<PAGE>

                                                                    Exhibit 10.6

                         TAX DISAFFILIATION AGREEMENT

     This Agreement is entered into as of the __ day of ____, ____ between
Western Resources, Inc., a Kansas corporation (the "Company"), and Westar
Industries, Inc., a Kansas corporation ("Westar").

                                  WITNESSETH:

     WHEREAS, the Company, Public Service Company of New Mexico, a New Mexico
corporation, HVOLT Enterprises, Inc., a Delaware corporation ("Parent"), [HVK,
Inc.], a Kansas corporation and a wholly owned subsidiary of Parent, and [HVNM,
Inc.], a Kansas corporation and a wholly owned subsidiary of Parent, have
entered into an Agreement and Plan of Restructuring and Merger dated as of
November 8, 2000 (the "Merger Agreement");

     WHEREAS, the Company and Westar intend to enter into an Asset Allocation
and Separation Agreement dated November 8, 2000 (the "Allocation and Separation
Agreement"), providing for the distribution by the Company to its shareholders
of all of the common stock of Westar (the "Split-Off");

     WHEREAS, the Company and Westar desire to set forth their agreement on the
rights and obligations of the Company, Westar and their respective Affiliates
with respect to various Tax matters and the handling and allocation of federal,
state, and local Taxes incurred in certain Taxable periods;

     NOW, THEREFORE, in consideration of the mutual covenants and agreements
hereinafter set forth, the parties agree as follows:

1    Definitions.
     -----------
     (a)  As used in this Agreement:

          "Affiliate" (and the correlative meaning, "Affiliation") of any person
     shall mean any individual, corporation, partnership or other entity,
     directly or indirectly, controlling, controlled by or under common control
     with such person.

          "After-Tax Amount" is defined in Section 5(g).

          "Business Day" shall mean any day other than a Saturday, Sunday or one
     on which banks are authorized or required by law to close in New York, New
     York.

          "Code" shall mean the Internal Revenue Code of 1986, as amended, or
     any successor thereto.

          "Combined Kansas Tax" shall mean the combined, unitary or other
     similar Kansas Tax of the Company Consolidated Group or determined on the
     basis of any member included in the Company Group and any member included
     in the Westar Group.


<PAGE>

          "Combined State/Local Tax" shall mean the combined, unitary or other
     similar state (other than Kansas) or local Tax of the Company Consolidated
     Group or determined on the basis of any member included in the Company
     Group and any member included in the Westar Group.

          "Company Consolidated Group" shall mean, with respect to any Taxable
     period, the corporations which are members of the affiliated group of
     corporations of which the Company is the common parent (within the meaning
     of Section 1504 of the Code).

          "Company Group" shall mean the corporations which are members of the
     Company Consolidated Group during any Taxable period, excluding the
     corporations which are the members of the Westar Group.

          "Consolidated Federal Tax" shall mean, with respect to income Taxes,
     the Federal Tax liability of the Company Consolidated Group determined on a
     consolidated basis.

          "Effective Tax Rate" is defined in Section 5(g).

          "Federal Tax" shall mean any United States Federal Tax.

          "Final Determination" shall mean (i) with respect to Federal Taxes,
     (A) a "determination" as defined in Section 1313(a) of the Code, or (B) the
     date of acceptance by or on behalf of the Internal Revenue Service of Form
     870-AD (or any successor form thereto), as a final resolution of Federal
     Tax liability for any Taxable period, except that a Form 870-AD (or
     successor form thereto) that reserves the right of the taxpayer to file a
     claim for refund and/or the right of the Internal Revenue Service to assert
     a further deficiency shall not constitute a Final Determination with
     respect to the item or items so reserved; (ii) with respect to Taxes other
     than Federal Taxes, any final determination of liability in respect of a
     Tax provided for under applicable law; (iii) any final disposition by
     reason of the expiration of the applicable statute of limitations; and (iv)
     the payment of Tax by the Company, Westar, or any Affiliate of the Company
     or Westar, whichever is responsible for payment of such Tax under
     applicable law, with respect to any item disallowed or adjusted by a Taxing
     Authority, provided that the provisions of Section 8 hereof have been
     complied with, or, if such section is inapplicable, that the party
     responsible under the terms of this Agreement for such Tax is notified by
     the party paying such Tax that it has determined that no action should be
     taken to recoup such disallowed item, and the other party agrees with such
     determination.

          "Final Liability" is defined in Section 8(c).

          "Gross-Up Payment" shall have the meaning set forth in the employment
     agreements listed in Item 10 of Section 7.9 of the Company Disclosure
     Letter to the Merger Agreement.



                                       2
<PAGE>

          "Kansas Tax" shall mean any Kansas state Tax.

          "Other Taxes" are defined in Section 4.

          "Pre-Split-Off Combined Kansas Tax Return" shall mean the combined
     Kansas Tax Return to be filed on behalf of the Company Consolidated Group
     for any Pre-Split-Off Period that has not been filed prior to the Split-Off
     Date.

          "Pre-Split-Off Combined State/Local Tax Return" shall mean the
     combined, unitary or other similar State/Local Tax Return (other than a
     Pre-Split-Off Combined Kansas Tax Return) to be filed on behalf of the
     Company Consolidated Group (or any member thereof) and which includes
     members of the Westar Group for any Pre-Split-Off Period that has not been
     filed prior to the Split-Off Date.

          "Pre-Split-Off Consolidated Federal Tax Return" shall mean the
     consolidated Federal Tax Return to be filed on behalf of the Company
     Consolidated Group for any Pre-Split-Off Period that has not been filed
     prior to the Split-Off Date.

          "Post-Split-Off Period" shall mean any Taxable period beginning after
     the Split-Off Date.

          "Pre-Split-Off Period" shall mean any Taxable period ending before or
     including the Split-Off Date.

          "Pre-Split-Off Tax Liability" shall mean the Tax liability of the
     Company and each corporation included in the Company Consolidated Group for
     all Pre-Split-Off Periods or portions thereof ending on or before the
     Split-Off Date regardless of whether any such liability has been previously
     assessed in whole or in part or is assessed in whole or in part after the
     date hereof, or whether such liability is or was imposed on the Company
     Consolidated Group collectively or on any corporation included within any
     such group separately.

