Document:

exv10w2

 

EXHIBIT 10.2

FINAL: December 1, 2005

EXHIBIT A

AMENDMENT TO AGREEMENT REGARDING CLOSING

     This agreement (“Agreement”) is entered into as of the date set forth below between John
Garamendi, Insurance Commissioner of the State of California (“Insurance Commissioner”), in his
capacity as Trustee of the Mission Insurance Company Trust (“MIC Trust”), the Mission National
Insurance Company Trust (“MNIC Trust”), and the Enterprise Insurance Company Trust (“EIC Trust”)
(the Insurance Commissioner as Trustee shall be referred to herein as the “Trustee”), on the one
hand, and Covanta Holding Corporation (“Covanta”), formerly known as Danielson Holding Corporation
(“Danielson”) and as Mission Insurance Group, Inc., on the other hand (collectively the “Parties”).

Definitions

     1. “Affiliated Group” shall mean the affiliated group of corporations of which Covanta or its
successor is the common parent in respect of any tax period, as defined in section 1504 of the
Internal Revenue Code of 1986, as amended (the “Code”).

     2. “Consolidated Return(s)” shall mean the Income Tax returns, statements, schedules, forms,
and reports filed with the Internal Revenue Service by, or on behalf of or with respect to, the
Affiliated Group.

     3. “Effective Date” is defined in paragraph 9.

     4. “Income Taxes” shall mean state, local, and U.S. federal income taxes, interest, and
penalties thereon.

     5. “IRS” shall mean the Internal Revenue Service.

 

 

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     6. “Latent Deficiency Claims” shall have the same meaning as described in paragraphs 29 and 30
of the Rehabilitation Plan Implementation Agreement.

Recitals

     WHEREAS, on October 31, 1985, on the application of the Insurance Commissioner, the Superior
Court for the County of Los Angeles (“Liquidation Court”) issued an order that placed Mission
Insurance Company, Mission National Insurance Company, and Enterprise Insurance Company into
conservation proceedings in the case captioned, Insurance Commissioner of the State of
California v. Mission Insurance Company, et al., case number C572 724. As of December 13,
1989, the Insurance Commissioner, as Liquidator of Mission Insurance Company, Mission National
Insurance Company, and Enterprise Insurance Company, and as Conservator of Mission American
Insurance Company and Compac Insurance Company, entered into that agreement with the Missouri
Insurance Director as receiver of Holland America Insurance Company and Mission Reinsurance
Corporation, and with Mission Insurance Group, Inc., entitled the Agreement of Reorganization,
Rehabilitation, and Restructuring (the “RRR Agreement”). 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 MIC Trust, the MNIC Trust, and the EIC Trust (collectively the
“Trusts”), pursuant to the agreement of each of the Trusts.

     WHEREAS, on August 9, 1990, the Parties entered into the Agreement Regarding Closing (“Closing
Agreement”) to implement and amend the RRR Agreement, pursuant to which

 

 

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the Parties agreed, inter alia, (1) that in the event the Affiliated Group is required to pay any
federal, state, or local income taxes for any reason on any income of the grantor derived from the
activities of the EIC Trust, the MIC Trust, or the MNIC Trust, the respective Trust shall be
obligated to remit such taxes to the Trust’s respective grantor (“Grantor”), such amounts to
constitute an administrative cost of the Trust; (2) that in the event of any administrative
procedure or litigation with the IRS (or other taxing authority) concerning the federal, state, or
local income taxation of the Trust or of any Grantor or other “designated person” with respect to
Trust income, all reasonable costs, including attorneys’ fees, with respect to such administrative
procedure or litigation, shall be paid by the trustee of the Trust from Principal or Income (as
defined in Section 2.7 of each Trust) of the Trust; and (3) that in the event that a determination
is made by the IRS or a court of appropriate jurisdiction that a Grantor is not the “grantor” of
the respective Trust, the Trustee (on behalf of the Trust) and the Grantor shall file all returns,
pay taxes, and report all distributions from the Trust in accordance with that determination.

     WHEREAS, the Parties entered into the Rehabilitation Plan Implementation Agreement
(“Implementation Agreement”) on even date herewith.

