Exhibit B-7
Exhibit H to the Master Separation and Distribution Agreement
INDEMNIFICATION & INSURANCE MATTERS AGREEMENT
INDEMNIFICATION AND INSURANCE MATTERS AGREEMENT
BETWEEN
ALLEGHENY ENERGY, INC.
AND
[SUPPLY HOLDCO]
INDEMNIFICATION AND INSURANCE MATTERS AGREEMENT
INDEMNIFICATION AND INSURANCE MATTERS AGREEMENT (the
"Agreement"), dated ___________, 2001, between Allegheny
Energy, Inc., a Maryland corporation ("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 other
agreements in order to facilitate the foregoing; and
WHEREAS, in connection with the foregoing, the parties
desire to set forth certain agreements regarding
indemnification and insurance.
NOW, THEREFORE, in consideration of the foregoing and
the covenants and agreements set forth below, Allegheny and
Supply Holdco agree as follows:
ARTICLE I
DEFINITIONS
For the purpose 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.
"Action" means any demand, action, suit, countersuit,
arbitration, inquiry, proceeding or investigation by or
before any federal, state, local, foreign or international
governmental authority or any arbitration or mediation
tribunal.
"Allegheny Indemnitees" means Allegheny, each member of
the Allegheny Group and each of their respective directors,
officers and employees.
"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.
"Claims Committee" means a committee composed of (i)
either the General Counsel or Deputy General Counsel of
Allegheny and (ii) either the General Counsel or Deputy
General Counsel of Supply Holdco.
"Commingled Claims" means, collectively, any Third
Party Claims (i) which involve an employee, consultant or
contractor that was employed by both the Supply Holdco
Business and the Allegheny Business, (ii) in which both
Allegheny and Supply Holdco are named, or (iii) involving
both the Supply Holdco Business and the Allegheny Business.
"Coverage Amount" has the meaning set forth in Section
3.6 hereof.
"Employee Matters Agreement" means the Employee Matters
Agreement between Allegheny and Supply Holdco.
"Employment Liabilities" has the meaning set forth in
the Employee Matters Agreement.
"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.
"Existing Authority" has the meaning set forth in 4.12
hereof.
"Indemnifying Party" has the meaning set forth in
Section 2.5(a) hereof.
"Indemnitee" has the meaning set forth in Section
2.5(a) hereof.
"Insurance Policies" means insurance policies pursuant
to which a Person makes a true risk transfer to an insurer.
"Insurance Transition Period" has the meaning set forth
in Section 3.1(a) of this Agreement.
"Insured Supply Holdco Liability" means any Supply
Holdco Liability to the extent that (i) it is covered under
the terms of Allegheny's Insurance Policies in effect prior
to the IPO Closing Date and (ii) Supply Holdco is not a
named insured under, or otherwise entitled to the benefits
of, such Insurance Policies.
"Intercompany Agreements" means any written agreement
between Allegheny or any of its Subsidiaries and Supply
Holdco or any of its Subsidiaries, which is in effect prior
to the IPO Closing Date.
"Liabilities" means all debts, liabilities, guarantees,
assurances, commitments and obligations, whether fixed,
contingent or absolute, asserted or unasserted, matured or
unmatured, liquidated or un-liquidated, 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. For purposes of any
indemnification hereunder, "Liabilities" shall be deemed
also to include any and all damages, claims, suits,
judgments, fines, penalties, costs and expenses of any kind
or character, including attorney's fees.
"Overallocated Party" has the meaning set forth in
Section 3.6 hereof.
"Master Separation Agreement" means the Master
Separation and Distribution Agreement between Allegheny and
Supply Holdco.
"Supply Holdco Covered Parties" shall have the meaning
set forth in Section 3.1(a) of this Agreement.
"Supply Holdco Indemnitees" means Supply Holdco, each
member of the Supply Holdco Group and each of their
respective directors, officers and employees.