          "Preliminary Kansas Tax Return" shall mean any preliminary Pre-Split-
     Off Combined Kansas Tax Return provided to Westar pursuant to Section 2(e).

          "Preliminary State/Local Tax Return" shall mean any preliminary Pre-
     Split-Off Combined State/Local Tax Return (other than a Preliminary Kansas
     Tax Return) provided to Westar pursuant to Section 2(f).

          "Preliminary Federal Tax Return" shall mean any preliminary Pre-Slit-
     Off Consolidated Federal Tax Return provided to Westar pursuant to Section
     2(d).

          "Prepaid Amount" is defined in Section 8(c).

          "Prime" shall mean the rate announced from time to time as "prime" by
     The Chase Manhattan Bank as its prime rate in New York City.



                                       3
<PAGE>

          "Pro Forma Kansas Return" means any pro forma Kansas Tax Return
     setting forth the Combined Kansas Tax liability of the Westar Group
     attributable to a Pre-Split-Off Combined Kansas Tax Return.

          "Pro Forma State/Local Return" means any pro forma state or local Tax
     Return setting forth the Combined State/Local Tax liability of the Westar
     Group attributable to a Pre-Split-Off Combined State/Local Tax Return.

          "Pro Forma Federal Return" means any pro forma Federal Tax Return
     setting forth the Consolidated Federal Tax liability of the Westar Group
     attributable to a Pre-Split-Off Consolidated Federal Tax Return.

          "Referee" is defined in Section 15.

          "Return" shall mean any Tax Return, statement, report or form
     (including any consolidated, combined or unitary Returns, estimated Tax
     Returns and reports, and information Returns and reports) required to be
     filed with any Taxing Authority.

          "Split-Off Date" shall mean the date on which the Company distributes
     to its shareholders the common stock of Westar held by the Company on such
     Split-Off Date.

          "State Parent" shall mean any member of the Company Group that is
     required to file a Pre-Split-Off Combined State/Local Tax Return.

          "State/Local Tax" shall mean any state or local Tax.

          "Stock Purchase Option Agreement" shall mean the stock option purchase
     agreement for Westar Generating, Inc. between the Company and Westar dated
     as of [               ], 2000.

          "Tax" (and the correlative meaning, "Taxes," "Taxing" and "Taxable")
     shall mean (i) any net income, gross income, gross receipts, alternative or
     add-on minimum, sales, use, ad valorem, franchise, profits, license,
     withholding, payroll, employment, excise, transfer, recording, severance,
     stamp, occupation, premium, property, environmental, custom duty, or other
     tax, governmental fee or other like assessment or charge of any kind
     whatsoever, together with any interest and any penalty, addition to Tax or
     additional amount imposed by a Taxing Authority; (ii) any liability of the
     Company, Westar or any Affiliate of the Company or Westar (or, in each
     case, any predecessor or successor in interest thereto by merger or
     otherwise), as the case may be, for the payment of any amounts of the type
     described in clause (i) for any Taxable period resulting from the
     application of Treasury Regulation Section 1.1502-6 or, in the case of any
     similar provision applicable under state, local or foreign law; and (iii)
     any liability of the Company, Westar or any Affiliate of the Company or
     Westar (or, in each case, any predecessor or successor in interest thereto
     by merger or otherwise) for the payment of any amounts described in clause
     (i) as a result of any express or implied obligation to indemnify any other
     party; provided, however, that Tax shall include all



                                       4
<PAGE>

     or any portion of the Gross-Up Payment attributable to any Tax described in
     clause (i) above or the loss of any Tax deductions attributable thereto
     only for purposes of Section 7 and 8 and, for those purposes, only as a Tax
     shared by both parties for a Pre-Split-Off Period.

          "Tax Asset" shall mean any net operating loss, net capital loss,
     investment Tax credit, foreign Tax credit, charitable deduction or any
     other credit or Tax attribute, including additions to basis of property,
     which could reduce Federal Taxes including, without limitation, deductions,
     credits, or alternative minimum net operating loss carryforwards related to
     alternative minimum Taxes.

          "Taxing Authority" shall mean any governmental authority responsible
     for the imposition of any Tax.

          "Tax Settlement" is defined in Section 8(b).

          "Westar Combined Kansas Tax Allocation Statement" is defined in
     Section 2(e).

          "Westar Combined State/Local Tax Allocation Statement" shall mean the
     statement setting forth the amount of the overpaid or underpaid portion of
     the Westar Group's allocable share of the total Combined State/Local Tax
     liability shown on the Preliminary State/Local Return.

          "Westar Consolidated Federal Tax Allocation Statement" is defined in
     Section 2(d).

          "Westar Group" shall mean the corporations which are members of the
     affiliated group of corporations of which Westar is the common parent
     (within the meaning of Section 1504 of the Code) immediately after the
     Split-Off Date and any successors thereto.

     (b)  Whenever this Agreement specifies that consent is not to be
     unreasonably withheld, the determination shall take into account, among
     other things, the relative amount of potential Tax exposure or refund
     involved for the members of the Company Group on the one hand and the
     members of the Westar Group on the other hand, and if the consent relates
     to bringing proceedings in one venue rather than another, the impact on
     such decision on such interests of each Group. Any controversy over refusal
     of a consent shall be resolved pursuant to Section 15(b).

     (c)  Any term used in this Agreement which is not defined in this Agreement
     shall, to the extent the context requires, have the meaning assigned to it
     in the Code or the applicable Treasury regulations thereunder.



                                       5
<PAGE>

2    Administrative and Compliance Matters.
     -------------------------------------

     (a)  Sole Tax Sharing Agreement. The parties acknowledge that there has not
     been a Final Determination of all Pre-Split-Off Tax Liabilities, and that
     the members of the Westar Group are includible in the Company Consolidated
     Group for the Pre-Split-Off Period. Any and all existing Tax sharing
     agreements or arrangements, written or unwritten, between any members of
     the Company Group, on the one hand, and any members of the Westar Group, on
     the other hand, shall be terminated as of the Split-Off Date, and after
     such date this Agreement shall constitute the sole Tax sharing agreement
     between any members of the Company Group, on the one hand, and any members
     of the Westar Group, on the other hand.

