January 19, 2006 - Commissioner files Notice Of Motion And Motion To Approve Rehabilitation Plan Implementation Agreement and Related Exhibits With Covanta Holding Corporation to be heard on February 24, 2006.
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ROBERT H. NUNNALLY, JR.
State Bar Number 134151
WISENER*NUNNALLY*GOLD, LLP
625 West Centerville Road, Suite 110
Garland, Texas 75041
Phone: (972) 840-9080
Facsimile: (972) 840 6575
Attorneys for Insurance Commissioner
SUPERIOR COURT OF THE STATE OF CALIFORNIA
FOR THE COUNTY OF LOS ANGELES
JOHN GARAMENDI, Insurance Commissioner
of the State of California,
Applicant,
vs.
MISSION INSURANCE COMPANY, a
California Corporation,
Respondent.
Consolidated with Case Numbers C 576 324;
C 576 416; C 576 323; C 576 325; C 629 709
Case No. C 572 724
Honorable John Shepard Wiley, Jr.
Dept. 50
NOTICE OF MOTION AND MOTION TO
APPROVE REHABILITATION PLAN
IMPLEMENTATION AGREEMENT AND
RELATED EXHIBITS WITH COVANTA
HOLDING CORPORATION
Hearing date: February 24, 2006
Hearing time: 8:30 a.m.
Dept. 50
Action Filed: October 31, 1985
PLEASE TAKE NOTICE THAT ON THE 24th day of February, 2006, at the hour of 8:30 a.m., or as soon thereafter as the matter may be heard, 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 (collectively, the "Trusts"), will seek approval of the Court for entry into a Rehabilitation Plan Implementation Agreement ("Implementation Agreement") with Covanta Holding Corporation ("Covanta"), which shall then be part of the rehabilitation plan. [Exhibit "1" to the Declaration of Robert H. Nunnally, Jr.] The Implementation Agreement provides for a valuation process for establishing the minimum liability to claimants under the agreement of Reorganization, Rehabilitation, and Restructuring ("RRR Agreement") and administration process for the purpose of shares distribution under the RRR Agreement in place as a result of prior orders of this Court. This agreement also resolves various disagreements between Covanta Holding Corporation ("Covanta") and the Insurance Commissioner regarding the obligations of the parties under the RRR Agreement, the Agreement Regarding Closing, and the trust agreements for each of the Trusts (collectively, the "Rehabilitation Agreement") and offers to the Trusts each of the following benefits:
Covanta shall assume certain tax costs allocated to the Trusts under the RRR Agreement;
Covanta shall bear the expense of evaluating and processing certain claims under the RRR Agreement;
Covanta shall provide certain indemnifications, as described in the Implementation Agreement;
Covanta shall provide a tax opinion letter, whose form has been finalized;
Covanta shall contribute in excess of nine million dollars to the Trusts to assure the Trustee's compliance with his responsibility to ensure that no approved claimant suffers a dilution in distribution;
Covanta shall issue a release to the Trusts except as to future performance under the rehabilitation plan;
Covanta shall make appropriate disclosures regarding the Implementation Agreement to the SEC and to the IRS.
This motion will be based on the Declaration of Mohsen Sultan, the Declaration of Robert H. Nunnally, Jr., the proposed Agreements attached as exhibits to his declaration, and the accompanying memorandum of points and authorities.
Dated: January 19, 2006
Respectfully submitted,
WISENER * NUNNALLY * GOLD, LLP
By: Roberth H. Nunnally, Jr.
MEMORANDUM OF POINTS AND AUTHORITIES
This motion seeks approval for entry into the Implementation Agreement with Covanta. If approved, this Implementation Agreement resolves a substantial outstanding issue in this case.
