EXHIBIT 10.3
LATENT DEFICIENCY CLAIMS
ADMINISTRATION PROCEDURES AGREEMENT
     This Latent Deficiency Claims Administration Procedures Agreement is
entered into as of the date set forth below between John Garamendi, Insurance
Commissioner of the State of California, in his capacity as Trustee of the
Mission Insurance Company Trust, the Mission National Insurance Company Trust
and the Enterprise Insurance Company Trust, on the one hand, and Covanta Holding
Corporation, formerly known as Danielson Holding Corporation on the other hand.
Unless otherwise defined herein, capitalized terms shall have the meaning
ascribed to them in the Rehabilitation Plan Implementation Agreement entered
into as of even date herewith by and among the parties hereto.
Definitions
     1. “Agreement” shall mean this Latent Deficiency Claims Administration
Procedures Agreement between the parties set forth above.
     2. “Deficiency Claims” shall have the meaning ascribed to such term in
Section 1.8 of the RRR Agreement.
     3. “Latent Deficiency Claim” shall mean a claim that is a “Deficiency
Claim” except that the claimant did not qualify as a creditor against EICT, MICT
or MNICT under California Insurance Code Sections 1021 to 1024 and 1032 for one
or more of the reasons listed below
a. The claimant did not meet the August 18, 1995 deadline for filing amendments
to proofs of claim, pursuant to the Amended Final Liquidation Dividend plan for
the EICT, MICT and MNICT;

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b. The claimant’s claim was an otherwise valid policyholder priority claim
within the meaning of Section 1033 of the California Insurance Code, but did not
become liquidated (in whole or in part) and certain within the meaning of
California Insurance Code Section 1025 by the court-ordered deadline of
December 31, 2003 (for purposes of clarity and the definition of Latent
Deficiency Claims, but not for the purpose of any revaluation of proof of claims
for purposes of distributions under Section 1033 of the California Insurance
Code, and without limiting the generality of the foregoing, this category
includes claims of claimants under direct insurance contracts issued by Mission
Insurance Company, Mission National Insurance Company and Enterprise Insurance
Company that were settled for less than the stated amount of such claims); or
c. The claimant’s claim was an otherwise valid non-policyholder priority claim
within the meaning of Section 1033 of the California Insurance Code, but did not
become liquidated (in whole or in part) and certain within that meaning of
California Insurance Code Section 1025 by the court-ordered deadline of
August 2, 2004 (for purposes of clarity and the definition of Latent Deficiency
Claims, but not for the purpose of any revaluation of proof of claims for
purposes of distributions under Section 1033 of the California Insurance Code,
and without limiting the generality of the foregoing, this category include
claims of claimants under reinsurance contracts issued by Mission Insurance
Company, Mission National Insurance Company and Enterprise Insurance Company
that were settled for less than the stated amount of such claims).
     4. “Implementation Agreement” shall mean the Rehabilitation Plan
Implementation Agreement below between John Garamendi, Insurance Commissioner of
the State of California, in his capacity as Trustee of the Mission Insurance
Company Trust, the Mission National

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Insurance Company Trust and the Enterprise Insurance Company Trust, on the one
hand, and Covanta Holding Corporation, formerly known as Danielson Holding
Corporation and Mission Insurance Group, Inc. on the other hand.
Initial Recitals
     5. Mission Insurance Company, Mission National Insurance Company, and
Enterprise Insurance Company are or were California-domiciled property and
casualty insurance companies.
     6. On October 31, 1985, on the application of the Insurance Commissioner,
the Superior Court for the County of Los Angeles issued an order which placed
Mission Insurance Company, Mission National Insurance Company and Enterprise
Insurance Company into conservation proceedings, in case number C 572 724.
     7. On February 24, 1987, the Superior Court for the County of Los Angeles
entered those orders which placed Mission Insurance Company, Mission National
Insurance Company and Enterprise Insurance Company in liquidation proceedings in
the case captioned Insurance Commissioner of the State of California v. Mission
Insurance Company, et al. case number C 572 724.
     8. As of December 13, 1989, the Insurance Commissioner, as Liquidator of
Mission Insurance Company, Mission National Insurance Company, Enterprise
Insurance Company, and as Conservator of Mission American Insurance Company and
Compac Insurance Company, entered into the RRR Agreement with the Missouri
Insurance Director as Receiver of Holland-America Insurance Company and Mission
Reinsurance Corporation, and with Mission Insurance Group, Inc.

