Exhibit B-2
Exhibit D to the Master Separation and Distribution
Agreement
EMPLOYEE MATTERS AGREEMENT
EMPLOYEE MATTERS AGREEMENT
BETWEEN
ALLEGHENY ENERGY, INC.
AND
[SUPPLY HOLDCO]
TABLE OF CONTENTS
ARTICLE 1 DEFINITIONS
ARTICLE 2 GENERAL PRINCIPLES
SECTION 2.1 ASSUMPTION OF LIABILITIES AND TRANSFER OF PLAN ASSETS 7
SECTION 2.2 ESTABLISHMENT OF PLANS 7
SECTION 2.3 ALLEGHENY PLANS 8
SECTION 2.4 PARTICIPATION BY SUPPLY HOLDCO EMPLOYEES IN ALLEGHENY
PLANS 9
ARTICLE 3 DEFINED BENEFIT PLAN
SECTION 3.1 ESTABLISHMENT OF MASTER PENSION PLAN TRUST 10
SECTION 3.2 ASSUMPTION OF PENSION PLAN 10
SECTION 3.3 NO DISTRIBUTIONS TO SUPPLY HOLDCO EMPLOYEES 11
ARTICLE 4 DEFINED CONTRIBUTION PLANS
SECTION 4.1 EMPLOYEE STOCK OWNERSHIP AND SAVINGS PLAN 11
SECTION 4.2 CONTRIBUTIONS DISCONTINUED 11
SECTION 4.3 DISCRETIONARY PLAN DESIGN 11
ARTICLE 5 NON-QUALIFIED AND OTHER PLANS
SECTION 5.1 DEFERRED COMPENSATION PLAN 11
SECTION 5.2 SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN 12
SECTION 5.3 SUPPLY HOLDCO CHANGE IN CONTROL PROGRAMS 12
SECTION 5.4 SEVERANCE PLAN 12
ARTICLE 6 HEALTH AND WELFARE PLANS
SECTION 6.1 ASSUMPTION OF HEALTH AND WELFARE PLAN LIABILITIES 13
SECTION 6.2 CLAIMS FOR HEALTH AND WELFARE PLANS 13
SECTION 6.3 POST-SEPARATION TRANSITIONAL ARRANGEMENTS 13
SECTION 6.4 VENDOR AND INSURANCE ARRANGEMENTS 14
SECTION 6.5 ASSET ALLOCATION AND TRANSFERS FOR POST-RETIREMENT
MEDICAL AND LIFE INSURANCE BENEFITS 15
SECTION 6.6 ELIP 16
SECTION 6.7 LEAVE OF ABSENCE PROGRAMS AND FMLA 16
SECTION 6.8 ALLEGHENY WORKERS' COMPENSATION PROGRAM 16
ARTICLE 7 EQUITY AND OTHER COMPENSATION
SECTION 7.1 SHORT-TERM INCENTIVE PLAN 17
SECTION 7.2 LONG-TERM INCENTIVE PLAN 18
SECTION 7.3 ALLEGHENY PERFORMANCE SHARE PLAN 18
SECTION 7.4 ALLEGHENY STOCK OPTION PLAN 18
SECTION 7.5 CORPORATE VARIABLE PAY PROGRAM 18
SECTION 7.6 DESCRETIONARY PLAN DESIGN 18
ARTICLE 8 FRINGE AND OTHER BENEFITS
SECTION 8.1 EMPLOYEE ASSISTANCE PROGRAM 18
SECTION 8.2 EDUCATIONAL ASSISTANCE PROGRAM 19
SECTION 8.3 RELOCATION 19
SECTION 8.4 OTHER BENEFITS 19
ARTICLE 9 DIRECTOR COMPENSATION PROGRAM
SECTION 9.1 ESTABLISHMENT OF SUPPLY HOLDCO DIRECTOR COMPENSATION
PROGRAM 19
SECTION 9.2 PARTICIPATION IN SUPPLY HOLDCO DIRECTOR COMPENSATION
PROGRAM 19
SECTION 9.3 ANNUAL RETAINER 19
SECTION 9.4 MEETING FEES 20
SECTION 9.5 PLAN FOR DEFERRAL OF COMPENSATION OF DIRECTORS 20
SECTION 9.6 DEFERRED STOCK UNIT PLAN FOR OUTSIDE DIRECTORS 20
SECTION 9.7 STOCK OPTIONS 20
SECTION 9.8 RESTRICTED STOCK PLAN FOR OUTSIDE DIRECTORS 20
SECTION 9.9 DIRECTOR 20
ARTICLE 10 TRANSITION
SECTION 10.1 TRANSITIONAL SERVICES AGREEMENT 20
SECTION 10.2 PAYMENT OF LIABILITIES, PLAN EXPENSES AND RELATED
MATTERS 21
SECTION 10.3 SHARING OF PARTICIPANT INFORMATION 21
SECTION 10.4 REPORTING AND DISCLOSURE COMMUNICATIONS TO
PARTICIPANTS 21
SECTION 10.5 AUDITS REGARDING VENDOR CONTRACTS 22
SECTION 10.6 BENEFICIARY DESIGNATIONS 22
SECTION 10.7 REQUESTS FOR IRS AND DOL OPINIONS 22
SECTION 10.8 FIDUCIARY MATTERS 22
SECTION 10.9 CONSENT OF THIRD PARTIES 22
SECTION 10.10 TAX COOPERATION 23
SECTION 10.11 PLAN RETURNS 23
ARTICLE 11 EMPLOYMENT-RELATED MATTERS
SECTION 11.1 TERMS OF SUPPLY HOLDCO EMPLOYMENT 23
SECTION 11.2 HR DATA SUPPORT SYSTEMS 23
SECTION 11.3 EMPLOYMENT OF EMPLOYEES WITH U.S. WORK VISAS 23
SECTION 11.4 CONFIDENTIALITY AND PROPRIETARY INFORMATION 23
SECTION 11.5 ACCRUED PAYROLL, BONUSES, PROFIT SHARING AND
COMMISSIONS 28
SECTION 11.6 PAYROLL AND WITHHOLDING 28
SECTION 11.7 PERSONNEL AND PAY RECORDS 28
SECTION 11.8 NON-TERMINATION OF EMPLOYMENT; NO THIRD-PARTY
BENEFICIARIES 29
SECTION 11.9 EMPLOYMENT LITIGATION 29
ARTICLE 12 DISPUTE RESOLUTION
ARTICLE 13 GENERAL PROVISIONS
SECTION 13.1 EFFECT IF IPO AND/OR DISTRIBUTION DOES NOT OCCUR 30
SECTION 13.2 RELATIONSHIP OF THE PARTIES 30
SECTION 13.3 AFFILIATED COMPANIES 30
SECTION 13.4 INCORPORATION OF MASTER SEPARATION AGREEMENT
PROVISIONS 30
SECTION 13.5 GOVERNING LAW 30
SECTION 13.6 SEVERABILITY 30
SECTION 13.7 AMENDMENT 31
SECTION 13.8 TERMINATION 31
SECTION 13.9 CONFLICT 31
SECTION 13.10 DESCRIPTIVE HEADINGS 31
SECTION 13.11 COUNTERPARTS 31
EMPLOYEE MATTERS AGREEMENT
EMPLOYEE MATTERS AGREEMENT (the "Agreement"), dated as
of __________, 2001, between Allegheny Energy, Inc.
("Allegheny") and [________], a Maryland corporation
("Supply Holdco").
RECITALS
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 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; and
WHEREAS, in connection with the foregoing, the parties
desire to enter into this Agreement to allocate between them
assets, liabilities and responsibilities with respect to
certain employee compensation, benefit plans and programs,
and other employee 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. When
"Allegheny" immediately precedes a defined term it shall
mean the plans and programs of Allegheny. When "Supply
Holdco" immediately precedes a defined term it shall mean
the plans or programs of Supply Holdco or the plans and
programs to be established and maintained by Supply Holdco.
"ADA" means the Americans with Disabilities Act of
1990, as amended.
"AE Supply" means Allegheny Energy Supply Company, LLC,
a Delaware limited liability company that was merged into
Supply Holdco with Supply Holdco as the surviving entity.
"Allegheny" means Allegheny Energy, Inc., a Maryland
corporation. Each reference to Allegheny in this Agreement
shall also be deemed to include a reference to each member
of the Allegheny System unless it specifically provides
otherwise; provided, however that Allegheny shall be solely
responsible to Supply Holdco for ensuring that each member
of the Allegheny System complies with the applicable terms
of this Agreement.
"Allegheny Employee" means an individual who, on the
Separation Date or other date as agreed upon by Allegheny
and Supply Holdco, is or was employed within the Allegheny
System and is not a Supply Holdco Employee. Allegheny
Employee shall include Allegheny Retired Employees and
Allegheny Terminated Employees.
"Allegheny Indemnitees" means Allegheny, each member of
the Allegheny System and each of their respective directors,
officers and employees.
"Allegheny Retired Employee" means any Allegheny
Employee and any Supply Holdco Employee who retired on or
before the Distribution Date. Allegheny Retired Employee
shall include an alternate payee under a QDRO, alternate
recipient under a QMCSO, beneficiary, covered dependent, or
qualified beneficiary of an Allegheny Employee or Supply
Holdco Employee who retired on or before the Distribution
Date.
"Allegheny System" means all subsidiary, affiliate and
associate companies of Allegheny as defined under the Public
Utility Holding Company Act of 1935, as amended, and the
Rules under such Act.
"Allegheny Terminated Employee" means any individual
who is a former employee of the Allegheny System and any
individual who is a former employee of Supply Holdco on the
Distribution Date. Allegheny Terminated Employee shall
include an alternate payee under a QDRO, alternate recipient
under a QMCSO, beneficiary, covered dependent, or qualified
beneficiary of a former employee of the Allegheny System or
Supply Holdco on the Distribution Date, but shall not
include any Supply Holdco Employee.
"Asbestos Claim" means any past, present or future
claim, demand, request, complaint, cross-complaint, cross-
claim, right, suit, lawsuit, action or proceeding or cause
of action or order seeking monetary relief (including,
without limitation, punitive or exemplary damages) or other
relief (including, without limitation, medical monitoring,
injunctive or declaratory relief) allegedly caused by,
arising out of (including, without limitation, whether
arising out of any contract or tort based on negligence or
strict liability), or relating to, in whole or in part, any
exposure to asbestos.
"ASO Contracts" is defined in Section 6.4.
"Change in Control Programs" means the individual
change in control agreements entered into from time to time
with executives.
"COBRA" means the continuation coverage requirements
for "group health plans" under Title X of the Consolidated
Omnibus Budget Reconciliation Act of 1985, as amended, and
as codified in Code Section 4980B and ERISA Sections 601
through 608.
"Corporate Variable Pay Program" means the annual
incentive compensation plan covering all nonunion employees,
and employees represented by a collective bargaining unit
which has negotiated for their participation, exclusive of
employees participating in the Short-Term Incentive Plan,
and other business-specific variable compensation programs.
"Deferred Incentive Compensation Plan" means the plan
under which any executive who is a participant in the Short-
Term Incentive Plan may elect to defer receipt of all or a
portion of an award received under the Short-Term Incentive
Plan.
"Deferred Stock Unit Plan for Outside Directors" means
the plan under which a lump sum payment (calculated by
reference to the price of the company's common stock) is
provided to eligible directors.
"Director Compensation Program" means the plans and
programs under which a director is compensated for services.