"Supply Holdco Liabilities" means (i) all Liabilities
of the Supply Holdco Group and (ii) the Credit Support
Arrangements.
"Tax Indemnification Agreement" means the Tax
Indemnification Agreement between Allegheny and Supply
Holdco.
"Taxes" has the meaning set forth in the Tax
Indemnification Agreement.
"Third Party Claim" has the meaning set forth in
Section 2.5(a) of this Agreement.
ARTICLE II
MUTUAL RELEASES; INDEMNIFICATION
SECTION 2.1 Release of Pre-Closing Claims.
(a) Supply Holdco Release. Except as provided in Section
2.1(c), effective as of the IPO Closing Date, Supply Holdco
does hereby, for itself and as agent for each member of the
Supply Holdco Group, remise, release and forever discharge
the Allegheny Indemnitees from any and all Liabilities
whatsoever, whether at law or in equity (including any right
of contribution), whether arising under any contract or
agreement, by operation of law or otherwise, existing or
arising on or prior to the IPO Closing Date from any acts or
events occurring or failing to occur or alleged to have
occurred or to have failed to occur or any conditions
existing or alleged to have existed on or before the IPO
Closing Date, including any such acts, events or conditions
on or before the IPO Closing Date in connection with the
transactions and all other activities to implement any of
the Separation, the IPO and the Distribution.
(b) Allegheny Release. Except as provided in Section
2.1(c), effective as of the IPO Closing Date, Allegheny does
hereby, for itself and as agent for each member of the
Allegheny Group, remise, release and forever discharge the
Supply Holdco Indemnitees from any and all Liabilities
whatsoever, whether at law or in equity (including any right
of contribution), whether arising on or prior to the IPO
Closing Date under any contract or agreement, by operation
of law or otherwise, existing or arising from any acts or
events occurring or failing to occur or alleged to have
occurred or to have failed to occur or any conditions
existing or alleged to have existed on or before the IPO
Closing Date, including any such acts, events or conditions
on or before the IPO Closing Date in connection with the
transactions and all other activities to implement any of
the Separation, the IPO and the Distribution.
(c) Excluded Liabilities; No Impairment. Nothing contained
in Section 2.1(a) or (b) shall release any claims under, or
impair any right of any Person to enforce, the Master
Separation Agreement, any Ancillary Agreement (including
this Agreement), or any Intercompany Agreement, in each case
in accordance with its terms.
(d) No Actions as to Released Claims. Supply Holdco
agrees, for itself and as agent for each member of the
Supply Holdco Group, not to make any claim or demand, or
commence any Action asserting any claim or demand, including
any claim of contribution or any indemnification, against
Allegheny or any member of the Allegheny Group, or any other
Person released pursuant to Section 2.1(a), with respect to
any Liabilities released pursuant to Section 2.1(a).
Allegheny agrees, for itself and as agent for each member of
the Allegheny Group, not to make any claim or demand, or
commence any Action asserting any claim or demand, including
any claim of contribution or any indemnification, against
Supply Holdco or any member of the Supply Holdco Group, or
any other Person released pursuant to Section 2.1(b), with
respect to any Liabilities released pursuant to Section
2.1(b).
(e) Further Instruments. At any time, at the request of any
other party, each party shall cause each member of its
respective Group to execute and deliver releases reflecting
the provisions hereof.
Section 2.2 Indemnification by Supply Holdco. Except as
otherwise provided in this Agreement, 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 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 Liabilities relate
to, arise out of or result from any of the following items
(without duplication):
(i) subject to Section 2.4, any acts or omission or alleged
acts or omissions by or on behalf of any member of the
Supply Holdco Group in the conduct of the Supply Holdco
Business or in connection with the IPO or the Distribution;
(ii) any breach by Supply Holdco or any member of the Supply
Holdco Group of the Master Separation Agreement or any of
the Ancillary Agreements (including this Agreement); and
(iii) subject to Section 2.4 any Supply Holdco
Liability.
