Common use of Special Tax Indemnity Clause in Contracts

Special Tax Indemnity. (a) Subject to Section 6.05, from and after the Closing Date, ES Partnership shall indemnify the Indemnified Parties and hold them harmless from and against all liability for any Taxes imposed on or payable by or with respect to the Merging Entity for any Pre-Closing Tax Periods in connection with or as a result of the Energysource Distribution, and any Losses, liabilities, costs and expenses, including reasonable attorneys’ fees, incurred or arising in connection with or in respect of the assessment, assertion, contest or imposition of a Tax described in this Section 6.04(a) (collectively, a “Special Tax Loss”). ES Partnership’s indemnification obligation pursuant to this Section 6.04 shall be secured by a pledge of its equity interests in Energysource in accordance with the terms and conditions of a pledge agreement to be entered into between the Parent and ES Partnership. Such pledge agreement shall include mutually acceptable provisions providing for the termination of both the pledge and ES Partnership’s indemnification obligations under this Agreement upon the Owner or one of its Affiliates agreeing to indemnify the Indemnified Parties in a manner consistent with this section including providing alternative collateral or other reasonably satisfactory arrangements securing such indemnification obligation. (b) Not later than 30 days after receipt by the Owner of written notice from the Parent stating that any Special Tax Loss has been incurred by any of the Persons specified in Section 6.04(a) and the amount thereof, ES Partnership shall discharge its indemnification obligation with respect to such Special Tax Loss by paying to the Parent an amount equal to the amount of such Special Tax Loss. The payment by the Parent or any of the other Persons specified in Section 6.04(a) of any Special Tax Loss shall not relieve ES Partnership of its obligation under this Section 6.04. (c) The Parent agrees to give prompt notice to the Owner, with respect to the Merging Entity, of any Special Tax Loss or the assertion of any claim, or the commencement of any suit, action or proceeding in respect of which indemnity may be sought under this Section 6.04 or Section 7.01 (solely with respect to a breach of a representation or warranty in Section 4.01(h)) (a “Tax Proceeding”) and will give the Owner such information with respect thereto as the Owner may reasonably request. The Owner may assume the defense of any such suit, action or proceeding (including any Tax audit) that relates to a Pre-Closing Tax Period; provided that (x) the Owner shall thereafter consult with the Parent upon the Parent’s reasonable request for such consultation from time to time with respect to such suit, action or proceeding (including any Tax audit) and (y) the Owner shall not, without the Parent’s consent, agree to any settlement with respect to any Tax if such settlement could adversely affect the Tax liability of any Indemnified Party (including, effective upon the Closing, the Merging Entity). If the Owner assumes such defense, (i) the Parent shall have the right (but not the duty) to participate in the defense thereof and to employ counsel, at its own expense, separate from the counsel employed by the Owner and (ii) the Owner shall not assert that the Special Tax Loss, or any portion thereof, with respect to which the Parent seeks indemnification is not within the ambit of this Section 6.04. For avoidance of doubt, unless and until the Owner notifies the Parent in writing of the Owner’s decision to exercise the control and participation rights described in this Section 6.04(d), the Parent shall be entitled to take such actions as it decides are reasonable with respect to such suit, action or proceeding, including paying, compromising or contesting the Tax at issue. Whether or not the Owner chooses to defend or prosecute any claim, all of the parties hereto shall cooperate in the defense or prosecution thereof. (d) Notwithstanding anything to the contrary in this Agreement, Section 6.04 and not Sections 7.01 and 7.02 shall govern indemnification of the Indemnified Parties in respect of Special Tax Losses and the conduct of Tax Proceedings resulting therefrom.