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control over any challenges by the IRS to the inclusion of
petitioners in the consolidated return filed by Amax for each of
the years 1984, 1985, and 1986. That agreement stated:
(a)(i) If the Internal Revenue Service shall
propose an adjustment in the tax liability of the
Alumax Consolidated Group [petitioners' group] for
which Amax would be required to pay an indemnity pursu-
ant to Section 1 of this Agreement (a "Challenge to
Consolidation"), then Alumax or Amax, whichever shall
receive notice of the Challenge to Consolidation from
the Internal Revenue Service, shall give prompt notice
to the other of the Challenge to Consolidation. Amax
shall determine in its sole discretion whether to
contest the Challenge to Consolidation, and, with
respect to any such contest, shall determine the nature
of all action to be taken to contest such Challenge to
Consolidation including (A) whether any action to
contest such Challenge to Consolidation shall be by way
of judicial or administrative proceedings, or both, (B)
whether any such Challenge to Consolidation shall be
contested by resisting payment of the proposed adjust-
ment or by paying the same and seeking a refund there-
of, and (C) if Amax chooses to proceed through judicial
proceedings, the court or other judicial body before
which judicial action shall be commenced. Amax shall
have full control over any contest pursuant to this
Section 3(a), but shall keep Alumax and the Mitsui
Group informed of the status thereof and shall consider
in good faith requests by them concerning the contest
of the claim.
(ii) Notwithstanding paragraph (i) above, Alumax
shall retain the rights specified in Section 6 of the
Tax Sharing Agreement with respect to issues described
therein other than whether the inclusion of the Alumax
Consolidated Group in the Combined Consolidated Group
[the Amax group and petitioners' group together] was
proper. * * *
The pledge and indemnity agreement further provided, inter
alia, that it was to terminate upon the earliest date on which
all of the following conditions were met: (1) No taxing author-
ity was any longer entitled to propose an adjustment to any tax
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