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
Liabilities 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 Liability.
Section 2.3 Indemnification by Allegheny. Except as
otherwise provided in this Agreement, 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 Indemnitees
from and against any and all 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 Liabilities relate to, arise out of or
result from any of the following items (without
duplication):
(i) subject to Section 2.4, any acts or omissions or
alleged acts or omissions by or on behalf of any member of
the Allegheny Group in the conduct of the Allegheny Business
or in connection with the IPO or the Distribution;
(ii) any breach by Allegheny or any member of the Allegheny
Group of the Master Separation Agreement or any of the
Ancillary Agreements (including this Agreement); and
(iii) subject to Section 2.4, any Liabilities of the
Allegheny Group other than the Credit Support Arrangements.
In the event that any member of the Allegheny Group
makes a payment to the Supply Holdco Indemnitees hereunder,
and any of the Supply Holdco Indemnitees subsequently
diminishes the Liabilities 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 Group the amount by which the payment made by such
member of the Allegheny Group exceeds the actual cost to the
Supply Holdco Indemnitee of the indemnified Liabilities.
Section 2.4 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 2.4, 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 2.5 Procedures for Defense, Settlement and
Indemnification of Third Party Claims.
(a) Notice of Claims. If an Allegheny Indemnitee or a
Supply Holdco Indemnitee (as applicable) (an "Indemnitee")
shall receive notice or otherwise learn of the assertion by
a Person (including any Regulatory Authority) who is not a
member of the Allegheny Group or the Supply Holdco Group of
any claim or of the commencement by any such Person of any
Action (collectively, a "Third Party Claim") with respect to
which a party (an "Indemnifying Party") may be obligated to
provide indemnification to such Indemnitee pursuant to
Section 2.2 or 2.3, or any section of the Master Separation
Agreement or any Ancillary Agreement (including this
Agreement), Allegheny and Supply Holdco (as applicable) will
ensure that such Indemnitee shall give such Indemnifying
Party written notice thereof within thirty (30) days after
becoming aware of such Third Party Claim. Any such notice
shall describe the Third Party Claim in reasonable detail.
Notwithstanding the foregoing, the delay or failure of any
Indemnitee or other Person to give notice as provided in
this Section 2.5(a) shall not relieve the related
Indemnifying Party of its obligations under this Article II,
except to the extent that such Indemnifying Party is
actually and substantially prejudiced by such delay or
failure to give notice.
(b) Claims Committee. Any of the parties may refer any
dispute regarding the provisions of this Article II to the
Claims Committee for resolution. All determinations of the
Claims Committee, if unanimous, shall be binding on all of
the parties and their respective successors and assigns. The
Claims Committee shall reach a resolution that minimizes
expenses for all parties and seeks to avoid hiring multiple
counsel. In the event a Liability arises from both an event,
act and omission relating primarily to the Supply Holdco
Business and an event, act or omission relating primarily to
the Allegheny Business, the Claims Committee shall apportion
the Liability in accordance with comparative fault, and it
may re-apportion the Liability as it learns of additional
facts bearing on that assessment. In the event that the
Claims Committee cannot reach a unanimous determination as
to the nature, status or handling of any such claims within
thirty (30) days after such referral (unless the Claims
Committee unanimously agrees to a longer time period), the
issue will be submitted for resolution pursuant to the
procedures set forth in the dispute resolution provisions
contained in Section 6.7 of the Master Separation Agreement;
provided, that the provisions of this Section 2.5(b) shall
supercede the requirements of the second sentence of Section
6.7(a) of the Master Separation Agreement.
(c) Defense of Commingled Claims. With respect to any
Commingled Claim, the Claims Committee shall determine which
party shall manage the defense of, and may seek to settle or
compromise, such Commingled Claim based upon the specific
facts of such claim.