     WHEREAS, Covanta or its successor corporation (“Parent”) is the common parent corporation of
the Affiliated Group.

     WHEREAS, such Affiliated Group has filed a Consolidated Return in past years and will be
required to file a Consolidated Return in future years, and the Affiliated Group is required to
report the income, gains, deductions, credits and losses (collectively the “Tax Items”)
attributable to the activities of the Trusts in the Consolidated Return for the Affiliated Group so
long as the Trusts are subject to the grantor trust rules of section 671 through 678 of the Code.

 

 

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     WHEREAS, it is the Parties’ expectation that the case of the Trusts pending before the
Liquidation Court (case C572 724) will close by December 31, 2005, but it is expected that the
Trusts will continue in existence for Income Tax purposes for some period of time thereafter,
subject to the oversight of the Trustee. During such time, Parent will provide administrative
services as provided in the Latent Deficiency Claims Administration Procedures Agreement with
respect to Latent Deficiency Claims.

     WHEREAS, pursuant to paragraph 51 of the Implementation Agreement, the Parties have agreed to
enter into this Agreement, which is attached as Exhibit A to the Implementation Agreement and which
amends the Closing Agreement and the RRR Agreement in certain respects.

     NOW, THEREFORE, in consideration of the mutual covenants and promises contained herein, the
Parties, intending to be legally bound, hereto agree as follows:

     (1) Filing of Consolidated Return and Payment of Taxes. Except as specifically
provided herein, Parent shall have sole responsibility for and control over the preparation and
filing of all Consolidated Returns with respect to the Affiliated Group. Parent shall timely and
accurately file such Consolidated Returns and pay to the IRS any amounts shown as due thereon. So
long as the Trusts are grantor trusts, Parent shall include all Tax Items attributable to the
Trusts in the filing of such Consolidated Returns as required by the grantor trust rules of
sections 671 through 678 of the Code.

     (2) Audits of Consolidated Return. Parent shall have the sole responsibility for and
control over the conduct and disposition of (A) any audit, conference, or other proceeding with the
IRS, and (B) any judicial proceedings concerning the determination of the federal Income

 

 

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Tax liabilities (including the Tax Items of the Trusts) of any member or members of the
Affiliated Group (including any successor members thereof). The Trustee agrees to provide all
requested documentation and assistance requested by Parent in connection with its conduct of the
foregoing activities, provided such request is reasonable in scope as well as reasonable in time
and expense. Parent agrees not to take a position in connection with any proceeding described in
this paragraph that (i) results, directly or indirectly, in an increase in taxable income of the
Grantor derived from the Trust’s activities in any taxable year preceding the taxable year ending
December 31, 2004 except to the extent that Parent agrees to pay any increase in tax liability for
such taxable years, or (ii) jeopardizes the grantor trust status of the Trusts in any taxable year.
From and after the date this Agreement is entered into, the Trustee also agrees not to propose to
Parent any changes that increase the tax liability for a respective Trust, for taxable years before
the taxable year ending December 31, 2004.

     (3) Copy of Consolidated Return. Parent shall provide the Trustee a complete copy of
the Consolidated Return (as filed) and any amended Consolidated Return for periods beginning with
the Effective Date within fifteen (15) days after the Consolidated Return or amended Consolidated
Return is filed with the IRS. Parent shall keep the Trustee reasonably informed as to any
developments concerning the filed Consolidated Returns, including but not limited to, the receipt
of any notices of deficiency, notices of audit, revenue agent’s reports, and information document
requests, and the receipt or sending of any correspondence with the IRS regarding the Trusts’ Tax
Items but exclusive of any material subject to an existing attorney-client privilege. The Trustee
shall take reasonable steps to insure that all such Income Tax

 

 

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information provided by Parent will be kept confidential and shall not be disclosed, except as
required by law.