"DOL" means the United States Department of Labor.
"Effective Date" is defined in Section 3.2(a).
"ELIP" means the Executive Life Insurance Plan under
which life insurance policies were issued to certain
eligible executives.
"Employment Liabilities" means all claims, causes of
action, demands, liabilities, debts or damages (known or
unknown) related to all employment matters addressed in this
Agreement, including but not limited to claims arising under
ERISA, the Code, claims for breach of contract, breach of
fiduciary duty, promissory estoppel, equitable estoppel;
claims for violation of any other federal or state statute
or regulation or local ordinance; claims for lost or unpaid
wages or other employee benefits; claims under the ADA;
claims under the FMLA; claims under Title VII of the Civil
Rights Act of 1964, as amended; and claims under state law
for intentional infliction of emotional distress, pain,
suffering or anxiety, negligence, outrageous conduct,
invasion of privacy, harassment, assault, battery,
defamation, slander, libel, wrongful or constructive
discharge or any other actions arising in tort or contract.
"Environmental Claim" means any and all administrative
or judicial actions, suits, orders, claims, liens, notices
of violation, investigations, complaints, requests for
information, proceedings or other written communication,
whether criminal or civil, by any Person based upon,
alleging, asserting, or claiming any (a) violation of, or
liability under any environmental law, (b) violation of any
permit, or (c) liability for investigatory costs, cleanup
costs, removal costs, remedial costs, response costs,
natural resource damages, property damage, personal injury,
fines, or penalties arising out of, based upon, resulting
from or related to, the presence, release, or threatened
release into the environment of any hazardous materials or
any other environmental condition.
"ERISA" means the Employee Retirement Income Security
Act of 1974, as amended.
"ESOSP" means the Employee Stock Ownership and Savings
Plan, a defined contribution plan.
"FMLA" means the Family and Medical Leave Act of 1993,
as amended.
"Fringe Benefits" means other miscellaneous benefits,
plans, programs and arrangements as described in Article 8.
"Group Insurance Policies" is defined in Section 6.4.
"HCFA" means the United States Health Care Financing
Administration.
"Health and Welfare Plans" means the health and welfare
plans established and maintained for the benefit of
employees and retirees, and such other welfare plans or
programs as may apply to such employees and retirees as of
the Separation Date or other date as agreed upon by
Allegheny and Supply Holdco.
"Indemnification and Insurance Matters Agreement"
means the Indemnification and Insurance Matters Agreement
between Allegheny and Supply Holdco.
"IRS" means the United States Internal Revenue Service.
"Leave of Absence Programs" means the personal,
medical, military and FMLA leave offered from time to time
under the personnel policies and practices.
"Long-Term Incentive Plan" means the Long-Term
Incentive Plan which is comprised of, but not limited to,
the following components: the Performance Share Plan and
the Stock Option Plan.
"Liabilities" means all debts, liabilities, guarantees,
assurances, commitments, and obligations, whether fixed,
contingent or absolute, asserted or unasserted, matured or
unmatured, liquidated or unliquidated, accrued or not
accrued, known or unknown, due or to become due, whenever or
however arising (including, without limitation, whether
arising out of any Contract or tort based on negligence or
strict liability) and whether or not the same would be
required by generally accepted accounting principles and
accounting policies to be reflected in financial statements
or disclosed in the notes thereto. "Contract" means any
contract, agreement, lease, license, sales order, purchase
order, instrument or other commitment that is binding on any
Person or any part of its property under applicable law.
"Master Separation Agreement" means the Master
Separation and Distribution Agreement between Allegheny and
Supply Holdco.
"Master Trust" means a master trust which is intended
to be qualified under Code Section 401(a) and exempt from
taxation under Code Section 501(a)(1).
"Non-Qualified Plans" means the SERP and the Deferred
Incentive Compensation Plan.
"Outsource" is defined in Subsection 6.2(b).
"Participating Company" means: (a) Allegheny; (b) any
Person (other than an individual) that Allegheny has
approved for participation in, has accepted participation
in, and which is participating in, a Plan sponsored by
Allegheny; or (c) any Person (other than an individual)
which, by the terms of such Plan, participates in such Plan
or any employees of which, by the terms of such Plan,
participate in or are covered by such Plan.
"PBGC" means the Pension Benefit Guaranty Corporation.
"Pension Plan" means the defined benefit plan.
"Performance Share Plan" means the component of the
Long-Term Incentive Plan under which performance shares are
issued and held by employees.
"Plan" means any plan, policy, program, payroll
practice, arrangement, contract, trust, insurance policy, or
any agreement or funding vehicle providing compensation or
benefits to employees, former employees or directors of
Allegheny or Supply Holdco.
"Plan for Deferral of Compensation of Directors" means
the plan under which any director may defer receipt of all
or a portion of the annual retainer and meeting fees.
"Post-Retirement Programs" means the plans that permit
certain retirees and their eligible spouses and dependents
to continue to receive coverage and benefits under certain
Health and Welfare Plans.
"QDRO" means a domestic relations order, which
qualifies under Code Section 414(p) and ERISA Section 206(d)
and which creates or recognizes an alternate payee's right
to, or assigns to an alternate payee, all or a portion of
the benefits payable to a participant under any of the
Allegheny Retirement Plans.
"QMCSO" means a medical child support order that
qualifies under ERISA Section 609(a) and which creates or
recognizes the existence of an alternate recipient's right
to, or assigns to an alternate recipient the right to,
receive benefits for which a participant or beneficiary is
eligible under any of the Health Plans.
"Replacement Options" is defined in Section 7.4.
"Retirement Plans" means the Pension Plan and the
ESOSP.
"SBP" means the Secured Benefit Plan which is the
secured SERP arrangement applicable to all active employees
who participate in the SERP on and after January 1, 1993.
"SERP" means the Supplemental Executive Retirement
Plan.
"Severance Plan" means any separation allowance plan
that provides for benefits to eligible employees.
"Short-Term Incentive Plan" means the annual incentive
compensation plan under which certain executives receive
awards on the basis of corporate, group/function and
individual performance.
"Stock Option Plan" means the component of the Long-
Term Incentive Plan under which stock options are granted
and held by employees.
"Supply Holdco Employee" means an individual who, as of
the Separation Date or other date as agreed upon by
Allegheny and Supply Holdco, is:
(i) employed by Supply Holdco;
(ii) on leave of absence from Supply Holdco;
(iii) on worker's compensation or long-term disability,
and if released to return to work, would return to work for
Supply Holdco; or
(iv) an alternate payee under a QDRO, alternate recipient
under a QMCSO, beneficiary, covered dependent, or qualified
beneficiary of an employee described in Subsection (i),
(ii), or (iii) above;
but who is not an Allegheny Employee.
"Supply Holdco Indemnitees" means Supply Holdco, each
member of the Supply Holdco Group and each of their
respective directors, officers and employees.
"Supply Holdco WCP Claims" means all claims that are,
or have been, incurred under Supply Holdco WCP by Supply
Holdco Employees.
"Tax Indemnification Agreement" means the Tax
Indemnification Agreement between Allegheny and Supply
Holdco.
"Transitional Services Agreement" means the
Transitional Services Agreement between Allegheny and Supply
Holdco.
"VEBA" means Voluntary Employees' Beneficiary
Association established pursuant to IRC Section 501(c)(9) as
a funding arrangement for subsidized medical and life
insurance benefits to certain employees in retirement.
"WCP" means the Workers' Compensation Program comprised
of the various arrangements established to comply with the
workers' compensation requirements of the states in which
the Allegheny System conducts business.
ARTICLE 2
GENERAL PRINCIPLES
SECTION 2.1 Assumption Of Liabilities And Transfer Of
Plan Assets.
(a) Assumption Of Liabilities. Except as otherwise
specified in this Agreement, or as mutually agreed by Supply
Holdco and Allegheny from time to time, Supply Holdco hereby
assumes and agrees to pay, perform, fulfill and discharge,
in accordance with their respective terms, subject to
Section 10.2 and to the indemnification provisions of
Schedule 2.1, all Liabilities to, or relating to, Supply
Holdco Employees arising out of or resulting from:
(i) employment by the Allegheny System before the
Separation Date or other date as mutually agreed upon by
Allegheny and Supply Holdco (including Liabilities arising
under or relating to Allegheny Plans and Supply Holdco
Plans);
(ii) former, present or future employment with Supply Holdco
(including Liabilities arising under or relating to
Allegheny Plans and Supply Holdco Plans);
(iii) other actual or alleged employment relationship
with the Supply Holdco; and
(iv) obligations, liabilities and responsibilities expressly
assumed or retained by Supply Holdco, or a Supply Holdco
Plan, pursuant to this Agreement.
(b) Transfer Of Plan Assets. Except as otherwise
specified in this Agreement or as otherwise mutually agreed
by Allegheny and Supply Holdco from time to time, with
respect to each Allegheny Plan, Allegheny shall transfer to
Supply Holdco an amount equal to trust assets and other
related assets as consistent with the applicable Plan
transition that arises out of or relates to Supply Holdco's
interest in such Allegheny Plan. Notwithstanding the
foregoing, the Liabilities and or assets attributable to
Allegheny Retired Employees shall be determined as provided
in Schedule 2.1(a).
Section 2.2 Establishment Of Plans.
(a) Health and Welfare Plans. Except as otherwise
specified in this Agreement, effective as of the Separation
Date or such other date(s) as Allegheny and Supply Holdco
may mutually agree, Supply Holdco shall establish the Supply
Holdco Health and Welfare Plans and the Supply Holdco Post-
Retirement Programs, which shall be comparable to the
Allegheny Health and Welfare Plans and the Allegheny Post-
Retirement Programs listed in Schedule 2.2.
(b) Retirement Plans. Except as otherwise specified
in this Agreement, effective as of the Separation Date or
such other date(s) as Allegheny and Supply Holdco may
mutually agree, Supply Holdco shall establish the Supply
Holdco Retirement Plans, which shall be comparable to the
Allegheny Retirement Plans.
(c) Fringe Benefits. Except as otherwise specified in
this Agreement, effective as of the Separation Date or such
other date(s) as Allegheny and Supply Holdco may mutually
agree, Supply Holdco shall establish the Supply Holdco
Fringe Benefits Plans, which shall be comparable to the
Allegheny Fringe Benefits Plans.
(d) Equity and Other Compensation. Except as otherwise
specified in this Agreement, effective as of the Separation
Date or such other date(s) as Allegheny and Supply Holdco
may mutually agree, Supply Holdco shall establish such Plans
as may be determined to be appropriate by mutual consent of
Supply Holdco and Allegheny, including, without limitation,
the Supply Holdco Short-Term Incentive Plan, the Supply
Holdco Deferred Incentive Compensation Plan, the Supply
Holdco Corporate Variable Pay Program, the Supply Holdco
Long-Term Incentive Plan and the Supply Holdco Change in
Control Programs, which shall be comparable to the
respective Allegheny Plans.
(e) No Obligation to Maintain Plans. Except as
otherwise specified in this Agreement, to the extent
permitted by applicable laws, nothing in this Agreement
shall preclude Supply Holdco at any time from amending,
merging, modifying, terminating, eliminating, reducing, or
otherwise altering in any respect any Supply Holdco Plan,
any benefit under any Supply Holdco Plan or any trust,
insurance policy or funding vehicle related to any Supply
Holdco Plan.
Section 2.3 Allegheny Plans.
(a) Participation in Allegheny Plans. Except as
otherwise specified in this Agreement, or as Allegheny and
Supply Holdco mutually agree, Supply Holdco shall continue
as a Participating Company in the Allegheny Plans in effect
as of the Separation Date to the extent that Supply Holdco
has not established comparable Plans. Effective as of any
date on or after the Separation Date and before the
Distribution Date (or such other date as Allegheny or Supply
Holdco may mutually agree), any member of the Supply Holdco
Group not described in the preceding sentence may, at its
request and with the consent of Allegheny and Supply Holdco,
become a Participating Company in any or all of the
Allegheny Plans, to the extent that Supply Holdco has not
established a comparable Plan.
(b) Allegheny's General Obligations as Plan Sponsor.
To the extent that Supply Holdco is a Participating Company
in any Allegheny Plan(s), Allegheny shall continue to
administer, or cause to be administered, in accordance with
their terms and applicable law, such Allegheny Plan(s), and
shall have the sole and absolute discretion and authority to
interpret the Allegheny Plan(s), as set forth therein.
Allegheny shall not, without first consulting with Supply
Holdco, amend any material feature of any Allegheny Plan in
which Supply Holdco is a Participating Company, except to
the extent such amendment would not affect any benefits of
Supply Holdco's Employees under such Plan or as may be
necessary or appropriate to comply with applicable law.
(c) Supply Holdco's General Obligations as a
Participating Company. Supply Holdco shall perform, with
respect to its participation in the Allegheny Plans, the
duties of a Participating Company as set forth in each such
Plan or any procedures adopted pursuant thereto, including
(without limitation):
(i) assisting in the administration of claims, to the
extent requested by the claims administrator of the
applicable Allegheny Plan;
(ii) cooperating fully with Allegheny Plan auditors, benefit
personnel and benefit vendors;
(iii) preserving the confidentiality of all financial
arrangements Allegheny has or may have with any vendors,
claims administrators, trustees or any other entity or
individual with whom Allegheny has entered into an agreement
relating to the Allegheny Plans; and
(iv) preserving the confidentiality of participant
information (including, without limitation, health
information in relation to FMLA leaves) to the extent not
otherwise specified in this Agreement.
(d) Termination of Participating Company Status.
Except as otherwise may be mutually agreed by Allegheny and
Supply Holdco, effective as of the Distribution Date or such
other date as Supply Holdco establishes a comparable Plan
(as specified in Section 2.2 or otherwise in this
Agreement), Supply Holdco shall automatically cease to be a
Participating Company in the corresponding Allegheny Plan.
Section 2.4 Participation By Supply Holdco Employees In
Allegheny Plans.
(a) Non-Duplication of Benefits. As of the Separation
Date or such later date that applies to the particular
Supply Holdco Plan established thereafter, the Supply Holdco
Plans shall be, with respect to Supply Holdco Employees, in
all respects the successors in interest to, and shall not
provide benefits that duplicate benefits provided by, the
corresponding Allegheny Plans. Allegheny and Supply Holdco
shall mutually agree, if necessary, on methods and
procedures, including amending the respective Plan
documents, to prevent Supply Holdco Employees from receiving
duplicate benefits from the Allegheny Plans and the Supply
Holdco Plans.
(b) Service Credit. Except as otherwise specified in
this Agreement, with respect to Supply Holdco Employees,
each Supply Holdco Plan shall provide that all service, all
compensation and all other benefit-affecting determinations
that were recognized under the corresponding Allegheny Plan
shall, as of the date of their initial participation in each
Supply Holdco Plan, receive full recognition and credit and
be taken into account under such Supply Holdco Plan to the
same extent as if such items occurred under such Supply
Holdco Plan, except to the extent that duplication of
benefits would result. The service crediting provisions
shall be subject to any respectively applicable "service
bridging," "break in service," "employment date," or
"eligibility date" rules under the Supply Holdco Plans and
the Allegheny Plans.
ARTICLE 3
DEFINED BENEFIT PLAN
Section 3.1 Establishment Of Master Pension Plan Trust.
Effective as of the Separation Date or such later date as
mutually agreed upon by Allegheny and Supply Holdco, Supply
Holdco shall establish, or cause to be established, the
Supply Holdco Master Trust, to hold the assets of the Supply
Holdco Pension Plan and any other Plan established for the
benefit of Supply Holdco Employees.
Section 3.2 Assumption Of Pension Plan.
(a) Effective as of the Separation Date or such later
date as mutually agreed upon by Allegheny and Supply Holdco
("Effective Date"), Allegheny shall cause all of the Supply
Holdco Employees who are participants in the Allegheny
Pension Plan to cease to accrue benefits under such Plan,
and Supply Holdco shall establish a Supply Holdco Pension
Plan and trust intended to qualify under Sections 401(a) and
501(a) of the Code, respectively. All liabilities for
benefits accrued for Supply Holdco Employees shall be
transferred to the Supply Holdco Pension Plan, and such Plan
shall give the Supply Holdco Employees credit, for purposes
of eligibility, vesting, and benefit accrual, for service on
or prior to the Effective Date, to the extent such service
was recognized under the Allegheny Pension Plan.
(b) As soon as practicable after the Effective Date,
Allegheny shall cause the trustee of the Allegheny Pension
Plan to transfer, in one or more installments, to the
trustee of the Supply Holdco Pension Plan an amount in cash
and other investment assets held in the trust equal to an
amount determined to at least satisfy the minimum transfer
requirements mandated under Code Section 414(l). The
actuarial assumptions that will be used to value the
transfer amount in the preceding sentence shall be those
used by the PBGC with respect to plan termination occurring
on the Effective Date or other such assumptions as may be
mutually agreed to by Allegheny and Supply Holdco prior to
the Effective Date. The amount(s) so transferred shall be
adjusted as specified below:
(i) Interest shall be credited to each installment of the
transfer amount based on the investment rate of return of
the assets of the Allegheny Pension Plan from the Effective
Date to the actual transfer date, net of investment fees and
expenses.
(ii) The amount of benefits paid by the Allegheny Pension
Plan to Supply Holdco Employees between the Effective Date
and the date Plan assets are transferred shall be deducted
from any installment payment.
(iii) The Supply Holdco Pension Plan and the Supply
Holdco Master Trust shall receive a transfer of a portion of
the assets currently held in a Code Section 401(h) sub-
account within the Allegheny Master Trust. Such pro rata
portion of assets shall be determined on the basis of the
portion of the company-subsidized postretirement medical
plan and life insurance plan liability attributable to the
non-union Supply Holdco Employees transferred from the
Allegheny System.
Section 3.3 No Distributions To Supply Holdco Employees.
The Allegheny Pension Plan and the Supply Holdco Pension
Plan shall provide that no distribution of retirement
benefits shall be made by Allegheny to any Supply Holdco
Employee on or after the Distribution Date on account of the
Supply Holdco ceasing to be a Subsidiary of the Allegheny
System.
ARTICLE 4
DEFINED CONTRIBUTION PLANS
Section 4.1 Employee Stock Ownership and Savings Plan.
Effective as of the Distribution Date or other date as
mutually agreed upon by Allegheny and Supply Holdco, Supply
Holdco shall establish the Supply Holdco ESOSP, or cause to
be established, a trust, which is intended to be qualified
under Code Section 401(a), exempt from taxation under Code
Section 501(a)(1). The Supply Holdco ESOSP shall be
comparable to the Allegheny ESOSP. Upon the mutual agreement
of Allegheny and Supply Holdco, the Supply Holdco ESOSP
shall accept asset transfers from the Allegheny ESOSP. As
soon as reasonably practicable after the Distribution Date,
Supply Holdco shall use its commercially reasonable best
efforts to enter into agreements to accomplish such asset
transfer(s), to engage a trustee and record keeper and to
transfer and maintain the necessary participant records.
Supply Holdco and Allegheny each agree to use their
commercially reasonable best efforts to accomplish any
transfer of assets.
Section 4.2 Contributions Discontinued. After the
company match contribution is made by Allegheny for the
calendar quarter in which Supply Holdco Employees terminate
participation in the Allegheny ESOSP, no further company
match contributions will be funded by Allegheny to accounts
for Supply Holdco Employees.
Section 4.3 Discretionary Plan Design. Notwithstanding
the foregoing, effective as of the Distribution Date or such
other date as mutually agreed upon by Allegheny and Supply
Holdco, Supply Holdco shall have the discretion to modify
the Supply Holdco ESOSP.
ARTICLE 5
NON-QUALIFIED AND OTHER PLANS
Section 5.1 Deferred Compensation Plan.
(a) Establishment of Supply Holdco Deferred Incentive
Compensation Plan. Effective as of the Separation Date or
other date as mutually agreed upon by Allegheny and Supply
Holdco, Supply Holdco shall establish the Supply Holdco
Deferred Incentive Compensation Plan, which shall be
comparable to the Allegheny Deferred Incentive Compensation
Plan, and shall assume all Liabilities to or relating to the
Supply Holdco Employees under the Allegheny Deferred
Incentive Compensation Plan. Allegheny shall continue to
assume all Liabilities to or relating to Allegheny Employees
under the Allegheny Deferred Incentive Compensation Plan.
(a) Participation in Deferred Compensation Plans.
Effective as of the establishment of the Supply Holdco
Deferred Incentive Compensation Plan, eligible Supply Holdco
Employees shall only be eligible to participate in the
Supply Holdco Deferred Incentive Compensation Plan.
Section 5.2 Supplemental Executive Retirement Plan.
(a) Supply Holdco SERP.
(i) Establishment of the Supply Holdco SERP. Effective as
of the Separation Date or other date as mutually agreed upon
by Allegheny and Supply Holdco, Supply Holdco shall
establish the Supply Holdco SERP, which shall be comparable
to the Allegheny SERP, and shall assume all Liabilities to
or relating to the Supply Holdco Employees under the
Allegheny SERP.
(ii) Participation in the Supply Holdco SERP. Effective as
of the establishment of the Supply Holdco SERP, eligible
Supply Holdco Employees shall only be eligible to
participate in the Supply Holdco SERP.
(b) Allegheny SERP. Allegheny shall continue to be
responsible for all Liabilities to or relating to Allegheny
Employees under the Allegheny SERP.
(c) Asset Transfer. Effective as of the Separation
Date or other date as mutually agreed upon by Allegheny and
Supply Holdco, life insurance policies purchased jointly by
Allegheny and certain employees under the SBP shall be
transferred to Supply Holdco for such Supply Holdco
Employees.
Section 5.3 Supply Holdco Change In Control Programs.
Effective as of the Separation Date or other date as
mutually agreed upon by Allegheny and Supply Holdco, Supply
Holdco shall establish the Supply Holdco Change in Control
Programs, which shall be comparable to the Allegheny Change
in Control Programs.
Section 5.4 Severance Plan. Effective as of the
Separation Date or other date as mutually agreed upon by
Allegheny and Supply Holdco, Supply Holdco shall establish
the Supply Holdco Severance Plan. The Supply Holdco
Severance Plan shall provide that no Supply Holdco Employee
shall become eligible for severance benefits on account of
the Supply Holdco Group ceasing to be a Subsidiary of the
Allegheny System as of the Distribution Date.
ARTICLE 6
HEALTH AND WELFARE PLANS
SECTION 6.1 Assumption Of Health And Welfare Plan
Liabilities.
(a) General - Health and Welfare Plans. Except as
provided in Subsection 6.1(b), each Allegheny Health and
Welfare Plan shall retain all Liabilities incurred through
the Separation Date or other date as agreed upon by
Allegheny and Supply Holdco under such Allegheny Health and
Welfare Plan, whether or not claims are filed before such
date, by or on behalf of eligible and participating Supply
Holdco Employees or their spouses or dependents.
(b) Substantially Similar Self-Insured Plans. Any
Health and Welfare Plan self-insured by Allegheny and
substantially similar to any Supply Holdco Health and
Welfare Plan established as of the Separation Date, or such
later date as agreed by Allegheny and Supply Holdco, shall
cease to be responsible for Liabilities to or relating to
Supply Holdco Employees under the Allegheny Health and
Welfare Plans as of such date, and the corresponding Supply
Holdco Health and Welfare Plans shall assume such
Liabilities as of that date.
Section 6.2 Claims For Health And Welfare Plans.
(a) Administration of Allegheny Claims. For a period
not to exceed six months after the establishment of each
Supply Holdco Health and Welfare Plan, Allegheny shall
administer claims incurred under the Allegheny Health and
Welfare Plans by Supply Holdco Employees before such
establishment date, but only to the extent that Supply
Holdco has not, before such establishment date, assumed
administrative responsibility through a comparable Plan. Any
determination made or settlements entered into by Allegheny
with respect to such claims shall be final and binding.
(b) Outsourcing of Claims by Allegheny. Allegheny
shall have the right to engage a third party administrator,
vendor, or insurance company to administer ("Outsource")
claims incurred under the Allegheny Health and Welfare
Plans, including claims incurred by Supply Holdco Employees.
Allegheny may determine the manner and extent of such
Outsourcing, including the selection of one or more third
party administrators, vendors, or insurance companies and
the ability to transfer the liability for such claims to one
or more independent insurance companies. Allegheny has
outsourced administration of many Allegheny Health and
Welfare Plans, as set forth in Section 6.4 and the Schedules
6.4(a) and 6.4(b).
(c) Outsourcing of Claims by Supply Holdco. Allegheny
shall use its commercially reasonable best efforts for and
on behalf of Supply Holdco to negotiate for Outsourcing
arrangements with its third party administrators, vendors,
or insurance companies with features comparable to each of
Allegheny's current Outsourcing arrangements.
Section 6.3 Post-Separation Transitional Arrangements.
(a) Continuance of Elections, Co-Payments and Maximum
Benefits.
(i) As of the Separation Date or such other date as
Allegheny and Supply Holdco may mutually agree, Supply
Holdco shall cause the Supply Holdco Health and Welfare
Plans to maintain comparable coverage and contribution
elections made by Supply Holdco Employees under the
Allegheny Health and Welfare Plans and apply such elections
under the Supply Holdco Health and Welfare Plans for the
remainder of the period or periods for which such elections
are by their terms applicable. The transfer or other
movement of employment between Allegheny and Supply Holdco
at any time on and after the Separation Date and prior to
the Distribution Date in itself shall constitute neither a
"status change" under the Allegheny Health and Welfare Plans
or the Supply Holdco Health and Welfare Plans nor a
"qualifying event," as defined under COBRA.
(ii) On and after the Separation Date or other date as
mutually agreed upon by Allegheny and Supply Holdco, Supply
Holdco shall cause the Supply Holdco Health Plans to
recognize and give credit for (A) all amounts applied to
deductibles, out-of-pocket maximums, co-payments and other
applicable benefit coverage limits with respect to which
such expenses have been incurred by Supply Holdco Employees
under the Allegheny Health Plans for the remainder of the
calendar year in which the Separation Date occurs, and (B)
all benefits paid to Supply Holdco Employees under the
Allegheny Health Plans for purposes of determining when such
persons have reached their lifetime maximum benefits under
the Supply Holdco Health Plans. Notwithstanding the above,
Supply Holdco's obligations under this Subsection 6.3(a)(ii)
shall be limited by the market availability of health
insurance products or other arrangements satisfying the
criteria described above. Supply Holdco shall use its
commercially reasonable best efforts to locate and engage
the services of a vendor whose policies or other
arrangements meet the requirements above.
(b) HCFA Administration. As of the Separation Date or
other date as mutually agreed upon by Allegheny and Supply
Holdco, Supply Holdco shall assume all Liabilities relating
to, arising out of or resulting from claims verified by
Allegheny or Supply Holdco under the HCFA data match reports
that relate to Supply Holdco Employees.
Section 6.4 Vendor And Insurance Arrangements. Allegheny
shall use its commercially reasonable best efforts for and
on behalf of Supply Holdco to negotiate for, effective as of
the Separation Date or such other date as Allegheny and
Supply Holdco mutually agree: (a) third party ASO Contracts
with comparable features and costs to the ASO Contracts
entered into by Allegheny, as set forth in Schedule 6.4(a)
(the "ASO Contracts"); (b) Group Insurance Policies with
comparable features and costs to the Group Insurance
Policies entered into by Allegheny, as set forth in Schedule
6.4(b) (the "Group Insurance Policies"); and (c) competitive
premium rates for all Supply Holdco Health and Welfare
Plans. In each case, Supply Holdco shall, as of the
Separation Date or such other date as Allegheny and Supply
Holdco mutually agree, establish, adopt and/or implement
acceptable contracts, agreements or arrangements. In
accordance with Section 10.3, Allegheny shall provide upon
the request of Supply Holdco copies of such contracts or
successor arrangements thereto identified in Schedules
6.4(a) and 6.4(b).
Section 6.5 Asset Allocation And Transfers For Post-
Retirement Medical And Life Insurance Benefits.
(a) Effective as of the Separation Date, or such other
date as mutually agreed upon by Allegheny and Supply Holdco,
Supply Holdco shall establish, or cause to be established, a
separate VEBA to hold the assets for postretirement medical
and life insurance benefits established for the benefit of
Supply Holdco Employees.
(b) As soon as reasonably practicable, but in any case
before the date of establishment of the VEBA, Allegheny
shall engage actuaries and cause to be determined for the
Allegheny VEBAs the amount of assets to be transferred from
the Allegheny VEBAs to the Supply Holdco VEBA. Such pro
rata portion of assets shall be determined on the basis of
the portion of the company-subsidized postretirement medical
plan and life insurance plan liability attributable to the
Supply Holdco Employees transferred from Allegheny. The
actuarial assumptions that will be used to value the accrued
benefit liabilities described in the preceding sentence
shall be the same as those used to develop the value of the
accrued liabilities for purposes of determining the annual
VEBA funding parameters for the calendar year in which the
Separation Date occurs. These assumptions shall include not
only the discount rate, the expected rate of future salary
increases and the projected rate of medical inflation (where
applicable) used for funding purposes as of the January 1
measurement date but shall also include all non-economic
assumptions employed in the valuation including assumed
rates of mortality, retirement and employee turnover.
(c) As soon as practicable after the date of
establishment of the Supply Holdco VEBA, Allegheny shall
cause the trustee of the Allegheny VEBAs to transfer, in one
or more installments, to the trustee of the Supply Holdco
VEBA an amount in cash and other investment assets
(including all trust-owned life insurance contracts) held in
the trust equal to an amount determined to be the accrued
benefits associated with the Supply Holdco Employees. The
amount(s) so transferred shall be adjusted as specified
below:
(i) Interest shall be credited to each installment of the
transfer amount based on the investment rate of return of
the assets of the Allegheny VEBAs from the date of
establishment of the Supply Holdco VEBA to the actual
transfer date, net of investment fees and expense.
(ii) The amount of benefits paid by the Allegheny VEBAs to
Supply Holdco Employees between the establishment date of
the Supply Holdco VEBA and the date Plan assets are
transferred shall be deducted from any installment payment.
Section 6.6 ELIP. Effective as of the Separation Date or
other date as mutually agreed upon by Allegheny and Supply
Holdco, life insurance policies purchased by Allegheny for
certain Allegheny Employees under the ELIP shall be
transferred to Supply Holdco for such Supply Holdco
Employees.
Section 6.7 Leave Of Absence Programs And FMLA.
(a) Allocation of Responsibilities After Separation
Date. Effective as of the Separation Date or other date as
mutually agreed upon by Allegheny and Supply Holdco, Supply
Holdco shall establish its Leave of Absence Programs and
FMLA programs, which shall be comparable to the Allegheny
Leave of Absence Programs, and shall be responsible for
administering leaves of absence and complying with FMLA with
respect to Supply Holdco Employees.
(b) Disclosure. As soon as administratively
practicable after the Separation Date or other date as
mutually agreed upon by Allegheny and Supply Holdco,
Allegheny shall provide to Supply Holdco copies of all
records pertaining to the leaves of absence and FMLA with
respect to all Supply Holdco Employees to the extent such
records have not been previously provided.
Section 6.8 Allegheny Workers' Compensation Program.
(a) Administration Of Claims.
(i) Effective as of the Separation Date or such other date
as Allegheny and Supply Holdco may mutually agree, Supply
Holdco shall be responsible for the administration of all
Supply Holdco WCP Claims. Supply Holdco WCP Claims shall
include all WCP claims previously incurred and identified as
being associated with AE Supply prior to the Separation Date
and all WCP claims incurred by Supply Holdco Employees after
the Separation Date.
(ii) Each party shall fully cooperate with the other with
respect to the administration and reporting of Supply Holdco
WCP Claims, the payment of Supply Holdco WCP Claims
determined to be payable, and the transfer of the
administration of any Supply Holdco WCP Claims to the other
party.
(b) Self-Insurance Status. Allegheny shall use its
commercially reasonable best efforts to obtain self-
insurance status for workers' compensation for Supply Holdco
effective as of the Separation Date, or such later date as
Allegheny and Supply Holdco may mutually agree, in those
jurisdictions in which (i) Supply Holdco conducts business,
(ii) Allegheny is self-insured, and (iii) Allegheny and
Supply Holdco mutually agree that such status is beneficial
to Supply Holdco. Supply Holdco hereby authorizes Allegheny
to take all actions necessary and appropriate on its behalf
in order to obtain such self-insurance status. All costs
incurred by Allegheny in amending such certificates,
including without limitation filing fees, adjustments of
security and excess loss policies and amendments of safety
programs, shall be shared pro rata by Allegheny and Supply
Holdco.
(c) Insurance Policy.
(i) Effective as of the Separation Date or other date as
mutually agreed upon by Allegheny and Supply Holdco, in the
states that employ both Allegheny Employees and Supply
Holdco Employees and other than those states where Supply
Holdco is to be self-insured pursuant to Subsection 6.6(b)
above, Allegheny shall use its commercially reasonable best
efforts to negotiate for workers' compensation insurance
policies on behalf of Supply Holdco from the issuing
insurance companies as set forth in the relevant portion of
Schedule 6.4(b) or different insurance companies which are
comparable to the policies previously maintained by
Allegheny; provided that the retention under such Supply
Holdco policies shall be as determined by Supply Holdco.
(ii) Allegheny shall use its commercially reasonable best
efforts to maintain the premium rates for all workers'
compensation insurance policies for both Allegheny and
Supply Holdco in effect for periods through the Separation
Date or other date as mutually agreed upon by Allegheny and
Supply Holdco to be based on the aggregate number of
employees covered under the workers' compensation insurance
policies of both Allegheny and Supply Holdco. Any premiums
due under the separate workers' compensation insurance
issued to Supply Holdco shall be payable by Supply Holdco.
ARTICLE 7
EQUITY AND OTHER COMPENSATION
SECTION 7.1 Short-Term Incentive Plan. Effective on the
Separation Date or other date as mutually agreed upon by
Allegheny and Supply Holdco, Supply Holdco shall establish
the Supply Holdco Incentive Plan for the benefit of Supply
Holdco executives, which shall be comparable to the
Allegheny Short-Term Incentive Plan. As of such date,
awards under the Allegheny Short-Term Incentive Plan will be
determined on a prorated basis as determined by the
Management Review and Directors' Affairs Committee of the
Allegheny Board of Directors.
Section 7.2 Long-Term Incentive Plan. Effective on or
after the Separation Date, Supply Holdco shall establish the
Supply Holdco Long-Term Incentive Plan which shall be
comparable to the Allegheny Long-Term Incentive Plan.
Section 7.3 Allegheny Performance Share Plan. Effective
on the Separation Date or other date as mutually agreed upon
by Allegheny and Supply Holdco, all outstanding cycles of
the Allegheny Performance Share Plan component of the
Allegheny Long-Term Incentive Plan shall terminate and a
prorated award under each three-year cycle will be paid in
cash based on the number of months completed in each cycle.
Such awards will be paid to Supply Holdco Employees and
Allegheny Employees who participated in such outstanding
cycles. As of the Separation Date or other date as mutually
agreed upon by Allegheny and Supply Holdco, liabilities for
awards previously deferred under the Allegheny Performance
Share Plan shall be assumed by Supply Holdco for those
awards relating to Supply Holdco Employees.
Section 7.4 Allegheny Stock Option Plan. Effective on
the Distribution Date or other date as mutually agreed upon
by Allegheny and Supply Holdco, all outstanding options in
the Allegheny Stock Option Plan component of the Allegheny
Long-Term Incentive Plan shall be converted into options
("Replacement Options") under both the Supply Holdco and the
Allegheny Stock Option Plans for each Supply Holdco Employee
or Allegheny Employee who participates in the Allegheny
Stock Option Plan prior to such date. The respective
exercise prices for such options shall be as determined by
the Management Review and Directors' Affairs Committee of
the Allegheny Board of Directors.
Section 7.5 Corporate Variable Pay Program. Effective on
the Separation Date or other date as mutually agreed upon by
Allegheny and Supply Holdco, Supply Holdco shall establish
the Supply Holdco Corporate Variable Pay Program, which
shall be comparable to the Allegheny Corporate Variable Pay
Program. As of such date, awards under the Allegheny
Corporate Variable Pay Program will be determined on a
prorated basis in accordance with the determinations made
for the Allegheny Short-Term Incentive Plan by the
Management Review and Directors' Affairs Committee of the
Allegheny Board of Directors.
Section 7.6 Discretionary Plan Design. Notwithstanding
the foregoing, effective as of the Separation Date or other
such date as mutually agreed by Allegheny and Supply Holdco,
Supply Holdco shall have the discretion to modify the
aforementioned plans and programs described in this Article
7.
ARTICLE 8
FRINGE AND OTHER BENEFITS
SECTION 8.1 Employee Assistance Program. Allegheny shall
use its commercially reasonable best efforts for and on
behalf of Supply Holdco to negotiate for, effective as of
the Separation Date or such other date as Allegheny and
Supply Holdco may mutually agree, contracts and/or
arrangements with Allegheny's vendors that contain
comparable features to Allegheny's contracts and/or
arrangements providing for an employee assistance program.
Section 8.2 Educational Assistance Program. Effective as
of the Separation Date or other date as mutually agreed upon
by Allegheny and Supply Holdco, Supply Holdco shall
establish an Supply Holdco educational assistance program
for Supply Holdco Employees that is comparable to the
Allegheny program.
Section 8.3 Relocation. Effective as of the Separation
Date or such other date as Supply Holdco and Allegheny may
mutually agree, Supply Holdco shall provide a Supply Holdco
relocation program to Supply Holdco Employees that is
comparable to the Allegheny relocation program. Allegheny
shall use its commercially reasonable best efforts for and
on behalf of Supply Holdco to negotiate for contracts or
arrangements with Allegheny's vendors, effective as of the
Separation Date or such other date as Allegheny and Supply
Holdco may mutually agree, that contain features comparable
to Allegheny's contracts and/or arrangements providing for
an employee relocation program.
Section 8.4 Other Benefits. To the extent that Allegheny
maintains, sponsors or provides other fringe benefits for
its employees that may or may not be specifically identified
on Schedule 8.4 to this Agreement, then Allegheny shall, to
the extent permitted by law, continue to make such benefits
available to Supply Holdco Employees on substantially
similar terms and conditions as are offered to the employees
of the Allegheny System through the Separation Date or such
other date upon which Supply Holdco and Allegheny mutually
agree. Supply Holdco and Allegheny agree to make
commercially reasonable best efforts to mutually agree on
whether, when, and on what terms any member of the Supply
Holdco Group shall maintain, sponsor or offer fringe
benefits.
ARTICLE 9
DIRECTOR COMPENSATION PROGRAM
SECTION 9.1 Establishment Of Supply Holdco Director
Compensation Program. Effective as of the Distribution Date
or other date as mutually agreed upon by Allegheny and
Supply Holdco, Supply Holdco shall establish the Supply
Holdco Director Compensation Program, which shall be
comparable to the Allegheny Director Compensation Program,
and shall consist of the components described in Sections
9.3 through 9.8.
Section 9.2 Participation In Supply Holdco Director
Compensation Program. Effective as of the Distribution Date
or other date as mutually agreed upon by Allegheny and
Supply Holdco, Supply Holdco Directors shall only be
eligible to participate in the Supply Holdco Director
Compensation Program.
Section 9.3 Annual Retainer. Effective as of the
Distribution Date or other date as mutually agreed upon by
Allegheny and Supply Holdco, Supply Holdco shall establish
annual retainer fee schedules which shall be comparable to
the Allegheny annual retainer fee schedules.
Section 9.4 Meeting Fees. Effective as of the
Distribution Date or other date as mutually agreed upon by
Allegheny and Supply Holdco, Supply Holdco shall establish
meeting fee schedules which shall be comparable to the
Allegheny meeting fee schedules.
Section 9.5 Plan For Deferral Of Compensation Of
Directors. Effective as of the Distribution Date or other
date as mutually agreed upon by Allegheny and Supply Holdco,
Supply Holdco shall establish the Supply Holdco Plan for
Deferral of Compensation of Directors, which shall be
comparable to the Allegheny Plan for Deferral of
Compensation of Directors. As of such date, Supply Holdco
shall assume all Liabilities to or relating to the Supply
Holdco Directors under the Supply Holdco Plan for Deferral
of Compensation of Directors. As of such date, Allegheny
shall continue to assume all Liabilities to or relating to
Allegheny Directors under the Allegheny Plan for Deferral of
Compensation of Directors.
Section 9.6 Deferred Stock Unit Plan For Outside
Directors. Effective as of the Distribution Date or other
date as mutually agreed upon by Allegheny and Supply Holdco,
Supply Holdco shall establish the Supply Holdco Deferred
Stock Unit Plan for Outside Directors, which shall be
comparable to the Allegheny Deferred Stock Unit Plan for
Outside Directors. As of such date, Supply Holdco shall
assume all Liabilities to or relating to the Supply Holdco
Directors under the Supply Holdco Deferred Stock Unit Plan
for Outside Directors. As of such date, Allegheny shall
continue to assume all Liabilities to or relating to
Allegheny Directors under the Allegheny Deferred Stock Unit
Plan for Outside Directors.
Section 9.7 Stock Options. Effective on the Distribution
Date or other date as mutually agreed upon by Allegheny and
Supply Holdco, all outstanding options granted to Directors
under the Allegheny Stock Option Plan shall be converted
into Replacement Options under both the Supply Holdco and
the Allegheny Stock Option Plans using the same methodology
used pursuant to Section 7.4 for Employees.
Section 9.8 Restricted Stock Plan For Outside Directors.
Effective as of the Distribution Date or other date as
mutually agreed upon by Allegheny and Supply Holdco, Supply
Holdco shall establish the Supply Holdco Restricted Stock
Plan for Outside Directors, which shall be comparable to the
Allegheny Restricted Stock Plan for Outside Directors.
Section 9.9 Director. As used herein this Article 9,
"Director" means any outside director who does not at any
time during such service or prior thereto serve as an
employee.
ARTICLE 10
TRANSITION
Section 10.1 Transitional Services Agreement. On or about
the date hereof, Allegheny and Supply Holdco shall enter
into the Transitional Services Agreement covering the
provision of various services by Allegheny and Supply Holdco
to each other. The provisions of this Agreement shall be
subject to the provisions of such Transitional Services
Agreement.
Section 10.2 Payment Of Liabilities, Plan Expenses And
Related Matters.
(a) Shared Costs. Supply Holdco shall pay its share,
as determined by Allegheny in good faith, of any
contributions made to any trust maintained in connection
with a Allegheny Plan while Supply Holdco is a Participating
Company in that Allegheny Plan.
(b) Contributions to Trusts. With respect to Allegheny
Plans to which Supply Holdco Employees make contributions,
Allegheny shall use reasonable procedures to determine
Supply Holdco Liabilities associated with such Plans, taking
into account such contributions, settlements, refunds and
similar payments.
(c) Administrative Expenses Not Chargeable to a Trust.
To the extent not charged pursuant to the Transitional
Services Agreement and to the extent not otherwise agreed to
by Allegheny and Supply Holdco, and to the extent not
chargeable to a trust established in connection with an
Allegheny Plan, Supply Holdco shall be responsible, through
either direct payment or reimbursement to Allegheny, for its
allocable share of expenses incurred by Allegheny in the
administration of (i) the Allegheny Plans while Supply
Holdco participates in such Plans, and (ii) the Supply
Holdco Plans, to the extent Allegheny administers such
Plans. For this purpose, Supply Holdco's allocable share of
such expenses shall be calculated in accordance with current
practice in effect as of the date of this Agreement.
Section 10.3 Sharing Of Participant Information.
Allegheny and Supply Holdco shall share, or cause to be
shared, all participant information that is necessary or
appropriate for the efficient and accurate administration of
each of the Allegheny Plans and the Supply Holdco Plans
during the respective periods applicable to such Plans as
Supply Holdco and Allegheny may mutually agree. Allegheny
and Supply Holdco and their respective authorized agents
shall, subject to applicable laws of confidentiality and
data protection, be given reasonable and timely access to,
and may make copies of, all information relating to the
subjects of this Agreement in the custody of the other party
or its agents, to the extent necessary or appropriate for
such administration.
Section 10.4 Reporting And Disclosure Communications To
Participants. While Supply Holdco is a Participating
Company in the Allegheny Plans, Allegheny shall take, or
cause to be taken, all actions necessary or appropriate to
facilitate the distribution of all Allegheny Plan-related
communications and materials to employees, participants and
beneficiaries, including (without limitation) summary plan
descriptions and related summaries of material
modification(s), summary annual reports, investment
information, prospectuses, notices and enrollment material
for the Allegheny Plans. Supply Holdco shall provide all
information needed by Allegheny to facilitate such Allegheny
Plan-related communications. Supply Holdco shall take, or
cause to be taken, all actions necessary or appropriate to
facilitate the distribution of all Supply Holdco Plan-
related communications and materials to employees,
participants and beneficiaries. Supply Holdco shall assist,
and Supply Holdco shall cause each other applicable member
of the Supply Holdco Group to assist, Allegheny in complying
with all reporting and disclosure requirements of ERISA,
including the preparation of Form Series 5500 annual
reports, for the Allegheny Plans, where applicable.
Section 10.5 Audits Regarding Vendor Contracts. From the
period beginning as of the Separation Date and ending on
such date as Allegheny and Supply Holdco may mutually agree,
Allegheny and Supply Holdco and their duly authorized
representatives shall have the right to conduct joint audits
with respect to any vendor contracts that relate to both the
Allegheny Health and Welfare Plans and the Supply Holdco
Health and Welfare Plans. The scope of such audits shall
remain consistent with the current practices and all
documents and other information currently made available for
review shall continue to be made available. Allegheny and
Supply Holdco shall agree on the performance standards,
audit methodology, auditing policy and quality measures,
reporting requirements, and the manner in which costs
incurred in connection with such audits will be shared.
Section 10.6 Beneficiary Designations. Subject to Section
10.9, all beneficiary designations made by Supply Holdco
Employees for the Allegheny Plans shall be transferred to
and be in full force and effect under the corresponding
Supply Holdco Plans until such beneficiary designations are
replaced or revoked by the Supply Holdco Employees who made
the beneficiary designations.
Section 10.7 Requests For IRS and DOL Opinions. Allegheny
and Supply Holdco shall make such applications to regulatory
agencies, including the IRS and DOL, as may be necessary or
appropriate. Supply Holdco and Allegheny shall cooperate
fully with one another on any issue relating to the
transactions contemplated by this Agreement for which
Allegheny and/or Supply Holdco elects to seek a
determination letter or private letter ruling from the IRS
or an advisory opinion from the DOL.
Section 10.8 Fiduciary Matters. Allegheny and Supply
Holdco each acknowledge that actions contemplated to be
taken pursuant to this Agreement may be subject to fiduciary
duties or standards of conduct under ERISA or other
applicable law, and no party shall be deemed to be in
violation of this Agreement if such party fails to comply
with any provisions hereof based upon such party's good
faith determination that to do so would violate such a
fiduciary duty or standard.
Section 10.9 Consent Of Third Parties. If any provision
of this Agreement is dependent on the consent of any third
party (such as a vendor) and such consent is withheld,
Allegheny and Supply Holdco shall use their commercially
reasonable best efforts to implement the applicable
provisions of this Agreement. If any provision of this
Agreement cannot be implemented due to the failure of such
third party to consent, Allegheny and Supply Holdco shall
negotiate in good faith to implement the provision in a
mutually satisfactory manner.
Section 10.10 Tax Cooperation. In connection with the
interpretation and administration of this Agreement,
Allegheny and Supply Holdco shall take into account the
agreements and policies established pursuant to the Master
Separation Agreement and the Tax Indemnification Agreement.
Section 10.11 Plan Returns. Plan Returns shall be filed or
caused to be filed by Allegheny or Supply Holdco as the case
may be in accordance with the principles established in
Section 2 of the Tax Indemnification Agreement. For purposes
of this Section 10.11, "Plan Return" means any return,
report, certificate, form or similar statement or document
required to be filed with a government agency with respect
to an employee benefit plan governed by ERISA or a program
governed by Section 6039D.
ARTICLE 11
EMPLOYMENT-RELATED MATTERS
Section 11.1 Terms Of Supply Holdco Employment. Supply
Holdco Employees shall be required to execute a new
agreement regarding confidential information and proprietary
developments in a form approved by Supply Holdco. In
addition, nothing in the Master Separation Agreement, this
Agreement, or any Ancillary Agreement should be construed to
change the at-will status of any of the employees of the
Allegheny System or the Supply Holdco Group.
Section 11.2 HR Data Support Systems. Allegheny shall
provide human resources data support for Supply Holdco
Employees through the date set forth in the Transitional
Services Agreement or such other date as Allegheny and
Supply Holdco may mutually agree.
Section 11.3 Employment Of Employees With U.S. Work Visas.
Supply Holdco Employees who, on the Separation Date, are
employed in the U.S. pursuant to a work or training visa
which authorizes employment only by the Allegheny System
shall remain employed by the Allegheny System until the visa
is amended or a new visa is granted to authorize employment
by the Supply Holdco Group and, at that time, shall become
an employee of the Supply Holdco Group with substantially
similar rights as all other Supply Holdco Employees. During
the period from the Separation Date until the amended or new
visa is issued, such employee shall continue to participate
in Allegheny Plans.
Section 11.4 Confidentiality And Proprietary Information.
(a) No provision of the Master Separation Agreement or
any Ancillary Agreement shall be deemed to release any
individual for any violation of the Allegheny non-
competition guideline or any agreement or policy pertaining
to confidential or proprietary information of any member of
the Allegheny System or Supply Holdco Group, or otherwise
relieve any individual of his or her obligations under such
non-competition guideline, agreement, or policy.
(b) Employee Agreements. As used in this Section 11.4,
"Employee Agreement" means the confidentiality agreement or
other such agreements as executed by Allegheny or Supply
Holdco employees in connection with their employment.
Nothing in this Agreement, the Master Separation Agreement
or any other Ancillary Agreement shall be deemed to
supercede any provision regarding the conduct of employees
mandated by the Federal Energy Regulatory Commission or any
other applicable regulatory authority.
(i) Survival of Allegheny Employee Agreement Obligations
and Allegheny's Common Law Rights. The Allegheny Employee
Agreements of all Supply Holdco Employees and all former
Allegheny employees transferred to Supply Holdco on or after
the Separation Date shall remain in full force and effect
according to their terms; provided, however, that none of
the following acts committed by former Allegheny or Supply
Holdco employees within the scope of their Supply Holdco
employment shall constitute a breach of such Allegheny
Employee Agreements: (i) the use or disclosure of
Confidential Information (as that term is defined in the
Allegheny Employee Agreement) for or on behalf of Supply
Holdco, if such disclosure is consistent with the license
rights granted to Supply Holdco and restrictions imposed on
Supply Holdco under the Master Separation Agreement, any
other Ancillary Agreement or any other agreement between the
parties, and (ii) the rendering of any services, directly or
indirectly, to Supply Holdco to the extent such services are
consistent with the assignment or license of rights granted
to Supply Holdco and the restrictions imposed on Supply
Holdco under the Master Separation Agreement, any other
Ancillary Agreement or any other agreement between the
parties. Further, Allegheny retains any rights it has under
statute or common law with respect to actions by its former
employees to the extent such actions are inconsistent with
the rights granted to Supply Holdco and restrictions imposed
on Supply Holdco under the Master Separation Agreement, any
other Ancillary Agreement or any other agreement between the
parties.
(ii) Survival of Supply Holdco's Employee Agreement
Obligations and Supply Holdco's Common Law Rights. The
Supply Holdco Employee Agreements of all Allegheny Employees
and all former Supply Holdco employees transferred to
Allegheny on or before the Separation Date shall remain in
full force and effect according to their terms; provided,
however, that none of the following acts committed by former
Supply Holdco or Allegheny employees within the scope of
their Allegheny employment shall constitute a breach of such
Supply Holdco Employee Agreements: (i) the use or disclosure
of Confidential Information (as that term is defined in the
Allegheny Employee Agreement) for or on behalf of Allegheny,
if such disclosure is consistent with the license rights
granted to Allegheny and restrictions imposed on Allegheny
under the Master Separation Agreement, any other Ancillary
Agreement or any other agreement between the parties, and
(ii) the rendering of any services, directly or indirectly,
to Allegheny to the extent such services are consistent with
the assignment or license of rights granted to Allegheny and
the restrictions imposed on Allegheny under the Master
Separation Agreement, any other Ancillary Agreement or any
other agreement between the parties. Further, Supply Holdco
retains any rights it has under statute or common law with
respect to actions by its former employees to the extent
such actions are inconsistent with the rights granted to
Allegheny and restrictions imposed on Allegheny under the
Master Separation Agreement, any other Ancillary Agreement
or any other agreement between the parties.
(iii) Assignment, Cooperation for Compliance and Enforcement.
(A)(1) Allegheny retains all rights under the
Allegheny Employee Agreements of all former
Allegheny employees necessary to permit
Allegheny to protect the rights and interests
of Allegheny, but hereby transfers and
assigns to Supply Holdco its rights under the
Allegheny Employee Agreements of all former
Allegheny employees to the extent required to
permit Supply Holdco to enjoin, restrain,
recover damages from or obtain specific
performance of the Allegheny Employee
Agreements or obtain other remedies against
any employee who breaches his or her
Allegheny Employee Agreement, and to the
extent necessary to permit Supply Holdco to
protect its rights and interests.
(2) Allegheny and Supply Holdco agree, at
their own respective cost and expense, to use
their reasonable efforts to cooperate as
follows: (A) Supply Holdco shall advise
Allegheny of: (1) any violation(s) of the
Allegheny Employee Agreement by Supply Holdco
or former Allegheny employees, and (2) any
violation(s) of the Supply Holdco Employee
Agreement which affect Allegheny's rights;
and (B) Allegheny shall advise Supply Holdco
of any violations of the Allegheny Employee
Agreement by current or former Allegheny
employees which affect Supply Holdco's
rights; provided, however, that the foregoing
obligations shall only apply to violations
which become known to an attorney within the
legal department of the party obligated to
provide notice thereof.
(3) Allegheny and Supply Holdco each may
separately enforce the Allegheny Employee
Agreements of Supply Holdco and former
Allegheny employees to the extent necessary
to reasonably protect their respective
interests, provided, however, that (i) Supply
Holdco shall not commence any litigation
relating thereto without first consulting
with Allegheny's General Counsel or his or
her designee and (ii) Allegheny shall not
commence any litigation relating thereto
against any former Allegheny employee who is
at the time a Supply Holdco Employee without
first consulting with Supply Holdco's General
Counsel or his or her designee. If either
party, in seeking to enforce any Allegheny
Employee Agreement, notifies the other party
that it requires, or desires, the other party
to join in such action, then the other party
shall do so. In addition, if either party
commences or becomes a party to any action to
enforce a Allegheny Employee Agreement of a
Supply Holdco Employee or former Allegheny
employee, the other party shall, whether or
not it becomes a party to the action,
cooperate with the enforcing party by making
available its files and employees who have
information or knowledge relevant to the
dispute, subject to appropriate measures to
protect the confidentiality of any
proprietary or confidential information that
may be disclosed in the course of such
cooperation or action and subject to any
relevant privacy laws and regulations. Any
such action shall be conducted at the expense
of the party bringing the action and the
parties shall agree on a case by case basis
on compensation, if any, of the other party
for the value of the time of such other
party's employees as reasonably required in
connection with the action.
(B)(1) Supply Holdco retains all rights under
the Supply Holdco Employee Agreements of all
former Allegheny employees necessary to
permit Supply Holdco to protect the rights
and interests of Supply Holdco, but hereby
transfers and assigns to Allegheny its rights
under the Supply Holdco Employee Agreements
of all former Allegheny employees to the
extent required to permit Allegheny to
enjoin, restrain, recover damages from or
obtain specific performance of the Supply
Holdco Employee Agreements or obtain other
remedies against any employee who breaches
his or her Supply Holdco Employee Agreement,
and to the extent necessary to permit
Allegheny to protect its rights and
interests.
(2) Allegheny and Supply Holdco agree, at
their own respective cost and expense, to use
their reasonable efforts to cooperate as
follows: (A) Allegheny shall advise Supply
Holdco of: (1) any violation(s) of the
Allegheny Employee Agreement by Allegheny or
former Allegheny employees, and (2) any
violation(s) of the Allegheny Employee
Agreement which affect Supply Holdco's
rights; and (B) Supply Holdco shall advise
Allegheny of any violations of the Supply
Holdco Employee Agreement by current or
former Supply Holdco employees which affect
Allegheny's rights; provided, however, that
the foregoing obligations shall only apply to
violations which become known to an attorney
within the legal department of the party
obligated to provide notice thereof.
(3) Allegheny and Supply Holdco each may
separately enforce the Allegheny Employee
Agreements of Allegheny and former Supply
Holdco employees to the extent necessary to
reasonably protect their respective
interests, provided, however, that (i)
Allegheny shall not commence any litigation
relating thereto without first consulting
with Supply Holdco's General Counsel or his
or her designee and (ii) Supply Holdco shall
not commence any litigation relating thereto
against any former Supply Holdco employee who
is at the time a Allegheny Employee without
first consulting with Allegheny's General
Counsel or his or her designee. If either
party, in seeking to enforce any Employee
Agreement, notifies the other party that it
requires, or desires, the other party to join
in such action, then the other party shall do
so. In addition, if either party commences or
becomes a party to any action to enforce a
Supply Holdco Employee Agreement of an
Allegheny Employee or former Supply Holdco
employee, the other party shall, whether or
not it becomes a party to the action,
cooperate with the enforcing party by making
available its files and employees who have
information or knowledge relevant to the
dispute, subject to appropriate measures to
protect the confidentiality of any
proprietary or confidential information that
may be disclosed in the course of such
cooperation or action and subject to any
relevant privacy laws and regulations. Any
such action shall be conducted at the expense
of the party bringing the action and the
parties shall agree on a case by case basis
on compensation, if any, of the other party
for the value of the time of such other
party's employees as reasonably required in
connection with the action.
(C) Allegheny and Supply Holdco understand
and acknowledge that matters relating to the
making, performance, enforcement, assignment
and termination of employee agreements are
typically governed by the laws and
regulations of the national, federal, state
or local governmental unit where an employee
resides, or where an employee's services are
rendered, and that such laws and regulations
may supersede or limit the applicability or
enforceability of this Section 11.4. In such
circumstances, Allegheny and Supply Holdco
agree to take action with respect to the
employee agreements that best accomplishes
the parties' objectives as set forth in this
Section 11.4 and that is consistent with
applicable law.
Section 11.5 Accrued Payroll, Bonuses, Profit Sharing And
Commissions. Allegheny shall be responsible for all
Liabilities relating to, arising out of, or attributable to
payroll, bonuses, profit sharing and commissions accrued by
employees of Supply Holdco through the Separation Date or
other date as may be mutually agreed upon by Allegheny and
Supply Holdco. Allegheny and Supply Holdco shall agree on
the manner and method of payment for all payroll, bonuses,
profit sharing and commissions agreed to on behalf of
employees who have been employed by Supply Holdco on or
after the Separation Date. Effective as of the Separation
Date, or such later date as Allegheny and Supply Holdco may
mutually agree, Supply Holdco shall establish its own
payroll system for Supply Holdco Employees.
Section 11.6 Payroll And Withholding.
(a) Income Reporting, Withholding. Allegheny shall
perform in the same manner as in effect on the date of this
Agreement the income reporting and withholding function
under Supply Holdco's employer identification number for
Supply Holdco Employees and other service providers,
commencing with service periods beginning on or after the
Separation Date and ending on such later date as Allegheny
and Supply Holdco may mutually agree; provided, that, if the
ending date is after the Distribution Date, such income
reporting and withholding function shall be in accordance
with the Transitional Services Agreement. Supply Holdco
shall hold Allegheny harmless with respect to any
Liabilities arising after the Separation Date as a result of
the provisions of such income reporting and withholding
function as set forth in the Transitional Services
Agreement.
(b) Delivery of, and Access to, Documents and Other
Information. Concurrently with the Separation Date or other
date as mutually agreed upon by Allegheny and Supply Holdco,
Allegheny shall cause to be delivered to Supply Holdco, the
employee information set forth on all Forms W-4 executed by
Allegheny Employees designated as Supply Holdco Employees as
of such date. For the period ending on such date (and for
such additional period as Allegheny and Supply Holdco may
mutually agree), Allegheny shall make reasonably available
to Supply Holdco all forms, documents or information, no
matter in what format stored, relating to compensation or
payments made to any employee or service provider of Supply
Holdco. Such information may include, but is not limited to,
information concerning employee payroll deductions, payroll
adjustments, records of time worked, tax records (e.g.,
Forms W-2, W-4, 940 and 941), and information concerning
garnishment of wages or other payments.
(c) Consistency of Tax Positions; Duplication.
Allegheny and Supply Holdco shall individually and
collectively make commercially reasonable best efforts to
avoid unnecessarily duplicated federal, state or local
payroll taxes, insurance or workers' compensation
contributions, or unemployment contributions arising on or
after the Separation Date. Allegheny and Supply Holdco shall
take consistent reporting and withholding positions with
respect to any such taxes or contributions.
Section 11.7 Personnel And Pay Records. For the period
beginning on the date of this Agreement and ending on the
Separation Date (and for such additional period as Allegheny
and Supply Holdco may mutually agree), Allegheny shall make
reasonably available to Supply Holdco, subject to applicable
laws on confidentiality and data protection, all current and
historic forms, documents or information, no matter in what
format stored, relating to pre-Separation Date personnel and
medical records. Such forms, documents or information may
include, but are not limited to: (a) information regarding a
Supply Holdco Employee's ranking or promotions; (b) the
existence and nature of garnishment orders or other judicial
or administrative actions or orders affecting an employee's
or service provider's compensation; and (c) performance
evaluations.
Section 11.8 Non-Termination Of Employment; No Third-Party
Beneficiaries. No provision of this Agreement, the Master
Separation Agreement, or any Ancillary Agreement shall be
construed to create any right, or accelerate entitlement, to
any compensation or benefit whatsoever on the part of any
Supply Holdco Employee or other future, present or former
employee of Allegheny or Supply Holdco under any Allegheny
Plan or Supply Holdco Plan or otherwise. Without limiting
the generality of the foregoing: (a) neither the Separation
nor the termination of the Participating Company status of
Supply Holdco or any member of the Supply Holdco Group shall
cause any employee to be deemed to have incurred a
termination of employment; and (b) no transfer of employment
between Allegheny and Supply Holdco at any time on and after
the Separation Date and prior to the Distribution Date shall
be deemed a termination of employment for any purpose
hereunder.
Section 11.9 Employment Litigation.
(a) Claims to be Transferred to Supply Holdco. Supply
Holdco shall continue to be legally responsible for and
continue the defense of claims identified in Schedule
11.9(a). Supply Holdco hereby agrees to indemnify, defend
and hold harmless Allegheny against these claims.
(b) Claims to be Jointly Defended by Allegheny and
Supply Holdco. Allegheny and Supply Holdco shall jointly
defend the claims identified in Schedule 11.9(b); provided,
however, that Supply Holdco or Allegheny shall indemnify,
defend and hold harmless the other against any judgments in
accordance with Schedule 2.1.
(c) Unscheduled Claims. Supply Holdco and Allegheny
shall have responsibility for all Employment Liabilities in
accordance with Schedule 2.1.
(d) Cooperation. Each of Allegheny and Supply Holdco
shall use its commercially reasonable efforts to share such
information as is reasonably necessary in order for the
other to defend any claims set forth in this Section 11.9.
ARTICLE 12
DISPUTE RESOLUTION
Any dispute or claim arising out of or related to this
Agreement shall be resolved in accordance with the dispute
resolutions procedures set forth in Section 6.7 of the
Master Separation Agreement.
ARTICLE 13
GENERAL PROVISIONS
Section 13.1 Effect If IPO And/Or Distribution Does Not
Occur. Subject to Section 13.8, if the IPO and/or
Distribution does not occur, then all actions and events
that are, under this Agreement, to be taken or occur
effective as of the IPO, and/or Distribution Date, or
otherwise in connection with the IPO and/or Distribution,
shall not be taken or occur except to the extent
specifically agreed by Supply Holdco and Allegheny.
Section 13.2 Relationship Of The Parties. Nothing in this
Agreement shall be deemed or construed by the parties or any
third party as creating the relationship of principal and
agent, partnership or joint venture between the parties, the
understanding and agreement being that no provision
contained herein, and no act of the parties, shall be deemed
to create any relationship between the parties other than
the relationship set forth herein. This Agreement shall be
binding upon and inure solely to the benefit of and be
enforceable by each party and its respective successors and
permitted assigns. Nothing in this Agreement, express or
implied, is intended to or shall confer upon any other
person any right, benefit or remedy of any nature whatsoever
under or by reason of this Agreement.
Section 13.3 Affiliated Companies. Each of Allegheny and
Supply Holdco shall cause to be performed, and hereby
guarantee the performance of, any and all actions of the
Allegheny System or the Supply Holdco Group, respectively.
Section 13.4 Incorporation Of Master Separation Agreement
Provisions. The provisions of Article VI and Article VII
(other than Section 7.03) of the Master Separation Agreement
are hereby incorporated herein by reference, and unless
otherwise expressly specified herein, such provisions shall
apply as if fully set forth herein (references in this
Section to an "Article" or "Section" shall mean Articles or
Sections of the Master Separation Agreement, and, except as
expressly set forth herein, references in the material
incorporated herein by reference shall be references to the
Master Separation Agreement).
Section 13.5 Governing Law. To the extent not preempted
by applicable federal law, this Agreement shall be governed
by, construed and interpreted in accordance with the laws of
the State of Maryland.
Section 13.6 Severability. If any term or other provision
of this Agreement is determined to be invalid, illegal or
incapable of being enforced by any rule of law or public
policy, all other conditions and provisions of this
Agreement shall nevertheless remain in full force and effect
so long as the economic or legal substance of the
transactions contemplated hereby is not affected in any
manner materially adverse to either party. Upon such
determination that any term or other provision is invalid,
illegal or incapable of being enforced, the parties hereto
shall negotiate in good faith to modify this Agreement so as
to effect the original intent of the parties as closely as
possible and in an acceptable manner to the end that
transactions contemplated hereby are fulfilled to the
fullest possible extent.
Section 13.7 Amendment. Supply Holdco and Allegheny may
mutually agree to amend the provisions of this Agreement at
any time or times, either prospectively or retroactively, to
such extent and in such manner as the Boards mutually deem
advisable. Each Board may delegate its amendment power, in
whole or in part, to one or more Persons or committees as it
deems advisable.
Section 13.8 Termination. This Agreement may be
terminated and the Separation abandoned at any time prior to
the IPO Closing Date by Allegheny in its sole discretion.
This Agreement may be terminated at any time after the IPO
Closing Date and before the Distribution Date by mutual
consent of Allegheny and Supply Holdco. In the event of
termination pursuant to this Section, no party shall have
any liability of any kind under this Agreement to the other
party.
Section 13.9 Conflict. In the event of any conflict
between the provisions of this Agreement and the Master
Separation Agreement, any Ancillary Agreement, or Plan, the
provisions of this Agreement shall control.
Section 13.10 Descriptive Headings. The descriptive
headings herein are inserted for convenience of reference
only and are not intended to be part of or to affect the
meaning or interpretation of this Agreement.
Section 13.11 Counterparts. This Agreement may be executed
in two or more counterparts each of which shall be deemed to
be an original, but all of which together shall constitute
but one and the same Agreement.
IN WITNESS WHEREOF, each of the parties have caused
this Employee Matters Agreement to be executed on its behalf
by its officers thereunto duly authorized on the day and
year first above written.
ALLEGHENY ENERGY, INC
By:
Name:
Title:
[_____________________]
By:
Name:
Title:
SCHEDULE 2.1
EMPLOYMENT LIABILITIES INDEMNIFICATION
Section 1. Indemnification by Supply Holdco. Except as
otherwise provided in this Agreement or Section 3 of this
Schedule, Supply Holdco shall, for itself and as agent for
each member of the Supply Holdco Group, indemnify, defend
(or, where applicable, pay the defense costs for) and hold
harmless the Allegheny Indemnitees from and against any and
all Employment Liabilities that any third party seeks to
impose upon the Allegheny Indemnitees, or which are imposed
upon the Allegheny Indemnitees, if and to the extent such
Employment Liabilities relate to, arise out of or result
from any of the following items (without duplication):
(i) subject to Section 4, any acts or omission or alleged
acts or omissions by or on behalf of any member or person
employed by a member of the Supply Holdco Group in the
conduct of the Supply Holdco Business;
(ii) any claim by an officer of the Supply Holdco Group (who
is an officer as of the IPO Closing Date) against any member
or employee of the Allegheny System;
(iii) any breach by Supply Holdco or any member or
person employed by a member of the Supply Holdco Group of
this Agreement, the Master Separation Agreement or any
other Ancillary Agreement; and
(iv) subject to Section 4, any Employment Liabilities of the
Supply Holdco Group.
In the event that any member of the Supply Holdco Group
makes a payment to the Allegheny Indemnitees hereunder, and
any of the Allegheny Indemnitees subsequently diminishes the
Employment Liability on account of which such payment was
made, either directly or through a third-party recovery,
Allegheny will promptly repay (or will procure a Allegheny
Indemnitee to promptly repay) such member of the Supply
Holdco Group the amount by which the payment made by such
member of the Supply Holdco Group exceeds the actual cost to
the Allegheny Indemnitee of the associated indemnified
Employment Liability.
Section 2. Indemnification by Allegheny. Except as
otherwise provided in this Agreement or Section 3 of this
Schedule, Allegheny shall, for itself and as agent for each
member of the Allegheny System, indemnify, defend (or, where
applicable, pay the defense costs for) and hold harmless the
Supply Holdco Indemnitees from and against any and all
Employment Liabilities that any third party seeks to impose
upon the Supply Holdco Indemnitees, or which are imposed
upon the Supply Holdco Indemnitees, if and to the extent
such Employment Liabilities relate to, arise out of or
result from any of the following items (without
duplication):
(i) subject to Section 4, any acts or omissions or alleged
acts or omissions by or on behalf of any member or person
employed by a member of the Allegheny System in the conduct
of the Allegheny Business;
(ii) any claim by an officer of the Allegheny System against
any member or employee of the Supply Holdco Group (who is an
officer as of the IPO Closing Date);
(iii) any breach by Allegheny or any member or person
employed by a member of the Allegheny System of this
Agreement, the Master Separation Agreement or any other
Ancillary Agreement; and
(iv) subject to Section 4, any Employment Liabilities of a
member of the Allegheny System.
In the event that any member of the Allegheny System
makes a payment to the Supply Holdco Indemnitees hereunder,
and any of the Supply Holdco Indemnitees subsequently
diminishes the Employment Liability on account of which such
payment was made, either directly or through a third-party
recovery, Supply Holdco will promptly repay (or will procure
a Supply Holdco Indemnitee to promptly repay) such member of
the Allegheny System the amount by which the payment made by
such member of the Allegheny System exceeds the actual cost
to the Supply Holdco Indemnitee of the indemnified
Employment Liability.
Section 3. Exceptions.
In accordance with the current practice in effect as of
the execution of the Agreement, with respect to claims for
benefits or compensation, if an underlying act or omission
as contemplated in Section 1 or 2 of this Schedule occurs
and such act or omission constitutes the principal basis for
such a claim, then Section 1 or 2 shall apply, as
applicable, to establish indemnification obligations. If,
however, no specific act or omission occurs that is
attributable to Allegheny or Supply Holdco and the principal
underlying basis for a claim for benefits or compensation
involves plan administration or other similar systemic type
activities related to maintenance of plans, notwithstanding
Sections 1 and 2, in accordance with the current practice in
effect as of the execution of the Agreement, Supply Holdco
and Allegheny shall be responsible for their pro rata
allocated share of costs to defend such claim.
Section 4. Indemnification of Environmental Claims and
Asbestos Claims. Any Environmental Claims or Asbestos
Claims against a Supply Holdco Indemnitee arising prior to
the IPO Closing Date are the responsibility of Allegheny and
Allegheny shall, for itself and as agent for each member of
the Allegheny Group, indemnify, defend (or, where
applicable, pay the defense costs for) and hold harmless the
Supply Holdco Indemnitee from and against any and all such
claims that any third party seeks to impose upon the Supply
Holdco Indemnitee, or which are imposed upon the Supply
Holdco Indemnitee. Any Environmental Claims or Asbestos
Claims against an Allegheny Indemnitee arising after the IPO
Closing Date are the responsibility of Supply Holdco and
Supply Holdco shall, for itself and as agent for each member
of the Supply Holdco Group, indemnify, defend (or, where
applicable, pay the defense costs for) and hold harmless the
Allegheny Indemnitee from and against any and all such
claims that any third party seeks to impose upon the
Allegheny Indemnitee, or which are imposed upon the
Allegheny Indemnitee. For purposes of this Section 4, an
Asbestos Claim or Environmental Claim shall be deemed to
have arisen "prior to" the IPO Closing Date if the claim
arises from or relates to exposure to, handling or use of
asbestos, or to the treatment, transportation or disposal of
alleged environmentally harmful substances, prior to the IPO
Closing Date, regardless of when the alleged injury or claim
is manifested or asserted, unless the claim arises from or
relates to negligent or otherwise unlawful acts of a Supply
Holdco Indemnitee after the IPO Closing Date. By way of
example only:
(i) Claims involving alleged exposure to asbestos or
contamination from emissions of or disposal of alleged
environmentally harmful substances allegedly occurring prior
to the IPO Closing Date shall be considered to have arisen
prior to the IPO Closing Date, regardless of when the claim
is commenced.
(ii) Claims involving alleged exposure to asbestos or
contamination from emissions of or disposal of alleged
environmentally harmful substances allegedly occurring after
the IPO Closing Date, or from allegedly negligent acts or
omissions in dealing with asbestos or such allegedly
environmentally harmful substances after the IPO Closing
Date, shall be considered to have arisen after the IPO
Closing Date regardless of when such asbestos or alleged
environmentally harmful substance was placed in any Supply
Holdco facility or was created or used in any Supply Holdco
Business.
(iii) Claims involving alleged exposure to asbestos or
contamination from emissions of or disposal of alleged
environmentally harmful substances allegedly occurring in
part before and in part after the IPO Closing Date shall be
handled as Commingled Claims under Section 2.5 of this
Agreement.
(iv) Violations of environmental permits by a Supply Holdco
Indemnitee after the IPO Closing Date will be deemed to
arise after the IPO Closing Date; provided, however, that to
the extent fines, penalties or other liabilities are imposed
as a result of such violations having also existed prior to
the IPO Closing Date, the pre-IPO portion of any such fines,
penalties or other liabilities shall be deemed to have
arisen prior to the IPO Closing Date.
Section 5. Relationship to Indemnification and Insurance
Matters Agreement.
(i) Unless expressly modified in this Schedule, all other
provisions of Article I of the Indemnification and Insurance
Matters Agreement will apply to an indemnifiable claim.
(ii) Any claim, which is not an Employment Liability, will
only be subject to the provisions of the Indemnification and
Insurance Matters Agreement.
SCHEDULE 2.1(a)
BENEFITS AND LIABILITIES FOR
ALLEGHENY RETIRED EMPLOYEES
At the Separation Date or other date as mutually agreed
upon by Allegheny and Supply Holdco, the following will
occur:
1. Retiree benefits for all Allegheny Retired
Employees and terminated vested employees as of such date
will continue to be the responsibility of Allegheny.
Retiree medical benefits
Retiree life benefits
Allegheny Pension Plan benefits
Allegheny SERP benefits
Allegheny Deferred Incentive Compensation
Plan benefits
Specified benefits in individual contracts
Cobra benefits
2. Supply Holdco will become fully responsible for
Supply Holdco SERP benefits for all Supply Holdco Employees
as of such date. Specifically, the other Allegheny
Subsidiaries will be relieved of any responsibilities to
provide a portion of the transferred employees' ultimate
SERP benefits due to periods of service the Supply Holdco
Employees worked for those other Subsidiaries.
3. Allegheny will be fully responsible for the
Allegheny SERP benefits for all Allegheny Employees as of
such date. Specifically, Supply Holdco will be relieved of
any responsibilities to provide a portion of the Allegheny
Employees' ultimate SERP benefits due to periods of service
the employees worked for Supply Holdco.
SCHEDULE 2.2
HEALTH AND WELFARE PLANS
AND
POST-RETIREMENT PROGRAMS
1. Flexible Benefits Program
a. Medical Plan
b. Dental Plan
c. Long-Term Disability Plan
d. Flexible Spending Accounts
1. Health Care Spending Account Plan
2. Dependent Care Spending Account Plan
2. Life Insurance Program
a. Group Life Insurance Plan
b. Group Universal Life Program
c. Death Benefit Plan
d. Travel Accident Insurance Plan
e. ELIP
3. Post-Retirement Programs
a. Retiree Medical (through the Medical Plan)
b. Medicare Part B premium reimbursement
c. Retiree Life (through the Group Life Insurance Plan and
ELIP)
SCHEDULE 6.4(a)
THIRD PARTY ASO CONTRACTS
Pension Plan MetLife, Equitable
ESOSP ▇. ▇▇▇▇ Price
Health and Welfare Plans
Medical Plan Highmark BC/BS, The Health Plan,
Aetna US Healthcare, and Caremark
Dental Plan CIGNA
Long-Term Disability Plan CIGNA
Flexible Spending Accounts
Health Care Spending Account Plan EBDS
Dependent Care Spending Account Plan EBDS
SCHEDULE 6.4(b)
GROUP INSURANCE POLICIES
Life Insurance Program
a. Group Life Insurance Plan CIGNA
b. Group Universal Life Program CIGNA
c. Travel Accident Insurance Plan Zurich-American
ELIP Security Life of Denver,
New York Life
SBP Pacific Mutual
SCHEDULE 8.4
FRINGE BENEFITS
1. Company Funding for Social Activities
a. Corporate-wide events (Golf, Bowling, Picnic)
b. Employee associations
2. Discount Vision Program
3. Educational Assistance Program
4. Enhanced Executive Auto-reimbursement Plan
5. Personal Computer Loans
6. Relocation Assistance
7. Scholarship Program
8. Separation Allowance Plan
9. Voluntary Benefits Program
a. Group Automobile, Homeowner's, and Renter's
Insurance
b. Group Vision Insurance
SCHEDULE 11.9(a)
EMPLOYMENT LITIGATION
TRANSFERRED CLAIMS
SCHEDULE 11.9(b)
EMPLOYMENT LITIGATION
JOINTLY DEFENDED CLAIMS