(d) Defense By Indemnifying Party. Other than in the case
of a Commingled Claim, an Indemnifying Party will manage the
defense of and (unless the Indemnifying Party has specified
any reservations or exceptions to the obligation to manage
the defense or to indemnify that have been referred to, but
not resolved by, the Claims Committee) may settle or
compromise any Third Party Claim. Within thirty (30) days
after the receipt of notice from an Indemnitee in accordance
with Section 2.5(a) (or sooner, if the nature of such Third
Party Claim so requires), the Indemnifying Party shall
notify the Indemnitee that the Indemnifying Party will
assume responsibility for managing the defense of such Third
Party Claim, which notice shall specify any reservations or
exceptions.
(e) Defense By Indemnitee. If an Indemnifying Party fails
to assume responsibility for managing the defense of a Third
Party Claim, or fails to notify an Indemnitee that it will
assume responsibility as provided in Section 2.5(d), such
Indemnitee may manage the defense of such Third Party Claim.
(f) No Settlement By Indemnitee Without Consent. Unless the
Indemnifying Party has failed to manage the defense of the
Third Party Claim in accordance with the terms of this
Agreement, no Indemnitee may settle or compromise any Third
Party Claim without the consent of the Indemnifying Party.
(g) No Consent to Certain Judgments or Settlements Without
Consent. Notwithstanding Section 2.5(d) above, no party
shall consent to entry of any judgment or enter into any
settlement of a Third Party Claim without the consent of the
other party (such consent not to be unreasonably withheld)
if the effect of such judgment or settlement is to (A)
permit any injunction, declaratory judgment, other order or
other nonmonetary relief to be entered, directly or
indirectly, against the other party or (B) materially affect
the other party due to the allocation of Liabilities and
related indemnities set forth in the Master Separation
Agreement, this Agreement or any other Ancillary Agreement.
Section 2.6 Additional Matters.
(a) Cooperation in Defense and Settlement. With respect to
any Third Party Claim that implicates both Supply Holdco and
Allegheny in a material fashion due to the allocation of
Liabilities, responsibilities for management of defense and
related indemnities set forth in the Master Separation
Agreement, this Agreement or any of the Ancillary
Agreements, the parties agree to cooperate fully and
maintain a joint defense (in a manner that will preserve the
attorney-client privilege with respect thereto) so as to
minimize such Liabilities and defense costs associated
therewith. The party that is not responsible for managing
the defense of such Third Party Claims shall, upon
reasonable request, be consulted with respect to significant
matters relating thereto and may, if necessary or helpful,
associate counsel to assist in the defense of such claims.
(b) Substitution. In the event of an Action in which the
Indemnifying Party is not a named defendant, if either the
Indemnitee or the Indemnifying Party shall so request, the
parties shall endeavor to substitute the Indemnifying Party
for the named defendant. If such substitution or addition
cannot be achieved for any reason or is not requested, the
rights and obligations of the parties regarding
indemnification and the management of the defense of claims
as set forth in this Article II shall not be altered.
(c) Subrogation. In the event of payment by or on behalf of
any Indemnifying Party to or on behalf of any Indemnitee in
connection with any Third Party Claim, such Indemnifying
Party shall be subrogated to and shall stand in the place of
such Indemnitee, in whole or in part based upon whether the
Indemnifying Party has paid all or only part of the
Indemnitee's Liability, as to any events or circumstances in
respect of which such Indemnitee may have any right, defense
or claim relating to such Third Party Claim against any
claimant or plaintiff asserting such Third Party Claim or
against any other person. Such Indemnitee shall cooperate
with such Indemnifying Party in a reasonable manner, and at
the cost and expense of such Indemnifying Party, in
prosecuting any subrogated right, defense or claim.
(d) Not Applicable to Taxes or Employment Liabilities. This
Agreement shall not apply to Taxes (which are covered by the
Tax Indemnification Agreement) or Employment Liabilities
(which are covered by the Employee Matters Agreement).