     (4) No Obligation to Reimburse Parent for Income Taxes. The obligation of each of the
Trusts to reimburse its respective Grantor (or its successor) for any Income Taxes of Parent or any
other member of the Affiliated Group for Income Taxes attributable, directly or indirectly, to the
Tax Items of the Trust that the Grantor is required to include on its returns pursuant to sections
671 through 678 of the Code set forth in Section 8.3 of the Closing Agreement shall be terminated
beginning with the Income Taxes due for the taxable year ending on December 31, 2004, so that the
Trustee shall have no obligation to Parent or any other member of the Affiliated Group for Income
Taxes due for the taxable year ending on December 31, 2004 and subsequent tax periods.

     (5) Maintenance of Trusts. Notwithstanding anything to the contrary in this
Agreement, the RRR Agreement and the Final Order of Rehabilitation (and all related documents),
other than as described in the Closing Agreement, Parent shall take no action that will terminate
the grantor trust status of any of the Trusts, unless (i) Parent notifies the Trustee in writing at
least 60 days before taking any such action; and (ii) the Trustee, in his sole discretion, consents
thereto in writing. Furthermore, unless the Trustee waives the required action, Parent shall
timely take or cause other members of the Affiliated Group to take all action necessary to
terminate grantor trust status of the Trusts in the event Parent is determined to be insolvent
within the meaning of section 108(d)(3) of the Code. Should Parent be determined to be insolvent,
the Trustee shall be notified in writing within 10 days of such determination and will

 

 

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have 10 days from the date of notification to determine whether to waive the required actions
herein.

     (6) Indemnification. Parent shall indemnify and hold harmless the Trusts and the
Trustee from any claims, demands, losses, liabilities, attorneys’ fees, costs, incidental damages,
actual damages, or consequential damages imposed on the Trustee or the Trusts for Income Taxes the
Trusts may be required to pay that are attributable to income reportable in the Consolidated Return
for taxable years beginning with the taxable year ending on December 31, 2004. This
indemnification specifically includes the amount, if any, assessed against the Trustee on the basis
of personal liability under 31 U.S.C. section 3713. The Trustee shall keep Parent reasonably
informed as to any developments concerning any potential demand for Income Taxes, including all
penalties, additional taxes, and interest thereon, reimbursable under this paragraph, including but
not limited to, the receipt of any notices of audit, information document requests, revenue agent’s
reports, notices of deficiency, or other correspondence or communication with the IRS or comparable
state or local tax authority and shall permit Parent to exercise its rights under paragraph 2,
above. The Insurance Commissioner and the Trustee may retain counsel of their own choosing the
costs of which will be reimbursed under this paragraph. If the Insurance Commissioner or the
Trustee selects the California Attorney General’s office as his counsel, then Covanta shall
reimburse the fees and costs associated with that office at the rate that office charges (or
attributes to) the Insurance Commissioner or the Trustee.

     (7) Disclosure on Consolidated Return. Parent shall include with the Consolidated
Returns filed for the appropriate taxable years a disclosure statement, which disclosure shall
include at a minimum a statement substantially similar, in all material respects, to the disclosure

 

 

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described below. In addition, Parent shall not make any disclosure in the Consolidated
Return which is contrary to the statements set forth below.

     (a) For the taxable year ending December 31, 2005 (and for any amended return for the taxable
year ending December 31, 2004), and for each other succeeding taxable year ending prior to the
taxable year described in paragraph (b) below:

     “Pursuant to the order of the Superior Court for the County of Los Angeles in case C572 724,
“Insurance Commissioner of the State of California v. Mission Insurance Company, et al.,
dated ___, the Enterprise Insurance Company Trust, the Mission Insurance Company
Trust and the Mission National Insurance Company Trust (which are grantor trusts whose income,
deductions, gains and losses are included in the Consolidated Group) have an obligation, inter
alia, with respect to certain claims (in amounts and as defined in the Order), and the reserves of
the insurance operations of these grantor trusts include an estimate of the liabilities related to
such claims.”

     (b) For the taxable year(s) in which Parent stock is allocated and the stock-for-debt
exception is applied to the Latent Deficiency Claims:

     “The taxable income of the Affiliated Group as reported reflects the fact that stock eligible
for the stock-for-debt exception to the discharge of indebtedness income rules of former section
108(e)(10)(B) was distributed to holders of certain claims (in amounts and as defined in the Order
dated ___, which was issued by the Superior Court for the County of Los Angeles in case
C572 724), the liabilities for which had been reflected in the reserves of the insurance
operations. The stock-for-debt exception (including its requirements that applied prior

 

 

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to its repeal), as in effect prior to the amendments to section 108 by P.L. 103-66, is
applicable to the payment of these liabilities with such stock.”

     (8) Amendment of Closing Agreement. The provisions set forth in Section 8.3 of the
Closing Agreement with respect to the Trustee’s obligation to reimburse the Grantor for Income
Taxes shall be deemed modified as set forth by this Agreement beginning with the taxable year in
which this Agreement is first effective.

     (9) Effective Dates. If the conditions precedent set forth in paragraphs 53 and 54
(other than paragraphs 53(iii) and 54(iii)) of the Implementation Agreement are fully satisfied or
waived, this Agreement shall be effective beginning with the taxable year ending on December 31,
2004, and will terminate beginning on the first day in which all of the Trusts are no longer in
existence for Income Tax purposes or no longer qualify as grantor trusts under the Internal Revenue
Code (under the conditions set forth in paragraph (5)). However, notwithstanding such termination,
the obligations of the Trustee pursuant to paragraph (2) of this Agreement shall continue to be in
effect for so long as any taxable period in which the Tax Items attributable to the activities of
the Trust were included in the Consolidated Return remains open for assessment and collection under
the Code. Any amounts owed with respect to the periods before the taxable year ending on December
31, 2004, shall be allocated pursuant to Section 8.3 of the Closing Agreement without modification
by this Agreement.

     (10) Preparation of Consolidated Returns. The Trustee shall provide to Parent
detailed and accurate information as reasonably required or appropriate to enable Parent to prepare
the Consolidated Return no later than 5 1/2 months after the close of the taxable year. Such
information shall be provided to Parent in the form and manner prescribed by Parent or

 

 

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otherwise in the form and manner as mutually agreed. Parent shall provide the Trustee with a
copy of the draft Consolidated Return and a schedule that identifies the Tax Items attributable to
the activities of the Trusts 30 days before the Consolidated Return is due to be filed (with
authorized extensions.) Should the Trustee have any objection to the Trusts’ Tax Items as reported
on the Consolidated Return, the Trustee shall notify Parent in writing as soon as possible but not
later than 10 days prior to the due date (with extensions) of filing the Consolidated Return.

     (11) General Cooperation. The Parties agree to cooperate in the implementation of
this Agreement and to provide such assistance as may reasonably be requested by each other in
connection with the preparation of any Consolidated Return, audit, or judicial or administrative
proceeding or determination relating to a liability for taxes, including reasonable access to and
assistance in identifying and interpreting the books and records, financial statements and work
papers, as well as the execution of documents and the performance of other acts reasonably
necessary to accomplish the purposes of this Agreement.

     (12) Validity of Provisions. The invalidity or unenforceability of any particular
provision of this Agreement shall not affect the other provisions hereof, and this Agreement shall
be construed in all respects as if such invalid or unenforceable provision were omitted.

     (13) Disputes. The Parties shall make good faith efforts to resolve any dispute or
difference between the Parties with respect to the operation or interpretation of this Agreement
pursuant to the decision of a person mutually approved by Parent and the Trustee.

 

 

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John Garamendi, Insurance Commissioner of the State of California, in his capacity as Trustee of
the MIC Trust, the MNIC Trust, and the EIC Trust.

	 	 	 	 	 
	/s/ David E. Wilson

	 	 	 	January 10, 2006
	 	 	 	 	 
	 
	 	 	 	 
	David E. Wilson, Special Deputy Insurance Commissioner

	 	 	 	Date

	 	 	 	 	 	 	 
	Covanta Holding Corporation	 	 	 	 
	 
	 	 	 	 	 	 
	By:

	 	/s/ Craig D. Abolt
	 	 	 	 
	 

	 	 	 	 	 	 
	 
	 	 	 	 	 	 
	Title:

	 	Senior Vice President and Chief Financial Officer
	 	 	 	Dateexv10w3

 

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

4

 

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

6

 

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.

7

 

     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

8

 

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

10

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