On 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 Director of the Division of Insurance as Receiver of Holland-America Insurance Company and Mission Reinsurance Corporation, and with Mission Insurance Group, Inc. [Exhibit "2" to the Declaration of Robert H. Nunnally, Jr.]. The RRR Agreement provided for a comprehensive rehabilitation, including a "debt for equity swap" and a Chapter 11 reorganization for Mission Insurance Group, Inc. Covanta is the successor of that reorganized debtor. 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 MICT, MNICT and EICT, pursuant to the agreement of MICT, the agreement of MNICT and the agreement of EICT. [Exhibit "3" to the Declaration of Robert H. Nunnally, Jr.]. Pursuant to the Rehabilitation Agreement, as of August 15, 1990, an aggregate of 1,648,488 shares of Covanta common stock were issued to the Insurance Commissioner to be held for and on behalf of holders of Deficiency Claims (as defined in the RRR Agreement) (the "Allocated Shares"), which Allocated Shares have been allocated to MICT (1,172,874 shares), MNICT (399,751 shares) and EICT (75,863 shares). [Exhibit "4" to Declaration of Robert H. Nunnally, Jr.]. The RRR Agreement provides that these shares will be distributed to holders of "Deficiency Claims," that is, claimants who made or could have made claims against the Mission companies.
The Implementation Agreement seeks to allocate the shares among not only those who qualified by having unpaid approved proofs of claims, but also those who "could have made" claims as defined and contemplated under the Rehabilitation Agreement but did not due to the various strictures of the amended final dividend plan process. Covanta had filed objections to the closing plan in this Court, contending that other claimants under the RRR Agreement should be included in the shares distribution in order to implement the rehabilitation plan correctly. The Implementation Agreement provides that Covanta will make a contribution to the Trusts in order to resolve various disagreements between Covanta and the Trustee and to resolve any issues as to the Trustee's compliance with his responsibility to ensure that no approved claimant is prejudiced by any arguable shares dilution caused by any distribution of shares to additional claimants under the RRR Agreement and will evaluate and process such claims at its own expense. Covanta will also indemnify the Insurance Commissioner and the Trusts against a number of events, as set forth in the Implementation Agreement. Thus, the Implementation Agreement resolves outstanding issues, thereby saving the Trusts additional expense, and also provides additional assets to the Trusts for distribution to claimants and relieves the Trusts of certain costs that otherwise would have been borne by the assets otherwise available for claimants.
This implementation plan contemplates an additional motion to approve a valuation of the minimum liability to certain claimants under the RRR Agreement, which motion is expected to be filed in January 2006 for hearing in February 2006. The valuation process should not delay or hinder closing of the other aspects of this case on January 24, 2006.
California Insurance Code Section 1037 accords the Insurance Commissioner wide latitude in settling matters, subject only to abuse of discretion review. Low v. Golden Eagle Ins. Co., 104 Cal.App.4th 306,128 Cal.Rptr.2d 423 (2002).
The Declaration of Mohsen Sultan is submitted in support of the reasonableness of the Implementation Agreement. This agreement resolves a key issue in the closing process.
CONCLUSION
The Court is requested to approve the Implementation Agreement.
Dated January 19, 2006
Respectfully submitted,
WISENER * NUNNALLY * GOLD, LLP
By: Robert H. Nunnally, Jr.
PROOF OF SERVICE: By Federal Express
(Code Civ. Proc., §§ 1013, 2015.5)
STATE OF TEXAS, COUNTY OF DALLAS.
I am employed in the County of Dallas, State of Texas. I am over the age of 18 and not a party to the within action; my business address is 625 West Centerville Road, Suite 110, Street, Garland, Texas 75041.
On this date, I served the foregoing documents described NOTICE OF MOTION AND MOTION TO APPROVE REHABILITATION PLAN IMPLEMENTATION AGREEMENT AND RELATED EXHIBITS WITH COVANTA HOLDING CORPORATION by placing a copy thereof enclosed in sealed envelopes addressed as follows:
Sent via Federal Express to:
See Attached Exhibit "A".
I am readily familiar with my employer's practices of collection and processing correspondence for mailing with the Federal Express and the above-referenced correspondence will be deposited with Federal Express on the same date as stated below, following ordinary course of business.