Section 2.7 Survival of Indemnities. Subject to Section
4.7, the rights and obligations of the members of the
Allegheny Group and the Supply Holdco Group under this
Article II shall survive the sale or other transfer by any
party of any assets or businesses or the assignment by it of
any Liabilities or the sale by any member of the Allegheny
Group or the Supply Holdco Group of the capital stock or
other equity interests of any Subsidiary to any Person.
ARTICLE III
INSURANCE MATTERS
SECTION 3.1 Supply Holdco Insurance Coverage During the
Transition Period.
(a) Maintain Comparable Insurance. Throughout the period
beginning on the IPO Closing Date and ending on the
Distribution Date (the "Insurance Transition Period"),
Allegheny shall, subject to insurance market conditions and
other factors beyond its control, maintain policies of
insurance, including for the benefit of Supply Holdco or any
of its Subsidiaries, directors, officers, employees or other
covered parties (collectively, "Supply Holdco Covered
Parties") which are comparable to those maintained generally
by Allegheny; provided, however, that if Allegheny
determines that (i) the amount or scope of such coverage
will be reduced to a level materially inferior to the level
of coverage in existence immediately prior to the Insurance
Transition Period or (ii) the retention or deductible level
applicable to such coverage, if any, will be increased to a
level materially greater than the levels in existence
immediately prior to the Insurance Transition Period,
Allegheny shall give Supply Holdco notice of such
determination as promptly as practicable. Upon notice of
such determination, Supply Holdco shall be entitled to no
less than sixty (60) days to evaluate its options regarding
continuance of coverage hereunder and may cancel its
interest in all or any portion of such coverage as of any
day within such sixty (60) day period. Except as provided
below, during the Insurance Transition Period, such policies
of insurance shall cover Supply Holdco Covered Parties for
liabilities and losses insured prior to the Distribution
Date.
(b) Reimbursement for Premiums. Supply Holdco shall
promptly pay or reimburse Allegheny, as the case may be, for
premium expenses, and Supply Holdco Covered Parties shall
promptly pay or reimburse Allegheny for any costs and
expenses which Allegheny may incur in connection with the
insurance coverages maintained pursuant to this Section 3.1,
including but not limited to any subsequent premium
adjustments. All payments and reimbursements by Supply
Holdco and Supply Holdco Covered Parties to Allegheny shall
be made within fifteen (15) days after Supply Holdco's
receipt of an invoice from Allegheny.
Section 3.2 Cooperation and Agreement Not to Release
Carriers. Each of Allegheny and Supply Holdco will share
such information as is reasonably necessary in order to
permit the other to manage and conduct its insurance matters
in an orderly fashion. Each of Allegheny and Supply Holdco,
at the request of the other, shall cooperate with and use
commercially reasonable efforts to assist the other in
recoveries for claims made under any insurance policy for
the benefit of any insured party, and neither Allegheny nor
Supply Holdco, nor any of their Subsidiaries, shall take any
action which would intentionally jeopardize or otherwise
interfere with either party's ability to collect any
proceeds payable pursuant to any insurance policy. Except as
otherwise contemplated by the Master Separation Agreement,
this Agreement or any Ancillary Agreement, after the IPO
Closing Date, neither Allegheny nor Supply Holdco shall (and
shall ensure that no member of their respective Groups
shall), without the consent of the other, provide any
insurance carrier with a release, or amend, modify or waive
any rights under any such policy or agreement, if such
release, amendment, modification or waiver would adversely
affect any rights or potential rights of any member of the
other Group thereunder. However, nothing in this Section 3.2
shall (A) preclude any member of any Group from presenting
any claim or from exhausting any policy limit, (B) require
any member of any Group to pay any premium or other amount
or to incur any Liability, (C) require any member of any
Group to renew, extend or continue any policy in force or
(D) except as otherwise provided in Section 3.12, apply to
Allegheny in connection with rights to coverage for
Environmental Claims under Insurance Policies in effect
prior to the IPO Closing Date.