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     9. On April 25, 1990, the Final Order of Rehabilitation was issued by the
Liquidation Court which had the effect, inter alia, of entering a rehabilitation
order as to Mission Insurance Company, Mission National Insurance Company and
Enterprise Insurance Company, and, upon closing of the transactions described in
the RRR Agreement, resulted in the creation of the MICT, the MNICT and the EICT,
pursuant to the agreement of MICT, the agreement of MNICT and the agreement of
the EICT.
     10. The parties to this Agreement recognize that numerous claimants filed
proofs of claim against EICT, MICT and MNICT which were approved by the Trustee.
The unsatisfied portions of such claims shall be treated as Deficiency Claims
under the RRR Agreement. This Agreement recognizes that among the Deficiency
Claims are the Latent Deficiency Claims that either in part or in whole do not
qualify for or are not entitled to receive cash distributions from the EICT,
MICT or MNICT pursuant to California Insurance Code sections 1011, et seq., but
which claims nonetheless, qualify and are entitled to share in the distribution
of shares of Covanta common stock pursuant to the RRR Agreement.
     11. Pursuant to the RRR Agreement, the Commissioner now holds as agent for
and on behalf of claimants against the MICT and MNICT, shares of Covanta common
stock to be distributed to holders of Deficiency Claims (as defined in the RRR
Agreement).
     12. In order to effectuate the RRR Agreement, the parties enter into this
Agreement to set forth a method to evaluate the Deficiency Claims (including
Latent Deficiency Claims) for the purpose of distributing the shares of Covanta
common stock in accordance with the RRR Agreement.
     13. Under the terms of the Implementation Agreement concurrently entered
into between the parties, Covanta has agreed to administer a Latent Deficiency
Claims administration

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process, the purpose of which is to evaluate Latent Deficiency Claims in order
to ensure that any distribution of shares of Covanta common stock to the Latent
Deficiency Claims complies with the stock for debt provision of former section
108(e)(8)(B) of the Internal Revenue Code and implements the intents and
purposes of Sections 2.1(a)(i), 2.1(b)(i) and 2.1(d)(i) of the RRR Agreement.
     14. The Agreement contemplates that the court will issue an order
establishing the aggregate amount of the Latent Deficiency Claims. The Latent
Deficiency Claims administration procedures will be used to apportion individual
Latent Deficiency Claims to the total amount of Latent Deficiency Claims (set by
court order) in order to determine the proportionate amount of shares of Covanta
common stock each Latent Deficiency Claimant shall receive as required under the
RRR Agreement.
Latent Deficiency Claims Administration
     15. The Commissioner’s Conservation and Liquidation Office personnel shall
provide Covanta with a listing of substantially all claimants who timely filed
proofs of claim in the EICT, MICT and MNICT liquidation proceedings; shall
provide access to the claims files and other supporting documentation submitted
in support of those claims; and shall provide access to the documents and other
data reflecting the determination and adjudication of the claims in the
liquidation proceedings.
     16. Covanta shall send notice by first class mail to all claimants who
timely filed proofs of claim in the EICT, MICT and MNICT liquidation proceedings
advising them of the Latent Deficiency Claims administration evaluation process
and procedures. Covanta and the Commissioner will agree upon the form and
content of the notification to be sent to claimants,

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and such notice will provide, at a minimum, the following information and
instructions:

  •   the purpose of the Latent Deficiency Claims administration evaluation
process;     •   an advisory that the claims evaluation process will rely upon
the supporting documentation the claimants have previously provided in the EICT,
MICT and MNICT liquidation proceedings, unless supplemented as provided in the
notice;     •   a date after which claimants can no longer submit supplemental
claims information;     •   a claims supplemental information form and
directions for completing and filing such form; and     •   a telephone call-in
number for those who have questions about the process.

     17. Covanta shall establish the proper procedures to evaluate the Latent
Deficiency Claims; to exclude defective claims; and to provide the appropriate
level of scrutiny and review based upon the stated value and complexity of the
claims and taking into account the ultimate value of the recovery to respective
claimants for their claims and the amount in controversy. The Commissioner and
Covanta have balanced the cost of review procedures against the benefits of
(i) recognizing and maximizing the value of payments to be made to claimants as
a whole and (ii) reaching more refined levels of evaluation of the Latent
Deficiency Claims in the aggregate. Covanta and the Insurance Commissioner’s
Conservation and Liquidation Office personnel shall meet and confer as necessary
regarding the fulfillment by Covanta of its obligations under this provision,
including without limitation, to review forms to be utilized and processes to be
adopted in connection herewith.
     18. Covanta shall provide written notice of the evaluation of any Latent
Deficiency Claim to any claimant requesting such in writing. Any claimant
receiving written notice of a

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claims evaluation may then file with Covanta within thirty (30) days of the
mailing date of the notice of evaluation, an intent to appeal. The appeal shall
be determined by a retired Superior Court judge, sitting as claims arbitrator.
Covanta and the claimant shall equally share the cost of the claims arbitrator.
The claims arbitrator shall issue a determination, which shall be final and
binding upon the claimant and Covanta. The appeal to the claims arbitrator shall
be conducted on the written record, as contained in the claims file, and the
formal rules of evidence will not apply. The claims arbitrator will advise the
claimant who appeals that the claimant may submit an appeal brief within thirty
(30) days of a date set by the claims arbitrator. Covanta shall then have thirty
(30) days to submit a response, after which the claimant shall have thirty
(30) days to submit a reply. The claims arbitrator shall rule based on the
written record.
     19. Parties to an arbitration shall have the right to apply to the
Liquidation Court, or if the Liquidation Court no longer has jurisdiction over
any disputes hereunder to a court of competent jurisdiction in the County of Los
Angeles for an order to enforce the findings of a claims arbitrator as to the
amount of the Latent Deficiency Claim to which a holder may be entitled to
claim; provided, however, that any such orders shall be limited solely to the
entitlement of such claimant to the amount of the Latent Deficiency Claim so
claimed.
     20. Determinations by Covanta which are not appealed as to a Latent
Deficiency Claim’s evaluation shall be final.
     21. Nothing in this Agreement shall create a right in any claimant to share
in cash distributions from the EICT, MICT or the MNICT. The claims procedures in
this Agreement are solely for the purposes of evaluating the Latent Deficiency
Claims in order to comply with the stock for debt provisions in former section
108(e)(8)(B) of the Internal Revenue Code and shall not be binding for or
determinative of any other issue.

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     22. The Insurance Commissioner and Covanta shall cooperate to ensure that
the claims process reaches a timely conclusion. Covanta shall use commercially
reasonable best efforts to ensure that all initial claims evaluations are
completed on or prior to December 31, 2006.
     23. Nothing in this Agreement is intended to alter the liquidation
priorities set forth in California Insurance Code Section 1033. The shares of
Covanta common stock herein are distributed solely through the rehabilitation
plan set forth in the RRR Agreement, and do not constitute any variation from
the RRR Agreement. Nothing in this plan alters Section 1025 of the California
Insurance Code, or any other requirements of the California Insurance Code.
Miscellaneous Provisions
     24. The Trustee (but not the State of California) is a party to this
Agreement, only in his representative capacity as Trustee and as agent for and
on behalf of holders of Latent Deficiency Claims, and not individually. Neither
the Trustee nor the Insurance Commissioner, nor their agents, employees,
attorneys, deputies or representatives, shall have personal liability on this
transaction.
     25. This agreement is governed by California law, without regard to
principles of conflicts of law.
     26. The headings and captions in this Agreement are set forth for
convenience only, and shall not be deemed a part of this Agreement.
     27. The recitals herein are introductory only and not binding agreements or
admissions.
     28. Any failure of a party to comply with any obligation, covenant,
agreement or condition herein may be waived in writing, but such waiver or
failure to insist upon a duty, obligation or condition shall not waive or estop
the right of a party to require performance of a subsequent duty, condition or
obligation. Any waiver of a term of this Agreement must be

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written and signed by a duly authorized representative of the party on whose
behalf the waiver is being made.
     29. Each party shall execute and deliver to the other party such documents
as may reasonably be required to effectuate this document, but nothing in this
Agreement shall impose the duty on the Trustee to enter into additional
agreements not set forth in this Agreement.
     30. This Agreement may be executed in counterparts, which, when combined,
shall constitute a single Agreement.
     31. Any disputes arising from or relating to this Agreement shall be
submitted to the Mission Liquidation Court for resolution; provided, however,
that if the liquidation of MICT, MNICT and EICT is closed, then the party
initiating the dispute shall petition to re-open the case. If the case is not
open or re-opened, then the Superior Court of Los Angeles County, California
shall have jurisdiction over any such dispute, and, to the extent permitted by
law, such jurisdiction shall be exclusive as to all matters other than
enforcement of judgments.
     32. The addresses for notice and for counsel are set forth below the
signatures. Each party may change its address for notice by written notice.
Notices may be given by mail, by facsimile or by federal express; provided,
however, that if facsimile notice is given, then a letter shall also be sent by
mail.
     So agreed as of January 11, 2006:
John Garamendi, Insurance Commissioner of the State of California, in his
capacity as Trustee of the MICT, the MNICT and the EICT

     
 
   
     /s/ David E. Wilson
         
David E. Wilson
Special Deputy Insurance Commissioner
   

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Additional notice to:
Mohsen Sultan
Conservation and Liquidation Office
425 Market Street, 23rd Floor
San Francisco, CA 94105-2406
Jack Hom
State of California Insurance Department
45 Fremont Street, 19th Floor
San Francisco, CA 94105-2204
Robert H. Nunnally, Jr.
Wisener*Nunnally*Gold, LLP
625 W. Centerville Road, Suite 110
Garland, Texas 75041

         
 
        Covanta Holding Corporation
   
 
       
By:
  /s/ Craig D. Abolt              
 
  Craig D. Abolt    
Title:
  Senior Vice President and Chief Financial Officer    

With additional notice to:
Timothy J. Simpson
Senior Vice President and General Counsel
Covanta Holding Corporation
40 Lane Road
Fairfield, NJ 07004
David S. Stone
Neal, Gerber & Eisenberg LLP
2 North LaSalle Street
Suite 2200
Chicago, IL 60602
C. Guerry Collins
Lord Bissell & Brook LLP
300 South Grand Avenue
8th Floor
Los Angeles, California 90071
Latent Deficiency Claims Administration
Procedures Agreement

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