     (b)   Designation of Authority. Treasury regulations (and, by incorporation
     of such Treasury regulations, Kansas state Tax rules) designate the Company
     as the sole agent of all members of the Company Consolidated Group with
     respect to all Consolidated Federal Tax matters (and, to the extent
     provided by Kansas Tax law, Combined Kansas Tax matters, respectively) for
     Pre-Split-Off Periods. The Company, as agent, shall be responsible to see
     that all such administrative matters relating thereto shall be handled in a
     timely and appropriate manner. The Company shall be Westar's agent with
     respect to making payments to, or collecting Refunds from, any Taxing
     Authority with respect to Pre-Split-Off Tax Liabilities relating to any
     Consolidated Federal Taxes or Combined Kansas Taxes that are due from or to
     the Westar Group hereunder. Westar shall reimburse the Company, or the
     Company shall reimburse Westar, as the case may be, for the Westar
     allocable share. In so acting as agent, the Company shall not take any
     action on behalf of any member of the Westar Group, including, without
     limitation, strategies relating to waivers of any statute of limitations
     without the prior written consent of Westar (which consent shall not be
     unreasonably withheld) if such action is reasonably likely to materially
     increase the amount of Tax liability of the Westar Group not subject to
     indemnification under Section 5(b) over the amount it would have been
     without such action. In the event of disagreement over whether consent is
     required or is being unreasonably withheld, the parties shall resolve their
     disagreement in accordance with Section 15.

     (c)  Westar Authority. Notwithstanding Section 2(b) hereof, if the Internal
     Revenue Service District Director (or a corresponding state official) deals
     directly with any member of the Westar Group in respect of its Consolidated
     Federal Tax, Combined Kansas Tax or Combined State/Local Tax liability for
     a Pre-Split-Off Period, Westar shall have full authority to act or to
     designate such authority to such member of the Westar Group; provided,
     however, that Westar shall notify the Company, or such member of the Westar
     Group shall notify the Company and Westar, as the case may be, of any such
     communications or dealings and, with respect to any matters involving any
     Consolidated Federal Tax, Combined Kansas Tax or Combined State/Local Tax
     for any Pre-Split-Off Period not subject to indemnification under Section
     5(b), shall deal with any such Tax Authority only as the Company specifies
     pursuant to Section 2(b) hereof


                                       6
<PAGE>

     (subject to the limitations contained in this Agreement including the
     second to last sentence of Section 2(b)).

     (d)  Pre-Split-Off Consolidated Federal Tax Returns.

          (i)    The Company shall prepare and file the consolidated Federal Tax
     Return for any Pre-Split-Off Period that has not been filed prior to the
     Split-Off Date (a "Pre-Split-Off Consolidated Federal Tax Return").

          (ii)   Westar shall deliver to the Company the Pro Forma Federal
     Return 55 days prior to the due date for filing the Pre-Split-Off
     Consolidated Federal Tax Return (including extensions). The Company shall
     deliver to Westar the Preliminary Federal Tax Return 35 days prior to the
     due dates for filing (including extensions) and a statement setting forth
     the amount of the unpaid or overpaid portion of the Westar Group's
     allocable share of the total Consolidated Federal Tax liability, if any,
     shown on such Preliminary Federal Tax Return along with any related
     calculations used by the Company in determining such liability (the "Westar
     Consolidated Federal Tax Allocation Statement"). Such Pro Forma Federal
     Return and such Preliminary Federal Tax Return shall set forth all
     necessary and required information (including, without limitation,
     schedules, statements and such supporting documentation as the Company or
     Westar may reasonably request from time to time) in such form as would be
     required for filing with the Internal Revenue Service and shall correctly
     reflect the facts regarding the income, properties, operations and status
     of any entity required to be shown thereon. Except as otherwise required by
     law, such Pro Forma Federal Return or Preliminary Federal Tax Return shall
     be prepared making the elections and using the methods of accounting that
     were made or used by the Company Consolidated Group on the consolidated
     Federal Tax Return most recently filed with respect to a Tax period ending
     prior to the Split-Off Date unless the parties agree to make or use some
     other elections or methods of accounting (which agreement shall not be
     unreasonably withheld). The Company and Westar may (at their own expense)
     review all work papers and procedures used to prepare each Pro Forma
     Federal Return or Preliminary Federal Tax Return.

          (iii)  Westar shall notify the Company in writing of any proposed
     adjustments to a Preliminary Federal Tax Return including the Westar
     Consolidated Federal Tax Allocation Statement within 15 days of the date
     upon which it receives such Preliminary Federal Tax Return from the
     Company. In the event that the Company shall, within 5 days following the
     receipt of such notification from Westar, disagree with any proposed
     adjustment made under the above provision, such disagreement shall be
     resolved in accordance with Section 15(b). Upon agreement by the parties as
     to proposed adjustments, if any, to a Preliminary Federal Tax Return
     including the Westar Consolidated Federal Tax Allocation Statement, or upon
     a decision of the Referee, the Preliminary Federal Tax Return as adjusted
     (if at all) shall be deemed to be a final Pre-Split-Off Consolidated
     Federal Tax Return for purposes of this Agreement.



                                       7
<PAGE>

          (iv)   Prior to the due date of the Pre-Split-Off Consolidated Federal
     Tax Return (including any extensions), the Company shall pay to Westar or
     Westar shall pay to the Company the overpayment or underpayment,
     respectively, of the Westar Group allocation shown on the Westar
     Consolidated Federal Tax Allocation Statement taking into account any
     payments made by Westar or any member of the Westar Group to the Company,
     any member of the Company Group or any Taxing Authority.

     (e)  Pre-Split-Off Combined Kansas Tax Return.
          ----------------------------------------

          (i)    The Company shall prepare and file the Combined Kansas Tax
     Return for any Pre-Split-Off Period that has not been filed prior to the
     Split-Off Date (a "Pre-Split-Off Combined Kansas Tax Return").

          (ii)   Westar shall deliver to the Company the Pro Forma Kansas Return
     55 days prior to the due date for filing the Pre-Split-Off Combined Kansas
     Tax Return (including extensions). The Company shall deliver to Westar the
     Preliminary Kansas Tax Return 35 days prior to the due dates for filing
     (including extensions) and a statement setting forth the amount of the
     unpaid or overpaid portion of the Westar Group's allocable share of the
     total Combined Kansas Tax liability, if any, shown on such Preliminary
     Kansas Tax Return along with any related calculations used by the Company
     in determining such liability (the "Westar Combined Kansas Tax Allocation
     Statement"). Such Pro Forma Kansas Return or Preliminary Kansas Tax Return
     shall set forth all necessary and required information (including, without
     limitation, schedules, statements and such supporting documentation as the
     Company or Westar may reasonably request from time to time) in such form as
     would be required for filing with the applicable Kansas Taxing Authority
     and shall correctly reflect the facts regarding the income, properties,
     operations and status of any entity required to be shown thereon. Except as
     otherwise required by law, such Pro Forma Kansas Return or Preliminary
     Kansas Tax Return shall be prepared making the elections and using the
     methods of accounting that were made or used by the Kansas Company combined
     group on the combined Kansas Tax Return most recently filed with respect to
     a Tax period ending prior to the Split-Off Date unless the parties agree to
     make or use some other elections or methods of accounting (which agreement
     shall not be unreasonably withheld). The Company and Westar may (at their
     own expense) review all work papers and procedures used to prepare each Pro
     Forma Kansas Return or Preliminary Kansas Tax Return.

          (iii)  Westar shall notify the Company in writing of any proposed
     adjustments to a Preliminary Kansas Tax Return including the Westar
     Combined Kansas Tax Allocation Statement within 15 days of the date upon
     which it receives such Preliminary Kansas Tax Return from the Company. In
     the event that the Company shall, within 5 days following the receipt of
     such notification from Westar, disagree with any proposed adjustment made
     under the above provision, such disagreement shall be resolved in


                                       8
<PAGE>

     accordance with Section 15(b). Upon agreement by the parties as to proposed
     adjustments, if any, to a Preliminary Kansas Tax Return including the
     Westar Combined Kansas Tax Allocation Statement or upon a decision of the
     Referee, the Preliminary Kansas Tax Return as adjusted (if at all) shall be
     deemed to be a final Pre-Split-Off Combined Kansas Tax Return for purposes
     of this Agreement.

          (iv)   Prior to the due date of the Pre-Split-Off Combined Kansas Tax
     Return (including any extensions), the Company shall pay to Westar or
     Westar shall pay to the Company the overpayment or underpayment,
     respectively, of the Westar Group allocation shown on the Westar Combined
     Kansas Tax Allocation Statement taking into account any payments made by
     Westar or any member of the Westar Group to the Company, any member of the
     Company Group or any Taxing Authority.

     (f)  Pre-Split-Off Combined State/Local Tax Returns (other than the Pre-
     Split-Off Combined Kansas Tax Returns).

          (i)    In the event that the Company or any member of the Company
     Group (the "State Parent") is required to prepare and file a combined,
     unitary or other similar Return with a state (other than Kansas) or local
     Taxing Authority relating to a Pre-Split-Off Period in which any member of
     the Westar Group is required to be included (a "Pre-Split-Off Combined
     State/Local Tax Return"), the State Parent shall prepare and file such
     Return in accordance with the principals set forth in Section 2(e) hereof
     (and the parties shall make payments in accordance with the same principles
     as set forth in Section 2(e)(iv)) substituting the terms Combined
     State/Local Tax, Pro Forma State/Local Return, Preliminary State/Local Tax
     Return and Westar Combined State/Local Tax Allocation Statement for the
     terms Combined Kansas Tax, Pro Forma Kansas Return, Preliminary Kansas Tax
     Return and Westar Combined Kansas Tax Allocation Statement, respectively.
     Where possible, the Pro Forma State/Local Return or the Preliminary
     State/Local Tax Return shall be prepared making the elections and using the
     methods of accounting that are consistent with those made or used by the
     Company Consolidated Group on the Consolidated Federal Tax Return most
     recently filed with respect to a Tax period ending prior to the Split-Off
     Date unless the parties agree to make or use some other elections or
     methods of accounting (which agreement shall not be unreasonably withheld).

3    Consolidated, Combined, Unitary or Other Similar Tax Returns.
     ------------------------------------------------------------

     (a)  Federal Taxes. In its capacity as agent, the Company shall pay within
     the time and manner prescribed by law all Consolidated Federal Taxes due in
     connection with the filing of any Pre-Split-Off Consolidated Federal Tax
     Return.

     (b)  State or Local Taxes. The Company or the State Parent, as the case may
     be, shall pay within the time and manner prescribed by law all Combined
     Kansas Taxes or


                                       9
<PAGE>

     Combined State/Local Taxes due in connection with the filing of any Pre-
     Split-Off Combined Kansas Tax Return or Pre-Split-Off Combined State/Local
     Tax Return.

     (c)  Amended Returns and Refunds.

          (i)    The Company shall not file or cause or permit any State Parent
     to file any amended Pre-Split-Off Consolidated Federal Tax Return, Pre-
     Split-Off Combined Kansas Tax Return or Pre-Split-Off Combined State/Local
     Tax Return if such Return results in an increase in the Tax liability
     attributable to any member of the Westar Group or any Westar Affiliate for
     any Tax period without the prior written consent of Westar (which consent
     shall not be unreasonably withheld).

          (ii)   The Company or the State Parent shall upon receipt of a written
     request by Westar file an amended Pre-Split-Off Consolidated Federal Tax
     Return, Pre-Split-Off Kansas Tax Return or Pre-Split-Off Combined
     State/Local Tax Return if such Return results in a decrease in the Tax
     liability attributable to any member of the Westar Group or any Westar
     Affiliate for any Taxable period and does not result in an increase in the
     Tax liability attributable to any member of the Company Group or any
     Company Affiliate for any Tax period (other than an increase for which it
     would be unreasonable to withhold consent).

          (iii)  Refunds.  Any refund of Tax or Tax credit received by the
     Company or any State Parent relating to a Pre-Split-Off Period, to the
     extent attributable to a decrease in the Westar share of such Tax shall be
     the property of Westar and shall be paid by the Company or such State
     Parent to Westar within 30 days of receipt of payment or other credit for
     such refund.  Upon such receipt or credit the Company or such State Parent
     shall provide to Westar within 5 Business Days a statement setting forth
     the amount of such refund together with any supporting documentation.  If
     the Company or such State Parent disputes the fact or the amount of any
     Westar claim, the Company or such State Parent shall pay the amount not in
     dispute, and no payment of the amount in dispute shall be required, until
     any such dispute is resolved in accordance with Section 15; provided,
     however, that any amount not paid within 30 days of receipt of the refund
     shall bear interest as provided in Section 6.

4    Other Taxes.
     -----------

     (a)  The responsibility for the filing of all Returns that have not been
     filed on or prior to the Split-Off Date relating to Taxes other than
     Consolidated Federal Taxes, Combined Kansas Taxes or Combined State/Local
     Taxes ("Other Taxes") attributable to any member of the Westar Group shall
     be the sole responsibility of the Westar Group. The responsibility for the
     filing of all Returns relating to such Other Taxes attributable to any
     member of the Company Group shall be the sole responsibility of the Company
     Group.



                                       10
<PAGE>

     (b)  The Westar Group shall be entitled to all refunds and credits of Other
     Taxes attributable to any member of the Westar Group, and the Company Group
     shall be entitled to all refunds and credits of Other Taxes attributable to
     any member of the Company Group.

5    Indemnities.
     -----------

     (a)  Westar Indemnity. Westar and each member of the Westar Group shall
     jointly and severally indemnify the Company and each member of the Company
     Group against and hold them harmless from Westar's share of any
     Consolidated Federal Tax, Combined Kansas Tax or Combined State/Local Tax
     shown on any Pre-Split-Off Period Return filed after the Split-Off Date or
     assessed after the Split-Off Date pursuant to a Final Determination with
     respect to any Pre-Split-Off Period, to the extent not previously paid or
     credited to the Company, any member of the Company Group or any applicable
     Taxing Authority.

     (b)  Company Indemnity. The Company and each member of the Company Group
     shall jointly and severally indemnify Westar and each member of the Westar
     Group against and hold them harmless from any Consolidated Federal Tax,
     Combined Kansas Tax or Combined State/Local Tax liability for any
     Pre-Split-Off Period (including any Tax liability realized by Westar
     pursuant to Section 311(b) of the Code in connection with the Split-Off)
     other than any such liabilities described in Section 5(a) hereof.

     (c)  Discharge of Indemnity. Except as otherwise provided herein, Westar
     and each member of the Westar Group, and the Company and each member of the
     Company Group, shall discharge their obligations under Sections 5(a) and
     5(b) hereof, respectively, by paying the relevant amount within 30 days of
     demand therefor. Within 20 days of a Final Determination of an obligation
     of Westar and each member of the Westar Group under Section 5(a), the
     Company shall send a statement to Westar showing the amount due thereunder.
     Within 20 days of a Final Determination of an obligation of the Company and
     each member of the Company Group under Section 5(b), Westar shall send a
     statement to the Company showing the amount due thereunder. Calculation and
     payment mechanics relating to items described in Section 5(a) and (b) are
     set forth in Section 6. Notwithstanding the foregoing, and except as
     otherwise provided herein, if either Westar or the Company disputes in good
     faith the fact or the amount of its obligation under Section 5(a) or
     Section 5(b), such party shall pay the amount not in dispute, and no
     payment of the amount in dispute shall be required until any such good
     faith dispute is resolved in accordance with Section 15; provided, however,
     that any amount not paid within 30 days of demand therefor shall bear
     interest as provided in Section 6.

     (d)  Method of Calculation.  Except as otherwise provided, the amount of
     Westar's liability under Section 5(a) and the Company's liability under
     Section 5(b) shall be



                                       11
<PAGE>

     calculated pursuant to the methods described in Schedule I hereto with
     adjustment as provided in Section 5(f).

     (e)  Duplicative Payments Not Required. Notwithstanding any other provision
     of this Agreement, no payment shall be required under this Section 5 to the
     extent it is duplicative of (i) any payment required by any other provision
     of this Agreement, or (ii) any explicit Tax indemnity provided in the
     Allocation and Separation Agreement, the Stock Purchase Option Agreement or
     the Merger Agreement, and any such payment(s) shall be made as required by
     such other provisions or agreements.

     (f)  If any increase in Tax for any period for which indemnification is
     provided under Section 5(a) or 5(b) gives rise to a Tax Asset to an
     indemnified party or its Affiliate, the amount of the indemnity payment
     shall be reduced by the present value of such Tax Asset computed as of the
     end of the Tax year with respect to which the indemnified Tax arises. For
     this purpose, the present value of the Tax Asset shall be computed by (x)
     treating the Tax Asset as utilized as and to the extent it first becomes
     available (e.g., as any increase in Tax basis could be depreciated) to
     reduce Tax at the maximum rate applicable for that Tax for the Tax year
     with respect to which the indemnified Tax arises and then (y) discounting
     the resulting Tax savings to present value using a discount rate of the
     higher of the Prime Rate or the interest rate applicable to deficiencies at
     the end of the Tax year with respect to which the indemnified Tax arises.

     (g)  After-Tax Amount.  Any indemnity payment made pursuant to this Section
     shall be increased by an amount equal to the product of (i) the amount of
     any indemnified Tax calculated without regard to this Section 5(g) and (ii)
     a fraction, the numerator of which is the highest applicable combined
     federal and state Tax rate in effect with respect to the person receiving
     the indemnity payment expressed as a decimal (the "Effective Tax Rate") and
     the denominator of which is one minus the Effective Tax Rate (the "After-
     Tax Amount").

6    Calculation and Payments of Amounts Due.
     ---------------------------------------

     (a)  Method of Calculation. Except as otherwise provided herein, Westar's
     share of any Consolidated Federal Tax, Combined Kansas Tax or Combined
     State/Local Tax, as the case may be, shall be calculated pursuant to the
     methods described in Schedule I hereto.

     (b)  Payments. Except as otherwise provided herein, all payments required
     by this Agreement shall be due 30 days after the payment by a party to a
     Taxing Authority or a receipt of a refund or credit by a party from a
     Taxing Authority, whichever is applicable, of the relevant item. All
     payments to be made hereunder shall be made in immediately available funds.
     Payments shall be deemed made when received.



                                       12
<PAGE>

     (c)  Interest. Any amount not paid when due under this Agreement shall bear
     interest at Prime until the date on which payment is made.

7    Communication and Cooperation.
     -----------------------------

     (a)  Consult and Cooperate. Westar and the Company shall consult and
     cooperate (and shall cause each of their Affiliates to cooperate) fully at
     such time and to the extent reasonably requested by the other party in
     connection with all matters subject to this Agreement. Such cooperation
     shall include, without limitation,

          (i)    the retention and provision on reasonable request of any and
     all information including all books, records, documentation or other
     information, any necessary explanations of information, and access to
     personnel, until the expiration of the applicable statute of limitation for
     additional assessments of Tax for the Tax period for which such document or
     other information arises (giving effect to any extension, waiver, or
     mitigation thereof);

          (ii)   within the limits otherwise set forth herein, the execution of
     any document that may be necessary or helpful in connection of any required
     Return or in connection with any audit, proceeding, suit or action; and

          (iii)  the use of the parties' best efforts to obtain any
     documentation from a governmental authority or a third party that may be
     necessary or helpful in connection with the foregoing.

     (b)  Provide Information. The Company and Westar shall keep each other
     fully informed with respect to any material development relating to all
     matters subject to this Agreement.

     (c)  Tax Attribute Matters. The Company and Westar shall advise and consult
     with each other with respect to any tax election or the tax treatment of
     any item (including the treatment of any item that would be affected by a
     proposed Tax adjustment relating to a Consolidated Federal Tax, Combined
     Kansas Tax or Combined State/Local Tax which is the subject of an audit or
     investigation, or are the subject of any proceeding or litigation) which
     could affect any Tax attribute of the other party or its Affiliate
     (including, but not limited to, basis in an asset or the amount of earnings
     and profits).

8    Audits and Contests.
     -------------------

     (a)  Notice.  The Company shall promptly notify Westar in writing of any
     inquiries from the Internal Revenue Service or any other Taxing Authority
     which relate or may relate to matters described in Sections 3(c) or 5(a).
     Westar shall promptly notify the Company in writing of any inquiries from
     the Internal Revenue Service or other Taxing Authority which relate or may
     relate to matters described in Section 3(c) or 5(b).  Each



                                       13
<PAGE>

     party shall forward to the other party relevant portions of any reports or
     other communications which relate to such matters.

     (b)  Settlement of Issues.  The Company shall not settle, compromise or
     otherwise resolve any Tax matter relating to Pre-Split-Off Taxes (a "Tax
     Settlement") without the prior written consent of Westar (which consent
     shall not be unreasonably withheld) if such Tax Settlement is reasonably
     likely to materially increase the Tax paid by Westar with respect to any
     Tax not subject to indemnification under Section 5(b); provided, however,
     that in the event that Westar does not consent and the Company believes
     that the withholding of consent was unreasonable, or the Company believes
     that no consent of Westar is required, the parties shall resolve their
     disagreement in accordance with Section 15.  The provisions of this Section
     8(b) shall continue to apply to any settlement of any proceeding to which
     Section 8(c) or 8(d) applies.

     (c)  Venue. In the event that a notice of deficiency (or similar notice) is
     received from the Internal Revenue Service or other Taxing Authority by any
     member of the Company Group for a Pre-Split-Off Period and such notice
     relates in whole or in part to a matter for which Westar would be entitled
     to withhold its consent under the standards set forth in Section 8(b) and
     for which the amount in controversy that is described in Section 5(a) is in
     excess of $75,000, then:

          (i)    Subject to the consent of the Company as to such venue (which
     consent shall not be unreasonably withheld) and to Westar giving the
     Company sufficient notice for the petition to be prepared and timely filed,
     Westar shall be entitled to have a petition filed in the United States Tax
     Court by the Company for those items causing the liability for which Westar
     would be required to indemnify the Company. Upon a Final Determination of
     any such petition, Westar shall pay to the Company in accordance with
     Section 6 the amount, if any, of resulting Tax for which Westar is required
     to provide indemnity pursuant to Section 5(a).

          (ii)   If (A) Westar does not request the Company to file a petition
     in the United States Tax Court for redetermination of the deficiency
     pursuant to Section 8(c)(i), (B) the Company does not, on its own
     initiative, timely file such a petition, and (C) Westar requests that the
     Company file a claim for refund, then, subject to the consent of the
     Company (which consent shall not be unreasonably withheld), the Company
     shall pay the deficiency, file a claim for refund thereof, and, if the
     claim is denied, bring an action in a court of competent jurisdiction
     seeking such refund; provided that, in such case, Westar shall pay to the
     Company, (I) on or before the date on which the deficiency is paid by the
     Company, the amount as if the notice of deficiency were a Final
     Determination (that Westar would otherwise be responsible for with respect
     to matters described in Section 5(a)) and any such payment shall be (a)
     credited against any payment required (with appropriate adjustment as
     provided in Section 6) in connection with a Final Determination if the
     result is an underpayment of Tax by Westar, or (b) treated as a refund
     pursuant to Section 3(c)(iii) if the amount is



                                       14
<PAGE>

     an overpayment due Westar, and (II) within 30 days of demand, any
     reasonable out-of-pocket costs incurred by the Company in the prosecution
     of such refund claim with respect to the matter Westar requests be
     contested.

     (d)  Judicial Appeals. In the event that a judgment of the United States
     Tax Court or other court of competent jurisdiction results in an adverse
     determination with respect to a matter described in Section 5(a) then,
     subject to Section 8(b):

          (i)    In the case of an appeal of an adverse determination which
     involves no material issues other than matters described in Section 5(a),
     Westar shall have the right to cause the Company to appeal from such
     adverse determination.

          (ii)   In the case of an appeal of any other adverse determination
     which involves material issues other than those described in Section 5(a),
     Westar shall have the right to cause the Company to appeal from such
     adverse determination if Westar delivers to the Company an opinion from an
     independent tax counsel selected by Westar and reasonably acceptable to the
     Company that it is more likely than not that such appeal will succeed and
     the amount in controversy exceeds $100,000.

          (iii)  In the case of an adverse determination which involves matters
     described in Section 5(b) and within such determination material matters
     described in Section 5(a) were favorably disposed, Westar shall have the
     right to prevent the Company from appealing from such adverse determination
     unless the Company delivers to Westar an opinion from an independent tax
     counsel selected by the Company and reasonably acceptable to Westar that it
     is more likely than not that such appeal will succeed.

          (iv)   If Westar causes the Company to appeal any adverse
     determination pursuant to this Section 8(d), Westar shall pay the
     reasonable out-of-pocket costs of the Company incurred in such appeal.

     (e)  Participation and Closing.

          (i)    Westar and its representatives, at Westar's expense, shall be
     entitled to attend and be represented in connection with all conferences,
     meetings, or proceedings with any Taxing Authority, the subject matter of
     which is or includes matters described in Section 5(a) provided that the
     amount of the total of annual proposed adjustment attributable to matters
     described in Section 5(a) is greater than $100,000.

          (ii)   Westar and its representatives, at Westar's expense, shall be
     entitled to attend and be represented in connection with all appearances
     before any court, the subject matter of which includes matter described in
     Section 5(a) provided that the amount of the total of annual proposed
     adjustments attributable to matters described in Section 5(a) is greater
     than $100,000.



                                       15
<PAGE>

          (iii)  The representation referred to in Sections 7(e)(i) and (ii)
     shall include the right to participate in the preparation of documentation,
     protests, memoranda of fact and law and briefs, oral arguments or
     presentations, stipulations of facts and the selection of witnesses with
     respect to a matter described in Section 5(a) and shall include the right
     to control such matters if the matters in controversy involve only matters
     described in Section 5(a). With respect to matters described in both
     Section 5(a) and 5(b), the parties agree to consult in good faith to
     determine the submission and content of documentation, protests, memoranda
     of fact and law and brief, the conduct of oral arguments and presentations,
     the selection of witnesses and the negotiation of stipulations of fact. If
     the parties cannot agree with respect to the matters described in the
     preceding sentence, such dispute shall be referred to the Referee and
     resolved in accordance with Section 15.

9    Notices.
     -------

     Any notice, demand, claim, or other communication under this Agreement
shall be in writing and shall be deemed to have been given upon the delivery or
two Business Days after mailing thereof, as the case may be, if delivered
personally or sent by express certified mail, return receipt requested, postage
prepaid, to the parties at the following addresses (or at such other address as
a party may specify by notice to the other):

     (a)  If to the Company, to:

          Western Resources, Inc.
          818 South Kansas Avenue
          Topeka, Kansas 66612
          Attention:  Richard D. Terrill
          Executive   Vice President and
                      General Counsel
          Facsimile:  (785) 575-1936

          with a copy to:

          LeBoeuf, Lamb, Greene & MacRae, L.L.P.
          1125 West 55th Street
          New York, NY 10019
          Attention:  William S. Lamb
          Facsimile:  (212) 424-8500

     (b)  If to Westar, to:

          Westar Industries, Inc.
          818 South Kansas Avenue
          Topeka, Kansas 66612
          Attention:  President
          Facsimile:  (785) 575-1936





                                       16
<PAGE>

          with a copy to:

          LeBoeuf, Lamb, Greene & MacRae, L.L.P.
          1125 West 55th Street
          New York, NY 10019
          Attention:  William S. Lamb
          Facsimile:  (212) 424-8500

          and with a copy to:

          Winthrop, Stimson, Putnam & Roberts
          One Battery Park Plaza
          New York, NY 10004
          Attention:  Timothy Toy
          Facsimile:  (212) 858-1500

10   Costs and Expenses.
     ------------------

     Except as expressly set forth in this Agreement, each party shall bear its
own costs and expenses incurred pursuant to this Agreement. For purposes of this
Agreement, "out-of-pocket" expenses shall include reasonable attorney fees,
accountant fees and other related professional fees and disbursements.

11   Effectiveness; Termination and Survival.
     ---------------------------------------

     This Agreement shall become effective upon the consummation of the Split-
Off. Notwithstanding anything in this Agreement to the contrary, this Agreement
shall remain in effect and its provisions shall survive for the full period of
all applicable statutes of limitation (giving effect to any extension, waiver or
mitigation thereof).

12   Section Headings.
     ----------------

     The headings contained in this Agreement are inserted for convenience only
and shall not constitute a part hereof or in any way affect the meaning or
interpretation of this Agreement.

13   Entire Agreement, Amendments and Waivers.
     ----------------------------------------

     (a)  Entire Agreement. This Agreement contains the entire understanding of
     the parties hereto with respect to the subject matter contained herein. No
     alteration, amendment, modification, or waiver of any of the terms of this
     Agreement shall be valid unless made by an instrument signed by an
     authorized officer of the Company and


                                       17
<PAGE>

     Westar, or in the case of a waiver, by the party against whom the waiver is
     to be effective.

     (b)  Waiver. No failure or delay by any party in exercising any right,
     power or privilege hereunder shall operate as a waiver hereof nor shall any
     single or partial exercise thereof preclude any other or further exercise
     thereof or the exercise of any right, power or privilege.

14   Governing Law and Interpretation.
     --------------------------------

     This Agreement has been made in and shall be construed and enforced in
accordance with the laws of the State of Kansas.

15   Dispute Resolution.
     ------------------

     (a)  CEOs/CFOs. If the parties hereto are unable to resolve any
     disagreement or dispute, except with respect to any matter described in
     Section 2(d), 2(e) or 2(f), either party may refer the matter to the Chief
     Executive Officers (CEOs) or Chief Financial Officers (CFOs) of the parties
     by giving the other party written notice ("Notice") within 60 days of the
     failure of the parties to resolve such dispute. Within 20 days after
     delivery of Notice, the CEOs or CFOs of both parties shall meet at a
     mutually acceptable time and place to exchange relevant information and
     attempt to resolve the dispute within 30 days after delivery of Notice. All
     negotiations pursuant to this Section 15(a) shall be confidential and shall
     be treated as compromise and settlement negotiations for purposes of the
     Federal Rules of Evidence and state rules of evidence.

     (b)  Referees. Any disagreement not resolved by mutual agreement of the
     parties or under Section 15(a) shall be resolved by an independent referee
     that is mutually acceptable to the parties hereto (a "Referee"). In the
     event the parties cannot agree on a Referee within 10 days of the date of
     the Notice described in paragraph (a) above (or 3 Business Days in the case
     of a matter described in Section 2(d), 2(e) or 2(f)), each party shall
     select within 5 days (2 Business Days in the case of a matter described in
     Section 2(d), 2(e) or 2(f)) an independent nationally recognized law firm
     or accounting firm expert in tax matters and such firms shall jointly
     choose the Referee. A Referee so chosen shall consider the magnitude and
     size of the item in question, the impact of the resolution on other Taxable
     periods of the Westar and the Company Groups and the likelihood of a
     Group's position ultimately prevailing, and otherwise shall resolve any
     such disagreement pursuant to such procedures as it may deem advisable. The
     Referee shall render its decision within 30 days (5 Business Days in the
     case of any matter described in Section 2(d), 2(e) or 2(f)) unless another
     time period is specified herein or is mutually agreed upon by the Company
     and Westar. Any such resolution shall be binding on the parties hereto
     without further recourse.



                                       18
<PAGE>

     (c)  Costs. The costs of any Referee shall be apportioned between the
     Company and Westar as determined by such Referee in such manner as the
     Referee deems reasonable, taking into account the circumstances of the
     dispute, the conduct of the parties and the result of the dispute.

16   Counterparts.
     ------------

     This Agreement may be executed in one or more counterparts, each of which
shall be deemed an original, but all of which together shall constitute one and
the same instrument.

17   Assignments; Third Party Beneficiaries.
     --------------------------------------

     This Agreement shall be binding upon and shall inure only to the benefit of
the parties hereto and their respective successors and assigns. Upon
consummation of the Merger, Parent shall succeed to the rights and obligations
of the Company under this Agreement. This Agreement is not intended to benefit
any person other than the parties hereto and such successors and assigns, and no
such other person shall be a third party beneficiary hereof.



                                       19
<PAGE>

     IN WITNESS WHEREOF, the parties have executed and delivered this Agreement
as of the day and year first written above.

                              Company on its own behalf and on
                              behalf of the companies
                              listed on Schedule 1 hereto.

                              By: ..................................


                              Title: ...............................

                              Westar on its own behalf and on
                              behalf of the companies
                              listed on Schedule 2 hereto.

                              By: ..................................


                              Title: ...............................




                                       20
<PAGE>

                                  Schedule I

1.  If a Consolidated Federal Tax, Combined Kansas Tax or Combined State/Local
    Tax liability is assessed after the Split-Off Date pursuant to a Final
    Determination, to the extent that such Tax liability is attributable to an
    adjustment of any item of income, loss, credit deduction or other Tax
    attribute of any member of the Westar Group, then such liability shall be
    the sole responsibility of the Westar Group.

2.  In preparing a Pro Forma Federal, Kansas or State/Local Return, or a
    Preliminary Federal, Kansas or State/Local Return, the "closing of the
    books" method shall be used so that Tax liability will be calculated on the
    basis of actual Taxable income to the Closing Date as if the Tax year of
    each member and Affiliate of the Westar Group terminated on the Split-Off
    Date. Any real or personal property Tax for a period shall be attributed to
    the Pre-Split-Off Period on the basis of the number of days in such Pre-
    Split-Off Period to the total number of days in such entire period. Any
    adjustment required by Section 481 of the Code (including adjustments for
    marking receivables to market) shall be allocated to the deductions or
    credits (or lack thereof) giving rise to the Section 481 adjustment.

3.  The Westar Group's allocable share of any Consolidated Federal Tax
    liability, Combined Kansas Tax or Combined State/Local Tax liability, as the
    case may be, for any Pre-Split-Off Period shall be (a) calculated on a
    separate return basis (i.e., as if the Westar Group had filed a separate
    Return for such period), and (b) reduced by the amount of any Tax savings to
    the Company Group resulting from the utilization during that period of a
    Westar Group Tax Asset. If the amount of the Westar Group's share of any
    Consolidated Federal Tax, Combined Kansas Tax or Combined State/Local Tax
    liability, as the case may be, determined pursuant to the preceding
    sentence, is a negative amount, such amount shall be treated as an
    overpayment of Tax by the Westar Group.

4.  For purposes of paragraphs 1 and 2 above, "Tax liability" (a) shall exclude
    any liability for the payment of alternative minimum Tax, if applicable; and
    (b) shall refer to an actual out-of-pocket payment to any Taxing Authority,
    after taking into account the utilization of net operating losses and any
    other Tax Assets.

5.  Any alternative minimum Tax liability (and any Tax Assets attributable to
    such liability), if applicable, shall be allocated to Westar in the event
    that the preference items giving rise to such alternative minimum Tax
    liability are attributable to any member of the Westar Group, and shall be
    allocated to the Company in the event that the preference items giving rise
    to such alternative minimum Tax liability are attributable to any member of
    the Company Group.