Section 3.3 Supply Holdco Insurance Coverage After the
Insurance Transition Period. From and after expiration of
the Insurance Transition Period, Supply Holdco, and Supply
Holdco alone, shall be responsible for obtaining and
maintaining insurance programs for its risk of loss and such
insurance arrangements shall be separate and apart from
Allegheny's insurance programs. Notwithstanding the
foregoing, Allegheny, upon the request of Supply Holdco,
shall use all commercially reasonable efforts to assist
Supply Holdco in the transition to its own separate
insurance programs from and after the Insurance Transition
Period, and shall provide Supply Holdco with any information
that is in the possession of Allegheny and is reasonably
available and necessary to either obtain insurance coverages
for Supply Holdco or to assist Supply Holdco in preventing
unintended self-insurance, in whatever form.
Section 3.4 Responsibilities for Self-insured
Obligations. Supply Holdco will reimburse Allegheny for all
amounts necessary to exhaust or otherwise satisfy all
applicable self-insured retentions, amounts for fronted
policies, deductibles and retrospective premium adjustments
and similar amounts not covered by Insurance Policies in
connection with Supply Holdco Liabilities and Insured Supply
Holdco Liabilities.
Section 3.5 Procedures With Respect to Insured Supply
Holdco Liabilities.
(a) Reimbursement. Except for claims subject to Section
2.4, Supply Holdco will reimburse Allegheny for all amounts
incurred to pursue insurance recoveries from Insurance
Policies for Insured Supply Holdco Liabilities.
(b) Management of Claims. Except for claims subject to
Section 2.4, the defense of claims, suits or actions giving
rise to potential or actual Insured Supply Holdco
Liabilities will be managed (in conjunction with Allegheny's
insurers, as appropriate) by the party that would have had
responsibility for managing such claims, suits or actions
had such Insured Supply Holdco Liabilities been Supply
Holdco Liabilities.
Section 3.6 Insufficient Limits of Liability for
Allegheny Liabilities and Supply Holdco Liabilities. Except
for claims subject to Section 2.4, in the event that there
are insufficient limits of liability available under
Allegheny's Insurance Policies in effect prior to the
Distribution Date to cover the Liabilities of Allegheny
and/or Supply Holdco that would otherwise be covered by such
Insurance Policies, then to the extent that other insurance
is not available to Allegheny and/or Supply Holdco for such
Liabilities an adjustment will be made in accordance with
the following procedures:
(i) Each party will be allocated an amount equal to its
proportional share of any excess Liabilities (net of any
deductible) of the lesser of (A) the available limits of
liability available under Allegheny's Insurance Policies in
effect prior to the Distribution Date net of uncollectible
amounts attributable to insurer insolvencies, and (B) the
proceeds received from Allegheny's Insurance Policies if the
Liabilities are the subject of disputed coverage claims and,
following consultation with each other, Allegheny and/or
Supply Holdco agree to accept less than full policy limits
from Allegheny's and Supply Holdco's insurers (the "Coverage
Amount").
(ii) A party who receives more than its share of the
Coverage Amount (the "Overallocated Party") agrees to
reimburse the other party to the extent that the Liabilities
of the Overallocated Party that would have been covered
under such Insurance Policies (subject to the limitations of
Section 3.12) are less than the Overallocated Party's share
of the Coverage Amount.
(iii) This Section 3.6 shall terminate three years
following the Distribution Date; provided, however, that
either party may extend the three year period applicable to
these provisions by up to five additional two-year periods,
or as otherwise shall be agreed to in order to accomplish
the allocation objective set forth above and in order to
have access to any available coverage under the Insurance
Policies.
