from other
sources not under a duty of confidentiality by the party to
which it was furnished), and each party shall not release or
disclose such information to any other person, except its
directors, officers, employees, auditors, attorneys,
financial advisors, bankers and other consultants who shall
be advised of and agree to be bound by the provisions of
this Section 9.4. Each party shall be deemed to have
satisfied its obligation to hold confidential information
concerning or supplied by the other party if it exercises
the same care as it takes to preserve confidentiality for
its own similar information.
Section 9.5 Consent. Whenever this Agreement specifies
that consent is not to be unreasonably withheld, the
determination shall take into account, among other things,
the relative amount of potential Tax exposure or refund
involved for the members of the Allegheny Group on the one
hand and the members of the Supply Holdco Group on the other
hand, and if the consent relates to bringing proceedings in
one venue rather than another, the impact on such decision
on such interests of each group. Any controversy over
refusal of consent shall be resolved pursuant to
Section 9.12 of this Agreement.
Section 9.6 Successors. This Agreement shall be binding
on and inure to the benefit and detriment of any successor,
by merger, acquisition of assets or otherwise, to any of the
parties hereto, to the same extent as if such successor had
been an original party.
Section 9.7 Assignment. Except for assignments or
transfers by operation of law, this Agreement shall not be
assignable, in whole or in part, directly or indirectly, by
any party hereto without the prior written consent of the
other party hereto, which consent will not be unreasonably
withheld, and any attempt to assign any rights or
obligations arising under this Agreement without such
consent shall be void.
Section 9.8 Affiliated Companies. Allegheny shall cause
to be performed, and hereby guarantees the performance of,
all actions, agreements and obligations set forth herein to
be performed by any Affiliated Company of Allegheny, and
Supply Holdco shall cause to be performed, and hereby
guarantees the performance of, all actions, agreements and
obligations set forth herein to be performed by any
Affiliated Company of Supply Holdco.
Section 9.9 Authorization, Etc. Each of the parties
hereto hereby represents and warrants that it has the power
and authority to execute, deliver and perform this
Agreement, that this Agreement has been duly authorized by
all necessary corporate action on the part of such party,
that this Agreement constitutes a legal, valid and binding
obligation of each such party and that the execution,
delivery and performance of this Agreement by such party
does not contravene or conflict with any provision of law or
of its charter or bylaws or any agreement, instrument or
order binding on such party.
Section 9.10 Entire Agreement. This Agreement and the Tax
Allocation Agreement contains the entire agreement among the
parties hereto with respect to the subject matter hereof and
shall supersede all previous negotiations, commitments and
writings with respect to such subject matter.
Section 9.11 Governing Law; Jurisdiction. This Agreement
shall be governed by and construed and enforced in
accordance with the laws of the State of Maryland as to all
matters regardless of the law that might otherwise govern
under the principles of conflicts of law applicable thereto.
Section 9.12 Dispute Resolution. Senior financial
management of the parties shall make good faith reasonable
efforts to resolve any disagreement by mutual agreement. If
either party reasonably determines that such efforts will
not resolve the dispute, such party shall provide notice to
that effect to the other party ("Notice"). Any disagreement
not resolved by mutual agreement of the parties shall be
resolved by an independent referee that is mutually
acceptable to the parties hereto (a "Referee"). In the
event the parties cannot agree on a Referee within 10 days
of the date of the above Notice described in paragraph (a)
each party shall select within 5 days an independent
nationally recognized law firm or accounting firm expert in
tax matters and such firms shall jointly choose the Referee.
The Referee so chosen shall consider the magnitude and size
of the item in question, the impact of the resolution on
other taxable periods of the Allegheny Group and the Supply
Holdco Group and the likelihood of a group's position
ultimately prevailing, and otherwise shall resolve any such
disagreement pursuant to such procedures as it may deem
advisable. The Referee shall render its decision within 30
days unless another time period is specified herein or is
mutually agreed upon by Allegheny and Supply Holdco. Any
such resolution shall be binding on the parties hereto
without further recourse.
(a) Costs. The costs of any Referee shall be
apportioned between Allegheny and Supply Holdco as
determined by such referee in such manner as the Referee
deems reasonable, taking into account the circumstances of
the dispute, the conduct of the parties and the result of
the dispute.
Section 9.13 The resolution of any and all disputes
arising from or in connection with this Agreement shall be
governed by and settled in accordance with the provisions of
Section 6.7 of the Separation Agreement; provided, however,
that at the request of Allegheny or Supply Holdco, a
nationally recognized tax attorney or tax accountant that is
a member of a nationally recognized law firm or accounting
firm, which firm is independent of both parties, will be
appointed for purposes of the non-binding mediation
procedures described in Section 6.7(b) of the Separation
Agreement.
Section 9.14 Counterparts. This Agreement may be executed
in any number of counterparts, each of which shall be deemed
an original, but all of which together shall constitute one
and the same Agreement.
Section 9.15 Severability. If any term, provision,
covenant, or restriction of this Agreement is held by a
court of competent jurisdiction (or an arbitrator or
arbitration panel) to be invalid, void, or unenforceable,
the remainder of the terms, provisions, covenants, and
restrictions set forth herein shall remain in full force and
effect, and shall in no way be affected, impaired, or
invalidated. It is hereby stipulated and declared to be the
intention of the parties that they would have executed the
remaining terms, provisions, covenants, and restrictions
without including any of such which may be hereafter
declared invalid, void, or unenforceable. In the event that
any such term, provision, covenant or restriction is held to
be invalid, void or unenforceable, the parties hereto shall
use their best efforts to find and employ an alternate means
to achieve the same or substantially the same result as that
contemplated by such terms, provisions, covenant, or
restriction.
Section 9.16 No Third Party Beneficiaries. This Agreement
is solely for the benefit of Allegheny, the Allegheny
Affiliated Companies, Supply Holdco and the Supply Holdco
Affiliated Companies. This Agreement should not be deemed to
confer upon third parties any remedy, claim, liability,
reimbursement, cause of action or other rights in excess of
those existing without this Agreement.
Section 9.17 Waivers. No failure or delay on the part of
the parties in exercising any power or right hereunder shall
operate as a waiver thereof, nor shall any single or partial
exercise of any such right or power, or any abandonment or
discontinuance of steps to enforce such right or power,
preclude any other or further exercise thereof or the
exercise of any other right or power. No modification or
waiver of any provision of this Agreement nor consent to any
departure by the parties there from shall in any event be
effective unless the same shall be in writing.
Section 9.18 Setoff. All payments to be made by any party
under this Agreement may be netted against payments due to
such party under this Agreement, but otherwise shall be made
without setoff, counterclaim or withholding, all of which
are hereby expressly waived.
Section 9.19 Amendments. This Agreement may not be
modified or amended except by an agreement in writing signed
by each of the parties hereto.
Section 9.20 Title and Headings. Titles and headings to
sections herein are inserted for the convenience of
reference only and are not intended to be a part of or to
affect the meaning or interpretation of this Agreement.
IN WITNESS WHEREOF, each of the parties hereto has
caused this Agreement to be executed by a duly authorized
officer as of the date first above written.
ALLEGHENY ENERGY, INC.
On behalf of itself and the
Allegheny Affiliated Companies
By:___________________________
Name:
Title:
[ ]
On behalf of itself and the
Supply Holdco Affiliated
Companies
By:___________________________
Name:
Title: