KEYSPAN CORPORATION AND ITS SUBSIDIARIES
INTERIM INCOME TAX ALLOCATION AGREEMENT
THIS AGREEMENT, made as of the 2nd day of November, 2000, by and
between KeySpan Corporation ("KSE") and its subsidiaries (hereinafter referred
to individually as the "Company" and collectively as "the Companies" and set
forth in Exhibit 1), is effective for the Consolidated Tax reflected on the
Consolidated Tax Return for calendar year ended December 31, 2000 and subsequent
years.
In the event that the acquisition of Eastern Enterprises ("EE") by KSE, by
merger of EE into a wholly-owned subsidiary of KSE, with Eastern surviving the
merger, is approved by all required governmental authorities -which is fully
anticipated, the shareholders of Eastern Enterprises having on April 26, 2000
approved of said merger - EE will become a wholly-owned subsidiary of KSE. EE
and each of its subsidiaries will likewise participate in this Agreement
beginning with the first calendar year-end Consolidated Tax Return for which it
is able. EE and each of its subsidiaries (see Exhibit 2) shall also be referred
to as a "Company" in accordance with the preceding paragraph.
Similarly, in the event that the acquisition of EnergyNorth, Inc.
("ENI") by EE, by merger of ENI into a wholly-owned subsidiary of EE, with ENI
surviving the merger, is approved by all required governmental authorities -
which is fully anticipated, the shareholders of ENI having on April 27, 2000
approved of said merger - ENI will become a wholly-owned subsidiary of EE. ENI
and each of its subsidiaries will likewise participate in this Agreement
beginning with the first calendar year-end Consolidated Tax Return for which it
is able. ENI and each of its subsidiaries shall also be referred to as a
"Company" in accordance with the initial paragraph.
WITNESSETH:
WHEREAS, the Companies file a consolidated Federal income tax return
and the consolidated Federal income tax liability has been allocated among the
Companies included in the consolidated return in accordance with the provisions
of subparagraph (a)(1) of Section 1552 of the Internal Revenue Code of 1986 and
other applicable requirements of Rule 45(c) under the Public Utility Holding
Company Act of 1935.
WHEREAS, Rule 45(c) sets forth the method by which Companies filing a
consolidated Federal income tax return (hereinafter referred to as the
"consolidated tax return") may use to allocate the consolidated federal income
tax liability among the members of the group; however, in order to utilize such
method, a written agreement must be executed by the Company setting forth the
allocation method for each taxable year.
WHEREAS, the Companies desire to allocate their Federal income tax
liability in accordance with the following procedures; NOW THEREFORE, the
Companies do agree as follows:
ARTICLE I
Definitions
1.1 "Consolidated Tax" is the aggregate tax liability for a tax year,
being the tax shown on the consolidated return and any adjustments thereto
thereafter determined. The consolidated tax will be the refund if the
consolidated return shows a negative tax.
1.2 "Corporate Tax Credit" is a negative separate return tax of a
Company for a tax year, equal to the amount by which the consolidated tax is
reduced by including a net corporate taxable loss or other net tax benefit of
such Company in the consolidated tax return.
1.3 "Corporate Taxable Income" is the income or loss of a Company for
a tax year, computed as though such Company had filed a separate return on the
same basis as used in the consolidated return, except that dividend income from
the Companies shall be disregarded, and other intercompany transactions
eliminated in the consolidated return shall be given appropriate effect. It
shall further be adjusted to allow for applicable rights accrued to a Company
for the recognition of negative corporate taxable income consistent with the
provisions of Article II herein, but carryovers and carrybacks shall not be
taken into account as loss Companies are to receive current payment of their
Corporate Tax Credits. If a Company is a member of the registered system's
consolidated tax group for only part of a tax year, that period will be deemed
to be its tax year for all purposes for that year under this Agreement.
1.4 "Separate Return Tax" is the tax on the Corporate Taxable Income
of a Company computed as though such Company was not a member of a consolidated
group.
ARTICLE II
Tax Allocation Procedures
2.1 The Consolidated Tax shall be apportioned among the Companies in
proportion to the Corporate Taxable Income of each member of the affiliated
group. Each Company which incurs a tax loss for the year shall be included in
the allocation of Consolidated Tax and shall receive a Corporate Tax Credit, the
amount of which shall be currently paid to the Company by KSE increased by any
amounts previously assessed by KSE and remitted by the Company to KSE for
estimated tax payment purposes attributable to the subject taxable year.
Companies with a positive allocation of the Consolidated Tax shall currently pay
the amount so allocated, decreased by any amounts previously assessed by KSE and
remitted by the Company to KSE for estimated tax payment purposes attributable
to the subject taxable year.
Special Rule Regarding KSE: In making the tax allocations provided for
in this Agreement, notwithstanding any of the foregoing, no corporate tax
benefits
shall be allocated to KSE. Although the separate corporate taxable income or
taxable loss of KSE and any tax credits attributable to KSE will be included in
the consolidated return, only the tax savings attributable to such items shall
be allocated to the other Companies as if KSE was not a member of the Companies
in the consolidated return group. In making this allocation, the tax savings of
KSE shall be allocated only to the other member Companies in the consolidated
return group having taxable income. KSE will remit, from its separate resources,
funds for the payment of tax liabilities owed by KSE.
2.2 KSE shall pay to the Internal Revenue Service the group's
Consolidated Tax liability from the net of the receipts and payments.
2.3 No Company shall be allocated any income tax greater than the
Separate Return Tax of such Company.
2.4 To the extent that the Consolidated and Corporate Taxable Incomes
include material items taxed at rates other than the statutory rate (such as
capital gains and preference items), the portion of the Consolidated Tax
attributable to these items shall be apportioned directly to the members of the
group giving rise to such items.
2.5 Should the Companies generate a net consolidated tax loss for a
tax year that is too large to be used in full for that year, with result that
there are uncompensated Corporate Tax Credit benefits for that year, the
carryover of uncompensated benefits related to the carryforward of tax losses
applied to reduce Consolidated Taxable Income in future tax years shall be
apportioned in accordance with the respective Companies' contributions to such
loss. The tax benefits of any resultant carryback shall be allocated
proportionally to the Companies that generated corporate tax losses in the year
the consolidated net operating tax loss was generated. Any related loss of
credits, including investment tax credit reversals, shall be allocated to the
member Company that utilized the credits in the prior year in the same
proportion that the credit lost is to the total credit utilized in the prior
year. Investment tax credit reversals allocated to a member Company will be
added to that Company's available corporate investment tax credit for future
allocations. A prior year consolidated net operating tax loss carryforward
applied to reduce current year Consolidated Taxable Income shall be allocated
proportionally to member Companies that generated a corporate tax loss in the
year the consolidated net operating loss was generated.
2.6 Adjustments to or revisions of the Consolidated Tax as a result of
subsequent events such as amended returns, revenue agents' reports, litigation
or negotiated settlements shall be allocated in accordance with the principles
established in this Agreement.
ARTICLE III
Amendment
This Agreement is subject to revision as a result of changes in income
tax law and changes in relevant facts and circumstances.
IN WITNESS WHEREOF, this Agreement has been executed by an officer of
each company as of the day and year first above written by the Companies.
/s/ Chief Financial Officer of Subsidiary Corporation
By:
-------------------------------------------
DATE:
----------------------
EXHIBIT 1
The following members of the KeySpan Corporation affiliated group of
corporations as described in Section 1504 of the Internal Revenue Code hereby
authorize their common parent corporation, KeySpan Corporation to make and file
a consolidated federal income tax return on behalf of the group:
Federal Employer
Identification
Name and Address Number_______
--------------------------------------------------------------------------------
KeySpan Corporation............................................ 00-0000000
KeySpan Energy Corporation..................................... 00-0000000
ACJ Acquisition LLC............................................ 00-0000000
Active Conditioning Corp....................................... 00-0000000
The Brooklyn Union Gas Company................................. 00-0000000
Delta KeySpan Inc.............................................. 00-0000000
Fourth Avenue Enterprise Piping Corp........................... 00-0000000
Xxxxxx-KeySpan LLC............................................. 00-0000000
GEI Development Corp........................................... 00-0000000
GEI Timna Inc.................................................. 00-0000000
KeySpan Communications Corp.................................... 00-0000000
KeySpan Corporate Services LLC................................. 00-0000000
KeySpan Cross Bay, LLC......................................... 00-0000000
KeySpan Electric Services LLC.................................. 00-0000000
KeySpan Energy Development Corporation......................... 00-0000000
KeySpan Energy Management Inc.................................. 00-0000000
KeySpan Energy Services Inc.................................... 00-0000000
KeySpan Energy Solutions, LLC.................................. 00-0000000
KeySpan Energy Supply LLC...................................... 00-0000000
KeySpan Energy Trading Services LLC............................ 00-0000000
KeySpan Engineering Associates, Inc............................ 00-0000000
KeySpan Exploration and Production LLC......................... 00-0000000
KeySpan Gas East Corporation................................... 00-0000000
KeySpan Generation LLC......................................... 00-0000000
KeySpan International Corporation.............................. 00-0000000
KeySpan MHK, Inc............................................... 00-0000000
KeySpan Midstream LLC.......................................... 00-0000000
KeySpan Northeast Ventures, Inc................................ 00-0000000
KeySpan Operating Services, LLC................................ 00-0000000
KeySpan Plumbing Solutions, Inc................................ 00-0000000
KeySpan Ravenswood, Inc........................................ 00-0000000
KeySpan Services, Inc.......................................... 00-0000000
KeySpan Technologies, Inc...................................... 00-0000000
KeySpan Utility Services LLC................................... 00-0000000
KeySpan-Ravenswood Services Corp............................... 00-0000000
Northeast Transmission Co., Inc................................ 00-0000000
Xxxxxx, Xxxxxxxxxx and Xxxxxx Inc.............................. 00-0000000
X. X. Xxxxxxx LLC.............................................. 00-0000000
Xxx-Xxx Inc.................................................... 00-0000000
Xxx-Xxx Electrical Inc......................................... 00-0000000
Xxx-Xxx Mechanical Inc......................................... 00-0000000
THEC Holdings Corp............................................. 00-0000000
WDF, Inc....................................................... 00-0000000
EXHIBIT 2
The following corporations will be members of the KeySpan Corporation
affiliated group of corporations as described in Section 1504 of the Internal
Revenue Code upon the completion of the Eastern Enterprises and EnergyNorth,
Inc. acquisitions described supra and will authorize their common parent
corporation, KeySpan Corporation to make and file a consolidated federal income
tax return on behalf of the group once the transactions are completed:
Federal Employer
Identification
Name and Address Number_______
--------------------------------------------------------------------------------
Eastern Enterprises............................................ 00-0000000
EE-AEM Company, Inc............................................ 00-0000000
AMR Data Corporation........................................... 00-0000000
Boston Gas Company............................................. 00-0000000
Boston Gas Services, Inc....................................... 00-0000000
Broken Bridge Corporation...................................... 00-0000000
Capital Marine Supply, Inc..................................... 00-0000000
Chotin Transportation, Inc..................................... 00-0000000
Colonial Gas Company........................................... 00-0000000
Eastern Associated Capital Corp................................ 00-0000000
Eastern Associated Securities Corp............................. 00-0000000
Eastern Associated Terminals Company........................... 00-0000000
Eastern Energy Systems Corp.................................... 00-0000000
Eastern Rivermoor Company, Inc................................. 00-0000000
Eastern Urban Services, Inc.................................... 00-0000000
EE Acquisition Company, Inc.................................... 00-0000000
EnergyNorth Incorporated....................................... 00-0000000
EnergyNorth Natural Gas, Inc................................... 00-0000000
EnergyNorth Propane, Inc....................................... 00-0000000
EnergyNorth Realty, Inc........................................ 00-0000000
EnergyNorth Resources, Inc..................................... 00-0000000
ENI Mechanicals, Inc........................................... 00-0000000
Essex Gas Company.............................................. 00-0000000
Federal Barge Lines, Inc....................................... 00-0000000
Granite State Plumbing & Heating............................... 00-0000000
Xxxxxxx Marine Corp............................................ 00-0000000
LNG Storage, Inc............................................... 00-0000000
Massachusetts LNG, Inc......................................... 00-0000000
Midland Enterprises, Inc....................................... 00-0000000
Minnesota Harbor Services...................................... 00-0000000
Mystic Steamship Corporation................................... 00-0000000
Northern Energy Company, Inc................................... 00-0000000
Northern Peabody Inc........................................... 00-0000000
Orgulf Transport Co............................................ 00-0000000
Orsouth Transport Co........................................... 00-0000000
PCC Land Company, Inc.......................................... 00-0000000
Philadelphia Coke Company, Inc................................. 00-0000000
Port Xxxxx Marine Service, Inc................................. 00-0000000
Red Circle Transport Co........................................ 00-0000000
River Fleets, Inc.............................................. 00-0000000
ServicEdge Partners, Inc....................................... 00-0000000
The Ohio River Company......................................... 00-0000000
The Ohio River Company Traffic Division, Inc................... 00-0000000
The Ohio River Terminals Company............................... 00-0000000
Transgas, Inc.................................................. 00-0000000
Water Products Group Incorporated.............................. 00-0000000
Western Associated Energy Corp................................. 00-0000000
West Virginia Terminals Co..................................... 00-0000000