Section 3.7 Cooperation. Allegheny and Supply Holdco will
cooperate with each other in all respects, and they shall
execute any additional documents which are reasonably
necessary, to effectuate the provisions of this Article III.
Section 3.8 No Assignment or Waiver. This Agreement shall
not be considered as an attempted assignment of any policy
of insurance or as a contract of insurance and shall not be
construed to waive any right or remedy of any member of the
Allegheny Group in respect of any Insurance Policy or any
other contract or policy of insurance.
Section 3.9 No Liability. Supply Holdco does hereby, for
itself and as agent for each other member of the Supply
Holdco Group, agree that no member of the Allegheny Group or
any Allegheny Indemnitee shall have any Liability whatsoever
as a result of the insurance policies and practices of
Allegheny and its Subsidiaries as in effect at any time
prior to the Distribution Date, including as a result of the
level or scope of any such insurance, the creditworthiness
of any insurance carrier, the terms and conditions of any
policy, the adequacy or timeliness of any notice to any
insurance carrier with respect to any claim or potential
claim or otherwise.
Section 3.10 No Restrictions. Nothing in this Agreement
shall be deemed to restrict any member of the Supply Holdco
Group from acquiring at its own expense any other insurance
policy in respect of any Liabilities or covering any period.
Section 3.11 Further Agreements. The Parties acknowledge
that they intend to allocate financial obligations without
violating any laws regarding insurance, self-insurance or
other financial responsibility. If it is determined that any
action undertaken pursuant to the Master Separation
Agreement, this Agreement or any Ancillary Agreement is
violative of any insurance, self-insurance or related
financial responsibility law or regulation, the parties
agree to work together to do whatever is necessary to comply
with such law or regulation while trying to accomplish, as
much as possible, the allocation of financial obligations as
intended in the Master Separation Agreement, this Agreement
and any Ancillary Agreement.
Section 3.12 Agreement Regarding Insurance Covering
Environmental Claims and Asbestos Claims. Notwithstanding
anything to the contrary in this Agreement (including
Article III hereof), the Master Separation Agreement or any
Ancillary Agreement, Supply Holdco shall not make any claim
against, or be entitled to any proceeds from, any primary,
umbrella or excess general liability policy in effect prior
to the IPO Closing Date for any Environmental Claims or
Asbestos Claims except to the extent permitted or requested
by Allegheny. Each Supply Holdco Indemnitee shall, as a
condition of the indemnity provided by Allegheny hereunder,
cooperate fully with Allegheny at Allegheny's request in the
pursuit of insurance coverage under any policy in effect
prior to the IPO Closing Date. The proceeds of any such
policy shall be solely for Allegheny's account.
Section 3.13 Matters Governed by Employee Matters
Agreement. This Article III shall not apply to any insurance
policies that are the subject of the Employee Matters
Agreement.
ARTICLE IV
MISCELLANEOUS
Section 4.1 Entire Agreement. This Agreement, the Master
Separation Agreement, the other Ancillary Agreements and the
Exhibits and Schedules attached thereto, constitute the
entire agreement between the parties with respect to the
subject matter hereof and shall supersede all prior written
and oral and all contemporaneous oral agreements and
understandings with respect to the subject matter hereof.
Section 4.2 Governing Law. This Agreement shall be
governed by and construed in accordance with the laws of the
State of Maryland as to all matters regardless of the laws
that might otherwise govern under principles of conflicts of
laws applicable thereto.
Section 4.3 Notices. All notices and other
communications hereunder shall be in writing and shall be
deemed to have been duly given when delivered in person, by
telecopy with answer back, by express or overnight mail
delivered by a nationally recognized air courier (delivery
charges prepaid), or by registered or certified mail
(postage prepaid, return receipt requested) as follows:
if to Allegheny:
Allegheny Energy, Inc.
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Attention: General Counsel
if to Supply Holdco:
[_____________]
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Attention: General Counsel
or to such other address as the party to whom notice is
given may have previously furnished to the other in writing
in the manner set forth above. Any notice or communication
delivered in person shall be deemed effective on delivery.
Any notice or communication sent by telecopy or by overnight
air courier shall be deemed effective on the first Business
Day following the day on which such notice or communication
was sent. Any notice or communication sent by registered or
certified mail shall be deemed effective on the third
Business Day following the day on which such notice or
communication was mailed. As used in this Section 4.3,
"Business Day" means any day other than a Saturday, a Sunday
or a day on which banking institutions located in the State
of Maryland are authorized or obligated by law or executive
order to close.
Section 4.4 Parties in Interest. This Agreement and the
other documents referred to herein, shall be binding upon
Allegheny, Allegheny's Subsidiaries, Supply Holdco and
Supply Holdco's Subsidiaries and inure solely to the benefit
of the Supply Holdco Indemnitees and the Allegheny
Indemnitees and their respective permitted assigns, and
nothing in this Agreement, express or implied, is intended
to confer upon any other Person any rights or remedies of
any nature whatsoever under or by reason of this Agreement.
Section 4.5 Other Agreements Evidencing Indemnification
Obligations. Allegheny hereby agrees to execute, for the
benefit of any Supply Holdco Indemnitee, such documents as
may be reasonably requested by such Supply Holdco
Indemnitee, evidencing Allegheny's agreement that the
indemnification obligations of Allegheny set forth in this
Agreement inure to the benefit of and are enforceable by
such Supply Holdco Indemnitee. Supply Holdco hereby agrees
to execute, for the benefit of any Allegheny Indemnitee,
such documents as may be reasonably requested by such
Allegheny Indemnitee, evidencing Supply Holdco's agreement
that the indemnification obligations of Supply Holdco set
forth in this Agreement inure to the benefit of and are
enforceable by such Allegheny Indemnitee.
Section 4.6 Counterparts. This Agreement and the other
documents referred to herein, may be executed in
counterparts, each of which shall be deemed to be an
original but all of which shall constitute one and the same
agreement.
Section 4.7 Assignment. The rights and obligations in
this Agreement may not be assigned or delegated by any party
hereto, in whole or in part, without the express prior
written consent of the other party hereto.
Section 4.8 Severability. If any term or other provision
of this Agreement is determined by a nonappealable decision
by a court, administrative agency or arbitrator 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 any 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 in an acceptable manner to the end that
transactions contemplated hereby are fulfilled to the
fullest extent possible.
Section 4.9 Failure or Indulgence Not Waiver. No failure
or delay on the part of either party hereto in the exercise
of any right hereunder shall impair such right or be
construed to be a waiver of, or acquiescence in, any breach
of any representation, warranty or agreement herein, nor
shall any single or partial exercise of any such right
preclude other or further exercise thereof or of any other
right.
Section 4.10 Amendment. No change or amendment will be
made to this Agreement except by an instrument in writing
signed on behalf of each of the parties to this Agreement.
Section 4.11 Interpretation. The headings contained in
this Agreement are for reference purposes only and shall not
affect in any way the meaning or interpretation of this
Agreement. When a reference is made in this Agreement to an
Article or a Section, such reference shall be to an Article
or Section of this Agreement unless otherwise indicated.
Section 4.12 Governmental Approvals. The parties
acknowledge that certain of the provisions of this Agreement
may be subject to certain conditions established by
applicable government regulations, orders, and approvals
("Existing Authority"). The parties intend to implement this
Agreement consistent with and to the extent permitted by
Existing Authority and to cooperate toward obtaining and
maintaining in effect such governmental agency consents,
orders or approvals as may be required in order to implement
this Agreement as fully as possible in accordance with its
terms.
WHEREFORE, the parties have signed this Agreement
effective as of the date first set forth above.
ALLEGHENY ENERGY, INC. [______________________]
By:______________________ By: ____________________
Name: Name:
Title: Title: