-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, NYgdJ4nohQJqjzvQ6+L/iEldncPPOpXJ99oWO9cKSETkcJ8apZq3WZRC6LsUuLyi UfNM8LNzc8QrDf4yclvv0Q== 0000903423-03-000754.txt : 20030909 0000903423-03-000754.hdr.sgml : 20030909 20030909165629 ACCESSION NUMBER: 0000903423-03-000754 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 20030905 ITEM INFORMATION: Other events ITEM INFORMATION: Financial statements and exhibits FILED AS OF DATE: 20030909 FILER: COMPANY DATA: COMPANY CONFORMED NAME: COVANTA ENERGY CORP CENTRAL INDEX KEY: 0000073902 STANDARD INDUSTRIAL CLASSIFICATION: COGENERATION SERVICES & SMALL POWER PRODUCERS [4991] IRS NUMBER: 135549268 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 8-K SEC ACT: 1934 Act SEC FILE NUMBER: 001-03122 FILM NUMBER: 03888444 BUSINESS ADDRESS: STREET 1: 40 LANE ROAD CITY: FAIRFIELD STATE: NJ ZIP: 07004 BUSINESS PHONE: 2128686100 MAIL ADDRESS: STREET 1: 40 LANE ROAD CITY: FAIRFIELD STATE: NJ ZIP: 07004 FORMER COMPANY: FORMER CONFORMED NAME: OGDEN CORP DATE OF NAME CHANGE: 19920703 8-K 1 cov8k_0909.txt UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 ----------------------- FORM 8-K ----------------------- CURRENT REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 Date of report (Date of earliest event reported): September 5, 2003 Covanta Energy Corporation - -------------------------------------------------------------------------------- (Exact Name of Registrant as Specified in Charter) Delaware 1-3122 13-5549268 - -------------------------------------------------------------------------------- (State or Other Jurisdiction (Commission File (IRS Employer of Incorporation) Number) Identification No.) 40 Lane Road, Fairfield, New Jersey 07004 - -------------------------------------------------------------------------------- (Address of Principal Executive Offices) (Zip Code) Registrant's telephone number, including area code: (973) 882-9000 Not Applicable - -------------------------------------------------------------------------------- (Former Name or Former Address, if Changed Since Last Report) Item 5. Other Events. On September 8, 2003, Covanta Energy Corporation ("Covanta") and its affiliated reorganizing debtors and liquidating debtors (together with Covanta, the "Debtors") filed a draft Joint Plan of Reorganization (the "Reorganization Plan"), a draft Joint Plan of Liquidation (the "Liquidation Plan" and together, the "Plans") and a related draft Disclosure Statement (the "Disclosure Statement") with the United States Bankruptcy Court for the Southern District of New York (the "Bankruptcy Court"). The Disclosure Statement filed with the Bankruptcy Court is subject to approval by the Bankruptcy Court, and will be revised prior to its distribution to creditors in connection with the voting process for the Plans. Copies of the Reorganization Plan, the Liquidation Plan and the Disclosure Statement are attached hereto as Exhibits 2.1, 2.2 and 2.3, respectively. Bankruptcy law does not permit solicitation of acceptances of the Plans until the Bankruptcy Court approves the final Disclosure Statement as providing adequate information of a kind, and in sufficient detail, as far as is reasonably practicable in light of the nature and history of the debtor and the condition of the debtor's books and records, that would enable a hypothetical reasonable investor typical of the holder of claims or interests of the relevant class to make an informed judgment about the Plans. Accordingly, this announcement is not intended to be, nor should it be construed as, a solicitation for a vote on the Plans. The Company will emerge from Chapter 11 if and when the Plans receive the requisite creditor approval and are confirmed by the Bankruptcy Court. Additionally, on September 5, 2003, Covanta and certain of its subsidiaries entered into an agreement to sell their interests in Heber Geothermal Company, Heber Field Company, Second Imperial Geothermal Co., Mammoth-Pacific L.P. and certain related holding companies to affiliates of ArcLight Energy Partners Fund I, L.P. and Caithness Energy, L.L.C. for a purchase price of $170,000,000, subject to adjustments. The agreement is conditional on the approval of the Bankruptcy Court and other customary conditions precedent. Item 7. Financial Statements, Pro Forma Financial Information and Exhibits. (a) Financial Statements of business acquired: [Not applicable]. (b) Pro forma financial information: [Not applicable]. (c) Exhibits: Exhibit 2.1 Debtors' Joint Plan of Reorganization under Chapter 11 of the Bankruptcy Code. Exhibit 2.2 Debtors' Joint Plan of Liquidation under Chapter 11 of the Bankruptcy Code. Exhibit 2.3 Disclosure Statement with Respect to Debtors' Joint Plan of Reorganization and Joint Plan of Liquidation under Chapter 11 of the Bankruptcy Code. SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereto duly authorized. Date: September 9, 2003 COVANTA ENERGY CORPORATION By: /s/ Timothy J. Simpson ----------------------- Name: Timothy J. Simpson Title: Vice President, Associate General Counsel and Assistant Secretary EX-2.1 3 cov8k-ex21_0909.txt Exhibit 2.1 CLEARY, GOTTLIEB, STEEN & HAMILTON Deborah M. Buell (DB 3562) James L. Bromley (JB 5125) One Liberty Plaza New York, New York 10006 and JENNER & BLOCK, LLC Vincent E. Lazar (VL 7320) Christine L. Childers (CC 0092) One IBM Plaza Chicago, Illinois 60611 UNITED STATES BANKRUPTCY COURT SOUTHERN DISTRICT OF NEW YORK ----------------------------------------------x : In re: : Chapter 11 : OGDEN NEW YORK SERVICES, INC., et al., : Case Nos. 02-40826 (CB), et al. : Debtors and Debtors in Possession : : Jointly Administered : ----------------------------------------------x DEBTORS' JOINT PLAN OF REORGANIZATION UNDER CHAPTER 11 OF THE BANKRUPTCY CODE September 8, 2003 THIS IS NOT A SOLICITATION OF ACCEPTANCE OR REJECTION OF THE REORGANIZATION PLAN. ACCEPTANCES OR REJECTIONS MAY NOT BE SOLICITED UNTIL A DISCLOSURE STATEMENT HAS BEEN APPROVED BY THE BANKRUPTCY COURT. A DISCLOSURE STATEMENT HAS BEEN SUBMITTED FOR APPROVAL BUT HAS NOT BEEN APPROVED BY THE COURT. Covanta Energy Corporation and those of its affiliates set forth on Exhibit 1 attached hereto (each a "Reorganizing Debtor" and collectively, the "Reorganizing Debtors") and AMOR 14 Corporation, Covanta SIGC Energy, Inc., Covanta SIGC Energy II, Inc., Heber Field Company, Heber Geothermal Company and Second Imperial Geothermal Company, L.P. (each a "Heber Debtor" and collectively, the "Heber Debtors"), as debtors and debtors in possession under chapter 11 of title 11 of the United States Code, in each of their separate cases, which have been consolidated for procedural purposes only, hereby propose and file this Joint Plan of Reorganization. TABLE OF CONTENTS Page ARTICLE I DEFINITIONS AND INTERPRETATION...............................1 1.1 Definitions.......................................................1 ARTICLE II TREATMENT OF ADMINISTRATIVE EXPENSE CLAIMS AND PRIORITY TAX CLAIMS.......................19 2.1 Non-Classification...............................................19 2.2 Administrative Expense Claims....................................19 2.3 Compensation and Reimbursement Claims............................19 2.4 Priority Tax Claims..............................................21 2.5 DIP Financing Facility Claims....................................21 ARTICLE III CLASSIFICATION OF CLAIMS AND EQUITY INTERESTS...............22 3.1 General Rules of Classification..................................22 ARTICLE IV TREATMENT OF CLAIMS AND EQUITY INTERESTS....................22 4.1 Class 1 - Allowed Priority Non-Tax Claims........................25 4.2 Class 2 - Allowed Project Debt Claims............................25 4.3 Class 2H - Allowed Heber Secured Claims..........................25 4.4 Class 3 - Allowed Reorganized Covanta Secured Claims.............26 4.5 Class 4 - Allowed Operating Company Unsecured Claims.............28 4.6 Class 5 - Allowed Covanta Energy Americas Unsecured Claims.......28 4.7 Class 6 - Allowed Covanta Unsecured Claims.......................29 4.8 Class 7 - Allowed Heber Unsecured Claims.........................29 4.9 Class 8 - Allowed Convenience Claims.............................29 4.10 Class 9 - Intercompany Claims....................................30 4.11 Class 10 - Subordinated Claims...................................30 4.12 Class 11 - Equity Interests in Subsidiary Debtors................31 4.13 Class 12 - Equity Interests in Covanta Huntington, Covanta Onondaga and DSS Environmental...................................31 4.14 Class 13 - Old Covanta Stock Equity Interests....................31 4.15 Class 14 - Equity Interests in Heber Debtors.....................32 4.16 Settlement of Loss Sharing Litigation............................32 ARTICLE V ACCEPTANCE OR REJECTION OF THE REORGANIZATION PLAN..........32 5.1 Voting of Claims.................................................33 5.2 Acceptance by a Class............................................33 5.3 Presumed Acceptance of Plan......................................33 5.4 Presumed Rejection of Plan.......................................33 5.5 Cramdown.........................................................33 ARTICLE VI MEANS FOR IMPLEMENTATION....................................33 6.1 Exit Financing...................................................33 6.2 Implementation of Geothermal Sale................................34 6.3 Authorization of Common Stock, Reorganization Plan Notes and Reorganized Heber Equity Interests...............................34 6.4 Formation of ESOP................................................34 6.5 Cancellation of Existing Securities and Agreements...............34 6.6 Board of Directors and Executive Officers........................35 6.7 Deemed Consolidation of Debtors for Plan Purposes Only...........35 6.8 Continued Corporate Existence; Vesting of Assets in the Reorganized Debtors and Heber Debtors and Corporate Restructuring....................................................35 6.9 Amended Organizational Documents.................................36 6.10 Settlements......................................................36 6.11 Employee Benefits................................................36 6.12 Funding the Operating Reserve....................................36 6.13 Management Incentive Payment.....................................36 ARTICLE VII DISTRIBUTIONS...............................................37 7.1 Distribution Record Date.........................................37 7.2 Date of Distributions............................................37 7.3 Disbursing Agent.................................................37 7.4 Rights and Powers of Disbursing Agent............................37 7.5 Surrender of Instruments.........................................38 7.6 Delivery of Distributions........................................38 7.7 Manner of Payment Under Plan.....................................38 7.8 De Minimis and Fractional Distributions..........................39 7.9 Exemption from Securities Laws...................................39 7.10 Setoffs..........................................................39 7.11 Allocation of Plan Distribution Between Principal and Interest...39 7.12 Withholding and Reporting Requirements...........................40 7.13 Time Bar to Cash Payments........................................40 7.14 Closing of Chapter 11 Cases......................................40 ARTICLE VIII PROCEDURES FOR RESOLVING AND TREATING DISPUTED CLAIMS.......40 8.1 No Distribution Pending Allowance................................40 8.2 Resolution of Disputed Claims and Equity Interests...............41 8.3 Estimation of Claims and Equity Interests........................41 8.4 Reserve Account for Disputed Claims..............................42 8.5 Allowance of Disputed Claims.....................................42 8.6 Release of Funds from Disputed Claims Reserve....................42 ARTICLE IX TREATMENT OF EXECUTORY CONTRACTS AND UNEXPIRED LEASES.......43 9.1 General Treatment................................................43 9.2 Cure of Defaults.................................................43 9.3 Approval of Assumption of Certain Executory Contracts............44 9.4 Approval of Rejection of Executory Contracts and Unexpired Leases...........................................................44 9.5 Bar Date for Filing Proofs of Claim Relating to Executory Contracts and Unexpired Leases Rejected Pursuant to the Reorganization Plan..............................................44 9.6 Survival of Debtors' Corporate Indemnities.......................45 9.7 Reservation of Rights Under Insurance Policies and Bonds.........45 ARTICLE X CONDITIONS PRECEDENT TO THE CONFIRMATION DATE AND THE EFFECTIVE DATE..............................................45 10.1 Conditions to Confirmation.......................................45 10.2 Conditions Precedent to the Effective Date.......................46 10.3 Waiver of Conditions.............................................47 10.4 Failure to Satisfy or Waiver of Conditions Precedent.............47 ARTICLE XI EFFECT OF CONFIRMATION......................................48 11.1 Revesting of Assets..............................................48 11.2 Discharge of Claims and Cancellation of Equity Interests.........48 11.3 Discharge of Reorganizing Debtors and Heber Debtors..............48 11.4 Binding Effect...................................................49 11.5 Term of Injunctions or Stays.....................................49 11.6 Injunction Against Interference with Plan........................49 11.7 Exculpation......................................................49 11.8 Rights of Action.................................................50 11.9 Injunction.......................................................50 11.10 Release..........................................................51 ARTICLE XII RETENTION OF JURISDICTION...................................51 12.1 Jurisdiction of Court............................................51 ARTICLE XIII MISCELLANEOUS PROVISIONS....................................53 13.1 Deletion of Classes and Subclasses...............................53 13.2 Dissolution of the Committee.....................................53 13.3 Effectuating Documents and Further Transactions..................53 13.4 Payment of Statutory Fees........................................54 13.5 Modification of Plan.............................................54 13.6 Courts of Competent Jurisdiction.................................54 13.7 Exemption From Transfer Taxes....................................54 13.8 Rules of Construction............................................55 13.9 Computation of Time..............................................55 13.10 Successors and Assigns...........................................55 13.11 Notices..........................................................56 13.12 Severability.....................................................56 13.13 Governing Law....................................................57 13.14 Exhibits.........................................................57 13.15 Counterparts.....................................................57 EXHIBITS TO REORGANIZATION PLAN Exhibit Number Exhibit 1 List of Reorganizing Debtors 2 List of Liquidating Debtors 3 List of Reorganizing Debtors That Filed on Initial Petition Date and Subsequent Petition Date 4 Description of Settlement of Loss Sharing Litigation 9.1A List of Rejecting Debtors 9.1B List of Assuming Debtors EXHIBITS TO REORGANIZATION PLAN SUPPLEMENT Exhibit Number Exhibit 1 Reorganization Plan Warrant Agreement 2 New CPIH Funded Debt 3 New CPIH Revolver Facility 4 New High Yield Indenture 5 New High Yield Secured Note 6 New L/C Facility 7 New Revolver Facility 8 Reinstated L/C Facility 9 Reorganization Plan CPIH Preferred Stock 10 Reorganization Plan Unsecured Note 11 Form of Reorganization Plan Warrant 12 Settlement of Loss Sharing Litigation INTRODUCTION These Chapter 11 Cases have been consolidated for procedural purposes only and are being jointly administered pursuant to an order of the Court. While this is a Joint Reorganization Plan for each of the Reorganizing Debtors and Heber Debtors, and without limiting the terms of Section 6.8 of this Reorganization Plan, it does NOT provide that these Chapter 11 Cases will be substantively consolidated. Capitalized terms used herein shall have the meanings ascribed to such terms in Article I of this Reorganization Plan. Reference is made to the Disclosure Statement accompanying this Reorganization Plan, including the Exhibits thereto, for a discussion of the Reorganizing Debtors, and Heber Debtors' history, business, results of operations and properties, and for a summary and analysis of the Reorganization Plan. All creditors are encouraged to consult the Disclosure Statement and read this Reorganization Plan carefully before voting to accept or reject this Reorganization Plan. NO SOLICITATION MATERIALS, OTHER THAN THE DISCLOSURE STATEMENT AND RELATED MATERIALS TRANSMITTED THEREWITH AND APPROVED BY THE COURT, HAVE BEEN AUTHORIZED BY THE COURT FOR USE IN SOLICITING ACCEPTANCES OR REJECTIONS OF THIS REORGANIZATION PLAN. The Reorganizing Debtors and Heber Debtors reserve the right to proceed with confirmation of this Reorganization Plan as to some but not all of the Reorganizing Debtors and/or Heber Debtors. ARTICLE I DEFINITIONS AND INTERPRETATION 1.1 Definitions. In addition to such other terms as are defined in other Sections of this Reorganization Plan, the following terms (which appear herein as capitalized terms) shall have the meanings set forth below, such meanings to be applicable to both the singular and plural forms of the terms defined. A term used in this Reorganization Plan and not defined herein or elsewhere in this Reorganization Plan, but that is defined in the Bankruptcy Code has the meaning set forth therein. "Administrative Expense Claim" means a Claim under sections 503(b), 507(a)(1), 507(b) or 1114(e)(2) of the Bankruptcy Code, including, without limitation, any actual and necessary expenses incurred after the Petition Date for preserving the assets of the Reorganizing Debtors and Heber Debtors, any actual and necessary costs and expenses of operating the businesses of the Reorganizing Debtors and Heber Debtors incurred after the Petition Date, all compensation and reimbursement of expenses allowed by the Court under sections 330, 331 or 503 of the Bankruptcy Code, any reclamation claims arising under section 546(c) of the Bankruptcy Code, any fee chargeable under section 1930 of Chapter 123 of Title 28 of the United States Code and any amounts payable with respect to Tranche A or Tranche B of the DIP Financing Facility. "Administrative Expense Claim Bar Date" means the date that is thirty (30) days following the Effective Date. The Administrative Expense Claim Bar Date shall apply to all holders of Administrative Expense Claims not satisfied prior to the Administrative Expense Claim Bar Date, except that the Administrative Expense Claim Bar Date shall not apply to holders of the following limited types of claims: (a) United States Trustee Claims; (b) post-petition liabilities incurred and payable in the ordinary course of business by any Reorganizing Debtor or Heber Debtor; or (c) fees and expenses incurred by (i) Retained Professionals and (ii) Persons employed by the Reorganizing Debtors or Heber Debtors or serving as independent contractors to the Reorganizing Debtors or Heber Debtors in connection with their reorganization efforts, including without limitation the Balloting Agent. "Additional Class 3 Warrants" means Reorganization Plan Warrants issued by Reorganized Covanta pursuant to this Reorganization Plan representing [ ____ percent (__%)] of Reorganized Covanta's Common Stock on a fully diluted basis as of the Effective Date. "Additional New Lenders" means the group of new lenders organized by [ ] that together are responsible for underwriting $45 million of the funding commitment with respect to the Exit Financing Agreements, which will be allocated ratably among the New Revolver Facility, the New CPIH Revolver Facility and the New L/C Facility. "Agent Banks" means Bank of America, N.A., as Administrative Agent, and Deutsche Bank, AG, New York Branch, as Documentation Agent, under the Prepetition Credit Agreement. "Allowed" means, with reference to the portion of any Claim (other than Administrative Expense Claims) or Equity Interest and with respect to each Reorganizing Debtor or Heber Debtor, (a) any such Claim against or Equity Interest in such Reorganizing Debtor or Heber Debtor which has been listed by a Reorganizing Debtor or Heber Debtor in its Schedules, as such Schedules have been or may be amended or supplemented by a Reorganizing Debtor or Heber Debtor from time to time in accordance with Bankruptcy Rule 1009, as liquidated in amount and not disputed or contingent and for which no contrary proof of claim or interest has been filed, (b) any Claim or Equity Interest allowed (i) under the Reorganization Plan or under any settlement agreement incorporated or otherwise implemented hereby, (ii) by Final Order, or (iii) as to which the liability of each Reorganizing Debtor or Heber Debtor and the amount thereof are determined by a final, non-appealable order of a court of competent jurisdiction other than the Court or (c) as to which a proof of claim has been timely filed before the applicable Bar Date in a liquidated amount with the Court pursuant to the Bankruptcy Code or any order of the Court, provided that (i) no objection to the allowance of such Claim or notice to expunge such Claim has been interposed by the Reorganizing Debtors, the Heber Debtors, the Committee, the United States Trustee or any other party in interest as permitted under the Bankruptcy Code before any final date for the filing of such objections or motions set forth in the Reorganization Plan, the Confirmation Order or other order of the Court, or (ii) if such objection or motion has been filed and not withdrawn, such objection or motion has been overruled by a Final Order (but only to the extent such objection or motion has been overruled); provided, further that any such Claims or Equity Interests allowed solely for the purpose of voting to accept or reject the Reorganization Plan pursuant to an order of the Court shall not be considered "Allowed Claims" or "Allowed Equity Interests" for the purpose of distributions hereunder. Except as expressly stated in this Reorganization Plan or as provided under section 506(b) of the Bankruptcy Code or a Final Order of the Court, an Allowed Claim shall not include interest on the principal amount of any Claim accruing from and after the Petition Date or any fees (including attorneys' fees), costs or charges (including late payment charges) related to any Claim accruing from or after the Petition Date. "Allowed Administrative Expense Claim" means the portion of any Administrative Expense Claim (including any interest for which the Reorganizing Debtors or Heber Debtors are legally obligated) that is (i) incurred or arising after the Petition Date and prior to the Effective Date, (ii) for those Administrative Expense Claims as to which the Administrative Expense Claim Bar Date is applicable, which has been filed before the Administrative Expense Bar Date, and (iii) as to which no objection to the allowance of such Administrative Expense Claim has been filed by the Reorganizing Debtors, the Heber Debtors, the Committee, the United States Trustee or any other party in interest as permitted under the Bankruptcy Code. All Administrative Expense Claims arising under or relating to the DIP Financing Facility are deemed Allowed Administrative Expense Claims. "Allowed Class o Claim " means an Allowed Claim in the specified Class. "Allowed Priority Tax Claims" means any Claim that is Allowed pursuant to Section 2.4 of this Reorganization Plan. "Allowed Subclass 3A Secured Claim Amount" means the allowed amount of the Secured Bank Claims, currently estimated to be $434 million including accrued but unpaid fees and interest, but subject to ultimate resolution of the claims under the Prepetition Credit Agreement. "Allowed Subclass 3B Secured Claim Amount" means the allowed amount of the 9.25% Debenture Claims, currently estimated to be $105 million including accrued but unpaid fees and interest, but subject to ultimate resolution of the claims under the 9.25% Debentures. "Assuming Debtors' Schedule of Rejected Contracts and Leases" means a schedule of the executory contracts and unexpired leases to which each of the Assuming Debtors (as defined in Section 9.1(b) of this Reorganization Plan) or Heber Debtors is a party that will be rejected under Article IX of the Plan, which schedule shall be filed and served on the relevant parties no less than twenty-three (23) days prior to the Confirmation Hearing. "Ballot" means the ballot that accompanies the Disclosure Statement upon which holders of Impaired Claims entitled to vote on the Reorganization Plan shall indicate their acceptance or rejection of the Reorganization Plan. "Ballot Deadline" means the date and time set by the Court by which the Balloting Agent must receive all Ballots. "Balloting Agent" means Bankruptcy Services LLC ("BSI") or such other entity authorized by the Court to distribute, collect and tally Ballots. "Bankruptcy Code" means title 11 of the United States Code, as amended from time to time, as applicable to the Chapter 11 Cases. "Bankruptcy Rules" means the Federal Rules of Bankruptcy Procedure promulgated by the United States Supreme Court under 28 U.S.C. ss. 2075 and the local rules of the Court (including any applicable local rules and standing and administrative orders of the Court), as now in effect or hereafter amended, as applicable to the Chapter 11 Cases. "Bar Date" means the applicable date or dates fixed by the Court or this Reorganization Plan for filing proofs of claim or interests in the Chapter 11 Cases. "Bondholders Committee" means the Informal Committee of Secured Debenture Holders of certain holders of, and the Indenture Trustee for, the 9.25% Debentures issued by Covanta. "Business Day" means any day other than a Saturday, Sunday or "legal holiday" as such term is defined in Bankruptcy Rule 9006(a). "Cash" means lawful currency of the United States, including cash equivalents, bank deposits, checks and other similar items, unless otherwise indicated. "Chapter 11 Cases" means the voluntary cases under Chapter 11 of the Bankruptcy Code commenced by each Reorganizing Debtor and each Heber Debtor, which cases are currently pending before the Court under the caption In re Ogden Services New York, Inc. et al., Case Nos. 02-40826 (CB), et al. "Claim" has the meaning set forth in section 101 of the Bankruptcy Code, whether or not asserted. "Claims Objection Deadline" means that day which is one hundred eighty (180) days after the Effective Date, as the same may be extended from time to time by the Court, without further notice to parties in interest. "Class" means any group of similar Claims or Equity Interests described in Article IV of the Reorganization Plan in accordance with section 1123(a)(1) of the Bankruptcy Code. "Committee" means the Official Committee of Unsecured Creditors appointed by the Office of the United States Trustee in the Chapter 11 Cases pursuant to section 1102 of the Bankruptcy Code, as appointed, modified or reconstituted from time to time. "Confirmation Date" means the date on which the clerk of the Court enters the Confirmation Order on the docket, within the meaning of Bankruptcy Rules 5003 and 9021. "Confirmation Hearing" means the hearing held by the Court to consider confirmation of the Reorganization Plan pursuant to section 1128 of the Bankruptcy Code, as such hearing may be adjourned or continued from time to time. "Confirmation Order" means the order of the Court confirming the Reorganization Plan pursuant to section 1129 of the Bankruptcy Code, together with any subsequent orders, if any, pursuant to sections 1127 and 1129 of the Bankruptcy Code approving modifications to the Reorganization Plan, which in each case shall be in form and substance satisfactory to the Reorganizing Debtors. "Convenience Claim" means any Unsecured Claim, other than an Intercompany Claim, against any Operating Company Reorganizing Debtor in an amount equal to or less than $2,500. "Convertible Subordinated Bond Claims" means any Unsecured Claim that arises out of, or is attributable to, ownership of the Convertible Subordinated Bonds. "Convertible Subordinated Bonds" means all the convertible subordinated notes issued by Covanta, including (i) those in the aggregate principal amount of $85,000,000 bearing an interest rate of 6% per annum and (ii) those in the aggregate principal amount of $63,500,000 bearing an interest rate of 5-3/4% per annum. "Court" collectively means the United States Bankruptcy Court for the Southern District of New York and, to the extent it may exercise jurisdiction over the Chapter 11 Cases, the United States District Court for the Southern District of New York or if either such court ceases to exercise jurisdiction over the Chapter 11 Cases, such other Court or adjunct thereof that exercises competent jurisdiction over the Chapter 11 Cases or any proceeding therein. "Covanta" means Covanta Energy Corporation, a Reorganizing Debtor and the ultimate corporate parent directly or indirectly holding an interest in all the Reorganizing Debtors and Heber Debtors in these Chapter 11 Cases. "Covanta Energy Americas" means Covanta Energy Americas, Inc., a Reorganizing Debtor. "Covanta Energy Americas Unsecured Claim" means (i) all Unsecured Claims asserted against Covanta Energy Americas, (ii) without duplication of clause (i) of this definition, the 9.25% Deficiency Claim, and (iii) without duplication of clause (i) of this definition, the Prepetition Lender Deficiency Claim; provided, however, that the term Covanta Unsecured Claims shall not include any Convenience Claims. "Covanta Huntington" means Covanta Huntington, L.P., a Reorganizing Debtor. "Covanta Onondaga" means Covanta Onondaga, L.P., a Reorganizing Debtor. "Covanta Unsecured Claims" means (i) all Unsecured Claims asserted against Covanta or any Intermediate Holding Company Debtor, (ii) without duplication of clause (i) of this definition, the 9.25% Deficiency Claim, and (iii) without duplication of clause (i) of this definition, the Prepetition Lender Deficiency Claim; provided, however, that the term Covanta Unsecured Claims shall not include any Convenience Claims. "CPIH" means Covanta Power International Holdings, Inc., a Reorganizing Debtor. "Deficiency Claim" means an Allowed Claim of a holder equal to the amount by which the aggregate Allowed Claims of such holder exceed the sum of (a) any setoff rights of the holder permitted under section 553 of the Bankruptcy Code plus (b) (without duplication of clause (a)) the Secured Claim of such holder; provided, however, that if the holder of a Secured Claim makes the election pursuant to section 1111(b)(2) of the Bankruptcy Code, there shall not be a Deficiency Claim in respect of such Claim. "DIP Agents" means Bank of America, N.A., as administrative agent, and Deutsche Bank AG, New York branch, as documentation agent, under the DIP Financing Facility. "DIP Financing Facility" means the Debtor-in-Possession Credit Agreement, dated as of April 1, 2002, among the Reorganizing Debtors, the Heber Debtors, the Liquidating Debtors, the DIP Lenders and the DIP Agents, as it has been or may be amended and modified from time to time, and as approved and extended by order of the Court. "DIP Lenders" means those Persons from time to time party to the DIP Financing Facility as lenders. "Disbursing Agent" means Reorganized Covanta, in its capacity as disbursing agent under this Reorganization Plan, together with such other persons as may be selected by Reorganized Covanta in accordance with Section 7.3 of this Reorganization Plan. "Disclosure Statement" means the written disclosure statement that relates to this Reorganization Plan and is approved by the Court pursuant to section 1125 of the Bankruptcy Code, as such disclosure statement may be amended, modified, or supplemented (and all exhibits and schedules annexed thereto or referred to therein) and that is prepared and distributed in accordance with section 1125 of the Bankruptcy Code and Bankruptcy Rule 3018. "Disputed Claim" means that portion (including, when appropriate, the whole) of a Claim that is not an Allowed Claim, is subject to an Estimation Request, or as to which an objection has been filed. For the purposes of the Reorganization Plan, a Claim shall be considered a Disputed Claim in its entirety before the time that an objection has been or may be filed if: (a) the amount or classification of the Claim specified in the relevant proof of claim exceeds the amount or classification of any corresponding Claim scheduled by a Reorganizing Debtor or Heber Debtor in its Schedules; (b) any corresponding Claim scheduled by a Reorganizing Debtor or Heber Debtor has been scheduled as disputed, contingent or unliquidated in its Schedules; or (c) no corresponding Claim has been scheduled by a Reorganizing Debtor or Heber Debtor in its Schedules. "Disputed Claims Reserve" means, with respect to each Class of Claims in which there exists any Disputed Claim on or after the Effective Date other than Class 4, Cash, Reorganization Plan Notes or Reorganization Plan Equity Securities and Warrants to be set aside by the Disbursing Agent in separate accounts corresponding to each such Class of Claims in which there are Disputed Claims, in an amount such that, if such Disputed Claims become Allowed Claims, there will be sufficient Cash, Reorganization Plan Notes or Reorganization Plan Equity Securities and Warrants to pay all such Disputed Claims pro rata with Allowed Claims in such Class with respect to each such Class of Claims in accordance with the provisions of this Reorganization Plan. Each Disputed Claims Reserve is to be maintained under this Reorganization Plan, as set forth more fully in Article VIII of this Reorganization Plan. "Distributable Cash" means an amount of Cash equal to the lesser of (i) $60 million, and (ii) the amount of (x) Free Cash minus (y) Exit Costs. "Distribution" means the distribution to holders of Allowed Claims in accordance with this Reorganization Plan of Cash, Reorganization Plan Notes, Reorganization Plan Equity Securities and Warrants or other property, as the case may be. "Distribution Address" means (i) the address of the holder of a Claim set forth in the relevant proof of claim, (ii) the address set forth in any written notices of address change delivered to the Disbursing Agent after the date of any related proof of claim, or (iii) if no proof of claim is filed in respect to a particular Claim, the address set forth in the relevant Reorganizing Debtor's Schedules of Assets and Liabilities or register maintained for registered securities. "Distribution Date" means the date that is the later of (i) the Effective Date or as soon thereafter as reasonably practicable, but in no event later than thirty (30) days after the Effective Date and (ii) the first Business Day after the date that is thirty (30) days after the date such Claims become Allowed Claims or otherwise become payable under the Reorganization Plan. "Distribution Record Date" means the Confirmation Date or, with respect to holders of 9.25% Debenture Claims, the date fixed by the Court as the record date for determining the holders of 9.25% Debentures who are entitled to receive Distributions under this Reorganization Plan. "Domestic Reorganizing Debtors" means the Reorganizing Debtors other than CPIH and its direct and indirect subsidiaries. "DSS Environmental" means DSS Environmental, Inc., a Reorganizing Debtor. "Effective Date" means a date, which is a Business Day, selected by each of the Reorganizing Debtors and Heber Debtors that is no more than ten (10) Business Days following the date on which all conditions set forth in Section 10.2 of this Reorganization Plan have been satisfied or expressly waived pursuant to Section 10.3 of this Reorganization Plan. "Elective Convenience Claim" means any Unsecured Claim, other than an Intercompany Claim, against any of the Operating Company Reorganizing Debtors for which the holder of the Unsecured Claim elects, by so indicating in writing on a validly executed and timely delivered Ballot, to receive (at the option of the Reorganizing Debtors) either (A) payment in Cash, in an amount equal to the lesser of $2,500 or 75% of the Allowed Class 4 Claim, or (B) the Reorganization Plan Unsecured Notes that such holder would otherwise have been entitled to receive pursuant to the Reorganization Plan in settlement, release and discharge of the Allowed Class 4 Claim. "Equity Interest" means as to each Reorganizing Debtor and Heber Debtor, any equity security, partnership interest or share of common stock or other instrument evidencing an ownership interest in such Reorganizing Debtor or Heber Debtor, regardless of whether it may be transferred, and any option, warrant or right, contractual or otherwise, to acquire an ownership interest or other equity security in such Reorganizing Debtor or Heber Debtor and shall include any redemption, conversion, exchange, voting participation, dividend rights and liquidation preferences relating thereto. "ESOP" means an employee stock ownership plan within the meaning of section 4975(e)(7) of the Internal Revenue Code of 1986, as amended. "Estate" means as to each Reorganizing Debtor or Heber Debtor, the estate which was created by the commencement of such Reorganizing Debtor or Heber Debtor's Chapter 11 Case pursuant to section 541 of the Bankruptcy Code, and shall be deemed to include, without limitation, any and all privileges of such Reorganizing Debtor or Heber Debtor and all interests in property, whether real, personal or mixed, rights, causes of action, avoidance powers or extensions of time that such Reorganizing Debtor or Heber Debtor or such estate shall have had effective as of the commencement of the Chapter 11 Case, or which such estate acquired after the commencement of the Chapter 11 Case, whether by virtue of section 544, 545, 546, 547, 548, 549 or 550 of the Bankruptcy Code or otherwise. "Estimated Recovery Value" means the estimated value of any Distribution under this Reorganization Plan; provided, that with respect to Distributions consisting of Reorganization Plan Notes, the Estimated Recovery Value shall be determined based upon the face amount of such Reorganization Plan Notes; and further, provided, that with respect to Distributions consisting of Reorganization Plan Equity Securities and Warrants, the Estimated Recovery Value shall be the valuation for any such Reorganization Plan Equity Securities and Warrants set forth in the Disclosure Statement or as determined by the Court. "Estimation Request" means a request for estimation of a Claim in accordance with the Bankruptcy Code and Bankruptcy Rules. "Excess Distributable Cash" means, if Distributable Cash is equal to $60 million, an amount of Cash equal to ninety-seven and one half percent (97.5%) of Free Cash in excess of Distributable Cash. "Exit Costs" means the Cash costs for consummation of this Reorganization Plan, to be either paid or reserved on or shortly after the Effective Date pursuant to the terms hereof, including without limitation, (i) all amounts required with respect to Distributions to holders of Allowed Administrative Expense Claims, Allowed Convenience Claims, Allowed Elective Convenience Claims to the extent the Reorganized Debtors elect to pay such claims in Cash, if any, and funding of reserves with respect to Disputed Claims, (ii) funding the Operating Reserve, (iii) payment of all costs and expenses associated with the transactions contemplated hereunder, (iv) severance costs, (v) establishment of tax reserves with respect to the Geothermal Sale, and (vi) such other reserves as may be required under one or more of the Exit Financing Agreements. "Exit Financing Agreements" means the agreements providing for new credit facilities, to be entered into on the Effective Date among the Exit Financing Borrowers and the Persons identified therein as lenders, consisting of the Reinstated L/C Facility, the New Revolver Facility, the New L/C Facility, the New CPIH Funded Debt, the New CPIH Revolver Facility and the New High Yield Indenture, each substantially in the form set forth in the Reorganization Plan Supplement, and all collateral agreements executed in connection therewith. "Exit Facility Agents" means Bank of America, N.A., as Administrative Agent and Collateral Agent and Deutschebank A.G., New York branch, as Document Agent, under certain of the Exit Financing Agreements. "Exit Financing Borrowers" means Reorganized Covanta and each other Reorganized Debtor [(other than the borrowers under the New CPIH Revolver Facility, if any)], to the extent permissible under existing law and subject to exceptions satisfactory to the Exit Facility Agents (including an exception for any Reorganized Debtor precluded by virtue of valid and effective charter or contractual restrictions from borrowing under the New Revolver Facility). "Final Order" means an order or judgment of the Court, as entered on the docket of the Court, that has not been reversed, stayed, modified, or amended, and as to which: (a) the time to appeal, seek review or rehearing or petition for certiorari under the Bankruptcy Rules has expired and no timely filed appeal or petition for review, rehearing, remand or certiorari is pending; or (b) any appeal taken or petition for certiorari filed has been resolved by the highest Court to which the order or judgment was appealed or from which certiorari was sought, provided, however, that the possibility that a motion under Rule 59 or Rule 60 of the Federal Rules of Civil Procedure, or any analogous rule under the Bankruptcy Rules or other rules governing procedure in cases before the Court, may be filed with respect to such order or judgment shall not cause such order or judgment not to be a Final Order. "Free Cash" means the total amount of Cash held by the Reorganizing Debtors on the Effective Date after consummation of the Geothermal Sale and immediately prior to giving effect to the payment of Exit Costs or any other Distributions or transactions contemplated by this Reorganization Plan; provided, however that Free Cash does not include the Post-Confirmation Working Capital or any other Cash as to which usage by the Reorganizing Debtors is restricted in any manner pursuant to the terms of any applicable agreements to which the Reorganized Debtors are party, including, without limitation, any project financing or operating agreements. "Geothermal Sale" means the sale by the Reorganizing Debtors of certain assets related to the Heber Debtors' geothermal independent power production business or the equity thereof pursuant to section 363 of the Bankruptcy Code or through a plan of reorganization. "Heber Debtors Intercompany Claim" means any Intercompany Claim held by a Heber Debtor, but excluding any such Claim that would also be included in the definition of Liquidating Debtors Intercompany Claim or Reorganizing Debtors Intercompany Claim. "Heber Secured Claim" means (i) any Secured Claim against a Heber Reorganizing Debtor that is secured by a Lien on such Heber Reorganizing Debtor's tangible or intangible assets [and (ii) any Claim against _________ based on a guarantee of a Secured Claim described in the preceding clause of this definition]; provided, however, that Heber Secured Claims do not include the Claims of the DIP Lenders, or Intercompany Claims. "Heber Unsecured Claims" means all Unsecured Claims asserted against any Heber Debtor. "Impaired" means, when used with reference to an Allowed Claim or an Allowed Equity Interest, a Claim or Equity Interest that is impaired within the meaning of section 1124 of the Bankruptcy Code. "Indenture Trustee" means Wells Fargo Bank Minnesota, National Association, in its capacity as indenture trustee with respect to the 9.25% Debentures. "Initial Distribution" means the initial distribution of the Secured Class 3 Total Distribution into separate Distributions for Subclass 3A and Subclass 3B in accordance with Section 4.4(c)(I) of this Reorganization Plan. "Initial Petition Date" means April 1, 2002, the date upon which the Reorganizing Debtors identified on Exhibit 3 hereto and the Heber Debtors filed their respective orders for relief under Chapter 11 of the Bankruptcy Code. "Intercompany Claims" means all Claims against a Reorganizing Debtor or Heber Debtor asserted by any Liquidating Debtor or any other Reorganizing Debtor or Heber Debtor, including, without limitation, any (a) preference actions, fraudulent conveyance actions, rights of setoff and other claims or causes of action under sections 544, 547, 548, 549, 550 and 553 of the Bankruptcy Code and other applicable bankruptcy or nonbankruptcy law, (b) claims or causes of action arising out of illegal dividends or similar theories of liability, (c) claims or causes of action based on piercing the corporate veil, alter ego liability or similar legal or equitable theories of recovery arising out of the ownership or operation of any of the Reorganizing Debtors or Heber Debtors prior to the applicable Petition Date, (d) claims or causes of action based on unjust enrichment, (e) claims or causes of action for breach of fiduciary duty, mismanagement, malfeasance or, to the extent they are claims or causes of action of any of the Reorganizing Debtors or Heber Debtors, fraud, (f) claims or causes of action arising out of any contracts or other agreements between or among any of the Reorganizing Debtors or Heber Debtors and any Liquidating Debtor or any other Reorganizing Debtor or Heber Debtors that are rejected, and (g) any other claims or causes of action arising out of or related in any way to the Chapter 11 Cases, the Liquidation Plan or this Reorganization Plan that are based on an injury that affects or affected the shareholders or creditors of any of the Liquidating Debtors, Heber Debtors or Reorganizing Debtors generally. "Intercreditor Agreement" means the Intercreditor Agreement dated as of March 14, 2001, among Covanta and its affiliates named therein and the Prepetition Lenders, as it has been or may be amended, supplemented or otherwise modified. "Intermediate Holding Company Debtor" means the following Reorganizing Debtors: [to come]. "Lien" has the meaning set forth in section 101(37) of the Bankruptcy Code. "Liquidating Debtors" means those debtors identified on Exhibit 2 attached hereto that are being liquidated pursuant to the Liquidation Plan. "Liquidating Debtors Intercompany Claim" means any Intercompany Claim held by a Liquidating Debtor or any of its direct or indirect subsidiaries. "Liquidation Plan" means the Joint Plan of Liquidation of Ogden New York Services, Inc., et al. under Chapter 11 of the Bankruptcy Code (including all exhibits, supplements, appendices and schedules annexed thereto), dated September__, 2003, as the same may be amended, modified or supplemented from time to time. "Loss Sharing Litigation" means docket item number 595 in the Chapter 11 Cases captioned as The Motion of Canadian Imperial Bank of Commerce, as agent for the Canadian Loss Sharing Lenders, for an Order (1) Interpreting and Enforcing the Final DIP Order and (2) Confirming the Amount of the Tranche C Loans to the Debtors, dated June 25, 2002, pending before the Court. "New CPIH Funded Debt" means the new debt to be issued, in the form of a term loan, by Reorganized CPIH as part of the Exit Financing Agreements on the Effective Date in the aggregate principal amount of $80 million, to be secured by a second priority lien on substantially all of Reorganized CPIH's and its domestic subsidiaries' assets. "New CPIH Revolver Facility" means the new revolving line of credit facility, to be entered into as part of the Exit Financing Agreements as an obligation of Reorganized CPIH and its domestic subsidiaries, guaranteed and secured by the Domestic Reorganizing Debtors, and secured by a first priority lien on substantially all of Reorganized CPIH's and its domestic subsidiaries' assets, junior only to duly perfected and unavoidable prior liens, providing for a revolving credit line of up to $10 million dollars for purposes of supporting the business operations of CPIH and its domestic subsidiaries, as more particularly described therein. "New Facility Lenders" means the Persons, other than any of the Additional New Lenders, named as lenders with respect to the New Revolver Facility, the New CPIH Revolver Facility or the New L/C Facility. "New High Yield Indenture" means the indenture to be entered into as part of the Exit Financing Agreements providing for the issuance by Reorganized Covanta of the New High Yield Secured Notes at discount in the aggregate amount of [$200 million, which liability will grow to $225 million at maturity.] "New High Yield Secured Notes" means the new notes, secured by a third priority lien on the Post-Confirmation Collateral, to be issued by Reorganized Covanta and guaranteed by the Domestic Reorganizing Debtors on the Effective Date pursuant to the New High Yield Indenture in accordance with the terms of this Reorganization Plan substantially in the form of the New High Yield Secured Note contained in the Reorganization Plan Supplement. "New Lender Warrants" means Reorganization Plan Warrants issued by Reorganized Covanta pursuant to this Reorganization Plan representing [______ percent (___%)] of Reorganized Covanta's Common Stock on a fully diluted basis as of the Effective Date. "New L/C Facility" means the new letter of credit facility, to be entered into as part of the Exit Financing Agreements, as an obligation of the Domestic Reorganizing Debtors, secured by a first priority lien on the Post-Confirmation Collateral and the assets of CPIH and its subsidiaries, junior only to duly perfected and unavoidable prior liens, providing for commitments for issuance of certain letters of credit of up to [$87.0] million for purposes of supporting the Domestic Reorganizing Debtors business operations, as more particularly described therein. "New Revolver Facility" means the new revolving line of credit facility, to be entered into as part of the Exit Financing Agreements, as an obligation of the Domestic Reorganizing Debtors, secured by a first priority lien on the Post-Confirmation Collateral and the assets of CPIH and its subsidiaries, junior only to duly perfected and unavoidable prior liens, providing for a revolving credit line of up to [$40] million for purposes of financing the business operations of the Domestic Reorganizing Debtors, as more particularly described therein. "Non-Participating Lender" means any holder of an Allowed Class 3 Claim that is not a New Facility Lender or one of the Additional New Lenders. "Non-Priority Subclass 3A Claims" means all Secured Bank Claims other than Priority Bank Claims. "9.25% Debenture Claim" means any Claim that arises out of, or is attributable to, ownership of the 9.25 % Debentures. "9.25% Debenture Holders Subclass 3B Distribution" means the aggregate Distribution to holders of Allowed Subclass 3B Claims pursuant to this Reorganization Plan. "9.25% Debentures" means those certain debentures issued by Ogden Corporation (now known as Covanta) in the aggregate principal amount of $100,000,000 due in March 2022 and bearing an interest rate of 9.25 % per annum (Cusip No. 676346AF6). "9.25% Debentures Adversary Proceeding" means adversary proceeding No. 02-03004 captioned as The Official Committee of Unsecured Creditors v. Wells Fargo Bank Minnesota, National Association, et al., pending before the Court. "9.25% Deficiency Claim" means an amount equal to (X) the Allowed amount of 9.25% Debenture Claims, currently estimated at $105 million including accrued but unpaid fees and interest minus (Y) as of the Effective Date, the Estimated Recovery Value of the 9.25% Debenture Holders Subclass 3B Distribution, such amount to be determined by agreement of the holders of the 9.25% Debentures, the Reorganizing Debtors and the Committee, or by order of the Court. "Old Covanta Stock" means the pre-confirmation common stock, options, warrants, preferred stock or any other Equity Interest of Covanta, whether issued and outstanding or held in treasury. "Operating Company Reorganizing Debtor" means any of the Reorganizing Debtors other than Covanta, Covanta Energy Americas and the Intermediate Holding Company Debtors. "Operating Company Unsecured Claims" means all Unsecured Claims asserted against any Operating Company Reorganizing Debtor; provided, however, that the term Operating Company Unsecured Claims shall not include any Convenience Claim. "Operating Reserve" shall have the meaning assigned to such term in the Liquidation Plan. "Operating Reserve Deficiency Amount" means the amount of the Operating Reserve Deficiency (as defined in Section 6.1(a) of the Liquidation Plan), if any, that shall be transferred by the Reorganizing Debtors to the Operating Reserve. "Person" has the meaning provided in section 101(41) of the Bankruptcy Code and includes, without limitation, any individual, corporation, partnership, association, indenture trustee, organization, joint stock company, joint venture, estate, trust, governmental unit or any political subdivision thereof, the Committee, Indenture Trustee, Equity Interest holders, holders of Claims, current or former employees of any Reorganizing Debtor, or any other entity. "Petition Date" means, collectively, the Initial Petition Date and the Subsequent Petition Date. "Plan Documents" means the documents to be executed, delivered, assumed or performed in conjunction with the consummation of this Reorganization Plan on the Effective Date, including, without limitation, the amended organizational documents for Reorganized Covanta and the Exit Financing Agreements and shall be treated as if incorporated herein. "Post-Confirmation Collateral" means all assets of the Domestic Reorganizing Debtors, including the common stock of CPIH, to the extent such assets may be subject to a Lien, with respect to the Exit Financing Borrowers' obligations under the Exit Financing Agreements without violation of any applicable law or the terms of any contracts that have been assumed or reinstated by the Reorganized Debtors unless otherwise waived or consented to. "Post-Confirmation Working Capital" means an amount of Cash equal to $10 million to be retained on the Effective Date by the Domestic Reorganizing Debtors. "Preference Claim" means a claim, right or cause of action accruing under section 547 of the Bankruptcy Code, or under section 550 of the Bankruptcy Code to recover a transfer avoided under section 547 of the Bankruptcy Code, and which may be asserted by or on behalf of a Reorganizing Debtor or Heber Debtor. "Preferred Distribution" shall have the meaning assigned to that term under the Intercreditor Agreement. "Prepetition Credit Agreement" means the Revolving Credit and Participation Agreement dated as of March 14, 2001, among Covanta, certain other Reorganizing Debtors, certain other Liquidating Debtors and the Prepetition Lenders and the Security Agreement dated as of March 14, 2001, both as they have been or may be amended, supplemented or otherwise modified from time to time. "Prepetition Lenders" means the Persons identified as lenders under the Prepetition Credit Agreement, together with their successors and permitted assigns. "Prepetition Lender Deficiency Claim" means an amount equal to (X) the Allowed amount of the claims of the Prepetition Lenders, currently estimated at $434 million including accrued but unpaid fees and interest minus (Y) as of the Effective Date, the Estimated Recovery Value of the Subclass 3A Recovery, such amount to be determined by agreement of the Prepetition Lenders, the Reorganizing Debtors and the Committee, or by order of the Court. "Priority Bank Claims" means all Secured Bank Claims that are entitled to a Preferred Distribution or Ratable Paydown pursuant to the Intercreditor Agreement. "Priority Bank Lenders" means the Prepetition Lenders that hold Priority Bank Claims. "Priority Non-Tax Claim" means any Claim entitled to priority pursuant to section 507(a) of the Bankruptcy Code, other than: (a) an Administrative Expense Claim or (b) a Priority Tax Claim. "Priority Tax Claim" means any Claim of a Government Unit of the kind entitled to priority in payment as specified in sections 502(i) and 507(a)(8) of the Bankruptcy Code. "Pro Rata Class Share" means the proportion that the amount of any Claim bears to the aggregate amount of such Claim and all other Claims in the same Class entitled to distributions from the same source of Cash, Reorganization Plan Notes or Reorganization Plan Equity Securities and Warrants, including Disputed Claims. "Pro Rata Subclass Share" means the proportion that the amount of any Claim bears to the aggregate amount of such Claim and all other Claims in the same Subclass entitled to Distributions from the same source of Cash, Reorganization Plan Notes or Reorganization Plan Equity Securities and Warrants, including Disputed Claims. "Project Debt Claim" means (i) any Secured Claim against an Operating Company Reorganizing Debtor that is secured by a Lien on such Operating Company Reorganizing Debtor's tangible or intangible assets, and (ii) any Claim against Covanta based on a guarantee of a Secured Claim described in the preceding clause of this definition; provided, however, that Project Debt Claims do not include the Claims of the Prepetition Lenders, the DIP Lenders, the holders of the 9.25% Debentures or Intercompany Claims. "Ratable Paydown" shall have the meaning assigned to that term under the Intercreditor Agreement. "Reinstated L/C Facility" means the letter of credit facility, secured by a second priority lien on the Post-Confirmation Collateral, to be reinstated as part of the Exit Financing Agreements providing for letters of credit in the aggregate face amount of up to $176 million for purposes of continuing or replacing certain unfunded letters of credit issued and outstanding as of the Effective Date under Tranche B of the DIP Financing Facility and for funding draws with respect thereto. "Rejecting Debtors' Schedule of Assumed Contracts and Leases" means a schedule of the executory contracts and unexpired leases to which each of the Rejecting Debtors (as defined in Section 9.1(a) of this Reorganization Plan) is a party that will be assumed under Article IX of the Plan, which schedule shall be filed and served on the relevant parties no less than twenty-three (23) days prior to the Confirmation Hearing. "Released Party" means each Reorganizing Debtor and each Heber Debtor, and any officer, director or employee of any Reorganizing Debtor and any Heber Debtor but only if and to the extent, in each case, such party served in such capacity on or after the applicable Petition Date. "Reorganization Plan" means this chapter 11 plan of reorganization, including without limitation, all documents referenced herein and all exhibits, supplements, appendices and schedules hereto, either in its present form or as the same may be altered, amended or modified from time to time. "Reorganization Plan Equity Securities and Warrants" means the Reorganized CPIH Preferred Stock, Reorganized Covanta Common Stock and Reorganization Plan Warrants. "Reorganization Plan Notes" means the New High Yield Secured Notes, the Reorganization Plan Unsecured Notes and the New CPIH Funded Debt. "Reorganization Plan Supplement" means a supplemental appendix to this Reorganization Plan that will contain the Plan Documents in substantially completed form, to be filed no later than five (5) days prior to the last date by which votes to accept or reject this Reorganization Plan must be submitted. Documents to be included in the Reorganization Plan Supplement will be posted at www.covantaenergy.com as they become available. "Reorganization Plan Unsecured Notes" means the new subordinated unsecured notes to be issued by Reorganized Covanta on the Effective Date in accordance with the terms of this Reorganization Plan in an aggregate principal amount equal to the aggregate amount of Allowed Class 4 Claims and Allowed Class 5 Claims, substantially in the form of the Reorganization Plan Unsecured Note contained in the Reorganization Plan Supplement. "Reorganization Plan Warrants" means the warrants exercisable for [forty nine percent (49%)] of Reorganized Covanta Common Stock to be issued by Reorganized Covanta on the Effective Date in accordance with the terms of this Reorganization Plan, substantially in the form of the Reorganization Plan Warrant contained in the Reorganization Plan Supplement. "Reorganized Covanta" means Covanta on and after the Effective Date. "Reorganized Covanta Common Stock" means the shares of common stock of Reorganized Covanta, authorized under Section 6.3 of this Reorganization Plan and under the amended and restated certificate of incorporation for Reorganized Covanta. The number of issued and outstanding shares of Common Stock as of the Effective Date shall be [______], and the number of authorized shares shall be [_______]. "Reorganized Covanta Secured Claims" means the Secured Bank Claims and Secured 9.25% Debenture Claims. "Reorganized CPIH Preferred Stock" means the shares of preferred stock of CPIH, authorized under Section 6.3 of this Reorganization Plan and under the amended and restated certificate of incorporation for Reorganized CPIH with an aggregate liquidation preference of $30 million and with voting and dividend rights, as set forth substantially in the form of the Reorganization Plan CPIH Preferred Stock certificate of designation contained in the Reorganization Plan Supplement. The number of issued and outstanding shares of CPIH Preferred Stock as of the Effective Date shall be [1,000,000], and the number of authorized shares shall be [1,000,000]. "Reorganized Debtor" means each Reorganizing Debtor, on or after the Effective Date. "Reorganized Heber Debtor" means each Heber Debtor, on or after the Effective Date. "Reorganized Senior Heber Equity Interests" means the new Equity Interests in Covanta SIGC Energy I, Covanta SIGC Energy II, Heber Field Company and Heber Geothermal Company, authorized under Section 6.3 of this Reorganization Plan to be issued on the Effective Date. "Reorganizing Debtors" has the meaning ascribed to such term on the first page of this Reorganization Plan (each of the Reorganizing Debtors is individually referred to herein as a Reorganizing Debtor). A list of the Reorganizing Debtors is attached hereto as Exhibit 1. "Reorganizing Debtors Intercompany Claim" means any Intercompany Claim held by a Reorganizing Debtor, but excluding any such Claims that would also be included in the definition of Liquidating Debtors Intercompany Claim or Heber Debtors Intercompany Claim. "Retained Professional" means the professionals retained in these jointly administered Chapter 11 Cases by the Reorganizing Debtors, the Heber Debtors or the Committee pursuant to sections 327, 328 or 1103 of the Bankruptcy Code pursuant to Final Orders of the Court. "Schedules" means the schedules of assets and liabilities and the statement of financial affairs filed by the Reorganizing Debtors as required by sections 521 and 1106(a)(2) of the Bankruptcy Code and Bankruptcy Rule 1007, as they have been or may be supplemented or amended from time to time. "Secured Bank Claims" means the Secured Claims of the Prepetition Lenders arising under (i) the Prepetition Credit Agreement and related collateral documents, and (ii) the Intercreditor Agreement, including the Priority Bank Claims and the Non-Priority Subclass 3A Claims. "Secured Claim" means, pursuant to section 506 of the Bankruptcy Code, that portion of a Claim that is secured by a valid, perfected and enforceable security interest, lien, mortgage or other encumbrance, that is not subject to avoidance under applicable bankruptcy or non-bankruptcy law, in or upon any right, title or interest of any of the Reorganizing Debtors in and to property of the Estates, to the extent of the value of the holder's interest in such property as of the relevant determination date. The defined term Secured Claim includes any Claim that is (i) subject to an offset right under applicable law, and (ii) a secured claim against any of the Reorganizing Debtors or Heber Debtors pursuant to sections 506(a) and 553 of the Bankruptcy Code. Such defined term shall not include for voting or Distribution purposes any such Claim that has been or will be paid in connection with the cure of defaults under an assumed executory contract or unexpired lease under section 365 of the Bankruptcy Code. A Secured Claim shall not include any portion of the Claim that exceeds that value of the interest in property of the Estate securing such Claim. "Secured Class 3 Total Distribution" means the total Distribution to Allowed Class 3 Claims (including Allowed Subclass 3A Claims and Allowed Subclass 3B Claims) under this Reorganization Plan, consisting of: (i) Distributable Cash, (ii) Excess Distributable Cash (if any), (iii) the New High Yield Secured Notes, (iv) New CPIH Funded Debt, (v) Reorganized CPIH Preferred Stock, (vi) the New Lender Warrants, and (vii) [Additional Class 3 Warrants]. "Secured Value Distribution" means the portion of the Secured Class 3 Total Distribution made to holders of Allowed Subclass 3A Claims or Allowed Subclass 3B Claims in the form of either Distributable Cash or New High Yield Secured Notes. ["Senior Unsecured Claims" means all Allowed Class 6 Claims that are entitled to enforcement of the subordination provisions contained in the indenture for the Convertible Subordinated Bonds.] "Specified Personnel" means any individual serving as a present or former officer, director or employee of the Reorganizing Debtors who, prior to the Confirmation Date, was entitled to indemnification from one of the Reorganizing Debtors or for whom such indemnification was permitted under applicable law. "Subclass 3A Percentage" means the percentage determined by dividing (i) the Allowed Subclass 3A Secured Claim Amount by (ii) the Total Allowed Class 3 Secured Claim Amount. "Subclass 3A Recovery" means a Distribution equal to the Subclass 3A Percentage of the Secured Class 3 Total Distribution. "Subclass 3B Percentage" means the percentage determined by dividing (i) the Allowed Subclass 3B Secured Claim Amount by (ii) the Total Allowed Class 3 Secured Claim Amount. "Subclass 3B Recovery" means a Distribution equal to the Subclass 3B Percentage of the Secured Class 3 Total Distribution. "Subordinated Claims" means (a) Claims for fines, penalties or forfeiture or for multiple, exemplary or punitive damages, to the extent that such fines, penalties, forfeitures or damages are not compensation for actual pecuniary loss suffered by the holders of such claims, (b) Claims subject to subordination under section 510(b) of the Bankruptcy Code, including without limitation claims for rescission, damages or reimbursement, indemnification or contribution arising out of a purchase or sale of any security of any of the Reorganizing Debtors or Liquidating Debtors, and (c) Claims subject to equitable subordination under section 510(c) of the Bankruptcy Code. "Subsequent Petition Date" means June 6, 2003, the date upon which the Reorganizing Debtors identified on Schedule 3 hereto filed their respective orders for relief under chapter 11 of the Bankruptcy Code. "Subsidiary Debtors" means the Reorganizing Debtors other than Covanta, Covanta Huntington and Covanta Onondaga. "Substantial Contribution Claims" means the claim by any creditor or party in interest for reasonable compensation for services rendered in these Chapter 11 Cases pursuant to section 503(b)(3), (4) or (5) of the Bankruptcy Code. "Total Allowed Class 3 Secured Claim Amount" means the sum of (i) Allowed Subclass 3A Secured Claim Amount and (ii) Allowed Subclass 3B Secured Claim Amount. "Unimpaired" means, when used with reference to a Claim or Equity Interest, a Claim or Equity Interest that is not Impaired. "United States Trustee" means the Office of the United States Trustee for the Southern District of New York. "United States Trustee Claims" means all United States Trustee Fees accrued through the close of the Chapter 11 Cases. "United States Trustee Fees" means all fees and charges due from the Reorganizing Debtors or Heber Debtors to the United States Trustee pursuant to section 1930 of Title 28 of the United States Code. "Unsecured Claims" means any Claim (including, without limitation, (a) Claims arising from the rejection of executory contracts and unexpired leases and (b) any Deficiency Claims) that is not a Secured Claim, Administrative Expense Claim, Priority Tax Claim, Priority Non-Tax Claim, Project Debt Claim, Reorganized Covanta Secured Claim, Intercompany Company Claim or Subordinated Claim. ARTICLE II TREATMENT OF ADMINISTRATIVE EXPENSE CLAIMS AND PRIORITY TAX CLAIMS 2.1 Non-Classification. As provided in section 1123(a)(1) of the Bankruptcy Code, Administrative Expense Claims and Priority Tax Claims against the Reorganizing Debtors and Heber Debtors are not classified for purposes of voting on or receiving Distributions under this Reorganization Plan. All such Claims are instead treated separately pursuant to the terms set forth in this Article II. 2.2 Administrative Expense Claims. Except to the extent that the applicable Reorganizing Debtor or Heber Debtor and a holder of an Allowed Administrative Expense Claim agree to less favorable treatment and except as set forth in Sections 2.3 and 2.5 of this Reorganization Plan, each Reorganizing Debtor and Heber Debtor shall pay to each holder of an Allowed Administrative Expense Claim against such Reorganizing Debtor or Heber Debtor, in full satisfaction, settlement, release and discharge of and in exchange for such Allowed Administrative Expense Claim, Cash in an amount equal to such Allowed Administrative Expense Claim on the Distribution Date; provided that any such liabilities not incurred in the ordinary course of business were approved and authorized by a Final Order of the Court; provided, however, that Allowed Administrative Expense Claims representing liabilities incurred in the ordinary course of business by such Reorganizing Debtor or Heber Debtor, as a debtor in possession, or liabilities arising under loans or advances to or other obligations incurred by such Reorganizing Debtor or Heber Debtor, as debtor in possession, whether or not incurred in the ordinary course of business, shall be paid by such Reorganizing Debtor or Heber Debtor in the ordinary course of business, consistent with past practice and in accordance with the terms and subject to the conditions of any agreements governing, instruments evidencing, or other documents relating to such transactions. To the extent that the Administrative Expense Claim Bar Date applies, failure to file a timely request for payment of an Administrative Expense Claim prior to the Administrative Expense Claim Bar Date shall result in the Administrative Expense Claim being forever barred and discharged. 2.3 Compensation and Reimbursement Claims. (a) Except with respect to Substantial Contribution Claims, which are subject to Section 2.3(b), all (i) Retained Professionals and (ii) Persons employed by the Reorganizing Debtors or Heber Debtors or serving as independent contractors to the Reorganizing Debtors in connection with their reorganization efforts that are seeking an award by the Court of compensation for services rendered or reimbursement of expenses incurred through and including the Effective Date under subsections 503(b)(2), 503(b)(3), 503(b)(4) or 503(b)(5) of the Bankruptcy Code shall file and serve on counsel for the Reorganizing Debtors and Heber Debtors and as otherwise required by the Court and Bankruptcy Code their respective final applications for allowance of compensation for services rendered and reimbursement of expenses incurred on or before the date that is forty-five (45) days after the Effective Date, subject to prior written notice to counsel to the DIP Agents. The Reorganized Debtors and Reorganized Heber Debtors shall pay in full on the Distribution Date such Claims in such amounts as are Allowed by the Court, after notice and hearing, or upon such other less favorable terms as may be mutually agreed upon between the holder of such an Allowed Administrative Expense Claim and the Reorganizing Debtors and Heber Debtors or, on and after the Effective Date, the Reorganized Debtors and Reorganized Heber Debtors and, in each such case, approved by the Court after notice and hearing. Any request for payment of an Administrative Expense Claim of the type specified in this Section 2.3(a), which is not filed by the applicable deadline set forth above, shall be barred. (b) Any Person who requests compensation or expense reimbursement for a Substantial Contribution Claim in the Chapter 11 Cases must file an application with the clerk of the Court, on or before the Administrative Expense Claim Bar Date, and serve such application on counsel for the Reorganized Debtors and Reorganized Heber Debtors and as otherwise required by the Court and the Bankruptcy Code on or before such date, or be forever barred from seeking compensation or expense reimbursement for such Substantial Contribution Claim. (c) All other requests for payment of an Administrative Expense Claim (other than as set forth in clauses (a) and (b) of this Section 2.3 above) that are subject to the Administrative Expense Claim Bar Date must be filed with the Court and served on counsel for the Reorganizing Debtors and Heber Debtors and as otherwise required by the Court and Bankruptcy Code on or before the Administrative Expense Claim Bar Date. Unless the Reorganizing Debtors, Reorganized Debtors, Heber Debtors, Reorganized Heber Debtors or any other party in interest in the Chapter 11 Cases objects to an Administrative Expense Claim by the Claims Objection Deadline, such Administrative Expense Claim shall be deemed Allowed in the amount filed. In the event that the Reorganizing Debtors, Reorganized Debtors, Heber Debtors, Reorganized Heber Debtors or any other party in interest in the Chapter 11 Cases objects to an Administrative Expense Claim, the Court shall determine the Allowed amount of such Administrative Expense Claim. Notwithstanding the foregoing, no request for payment of an Administrative Expense Claim need be filed with respect to an Administrative Expense Claim incurred and payable by the Reorganizing Debtors or Heber Debtors in the ordinary course of business. (d) Under no circumstances will the deadlines set forth above be extended by order of the Court or otherwise. Any holders of Administrative Expense Claims who are required to file a Claim or request for payment of such Claims or expenses and who do not file such Claims or requests by the applicable dates set forth in this Section 2.3 shall be forever barred from asserting such Claims or expenses against the Reorganizing Debtors, the Reorganized Debtors, the Heber Debtors, the Reorganized Heber Debtors, or any property of the Reorganized Debtors, the Reorganizing Debtors, the Heber Debtors and the Reorganized Heber Debtors, and from receiving any Distributions under this Reorganization Plan with respect to such Claims. 2.4 Priority Tax Claims. Subject to the consent of [the requisite New Facility Lenders and Additional New Lenders], each holder of an Allowed Priority Tax Claim will receive in full satisfaction, settlement, release, and discharge of and in exchange for such Allowed Priority Tax Claim, Cash equal to the unpaid portion of such Allowed Priority Tax Claim on or as soon as practical after the later of: (i) thirty (30) days after the Effective Date, or (ii) thirty (30) days after the date on which such Priority Tax Claim becomes Allowed; provided, however, that at the option of the Reorganized Debtors or Reorganized Heber Debtors, a Reorganized Debtor or Reorganized Heber Debtor may pay any or all Allowed Priority Tax Claims over a period not exceeding six (6) years after the date of assessment of the Priority Tax Claims as provided in subsection 1129(a)(9)(C) of the Bankruptcy Code. If a Reorganized Debtor or Reorganized Heber Debtor elects this option as to any Allowed Priority Tax Claim, then the Reorganized Debtor or Reorganized Heber Debtor shall make payment of simple interest on the unpaid portion of such Claim semiannually without penalty of any kind, at the statutory rate of interest provided for such taxes under applicable nonbankruptcy law, with the first interest payment due on the latest of: (i) six (6) months after the Effective Date, (ii) six (6) months after the date on which such Priority Tax Claim becomes an Allowed Claim, or (iii) such longer time as may be agreed to by the holder of such Priority Tax Claim and the Reorganized Debtor or Reorganized Heber Debtor. 2.5 DIP Financing Facility Claims. On the Effective Date, the Reorganizing Debtors shall pay all funded amounts and additional amounts outstanding under the DIP Financing Facility and all commitments thereunder shall automatically and irrevocably terminate; provided, however, that on the Effective Date, all outstanding and unfunded letters of credit issued under Tranche A of the DIP Financing Facility shall be replaced by letters of credit to be issued under the New Revolver Facility and, subject to acceptance by the requisite number of Tranche B DIP Lenders in accordance with section 2.13 of the DIP Financing Facility, all outstanding and unfunded letters of credit issued under Tranche B of the DIP Financing Facility shall be replaced or otherwise continued by letters of credit to be issued under the Reinstated L/C Facility. Once all such payments have been received in Cash by the DIP Lenders and all commitments thereunder have been terminated and such letters of credit have been issued under the New Revolver Facility or the Reinstated L/C Facility, the DIP Financing Facility shall be terminated with respect to the Reorganizing Debtors (subject in all respects to any carve-out approved by the Court in the Final Order approving the DIP Financing Facility and any other terms of the DIP Financing Facility and the Final Order that by their express terms survive the termination of the DIP Financing Facility), and the DIP Lenders shall take all necessary action to confirm the removal of any liens on the properties of the applicable Reorganizing Debtors securing the DIP Financing Facility at the sole cost of the Reorganized Debtors. To the extent that Claims arising under Tranche B of the DIP Financing Facility will not be paid in full in Cash as a result of reinstatement and continuation of such letters of credit under the Reinstated L/C Facility, acceptance of such treatment in full satisfaction of their Allowed Administrative Expense Claim by the requisite DIP Lenders as provided under section 2.13 of the DIP Financing Facility shall be binding on all DIP Lenders. On the Effective Date applicable to the Heber Debtors, regardless of the amounts outstanding under the DIP Financing Facility, the DIP Financing Facility shall terminate with respect to the Heber Debtors and the DIP Lenders shall release the Heber Debtors from any claims thereunder and security interests granted in support of the DIP Financing Facility over Equity Interests in, and assets of, the Heber Debtors; provided, however, that such releases shall be contingent upon the receipt by the DIP Lenders of the proceeds of the sale of the Heber Debtors or their assets to the extent of the funded amounts and additional amounts outstanding under the DIP Financing Facility. ARTICLE III CLASSIFICATION OF CLAIMS AND EQUITY INTERESTS 3.1 General Rules of Classification. This Reorganization Plan constitutes a Joint Reorganization Plan of the Reorganizing Debtors and the Heber Debtors. In accordance with section 1123(a)(1) of the Bankruptcy Code, Administrative Expense Claims and Priority Tax Claims, as described in Article II, have not been classified and thus are excluded from the Classes described below. The classification of Claims and Equity Interests and implementation of the settlements set forth below shall be applicable for all purposes, including voting, confirmation, and distribution pursuant to the Reorganization Plan. As to each Reorganizing Debtor and Heber Debtor, a Claim or Equity Interest shall be deemed classified in a particular Class or Subclass only to the extent that the Claim or Equity Interest qualifies within the description of that Class or Subclass and shall be deemed classified in a different Class or Subclass to the extent that any remainder of the Claim or Equity Interest qualifies within the description of such different Class or Subclass. A Claim or Interest is in a particular Class or Subclass only to the extent that such Claim or Interest is Allowed in that Class or Subclass and has not been paid or otherwise settled prior to the Effective Date. ARTICLE IV TREATMENT OF CLAIMS AND EQUITY INTERESTS The following is a designation of the treatment to be accorded, with respect to each Reorganizing Debtor and each Heber Debtor, to each Class of Claims and Equity Interests denominated in this Reorganization Plan. As to each Reorganizing Debtor and each Heber Debtor, the treatment of and consideration to be provided on account of Claims and Equity Interests pursuant to the Reorganization Plan shall be in full settlement, release and discharge of such Claims and Equity Interests; provided, that such discharge shall not affect the liability of any other entity to, or the property of any other entity encumbered to secure payment to, the holder of any such Claim or Equity Interest, except as otherwise provided in the Reorganization Plan; and provided, further, that such discharge shall not encompass the Reorganizing Debtors' or Heber Debtors' obligations under this Reorganization Plan or the Liquidating Trustee's obligations under the Liquidating Plan. No Claim shall entitle the holder thereof to any Distribution pursuant to this Reorganization Plan unless, and only to the extent that, such Claim is an Allowed Claim. All Distributions on account of Allowed Claims shall be made on the applicable Distribution Date. - -------------------------------------------------------------------------------------------- Class Claims Status Voting Right - -------------------------------------------------------------------------------------------- 1 Allowed Priority Non-Tax Claims Unimpaired Deemed to Accept - -------------------------------------------------------------------------------------------- 2 Allowed Project Debt Claims Unimpaired Deemed to Accept - -------------------------------------------------------------------------------------------- 2H Allowed Heber Secured Claims Unimpaired Deemed to Accept - -------------------------------------------------------------------------------------------- 3 Allowed Reorganized Covanta Impaired Entitled to Vote Secured Claims - -------------------------------------------------------------------------------------------- 4 Allowed Operating Company Impaired Entitled to Vote Unsecured Claims - -------------------------------------------------------------------------------------------- 5 Allowed Covanta Energy America Impaired Entitled to Vote Unsecured Claims - -------------------------------------------------------------------------------------------- 6 Allowed Covanta Unsecured Claims Impaired Entitled to Vote - -------------------------------------------------------------------------------------------- 7 Allowed Heber Unsecured Claims Unimpaired Deemed to Accept - -------------------------------------------------------------------------------------------- 8 Allowed Convenience Claims Impaired Entitled to Vote - -------------------------------------------------------------------------------------------- 9 Intercompany Claims Impaired Deemed to Reject - -------------------------------------------------------------------------------------------- 10 Subordinated Claims Impaired Deemed to Reject - -------------------------------------------------------------------------------------------- 11 Equity Interests in Subsidiary Impaired Deemed to Reject Debtors - -------------------------------------------------------------------------------------------- 12 Equity Interests in Covanta Unimpaired Deemed to Accept Huntington, Covanta Onondaga and DSS Environmental - -------------------------------------------------------------------------------------------- 13 Old Covanta Stock Equity Interests Impaired Deemed to Reject - -------------------------------------------------------------------------------------------- 14 Equity Interests in Heber Debtors Impaired Deemed to Reject - --------------------------------------------------------------------------------------------
4.1 Class 1 - Allowed Priority Non-Tax Claims. a. Classification: Class 1 consists of all Allowed Priority Non-Tax Claims. b. Treatment: Each holder of an Allowed Class 1 Claim shall receive, in full settlement, release and discharge of its Class 1 Claim, either (i) Cash, on the Distribution Date, in an amount equal to such Allowed Claim, or (ii) such other less favorable terms as the Reorganizing Debtors or Reorganized Debtors and the holder of an Allowed Priority Non-Tax Claim agree. c. Voting: Class 1 Claims are Unimpaired, and the holders of Allowed Class 1 Claims are not entitled to vote to accept or reject the Reorganization Plan. 4.2 Class 2 - Allowed Project Debt Claims. a. Classification: Class 2 consists of all Allowed Project Debt Claims. b. Treatment: On the Effective Date, the legal, equitable and contractual rights of the holders of Allowed Class 2 Claims will be reinstated in full satisfaction, release and discharge of their respective Class 2 Claims and will remain unaltered under the Reorganization Plan, except as the Reorganizing Debtors and the holders of Allowed Class 2 Claims may otherwise agree or as such holders may otherwise consent. Notwithstanding the foregoing, no contractual provisions or applicable law that would entitle the holder of an Allowed Class 2 Claim to demand or receive payment of such Claim prior to the stated maturity of such Claim, terminate any contractual relationship or take such other enforcement action (as may be applicable) from and after the occurrence of a default that occurred prior to the Effective Date shall be enforceable against the Reorganized Debtors. c. Voting: Class 2 Claims are Unimpaired, and the holders of Allowed Class 2 Claims are not entitled to vote to accept or reject the Reorganization Plan. 4.3 Class 2H - Allowed Heber Secured Claims. a. Classification: Class 2H consists of all Allowed Heber Secured Claims. b. Treatment: On the Effective Date, to the extent such claims are not paid in full on or prior to the Effective Date, the legal, equitable and contractual rights of the holders of Allowed Class 2H Claims will be reinstated in full satisfaction, release and discharge of their respective Class 2H Claims and will remain unaltered under the Reorganization Plan, except as the Heber Debtors and the holders of Allowed Class 2H Claims may otherwise agree or as such holders may otherwise consent; provided, however, that that the assets of the Heber Debtors subject to Liens, Claims and encumbrances of holders of Allowed Class 2H Claims may be sold, subject to such Liens, Claims and encumbrances, as part of the Geothermal Sale contemplated by this Reorganization Plan, and provided further that to the extent an Allowed Class 2H Claim is paid in full on or prior to the Effective Date, the Liens, Claims and encumbrances securing such claim shall be released and discharged immediately upon such payment in full. Notwithstanding the foregoing, no contractual provisions or applicable law that would entitle the holder of an Allowed Class 2H Claim to demand or receive payment of such Claim prior to the stated maturity of such Claim, terminate any contractual relationship or take such other enforcement action (as may be applicable) from and after the occurrence of a default that occurred prior to the Effective Date shall be enforceable against the Reorganized Heber Debtors. c. Voting: Class 2H Claims are Unimpaired, and the holders of Allowed Class 2H Claims are not entitled to vote to accept or reject the Reorganization Plan. 4.4 Class 3 - Allowed Reorganized Covanta Secured Claims. a. Classification: Class 3 consists of all Allowed Reorganized Covanta Secured Claims. Class 3 is divided into two Subclasses for Distribution purposes: Subclass 3A consists of the Allowed Secured Bank Claims and Subclass 3B consists of Allowed Secured 9.25% Debenture Claims. b. Allowance: The aggregate amount of Allowed Secured Claims in Subclass 3A and Subclass 3B shall be determined as set forth in accordance with the definitions of the terms Allowed Subclass 3A Secured Claim Amount and the Allowed Subclass 3B Secured Claim Amount, respectively. c. Treatment: On the Distribution Date, holders of Allowed Class 3 Claims shall receive the Secured Class 3 Total Distribution in full settlement, release and discharge of their respective Allowed Class 3 Secured Claims. The Secured Class 3 Total Distribution shall be divided between Subclass 3A and Subclass 3B as follows: I. Pro Rata Distribution Between Subclass 3A and Subclass 3B: The Secured Class 3 Total Distribution shall be subject to an Initial Distribution between Subclass 3A and Subclass 3B, with each Subclass receiving in the aggregate its Pro Rata Share of the Secured Class 3 Total Distribution based upon the Allowed Subclass 3A Claim Amount and the Allowed Subclass 3B Claim Amount, respectively; provided, however, that Distributable Cash shall be included in the Initial Distribution to Subclass 3A or Subclass 3B only to the extent that the Allowed Subclass 3A Claim Amount or Allowed Subclass 3B Claim Amount relates to an Allowed Subclass 3A Claim or Subclass 3B Claim, as the case may be, that is held by a New Facility Lender; and further, provided, that New Lender Warrants shall be included in the Initial Distribution to Subclass 3A or Subclass 3B only to the extent that the Allowed Subclass 3A Claim Amount or Allowed Subclass 3B Claim Amount relates to an Allowed Subclass 3A Claim or Subclass 3B Claim, as the case may be, that is held by one of the Additional New Lenders. II. Distribution Among Members of Subclass 3A: Immediately after the Initial Distribution to Subclass 3A, the remaining Subclass 3A Recovery shall be distributed among the holders of Subclass 3A Claims as follows: First, in full settlement, release and discharge of the Allowed Priority Bank Claims, the Priority Bank Lenders shall receive first, to the extent available as part of the Subclass 3A Recovery, Excess Distributable Cash in an amount equal to the amount of such Allowed Priority Bank Claims and thereafter New High Yield Secured Notes in a principal amount equal to the remaining amount of such Allowed Priority Bank Claims; Second, immediately after making the Distribution on account of the Allowed Priority Bank Claims, in full settlement, release and discharge of Non-Priority Subclass 3A Claims, the holders of Allowed Non-Priority Subclass 3A Claims shall receive a Pro Rata Subclass Share of the remaining Subclass 3A Recovery; where such distribution shall consist of Distributable Cash, New High Yield Secured Notes and New Lender Warrants, which types of Distributions may be further allocated depending on whether the holder of a Subclass 3A Claim is a New Facility Lender, one of the Additional New Lenders or a Non-Participating Lender. Notwithstanding anything herein to the contrary, immediately prior to any Distribution to holders of Subclass 3A Claims, the settlement of the Loss Sharing Litigation as described in Exhibit 4 annexed hereto shall be deemed effective and implemented for purposes of Distributions hereunder. III. Distribution Among Members of Subclass 3B: Immediately after the Initial Distribution to Subclass 3B, the remaining Subclass 3B Recovery shall be distributed among the holders of Subclass 3B as follows: First, in full settlement, release and discharge of Allowed Subclass 3B Claims, each holder of an Allowed Subclass 3B Claim shall receive its Pro Rata Subclass Share of Distributions of the Subclass 3B Recovery; provided, however, that with respect to the Subclass 3B Recovery, (i) the New Facility Lenders in Subclass 3B, if any, shall receive their Secured Value Distribution first, to the extent available, in the form of Distributable Cash and thereafter in the form of New High Yield Secured Notes; and (ii) the members of the Additional New Lenders in Subclass 3B shall receive their Secured Value Distribution solely in the form of New High Yield Secured Notes plus a Pro Rata Subclass Share of the New Lender Warrants; and provided further that the Non-Participating Lenders in Subclass 3B shall not receive any Distributable Cash or any Distribution of New Lender Warrants. Second, in the event that the parties to the 9.25% Debentures Adversary Proceeding reach a settlement to their dispute, the Distributions made to each [holder of an Allowed Subclass 3B Claim] shall be subject to adjustment and modification in accordance with the provisions of that settlement. d. Voting: Class 3 Claims are Impaired, and the holders of Allowed Claims in such Class are entitled to vote to accept or reject the Reorganization Plan. The members of Subclasses 3A, and 3B shall vote together as a single Class for purposes of accepting or rejecting this Reorganization Plan. 4.5 Class 4 - Allowed Operating Company Unsecured Claims. a. Classification: Class 4 consists of all Allowed Operating Company Unsecured Claims. b. Treatment: On the Distribution Date, each holder of an Allowed Class 4 Claim shall receive, in full settlement, release and discharge of its Class 4 Claim, a Distribution of Reorganization Plan Unsecured Notes in the aggregate principal amount equal to the amount of its Allowed Class 4 Claim. With respect to Allowed Class 4 Claims for and to the extent which insurance is available, such Class 4 Claims shall be paid in the ordinary course of the Reorganizing Debtors' business to the extent of such insurance, when any such Claim becomes an Allowed Claim and such insurance proceeds become available; provided, however, that to the extent insurance is not available or is insufficient, treatment of such Allowed Class 4 Claims shall be as otherwise provided in this Section 4.5. In the event that the holder of an Allowed Class 4 Claim elects to be treated as an Elective Convenience Claim, then at the option of the Reorganizing Debtors, each such holder of a Class 4 Claim shall be entitled to receive either (A) payment in Cash, in an amount equal to the lesser of $2,500 or 75% of such Allowed Class 4 Claim, or (B) the Reorganization Plan Unsecured Notes that such holder would otherwise have been entitled to receive for its Allowed Class 4 Claim pursuant to this Reorganization Plan if such holder had not made such an election. c. Voting: Class 4 Claims are Impaired and the holders of Allowed Class 4 Claims are entitled to vote to accept or reject the Reorganization Plan. 4.6 Class 5 - Allowed Covanta Energy Americas Unsecured Claims. a. Classification: Class 5 consists of all Allowed Unsecured Claims against Covanta Energy Americas. b. Treatment: On the Distribution Date, each holder of an Allowed Class 5 Claim shall receive, in full satisfaction, release and discharge of its Class 5 Claim, a Distribution of Reorganization Plan Unsecured Notes in the aggregate principal amount equal to the amount of its Allowed Class 5 Claim. c. Voting: Class 5 Claims are Impaired and the holders of Allowed Class 5 Claims are entitled to vote to accept or reject this Reorganization Plan. 4.7 Class 6 - Allowed Covanta Unsecured Claims. a. Classification: Class 6 consists of all Allowed Covanta Unsecured Claims. b. Treatment: On the Distribution Date, each holder of an Allowed Class 6 Claim [(other than any Class 6 Claim consisting of a 9.25% Deficiency Claim or a Prepetition Lender Deficiency Claim)] shall receive, in full satisfaction, release and discharge of its Class 6 Claim, its Pro Rata Class Share of the Distribution of ___________________. Additionally, in the event that the parties to the 9.25% Debentures Adversary Proceeding reach a settlement to their dispute, the Distribution made to each holder of an Allowed Class 6 Claim (other than a Class 6 Claim consisting of a 9.25% Deficiency Claim or a Repetition Lender Deficiency Claim) shall be subject to adjustment and modification in accordance with the provisions of that settlement. With respect to Allowed Class 6 Claims for and to the extent which insurance is available, such Class 6 Claims shall be paid in the ordinary course of the Reorganizing Debtors' business to the extent of such insurance, when any such Claim becomes an Allowed Claim and such insurance proceeds become available; provided, however, that to the extent insurance is not available or is insufficient, treatment of such Allowed Class 6 Claims shall be as otherwise provided in this Section 4.7. c. [Enforcement of Subordination. In accordance with and in enforcement of the subordination provisions with respect to the Convertible Subordinated Bonds, all Distributions which the holders of Convertible Subordinated Bond Claims would otherwise be entitled to receive under this Reorganization Plan, shall be Distributed on a pro rata basis to the holders of Allowed Senior Unsecured Claims.] d. Voting: Class 6 Claims are Impaired and the holders Allowed Class 6 Claims are entitled to vote to accept or reject this Reorganization Plan. 4.8 Class 7 - Allowed Heber Unsecured Claims. a. Classification: Class 7 consists of all Allowed Heber Unsecured Claims. b. Treatment: On the Distribution Date, each holder of an Allowed Class 7 Claim shall receive, in full satisfaction, release and discharge of its Class 7 Claim, a Cash payment equal to the full amount of its Allowed Class 7 Claim. c. Voting: Class 7 Claims are Unimpaired and the holders of Allowed Class 7 Claims are not entitled to vote to accept or reject the Reorganization Plan. 4.9 Class 8 - Allowed Convenience Claims. a. Classification: Class 8 consists of all Allowed Convenience Claims. b. Treatment: On the Distribution Date, each holder of an Allowed Class 8 Claim shall receive, in full satisfaction, release and discharge of its Class 8 Claim, a payment in Cash, in an amount equal to seventy five percent (75%) of the Allowed amount of such Class 8 Claim. c. Voting: Class 8 Claims are Impaired and the holders of Allowed Class 8 Claims are entitled to vote to accept or reject the Reorganization Plan. 4.10 Class 9 - Intercompany Claims. a. Classification: Class 9 consists of all Intercompany Claims. Class 9 is subdivided into three Subclasses for Distribution purposes: Subclass 9A consists of the Liquidating Debtors Intercompany Claims; Subclass 9B consists of the Reorganized Debtors Intercompany Claims; Subclass 9C consists of the Heber Debtors Intercompany Claims. b. Treatment: On the Effective Date, Intercompany Claims shall, be treated as follows: I. Treatment of Subclass 9A Claims: In full satisfaction, release and discharge of each Liquidating Debtors Intercompany Claim, each such Liquidating Debtors Intercompany Claim shall be deemed cancelled or waived in exchange for the Reorganizing Debtors contribution of the Operating Reserve Deficiency Amount, if any, to the Operating Reserve. II. Treatment of Subclass 9B Claims: In the sole discretion of the applicable Reorganizing Debtor or Reorganized Debtor, Reorganizing Debtors Intercompany Claims shall be either: (a) preserved and reinstated, (b) released, waived and discharged, or (c) contributed to the capital of the obligor corporation. III. Treatment of Subclass 9C Claims: In full satisfaction, release and discharge of each Heber Debtors Intercompany Claim, each such Heber Debtors Intercompany Claim shall be deemed released, waived and discharged. c. Voting: Class 9 Claims are Impaired, and the holders of Allowed Class 9 Claims are conclusively presumed to reject the Reorganization Plan. The votes of the holders of Allowed Class 9 Claims will not be solicited. 4.11 Class 10 - Subordinated Claims. a. Classification: Class 10 consists of all Allowed Subordinated Claims. b. Treatment: As of the Effective Date, holders of Class 10 Claims shall not receive any Distributions or retain any property under the Reorganization Plan in respect of Class 10 Claims, in full satisfaction, release and discharge of such Claims. c. Voting: Class 10 Claims are Impaired, and the holders of Allowed Class 10 Claims are conclusively presumed to reject the Reorganization Plan. The votes of holders of Allowed Class 10 Claims will not be solicited. 4.12 Class 11 - Equity Interests in Subsidiary Debtors. a. Classification: Class 11 consists of all Allowed Equity Interests in Subsidiary Debtors. b. Treatment: Holders of Equity Interests in Subsidiary Debtors shall not receive any Distribution under the Reorganization Plan, except that any such Equity Interest in a Subsidiary Debtor shall continue to be held by the Reorganizing Debtor that originally held such Equity Interest, which Equity Interests shall be evidenced by the existing capital stock, partnership and/or membership interests. c. Voting: Class 11 Equity Interests are Impaired, and the holders of Allowed Class 11 Equity Interests are conclusively presumed to reject the Reorganization Plan. The votes of holders of Allowed Class 11 Equity Interests will not be solicited. 4.13 Class 12 - Equity Interests in Covanta Huntington, Covanta Onondaga and DSS Environmental. a. Classification: Class 12 consists of all Equity Interests in Covanta Huntington, Covanta Onondaga and DSS Environmental. b. Treatment: As of the Effective Date, the holders of Equity Interests in Covanta Huntington, Covanta Onondaga and DSS Environmental shall be reinstated, in full satisfaction, release and discharge of any Allowed Class 12 Equity Interests. c. Voting: Class 12 Equity Interests are Unimpaired, and the holders of Allowed Class 12 Equity Interests are conclusively presumed to accept this Reorganization Plan. The votes of holders of Class 12 Equity Interests will not be solicited. 4.14 Class 13 - Old Covanta Stock Equity Interests. a. Classification: Class 13 consists of all Equity Interests of holders of Old Covanta Stock. b. Treatment: Holders of Allowed Class 13 Equity Interests shall not receive any Distribution or retain any property under the Reorganization Plan in respect of Class 13 Equity Interests. All Class 13 Equity Interests shall be cancelled, annulled and extinguished, in full satisfaction, release and discharge of any Allowed Class 13 Equity Interests. c. Voting: Class 13 Equity Interests are Impaired, and the holders of Allowed Class 13 Equity Interests are conclusively presumed to reject the Reorganization Plan. The votes of holders of Allowed Class 13 Equity Interests will not be solicited. 4.15 Class 14 - Equity Interests in Heber Debtors. a. Classification: Class 14 consists of all Equity Interests in the Heber Debtors. Class 12 is subdivided into two Subclasses for Distribution purposes: Subclass 14A consists Equity Interests in Covanta SIGC Energy I, Covanta SIGC Energy II, Heber Field Company and Heber Geothermal Company; Subclass 14B consists of Equity Interests in Amor 14 and Second Imperial Geothermal Company. b. Treatment: Holders of Allowed Class 14A Equity Interests shall not receive any Distribution or retain any property under the Reorganization Plan in respect of Class 14A Equity Interests. All Class 14A Equity Interests shall be cancelled, annulled and extinguished, in full satisfaction, release and discharge of any Allowed Class 14A Equity Interests. Holders of Allowed Class 14B Equity Interests shall not receive any Distribution under the Reorganization Plan, except that any such Equity Interests shall continue to be held by the Heber Debtor or Reorganizing Debtor that originally held such Equity Interests, which Equity Interests shall continue to be evidenced by the existing capital stock, partnership and/or membership interests. c. Voting: Class 14 Equity Interests are Impaired, and the holders of Allowed Class 14 Equity Interests are conclusively presumed to reject the Reorganization Plan. The votes of holders of Allowed Class 14 Equity Interests will not be solicited. 4.16 Settlement of Loss Sharing Litigation. The Reorganization Plan hereby incorporates in full, makes a part hereof as if fully set forth herein and implements the proposed compromise and settlement of all issues relating to or arising under the Loss Sharing Litigation, which compromise and settlement is to be set forth in the Reorganization Plan Supplement substantially on the terms described in the term sheet annexed hereto as Exhibit 4. In consideration for the distribution and other benefits under the proposed compromise and settlement and the Reorganization Plan, the Loss Sharing Litigation shall be deemed settled on the Effective Date without further action by any Person and all parties thereto shall be permanently enjoined from asserting or continuing in any manner the Loss Sharing Litigation or any claims relating thereto. ARTICLE V ACCEPTANCE OR REJECTION OF THE REORGANIZATION PLAN 5.1 Voting of Claims. Except as otherwise indicated herein or as otherwise provided by a Final Order of the Court, each holder of an Allowed Claim in an Impaired Class of Claims shall be entitled to vote to accept or reject this Reorganization Plan. For purposes of calculating the number of Allowed Claims in a Class of Claims that have voted to accept or reject this Reorganization Plan under section 1126(c) of the Bankruptcy Code, all Allowed Claims in such Class held by one entity or any affiliate thereof (as defined in the Securities Act of 1933 and the rules and regulation promulgated thereunder) shall be aggregated and treated as one Allowed Claim in such Class. 5.2 Acceptance by a Class. Consistent with section 1126(c) of the Bankruptcy Code and except as provided for in section 1126(e) of the Bankruptcy Code, an Impaired Class of Claims shall have accepted this Reorganization Plan if it is accepted by at least two-thirds in dollar amount, and more than one-half in number of the Allowed Claims of such Class that have timely and properly voted to accept or reject this Reorganization Plan. 5.3 Presumed Acceptance of Plan. Holders of Claims in Classes 1, 2, 2H, 7 and 12 are Unimpaired by this Reorganization Plan. In accordance with section 1126 of the Bankruptcy Code, holders of Allowed Claims in such Classes are conclusively presumed to accept this Reorganization Plan and the votes of holders of such Claims will not be solicited. 5.4 Presumed Rejection of Plan. Holders of Claims and Equity Interests in Classes 9, 10, 11, 13 and 14 are Impaired and are not entitled to receive any Distribution under this Reorganization Plan on account of such Claims or Equity Interests. In accordance with section 1126 of the Bankruptcy Code, holders of Allowed Claims and Equity Interests in such Classes are conclusively presumed to reject this Reorganization Plan and are not entitled to vote. As such, the votes of such holders will not be solicited with respect to such Claims and Equity Interests. 5.5 Cramdown. To the extent that any Impaired Class rejects or is presumed to have rejected this Reorganization Plan, the Reorganizing Debtors and Heber Debtors reserve the right to (a) request that the Court confirm the Reorganization Plan in accordance with section 1129(b) of the Bankruptcy Code, or (b) modify, alter or amend this Reorganization Plan to provide treatment sufficient to assure that this Reorganization Plan does not discriminate unfairly, and is fair and equitable, with respect to the Class or Classes not accepting this Reorganization Plan, and, in particular, the treatment necessary to meet the requirements of subsections 1129(a) or (b) of the Bankruptcy Code with respect to the rejecting Classes and any other Classes affected by such modifications. ARTICLE VI MEANS FOR IMPLEMENTATION 6.1 Exit Financing. (a) On the Effective Date, the Reorganized Debtors are authorized to and shall enter into the Exit Financing Agreements and effect all transactions and take any actions provided for in or contemplated by the Exit Financing Agreements, including without limitation, the payment of all fees and other amounts contemplated by the Exit Financing Agreements. (b) All Cash necessary for the Reorganized Debtors to make payments pursuant to this Reorganization Plan will be obtained from the Reorganized Debtors' cash balances and operations and borrowings under the Exit Financing Agreements, subject to the terms thereof. 6.2 Implementation of Geothermal Sale. The implementation of this Reorganization Plan is predicated upon the approval by the Court of the Geothermal Sale, and the consummation thereof. The terms and conditions of the Geothermal Sale are incorporated herein and shall be deemed included as part of this Reorganization Plan for all purposes, including, without limitation, section 1146 of the Bankruptcy Code. 6.3 Authorization of Common Stock, Reorganization Plan Notes and Reorganized Heber Equity Interests. On the Effective Date, Reorganized Covanta is authorized to and shall issue the Reorganized Covanta Common Stock, the Reorganization Plan Warrants and the Reorganization Plan Notes and Reorganized CPIH is authorized to and shall issue the Reorganized CPIH Preferred Stock and the New CPIH Funded Debt, in each case as provided under this Reorganization Plan without the need for any further corporate action. Additionally, the Reorganized Heber Debtors are authorized to and shall issue, as applicable, the Reorganized Heber Equity Interests, in each case as provided under this Reorganization Plan without the need for further corporate action. 6.4 Formation of ESOP. On the Effective Date, subject to the terms and conditions of the ESOP Plan Document, Reorganized Covanta is authorized to, and shall establish an ESOP on behalf of its employees, which shall become the owner of one hundred percent (100%) of the Reorganized Covanta Common Stock. 6.5 Cancellation of Existing Securities and Agreements. Except for purposes of evidencing a right to Distributions under this Reorganization Plan or otherwise provided hereunder, on the Effective Date, all the agreements and other documents evidencing (i) any Claims or rights of any holder of a Claim against the applicable Reorganizing Debtor, including all indentures and notes evidencing such Claims and (ii) any options or warrants to purchase Equity Interests, obligating the applicable Reorganizing Debtor or Heber Debtor to issue, transfer or sell Equity Interests or any other capital stock of the applicable Reorganizing Debtor, shall be cancelled without the need for further action; provided, however, that notwithstanding the foregoing, the Reorganized Debtors and Reorganized Heber Debtors shall remain obligated with respect to liens, security interests or encumbrances in property of the Reorganized Debtors and Reorganized Heber Debtors that have been granted pursuant to any executory contracts that have been assumed in accordance with Article IX of this Reorganization Plan or pursuant to the Exit Financing Agreements. 6.6 Board of Directors and Executive Officers. (a) The identity of each of the nominees to serve on the Board of Directors of Reorganized Covanta shall be announced [thirty (30)] days prior to the Confirmation Hearing. In accordance with section 1129(a)(5) of the Bankruptcy Code, as part of such announcement, the Reorganizing Debtors shall disclose (i) the identity and affiliations of any individual proposed to serve, after the Effective Date, as a director or officer of the Reorganized Debtors, and (ii) the identity of any "insider" (as such term is defined in section 101(31) of the Bankruptcy Code) who shall be employed and retained by the Reorganized Debtors and the nature of any compensation for such insider. (b) Subject to Section 6.6(a), the officers of the Reorganizing Debtors and the directors of the Reorganizing Debtors other than Covanta that are in office immediately before the Effective Date shall continue to serve immediately after the Effective Date in their respective capacities. (c) The officers and directors of the Heber Debtors that are in office immediately before the Effective Date shall resign as of the Effective Date. The Buyers under the Geothermal Sale shall designate and appoint the new officers and directors of the Reorganized Heber Debtors. (d) [The Reorganizing Debtors and the Committee acknowledge, and the Confirmation Order shall confirm, the validity, priority, nonavoidability, perfection and enforceability of the Liens and Claims of the Agent Banks on behalf of the Prepetition Lenders under the Prepetition Credit Agreement, and any and all rights to bring any challenge with respect thereto are hereby waived.] 6.7 Deemed Consolidation of Debtors for Plan Purposes Only. Subject to the occurrence of the Effective Date, the Reorganizing Debtors and Heber Debtors shall be deemed consolidated solely for the following purposes under the Reorganization Plan: (i) as provided with respect to Class 11 Claims, no Distributions shall be made under the Reorganization Plan on account of Equity Interests in Subsidiary Debtors; and (ii) in some instances, Claims against more than one Reorganizing Debtor and Heber Debtors have been grouped together into a single Class of Claims for voting and distribution purposes. Such deemed consolidation, however, shall not affect: (i) the legal and organizational structure of the Reorganized Debtors and Heber Debtors; (ii) the ownership interest of any Reorganizing Debtor in any Subsidiary Debtor and (iii) pre and post-Petition Date guarantees, Liens and security interests that are required to be maintained (a) in connection with executory contracts or unexpired leases that were entered into during the Chapter 11 Cases or that have been or will be assumed, or (b) pursuant to this Reorganization Plan or the instruments and documents issued in connection herewith (including, without limitation, the Exit Financing Agreements). 6.8 Continued Corporate Existence; Vesting of Assets in the Reorganized Debtors and Reorganized Heber Debtors and Corporate Restructuring. (a) Each of the Reorganizing Debtors and Heber Debtors shall, as a Reorganized Debtor or Heber Debtor respectively, continue to exist after the Effective Date as a separate legal entity, with all powers of a corporation, limited liability company or general or limited partnership, as the case may be, under the laws of their respective states of incorporation or organization and without prejudice to any right to alter or terminate such existence (whether by merger or otherwise) under such applicable state law. (b) The Reorganized Debtors and Heber Debtors shall be revested with their assets as provided in Section 11.1 of this Reorganization Plan, subject to the Liens granted under the applicable Exit Financing Agreements. (c) On the Effective Date, the Reorganized Debtors shall undertake a corporate restructuring pursuant to which all Reorganized Debtors that own or operate businesses located outside the United States shall become direct or indirect subsidiaries of CPIH. (d) On the second business day prior to the Effective Date, the Heber Debtors that are stock corporations shall be authorized to convert into limited liability companies. 6.9 Amended Organizational Documents. On the Effective Date, the Reorganized Debtors and Heber Debtors are authorized to, and shall, without the need for any further corporate action, adopt and, as applicable, file their respective amended organizational documents with the applicable Secretary of State. The amended organizational documents shall prohibit the issuance of nonvoting equity securities, as required by sections 1123(a) and (b) of the Bankruptcy Code, subject to further amendment as permitted by applicable law. 6.10 Settlements. Except to the extent the Court has entered a separate order providing for such approval, the Confirmation Order shall constitute an order (a) approving as a compromise and settlement pursuant to section 1123(b)(3)(A) of the Bankruptcy Code and Bankruptcy Rule 9019, any settlement agreements entered into by any Reorganizing Debtor or Heber Debtor or any other Person as contemplated in confirmation of this Reorganization Plan, and (b) authorizing the Reorganizing Debtors' and Heber Debtors' execution and delivery of all settlement agreements entered into or to be entered into by any Reorganizing Debtor, Heber Debtor or any other Person as contemplated by this Reorganization Plan and all related agreements, instruments or documents to which any Reorganizing Debtor or Heber Debtor is a party. 6.11 Employee Benefits. Except as set forth in this Section, the Reorganizing Debtors generally intend to maintain existing employee benefit plans, subject to the Reorganizing Debtors or Reorganized Debtors' rights to amend, terminate or modify those plans at any time as permitted by such plans or applicable nonbankruptcy law. 6.12 Funding the Operating Reserve. On the Effective Date, the Reorganizing Debtors shall fund Operating Reserve to the extent of the Operating Reserve Deficiency Amount, if any, by transferring the Operating Reserve Deficiency Amount to the Operating Reserve. 6.13 Management Incentive Payment. On the Effective Date, management of the Reorganizing Debtors shall be entitled to receive an incentive bonus of cash in an amount equal to two and one half percent (2 1/2%) of the Free Cash, if any, in excess of Distributable Cash. ARTICLE VII DISTRIBUTIONS 7.1 Distribution Record Date. As of the close of business on the applicable Distribution Record Date, the applicable Reorganizing Debtor and Heber Debtor's books and records for each of the Classes of Claims or Equity Interests as maintained by such Reorganizing Debtor or its respective agent, or, in the case of the 9.25% Debentures, the Indenture Trustee therefor, shall be deemed closed, and there shall be no further changes in the record holders of any of the Claims or Equity Interests. The applicable Reorganizing Debtor or Heber Debtor shall have no obligation to recognize any transfer of Claims or Equity Interests occurring on or after the applicable Distribution Record Date. The applicable Reorganizing Debtor or Heber Debtor shall be entitled to recognize and deal for all purposes hereunder only with those record holders stated in the books and records of the applicable Reorganizing Debtor or Heber Debtor or its respective agent, or, in the case of the 9.25% Debentures, the Indenture Trustee thereof, as of the close of business on the Distribution Record Date, to the extent applicable. 7.2 Date of Distributions. Unless otherwise provided herein, any Distributions and deliveries to be made hereunder shall be made on the Effective Date or as soon thereafter as is practicable. In the event that any payment or act under this Reorganization Plan is required to be made or performed on a date that is not a Business Day, then the making of such payment or the performance of such act may be completed on the next succeeding Business Day, but shall be deemed to have been completed as of the initial due date. 7.3 Disbursing Agent. (a) Reorganized Covanta and such other Person as may be selected by Reorganized Covanta and approved by the Court shall act as Disbursing Agent(s) under the Reorganization Plan. No Court approval shall be required to use the Indenture Trustee for the 9.25% Debentures as a Disbursing Agent for distributions to holders of 9.25% Debentures or for using Bank of America, N.A., as a Disbursing Agent for distributions to the Prepetition Lenders. (b) A Disbursing Agent shall not be required to give any bond or surety or other security for the performance of its duties unless otherwise ordered by the Court, and, in the event that a Disbursing Agent is so otherwise ordered, the costs and expenses that are directly related to procuring any such bond or surety shall be borne by the Reorganized Debtors. 7.4 Rights and Powers of Disbursing Agent. The Disbursing Agent shall be empowered to (i) effect all actions and execute all agreements, instruments and other documents necessary to perform its duties under this Reorganization Plan, (ii) make all Distributions contemplated hereby, (iii) employ professionals to represent it with respect to its responsibilities, and (iv) exercise such other powers as may be vested in the Disbursing Agent by order of the Court, pursuant to this Reorganization Plan, or as deemed by the Disbursing Agent to be necessary and proper to implement the provisions hereof. 7.5 Surrender of Instruments. As a condition to receiving any Distribution under this Reorganization Plan, each holder of an Allowed Claim represented by a certificated instrument or note must surrender such instrument or note held by it to the Disbursing Agent or its designee, unless such certificated instrument or note is being reinstated or being left unimpaired under this Reorganization Plan. Any holder of such instrument or note that fails to (i) surrender such instrument or note or (ii) execute and deliver an affidavit of loss and/or indemnity reasonably satisfactory to the Disbursing Agent or furnish a bond in form, substance and amount reasonably satisfactory to the Disbursing Agent before the first anniversary of the Effective Date, shall be deemed to have forfeited all rights and Claims and may not participate in any Distribution under this Reorganization Plan in respect of such Claim. Any other holder of an Allowed Claim who fails to take such action as reasonably required by the Disbursing Agent or its designee to receive its Distribution hereunder before the first anniversary of the Effective Date, or such earlier time as otherwise provided for in this Reorganization Plan, may not participate in any Distribution under this Reorganization Plan in respect of such Claim. Any Distribution forfeited hereunder shall become property of the applicable Reorganized Debtor, or in the case of Cash Distributions made on behalf of Heber Debtors, shall become the property of the Reorganized Debtors. 7.6 Delivery of Distributions. Distributions to holders of Allowed Claims shall be made at the address of each such holder as set forth on the Schedules filed with the Court unless superseded by the address as set forth on the proofs of claim filed by such holders or other writing notifying the applicable Reorganized Debtor or Heber Debtor of a change of address. If any holder's Distribution is returned as undeliverable, no further Distributions to such holder shall be made unless and until the applicable Reorganized Debtor or Heber Debtor is notified of such holder's then current address, at which time all missed Distributions shall be made to such holder without interest on or before one hundred and twenty (120) days after the date such undeliverable Distribution was initially made. After such date, all unclaimed property shall, in the applicable Reorganized Debtor or Heber Debtor's discretion, be used to satisfy the costs of administering and fully consummating this Reorganization Plan or become property of the applicable Reorganized Debtor (or, in the case of Heber Debtors, shall become the property of the Reorganized Debtors), and the holder of any such Claim shall not be entitled to any other or further distribution under this Reorganization Plan on account of such Claim. 7.7 Manner of Payment Under Plan. (a) All Distributions of Cash, Reorganization Plan Notes or Reorganization Plan Equity Securities and Warrants to the holders of Allowed Claims against each of the Reorganizing Debtors under this Reorganization Plan, shall be made by the Disbursing Agent on behalf of the applicable Reorganized Debtor. Any Distributions that revert to the applicable Reorganized Debtor or are otherwise cancelled (such as pursuant to Section 7.5 or 7.6 of this Reorganization Plan) shall revest solely in the applicable Reorganized Debtor. (b) At the option of the applicable Reorganized Debtor, any Cash payment to be made hereunder may be made by a check or wire transfer or as otherwise required or provided in applicable agreements. 7.8 De Minimis and Fractional Distributions. Unless written request addressed to the Reorganized Debtors or Reorganized Heber Debtors, as applicable, or Disbursing Agent is received within one hundred and twenty (120) days after the Effective Date, the Disbursing Agent or such other entity designated by such Reorganized Debtor as a Disbursing Agent on or after the Effective Date will not be required to distribute Cash, Reorganization Plan Notes or Reorganization Plan Equity Securities and Warrants to the holder of an Allowed Claim in an Impaired Class if the amount of Cash or the Estimated Recovery Value of such Reorganization Plan Notes and Reorganization Equity Securities combined to be distributed on any Distribution Date under the Reorganization Plan on account of such Claim is less than $50. Any holder of an Allowed Claim on account of which the amount of Cash or the combined Estimated Recovery Value of Reorganization Plan Notes and Reorganization Plan Equity Securities and Warrants to be distributed is less than $50 will have its Claim for such Distribution discharged and will be forever barred from asserting any such Claim against the Reorganized Debtors, the Reorganized Heber Debtors or their respective property. Any Cash, Reorganization Plan Notes or Reorganization Equity Securities and Warrants not distributed pursuant to this Section 7.8 will become the property of the Reorganized Debtors, free of any Liens, encumbrances or restrictions thereon. 7.9 Exemption from Securities Laws. The issuance of the Reorganization Plan Notes and Reorganization Plan Equity Securities and Warrants pursuant to this Reorganization Plan shall be exempt from any securities laws registration requirements to the fullest extent permitted by section 1145(a)(1)(A) of the Bankruptcy Code and section (3)(a)(7) of the Securities Act of 1933. 7.10 Setoffs. Each Reorganizing Debtor may, in accordance with the provisions of the Reorganization Plan, section 553 of the Bankruptcy Code and applicable non-bankruptcy law, set off against any Allowed Claim and the Distributions to be made pursuant to this Reorganization Plan on account of such Allowed Claim (before any Distribution is made on account of such Allowed Claim), the Claims, rights and causes of action of any nature that such Reorganizing Debtor may hold against the holder of such Allowed Claim; provided, however, that neither the failure to effect such a setoff nor the allowance of any Claim hereunder shall constitute a waiver or release by the applicable Reorganizing Debtor of any such Claims, rights and causes of action that the applicable Reorganizing Debtor may possess against such holder; and provided, further that any Claims of each Reorganizing Debtor arising before the applicable Petition Date shall only be setoff against Claims against such Reorganizing Debtor arising before the applicable Petition Date. 7.11 Allocation of Plan Distribution Between Principal and Interest. All Distributions in respect of any Allowed Claim shall be allocated first to the principal amount of such Allowed Claim, as determined for federal income tax purposes, and thereafter, to the remaining portion of such Allowed Claim, if any. 7.12 Withholding and Reporting Requirements. In connection with this Reorganization Plan and all instruments issued in connection therewith and distributed thereon, the applicable Reorganizing Debtor, Heber Debtor and/or Disbursing Agent shall comply with all applicable withholding and reporting requirements imposed by any federal, state or local taxing authority, and all distributions under this Reorganization Plan shall be subject to any such withholding or reporting requirements. 7.13 Time Bar to Cash Payments. Checks issued by the Reorganized Debtors and Heber Debtors in respect of Allowed Claims shall be null and void if not negotiated within ninety (90) days after the date of issuance thereof. Requests for reissuance of any check shall be made to the applicable Reorganized Debtor or Reorganized Heber Debtor by the holder of the Allowed Claim to whom such check originally was issued. Any Claim in respect of such voided check shall be made on or before thirty (30) days after the expiration of the sixty (60) day period following the date of issuance of such check. After such date, all funds held on account of such voided check shall, in the discretion of the applicable Reorganized Debtor or Reorganized Heber Debtor, be used to satisfy the costs of administering and fully consummating this Reorganization Plan or become property of the applicable Reorganized Debtor (or, in the case of Cash not distributed by the Heber Debtors, shall become the property of the Reorganized Debtors), and the holder of any such Allowed Claim shall not be entitled to any other or further Distribution under this Reorganization Plan on account of such Allowed Claim. 7.14 Closing of Chapter 11 Cases. As to each Reorganizing Debtor and Heber Debtor, when substantially all Disputed Claims have become Allowed Claims or have been disallowed by Final Order, and all Distributions in respect of Allowed Claims have been made in accordance with this Reorganization Plan, or at such earlier time as each of the Reorganized Debtors or Reorganized Heber Debtors deems appropriate, the Reorganized Debtors and Reorganized Heber Debtors shall seek authority from the Court to close their respective Chapter 11 Cases in accordance with the Bankruptcy Code and the Bankruptcy Rules. ARTICLE VIII PROCEDURES FOR RESOLVING AND TREATING DISPUTED CLAIMS 8.1 No Distribution Pending Allowance. Notwithstanding any other provision of this Reorganization Plan, no Cash, Reorganization Plan Notes or Reorganization Plan Equity Securities and Warrants shall be distributed under this Reorganization Plan on account of any Disputed Claim, unless and until all objections to such Disputed Claim have been settled or withdrawn or have been determined by Final Order and the Disputed Claim, or some portion thereof, has become an Allowed Claim. 8.2 Resolution of Disputed Claims and Equity Interests. (a) Unless otherwise ordered by the Court after notice and a hearing, the Reorganizing Debtors or Reorganized Debtors, or the Heber Debtors or Reorganized Heber Debtors, as the case may be, shall have the exclusive right to make and file objections to Claims (other than Administrative Expense Claims) and shall serve a copy of each objection upon the holder of the Claim to which the objection is made as soon as practicable, but in no event later than one hundred and twenty (120) days after the Effective Date; provided, however, that such one hundred and twenty (120) day period may be automatically extended by the Reorganizing Debtors or Heber Debtors, without any further application to, or approval by, the Court, for up to an additional thirty (30) days. The foregoing deadlines for filing objections to Claims shall not apply to Claims for tort damages and, accordingly, no such deadline shall be imposed by this Reorganization Plan. Notwithstanding any authority to the contrary, an objection to a Claim shall be deemed properly served on the holder thereof if the Reorganizing Debtors or Heber Debtors effect service in any of the following manners: (i) in accordance with Rule 4 of the Federal Rules of Civil Procedure, as modified and made applicable by Bankruptcy Rule 7004; (ii) by first class mail, postage prepaid, on the signatory on the proof of claim or interest or other representative identified in the proof of claim or interest or any attachment thereto; or (iii) by first class mail, postage, on any counsel that has appeared on the holder's behalf in the Chapter 11 Cases. (b) Except with respect to Administrative Expense Claims as to which the Administrative Expense Claim Bar Date does not apply, Administrative Expense Claims must be filed with the Court and served on counsel for the Reorganizing Debtors and Heber Debtors on or before the Administrative Expense Claim Bar Date. The Reorganizing Debtors, Reorganized Debtors, Heber Debtors, Reorganized Heber Debtors or any other party in interest permitted under the Bankruptcy Code may make and file objections to any such Administrative Expense Claim and shall serve a copy of each objection upon the holder of the Claim to which the objection is made as soon as practicable, but in no event later than one hundred and eighty (180) days after the Effective Date. In the event the Reorganizing Debtors, Reorganized Debtors, Heber Debtors or Reorganized Heber Debtors file any such objection, the Court shall determine the Allowed amount of any such Administrative Expense Claim. Notwithstanding the foregoing, no request for payment of an Administrative Expense Claim need be filed with respect to an Administrative Expense Claim which is paid or payable by the Reorganizing Debtors or Heber Debtors in the ordinary course of business. 8.3 Estimation of Claims and Equity Interests. The Reorganizing Debtors and Heber Debtors may at any time request that the Court estimate any contingent, unliquidated or Disputed Claim pursuant to section 502(c) of the Bankruptcy Code, regardless of whether the Reorganizing Debtors or Heber Debtors previously objected to such Claim or whether the Court has ruled on any such objection, and the Court will retain jurisdiction to estimate any Claim at any time during litigation concerning any objection to any Claim. In the event that the Court estimates any Disputed Claim, that estimated amount may constitute either the Allowed amount of such Claim or a maximum limitation on such Claim, as determined by the Court. If the estimated amount constitutes a maximum limitation on such Claim, the Reorganizing Debtors or Heber Debtors may elect to pursue any supplemental proceedings to object to any ultimate payment of such Claim. All of the aforementioned Claims objection, estimation and resolution procedures are cumulative and not necessarily exclusive of one another. 8.4 Reserve Account for Disputed Claims. On and after the Effective Date, the Disbursing Agent shall hold in one or more Disputed Claims Reserves, for each Class in which there are any Disputed Claims, Cash, Reorganization Plan Notes or Reorganization Plan Equity Securities and Warrants in an aggregate amount sufficient to pay to each holder of a Disputed Claim the amount of Cash, Reorganization Plan Notes or Reorganization Plan Equity Securities and Warrants that such holder would have been entitled to receive pro rata under this Reorganization Plan if such Claim had been an Allowed Claim in such Class; provided, however that with respect to Disputed Claims in Class 4, the Reorganized Debtors shall not be required to establish a Disputed Claims Reserve but instead shall issue new Reorganization Plan Unsecured Notes if and when any Disputed Claim in Class 4 becomes an Allowed Claim. Cash withheld and reserved for payments to holders of Disputed Claims in any Class shall be held and deposited by the Disbursing Agent in one or more segregated interest-bearing reserve accounts for each Class of Claims in which there are Disputed Claims entitled to receive Cash, to be used to satisfy the Disputed Claims if and when such Disputed Claims become Allowed Claims. 8.5 Allowance of Disputed Claims. With respect to any Disputed Claim that is subsequently deemed Allowed, on the Distribution Date for any such Claim the Reorganizing Debtors or Heber Debtors shall distribute from the Disputed Claims Reserve Account corresponding to the Class in which such Claim is classified to the holder of such Allowed Claim the amount of Cash, Reorganization Plan Notes or Reorganization Plan Equity Securities and Warrants that such holder would have been entitled to recover pro rata under this Reorganization Plan if such Claim had been an Allowed Claim on the Effective Date, together with such claimholder's Pro Rata Class Share of net interest, if any, on such Allowed Claim. For purposes of the immediately preceding sentence, such holder's Pro Rata Class Share of net interest shall be calculated by multiplying the amount of interest on deposit in the applicable Disputed Claims Reserve account on the date immediately preceding the date on which such Allowed Claim is to be paid by a fraction, the numerator of which shall equal the amount of such Allowed Claim and the denominator of which shall equal the amount of all Claims for which deposits are being held in the applicable Disputed Claims Reserve account on the date immediately preceding the date on which such Allowed Claim is to be paid. 8.6 Release of Funds from Disputed Claims Reserve. If at any time or from time to time after the Effective Date, there shall be Cash, Reorganization Plan Notes or Reorganization Plan Equity Securities and Warrants in a Disputed Claims Reserve account in an amount in excess of the Reorganizing Debtors' or Heber Debtors maximum remaining payment obligations to the then existing holders of Disputed Claims in the Class of Claims corresponding to such Disputed Claims Reserve account under this Reorganization Plan, such excess funds, and the Pro Rata Class Share of net interest in respect thereof, shall become available for Distribution to the holders of Allowed Claims in the Class corresponding to the Disputed Claims Reserve Account at issue in accordance with this Reorganization Plan. ARTICLE IX TREATMENT OF EXECUTORY CONTRACTS AND UNEXPIRED LEASES 9.1 General Treatment. (a) On the Effective Date, all executory contracts and unexpired leases to which each Reorganizing Debtor listed on Exhibit 9.1A (collectively, the "Rejecting Debtors") is a party shall be deemed rejected, except for any executory contract or unexpired lease of the Rejecting Debtors that (i) has been previously assumed or rejected pursuant to a Final Order of the Court, (ii) is specifically designated as a contract or lease on the Rejecting Debtors' Schedule of Assumed Contracts and Leases, to be filed prior to the Confirmation Hearing, or (iii) is the subject of a separate motion to assume or reject filed under section 365 of the Bankruptcy Code by the Reorganizing Debtors prior to the Confirmation Hearing. (b) On the Effective Date, all executory contracts and unexpired leases to which each Reorganizing Debtor listed on Exhibit 9.1B and each Heber Debtor (collectively, the "Assuming Debtors") is a party shall be deemed assumed, except for any executory contract or unexpired lease of the Assuming Debtors that (i) has been previously assumed or rejected pursuant to a Final Order of the Court, (ii) is specifically designated as a contract or lease on the Assuming Debtors' Schedule of Rejected Contracts and Leases, to be filed prior to the Confirmation Hearing, or (iii) is the subject of a separate motion to assume or reject filed under section 365 of the Bankruptcy Code by the Reorganizing Debtors or Heber Debtors prior to the Confirmation Hearing. (c) Each executory contract and unexpired lease listed or to be listed on the Rejecting Debtors' Schedule of Assumed Contracts and Leases or the Assuming Debtors' Schedule of Rejected Contracts and Leases (collectively, the "Contract Schedules") shall include modifications, amendments, supplements, restatements or other agreements, including guarantees thereof, made directly or indirectly by any Reorganizing Debtor or Heber Debtor in any agreement, instrument or other document that in any manner affects such executory contract or unexpired lease, without regard to whether such agreement, instrument or other document is listed on the Contract Schedules. The mere listing of a document on the Contract Schedules shall not constitute an admission by the Reorganizing Debtors or Heber Debtors that such document is an executory contract or unexpired lease or that the Reorganizing Debtors have any liability thereunder. 9.2 Cure of Defaults. Except to the extent that (i) a different treatment has been agreed to by the nondebtor party or parties to any executory contract or unexpired lease to be assumed pursuant to Section 9.1 of this Reorganization Plan or, (ii) any executory contract or unexpired lease shall have been assumed pursuant to an order of the Court which order shall have approved the cure amounts with respect thereto, the applicable Reorganizing Debtor or Heber Debtor shall, pursuant to the provisions of sections 1123(a)(5)(G) and 1123(b)(2) of the Bankruptcy Code and consistent with the requirements of section 365 of the Bankruptcy Code, within thirty (30) days after the Confirmation Date, file with the Court and serve a pleading listing the cure amounts of all executory contracts or unexpired leases to be assumed. The parties to such executory contracts or unexpired leases to be assumed by the applicable Reorganizing Debtor or Heber Debtor shall have fifteen (15) days from service of such pleading to object to the cure amounts listed by the applicable Reorganizing Debtor or Heber Debtor. Service of such pleading shall be sufficient if served on the other party to the contract or lease at the address indicated on (i) the contract or lease, (ii) any proof of claim filed by such other party in respect of such contract or lease, or (iii) the Reorganizing Debtors' books and records, including the Schedules; provided, however, that if a pleading served by a Reorganizing Debtor or Heber Debtor to one of the foregoing addresses is promptly returned as undeliverable, the Reorganizing Debtor or Heber Debtor shall attempt reservice of the pleading on an alternative address, if any, from the above listed sources. If any objections are filed, the Court shall hold a hearing. Prior to assumption, the applicable Reorganizing Debtor or Heber Debtor shall retain its right to reject any of its executory contracts or unexpired leases, including contracts or leases that are subject to a dispute concerning amounts necessary to cure any defaults. Notwithstanding the foregoing or anything in Section 9.3 of this Reorganization Plan, at all times through the date that is five (5) Business Days after the Court enters an order resolving and fixing the amount of a disputed cure amount, the Reorganizing Debtors shall have the right to reject such executory contract or unexpired lease. 9.3 Approval of Assumption of Certain Executory Contracts. Subject to Sections 9.1 and 9.2 of this Reorganization Plan, the executory contracts and unexpired leases on the Rejecting Debtors' Schedule of Assumed Contracts and the executory contracts and unexpired leases of the Assuming Debtors other than those listed on the Assuming Debtors' Schedule of Rejected Contracts and Leases shall be assumed by the respective Reorganizing Debtors or Heber Debtors as of the Effective Date. Except as may otherwise be ordered by the Court, the Reorganizing Debtors and Heber Debtors shall have the right to cause any assumed executory contract or unexpired lease to vest in the Reorganized Debtor or Reorganized Heber Debtors designated for such purpose by the Reorganizing Debtors or Heber Debtors. 9.4 Approval of Rejection of Executory Contracts and Unexpired Leases. Entry of the Confirmation Order shall constitute the approval, pursuant to section 365(a) of the Bankruptcy Code, of the rejection of any executory contracts and unexpired leases to be rejected as and to the extent provided in Section 9.1 of this Reorganization Plan. 9.5 Bar Date for Filing Proofs of Claim Relating to Executory Contracts and Unexpired Leases Rejected Pursuant to the Reorganization Plan. Claims arising out of the rejection of an executory contract or unexpired lease pursuant to Section 9.1 of this Reorganization Plan must be filed with the Court no later than the later of (i) twenty (20) days after the Effective Date, and (ii) thirty (30) days after entry of an order rejecting such executory contract or lease. Any Claims not filed within such time period will be forever barred from assertion against any of the applicable Reorganizing Debtors and/or the Estates. 9.6 Survival of Debtors' Corporate Indemnities. Any obligations of any of the Reorganizing Debtors pursuant to the applicable Reorganizing Debtor's corporate charters and bylaws or agreements entered into any time prior to the Effective Date, to indemnify the Specified Personnel, with respect to all present and future actions, suits and proceedings against such Reorganizing Debtor or such Specified Personnel, based upon any act or omission for or on behalf of such Reorganizing Debtor, shall not be discharged or impaired by confirmation of this Reorganization Plan. Such obligations shall be deemed and treated as executory contracts to be assumed by the applicable Reorganizing Debtor pursuant to this Reorganization Plan and deemed to be included on the Rejecting Debtors' Schedule of Assumed Contracts and Leases (to the extent not otherwise assumed), and shall continue as obligations of the applicable Reorganizing Debtor. To the extent a Reorganizing Debtor is entitled to assert a Claim against Specified Personnel (whether directly or derivatively) and such Specified Personnel is entitled to indemnification, such Claim against Specified Personnel is released, waived and discharged. 9.7 Reservation of Rights Under Insurance Policies and Bonds. Nothing in this Reorganization Plan, including the discharge and release of the Reorganizing Debtors as provided in this Reorganization Plan, shall diminish, impair or otherwise affect the enforceability by beneficiaries of (i) any insurance policies that may cover Claims against any Reorganizing Debtors, or (ii) any bonds issued to assure the performance of any Reorganizing Debtors, nor shall anything contained herein constitute or be deemed to constitute a waiver of any cause of action that the Reorganizing Debtors or any entity may hold against any insurers or issuers of bonds under any such policies of insurance or bonds. To the extent any insurance policy or bond is deemed to be an executory contract, such insurance policy or bond shall be deemed assumed in accordance with Article IX of the Reorganization Plan. Notwithstanding the foregoing, the Reorganizing Debtors do not assume any payment or other obligations to any insurers or issuers or bonds, and any agreements or provisions of policies or bonds imposing payment or other obligations upon the Reorganizing Debtors shall only be assumed as provided pursuant to a separate order of the Court. ARTICLE X CONDITIONS PRECEDENT TO THE CONFIRMATION DATE AND THE EFFECTIVE DATE 10.1 Conditions to Confirmation. Each of the following is a condition to the Confirmation Date: (a) the entry of a Final Order finding that the Disclosure Statement contains adequate information pursuant to section 1125 of the Bankruptcy Code; (b) the proposed Confirmation Order shall be in form and substance, reasonably acceptable to the Reorganizing Debtors and Heber Debtors; (c) all provisions, terms and conditions hereof are approved in the Confirmation Order; (d) the Confirmation Order shall contain a finding that any Intercompany Claim held by a Reorganizing Debtor, Liquidating Debtor or Heber Debtor is the exclusive property of such Reorganizing Debtor or Liquidating Debtor pursuant to section 541 of the Bankruptcy Code; (e) the Confirmation Order shall contain a ruling that each of the Liquidating Debtors Claims against (i) the Reorganizing Debtors and Heber Debtors and any of their respective present or former officers, directors, employees, attorneys, accountants, financial advisors, investment bankers or agents and (ii) the other persons or entities identified in Section 11.10 of this Reorganization Plan will be fully settled and released as of the Effective Date; (f) the Confirmation Order shall contain a ruling that each of the Reorganizing Debtors and Heber Debtors Claims against (i) the Reorganizing Debtors and Heber Debtors and any of their respective present or former officers, directors, employees, attorneys, accountants, financial advisors, investment bankers or agents and (ii) the other persons or entities identified in Section 11.10 of this Reorganization Plan will be fully settled and released or, with respect to Claims against the Reorganizing Debtors or Heber Debtors, treated in accordance with Sections 4.9(b)(II) and 4.9(b)(III) of this Reorganization Plan; and (g) the Confirmation Order shall contain a finding that the Geothermal Sale shall be deemed to be incorporated into and consummated under this Reorganization Plan for all purposes including, without limitation, section 1146 of the Bankruptcy Code. 10.2 Conditions Precedent to the Effective Date. Each of the following is a condition precedent to the Effective Date of this Reorganization Plan: (a) The Confirmation Order shall: (i) have been entered by the Court and become a Final Order, (ii) be in form and substance satisfactory to the Reorganizing Debtors and Heber Debtors and (iii) provide that the Liquidating Debtors, the Reorganizing Debtors, the Reorganized Debtors, the Heber Debtors and the Reorganized Heber Debtors are authorized and directed to take all actions necessary or appropriate to enter into, implement and consummate the contracts, instruments, releases, leases, indentures and other agreements or documents created in connection with the Liquidation Plan and the Reorganization Plan; (b) The conditions precedent to the Effective Date of the Liquidation Plan shall have been satisfied or waived in accordance with the terms and provisions of the Liquidation Plan; (c) All conditions precedent to the closing of the Geothermal Sale or an alternative sale of some or all of the Heber Debtors or their assets shall have been satisfied; (d) All documents, instruments and agreements necessary to implement the ESOP for Reorganized Covanta shall have been executed and delivered by the parties thereto; (e) All regulatory approval necessary or desirable to effectuate the Reorganization Plan and the transactions contemplated hereunder shall have been obtained; (f) The Reorganized Covanta Common Stock shall have been delivered to the ESOP in accordance with the terms of this Reorganization Plan, Reorganized Covanta shall have delivered the Reorganization Plan Equity Securities and Warrants as contemplated hereunder and the equity securities of all the other Reorganized Debtors shall have been deemed to revert to ownership by the same entity by which they were held prior to the applicable Petition Date; (g) Reorganized Covanta shall have taken all steps necessary in its discretion to enable its conversion to an S Corporation effective as of January 1, 2004; (h) The Exit Financing Agreements shall have been executed and delivered by the parties thereto, and shall be in full force and effect in accordance with the terms thereof; (i) The Reorganized Debtors shall have sufficient Cash (i) to make payment of the estimated Exit Costs, including, without limitation, all Allowed Administrative Expense Claims, Allowed Priority Non-Tax Claims, Allowed Convenience Claims, (ii) to transfer Cash such that CPIH shall have $2 million in accounts under its control, and (iii) to deposit Cash in the Disputed Claims Reserve in respect of any Administrative Expense Claims and Priority Non-Tax Claims that are Disputed Claims; (j) All documents, instruments and agreements provided for under, or necessary to implement, this Reorganization Plan shall have been executed and delivered by the parties thereto, in form and substance satisfactory to the Reorganizing Debtors and Heber Debtors, unless such execution or delivery has been waived by the parties benefited thereby. 10.3 Waiver of Conditions. The Reorganizing Debtors and Heber Debtors may waive any of the foregoing conditions set forth in Section 10.1 or Section 10.2 of this Reorganization Plan without leave of or notice to the Court and without any formal action other than proceeding with confirmation of this Reorganization Plan or emergence from bankruptcy. 10.4 Failure to Satisfy or Waiver of Conditions Precedent. In the event that any or all of the conditions specified in Section 10.1 or 10.2 of this Reorganization Plan have not been satisfied or waived in accordance with the provisions of this Article X on or before December 19, 2003 (which date may be extended by the Reorganizing Debtors and Heber Debtors, and upon notification submitted by the Reorganizing Debtors and Heber Debtors to the Court), (a) the Confirmation Order shall be vacated (except as it may relate to the Heber Debtors), (b) no distributions under the Reorganization Plan shall be made (except as they may relate to the Heber Debtors), (c) the Reorganizing Debtors and all holders of Claims and Equity Interests shall be restored to the status quo ante as of the day immediately preceding the Confirmation Date as though such date never occurred, and (d) all the Reorganizing Debtors' respective obligations with respect to the Claims and Equity Interests shall remain unchanged and nothing contained herein or in the Disclosure Statement shall be deemed an admission or statement against interest or to constitute a waiver or release of any claims by or against any Reorganizing Debtor or any other Person or to prejudice in any manner the rights of any Reorganizing Debtor or any Person in any further proceedings involving any Reorganizing Debtor or Person. ARTICLE XI EFFECT OF CONFIRMATION 11.1 Revesting of Assets. Upon the Effective Date, pursuant to sections 1141(b) and (c) of the Bankruptcy Code, except for leases and executory contracts that have not yet been assumed or rejected (which leases and contracts shall be deemed vested when and if assumed), all property of each Reorganizing Debtor and Heber Debtor's Estate shall vest in the applicable Reorganized Debtor and Heber Debtor free and clear of all Claims, Liens, encumbrances, charges and other interests, except as provided herein or pursuant to any of the Plan Documents. Each Reorganized Debtor and Reorganized Heber Debtor may operate its businesses and may use, acquire and dispose of property free of any restrictions of the Bankruptcy Code or the Bankruptcy Rules and in all respects as if there were no pending cases under any chapter or provision of the Bankruptcy Code, except as provided herein. 11.2 Discharge of Claims and Cancellation of Equity Interests. Except as otherwise provided herein or in the Confirmation Order, the rights afforded in this Reorganization Plan and the entitlement to receive payments and distributions to be made hereunder shall discharge all existing Claims and Interests, of any kind, nature or description whatsoever against or in each of the Reorganizing Debtors and Heber Debtors or any of their assets or properties to the fullest extent permitted by section 1141 of the Bankruptcy Code. Except as provided in this Reorganization Plan, on the Effective Date, all existing Claims against each of the Reorganizing Debtors and Heber Debtors and Equity Interests in the Reorganizing Debtors and Heber Debtors shall be, and shall be deemed to be, discharged or canceled and each holder (as well as trustees and agents on behalf of all such holders) of a Claim or Equity Interest shall be precluded and enjoined from asserting against the Reorganized Debtors and Reorganized Heber Debtors, or any of their assets or properties, any Claim or Equity Interest based upon any act or omission, transaction or other activity of any kind or nature that occurred prior to the Confirmation Date, whether or not (i) such holder has filed a Proof of Claim or Equity Interest, (ii) a Claim based on such Claim or Equity Interest is Allowed, or (iii) the holder of the Claim or Equity Interest has accepted the Reorganization Plan. 11.3 Discharge of Reorganizing Debtors and Heber Debtors. Upon the Effective Date and in consideration of the distributions to be made hereunder, except as otherwise expressly provided herein, each holder (as well as any trustees and agents on behalf of each holder) of a Claim or Equity Interest of such holder shall be deemed to have forever waived, released and discharged each of the Reorganizing Debtors and Heber Debtors, to the fullest extent permitted by section 1141 of the Bankruptcy Code, of and from any and all Claims, Equity Interests, rights and liabilities (other than the right to enforce the Reorganizing Debtors or Reorganized Debtors and the Heber Debtors or Reorganized Heber Debtors obligations hereunder or under the Plan Documents) that arose prior to the Confirmation Date, whether existing in law or equity, whether based on fraud, contract or otherwise, liquidated or unliquidated, fixed or contingent, matured or unmatured, known or unknown, foreseen or unforeseen, then existing or thereafter arising, whether based in whole or in part on any act, omission or occurrence taking place on or before the Confirmation Date. Upon the Effective Date, all such persons shall be forever precluded and enjoined, pursuant to section 524 of the Bankruptcy Code, from prosecuting or asserting any such discharged Claim against or canceled Equity Interest in each of the Reorganizing Debtors and Heber Debtors. 11.4 Binding Effect. Except as otherwise provided in section 1141(d)(3) of the Bankruptcy Code, on and after the Confirmation Date, and subject to the Effective Date, the provisions of this Reorganization Plan shall bind all present and former holders of a Claim against, or Equity Interest in, the applicable Reorganizing Debtor or Heber Debtor and its respective successors and assigns, whether or not the Claim or Equity Interest of such holder is Impaired under this Reorganization Plan and whether or not such holder has filed a Proof of Claim or Equity Interest or accepted this Reorganization Plan. 11.5 Term of Injunctions or Stays. Unless otherwise provided herein, all injunctions or stays arising under section 105 or 362 of the Bankruptcy Code, any order entered during the Chapter 11 Cases under section 105 or 362 of the Bankruptcy Code or otherwise, and in existence on the Confirmation Date, shall remain in full force and effect until the later of the Effective Date and the date indicated in such order. 11.6 Injunction Against Interference with Plan. Upon the entry of the Confirmation Order, all holders of Claims and Equity Interests and other parties in interest, along with their respective present and former employees, agents, officers, directors and principals, shall be enjoined from taking any actions to interfere with the implementation or consummation of this Reorganization Plan. 11.7 Exculpation. Notwithstanding anything herein to the contrary, as of the Effective Date, none of (i) the Reorganizing Debtors, Reorganized Debtors, Heber Debtors or Reorganized Heber Debtors or their respective officers, directors and employees, (ii) the Specified Personnel, (iii) the Committee and any subcommittee thereof, (iv) the Agent Banks, the DIP Agents, the steering committee for the holders of the Secured Bank Claims and the Bondholders Committee, (v) the accountants, financial advisors, investment bankers, and attorneys for the Reorganizing Debtors, Reorganized Debtors, Heber Debtors or Reorganized Heber Debtors, and (vi) the directors, officers, employees, partners, members, agents, representatives, accountants, financial advisors, investment bankers, attorneys or affiliates for any of the persons or entities described in (i), (iii), (iv) or (v) of this Section 11.7 shall have or incur any liability to any holder of a Claim or an Interest, or any other party in interest, or any of their respective agents, employees, representatives, financial advisors, attorneys, or affiliates, or any of their successors or assigns, for any act or omission in connection with, relating to, or arising out of the commencement or conduct of the Chapter 11 Cases; the liquidations of the Liquidating Debtors listed on Exhibit 2 hereto; formulating, negotiating or implementing the Reorganization Plan; formulating, negotiating or implementing the Geothermal Sale under the Reorganization Plan; the solicitation of acceptances of the Reorganization Plan; the pursuit of confirmation of the Reorganization Plan; the confirmation, consummation or administration of the Reorganization Plan or the property to be distributed under the Reorganization Plan, except for their gross negligence or willful misconduct, and in all respects shall be entitled to rely upon the advice of counsel with respect to their duties and responsibilities under the Reorganization Plan. 11.8 Rights of Action. On and after the Effective Date, and except as may otherwise be agreed to by the Reorganizing Debtors or as provided in this Reorganization Plan, the Reorganized Debtors will retain and have the exclusive right to enforce any and all present or future rights, claims or causes of action against any Person and rights of the Reorganizing Debtors that arose before or after the applicable Petition Date, including, but not limited to, rights, claims, causes of action, avoiding powers, suits and proceedings arising under sections 544, 545, 548, 549, 550 and 553 of the Bankruptcy Code; and the Heber Debtors' right to enforce any and all present or future rights, claims or causes of action against any Person and the rights of the Heber Debtors that arose before or after the applicable Petition Date, including, but not limited to, rights, claims, causes of action, avoiding powers, suits and proceedings arising under sections 544, 545, 548, 549, 550 and 553 of the Bankruptcy Code, shall be assigned to the Reorganized Debtors. The Reorganized Debtors may pursue, abandon, settle or release any or all such rights of action, as they deem appropriate, without the need to obtain approval or any other or further relief from the Court. The Reorganized Debtors may, in their discretion, offset any such claim held against a Person against any payment due such Person under this Reorganization Plan; provided, however, that any claims of any of the Reorganizing Debtors arising before the applicable Petition Date shall first be offset against Claims against any of the Reorganized Debtors arising before the applicable Petition Date. 11.9 Injunction. Upon the Effective Date with respect to the Reorganization Plan and except as otherwise provided herein or in the Confirmation Order, all persons who have held, hold, or may hold Claims against or Equity Interests in the Reorganizing Debtors or Heber Debtors, and all other parties in interest in the Chapter 11 Cases, along with their respective present or former employees, agents, officers, directors or principals, shall be permanently enjoined on and after the Effective Date from directly or indirectly (i) commencing or continuing in any manner any action or other proceeding of any kind to collect or recover any property on account of any such Claim or Equity Interest against any such Reorganizing Debtor, Reorganized Debtors, Heber Debtor, Reorganized Heber Debtors or Person entitled to exculpation under Section 11.7 hereof, (ii) enforcing, attaching, collecting or recovering by any manner or means of any judgment, award, decree, or order to collect or recover any property on account of any such Claim or Equity Interest against any such Reorganizing Debtor, Reorganized Debtors, Heber Debtors or Reorganized Heber Debtors, (iii) creating, perfecting, or enforcing any encumbrance of any kind against any such Reorganizing Debtor, Reorganized Debtor, Heber Debtor or Reorganized Heber Debtor on account of such Claim or Equity Interest, (iv) except for recoupment, asserting any right of setoff or subrogation of any kind against any obligation due any such Reorganizing Debtor, Reorganized Debtor, Heber Debtor or Reorganized Heber Debtor or against the property or interests in property of any such Reorganizing Debtor, Reorganized Debtor, Heber Debtor or Reorganized Heber Debtor on account of any such Claim or Equity Interest, (v) commencing or continuing any action against the Reorganized Debtors or Heber Debtors in any manner or forum in respect of such Claim or Equity Interest that does not comply or is inconsistent with the Reorganization Plan, and (vi) taking any actions to interfere with the implementation or consummation of this Reorganization Plan; provided that nothing herein shall prohibit any holder of a Claim from prosecuting a properly completed and filed proof of claim in the Chapter 11 Cases. In no event shall the Reorganized Debtors, Reorganized Heber Debtors or any Person entitled to exculpation under Section 11.7 hereof have any liability or obligation for any Claim against or Equity Interest in any of the Reorganizing Debtors or Heber Debtors arising prior to the Effective Date, other than in accordance with the provisions of this Reorganization Plan. In addition, except as otherwise provided in this Reorganization Plan or the Confirmation Order, on and after the Effective Date, any individual, firm, corporation, limited liability company, partnership, company, trust or other entity, including any successor of such entity, shall be permanently enjoined from commencing or continuing in any manner, any litigation against the Reorganized Debtors, Reorganized Heber Debtors or any Person entitled to exculpation under Section 11.7 hereof on account of or in respect of any of the Reorganizing Debtors or Heber Debtors' prepetition liabilities or other liabilities satisfied pursuant to this Reorganization Plan. By accepting Distributions pursuant to this Reorganization Plan, each holder of an Allowed Claim or Allowed Equity Interest receiving Distributions pursuant to the Reorganization Plan will be deemed to have specifically consented to the injunctions set forth in this Section 11.9. 11.10 Release. As of the Effective Date, the Reorganizing Debtors and Heber Debtors, on behalf of themselves and their Estates, shall be deemed to release unconditionally all claims, obligations, suits, judgments, damages, rights, causes of action, and liabilities whatsoever, against the Reorganizing Debtors' or Heber Debtors' present or former officers, directors, employees, partners, members, advisors, attorneys, financial advisors, accountants, investment bankers and other professionals, and the Committee's members, advisors, attorneys, financial advisors, investment bankers, accountants and other professionals, in each case whether known or unknown, foreseen or unforeseen, existing or hereafter arising, in law, equity or otherwise, based in whole or in part upon actions taken with respect to any omission, transaction, event, or other occurrence taking place on or prior to the Effective Date in any way relating to the Reorganizing Debtors or Heber Debtors, the Chapter 11 Cases or the Reorganization Plan. ARTICLE XII RETENTION OF JURISDICTION 12.1 Jurisdiction of Court. The Court shall retain exclusive jurisdiction of all matters arising under, arising out of, or related to, the Chapter 11 Cases and this Reorganization Plan pursuant to, and for the purposes of, sections 105(a) and 1142 of the Bankruptcy Code and for, among other things, the following non-exclusive purposes: (a) to determine the allowance or classification of Claims and to hear and determine any objections thereto; (b) to hear and determine any motions for the assumption, assumption and assignment or rejection of executory contracts or unexpired leases, and the allowance of any Claims resulting therefrom; (c) to determine any and all motions, adversary proceedings, applications, contested matters and other litigated matters in connection with the Chapter 11 Cases that may be pending in the Court on, or initiated after, the Effective Date; (d) to enter and implement such orders as may be appropriate in the event the Confirmation Order is for any reason stayed, revoked, modified, or vacated; (e) to issue such orders in aid of the execution, implementation and consummation of this Reorganization Plan to the extent authorized by section 1142 of the Bankruptcy Code or otherwise; (f) to construe and take any action to enforce this Reorganization Plan; (g) to reconcile any inconsistency in any order of the Court, including, without limitation, the Confirmation Order; (h) to modify the Reorganization Plan pursuant to section 1127 of the Bankruptcy Code, or to remedy any apparent non-material defect or omission in this Reorganization Plan, or to reconcile any non-material inconsistency in the Reorganization Plan so as to carry out its intent and purposes; (i) to hear and determine all applications for compensation and reimbursement of expenses of professionals under sections 330, 331, and 503(b) of the Bankruptcy Code; (j) to determine any other requests for payment of Priority Tax Claims, Priority Non-Tax Claims or Administrative Expense Claims; (k) to hear and determine disputes arising in connection with the interpretation, implementation, or enforcement of this Reorganization Plan; (l) to hear and determine all matters relating to the 9.25% Debentures Adversary Proceeding, including any disputes arising in connection with the interpretation, implementation or enforcement of any settlement agreement related thereto; (m) to consider and act on the compromise and settlement or payment of any Claim against the Reorganizing Debtors; (n) to recover all assets of Reorganizing Debtors and Heber Debtors and property of the Estates, wherever located; (o) to determine all questions and disputes regarding title to the assets of the Reorganizing Debtors and Heber Debtors or their Estates; (p) to issue injunctions, enter and implement other orders or to take such other actions as may be necessary or appropriate to restrain interference by any entity with the consummation, implementation or enforcement of the Reorganization Plan or the Confirmation Order; (q) to remedy any breach or default occurring under this Reorganization Plan; (r) to resolve and finally determine all disputes that may relate to, impact on or arise in connection with, this Reorganization Plan; (s) to hear and determine matters concerning state, local, and federal taxes for any period of time, including, without limitation, pursuant to sections 346, 505, 1129 and 1146 of the Bankruptcy Code (including any requests for expedited determinations under section 505(b) of the Bankruptcy Code filed, or to be filed, with respect to tax returns for any and all taxable periods ending after each of the applicable Petition Dates through, and including, the final Distribution Date); (t) to determine such other matters and for such other purposes as may be provided in the Confirmation Order; (u) to hear any other matter consistent with the provisions of the Bankruptcy Code; and (v) to enter a final decree closing the Chapter 11 Cases. ARTICLE XIII MISCELLANEOUS PROVISIONS 13.1 Deletion of Classes and Subclasses. Any class or subclass of Claims that does not contain as an element thereof an Allowed Claim or a Claim temporarily allowed under Bankruptcy Rule 3018 as of the date of the commencement of the Confirmation Hearing shall be deemed deleted from this Reorganization Plan for purposes of voting to accept or reject this Reorganization Plan and for purposes of determining acceptance or rejection of this Reorganization Plan by such class or subclass under section 1129(a)(8) of the Bankruptcy Code. 13.2 Dissolution of the Committee. On the Effective Date, the Committee shall be dissolved and the members thereof shall be released and discharged of and from all further authority, duties, responsibilities, and obligations related to and arising from and in connection with the Chapter 11 Cases, and the retention or employment of the Committee's attorneys, accountants, and other agents, shall terminate. 13.3 Effectuating Documents and Further Transactions. The chief executive officer of each of the Reorganizing Debtors and Heber Debtors, or his or her designee, shall be authorized to execute, deliver, file, or record such contracts, instruments, releases and other agreements or documents and take such actions on behalf of the Reorganizing Debtors and Heber Debtors as may be necessary or appropriate to effectuate and further evidence the terms and conditions of this Reorganization Plan, without any further action by or approval of the Board of Directors or other governing body of the Reorganizing Debtors or Heber Debtors. 13.4 Payment of Statutory Fees. All fees payable pursuant to section 1930 of Title 28 of the United States Code shall be paid through the entry of a final decree closing these cases. 13.5 Modification of Plan. Subject to the provisions of Section 5.5 of this Reorganization Plan, the Reorganizing Debtors and Heber Debtors reserve the right, in accordance with the Bankruptcy Code and the Bankruptcy Rules, to amend or modify this Reorganization Plan at any time prior to the entry of the Confirmation Order. Additionally, the Reorganizing Debtors and Heber Debtors reserve the right to alter, amend, modify, revoke or withdraw the Reorganization Plan as it applies to any particular Reorganizing Debtor or Heber Debtor, including without limitation as a result of the consummation of the Geothermal Sale pursuant to section 363 of the Bankruptcy Code on or prior to the Confirmation Date. Additionally, the Reorganizing Debtors and Heber Debtors reserve the right to seek confirmation of the Reorganization Plan or a separate reorganization plan with substantially similar terms with respect to only certain of the Reorganized Debtors and/or Heber Debtors, and to alter, amend, modify, revoke or withdraw the Reorganization Plan, in whole or in part, for such purpose. Addtionally, the Reorganizing Debtors reserve their rights to redesignate Debtors as Reorganizing Debtors, Heber Debtors or Liquidating Debtors at any time prior to ten (10) days prior to the Confirmation Hearing. Holders of Claims or Equity Interests who are entitled to vote on the Reorganization Plan or Liquidation Plan and who are affected by any such redesignation shall have five (5) days from the notice of such redesignation to vote to accept or reject the Reorganization Plan or the Liquidation Plan, as the case may be. The Reorganizing Debtors also reserve the right to withdraw prior to the Confirmation Hearing one or more Reorganizing Debtors or Heber Debtors from the Reorganization Plan, and to thereafter file a plan solely with respect to such Debtor or Debtors. After the entry of the Confirmation Order, the Reorganizing Debtors and Heber Debtors may, upon order of the Court, amend or modify this Reorganization Plan, in accordance with section 1127(b) of the Bankruptcy Code, or remedy any defect or omission or reconcile any inconsistency in this Reorganization Plan in such manner as may be necessary to carry out the purpose and intent of this Reorganization Plan. A holder of an Allowed Claim or Allowed Equity Interest that is deemed to have accepted this Reorganization Plan shall be deemed to have accepted this Reorganization Plan as modified if the proposed modification does not materially and adversely change the treatment of the Claim or Equity Interest of such holder. 13.6 Courts of Competent Jurisdiction. If the Court abstains from exercising, or declines to exercise, jurisdiction or is otherwise without jurisdiction over any matter arising out of this Reorganization Plan, such abstention, refusal or failure of jurisdiction shall have no effect upon and shall not control, prohibit or limit the exercise of jurisdiction by any other Court having competent jurisdiction with respect to such matter. 13.7 Exemption From Transfer Taxes. Pursuant to section 1146(c) of the Bankruptcy Code, the issuance, transfer or exchange of notes or equity securities under or in connection with the Reorganization Plan, the creation of any mortgage, deed of trust or other security interest, the making or assignment of any lease or sublease, or the making or delivery of any deed or other instrument of transfer under, in furtherance of, or in connection with the Reorganization Plan (including without limitation the Geothermal Sale or other sale of some or all of the Heber Debtors or their assets), including any merger agreements or agreements of consolidation, deeds, bills of sale or assignments executed in connection with any of the transactions contemplated under the Reorganization Plan, the Geothermal Sale or other sale of some or all of the Heber Debtors or their assets shall not be subject to any stamp, real estate transfer, mortgage recording or other similar tax. 13.8 Rules of Construction. For purposes of this Reorganization Plan, the following rules of interpretation apply: (a) The words "herein," "hereof," "hereto," "hereunder" and others of similar import refer to this Reorganization Plan as a whole and not to any particular Section, subsection, or clause contained in this Reorganization Plan; (b) Wherever from the context it appears appropriate, each term stated in either the singular or the plural shall include the singular and the plural and pronouns stated in the masculine, feminine or neuter gender shall include the masculine, the feminine and the neuter; (c) Any reference in this Reorganization Plan to a contract, instrument, release, indenture or other agreement or document being in a particular form or on particular terms and conditions means that such document shall be substantially in such form or substantially on such terms and conditions; (d) Any reference in this Reorganization Plan to an existing document or exhibit filed or to be filed means such document or exhibit, as it may have been or may be amended, modified or supplemented; (e) Unless otherwise specified, all references in this Reorganization Plan to Sections, Articles, Schedules and Exhibits are references to Sections, Articles, Schedules and Exhibits of or to this Reorganization Plan; (f) Captions and headings to Articles and Sections are inserted for convenience of reference only are not intended to be a part of or to affect the interpretation of this Reorganization Plan; and (g) Unless otherwise expressly provided, the rules of construction set forth in section 102 of the Bankruptcy Code and in the Bankruptcy Rules shall apply to this Reorganization Plan. 13.9 Computation of Time. In computing any period of time prescribed or allowed by this Reorganization Plan, unless otherwise expressly provided, the provisions of Bankruptcy Rule 9006 shall apply. 13.10 Successors and Assigns. The rights, benefits and obligations of any entity named or referred to in the Reorganization Plan shall be bind on, and shall inure to the benefit of, any heir, executor, administrator, successor or assign of such entity. 13.11 Notices. Any notices to or requests of the Reorganizing Debtors or Heber Debtors by parties in interest under or in connection with this Reorganization Plan shall be in writing and served either by (a) certified mail, return receipt requested, postage prepaid, (b) hand delivery, or (c) reputable overnight delivery service, all charges prepaid, and shall be deemed to have been given when received by the following parties: Covanta Energy Corporation c/o CLEARY GOTTLIEB STEEN & HAMLTON One Liberty Plaza New York, New York 10006 Attn: Deborah M. Buell, Esq. James L. Bromley, Esq. and Covanta Energy Corporation c/o JENNER & BLOCK, LLC One IBM Plaza Chicago, Illinois 60611-7603 Attn: Vincent E. Lazar, Esq. 13.12 Severability. If, prior to the Confirmation Date, any term or provision of this Reorganization Plan is determined by the Court to be invalid, void or unenforceable, the Court will have the power to alter and interpret such term or provision to make it valid or enforceable to the maximum extent practicable, consistent with the original purpose of the term or provision held to be invalid, void or unenforceable, and such term or provision will then be applicable as altered or interpreted. Notwithstanding any such holding, alteration or interpretation, the remainder of the terms and provisions of this Reorganization Plan will remain in full force and effect and will in no way be affected, impaired or invalidated by such holding alteration or interpretation. The Confirmation Order will constitute a judicial interpretation that each term and provision of this Reorganization Plan, as it may have been altered or interpreted in accordance with the forgoing, is valid and enforceable pursuant to its terms. Additionally, if the Court determines that the Reorganization Plan, as it applies to any particular Reorganizing Debtor, is not confirmable pursuant to section 1129 of the Bankruptcy Code (and cannot be altered or interpreted in a way that makes it confirmable), such determination shall not limit or affect (a) the confirmability of the Reorganization Plan as it applies to any other Reorganizing Debtor or (b) the Reorganizing Debtors' ability to modify the Reorganization Plan, as it applies to any particular Reorganizing Debtor, to satisfy the confirmation requirements of section 1129 of the Bankruptcy Code. 13.13 Governing Law. Except to the extent the Bankruptcy Code or Bankruptcy Rules are applicable, the rights and obligations arising under this Reorganization Plan shall be governed by, and construed and enforced in accordance with, the laws of the State of New York. 13.14 Exhibits. All Exhibits and Schedules to this Reorganization Plan are incorporated into and are a part of this Reorganization Plan as if set forth in full herein. 13.15 Counterparts. This Reorganization Plan may be executed in any number of separate counterparts, each of which shall collectively and separately constitute one agreement. Dated: September 8, 2003 COVANTA ENERGY CORPORATION By: /s/ Scott G. Mackin ------------------------------------- COVANTA ACQUISITION, INC. By: /s/ Scott G. Mackin ------------------------------------ COVANTA ALEXANDRIA/ARLINGTON, INC. By: /s/ Scott G. Mackin ------------------------------------ COVANTA BABYLON, INC. By: /s/ Scott G. Mackin ------------------------------------ COVANTA BESSEMER, INC. By: /s/ Scott G. Mackin ------------------------------------ COVANTA BRISTOL, INC. By: /s/ Scott G. Mackin ------------------------------------ COVANTA CUNNINGHAM ENVIRONMENTAL SUPPORT SERVICES, INC. By: /s/ Scott G. Mackin ------------------------------------ COVANTA ENERGY AMERICAS, INC. By: /s/ Scott G. Mackin ------------------------------------ COVANTA ENERGY CONSTRUCTION, INC. By: /s/ Scott G. Mackin ------------------------------------ COVANTA ENERGY GROUP, INC. By: /s/ Scott G. Mackin ------------------------------------ COVANTA ENERGY INTERNATIONAL, INC. By: /s/ Scott G. Mackin ------------------------------------ COVANTA ENERGY RESOURCE CORP. By: /s/ Scott G. Mackin ------------------------------------ COVANTA ENERGY SERVICES OF NEW JERSEY, INC. By: /s/ Scott G. Mackin ------------------------------------ COVANTA ENERGY SERVICES, INC. By: /s/ Scott G. Mackin ------------------------------------ COVANTA ENERGY WEST, INC. By: /s/ Scott G. Mackin ------------------------------------ COVANTA ENGINEERING SERVICES, INC. By: /s/ Scott G. Mackin ------------------------------------ COVANTA FAIRFAX, INC. By: /s/ Scott G. Mackin ------------------------------------ COVANTA GEOTHERMAL OPERATIONS HOLDINGS, INC. By: /s/ Scott G. Mackin ------------------------------------ COVANTA GEOTHERMAL OPERATIONS, INC. By: /s/ Scott G. Mackin ------------------------------------ COVANTA HEBER FIELD ENERGY, INC. By: /s/ Scott G. Mackin ------------------------------------ COVANTA HENNEPIN ENERGY RESOURCE CO., L.P. By: /s/ Scott G. Mackin ------------------------------------ COVANTA HILLSBOROUGH, INC. By: /s/ Scott G. Mackin ------------------------------------ COVANTA HONOLULU RESOURCE RECOVERY VENTURE By: /s/ Scott G. Mackin ------------------------------------ COVANTA HUNTINGTON LIMITED PARTNERSHIP By: /s/ Scott G. Mackin ------------------------------------ COVANTA HUNTINGTON RESOURCE RECOVERY ONE CORP. By: /s/ Scott G. Mackin ------------------------------------ COVANTA HUNTINGTON RESOURCE RECOVERY SEVEN CORP. By: /s/ Scott G. Mackin ------------------------------------ COVANTA HUNTSVILLE, INC. By: /s/ Scott G. Mackin ------------------------------------ COVANTA HYDRO ENERGY, INC. By: /s/ Scott G. Mackin ------------------------------------ COVANTA HYDRO OPERATIONS WEST, INC. By: /s/ Scott G. Mackin ------------------------------------ COVANTA HYDRO OPERATIONS, INC. By: /s/ Scott G. Mackin ------------------------------------ COVANTA IMPERIAL POWER SERVICES, INC. By: /s/ Scott G. Mackin ------------------------------------ COVANTA INDIANAPOLIS, INC. By: /s/ Scott G. Mackin ------------------------------------ COVANTA KENT, INC. By: /s/ Scott G. Mackin ------------------------------------ COVANTA LAKE, INC. By: /s/ Scott G. Mackin ------------------------------------ COVANTA LANCASTER, INC. By: /s/ Scott G. Mackin ------------------------------------ COVANTA LEE, INC. By: /s/ Scott G. Mackin ------------------------------------ COVANTA LONG ISLAND, INC. By: /s/ Scott G. Mackin ------------------------------------ COVANTA MARION LAND CORP. By: /s/ Scott G. Mackin ------------------------------------ COVANTA MARION, INC. By: /s/ Scott G. Mackin ------------------------------------ COVANTA MID-CONN, INC. By: /s/ Scott G. Mackin ------------------------------------ COVANTA MONTGOMERY, INC. By: /s/ Scott G. Mackin ------------------------------------ COVANTA NEW MARTINSVILLE HYDRO-OPERATIONS CORP. By: /s/ Scott G. Mackin ------------------------------------ COVANTA OAHU WASTE ENERGY RECOVERY, INC. By: /s/ Scott G. Mackin ------------------------------------ COVANTA ONONDAGA FIVE CORP. By: /s/ Scott G. Mackin ------------------------------------ COVANTA ONONDAGA FOUR CORP. By: /s/ Scott G. Mackin ------------------------------------ COVANTA ONONDAGA LIMITED PARTNERSHIP By: /s/ Scott G. Mackin ------------------------------------ COVANTA ONONDAGA OPERATIONS, INC. By: /s/ Scott G. Mackin ------------------------------------ COVANTA ONONDAGA THREE CORP. By: /s/ Scott G. Mackin ------------------------------------ COVANTA ONONDAGA TWO CORP. By: /s/ Scott G. Mackin ------------------------------------ COVANTA ONONDAGA, INC. By: /s/ Scott G. Mackin ------------------------------------ COVANTA OPERATIONS OF UNION, LLC By: /s/ Scott G. Mackin ------------------------------------ COVANTA OPW ASSOCIATES, INC. By: /s/ Scott G. Mackin ------------------------------------ COVANTA OPWH, INC. By: /s/ Scott G. Mackin ------------------------------------ COVANTA PASCO, INC. By: /s/ Scott G. Mackin ------------------------------------ COVANTA POWER EQUITY CORP. By: /s/ Scott G. Mackin ------------------------------------ COVANTA POWER INTERNATIONAL HOLDINGS, INC. By: /s/ Scott G. Mackin ------------------------------------ COVANTA PROJECTS, INC. By: /s/ Scott G. Mackin ------------------------------------ COVANTA PROJECTS OF HAWAII, INC. By: /s/ Scott G. Mackin ------------------------------------ COVANTA PROJECTS OF WALLINGFORD, L.P. By: /s/ Scott G. Mackin ------------------------------------ COVANTA RRS HOLDINGS, INC. By: /s/ Scott G. Mackin ------------------------------------ COVANTA SECURE SERVICES, INC. By: /s/ Scott G. Mackin ------------------------------------ COVANTA SIGC ENERGY II, INC. By: /s/ Scott G. Mackin ------------------------------------ COVANTA SIGC ENERGY, INC. By: /s/ Scott G. Mackin ------------------------------------ COVANTA SIGC GEOTHERMAL OPERATIONS, INC. By: /s/ Scott G. Mackin ------------------------------------ COVANTA STANISLAUS, INC. By: /s/ Scott G. Mackin ------------------------------------ COVANTA SYSTEMS, INC. By: /s/ Scott G. Mackin ------------------------------------ COVANTA TAMPA BAY, INC. By: /s/ Scott G. Mackin ------------------------------------ COVANTA TULSA, INC. By: /s/ Scott G. Mackin ------------------------------------ COVANTA UNION, INC. By: /s/ Scott G. Mackin ------------------------------------ COVANTA WALLINGFORD ASSOCIATES, INC. By: /s/ Scott G. Mackin ------------------------------------ COVANTA WARREN ENERGY RESOURCE CO., L.P. By: /s/ Scott G. Mackin ------------------------------------ COVANTA WASTE TO ENERGY OF ITALY, INC. By: /s/ Scott G. Mackin ------------------------------------ COVANTA WASTE TO ENERGY, INC. By: /s/ Scott G. Mackin ------------------------------------ COVANTA WATER HOLDINGS, INC. By: /s/ Scott G. Mackin ------------------------------------ COVANTA WATER SYSTEMS, INC. By: /s/ Scott G. Mackin ------------------------------------ COVANTA WATER TREATMENT SERVICES, INC. By: /s/ Scott G. Mackin ------------------------------------ AMOR 14 CORP By: /s/ Scott G. Mackin ------------------------------------ DSS ENVIRONMENTAL, INC. By: /s/ Scott G. Mackin ------------------------------------ ERC ENERGY II, INC. By: /s/ Scott G. Mackin ------------------------------------ ERC ENERGY, INC. By: /s/ Scott G. Mackin ------------------------------------ HEBER FIELD COMPANY By: /s/ Scott G. Mackin ------------------------------------ HEBER FIELD ENERGY II, INC. By: /s/ Scott G. Mackin ------------------------------------ HEBER GEOTHERMAL COMPANY By: /s/ Scott G. Mackin ------------------------------------ HEBER LOAN PARTNERS By: /s/ Scott G. Mackin ------------------------------------ OPI QUEZON INC. By: /s/ Scott G. Mackin ------------------------------------ SECOND IMPERIAL GEOTHERMAL CO., L.P. By: /s/ Scott G. Mackin ------------------------------------ THREE MOUNTAIN OPERATIONS, INC. By: /s/ Scott G. Mackin ------------------------------------ THREE MOUNTAIN POWER, LLC By: /s/ Scott G. Mackin ------------------------------------ EXHIBITS TO THE REORGANIZATION PLAN EXHIBIT 1 TO REORGANIZATION PLAN SCHEDULE OF REORGANIZING DEBTORS Debtor Case Number ------ ----------- Covanta Acquisition, Inc. 02-40861 (CB) Covanta Alexandria/Arlington, Inc. 02-40929 (CB) Covanta Babylon, Inc. 02-40928 (CB) Covanta Bessemer, Inc. 02-40862 (CB) Covanta Bristol, Inc. 02-40930 (CB) Covanta Cunningham Environmental Support Services, Inc. 02-40863 (CB) Covanta Energy Americas, Inc. 02-40881 (CB) Covanta Energy Construction, Inc. 02-40870 (CB) Covanta Energy Corporation 02-40841 (CB) Covanta Energy Group, Inc. 03-13707 (CB) Covanta Energy International, Inc. 03-13706 (CB) Covanta Energy Resource Corp. 02-40915 (CB) Covanta Energy Services of New Jersey, Inc. 02-40900 (CB) Covanta Energy Services, Inc. 02-40899 (CB) Covanta Energy West, Inc. 02-40871 (CB) Covanta Engineering Services, Inc. 02-40898 (CB) Covanta Fairfax, Inc. 02-40931 (CB) Covanta Geothermal Operations Holdings, Inc. 02-40873 (CB) Covanta Geothermal Operations, Inc. 02-40872 (CB) Covanta Heber Field Energy, Inc. 02-40893 (CB) Covanta Hennepin Energy Resource Co., L.P. 02-40906 (CB) Covanta Hillsborough, Inc. 02-40932 (CB) Covanta Honolulu Resource Recovery Venture 02-40905 (CB) Covanta Huntington Limited Partnership 02-40916 (CB) Covanta Huntington Resource Recovery One Corp. 02-40919 (CB) Covanta Huntington Resource Recovery Seven Corp. 02-40920 (CB) Covanta Huntsville, Inc. 02-40933 (CB) Covanta Hydro Energy, Inc. 02-40894 (CB) Covanta Hydro Operations West, Inc. 02-40875 (CB) Covanta Hydro Operations, Inc. 02-40874 (CB) Covanta Imperial Power Services, Inc. 02-40876 (CB) Covanta Indianapolis, Inc. 02-40934 (CB) Covanta Kent, Inc. 02-40935 (CB) Covanta Lake, Inc. 02-40936 (CB) Covanta Lancaster, Inc. 02-40937 (CB) Covanta Lee, Inc. 02-40938 (CB) Covanta Long Island, Inc. 02-40917 (CB) Covanta Marion Land Corp. 02-40940 (CB) Covanta Marion, Inc. 02-40939 (CB) Covanta Mid-Conn, Inc. 02-40911 (CB) Covanta Montgomery, Inc. 02-40941 (CB) Covanta New Martinsville Hydro-Operations Corp. 02-40877 (CB) Covanta Oahu Waste Energy Recovery, Inc. 02-40912 (CB) Covanta Onondaga Five Corp. 02-40926 (CB) Covanta Onondaga Four Corp. 02-40925 (CB) Covanta Onondaga Limited Partnership 02-40921 (CB) Covanta Onondaga Operations, Inc. 02-40927 (CB) Covanta Onondaga Three Corp. 02-40924 (CB) Covanta Onondaga Two Corp. 02-40923 (CB) Covanta Onondaga, Inc. 02-40922 (CB) Covanta Operations of Union, LLC 02-40909 (CB) Covanta OPW Associates, Inc. 02-40908 (CB) Covanta OPWH, Inc. 02-40907 (CB) Covanta Pasco, Inc. 02-40943 (CB) Covanta Power Equity Corp. 02-40895 (CB) Covanta Power International Holdings, Inc. 03-13708 (CB) Covanta Projects, Inc. 03-13709 (CB) Covanta Projects of Hawaii, Inc. 02-40913 (CB) Covanta Projects of Wallingford, L.P. 02-40903 (CB) Covanta RRS Holdings, Inc. 02-40910 (CB) Covanta Secure Services, Inc. 02-40901 (CB) Covanta SIGC Geothermal Operations, Inc. 02-40883 (CB) Covanta Stanislaus, Inc. 02-40944 (CB) Covanta Systems, Inc. 02-40948 (CB) Covanta Tampa Bay, Inc. 02-40865 (CB) Covanta Tulsa, Inc. 02-40945 (CB) Covanta Union, Inc. 02-40946 (CB) Covanta Wallingford Associates, Inc. 02-40914 (CB) Covanta Warren Energy Resource Co., L.P. 02-40904 (CB) Covanta Waste to Energy of Italy, Inc. 02-40902 (CB) Covanta Waste to Energy, Inc. 02-40949 (CB) Covanta Water Holdings, Inc. 02-40866 (CB) Covanta Water Systems, Inc. 02-40867 (CB) Covanta Water Treatment Services, Inc. 02-40868 (CB) DSS Environmental, Inc. 02-40869 (CB) ERC Energy II, Inc. 02-40890 (CB) ERC Energy, Inc. 02-40891 (CB) Heber Field Energy II, Inc. 02-40892 (CB) Heber Loan Partners 02-40889 (CB) OPI Quezon, Inc. 02-40860 (CB) Three Mountain Operations, Inc. 02-40879 (CB) Three Mountain Power, LLC 02-40880 (CB) EXHIBITS TO THE REORGANIZATION PLAN EXHIBIT 2 TO REORGANIZATION PLAN LIST OF LIQUIDATING DEBTORS Liquidating Debtor Case Number ------------------ ----------- Alpine Food Products, Inc. 03-13679 (CB) BDC Liquidating Corp. 03-13681 (CB) Bouldin Development Corp. 03-13680 (CB) Covanta Concerts Holdings, Inc. 02-16332 (CB) Covanta Energy Sao Jeronimo, Inc. 02-40854 (CB) Covanta Equity of Alexandria/Arlington, Inc. 03-13682 (CB) Covanta Equity of Stanislaus, Inc. 03-13683 (CB) Covanta Financial Services, Inc. 02-40947 (CB) Covanta Huntington, Inc. 02-40918 (CB) Covanta Key Largo, Inc. 02-40864 (CB) Covanta Northwest Puerto Rico, Inc. 02-40942 (CB) Covanta Oil & Gas, Inc. 02-40878 (CB) Covanta Power Development of Bolivia, Inc. 02-40856 (CB) Covanta Power Development, Inc. 02-40855 (CB) Covanta Secure Services USA, Inc. 02-40896 (CB) Covanta Waste Solutions, Inc. 02-40897 (CB) Doggie Diner, Inc. 03-13684 (CB) Gulf Coast Catering Company, Inc. 03-13685 (CB) J.R. Jack's Construction Corporation 02-40857 (CB) Lenzar Electro-Optics, Inc. 02-40832 (CB) Logistics Operations, Inc. 03-13688 (CB) Offshore Food Service, Inc. 03-13694 (CB) OFS Equity of Alexandria/Arlington, Inc. 03-13687 (CB) OFS Equity of Babylon, Inc. 03-13690 (CB) OFS Equity of Delaware, Inc. 03-13689 (CB) OFS Equity of Huntington, Inc. 03-13691 (CB) OFS Equity of Indianapolis, Inc. 03-13693 (CB) OFS Equity of Stanislaus, Inc. 03-13692 (CB) Ogden Allied Abatement & Decontamination Service, Inc. 02-40827 (CB) Ogden Allied Maintenance Corp. 02-40828 (CB) Ogden Allied Payroll Services, Inc. 02-40835 (CB) Ogden Attractions, Inc. 02-40836 (CB) Ogden Aviation Distributing Corp. 02-40829 (CB) Ogden Aviation Fueling Company of Virginia, Inc. 02-40837 (CB) Ogden Aviation Security Services of Indiana, Inc. 03-13695 (CB) Ogden Aviation Service Company of Colorado, Inc. 02-40839 (CB) Ogden Aviation Service Company of Pennsylvania, Inc. 02-40834 (CB) Ogden Aviation Service International Corporation 02-40830 (CB) Ogden Aviation Terminal Services, Inc. 03-13696 (CB) Ogden Aviation, Inc. 02-40838 (CB) Ogden Cargo Spain, Inc. 02-40843 (CB) Ogden Central and South America, Inc. 02-40844 (CB) Ogden Cisco, Inc. 03-13698 (CB) Ogden Communications, Inc. 03-13697 (CB) Ogden Constructors, Inc. 02-40858 (CB) Ogden Environmental & Energy Services Co., Inc. 02-40859 (CB) Ogden Facility Holdings, Inc. 02-40845 (CB) Ogden Facility Management Corporation of Anaheim 02-40846 (CB) Ogden Facility Management Corporation of West Virginia 03-13699 (CB) Ogden Film and Theatre, Inc. 02-40847 (CB) Ogden Firehole Entertainment Corp. 02-40848 (CB) Ogden Food Service Corporation of Milwaukee, Inc. 03-13701 (CB) Ogden International Europe, Inc. 02-40849 (CB) Ogden Leisure, Inc. 03-13700 (CB) Ogden Management Services, Inc. 03-13702 (CB) Ogden New York Services, Inc. 02-40826 (CB) Ogden Pipeline Service Corporation 03-13704 (CB) Ogden Services Corporation 02-40850 (CB) Ogden Support Services, Inc. 02-40851 (CB) Ogden Technology Services Corporation 03-13703 (CB) Ogden Transition Corporation 03-13705 (CB) PA Aviation Fuel Holdings, Inc. 02-40852 (CB) Philadelphia Fuel Facilities Corporation 02-40853 (CB) EXHIBITS TO THE REORGANIZATION PLAN EXHIBIT 3 TO REORGANIZATION PLAN LIST OF REORGANIZING DEBTORS FILING ON INITIAL PETITION DATE AND SUBSEQUENT PETITION DATE SCHEDULE OF REORGANIZING DEBTORS FILING ON APRIL 1, 2002 (THE INITIAL PETITION DATE) Reorganizing Debtor Case Number ------------------- ----------- Covanta Acquisition, Inc. 02-40861 (CB) Covanta Alexandria/Arlington, Inc. 02-40929 (CB) Covanta Babylon, Inc. 02-40928 (CB) Covanta Bessemer, Inc. 02-40862 (CB) Covanta Bristol, Inc. 02-40930 (CB) Covanta Cunningham Environmental Support Services, Inc. 02-40863 (CB) Covanta Energy Americas, Inc. 02-40881 (CB) Covanta Energy Construction, Inc. 02-40870 (CB) Covanta Energy Corporation 02-40841 (CB) Covanta Energy Resource Corp. 02-40915 (CB) Covanta Energy Services of New Jersey, Inc. 02-40900 (CB) Covanta Energy Services, Inc. 02-40899 (CB) Covanta Energy West, Inc. 02-40871 (CB) Covanta Engineering Services, Inc. 02-40898 (CB) Covanta Fairfax, Inc. 02-40931 (CB) Covanta Geothermal Operations Holdings, Inc. 02-40873 (CB) Covanta Geothermal Operations, Inc. 02-40872 (CB) Covanta Heber Field Energy, Inc. 02-40893 (CB) Covanta Hennepin Energy Resource Co., L.P. 02-40906 (CB) Covanta Hillsborough, Inc. 02-40932 (CB) Covanta Honolulu Resource Recovery Venture 02-40905 (CB) Covanta Huntington Limited Partnership 02-40916 (CB) Covanta Huntington Resource Recovery One Corp. 02-40919 (CB) Covanta Huntington Resource Recovery Seven Corp. 02-40920 (CB) Covanta Huntsville, Inc. 02-40933 (CB) Covanta Hydro Energy, Inc. 02-40894 (CB) Covanta Hydro Operations West, Inc. 02-40875 (CB) Covanta Hydro Operations, Inc. 02-40874 (CB) Covanta Imperial Power Services, Inc. 02-40876 (CB) Covanta Indianapolis, Inc. 02-40934 (CB) Covanta Kent, Inc. 02-40935 (CB) Covanta Lake, Inc. 02-40936 (CB) Covanta Lancaster, Inc. 02-40937 (CB) Covanta Lee, Inc. 02-40938 (CB) Covanta Long Island, Inc. 02-40917 (CB) Covanta Marion Land Corp. 02-40940 (CB) Covanta Marion, Inc. 02-40939 (CB) Covanta Mid-Conn, Inc. 02-40911 (CB) Covanta Montgomery, Inc. 02-40941 (CB) Covanta New Martinsville Hydro-Operations Corp. 02-40877 (CB) Covanta Oahu Waste Energy Recovery, Inc. 02-40912 (CB) Covanta Onondaga Five Corp. 02-40926 (CB) Covanta Onondaga Four Corp. 02-40925 (CB) Covanta Onondaga Limited Partnership 02-40921 (CB) Covanta Onondaga Operations, Inc. 02-40927 (CB) Covanta Onondaga Three Corp. 02-40924 (CB) Covanta Onondaga Two Corp. 02-40923 (CB) Covanta Onondaga, Inc. 02-40922 (CB) Covanta Operations of Union, LLC 02-40909 (CB) Covanta OPW Associates, Inc. 02-40908 (CB) Covanta OPWH, Inc. 02-40907 (CB) Covanta Pasco, Inc. 02-40943 (CB) Covanta Power Equity Corp. 02-40895 (CB) Covanta Projects of Hawaii, Inc. 02-40913 (CB) Covanta Projects of Wallingford, L.P. 02-40903 (CB) Covanta RRS Holdings, Inc. 02-40910 (CB) Covanta Secure Services, Inc. 02-40901 (CB) Covanta SIGC Geothermal Operations, Inc. 02-40883 (CB) Covanta Stanislaus, Inc. 02-40944 (CB) Covanta Systems, Inc. 02-40948 (CB) Covanta Tampa Bay, Inc. 02-40865 (CB) Covanta Tulsa, Inc. 02-40945 (CB) Covanta Union, Inc. 02-40946 (CB) Covanta Wallingford Associates, Inc. 02-40914 (CB) Covanta Warren Energy Resource Co., L.P. 02-40904 (CB) Covanta Waste to Energy of Italy, Inc. 02-40902 (CB) Covanta Waste to Energy, Inc. 02-40949 (CB) Covanta Water Holdings, Inc. 02-40866 (CB) Covanta Water Systems, Inc. 02-40867 (CB) Covanta Water Treatment Services, Inc. 02-40868 (CB) DSS Environmental, Inc. 02-40869 (CB) ERC Energy II, Inc. 02-40890 (CB) ERC Energy, Inc. 02-40891 (CB) Heber Field Energy II, Inc. 02-40892 (CB) Heber Loan Partners 02-40889 (CB) OPI Quezon, Inc. 02-40860 (CB) Three Mountain Operations, Inc. 02-40879 (CB) Three Mountain Power, LLC 02-40880 (CB) SCHEDULE OF REORGANIZING DEBTORS FILING ON JUNE 6, 2003 (THE SUBSEQUENT PETITION DATE) Reorganizing Debtor Case Number ------------------- ----------- Covanta Energy International, Inc. 03-13706 (CB) Covanta Power International Holdings, Inc. 03-13708 (CB) Covanta Energy Group, Inc. 03-13707 (CB) Covanta Projects, Inc. 03-13709 (CB) EXHIBITS TO THE REORGANIZATION PLAN EXHIBIT 4 TO REORGANIZATION PLAN DESCRIPTION OF SETTLEMENT OF LOSS SHARING LITIGATION LOSS SHARING SETTLEMENT TERM SHEET Capitalized terms used herein without definition are used as defined in the Intercreditor Agreement dated as of March 14, 2001, as amended (as so amended, the "Intercreditor Agreement"), among Covanta Energy Corporation and certain of its subsidiaries, the financial institutions party thereto as Opt-Out Lenders, the financial institutions party thereto as Pooled Facility Lenders, the Opt-Out Facility Agents, the Pooled Facility Agents, Deutsche Bank AG, New York Branch, as Documentation Agent, and Bank of America, N.A., as Credit Agent (collectively, Documentation Agent and Credit Agent are the "Agents"). 1. Interim Reductions: Ernst & Young Corporate Finance LLC will calculate the Realized Percentages immediately prior to (x) the effective date (the "Plan Effective Date") of a plan of reorganization (the "Plan of Reorganization") for Covanta and its debtor subsidiaries (collectively, the "Debtors") in the jointly administered voluntary bankruptcy proceedings under the Bankruptcy Code for such Debtors initially commenced on April 1, 2002 (the "Chapter 11 Cases") and (y) giving effect to the "pooling" transaction described in paragraph 3 below. On or about the Plan Effective Date, the Pooled Facility Lenders and/or the Canadian Loss Sharing Lenders will make loss sharing payments required under Section 5.3 of the Intercreditor Agreement based on any adjustments to the Realized Percentage that occur during the period from June 25, 2003 to the time of such calculation. For the avoidance of doubt, all calculations contemplated herein of claim amounts and permanent reductions thereto shall be determined based solely on the principal amounts of such claims. 2. Exercise of Put/Realization on Collateral: On the Plan Effective Date CIBC, as administrative agent for the holders of the Class B Palladium Preferred Shares, will be deemed to exercise, and Company will be deemed on such date to accept, the put to Company under the Class B Palladium Put Agreement, as a result of which: a. Company shall receive the 72 million of outstanding Class B Palladium Preferred Shares and all rights related thereto; b. The Canadian Loss Sharing Lenders shall have an allowed claim (the "CLSL Claim") against Company for CDN $62,000,000 in respect of 62 million of the Class B Palladium Preferred Shares (i.e., the Class B Canadian Facility); and c. Separate and apart from its claim as one of the Canadian Loss Sharing Lenders, CIBC shall reserve its rights against Company with respect to the approximately CDN $10,000,000 of cash collateral held by CIBC and with respect to the 10 million Class B Palladium Preferred Shares that are not included in the Class B Canadian Facility. On the Plan Effective Date, the Canadian Loss Sharing Lenders will apply the amount of all payments received prior to the Plan Effective Date pursuant to Section 5.3 of the Intercreditor Agreement (i.e., CDN $16,465,133.83 in the aggregate plus any payment(s) made pursuant to paragraph 1 above) to reduce on a dollar-for-dollar basis the principal amount of the CLSL Claim. 3. Exit Facility Pooling: On the Plan Effective Date, after giving effect to all adjustments to the Realized Percentages (and all resulting payments under Section 5.3 of the Intercreditor Agreement) that are calculated as described in paragraph 1 above and immediately prior to emergence of the Debtors from the Chapter 11 Cases and distribution of any securities of Debtors in the Plan of Reorganization to holders of Non-Priority Prepetition Secured Claims (as defined below) (such securities being "Plan Paper"), (i) each participant in the Tranche B Letters of Credit and each Canadian Loss Sharing Lender (collectively, such participants and Canadian Loss Sharing Lenders are referred to herein as a "Pool Participant") at such time shall irrevocably purchase, from each Pool Participant that is the issuer of a letter of credit (each such letter of credit, a "Pooled Exit L/C") that replaces, renews or extends on the Plan Effective Date a Tranche B Letter of Credit outstanding immediately prior to the Plan Effective Date(1), a participation in such Pooled Exit L/C (and any drawings honored thereunder, to the extent not yet reimbursed) in an amount equal to such Pool Participant's Pro Rata Share thereof, and (ii) each Pool Participant that is a participant in the Tranche B Letters of Credit (without giving effect to the preceding clause (i)) at such time shall irrevocably purchase in cash, in U.S. Dollars, from each Pool Participant that is a Canadian Loss Sharing Lender, a portion of the Pooled Funded Claim (as defined below) held by such Canadian Loss Sharing Lender in an amount equal to such Pool Participant's Pro Rata Share thereof. As used herein: - -------- (1) Each outstanding Tranche B Letter of Credit that has not been drawn and reimbursed at the time this "pooling" transaction takes effect shall be replaced, renewed or extended as a Pooled Exit L/C. (1) the "Pro Rata Share" of a Pool Participant means the fraction, expressed as a percentage, obtained by dividing (x) the aggregate Pooled Funded Claim held by such Pool Participant plus the aggregate participations held by such Pool Participant in the Tranche B Letters of Credit replaced, renewed or extended by the Pooled Exit L/Cs, in each case determined immediately prior to giving effect to the purchases described in the first sentence of this paragraph 3, by (y) the aggregate Pooled Funded Claim held by all Pool Participants plus the aggregate participations held by all Pool Participants in the Tranche B Letters of Credit replaced, renewed or extended by the Pooled Exit L/Cs; (2) the "Pooled Funded Claim" means the amount of the portion of the outstanding principal amount of the CLSL Claim as of the Plan Effective Date equal to the amount which would be required to be paid to the Canadian Loss Sharing Lenders pursuant to the terms of Section 5.3 of the Intercreditor Agreement (in addition to amounts already paid pursuant to such Section or payable to Canadian Loss Sharing Lenders pursuant to paragraph 1 above) if the unfunded exposure of Pooled Facility Lenders were deemed permanently reduced on the Plan Effective Date by an amount equal to the amount of all Pooled Exit L/Cs, provided [that the foregoing calculations of permanent reductions and Realized Percentages shall be adjusted to reflect the fact that the Pooled Facility Lenders shall receive Plan Paper on account of the Loss Sharing Indemnity, and provided further,] that for purposes of the "pooling" transaction and calculating the "Pro Rata Share" of each Pool Participant as described above, the Pooled Funded Claim shall be converted to and measured in U.S. Dollars as of the Effective Date at the "spot" rate, and the CLSL Claim shall be reduced on a dollar-for-dollar basis by the Canadian dollar portion of the CLSL Claims represented by such converted Pooled Funded Claim; and (3) "Non-Priority Prepetition Secured Claims" means secured claims of the Pooled Facility Lenders in existence prior to the date of filing of the Chapter 11 Cases that are not given priority or priority claim status in the Chapter 11 Cases or pursuant to the Intercreditor Agreement. The effect of the foregoing "pooling" arrangement would be that the Pooled Facility Lenders would purchase in cash from the Canadian Loss Sharing Lenders their respective Pro Rata Shares of the Pooled Funded Claim (and the Pooled Funded Claim would thereafter be denominated in U.S. Dollars), and the Canadian Loss Sharing Lenders and Pooled Facility Lenders would all become lenders and participants with respect to the Pooled Exit L/Cs (with the Canadian Loss Sharing Lenders purchasing in cash from the Pooled Facility Lenders their respective Pro Rata Shares of any funded amounts under Pooled Exit L/Cs that had not been reimbursed), would be entitled to vote as lenders with respect to the credit facility for the Pooled Exit L/Cs, would be obligated to fund their ratable shares of any honored drawings under the Pooled Exit L/Cs, and would receive their ratable shares of any fees with respect to the Pooled Exit L/Cs and any interest on any drawn amounts, all in U.S. Dollars. Company will be required to "gross up" the Canadian Loss Sharing Lenders for any applicable withholding tax on payments made to them following this "pooling". The aforementioned purchase of the relevant portion of the Pooled Funded Claim by the Pooled Facility Lenders would be funded with the proceeds of "Tranche C Loans" under the DIP Credit Agreement, and upon such funding all claims of the Canadian Loss Sharing Lenders to the portion of the Pooled Funded Claim purchased with such Tranche C Loans would thereupon be released and waived, with such Tranche C Loans being substituted therefor. An example of the effect of the foregoing "pooling" arrangement is set forth on Schedule I annexed hereto, assuming the facts set forth in such Schedule. 4. Treatment of Pooled Funded Claim: On the Plan Effective Date, following the purchase of the participations described above, Pool Participants will be entitled to have those Tranche C Loans made as described in paragraph 3 above and any portion of the Pooled Funded Claim not purchased with the proceeds of Tranche C Loans treated in the Plan of Reorganization on the same status as Non-Priority Prepetition Secured Claims and to receive, in consideration of such Tranche C Loans and such portion of the Pooled Funded Claim, a ratable portion of any Plan Paper. 5. Treatment of Remaining CLSL Claim: On the Plan Effective Date, Canadian Loss Sharing Lenders will be entitled to have the portion of the principal amount of their CLSL Claim not constituting the Pooled Funded Claim treated in the Plan of Reorganization on the same status as Non-Priority Prepetition Secured Claims and to receive, in consideration of such portion of their CLSL Claim, a ratable portion of any Plan Paper. 6. Termination of Loss Sharing: On the Plan Effective Date, after giving effect to consummation of the transactions described above, (i) Section 5.3 of the Intercreditor Agreement and all other provisions of the Intercreditor Agreement relating to the "loss sharing" obligations of the Pooled Facility Lenders and the Canadian Loss Sharing Lenders will terminate, (ii) each of the Pooled Facility Lenders, on the one hand, and the Canadian Loss Sharing Lenders, on the other hand, will release any further existing or future claims against the other Group or against the Agents arising under or with respect to such provisions, (iii) the motion made in the Chapter 11 Cases by CIBC relating to the claims of the Canadian Loss Sharing Lenders shall be deemed dismissed with prejudice, and (iv) any "Tranche C Commitments" as defined in the DIP Credit Agreement shall be terminated. EXHIBITS TO THE REORGANIZATION PLAN EXHIBIT 9.1A TO REORGANIZATION PLAN LIST OF REJECTING DEBTORS TO COME EXHIBITS TO THE REORGANIZATION PLAN EXHIBIT 9.1B TO REORGANIZATION PLAN LIST OF ASSUMING DEBTORS TO COME EX-2.2 4 cov8k-ex22_0909.txt Exhibit 2.2 CLEARY, GOTTLIEB, STEEN & HAMILTON Deborah M. Buell (DB 3562) James L. Bromley (JB 5125) One Liberty Plaza New York, New York 10006 and JENNER & BLOCK, LLC Vincent E. Lazar (VL 7320) Christine L. Childers (CC 0092) One IBM Plaza Chicago, Illinois 60611 UNITED STATES BANKRUPTCY COURT SOUTHERN DISTRICT OF NEW YORK - ------------------------------------------------x : In re: : Chapter 11 Case Nos. 02-40826 (CB) et al. OGDEN NEW YORK SERVICES, INC., et al., : -- -- (Jointly Administered) Debtors and Debtors in Possession : - ------------------------------------------------x DEBTORS' JOINT PLAN OF LIQUIDATION UNDER CHAPTER 11 OF THE BANKRUPTCY CODE --------------------------------------- September 8, 2003 THIS IS NOT A SOLICITATION OF ACCEPTANCE OR REJECTION OF THE REORGANIZATION PLAN. ACCEPTANCES OR REJECTIONS MAY NOT BE SOLICITED UNTIL A DISCLOSURE STATEMENT HAS BEEN APPROVED BY THE BANKRUPTCY COURT. A DISCLOSURE STATEMENT HAS BEEN SUBMITTED FOR APPROVAL BUT HAS NOT BEEN APPROVED BY THE COURT. Ogden New York Services, Inc. and certain affiliates listed on Exhibit 1 attached hereto as debtors and debtors in possession under Chapter 11 of title 11 of the United States Code, in each of their separate cases, which have been consolidated for procedural purposes only, (each a "Liquidating Debtor" and collectively, the "Liquidating Debtors"), hereby propose and file this following Joint Plan of Liquidation (the "Liquidation Plan"): ARTICLE I DEFINITIONS AND INTERPRETATION...............................1 1.1 Definitions.......................................................1 ARTICLE II TREATMENT OF ADMINISTRATIVE.................................14 2.1 Non-Classification...............................................14 2.2 Administrative Expense Claims....................................14 2.3 Compensation and Reimbursement Claims............................15 2.4 Priority Tax Claims..............................................15 2.5 DIP Financing Facility Claims....................................16 ARTICLE III CLASSIFICATION OF CLAIMS AND INTERESTS......................16 3.1 General Rules of Classification..................................16 ARTICLE IV TREATMENT OF CLAIMS AND EQUITY INTERESTS....................17 4.1 Class 1-- Allowed Priority Non-Tax Claims........................17 4.2 Class 2-- Intentionally Omitted..................................17 4.3 Subclass 3A-- Allowed Liquidation Secured Claims.................17 4.4 Subclass 3B-- Allowed Secured CSFB Claim.........................18 4.5 Class 4-- Intentionally Omitted..................................18 4.6 Class 5-- Intentionally Omitted..................................18 4.7 Class 6-- Intentionally Omitted..................................18 4.8 Class 7-- Unsecured Liquidation Claims...........................18 4.9 Class 8-- Intentionally Omitted..................................18 4.10 Class 9-- Intercompany Claims....................................19 4.11 Class 10-- Intentionally omitted.................................19 4.12 Class 11-- Equity Interests in the Liquidating Debtors...........19 4.13 Class 12-- Intentionally Omitted.................................19 4.14 Class 13-- Intentionally Omitted.................................19 ARTICLE V ACCEPTANCE OR REJECTION OF THE LIQUIDATION PLAN.............19 5.1 Voting of Claims.................................................19 5.2 Acceptance by a Class............................................19 5.3 Presumed Acceptance of Plan......................................20 5.4 Presumed Rejection of Plan.......................................20 5.5 Cramdown.........................................................20 ARTICLE VI MEANS FOR IMPLEMENTATION....................................20 6.1 Actions Occurring On the Effective Date..........................20 6.2 Fractional Interests.............................................21 6.3 Date of Distributions............................................21 6.4 Settlements......................................................22 6.5 No Interim Cash Payments of $100 or Less on Account of Allowed Claims Prior to Final Liquidation Distribution Date..............22 6.6 Unclaimed Property...............................................22 6.7 Withholding Taxes................................................22 6.8 Reservation of Rights of the Estate..............................22 ARTICLE VII PROCEDURES FOR RESOLVING AND TREATING DISPUTED CLAIMS.......22 7.1 No Distribution Pending Allowance................................22 7.2 Resolution of Disputed Claims and Equity Interests...............23 7.3 Estimation of Claims and Equity Interests........................23 7.4 Reserve Account for Disputed Claims..............................23 7.5 Allowance of Disputed Claims.....................................24 ARTICLE VIII TREATMENT OF EXECUTORY CONTRACTS AND UNEXPIRED LEASES.......24 8.1 General Treatment................................................24 8.2 Cure of Defaults.................................................25 8.3 Approval of Assumption and Assignment of Executory Contracts on the Schedule of Assumed Contracts and Leases..................25 8.4 Approval of Rejection of Executory Contracts and Unexpired Leases...........................................................25 8.5 Bar Date for Filing Proofs of Claim Relating to Executory Contracts and Unexpired Leases Rejected Pursuant to the Liquidation Plan.................................................25 8.6 Reservation of Rights Under Insurance Policies and Bonds.........26 ARTICLE IX THE LIQUIDATING TRUSTEE.....................................26 9.1 Appointment......................................................26 9.2 Compensation of the Liquidating Trustee for Dissolution Expenses.........................................................26 9.3 Recovery or Realization of Liquidation Proceeds..................27 9.4 Distributions....................................................27 9.5 Engagement of Professionals......................................27 9.6 Status of the Liquidating Trustee................................27 9.7 Authority........................................................28 9.8 Objectives.......................................................29 9.9 Distributions....................................................29 9.10 Abandonment......................................................29 9.11 No Recourse......................................................29 9.12 Limited Liability................................................29 9.13 Resignation......................................................29 9.14 Reserves.........................................................30 9.15 Statements.......................................................30 9.16 Further Authorization............................................30 ARTICLE X APPOINTMENT OF THE OVERSIGHT NOMINEE........................30 10.1 Appointment of the Oversight Nominee.............................30 10.2 Authority and Responsibility of the Oversight Nominee............31 10.3 Limited Liability................................................31 10.4 The Oversight Nominee Expenses...................................31 ARTICLE XI CONDITIONS PRECEDENT TO THE CONFIRMATION AND THE EFFECTIVE DATE..............................................31 11.1 Conditions to Confirmation.......................................31 11.2 Conditions Precedent to the Effective Date.......................32 11.3 Waiver of Conditions.............................................32 11.4 Failure to Satisfy or Waiver of Conditions Precedent.............32 ARTICLE XII EFFECTS OF CONFIRMATION 12.1 Discharge........................................................33 12.2 Binding Effect...................................................33 12.3 Term of Injunctions or Stays.....................................33 12.4 Injunction Against Interference with Liquidation Plan............33 12.5 Exculpation......................................................33 12.6 Injunction.......................................................34 12.7 Release Granted by the Liquidating Debtors.......................34 ARTICLE XIII MISCELLANEOUS PROVISIONS....................................35 13.1 Retention of Jurisdiction........................................35 13.2 Deletion of Classes and Subclasses...............................37 13.3 Courts of Competent Jurisdiction.................................37 13.4 Payment of Statutory Fees........................................37 13.5 Dissolution of the Committee.....................................37 13.6 Effectuating Documents and Further Transactions..................37 13.7 Successors and Assigns...........................................37 13.8 Governing Law....................................................37 13.9 Modification of Plan.............................................37 13.10 Rules of Construction............................................38 13.11 Computation of Time..............................................38 13.12 Notices..........................................................38 13.13 Exhibits.........................................................39 13.14 Counterparts.....................................................39 13.15 Severability.....................................................39 EXHIBITS TO THE LIQUIDATION PLAN Exhibit Number Exhibit -------------- ------- 1 List of Liquidating Debtors 2 List of Reorganizing Debtors 3 List of Liquidating Debtors that Filed on the Initial Petition Date and the Subsequent Petition Date 4 List of Heber Debtors INTRODUCTION This Liquidation Plan contemplates a separate liquidation of each Liquidating Debtor administered by the Liquidating Trustee pursuant to which certain existing creditors of the Liquidating Debtors will receive, except as otherwise provided herein, the Cash proceeds of liquidation as their respective assets are liquidated and Claims against their respective assets are resolved to be distributed by the Liquidating Trustee. Although presented as a joint plan, this Liquidation Plan provides for separate treatment of each Liquidating Debtor, such that each Liquidating Debtor's estate will be liquidated and distributions made to holders of Allowed Claims against that Liquidating Debtor. This Liquidation Plan does NOT provide for substantive consolidation of the Liquidating Debtors. Capitalized terms used herein shall have the meanings ascribed to such terms in Article I of this Liquidation Plan. Reference is made to the Disclosure Statement accompanying this Liquidation Plan, including the Exhibits thereto, for a discussion of the Liquidating Debtors' history, business, results of operations and properties, and for a summary and analysis of the Liquidation Plan. All creditors are encouraged to consult the Disclosure Statement and read this Liquidation Plan carefully before voting to accept or reject this Liquidation Plan. NO SOLICITATION MATERIALS, OTHER THAN THE DISCLOSURE STATEMENT AND RELATED MATERIALS TRANSMITTED THEREWITH AND APPROVED BY THE COURT, HAVE BEEN AUTHORIZED BY THE COURT FOR USE IN SOLICITING ACCEPTANCES OR REJECTIONS OF THIS LIQUIDATION PLAN. The Liquidating Debtors reserve the right to proceed with confirmation of this Liquidation Plan as to some but not all of the Liquidating Debtors at the same time. ARTICLE I DEFINITIONS AND INTERPRETATION 1.1 Definitions. In addition to such other terms as are defined in other Sections of this Liquidation Plan, the following terms (which appear herein as capitalized terms) shall have the meanings set forth below, such meanings to be applicable to both the singular and plural forms of the terms defined. A term used in this Liquidation Plan and not defined herein or elsewhere in this Liquidation Plan, but that is defined in the Bankruptcy Code has the meaning set forth therein. "Administrative Expense Claim" means a Claim under sections 503(b), 507(a)(1), 507(b) or 1114(e)(2) of the Bankruptcy Code, including, without limitation, any actual and necessary expenses incurred after the applicable Petition Date for preserving the assets of the Liquidating Debtors, any actual and necessary costs and expenses of operating the businesses of the Liquidating Debtors incurred after the applicable Petition Date, all compensation and reimbursement of expenses allowed by the Court under sections 330, 331 or 503 of the Bankruptcy Code and any reclamation claims arising under section 546(c) of the Bankruptcy Code, any fee chargeable under section 1930 of Chapter 123 of Title 28 of the United States Code and any amounts payable with respect to Tranche A or Tranche B of the DIP Financing Facility. "Administrative Expense Claim Bar Date" means the date that is thirty (30) days following the Effective Date. The Administrative Expense Claim Bar Date shall apply to all holders of Administrative Expense Claims not satisfied prior to the Administrative Expense Claim Bar Date, except that the Administrative Expense Claim Bar Date shall not apply to holders of the following limited types of claims: (a) United States Trustee Claims; (b) post-petition liabilities incurred and payable in the ordinary course of business by any Liquidating Debtor; or (c) fees and expenses incurred by (i) Retained Professionals, (ii) Persons employed by the Liquidating Debtors or serving as independent contractors to the Liquidating Debtors in connection with their liquidation efforts, including, without limitation, the Liquidating Trustee, any Retained Liquidation Professional and the Balloting Agent. "Agent Banks" means Bank of America, N.A., as Administrative Agent and Deutsche Bank, AG, New York Branch, as Documentation Agent, under the Prepetition Agreement. "Allowed" means, with reference to the portion of any Claim (other than Administrative Expense Claims) or Equity Interest and with respect to each Liquidating Debtor, (a) any such Claim against or Equity Interest in such Liquidating Debtor which has been listed by a Liquidating Debtor in its Schedules, as such Schedules have been or may be amended or supplemented by a Liquidating Debtor from time to time in accordance with Bankruptcy Rule 1009, as liquidated in amount and not disputed or contingent and for which no contrary proof of claim or interest has been filed, (b) any Claim or Equity Interest allowed (i) under this Liquidation Plan or under any settlement agreement incorporated or otherwise implemented by this Liquidation Plan, (ii) by Final Order, or (iii) as to which the liability of each Liquidating Debtor and the amount thereof are determined by a final, non-appealable order of a court of competent jurisdiction other than the Court or (c) as to which a proof of claim has been timely filed before the applicable Bar Date in a liquidated amount with the Court pursuant to the Bankruptcy Code or any order of the Court, provided that (i) no objection to the allowance of such Claim or notice to expunge such Claim has been interposed by the Liquidating Debtors, the Liquidating Trustee, the United States Trustee or any other party in interest as permitted under the Bankruptcy Code before any final date for the filing of such objections or motions set forth in this Liquidation Plan, the Confirmation Order or other order of the Court or (ii) if such objection or motion has been filed and not withdrawn, such objection or motion has been overruled by a Final Order (but only to the extent such objection or motion has been overruled); provided, further that any such Claims or Equity Interests allowed solely for the purpose of voting to accept or reject the Liquidation Plan pursuant to an order of the Court shall not be considered "Allowed Claims" or "Allowed Equity Interests" for the purpose of distributions hereunder. Except as expressly stated in this Liquidation Plan or as provided under section 506(b) of the Bankruptcy Code or a Final Order of the Court, an Allowed Claim shall not include interest on the principal amount of any Claim accruing from and after the applicable Petition Date or any fees (including attorneys' fees), costs or charges (including late payment charges) related to any Claim accruing from or after the applicable Petition Date. "Allowed Administrative Expense Claim" means the portion of any Administrative Expense Claim (including any interest for which the Liquidating Debtors are legally obligated) that is (i) incurred or arising after the applicable Petition Date and prior to the Effective Date, (ii) for those Administrative Expense Claims as to which the Administrative Expense Claim Bar Date is applicable, which has been filed before the Administrative Expense Bar Date, and (iii) as to which no objection to the allowance of such Administrative Expense Claim has been filed or other dispute has been raised by the Liquidating Debtors, the Committee, the United States Trustee or any other party in interest as permitted under the Bankruptcy Code. All Administrative Expense Claims arising under or related to the DIP Financing Facility are deemed Allowed Administrative Expense Claims. "Allowed Class o Claims" means an Allowed Claim in the specified Class. "Allowed Priority Tax Claim" means any Claim that is Allowed pursuant to Section 2.4 of this Liquidation Plan. "Allowed Subclass 3A Liquidation Secured Claim Amount" means (i) the allowed amount of the Secured Bank Claims, currently estimated to be $434 million including accrued but unpaid fees and interest, but subject to ultimate resolution of the claims under the Prepetition Credit Agreement and (ii) the allowed amount of the Secured 9.25% Debenture Claims, currently estimated to be $105 million including accrued but unpaid fees and interest, but subject to ultimate resolution of the claims under the 9.25% Debentures. "Ballot" means the ballot that accompanies the Disclosure Statement upon which holders of Impaired Claims entitled to vote on the Liquidation Plan shall indicate their acceptance or rejection of the Liquidation Plan. "Balloting Agent" means Bankruptcy Services LLC ("BSI") or such other entity authorized by the Court to distribute, collect and tally Ballots. "Bank Agreement Ogden FMCA Collateral" means the assets of Ogden FMCA subject to a lien of CSFB, in its capacity as holder of the Secured CSFB Claim, pursuant to the Prepetition CSFB Agreement. "Bankruptcy Code" means title 11 of the United States Code, as amended from time to time, as applicable to the Chapter 11 Cases. "Bankruptcy Rules" means the Federal Rules of Bankruptcy Procedure promulgated by the United States Supreme Court under 28 U.S.C. ss. 2075 and the local rules of the Court (including any applicable local rules and standing and administrative orders of the Court), as now in effect or hereafter amended, as applicable to the Chapter 11 Cases. "Bar Date" means the applicable date or dates fixed by the Court or this Liquidation Plan for filing proofs of claim or interests in the Chapter 11 Cases. "Bondholders Committee" means the Informal Committee of Secured Debenture Holders of certain holders of, and the Indenture Trustee for, the 9.25% Debentures due 2022 issued by Ogden Corporation, now known as Covanta Energy Corporation. "Business Day" means any day other than a Saturday, Sunday or "legal holiday" as such term is defined in Bankruptcy Rule 9006(a). "Cash" means lawful currency of the United States, including cash equivalents, bank deposits, checks and other similar items, unless otherwise indicated. "Causes of Action" means as to each Liquidating Debtor all claims and causes of action now owned or hereafter acquired by such Liquidating Debtor, whether arising under any section under the Bankruptcy Code or other federal or state law, including, without limitation, causes of action for preferences, fraudulent conveyances, and other avoidance power claims arising under sections 544, 545, 547, 548, 549, 550, 551, 553(b) or other sections of the Bankruptcy Code. "Chapter 11 Cases" means the voluntary cases under Chapter 11 of the Bankruptcy Code commenced by each Liquidating Debtor which cases are currently pending before the Court under the caption In re Ogden Services New York, Inc. et. al., Case Nos. 02-40826 (CB), et al. "Claim" has the meaning set forth in section 101 of the Bankruptcy Code, whether or not asserted. "Claims Objection Deadline" means that day which is one hundred eighty (180) days after the Effective Date, as the same may be extended from time to time by the Court, without further notice to parties in interest. "Class" means any group of similar Claims or Equity Interests described in Article IV of the Liquidation Plan in accordance with section 1123(a)(1) of the Bankruptcy Code. "Collateral" means as to each Liquidating Debtor any property or interest in property of the estate of the Liquidating Debtor subject to a Lien to secure the payment or performance of an Allowed Claim, which Lien is not subject to avoidance under the Bankruptcy Code or otherwise invalid under the Bankruptcy Code or applicable state law. "Committee" means the Official Committee of Unsecured Creditors appointed by the Office of the United States Trustee in the Chapter 11 Cases pursuant to section 1102 of the Bankruptcy Code, as appointed, modified or reconstituted from time to time. "Confirmation Date" means the date on which the clerk of the Court enters the Confirmation Order on the docket, within the meaning of Bankruptcy Rules 5003 and 9021. "Confirmation Hearing" means the hearing held by the Court to consider confirmation of the Liquidation Plan pursuant to section 1128 of the Bankruptcy Code, as such hearing may be adjourned or continued from time to time. "Confirmation Order" means the order of the Court confirming the Liquidation Plan pursuant to section 1129 of the Bankruptcy Code, together with any subsequent orders, if any, pursuant to sections 1127 and 1129 of the Bankruptcy Code approving modifications to the Liquidation Plan, which in each case shall be in form and substance satisfactory to the Liquidating Debtors. "Court" collectively means the United States Bankruptcy Court for the Southern District of New York and, to the extent it may exercise jurisdiction over the Chapter 11 Cases, the United States District Court for the Southern District of New York or if either such court ceases to exercise jurisdiction over the Chapter 11 Cases, such other Court or adjunct thereof that exercises competent jurisdiction over the Chapter 11 Cases or any proceeding therein. "Covanta" means Covanta Energy Corporation, a Reorganizing Debtor and the ultimate corporate parent directly or indirectly holding an interest in all the Reorganizing Debtors and Heber Debtors in the Reorganizing Debtors' and Heber Debtors' Chapter 11 Cases. "CSFB" means Credit Suisse First Boston, or its predecessor entity, Credit Suisse, including the Persons participating in CSFB's interest under the Prepetition CSFB Agreement. "Designated DIP Collateral" means (i) any Cash held by the Liquidating Non-Pledgor Debtors (including the Liquidation Proceeds resulting from the sale of certain assets of Ogden Transition Corp.) or any entitlement or Claim of a Liquidating Non-Pledgor Debtor to any Cash, and (ii) any Causes of Action of the Liquidating Debtors. "DIP Agents" means Bank of America, N.A., as administrative agent and Deutsche Bank AG, New York branch, as documentation agent, under the DIP Financing Facility. "DIP Financing Facility" means the Debtor-in-Possession Credit Agreement, dated as of April 1, 2002, among the Reorganizing Debtors, the Heber Debtors, the Liquidating Debtors, the DIP Lenders and the DIP Agents, as it has been or may be amended and modified from time to time, and as approved and extended by order of the Court. "DIP Lender Direction" means the direction of the DIP Lenders, instructing the Liquidating Debtors to transfer any Designated DIP Collateral to Reorganized Covanta. "DIP Lenders" means those Persons from time to time party to the DIP Financing Facility as lenders. "Disclosure Statement" means the written disclosure statement that relates to this Liquidation Plan and is approved by the Court pursuant to section 1125 of the Bankruptcy Code, as such disclosure statement has been or may be amended, modified or supplemented (and all exhibits and schedules annexed thereto or referred to therein) and that is prepared and distributed in accordance with section 1125 of the Bankruptcy Code and Bankruptcy Rule 3018. "Disputed Claim" means that portion (including, when appropriate, the whole) of a Claim that is not an Allowed Claim or is subject to an Estimation Request, or as to which an objection has been filed. For the purposes of the Liquidation Plan, a Claim shall be considered a Disputed Claim in its entirety before the time that an objection has been or may be filed, if: (a) the amount or classification of the Claim specified in the relevant proof of claim exceeds the amount or classification of any corresponding Claim scheduled by the relevant Liquidating Debtor in its Schedules; (b) any corresponding Claim scheduled by a Liquidating Debtor has been scheduled as disputed, contingent or unliquidated in its Schedules or (c) no corresponding Claim has been scheduled by a Liquidating Debtor in its Schedules. "Disputed Claims Reserve " means the reserve established by the Liquidating Trustee pursuant to Section 9.14(a) of the Liquidation Plan, with respect to each Class of Claims entitled to Distributions under the Liquidation Plan, in which (i) the Liquidating Trustee determines that there exist any Disputed Claims in such Class and (ii) the Liquidating Trustee identifies Liquidation Proceeds that are not Collateral, in order to make Distributions in an amount such that, if such Disputed Claims were to become Allowed Claims, there will be sufficient Cash to pay all of such Disputed Claims with respect each such Class of Claims in accordance with the provisions of this Liquidation Plan. The Disputed Claims Reserve is to be maintained under this Liquidation Plan, as set forth more fully in Article VII of this Liquidation Plan. "Dissolution Expenses" means all reasonable and necessary costs of the Liquidating Trustee (including any Retained Liquidating Professional retained by the Liquidating Trustee, pursuant to Section 9.5 of the Liquidation Plan) associated with (i) winding up and dissolving the Liquidating Debtors in accordance with applicable state law, (ii) the abandonment of any Liquidation Assets in accordance with Section 9.10 of the Liquidation Plan, (iii) commencing a proceeding in the Court to determine the reasonableness, accuracy or proper scope of any Dissolution Expenses disputed by the Oversight Nominee, (iv) the administration of the Liquidation Trust (including the payment of any United States Trustee Fees), (v) obtaining a Final Order from the Court closing the Chapter 11 Case of each Liquidating Debtor, (vi) the filing of any necessary tax returns and other filings with governmental authorities on behalf of the Liquidation Trust and the Residual Liquidation Assets it holds and (vii) making any Distributions under this Liquidation Plan; provided, however, that Dissolution Expenses shall not include any Liquidation Expenses. "Distribution" means any distribution by the Liquidating Trustee of Net Liquidation Proceeds of other Liquidation Assets to the holders of Allowed Claims. "Effective Date" means the date upon which the Reorganization Plan Effective Date occurs. "Equity Interest" means as to each Liquidating Debtor, any equity security, partnership interest or share of common stock or other instrument evidencing an ownership interest in such Liquidating Debtor, regardless of whether it may be transferred, and any option, warrant or right, contractual or otherwise, to acquire an ownership interest or other equity security in such Liquidating Debtor and shall include any redemption, conversion, exchange, voting participation, dividend rights and liquidation preferences relating thereto. "Estate" means as to each Liquidating Debtor, the estate which was created by the commencement of such Liquidating Debtor's Chapter 11 Case pursuant to section 541 of the Bankruptcy Code, and shall be deemed to include, without limitation, any and all privileges of such Liquidating Debtor and all interests in property, whether real, personal or mixed, rights, causes of action, avoidance powers or extensions of time that such Liquidating Debtor or such estate shall have had effective as of the commencement of the Chapter 11 Cases, or which such estate acquired after the commencement of the Chapter 11 Case, whether by virtue of sections 544, 545, 546, 547, 548, 549 or 550 of the Bankruptcy Code or otherwise. "Estimation Request" means a request for estimation of a Claim in accordance with the Bankruptcy Code and the Bankruptcy Rules. "Fee Dispute Notice" means the notice sent by the Oversight Nominee to the Liquidating Trustee or any Retained Professional, within fifteen (15) days receipt of the Liquidation Trustee Fee Notice and Retained Professional Fee Notices, disputing the (i) reasonableness, (ii) accuracy or (iii) scope of any portion of the Dissolution Expenses claimed by the Liquidating Trustee or any Retained Professional. "Final Distribution" means with respect to each Liquidating Debtor, the distribution by the Liquidating Trustee that exhausts any Residual Liquidation Assets attributable to such Liquidating Debtor. "Final Liquidation Determination Date" means the date, as to each of the Liquidating Debtors, upon which either (i) the Final Liquidation Distribution Date occurs; or (ii) the Liquidating Trustee determines that there exist no Residual Liquidation Assets which could generate Liquidation Proceeds. "Final Liquidation Distribution Date" means with respect to each Liquidating Debtor, the Liquidation Distribution Date on which the Final Distribution is made. "Final Order" means an order or judgment of the Court, as entered on the docket of the Court, that has not been reversed, stayed, modified, or amended, and as to which: (a) the time to appeal, seek review or rehearing or petition for certiorari under the Bankruptcy Rules has expired and no timely filed appeal or petition for review, rehearing, remand or certiorari is pending; or (b) any appeal taken or petition for certiorari filed has been resolved by the highest Court to which the order or judgment was appealed or from which certiorari was sought, provided, however, that the possibility that a motion under Rule 59 or Rule 60 of the Federal Rules of Civil Procedure, or any analogous rule under the Bankruptcy Rules or other rules governing procedure in cases before the Court, may be filed with respect to such order or judgment shall not cause such order or judgment not to be a Final Order. "Heber Debtors" means, collectively, those debtors identified on Exhibit 4 attached to this Liquidation Plan that are being reorganized pursuant to the Reorganization Plan "Impaired" means, when used with reference to an Allowed Claim or an Allowed Equity Interest, a Claim or Equity Interest that is impaired within the meaning of section 1124 of the Bankruptcy Code. "Initial Liquidation Distribution Date" means the date that is the later of (i) the Effective Date (or soon thereafter as reasonably practicable, but in no event later than thirty (30) calendar days after the Effective Date) and (ii) the first Business Day after the date that is thirty (30) calendar days after the date any Claims become Allowed Claims or otherwise become payable under the Liquidation Plan. "Initial Petition Date" means April 1, 2002, the date upon which the Liquidating Debtors identified on Exhibit 3 as those that filed on the Initial Petition Date filed their respective orders for relief under Chapter 11 of the Bankruptcy Code. "Intercompany Claims" means all Claims against a Liquidating Debtor asserted by any other Liquidating Debtor, Reorganizing Debtor or Heber Debtor, including, without limitation, any (a) preference actions, fraudulent conveyance actions, rights of setoff and other claims or causes of action under sections 544, 547, 548, 549, 550 and 553 of the Bankruptcy Code and other applicable bankruptcy or nonbankruptcy law, (b) claims or causes of action arising out of illegal dividends or similar theories of liability, (c) claims or causes of action based on piercing the corporate veil, alter ego liability or similar legal or equitable theories of recovery arising out of the ownership or operation of any of the Liquidating Debtors prior to the applicable Petition Date, (d) claims or causes of action based on unjust enrichment, (e) claims or causes of action for breach of fiduciary duty, mismanagement, malfeasance or, to the extent they are claims or causes of action of any of the Liquidating Debtors, fraud, (f) claims or causes of action arising out of any contracts or other agreements between or among any of the Liquidating Debtors and any other Liquidating Debtor or any other Reorganizing Debtor or Heber Debtor that are rejected, and (g) any other claims or causes of action arising out of or related in any way to the Chapter 11 Cases, the Reorganization Plan or this Liquidation Plan that are based on an injury that affects or affected the shareholders or creditors of any of the Liquidating Debtors, Reorganizing Debtors or Heber Debtors generally. "Intercreditor Agreement" means the Intercreditor Agreement dated as of March 14, 2001, among Covanta and its affiliates named therein and the Prepetition Lenders, as it has been or may be amended, supplemented or otherwise modified. "Intermediate Petition Date" means December 16, 2002, the date upon which Covanta Concert Holdings, Inc. filed its order for relief under Chapter 11 of the Bankruptcy Code. "Lien" has the meaning set forth in section 101(37) of the Bankruptcy Code. "Liquidating Debtors" has the meaning ascribed to such term on the first page of this Liquidation Plan (each of the Liquidating Debtors is individually referred to herein as a Liquidating Debtor). A list of the Liquidating Debtors is attached hereto as Exhibit 1. "Liquidating Non-Pledgor Debtors" means the Liquidating Debtors that are not Liquidating Pledgor Debtors. "Liquidating Pledgor Debtor Assets" means any the following Claims and Liquidation Assets of the Liquidating Pledgor Debtors: (i) the claim to any tax refunds due to Ogden Allied Maintenance Corporation resulting from the sale of certain non-port aviation Liquidation Assets; (ii) the claim to any proceeds resulting from the dispute between Covanta Concert Holdings, Inc. and the purchaser of certain of its Liquidation Assets over certain rental payments; (iii) the claim to the proceeds of any settlement reached by Ogden New York Services, Inc. and the purchaser of substantially all of its Liquidation Assets; (iv) the claim to the Liquidation Proceeds or, if sold prior to the Effective Date, then the proceeds, relating to the sale of any Liquidation Assets of Ogden Firehole Entertainment Corp.; (v) any Liquidation Assets of Ogden FMCA, not otherwise surrendered to CSFB pursuant to Section 4.4 of this Liquidation Plan; (vi) any Cash held by a Liquidating Pledgor Debtor or any entitlement or Claim of a Liquidating Pledgor Debtor to any Cash, which arose prior to the Petition Date (including any accounts receivable); and (vii) any Causes of Action of the Liquidating Pledgor Debtors, not otherwise transferred to Reorganized Covanta pursuant to the DIP Lender Direction. "Liquidating Pledgor Debtors" means the Liquidating Debtors whose Liquidation Assets are Collateral of (i) the banks under the Prepetition Credit Agreement and (ii) the holders of the 9.25% Debentures. "Liquidating Trust" means a grantor trust established pursuant to a Liquidating Trust Agreement. "Liquidating Trust Agreement" means as to the Liquidating Debtors, the agreement, which creates the Liquidating Trust, to be entered into by the Liquidating Debtors and the Liquidating Trustee and which shall be included in the Liquidation Plan Supplement. "Liquidating Trustee" means as to the Liquidating Debtors, the individual identified in the Notice of Designation and any replacement thereof duly appointed by the Oversight Nominee. "Liquidating Trustee Billing Date" means the date that is the twenty-fifth (25th) day of each month following the first full month after the Effective Date. "Liquidating Trustee Fee Notice" means the reasonably detailed statement sent by the Liquidating Trustee to the Oversight Nominee on any Liquidation Trustee Billing Date detailing: (i) any Dissolution Expenses incurred by the Liquidating Trustee in the prior month; (ii) Distributions, if any, made in the previous month; and (iii) planned Distributions, if any, for the next Liquidation Distribution Date. "Liquidation Assets" means as to each Liquidating Debtor all of the assets, property, interests (including the equity interests of each and every Liquidating Debtor) and effects, real and personal, tangible and intangible, wherever located, of such Liquidating Debtor, provided, however, that the Liquidation Assets shall not include the Bank Agreement Ogden FMCA Collateral. "Liquidation Distribution Date" means any of the following dates if there are any Net Liquidation Proceeds in the Liquidating Trust attributable to any Liquidating Debtor on such date: (a) the Initial Liquidation Distribution Date, (b) from the Initial Liquidation Distribution Date until the Final Liquidation Distribution Date, the last Business Day of any calendar quarter, and (c) the Final Liquidation Distribution Date. "Liquidation Expenses" means the costs incurred by the Liquidating Trustee in its efforts to sell, transfer, collect or otherwise monetize any of the Residual Liquidation Assets. "Liquidation Plan" means this Joint Plan of Liquidation under Chapter 11 of the Bankruptcy Code, including, without limitation, all documents referenced herein and all exhibits, supplements, appendices and schedules hereto, either in its present form or as the same has been or may be altered, amended, modified or supplemented from time to time. "Liquidation Plan Supplement" means a supplemental appendix to this Liquidation Plan that will contain certain documents relating to this Liquidation Plan in substantially completed form, including the Liquidating Trust Agreement to be filed no later than five (5) days prior to the last date by which votes to accept or reject this Liquidation Plan must be submitted. Documents to be included in the Liquidation Plan Supplement will be posted at www.covantaenergy.com as they become available, but no later than five (5) days prior to the last date by which votes to accept this Liquidation Plan must be submitted. "Liquidation Proceeds" means the Cash consideration received from the sale, transfer or collection of any Liquidation Assets or the monetization of such Liquidation Assets to Cash in some other manner as contemplated in this Liquidation Plan, occurring after the applicable Petition Date, less the reasonable, necessary and customary expenses attributable to such sale, transfer, collection or monetization, including costs of curing defaults under executory contracts that are assigned, paying personal property or other taxes accruing in connection with such sale, transfer, collection or monetization of such Liquidation Assets, brokerage fees and commissions, collection costs, reasonable attorneys' fees and expenses and any applicable taxes or other claims of any Governmental Unit in connection with such Liquidation Assets and any escrows or accounts established to hold funds for purchase price adjustments, indemnification claims, or other purposes in connection with such sale, transfer, collection or monetization; provided, however, that upon the release to the Liquidating Debtors of funds from such escrows or accounts, such funds shall become Liquidation Proceeds of the relevant sale, transfer, collection or monetization. "Liquidation Secured Claims" means the Secured Bank Claims and the 9.25% Debenture Claims, provided, however, that such Claims shall not include the Secured CSFB Claim. "Net Liquidation Proceeds" shall consist of the Liquidation Proceeds, interest, dividends, and other investment (or other cash equivalent) income produced by the Liquidation Assets. "Notice of Designation" means the notice filed with the Court on or before thirty (30) days prior to the Confirmation Hearing, designating the Liquidating Trustee and the Oversight Nominee. "9.25% Debenture Claim" means any Claim that arises out of, or is attributable to, ownership of the 9.25% Debentures. "9.25% Debentures" means those certain debentures issued by Ogden Corporation (now known as Covanta) in the aggregate principal amount of $100,000,000 due in March 2022 and bearing an interest rate of 9.25% per annum (Cusip No. 676346AF6). "9.25% Debentures Adversary Proceeding" means adversary proceeding No. 02-03004 captioned as The Official Committee of Unsecured Creditors v. Wells Fargo Bank Minnesota, National Association, et al., pending before the Court. "Ogden FMCA" means Ogden Facility Management Corporation of Anaheim, a Liquidating Debtor. "Operating Reserve" means the reserve established by the Liquidating Trustee on the Effective Date to pay (x) the Administrative Expense Claims, Priority Tax Claims and Priority Non-Tax Claims of the Liquidating Debtors, (y) the Oversight Nominee Expenses and (z) the Dissolution Expenses, which reserve shall be funded in an amount not to exceed $500,000.00. "Oversight Nominee" means the Person identified in the Notice of Designation and appointed pursuant to Article X of this Liquidation Plan. "Oversight Nominee Expenses" means the reasonable fees and expenses of the Oversight Nominee in the discharge and performance of its duties specified in this Liquidation Plan. "Person" has the meaning provided in section 101(41) of the Bankruptcy Code and includes, without limitation, any individual, corporation, partnership, association, indenture trustee, organization, joint stock company, joint venture, estate, trust governmental unit or any political subdivision thereof, the Committee, Indenture Trustee, Equity Interest holders, holders of Claims, current or former employees of any Liquidating Debtor, or any other entity. "Petition Date" means, collectively, the Initial Petition Date, the Intermediate Petition Date and the Subsequent Petition Date. "Preferred Distribution" shall have the meaning assigned to that term under the Intercreditor Agreement. "Prepetition Credit Agreement" means the Revolving Credit and Participation Agreement dated as of March 14, 2001, among Covanta, certain other Reorganizing Debtors, Liquidating Debtors and Heber Debtors and the Prepetition Lenders and the Security Agreement, dated as of March 14, 2001, both as they have been or may be amended, supplemented or otherwise modified from time to time. "Prepetition CSFB Agreement" means the Bank Agreement dated as of December 1, 1993, among the City of Anaheim, Ogden FMCA and CSFB. "Prepetition Lenders" means the Persons identified as lenders under the Prepetition Credit Agreement, together with their successors and permitted assigns. "Priority Non-Tax Claim" means any Claim entitled to priority pursuant to section 507(a) of the Bankruptcy Code, other than (a) an Administrative Expense Claim or (b) a Priority Tax Claim. "Priority Tax Claim" means any Claim of a Governmental Unit of the kind entitled to priority in payment as specified in sections 502(i) and 507(a)(8) of the Bankruptcy Code. "Pro Rata Class Share" means, the proportion that the amount of any Claim bears to the aggregate amount of such Claim and all other Claims in the same Class entitled to distributions from the same source of Cash or Liquidation Assets (including Disputed Claims). "Reorganization Plan" means the Joint Plan of Reorganization of Ogden New York Services, Inc. et al. Under Chapter 11 Of The Bankruptcy Code (including all exhibits and schedules annexed thereto), as the same has been or may be amended, modified or supplemented from time to time. "Reorganization Plan Effective Date" means a date, which is a Business Day selected by the Reorganizing Debtors that is no more than ten (10) Business Days following the date on which all conditions set forth in Section 10.2 of the Reorganization Plan have been satisfied or expressly waived pursuant to Section 10.3 of the Reorganization Plan. "Reorganized Covanta" means Covanta on and after the Effective Date. "Reorganized Debtor" means each Reorganizing Debtor, on or after the Effective Date. "Reorganizing Debtors" means, collectively, those debtors identified on Exhibit 2 attached hereto that are being reorganized pursuant to the Reorganization Plan. "Residual Liquidation Assets" means any Liquidation Assets that are not Designated DIP Collateral or Liquidating Pledgor Debtor Assets. "Retained Liquidation Professional" means any attorney, accountant or other professional retained by the Liquidating Trustee with the prior approval of the Oversight Nominee, which professional is reasonably required by the Liquidating Trustee to perform its duties described in this Liquidation Plan. "Retained Liquidation Professional Fee Notice" means the reasonably detailed statement sent by any Retained Liquidation Professional to the Liquidating Trustee five (5) days prior to the Liquidating Trustee Billing Date detailing such Retained Liquidation Professional's fees and expenses arising under this Liquidation Plan. "Retained Professionals" means the professionals retained in these jointly administered Chapter 11 Cases by the Liquidating Debtors or the Committee pursuant to sections 327, 328 or 1103 of the Bankruptcy Code pursuant to Final Orders of the Court (other than Retained Liquidation Professionals). "Schedule of Assumed Contracts and Leases" means a schedule of the executory contracts and unexpired leases to which each of the Liquidating Debtors is a party that will be assumed under Article VIII of the Liquidation Plan, which schedule will be filed and served on the relevant parties no less than twenty-three (23) days prior to the Confirmation Hearing. "Schedules" means the schedules of assets and liabilities and the statement of financial affairs filed by the Liquidating Debtors as required by sections 521 and 1106(a)(2) of the Bankruptcy Code and Bankruptcy Rule 1007, as they have been or may be amended or supplemented from time to time. "Secured Bank Claims" means the Secured Claims of the Prepetition Lenders arising under the Prepetition Credit Agreement and related collateral documents. "Secured Claim" means, pursuant to section 506 of the Bankruptcy Code, that portion of a Claim that is secured by a valid, perfected and enforceable security interest, lien, mortgage or other encumbrance, that is not subject to avoidance under applicable bankruptcy or non-bankruptcy law, in or upon any right, title or interest of any of the Liquidating Debtors in and to property of the Estates, to the extent of the value of the holder's interest in such property as of the relevant determination date. The defined term "Secured Claim" includes any Claim that is: (i) subject to an offset right under applicable law and (ii) a secured claim against any of the Liquidating Debtors pursuant to sections 506(a) and 553 of the Bankruptcy Code. Such defined term shall not include for voting or Distribution purposes any such Claim that has been or will be paid in connection with the cure of defaults under an assumed executory contract or unexpired lease under section 365 of the Bankruptcy Code. "Secured Creditor Direction" means (a) the direction of the holders of Allowed Class 3A Claims instructing the Liquidating Pledgor Debtors to (i) transfer any Distributions in excess of $500,000 that such holders of Class 3A Claims would otherwise be entitled to under this Liquidation Plan to Reorganized Covanta, (ii) transfer up to $500,000 of such Distributions to the Operating Reserve and (iii) transfer any Liquidating Pledgor Debtor Assets to Reorganized Covanta; (b) the release by the holders of Allowed Class 3A Claims of any Liens on any Net Liquidation Proceeds and Liquidating Pledgor Debtor Assets resulting from the post-petition sale of any of the Liquidation Assets of the Liquidating Pledgor Debtors and all Liquidating Pledgor Debtor Assets transferred to Reorganized Covanta and (c) upon the occurrence of (I) the orders closing each of the Chapter 11 Cases becoming Final Orders, (II) the Final Liquidation Determination Date as to all of the Liquidating Debtors and (III) the final payment of any remaining Dissolution Expenses and Oversight Nominee Expenses, to the extent that there is any Cash in the Operating Reserve, such Cash shall be contributed to Reorganized Covanta. "Secured CSFB Claim" means the Secured Claim against Ogden FMCA of CSFB arising under the Prepetition CSFB Agreement. "Specified Personnel" means any individual serving as a present or former officer, director or employee of the Liquidating Debtors who, prior to the Confirmation Date, was entitled to indemnification from one of the Liquidating Debtors or for whom such indemnification was permitted under applicable law. "Subsequent Petition Date" means June 6, 2003, the date upon which the Liquidating Debtors identified on Exhibit 3 as those that filed on the Subsequent Petition Date filed their respective petitions for relief under Chapter 11 of the Bankruptcy Code. "Substantial Contribution Claims" means the claim by any creditor or party in interest for reasonable compensation for services rendered in the Chapter 11 Cases pursuant to section 503(b)(3), (4) or (5) of the Bankruptcy Code. "Unimpaired" means, when used with reference to a Claim or Equity Interest, a Claim or Equity Interest that is not Impaired. "United States Trustee" means the Office of the United States Trustee for the Southern District of New York. "United States Trustee Claims" means all United States Trustee Fees accrued through the close of the Chapter 11 Cases. "United States Trustee Fees" means all fees and charges due from the Liquidating Debtors to the United States Trustee pursuant to section 1930 of Title 28 of the United States Code. "Unsecured Liquidation Claim" means any Claim (including without limitation, Claims arising from the rejection of executory contracts and unexpired leases) that is not a Secured Claim, Administrative Expense Claim, Priority Tax Claim, Priority Non-Tax Claim or Intercompany Claim against the Liquidating Debtors. ARTICLE II TREATMENT OF ADMINISTRATIVE EXPENSE CLAIMS AND PRIORITY TAX CLAIMS 2.1 Non-Classification. As provided in section 1123(a)(1) of the Bankruptcy Code, Administrative Expense Claims and Priority Tax Claims against the Liquidating Debtors are not classified for the purposes of voting on or receiving Distributions under this Liquidation Plan. All such Claims are instead treated separately pursuant to the terms set forth in this Article II. 2.2 Administrative Expense Claims. Except to the extent that the applicable Liquidating Debtor and a holder of an Allowed Administrative Expense Claim agree to less favorable treatment and except as set forth in Section 2.3 and 2.5 of this Liquidation Plan, each Liquidating Debtor shall pay to each holder of an Allowed Administrative Expense Claim against such Liquidating Debtor, in full satisfaction, settlement, release and discharge of and in exchange for such Allowed Administrative Expense Claim, Cash in an amount equal to such Allowed Administrative Expense Claim on the Initial Liquidation Distribution Date from the Operating Reserve provided that any such liabilities not incurred in the ordinary course of business were approved and authorized by a Final Order of the Court; provided, however, that Allowed Administrative Expense Claims representing liabilities incurred in the ordinary course of business by such Liquidating Debtor, as a debtor in possession, shall be paid by the Liquidating Trustee from the Operating Reserve in the ordinary course of business, consistent with past practice and in accordance with the terms and subject to the conditions of any agreements governing, instruments evidencing, or other documents relating to such transactions. To the extent that the Administrative Expense Claim Bar Date applies, failure to file a timely request for payment of an Administrative Expense Claim prior to the Administrative Expense Claim Bar Date shall result in the Administrative Expense Claim being forever barred and discharged. 2.3 Compensation and Reimbursement Claims. (a) Except with respect to Substantial Contribution Claims which are subject to Section 2.3(b) of this Liquidation Plan, all (i) Retained Professionals and (ii) Persons employed by the Liquidating Debtors or serving as independent contractors to the Liquidating Debtors in connection with their liquidating efforts that are seeking an award by the Court of compensation for services rendered or reimbursement of expenses incurred through and including the Confirmation Date under subsections 503(b)(2), 503(b)(3), 503(b)(4) or 503(b)(5) of the Bankruptcy Code (other than the Liquidating Trustee and any Retained Liquidation Professionals) shall file and serve on counsel for the Liquidating Debtors and as otherwise required by the Court and the Bankruptcy Code their respective final applications for allowance of compensation for services rendered and reimbursement of expenses incurred on or before the date that is forty-five (45) days after the Effective Date. Any request for payment of an Administrative Expense Claim of the type specified in Section 2.3(a) of this Liquidation Plan, which is not filed by the applicable deadline set forth above, shall be barred. (b) Any Person who requests compensation or expense reimbursement for a Substantial Contribution Claim in these Chapter 11 Cases must file an application with the clerk of the Court, on or before the Administrative Expense Claim Bar Date, and serve such application on the Liquidating Trustee and counsel for the Reorganized Debtors and as otherwise required by the Court and the Bankruptcy Code on or before such date, or be forever barred from seeking compensation or expense reimbursement for such Substantial Contribution Claim. (c) All other requests for payment of an Administrative Expense Claim (other than as set forth in clauses (a) and (b) of this Section 2.3 above) that are subject to the Administrative Expense Claim Bar Date must be filed with the Court and served on counsel for the Liquidating Trustee on or before the Administrative Expense Claim Bar Date. Unless the Liquidating Trustee or any other party in interest permitted under the Bankruptcy Code objects to an Administrative Expense Claim by the Claims Objection Deadline, such Administrative Expense Claim shall be deemed Allowed in the amount filed. In the event that the Liquidating Trustee or any other party in interest in the Chapter 11 Cases objects to an Administrative Expense Claim, the Court shall determine the Allowed amount of such Administrative Expense Claim. Notwithstanding the foregoing, no request for payment of an Administrative Expense Claim need be filed with respect to an Administrative Expense Claim which is incurred and payable by the Liquidating Debtors or Liquidating Trustee in the ordinary course of business. (d) Under no circumstances will the deadlines set forth above be extended by order of the Court or otherwise. Any holders of Administrative Expense Claims who are required to file a Claim or request for payment of such Claims or expenses and who do not file such Claims or requests by the applicable dates set forth in this Section 2.3 shall be forever barred from asserting such Claims or expenses against the Liquidating Debtors or any property of the Liquidating Trust. 2.4 Priority Tax Claims. Subject to the consent of [the requisite New Facility Lenders and Additional New Lenders, (as defined by the Reorganization Plan)], each holder of an Allowed Priority Tax Claim will receive in full satisfaction, settlement, release and discharge of and in exchange for such Allowed Priority Tax Claim, Cash equal to the unpaid portion of such Allowed Priority Tax Claim on or as soon as practical after the later of: (i) thirty (30) days after the Effective Date, or (ii) thirty (30) days after the date on which such Priority Tax Claim becomes Allowed; provided, however, that at the option of the Liquidating Trustee, the Liquidating Trustee may pay any or all Allowed Priority Tax Claims over a period not exceeding six (6) years after the date of assessment of the Priority Tax Claims as provided in subsection 1129(a)(9)(C) of the Bankruptcy Code, provided, further, that in no event shall the Liquidating Trustee extend such date of repayment beyond the Final Liquidation Determination Date. If the Liquidating Trustee elects this option as to any Allowed Priority Tax Claim, then the Liquidating Trustee shall make payment of simple interest on the unpaid portion of such Claim semiannually without penalty of any kind, at the statutory rate of interest provided for such taxes under applicable nonbankruptcy law, with the first interest payment due on the latest of: (i) six (6) months after the Effective Date, (ii) six (6) months after the date on which such Priority Tax Claim becomes an Allowed Claim, or (iii) such longer time as may be agreed to by the holder of such Priority Tax Claim and the Liquidating Trustee, provided, however, that the Liquidating Trustee shall reserve the right to pay any Allowed Priority Tax Claim, or any remaining balance of such Allowed Priority Tax Claim, in full, at any time on or after the Effective Date, without premium or penalty. 2.5 DIP Financing Facility Claims. On the Effective Date, the Liquidating Debtors shall perform their obligations under the DIP Lender Direction and, subject to Section 2.5 of the Reorganization Plan, and in consideration of the Reorganizing Debtors' and Heber Debtors' obligations under Section 2.5 of the Reorganization Plan, all amounts outstanding under the DIP Financing Facility and all commitments thereunder shall automatically and irrevocably terminate. ARTICLE III CLASSIFICATION OF CLAIMS AND INTERESTS 3.1 General Rules of Classification. This Liquidation Plan constitutes a Joint Liquidation Plan of the Liquidating Debtors. In accordance with section 1123(a)(1) of the Bankruptcy Code, Administrative Expense Claims and Priority Tax Claims, as described in Article II, have not been classified and thus are excluded from the Classes described below. The classification of Claims and Equity Interests listed below shall be applicable for all purposes, including voting, confirmation, and distribution pursuant to the Liquidation Plan. As to each Liquidating Debtor, a Claim or Equity Interest shall be deemed classified in a particular Class or Subclass only to the extent that the Claim or Equity Interest qualifies within the description of that Class or Subclass and shall be deemed classified in a different Class or Subclass to the extent that any remainder of the Claim or Equity Interest qualifies within the description of such different Class or Subclass. A Claim or Interest is in a particular Class or Subclass only to the extent that such Claim or Interest is Allowed in that Class or Subclass and has not been paid or otherwise settled prior to the Effective Date. ARTICLE IV TREATMENT OF CLAIMS AND EQUITY INTERESTS The following is a designation of the treatment to be accorded, with respect to each Liquidating Debtor, to each Class of Claims and Equity Interests denominated in this Liquidation Plan. No Claim shall entitle the holder thereof to any Distribution pursuant to this Liquidation Plan unless, and only to the extent that, such Claim is an Allowed Claim. All Distributions on account of Allowed Claims shall be made on the Effective Date or the applicable Liquidation Distribution Date, as the case may be. 4.1 Class 1 -- Allowed Priority Non-Tax Claims. (a) Classification: Class 1 consists of all Allowed Priority Non-Tax Claims. (b) Treatment: In full settlement, release and discharge of its Class 1 Claim, each holder of an Allowed Claim in Class 1 shall receive Cash in an amount equal to such Allowed Class 1 Claim on the Initial Liquidation Distribution Date. (c) Voting: Class 1 Claims are Unimpaired, and the holders of Allowed Class 1 Claims are conclusively presumed to accept the Liquidation Plan. The votes of the holders of Class 1 Claims will not be solicited. 4.2 Class 2 -- Intentionally Omitted. 4.3 Subclass 3A -- Allowed Liquidation Secured Claims. (a) Classification: Class 3A consists of all Allowed Liquidation Secured Claims against the Liquidating Pledgor Debtors, which include Secured Bank Claims and 9.25% Debenture Claims. (b) Allowance: The aggregate amount of Allowed Liquidation Secured Claims in Subclass 3A shall be determined as set forth in accordance with the definition of the term Allowed Subclass 3A Liquidation Secured Claim. (c) Treatment: In full settlement, release and discharge of its Class 3A Claim, (I) (a) each holder of an Allowed Liquidation Secured Claim would be entitled, absent the Secured Creditor Direction, to receive on any Liquidation Distribution Date, such holder's Pro Rata Class Share of the sum of any Net Liquidation Proceeds and Liquidation Assets of the Liquidating Pledgor Debtors existing, but not yet distributed on such Liquidation Distribution Date and (b) on the Effective Date, (i) such holder of a Class 3A Allowed Liquidation Secured Claim shall be deemed to have received, on account of its Subclass 3A Allowed Liquidation Secured Claim, the Distribution it receives as a holder of a Subclass 3A or Subclass 3B Claim under the Reorganization Plan, as applicable, in full satisfaction of its Subclass 3A Claim under the Liquidation Plan and (ii) the Liquidating Trustee and the Liquidating Debtors will implement the Secured Creditor Direction and (II) each holder of an Allowed Liquidation Secured Claim shall be entitled to receive on any Liquidation Distribution Date, such holder's Pro Rata Class Share of any Net Liquidation Proceeds of any Liquidating Pledgor Debtor's Residual Liquidation Assets. (d) Voting: Class 3A Claims are Impaired and the holders of Allowed Class 3A Claims in such Class are entitled to vote to accept or reject the Liquidation Plan. 4.4 Subclass 3B -- Allowed Secured CSFB Claim. (a) Classification: Class 3B consists of the Allowed Secured CSFB Claim against Ogden FMCA. (b) Allowance: The Class 3B Claim shall be Allowed in the aggregate amount of the value of the Bank Agreement Ogden FMCA Collateral. (c) Treatment: On the Effective Date, or as soon thereafter as practicable, Ogden FMCA shall cause to be transferred, pursuant to Section 6.1(b) of this Liquidation Plan, to CSFB, in its capacity as holder of the Allowed Secured CSFB Claim, the Bank Agreement Ogden FMCA Collateral, in full settlement, release and discharge of its Class 3B Claim. (d) Voting: The Class 3B Claim is Impaired, and the holder of the Allowed Class 3A Claim in such Class is entitled to vote to accept or reject the Liquidation Plan. 4.5 Class 4 -- Intentionally Omitted. 4.6 Class 5 -- Intentionally Omitted. 4.7 Class 6 -- Intentionally Omitted. 4.8 Class 7 -- Unsecured Liquidation Claims. (a) Classification: Class 7 consists of all Allowed Unsecured Liquidation Claims. (b) Treatment: The holders of Class 7 Claims shall not be entitled to receive any Distribution under this Liquidation Plan. (c) Voting: Class 7 Claims are Impaired and the holders of Allowed Claims in such Class are conclusively presumed to reject the Liquidation P1an. The votes of holders of Class 7 Claims will not be solicited. With respect to Allowed Class 7 Claims for and to the extent which insurance is available, such Allowed Class 7 Claims shall be paid in the ordinary course of business to the extent of such insurance, which any such Claims become Allowed Claims and such insurance proceeds become available; provided, however, that to the extent that insurance is not available or is insufficient, treatment of such Allowed Class 7 Claim shall be as otherwise provided in this Liquidation Plan. 4.9 Class 8 -- Intentionally Omitted. 4.10 Class 9 -- Intercompany Claims. (a) Classification: Class 9 consists of all Intercompany Claims. (b) Treatment: On the Effective Date, all Intercompany Claims shall be cancelled, annulled and extinguished. Holders of such claims shall receive no distributions in respect of Class 9 Claims. (c) Voting: Class 9 Claims are impaired and holders of Allowed Claims in such Class are conclusively presumed to reject this Liquidation Plan. The votes of the holders of Class 9 Claims will not be solicited. 4.11 Class 10 -- Intentionally Omitted. 4.12 Class 11 -- Equity Interests in the Liquidating Debtors. (a) Classification: Class 11 consists of all Equity Interest in Liquidating Debtors. (b) Treatment: On and after the Effective Date, all Equity Interests in the Liquidating Debtors shall not be entitled to receive any Distributions under this Liquidation Plan. Such Equity Interests shall be cancelled, annulled and extinguished. (c) Voting: Class 11 Equity Interests are Impaired and the holders of Equity Interests in such Class are conclusively presumed to reject the Liquidation Plan. The votes of holders of Equity Interests in such Class will not be solicited. 4.13 Class 12 -- Intentionally Omitted. 4.14 Class 13 -- Intentionally Omitted. ARTICLE V ACCEPTANCE OR REJECTION OF THE LIQUIDATION PLAN 5.1 Voting of Claims. Except as otherwise indicated herein or as otherwise provided by a Final Order of the Court, each holder of an Allowed Claim in Class 3 shall be entitled to vote to accept or reject this Liquidation Plan. For purposes of calculating the number of Allowed Claims in a Class of Claims that have voted to accept or reject this Liquidation Plan under section 1126(c) of the Bankruptcy Code, all Allowed Claims in such Class held by one entity or any affiliate thereof (as defined in the Securities Act of 1933 and the rules and regulation promulgated thereunder) shall be aggregated and treated as one Allowed Claim in such Class. 5.2 Acceptance by a Class. Consistent with section 1126(c) of the Bankruptcy Code and except as provided for in section 1126(e) of the Bankruptcy Code, an Impaired Class of Claims shall have accepted this Liquidation Plan if it is accepted by at least two-thirds in dollar amount, and more than one-half in number of the Allowed Claims of such Class that have timely and properly voted to accept or reject this Liquidation Plan. 5.3 Presumed Acceptance of Plan. Holders of Claims in Class 1 are Unimpaired by this Liquidation Plan. In accordance with section 1126(f) of the Bankruptcy Code, holders of Allowed Claims in Class 1 are conclusively presumed to accept this Liquidation Plan and the votes of holders of such Claims will not be solicited. 5.4 Presumed Rejection of Plan. Claims in Class 7, Class 9 and Equity Interests in Class 11 are Impaired and holders of Class 7 Claims, Class 9 Claims and Class 11 Equity Interests are not entitled to receive any Distribution under this Liquidation Plan on account of such Claims or Equity Interests. In accordance with section 1126 of the Bankruptcy Code, holders of Allowed Unsecured Liquidation Claims in Class 7, Allowed Intercompany Claims in Class 9 and holders of Allowed Equity Interests in Class 11 are conclusively presumed to reject this Liquidation Plan and are not entitled to vote. As such, the votes of such holders will not be solicited with respect to such Claims and Equity Interests. 5.5 Cramdown. To the extent that any Impaired Class rejects or is presumed to have rejected this Liquidation Plan, the Liquidating Debtors reserve the right to (a) request that the Court confirm the Liquidation Plan in accordance with section 1129(b) of the Bankruptcy Code, or (b) modify, alter or amend this Liquidation Plan to provide treatment sufficient to assure that this Liquidation Plan does not discriminate unfairly, and is fair and equitable, with respect to the Class or Classes not accepting this Liquidation Plan, and, in particular, the treatment necessary to meet the requirements of subsections 1129(a) or (b) of the Bankruptcy Code with respect to the rejecting Classes and any other Classes affected by such modifications. ARTICLE VI MEANS FOR IMPLEMENTATION 6.1 Actions Occurring On the Effective Date. (a) The Funding of the Implementation of the Liquidation Plan. On the Effective Date, the Liquidating Pledgor Debtors and the Liquidating Trustee will implement the Secured Creditor Direction and the DIP Lender Direction. The Secured Creditor Direction and the DIP Lender Direction will operate to fund the implementation of the Liquidation Plan by requiring that $500,000 of the Liquidation Proceeds that would otherwise be transferred to Reorganized Covanta will remain in the accounts of the Liquidating Debtors and shall be transferred by the Liquidating Trustee to the Operating Reserve, provided, however, to the extent that the sum of all the Cash in the accounts of the Liquidating Debtors is less than $500,000 on the Effective Date (any such shortfall, the "Operating Reserve Deficiency Amount"), then (i) the Liquidating Trustee shall transfer the sum of all such Cash in the Liquidating Debtors' accounts to the Operating Reserve and (ii) Reorganized Covanta shall transfer the Operating Reserve Deficiency Amount to the operating Reserve. The Operating Reserve will be used to fund this Liquidation Plan in accordance with Section 9.14(b) of this Liquidation Plan. (b) Transfer of Liquidation Assets. On the Effective Date, each Liquidating Debtor shall irrevocably transfer and assign its Residual Liquidation Assets, if any, or cause such Residual Assets to be transferred and assigned to the Liquidating Trust, to hold in trust for the benefit of all holders of Allowed Claims with respect to each such Liquidating Debtor pursuant to the terms of this Liquidation Plan and of the Liquidating Trust Agreement, provided, however, that prior to the transfers contemplated hereby, the Liquidating Trustee and Liquidating Debtors, as applicable, shall make the transfers contemplated by the Secured Creditor Distribution and the DIP Lender Direction to Reorganized Covanta and to the Operating Reserve. In accordance with section 1141 of the Bankruptcy Code and except as otherwise provided by this Liquidation Plan or the Liquidating Trust Agreement, upon the Effective Date, title to the Residual Liquidation Assets shall pass to the Liquidating Trust free and clear of all Claims and Equity Interests. The Liquidating Trustee shall pay, or otherwise make Distributions on account of, all Claims against the Liquidating Debtors whose Residual Liquidation Assets were contributed to such Liquidating Trust strictly in accordance with this Liquidation Plan. For U.S. federal income tax purposes, the transfers of the Liquidating Debtors' Residual Liquidation Assets to the Liquidating Trust shall be deemed transfers to and for the benefit their respective beneficiaries followed by deemed transfer by the beneficiaries to the Liquidating Trust. The beneficiaries shall be treated as the grantors and deemed owners of the Liquidating Trust. The Liquidating Trustee shall cause a valuation to be made of the Liquidation Assets and that valuation shall be used by the Liquidating Trustee and the beneficiaries for U.S. federal income tax purposes, but shall not be binding on the Liquidating Trustee in regards to the liquidation of the Residual Liquidation Assets. (c) Distribution of the Bank Agreement Ogden FMCA Collateral. On the Effective Date, or as soon thereafter as practicable, Ogden FMCA shall cause to be transferred to CSFB, as holder of the Allowed Secured CSFB Claim, the Bank Agreement Ogden FMCA Collateral free and clear of all Claims and Equity Interests, in accordance with section 1141 of the Bankruptcy Code, and except as otherwise provided by this Liquidation Plan. (d) Dissolution of Liquidating Debtors. Following the transfers contemplated in Subsection 6.1(a) hereof and pursuant to the DIP Lender Direction, each Liquidating Debtor shall be dissolved pursuant to applicable state law. The Liquidating Trustee shall have all the power to wind up the affairs of each Liquidating Debtor under applicable state laws (including the filing of certificates of dissolution) in addition to all the rights, powers and responsibilities conferred by Bankruptcy Code, this Liquidation Plan, the Confirmation Order and the Liquidating Trust Agreement. 6.2 Fractional Interests. Whenever any payment of a fraction of a cent would otherwise be called for, the actual payment shall reflect a rounding of such fraction down to the nearest whole cent. 6.3 Date of Distributions. Unless otherwise provided herein, any distributions and deliveries to be made to holders of Allowed Claims hereunder shall be made on the applicable Liquidation Distribution Date or as soon thereafter as is practicable. In the event that any payment or act under this Liquidation Plan is required to be made or performed on a date that is not a Business Day, then the making of such payment or the performance of such act may be completed on the next succeeding Business Day, but shall be deemed to have been completed as of the initial due date. 6.4 Settlements. Except to the extent the Court has entered a separate order providing for such approval, the Confirmation Order shall constitute an order (a) approving as a compromise and settlement pursuant to section 1123(b)(3)(A) of the Bankruptcy Code, any settlement agreements entered into by any Liquidating Debtor or any other Person as contemplated in confirmation of the Liquidating Plan and (b) entered into or to be entered into by any Liquidating Debtor or any other Person as contemplated by the Liquidating Plan and all related agreements, instruments or documents to which any Liquidating Debtor is a party. 6.5 No Interim Cash Payments of $100 or Less on Account of Allowed Claims Prior to Final Liquidation Distribution Date. If a Cash payment to be received by holders of Allowed Claims on any distribution (except the Final Distribution) would be $100 or less in the aggregate, notwithstanding any contrary provision of this Liquidation Plan, no such payment will be made to such holder, and such Cash, if applicable, shall be held in trust for such holders until the Final Liquidation Distribution Date, at which time such Cash payment shall be made to the holders. 6.6 Unclaimed Property. All property that is unclaimed for one year after distribution thereof by mail to the latest mailing address filed of record with the Court for the party entitled thereto or, if no such mailing address has been so filed, the mailing address reflected in the applicable Liquidating Debtor's schedules filed with the Court or other address maintained by the Liquidating Debtors, shall become property of the Liquidating Trust. 6.7 Withholding Taxes. The Liquidating Trustee shall be entitled to withhold any applicable federal or state withholding taxes from any payments made with respect Allowed Claims, as appropriate, and shall otherwise comply with section 346 of the Bankruptcy Code. 6.8 Reservation of Rights of the Estate. As to each Liquidating Debtor, all claims or causes of action, cross-claims and counterclaims of such Liquidating Debtor of any kind or nature whatsoever, against third parties arising before the Confirmation Date shall be preserved for the benefit of the Liquidating Trust except for (i) such claims or causes of action, cross-claims and counterclaims of the Liquidating Debtors which have been released hereunder or pursuant to a Final Order and (ii) such claims or causes of action, cross claims and counterclaims of the Liquidating Debtors that have been transferred to Reorganized Covanta pursuant to the Secured Creditor Direction and the DIP Lender Direction. ARTICLE VII PROCEDURES FOR RESOLVING AND TREATING DISPUTED CLAIMS 7.1 No Distribution Pending Allowance. Notwithstanding any other provision of this Liquidation Plan, no Distribution shall be distributed under this Liquidation Plan on account of any Disputed Claim, unless and until all objections to such Disputed Claim have been settled or withdrawn or have been determined by Final Order and the Disputed Claim, or some portion thereof, has become an Allowed Claim. 7.2 Resolution of Disputed Claims and Equity Interests. (a) Unless otherwise ordered by the Court after notice and a hearing, the Liquidating Trustee shall have the exclusive right to make and file objections to Claims (other than Administrative Expense Claims) and shall serve a copy of each objection upon the holder of the Claim to which the objection is made as soon as practicable, but in no event later than one hundred and twenty (120) days after the Effective Date; provided, however, that such one hundred and twenty (120) day period may be automatically extended by the Liquidating Trustee, without any further application to, or approval by, the Court, for up to an additional thirty (30) days. The foregoing deadlines for filing objections to Claims shall not apply to filing objections to Claims for tort damages and, accordingly, no such deadline shall be imposed by this Liquidation Plan. Notwithstanding any authority to the contrary, an objection to a Claim shall be deemed properly served on the holder thereof if the Liquidating Trustee effects service in any of the following manners: (i) in accordance with Rule 4 of the Federal Rules of Civil Procedure, as modified and made applicable by Bankruptcy Rule 7004; (ii) by first class mail, postage prepaid, on the signatory on the proof of claim or interest or other representative identified in the proof of claim or interest or any attachment thereto; or (iii) by first class mail, postage, on any counsel that has appeared on the holder's behalf in the Chapter 11 Cases. (b) Except with respect to Administrative Expense Claims as to which the Administrative Expense Claim Bar Date does not apply, Administrative Expense Claims must be filed with the Court and served on counsel for the Liquidating Debtors (if prior to the Effective Date) and counsel for the Liquidating Trustee (if after the Effective Date) on or before the Administrative Expense Claim Bar Date. The Liquidating Debtors, the Liquidating Trustee or any other party in interest permitted under the Bankruptcy Code may make and file objections to any such Administrative Expense Claim and shall serve a copy of each objection upon the holder of the Claim to which the objection is made as soon as practicable, but in no event later the Claims Objection Deadline. In the event the Liquidating Debtors or the Liquidating Trustee file any such objection, the Court shall determine the Allowed amount of any such Administrative Expense Claim. Notwithstanding the foregoing, no request for payment of an Administrative Expense Claim need be filed with respect to an Administrative Expense Claim which is paid or payable by the Liquidating Debtors or the Liquidating Trustee in the ordinary course of business. 7.3 Estimation of Claims and Equity Interests. The Liquidating Trustee may, at any time request that the Court estimate any contingent, unliquidated or Disputed Claim pursuant to section 502(c) of the Bankruptcy Code, regardless of whether the Liquidating Debtors previously objected to such Claim or whether the Court has ruled on any such objection, and the Court will retain jurisdiction to estimate any Claim at any time during litigation concerning any objection to any Claim. In the event that the Court estimates any Disputed Claim, that estimated amount may constitute either the Allowed amount of such Claim or a maximum limitation on such Claim, as determined by the Court. If the estimated amount constitutes a maximum limitation on such Claim, the Liquidating Trustee may elect to pursue any supplemental proceedings to object to any ultimate payment of such Claim. All of the aforementioned Claims objection, estimation and resolution procedures are cumulative and not necessarily exclusive of one another. 7.4 Reserve Account for Disputed Claims. Upon (i) the Liquidating Trustee's determination that Disputed Claims have been asserted against a Liquidating Debtor in any particular Class and (ii) the Liquidating Trustee's identification of Liquidation Proceeds that are not Collateral, the Liquidating Trustee shall establish the Disputed Claims Reserve in accordance with Section 9.14(a) of this Liquidation Plan and hold in the Disputed Claims Reserve, for each Class in which there are any Disputed Claims, Cash in an aggregate amount sufficient to pay to each holder of a Disputed Claim the amount of Cash that such holder would have been entitled to receive under this Liquidation Plan if such Claim had been an Allowed Claim in such Class. Cash withheld and reserved for payments to holders of Disputed Claims in any Class shall be held and deposited by the Liquidating Trustee in one or more segregated interest-bearing reserve accounts for each Class of Claims in which there are Disputed Claims entitled to receive Cash, to be used to satisfy the Disputed Claims if and when such Disputed Claims become Allowed Claims. 7.5 Allowance of Disputed Claims. With respect to any Disputed Claim that is subsequently deemed Allowed, on the succeeding Liquidation Distribution Date for any such Claim after such Claim becomes Allowed, the Liquidating Trustee shall distribute from the Disputed Claims Reserve Account corresponding to the Class in which such Claim is classified to the holder of such Allowed Claim, the amount of Cash that such holder would have been entitled to recover under this Liquidation Plan if such Claim had been an Allowed Claim on the Effective Date, together with such claimholder's Pro Rata Class Share of net interest, if any, on such Allowed Claim. For the purposes of the immediately preceding sentence, such holder's Pro Rata Class Share of net interest shall be calculated by multiplying the amount of interest on deposit in the applicable Disputed Claims Reserve account on the immediately preceding date on which such Allowed Claim is to be paid by a fraction, the numerator of which shall equal the amount of such Allowed Claim and the denominator of which shall equal the amount of all Claims for which deposits are being held in the applicable Disputed Claims Reserve account on the date immediately preceding the date on which such Allowed Claim is to be paid. ARTICLE VIII TREATMENT OF EXECUTORY CONTRACTS AND UNEXPIRED LEASES 8.1 General Treatment. (a) On the Effective Date, all executory contracts and unexpired leases to which each Liquidating Debtor is a party shall be deemed rejected as of the Effective Date, except for any executory contract or unexpired lease that (i) has been previously assumed or rejected pursuant to a Final Order of the Court, (ii) is specifically designated as a contract or lease on the Schedule of Assumed Contracts and Leases or (iii) is the subject of a separate motion to assume or reject filed under section 365 of the Bankruptcy Code by the Liquidating Debtors prior to the Confirmation Hearing. On the Effective Date, all executory contracts and unexpired leases listed on the Schedule of Assumed Contracts and Leases to which each Liquidating Debtor is party shall be deemed assumed by the applicable Liquidating Debtor and assigned to Reorganized Covanta. (b) Each executory contract and unexpired lease listed or to be listed on the Schedule of Assumed Contracts and Leases shall include modifications, amendments, supplements, restatements or other agreements, including guarantees thereof, made directly or indirectly by any Liquidating Debtor in any agreement, instrument or other document that in any manner affects such executory contract or unexpired lease, without regard to whether such agreement, instrument or other document is listed on the Schedule of Assumed Contracts and Leases. The mere listing of a document on the Schedule of Assumed Contracts and Leases shall not constitute an admission by the Liquidating Debtors that such document is an executory contract or unexpired lease or that the Liquidating Debtors have any liability thereunder. 8.2 Cure of Defaults. Except to the extent that (i) a different treatment has been agreed to by the nondebtor party or parties to any executory contract or unexpired lease to be assumed pursuant to Section 8.1 hereof or (ii) any executory contract or unexpired lease shall have been assumed pursuant to an order of the Court, which order shall have approved the cure amounts with respect thereto, the applicable Liquidating Debtor shall, pursuant to the provisions of sections 1123(a)(5)(G) and 1123(b)(2) of the Bankruptcy Code and consistent with the requirements of section 365 of the Bankruptcy Code, within thirty (30) days after the Confirmation Date, file with the Court and serve a pleading with the Court listing the cure amounts of all executory contracts or unexpired leases to be assumed. The parties to such executory contracts or unexpired leases to be assumed by the applicable Liquidating Debtor shall have fifteen (15) days from service of such pleading to object to the cure amounts listed by the applicable Liquidating Debtor. Service of such pleading shall be sufficient if served on the other party to the contract or lease at the address indicated on (i) the contract or lease, (ii) any proof of claim filed by such other party in respect of such contract or lease, or (iii) the Liquidating Debtors' books and records, including the Schedules, provided, however, that if a pleading served by a Liquidating Debtor to one of the foregoing addresses is promptly returned as undeliverable, the Liquidating Debtor shall attempt reservice of the pleading on an alternative address, if any, from the above listed services. If any objections are filed, the Court shall hold a hearing. Prior to assumption, the applicable Liquidating Debtor shall retain its right to reject any of its executory contracts or unexpired leases, including contracts or leases that are subject to a dispute concerning amounts necessary to cure any defaults. Notwithstanding the foregoing, or anything in Section 8.3 of this Liquidation Plan, at all times through the date that is five (5) Business Days after the Court enters an order resolving and fixing the amount of a disputed cure amount, the Liquidating Debtors shall have the right to reject such executory contract or unexpired lease. 8.3 Approval of Assumption and Assignment of Executory Contracts on the Schedule of Assumed Contracts and Leases. Subject to Sections 8.1 and 8.2 of this Liquidation Plan, the executory contracts and unexpired leases on the Schedule of Assumed Contracts and Leases shall be assumed by the respective Liquidating Debtors as indicated on such schedule and shall be assigned to Reorganized Covanta, as of the Effective Date, except as may otherwise be ordered by the Court. 8.4 Approval of Rejection of Executory Contracts and Unexpired Leases. Entry of the Confirmation Order shall constitute the approval, pursuant to section 365(a) of the Bankruptcy Code, of the rejection of any executory contracts and unexpired leases to be rejected as and to the extent provided in Section 8.1 of this Liquidation Plan. 8.5 Bar Date for Filing Proofs of Claim Relating to Executory Contracts and Unexpired Leases Rejected Pursuant to the Liquidation Plan. Claims arising out of the rejection of an executory contract or unexpired lease pursuant to Section 8.1 of this Liquidation Plan must be filed with the Court no later than the later of (i) twenty (20) days after the Effective Date, and (ii) thirty (30) days after entry of an order rejecting such contract or lease. Any Claims not filed within such time period will be forever barred from assertion against any of the applicable Liquidating Debtors and/or the Estates. 8.6 Reservation of Rights Under Insurance Policies and Bonds. Nothing in this Liquidation Plan shall diminish or otherwise affect the enforceability by beneficiaries of (i) any insurance policies that may cover Claims against any Liquidating Debtor, or (ii) any bonds issued to assure the performance of any of the Liquidating Debtors, nor shall anything contained herein constitute or be deemed to constitute a waiver of any cause of action that the Liquidating Debtors or any entity may hold against any insurers or issuers of bonds under any such policies of insurance or bonds. To the extent any insurance policy or bond is deemed to be an executory contract, such insurance policy or bond shall be deemed assumed in accordance with Article VIII of the Liquidation Plan. Notwithstanding the foregoing, the Liquidating Debtors do not assume any payment or other obligations to any insurers or issuers of bonds, and any agreements or provisions of policies or bonds imposing payment or other obligations upon the Liquidating Debtors shall only be assumed pursuant to a separate order of the Court. ARTICLE IX THE LIQUIDATING TRUSTEE 9.1 Appointment. The Liquidating Trustee shall be designated by the Liquidating Debtors in the Notice of Designation, which shall be filed with the Court on or before thirty (30) days prior to the Confirmation Hearing. The Liquidating Trustee's appointment shall become effective upon the occurrence of the Effective Date. 9.2 Compensation of the Liquidating Trustee for Dissolution Expenses. The Liquidating Trustee shall be paid for all reasonable and necessary Dissolution Expenses (including the reasonable and necessary fees and expenses of Retained Liquidation Professionals) out of the Operating Reserve in the following manner. On or before any Liquidating Trustee Billing Date, the Liquidating Trustee shall send the Liquidating Trustee Fee Notice and any Retained Liquidation Professional Fee Notices to the Oversight Nominee. Fifteen (15) days after sending the Liquidating Trustee Fee Notice to the Oversight Nominee and any Retained Liquidation Professional Fee Notices, the Liquidating Trustee shall be entitled to withdraw from the Operating Reserve the Dissolution Expenses claimed in such Liquidating Trustee Fee Notice and such Retained Liquidation Professional Fee Notice, provided, however, that if the Oversight Nominee sends a Fee Dispute Notice within such fifteen (15) day period to the Liquidating Trustee or a Retained Liquidation Professional, then the Liquidating Trustee shall only be entitled to withdraw any undisputed portion of such Dissolution Expenses from the Operating Reserve on such date. As to the disputed portion of such Dissolution Expenses, within five (5) days receipt of the Fee Dispute Notice, the Liquidating Trustee or applicable Retained Liquidation Professional must either (a) notify the Oversight Nominee that it will reduce the Dissolution Expenses in accordance with the Fee Dispute Notice or (b) commence a proceeding in the Court to determine the reasonableness, accuracy or proper scope of the disputed Dissolution Expenses. The Liquidating Trustee shall be paid for all Liquidation Expenses in the manner specified in Section 9.3 of this Liquidation Plan. 9.3 Recovery or Realization of Liquidation Proceeds. To the extent that the Liquidating Trustee determines in its sole discretion that it could profitably realize Liquidation Proceeds from the sale, transfer, collection or monetization of any Residual Liquidation Assets, which shall not include any of the Liquidation Assets transferred to Reorganized Covanta pursuant to the Secured Creditor Direction or the DIP Lender Direction, or the Cash transferred to the Operating Reserve pursuant to the Secured Creditor Direction, then the Liquidating Trustee shall liquidate such Residual Liquidation Assets in accordance with the provisions of this Liquidation Plan. Alternatively, if the Liquidating Trustee determines that it would not be profitable to pursue the sale, transfer, collection or monetization of any Residual Liquidation Assets of any respective Liquidating Debtor, then the Liquidating Trustee shall abandon such assets in accordance with Section 9.10 of this Liquidation Plan. All Liquidation Expenses incurred by the Liquidating Trustee in the sale, transfer, collection or monetization of Residual Liquidation Assets shall be paid only from the recoveries therefrom. 9.4 Distributions. On the Liquidation Distribution Date following the realization of any Liquidation Proceeds from the sale, transfer, collection or monetization of any Residual Liquidation Assets, the Liquidating Trustee shall distribute any Net Liquidation Proceeds to the holders of Allowed Claims in accordance with this Liquidation Plan. The Liquidating Trustee shall provide notice to the Oversight Nominee in the Liquidation Trustee Billing Notice of (i) the realization of any Liquidation Proceeds; and (ii) any planned Distribution of any Net Liquidation Proceeds to be made on the next Liquidation Distribution Date. 9.5 Engagement of Professionals. The Liquidating Trustee shall obtain the approval of the Oversight Nominee prior to retention and engagement of any Retained Liquidation Professionals. Such approval shall not be unreasonably delayed or withheld. Each Retained Liquidation Professional shall submit its Retained Liquidation Professional Fee Notice to the Liquidating Trustee five (5) days prior to the Liquidating Trustee Billing Date. The fees and expenses of such professionals shall be (i) paid by the Liquidating Trustee out of the Operating Reserve so long as such fees and expenses constitute Dissolution Expenses and (ii) paid from the sale, transfer, collection or monetization of any Liquidation Assets, so long as the fees and expenses constitute Liquidation Expenses. The fees and expenses of Retained Liquidation Professionals are subject to the approval of the Oversight Nominee and any disputes concerning the fees and expenses of Retained Professionals will be dealt with in accordance with Section 9.2 of this Liquidation Plan. 9.6 Status of the Liquidating Trustee. Effective on the Effective Date, the Liquidating Trustee shall be the representative of each Liquidating Debtor's Estate as that term is used in section 1123(b)(3)(B) of the Bankruptcy Code and shall have the rights and powers provided for in the Liquidating Trust Agreement. In its capacity as the representative of an Estate, the Liquidating Trustee shall be the successor-in-interest to each Liquidating Debtor with respect to any action commenced by such Liquidating Debtor prior to the Confirmation Date, except with respect to the Claims of the Liquidating Pledgor Debtors and the Liquidating Non-Pledgor Debtors contributed to Reorganized Covanta pursuant to the Secured Creditor Direction and the DIP Lender Direction. All such actions and any and all other claims or interests constituting Liquidation Assets, and all claims, rights and interests thereunder shall be retained and enforced by the Liquidating Trustee as the representative of such Estate pursuant to section 1123(b)(3)(B) of the Bankruptcy Code. The Liquidating Trustee shall be a party in interest as to all matters over which the Court has jurisdiction. 9.7 Authority. Subject to the limitations contained herein, the Liquidating Trustee shall have, with respect to the Liquidating Debtors, the following powers, authorities, and duties, by way of illustration and not of limitation: (a) Manage, sell and convert all or any portion of the Liquidation Assets to Cash and distribute the Net Liquidation Proceeds as specified in this Liquidation Plan; (b) Release, convey or assign any right, title or interest in or about the Residual Liquidation Assets or any portion thereof; (c) Pay and discharge any costs, expenses and fees of Retained Liquidation Professionals and other obligations deemed necessary to preserve or enhance the value of the Residual Liquidation Assets, discharge duties under the Liquidation Plan or perform the purpose of the Liquidation Plan; (d) Open and maintain bank accounts and deposit funds and draw checks and make disbursements in accordance with the Liquidation Plan; (e) Engage and have such attorneys, accountants, agents, tax specialists, financial advisors, other professionals, and clerical assistance as may, in the discretion of the Liquidating Trustee, be deemed necessary for the purposes specified under this Liquidation Plan; (f) Sue and be sued and file or pursue objections to Claims and seek to estimate them; (g) Enforce, waive or release rights, privileges or immunities of any kind; (h) In general, without in any manner limiting any of the foregoing, deal with the Liquidation Assets or any part or parts thereof in all other ways as would be lawful for any person owning the same to deal therewith, whether similar to or different from the ways herein specified; (i) Abandon any Liquidation Assets in accordance with Section 9.10 hereof; (j) File certificates of dissolution and take any other action necessary to dissolve and wind up the affairs of the Liquidating Debtors in accordance with applicable state law; (k) As soon as is practicable after the Final Liquidation Distribution Date of each Liquidating Debtor, request the Court to enter the Final Order closing the Chapter 11 Case of each such Liquidating Debtor; and (l) Without limitation, do any and all things necessary to accomplish the purposes of the Liquidation Plan. 9.8 Objectives. In selling the Residual Liquidation Assets, or otherwise monetizing them, the Liquidating Trustee shall use its best efforts to maximize the amount of Liquidation Proceeds derived therefrom. The Liquidating Trustee shall cause all Residual Liquidation Assets not otherwise abandoned to be sold or otherwise monetized by the second anniversary of the Effective Date. 9.9 Distributions. The Liquidating Trustee shall be responsible for making Distributions described in this Liquidation Plan, and shall coordinate, as necessary, to make the transfers of the Distributions and other Liquidation Assets as contemplated by the Secured Creditor Direction and the DIP Lender Direction. 9.10 Abandonment. The Liquidating Trustee may abandon, on thirty (30) days' written notice to the Oversight Nominee and United States Trustee, any property which he or she determines in its reasonable discretion to be of de minimis value to the Liquidating Trust, including any pending adversary proceeding or other legal action commenced or commenceable by the Liquidating Trust. If either the Oversight Nominee or United States Trustee provides a written objection to the Liquidating Trustee prior to expiration of such thirty-day period with respect to the proposed abandonment of such property, then such property may be abandoned only pursuant to an application made to the Court. In the absence of any such objection, such property may be abandoned without further order of the Court. 9.11 No Recourse. No recourse shall ever be had, directly or indirectly, against the Liquidating Trustee personally or against any agent, employee or Retained Liquidation Professional of the Liquidating Trustee, by legal or equitable proceedings or by virtue any statute or otherwise, nor upon any promise, contract, instrument, undertaking, obligation, covenant or agreement whatsoever executed by the Liquidating Trustee under this Liquidation Plan, or by reason of the creation of any indebtedness by the Liquidating Trustee under this Liquidation Plan for any purpose authorized by this Liquidation Plan, it being expressly understood and agreed that all such liabilities, covenants, and agreements of the Liquidating Trustee, whether in writing or otherwise, shall be enforceable only against and be satisfied only out of the Residual Liquidation Assets or such part thereof as shall, under the terms of any such agreement, be liable therefor or shall be evidence only of a right of payment out of the Residual Liquidation Assets provided, however, that nothing contained in this Section 9.11 shall affect the liability of any of the parties listed above for gross negligence or willful misconduct. 9.12 Limited Liability. The Liquidating Trustee shall not be liable for any act he or she may do or omit to do while acting in good faith and in the exercise of its best judgment, and the fact that such act or omission was advised by an authorized attorney (or other Retained Liquidation Professional) for the Liquidating Trustee shall be conclusive evidence of such good faith and best judgment; nor shall the Liquidating Trustee be liable in any event, except for its gross negligence or willful misconduct. 9.13 Resignation. The Liquidating Trustee may resign at any time by giving at least thirty (30) days' written notice to the Oversight Nominee and the United States Trustee. In case of the resignation, removal or death of a Liquidating Trustee, a successor shall thereupon be appointed by agreement of the Oversight Nominee and the United States Trustee. 9.14 Reserves. (a) The Disputed Claims Reserve. Upon (i) the Liquidating Trustee's determination that Disputed Claims have been asserted against a Liquidating Debtor and (ii) the Liquidating Trustee's identification of Net Liquidation Proceeds that are not Collateral, the Liquidating Trustee shall establish the Disputed Claims Reserve, in order to make disbursements to each holder of a Disputed Claim against the applicable Liquidating Debtor, as provided in Article VII of this Liquidation Plan, whose Claim is or becomes an Allowed Claim, as the case may be, in the amount specified in the Final Order allowing such Disputed Claim on the Liquidation Distribution Date occurring after such order becomes a Final Order. (b) The Operating Reserve. On the Effective Date, the Liquidating Trustee shall establish the Operating Reserve in order to pay all Administrative Expense Claims, Priority Tax Claims and Priority Non-Tax Claims of the Liquidating Debtors and any Oversight Nominee Expenses and Dissolution Expenses. The Operating Reserve shall be funded in an amount not to exceed $500,000, pursuant to the Secured Creditor Direction and Reorganized Covanta's payment of the Operating Reserve Deficiency Amount, if any. Upon the latest to occur of (i) the entry of the Final Order closing each of the Liquidating Debtors' Chapter 11 Cases, (ii) the Final Liquidation Determination Date and (iii) the final payment of any Dissolution Expenses and Oversight Nominee Expenses, to the extent that there is any Cash in the Operating Reserve, the Liquidating Trustee shall contribute such Cash to Reorganized Covanta. 9.15 Statements. (a) The Liquidating Trustee shall maintain a record of the names and addresses of all holders of Allowed Unsecured Liquidation Claims against the applicable Liquidating Debtor for purposes of mailing Distributions to them. The Liquidating Trustee may rely on the name and address set forth in the applicable Liquidating Debtor's schedules filed with the Court, except to the extent a different name and/or address shall be set forth in a proof of claim filed by such holder in the cases, and the Liquidating Trustee may rely on the names and addresses in such schedules and/or proof of claim as being true and correct unless and until notified in writing. (b) The Liquidating Trustee shall file all tax returns and other filings with Governmental Units on behalf of the Liquidating Trust and the Residual Liquidation Assets it holds. 9.16 Further Authorization. The Liquidating Trustee shall be entitled to seek such orders, judgments, injunctions and rulings as they deem necessary to carry out the intentions and purposes, and to give full effect to the provisions, of this Liquidation Plan. ARTICLE X APPOINTMENT OF THE OVERSIGHT NOMINEE 10.1 Appointment of the Oversight Nominee. The Oversight Nominee shall be designated by the Liquidating Debtors in the Notice of Designation, which shall be filed with the Court on or before thirty (30) days prior to the Confirmation Hearing. The appointment of the Oversight Nominee shall become effective upon the occurrence of the Effective Date. 10.2 Authority and Responsibility of the Oversight Nominee. The Oversight Nominee shall have the authority and responsibility to review the activities and performance of the Liquidating Trustee, and shall have the authority to remove and replace the Liquidating Trustee. It shall have such further authority as may be specifically granted or necessarily implied by this Liquidation Plan. 10.3 Limited Liability. The Oversight Nominee shall not be liable for anything other than its own acts as shall constitute willful misconduct or gross negligence of its duties. None of the Oversight Nominee's designees, agents or representatives or their respective employees, shall incur or be under any liability or obligation by reason of any act done or omitted to be done, by the Oversight Nominee or its designee, agent or representative or their employees. The Oversight Nominee may, in connection with the performance of its functions, and in its sole and absolute discretion, consult with counsel, accountants and its agents, and shall not be liable for anything done or omitted or suffered to be done in accordance with such advice or opinions. If the Oversight Nominee determines not to consult with counsel, accountants or its agents, such determination shall not be deemed to impose any liability on the Oversight Nominee. 10.4 The Oversight Nominee Expenses. The Oversight Nominee Expenses shall be paid by the Liquidating Trustee out of the Operating Reserve. ARTICLE XI CONDITIONS PRECEDENT TO THE CONFIRMATION AND THE EFFECTIVE DATE 11.1 Conditions to Confirmation. Each of the following is a condition to the Confirmation Date: (a) the entry of a Final Order finding that the Disclosure Statement contains adequate information pursuant to section 1125 of the Bankruptcy Code; (b) the proposed Confirmation Order shall be in form and substance, reasonably acceptable to the Liquidating Debtors; (c) all provisions, terms and conditions of this Liquidation Plan are approved in the Confirmation Order; (d) the Confirmation Order shall contain a finding that any Intercompany Claim held by a Liquidating Debtor, Reorganizing Debtor or Heber Debtor is the exclusive property of such Liquidating Debtor, Reorganizing Debtor or Heber Debtor or debtor-in-possession pursuant to section 541 of the Bankruptcy Code; and (e) the Confirmation Order shall contain a ruling that each of the Intercompany Claims against (i) the Reorganizing Debtors, the Heber Debtors and the Liquidating Debtors and any of their respective present or former officers, directors, employees, attorneys, accountants, financial advisors, investment bankers or agents and (ii) the other persons or entities identified in Section 12.9 of this Liquidation Plan will be fully settled and released as of the Effective Date. 11.2 Conditions Precedent to the Effective Date. Each of the following is a condition precedent to the Effective Date of this Liquidation Plan: (a) That the Confirmation Order (i) shall have been entered by the Court and become a Final Order (ii) be in form and substance satisfactory to the Liquidating Debtors and (iii) provide that the Liquidating Debtors, the Reorganizing Debtors, the Heber Debtors and the Reorganized Debtors are authorized and directed to take all actions necessary or appropriate to enter into, implement and consummate the contracts, instruments, releases, leases, indentures and other agreements or documents created in connection with the Liquidation Plan and the Reorganization Plan; (b) that the Liquidating Trustee has entered into the Liquidating Trust Agreement, with the Liquidating Debtors and is willing to serve in such capacity and the terms of its service and compensation shall have been approved by the Court at the Confirmation Hearing; (c) that the conditions precedent to the Effective Date of the Reorganization Plan shall have been satisfied or waived; (d) the Liquidating Debtors, the Reorganizing Debtors and the Heber Debtors shall be authorized and directed to take all actions necessary or appropriate to enter into, implement and consummate the contracts, instruments, releases, leases, indentures and the agreements or documents created in connection with the Liquidation Plan and the Reorganization Plan; and (e) all actions, documents and agreements necessary to implement the Liquidation Plan and the Reorganization Plan shall have been effected or executed. 11.3 Waiver of Conditions. The Liquidating Debtors may waive any of the foregoing conditions set forth in Section 11.1 and 11.2 of this Liquidation Plan without leave of or notice to the Court and without any formal action other than proceeding with confirmation of this Liquidation Plan or emergence from bankruptcy. 11.4 Failure to Satisfy or Waiver of Conditions Precedent. In the event that any or all of the conditions specified in Section 11.1 or 11.2 of this Liquidation Plan have not been satisfied or waived in accordance with the provisions of this Article XI on or before December 19, 2003 (which date may be extended by the Liquidating Debtors, and upon notification submitted by the Liquidating Debtors to the Court, (a) the Confirmation Order shall be vacated (except as it may relate to the Heber Debtors), (b) no distributions under the Liquidation Plan shall be made, (c) the Liquidating Debtors and all holders of Claims and Equity Interests shall be restored to the status quo ante as of the day immediately preceding the Confirmation Date as though such date never occurred, and (d) all the Liquidating Debtors' respective obligations with respect to the Claims and Equity Interests shall remain unchanged and nothing contained herein or in the Disclosure Statement shall be deemed an admission or statement against interests or to constitute a waiver or release of any claims by or against any Liquidating Debtor or any other Person or to prejudice in any manner the rights of any Liquidating Debtor or any Person in any further proceedings involving any Liquidating Debtor or any Person. ARTICLE XII EFFECT OF CONFIRMATION 12.1 Discharge. Pursuant to section 1141(d)(3) of the Bankruptcy Code, occurrence of the Confirmation Date will not discharge Claims against the Liquidating Debtors; provided, however, that no holder of a Claim against any Liquidating Debtor may, on account of such Claim, seek or receive any payment or other distribution from, or seek recourse against, any Liquidating Debtor, Reorganizing Debtor or Heber Debtor their respective successors or their respective property, except as expressly provided herein. 12.2 Binding Effect. Except as otherwise provided in section 1141(d)(3) of the Bankruptcy Code, on and after the Confirmation Date, and subject to the Effective Date, the provisions of this Liquidation Plan shall bind all present and former holders of a Claim against, or Equity Interest in, the applicable Liquidating Debtor and its respective successors and assigns, whether or not the Claim or Equity Interest of such holder is Impaired under this Liquidation Plan and whether or not such holder has filed a Proof of Claim or Equity Interest or accepted this Liquidation Plan. 12.3 Term of Injunctions or Stays. Unless otherwise provided herein, all injunctions or stays arising under section 105 or 362 of the Bankruptcy Code, any order entered during the Chapter 11 Cases under section 105 or 362 of the Bankruptcy Code or otherwise, and in existence on the Confirmation Date, shall remain in full force and effect until the later of the Effective Date and the date indicated in such order. 12.4 Injunction Against Interference with Liquidation Plan. Upon the entry of the Confirmation Order, all holders of Claims and Equity Interests and other parties in interest, along with their respective present and former employees, agents, officers, directors and principals, shall be enjoined from taking any actions to interfere with the implementation or consummation of this Liquidation Plan. 12.5 Exculpation. Notwithstanding anything herein to the contrary, as of the Effective Date, none of (i) the Liquidating Debtors or their respective officers, directors and employees, (ii) the Specified Personnel, (iii) the Committee and any subcommittee thereof, (iv) the Agent Banks, the DIP Agents, the steering committee for the holders of the Secured Bank Claims and the Bondholders Committee, (v) the accountants, financial advisors, investment bankers, and attorneys for the Liquidating Debtors, (vi) the Liquidating Trustee and (vii) the directors, officers, employees, partners, members, agents, representatives, accountants, financial advisors, investment bankers, attorneys, employees or affiliates for any of the persons or entities described in (i), (iii), (iv), (v) or (vi) of this Section 12.5 shall have or incur any liability to any holder of a Claim or an Interest, or any other party in interest, or any of their respective agents, employees, representatives, financial advisors, attorneys, or affiliates, or any of their successors or assigns, for any act or omission in connection with, relating to, or arising out of the commencement or conduct of the Chapter 11 Cases; the reorganization of the Reorganizing Debtors and Heber Debtors; formulating, negotiating or implementing the Liquidation Plan; the solicitation of acceptances of the Liquidation Plan; the pursuit of confirmation of the Liquidation Plan; the confirmation, consummation or administration of the Liquidation Plan or the property to be distributed under the Liquidation Plan, except for their gross negligence or willful misconduct, and in all respects shall be entitled to rely upon the advice of counsel with respect to their duties and responsibilities under the Liquidation Plan. 12.6 Release Granted by the Liquidating Debtors. As of the Effective Date, the Liquidating Debtors, on behalf of themselves and their Estates, shall be deemed to release unconditionally all claims, obligations, suits, judgments, damages, rights, causes of action, and liabilities whatsoever, against the Reorganizing Debtors, Heber Debtors' and the Reorganizing Debtors', Heber Debtors' and Liquidating Debtors' respective officers, directors, employees, partners, members, affiliates, advisors, attorneys, financial advisors, accountants, investment bankers and other professionals, and the Committee's members, advisors, attorneys, financial advisors, investment bankers, accountants and other professionals, whether known or unknown, foreseen or unforeseen, existing or hereafter arising, in law, equity or otherwise, based in whole or in part upon actions taken in their respective capacities described above with respect to any omission, transaction, event or other occurrence taking place on or prior to the Effective Date in any way relating to the Liquidating Debtors, the Chapter 11 Cases, the Reorganization Plan or this Liquidation Plan. ARTICLE XIII MISCELLANEOUS PROVISIONS 13.1 Retention of Jurisdiction. The Court shall retain exclusive jurisdiction of all matters arising under, arising out of, or related to, the Chapter 11 Cases and this Liquidation Plan pursuant to, and for the purposes of, sections 105(a) and 1142 of the Bankruptcy Code and for, among other things, the following non-exclusive purposes: (a) To determine the allowance or classification of Claims and to hear and determine any objections thereto; (b) to hear and determine any motions for the assumption, assumption and assignment or rejection of executory contracts or unexpired leases, and the allowance of any Claims resulting therefrom; (c) to determine any and all motions, adversary proceedings, applications, contested matters and other litigated matters in connection with the Chapter 11 Cases that may be pending in the Court on, or initiated after, the Effective Date; (d) to enter and implement such orders as may be appropriate in the event the Confirmation Order is for any reason stayed, revoked, modified, or vacated; (e) to issue such orders in aid of the execution, implementation and consummation of this Liquidation Plan to the extent authorized by section 1142 of the Bankruptcy Code or otherwise; (f) to construe and take any action to enforce this Liquidation Plan; (g) to reconcile any inconsistency in any order of the Court, including, without limitation, the Confirmation Order; (h) to modify the Liquidation Plan pursuant to section 1127 of the Bankruptcy Code, or to remedy any apparent non-material defect or omission in this Liquidation Plan, or to reconcile any non-material inconsistency in the Liquidation Plan so as to carry out its intent and purposes; (i) to hear and determine all applications for compensation and reimbursement of expenses of professionals under sections 330, 331, and 503(b) of the Bankruptcy Code; (j) to resolve any disputes over the reasonableness, accuracy and proper scope of any Dissolution Expenses (including those of the Liquidating Trustee and any Retained Liquidation Professionals); (k) to determine any other requests for payment of Priority Tax Claims, Priority Non-Tax Claims or Administrative Expense Claims; (l) to hear and determine all matters relating to the 9.25% Debentures Adversary Proceeding, including any disputes arising in connection with the interpretation, implementation or enforcement of any settlement agreement related thereto; (m) to hear and determine disputes arising in connection with the interpretation, implementation, or enforcement of this Liquidation Plan; (n) to consider and act on the compromise and settlement or payment of any Claim against the Liquidating Debtors; (o) to recover all assets of Liquidating Debtors and property of the Estates, wherever located; (p) to determine all questions and disputes regarding title to the assets of the Liquidating Debtors or their Estates; (q) to issue injunctions, enter and implement other orders or to take such other actions as may be necessary or appropriate to restrain interference by any entity with the consummation, implementation or enforcement of the Liquidation Plan or the Confirmation Order; (r) to remedy any breach or default occurring under this Liquidation Plan; (s) to resolve and finally determine all disputes that may relate to, impact on or arise in connection with, this Liquidation Plan; (t) to hear and determine matters concerning state, local, and federal taxes for any period of time, including, without limitation, pursuant to sections 346, 505, 1129 and 1146 of the Bankruptcy Code (including any requests for expedited determinations under section 505(b) of the Bankruptcy Code filed, or to be filed, with respect to tax returns for any and all taxable periods ending after each of the applicable Petition Dates through, and including, the Final Liquidation Distribution Date); (u) to determine such other matters and for such other purposes as may be provided in the Confirmation Order; (v) to hear any other matter consistent with the provisions of the Bankruptcy Code; and (w) to enter a final decree closing the Chapter 11 Cases. 13.2 Deletion of Classes and Subclasses. Any class or subclass of Claims that does not contain as an element thereof an Allowed Claim or a Claim temporarily allowed under Bankruptcy Rule 3018 as of the date of the commencement of the Confirmation Hearing shall be deemed deleted from this Liquidation Plan for purposes of voting to accept or reject this Liquidation Plan and for purposes of determining acceptance or rejection of this Liquidation Plan by such class or subclass under section 1129(a)(8) of the Bankruptcy Code. 13.3 Courts of Competent Jurisdiction. If the Court abstains from exercising, or declines to exercise, jurisdiction or is otherwise without jurisdiction over any matter arising out of this Liquidation Plan, such abstention, refusal or failure of jurisdiction shall have no effect upon and shall not control, prohibit or limit the exercise of jurisdiction by any other Court having competent jurisdiction with respect to such matter. 13.4 Payment of Statutory Fees. All fees payable for any particular Liquidating Debtor, pursuant to section 1930 of Title 28 of the United States Code shall be paid by the Liquidating Trustee through the entry of a final decree closing the Chapter 11 Case of such Liquidating Debtor. 13.5 Dissolution of the Committee. On the Effective Date, the Committee shall be dissolved and the members thereof shall be released and discharged of and from all further authority, duties, responsibilities, and obligations related to and arising from and in connection with the Chapter 11 Cases, and the retention or employment of the Committee's attorneys, accountants, and other agents, shall terminate. 13.6 Effectuating Documents and Further Transactions. The chief executive officer of each of the Liquidating Debtors, or his or her designee, shall be authorized to execute, deliver, file or record such contracts, instruments, releases and other agreements or documents and take such actions on behalf of the Liquidating Debtors as may be necessary or appropriate to effectuate and further evidence the terms and conditions of this Liquidation Plan, without any further action by or approval of the Board of Directors or other governing body of the Liquidating Debtors. 13.7 Successors and Assigns. The rights, benefits and obligations of any person named or referred to in this Liquidation Plan shall be binding upon, and shall inure to the benefit of, the heir, executor, administrator, successor or assignee of such person. 13.8 Governing Law. Except to the extent that the Bankruptcy Code or the Bankruptcy Rules are applicable, the rights, duties and obligations arising under this Liquidation Plan shall be governed by and construed in accordance with the laws of the State of New York. 13.9 Modification of Plan. Subject to the provisions of Section 5.5 of this Liquidation Plan, the Liquidating Debtors reserve the right, in accordance with the Bankruptcy Code and the Bankruptcy Rules, to amend or modify this Liquidation Plan at any time prior to the entry of the Confirmation Order. Additionally, the Liquidating Debtors reserve the right to alter, amend, modify, revoke or withdraw the Liquidation Plan as it applies to any particular Liquidating Debtor. After the entry of the Confirmation Order, the Liquidating Trustee may, upon approval of the Oversight Nominee and order of the Court, amend or modify this Liquidation Plan, in accordance with section 1127(b) of the Bankruptcy Code, or remedy any defect or omission or reconcile any inconsistency in this Liquidation Plan in such a manner as may be necessary to carry out the purpose and intent of this Liquidation Plan. A holder of an Allowed Claim or Equity Interest that is deemed to have accepted this Liquidation Plan shall be deemed to have accepted this Liquidation Plan as modified if the proposed modification does not materially and adversely change the treatment of the Claim or Equity Interest of such holder. Additionally, the Liquidating Debtors reserve their rights to redesignate Debtors as Reorganizing Debtors, Heber Debtors or Liquidating Debtors at any time prior to ten (10) days prior to the Confirmation Hearing. Holders of Claims or Equity Interests who are entitled to vote on the Reorganization Plan or Liquidation Plan and who are affected by any such redesignation shall have five (5) days from the notice of such redesignation to vote to accept or reject the Reorganization Plan or the Liquidation Plan, as the case may be. The Liquidating Debtors also reserve the right to withdraw prior to the Confirmation Hearing one or more Liquidating Debtors from the Liquidation Plan, as the case may be, and to thereafter file a plan solely with respect to such Liquidating Debtor or Liquidating Debtors. 13.10 Rules of Construction. For purposes of this Liquidation Plan, the following rules of interpretation apply: (a) The words "herein," "hereof," "hereto," "hereunder" and others of similar import refer to this Liquidation Plan as a whole and not to any particular section, subsection, or clause contained in this Liquidation Plan. (b) The word "including" shall mean "including without limitation." (c) Wherever from the context it appears appropriate, each term stated in either the singular or the plural shall include the singular and the plural and pronouns stated in the masculine, feminine or neuter gender shall include the masculine, the feminine and the neuter. (d) Any reference in this Liquidation Plan to a contract, instrument, release, indenture or other agreement or document being in a particular form or on particular terms and conditions means that such document shall be substantially in such form or substantially on such terms and conditions. (e) Any reference in this Liquidation Plan to an existing document or exhibit filed or to be filed means such document or exhibit, as it may have been or may be amended, modified or supplemented. (f) Unless otherwise specified, all references in this Liquidation Plan to Sections, Articles, Schedules and Exhibits are references to Sections, Articles, Schedules and Exhibits of or to this Liquidation Plan. (g) Captions and headings to Articles and Sections are inserted for convenience of reference only are not intended to be a part of or to affect the interpretation of this Liquidation Plan. (h) Unless otherwise expressly provided, the rules of construction set forth in section 102 of the Bankruptcy Code and in the Bankruptcy Rules shall apply to this Liquidation Plan. 13.11 Computation of Time. In computing any period of time prescribed or allowed by this Liquidation Plan, unless otherwise expressly provided, the provisions of Bankruptcy Rule 9006 shall apply. 13.12 Notices. Following the Effective Date, any notices to or requests of the Liquidation Debtors by parties in interest under or in connection with this Liquidation Plan shall be in writing and served either by (a) certified mail, return receipt requested, postage prepaid, (b) hand delivery, or (c) reputable overnight delivery service, all charges prepaid, and shall be deemed to have been given when received by the Liquidating Trustee and any counsel to the Liquidating Trustee (each such party to be designated in the Notice of Designation). 13.13 Exhibits. All Exhibits and Schedules to this Liquidation Plan are incorporated into and are a part of this Liquidation Plan as if set forth in full herein. 13.14 Counterparts. This Liquidation Plan may be executed in any number of separate counterparts, each of which shall collectively and separately constitute one agreement. 13.15 Severability. If, prior to the Confirmation Date, any term or provision of this Liquidation Plan is determined by the Court to be invalid, void or unenforceable, the Court will have the power to alter and interpret such term or provision to make it valid or enforceable to the maximum extent practicable, consistent with the original purpose of the term or provision held to be invalid, void or unenforceable, and such term or provision will then be applicable as altered or interpreted. Notwithstanding any such holding, alteration or interpretation, the remainder of the terms and provisions of this Liquidation Plan will remain in full force and effect and will in no way be affected, impaired or invalidated by such holding alteration or interpretation. The Confirmation Order will constitute a judicial interpretation that each term and provision of this Liquidation Plan, as it may have been altered or interpreted in accordance with the forgoing, is valid and enforceable pursuant to its terms. Additionally, if the Court determines that the Liquidation Plan, as it applies to any particular Liquidating Debtor, is not confirmable pursuant to section 1129 of the Bankruptcy Code (and cannot be altered or interpreted in a way that makes it confirmable), such determination shall not limit or affect (a) the confirmability of the Liquidation Plan as it applies to any other Liquidating Debtor or (b) the Liquidating Debtors' ability to modify the Liquidation Plan, as it applies to any particular Liquidating Debtor, to satisfy the confirmation requirements of section 1129 of the Bankruptcy Code. Dated: New York, New York September 8, 2003 OGDEN NEW YORK SERVICES, INC. By: /s/ Scott G. Mackin ------------------- ALPINE FOOD PRODUCTS, INC. By: /s/ Scott G. Mackin ------------------- BDC LIQUIDATING CORP. By: /s/ Scott G. Mackin ------------------- BOULDIN DEVELOPMENT CORP. By: /s/ Scott G. Mackin ------------------- COVANTA CONCERTS HOLDINGS, INC. By: /s/ Scott G. Mackin ------------------- COVANTA ENERGY SAO JERONIMO, INC. By: /s/ Scott G. Mackin ------------------- COVANTA EQUITY OF ALEXANDRIA/ARLINGTON, INC. By: /s/ Scott G. Mackin ------------------- COVANTA EQUITY OF STANISLAUS, INC. By: /s/ Scott G. Mackin ------------------- COVANTA FINANCIAL SERVICES, INC. By: /s/ Scott G. Mackin ------------------- COVANTA HUNTINGTON, INC. By: /s/ Scott G. Mackin ------------------- COVANTA KEY LARGO, INC. By: /s/ Scott G. Mackin ------------------- COVANTA NORTHWEST PUERTO RICO, INC. By: /s/ Scott G. Mackin ------------------- COVANTA OIL & GAS, INC. By: /s/ Scott G. Mackin ------------------- COVANTA POWER DEVELOPMENT OF BOLIVIA, INC. By: /s/ Scott G. Mackin ------------------- COVANTA POWER DEVELOPMENT, INC. By: /s/ Scott G. Mackin ------------------- COVANTA SECURE SERVICES USA, INC. By: /s/ Scott G. Mackin ------------------- COVANTA WASTE SOLUTIONS, INC. By: /s/ Scott G. Mackin ------------------- DOGGIE DINER, INC. By: /s/ Scott G. Mackin ------------------- GULF COAST CATERING COMPANY, INC. By: /s/ Scott G. Mackin ------------------- J.R. JACK'S CONSTRUCTION CORPORATION By: /s/ Scott G. Mackin ------------------- LENZAR ELECTRO-OPTICS, INC. By: /s/ Scott G. Mackin ------------------- LOGISTICS OPERATIONS, INC. By: /s/ Scott G. Mackin ------------------- OFFSHORE FOOD SERVICE, INC. By: /s/ Scott G. Mackin ------------------- OFS EQUITY OF ALEXANDRIA/ARLINGTON, INC. By: /s/ Scott G. Mackin ------------------- OFS EQUITY OF BABYLON, INC. By: /s/ Scott G. Mackin ------------------- OFS EQUITY OF DELAWARE, INC. By: /s/ Scott G. Mackin ------------------- OFS EQUITY OF HUNTINGTON, INC. By: /s/ Scott G. Mackin ------------------- OFS EQUITY OF INDIANAPOLIS, INC. By: /s/ Scott G. Mackin ------------------- OFS EQUITY OF STANISLAUS, INC. By: /s/ Scott G. Mackin ------------------- OGDEN ALLIED ABATEMENT & DECONTAMINATION SERVICE, INC. By: /s/ Scott G. Mackin ------------------- OGDEN ALLIED MAINTENANCE CORP. By: /s/ Scott G. Mackin ------------------- OGDEN ALLIED PAYROLL SERVICES, INC. By: /s/ Scott G. Mackin ------------------- OGDEN ATTRACTIONS, INC. By: /s/ Scott G. Mackin ------------------- OGDEN AVIATION DISTRIBUTING CORP. By: /s/ Scott G. Mackin ------------------- OGDEN AVIATION FUELING COMPANY OF VIRGINIA, INC. By: /s/ Scott G. Mackin ------------------- OGDEN AVIATION SECURITY SERVICES OF INDIANA, INC. By: /s/ Scott G. Mackin ------------------- OGDEN AVIATION SERVICE COMPANY OF COLORADO, INC. By: /s/ Scott G. Mackin ------------------- OGDEN AVIATION SERVICE COMPANY OF PENNSYLVANIA, INC. By: /s/ Scott G. Mackin ------------------- OGDEN AVIATION SERVICE INTERNATIONAL CORPORATION By: /s/ Scott G. Mackin ------------------- OGDEN AVIATION TERMINAL SERVICES, INC. By: /s/ Scott G. Mackin ------------------- OGDEN AVIATION, INC. By: /s/ Scott G. Mackin ------------------- OGDEN CARGO SPAIN, INC. By: /s/ Scott G. Mackin ------------------- OGDEN CENTRAL AND SOUTH AMERICA, INC. By: /s/ Scott G. Mackin ------------------- OGDEN CISCO, INC. By: /s/ Scott G. Mackin ------------------- OGDEN COMMUNICATIONS, INC. By: /s/ Scott G. Mackin ------------------- OGDEN CONSTRUCTORS, INC. By: /s/ Scott G. Mackin ------------------- OGDEN ENVIRONMENTAL & ENERGY SERVICES CO., INC. By: /s/ Scott G. Mackin ------------------- OGDEN FACILITY HOLDINGS, INC. By: /s/ Scott G. Mackin ------------------- OGDEN FACILITY MANAGEMENT CORPORATION OF ANAHEIM By: /s/ Scott G. Mackin ------------------- OGDEN FACILITY MANAGEMENT CORPORATION OF WEST VIRGINIA By: /s/ Scott G. Mackin ------------------- OGDEN FILM AND THEATRE, INC. By: /s/ Scott G. Mackin ------------------- OGDEN FIREHOLE ENTERTAINMENT CORP. By: /s/ Scott G. Mackin ------------------- OGDEN FOOD SERVICE CORPORATION OF MILWAUKEE, INC. By: /s/ Scott G. Mackin ------------------- OGDEN INTERNATIONAL EUROPE, INC. By: /s/ Scott G. Mackin ------------------- OGDEN LEISURE, INC. By: /s/ Scott G. Mackin ------------------- OGDEN MANAGEMENT SERVICES, INC. By: /s/ Scott G. Mackin ------------------- OGDEN PIPELINE SERVICE CORPORATION By: /s/ Scott G. Mackin ------------------- OGDEN SERVICES CORPORATION By: /s/ Scott G. Mackin ------------------- OGDEN SUPPORT SERVICES, INC. By: /s/ Scott G. Mackin ------------------- OGDEN TECHNOLOGY SERVICES CORPORATION By: /s/ Scott G. Mackin ------------------- OGDEN TRANSITION CORPORATION By: /s/ Scott G. Mackin ------------------- PA AVIATION FUEL HOLDINGS, INC. By: /s/ Scott G. Mackin ------------------- PHILADELPHIA FUEL FACILITIES CORPORATION By: /s/ Scott G. Mackin ------------------- EXHIBITS TO THE LIQUIDATION PLAN EXHIBIT 1 TO THE LIQUIDATION PLAN LIST OF LIQUIDATING DEBTORS Liquidating Debtor Case Number ------------------ ----------- Alpine Food Products, Inc. 03-13679 (CB) BDC Liquidating Corp. 03-13681 (CB) Bouldin Development Corp. 03-13680 (CB) Covanta Concerts Holdings, Inc. 02-16332 (CB) Covanta Energy Sao Jeronimo, Inc. 02-40854 (CB) Covanta Equity of Alexandria/Arlington, Inc. 03-13682 (CB) Covanta Equity of Stanislaus, Inc. 03-13683 (CB) Covanta Financial Services, Inc. 02-40947 (CB) Covanta Huntington, Inc. 02-40918 (CB) Covanta Key Largo, Inc. 02-40864 (CB) Covanta Northwest Puerto Rico, Inc. 02-40942 (CB) Covanta Oil & Gas, Inc. 02-40878 (CB) Covanta Power Development of Bolivia, Inc. 02-40856 (CB) Covanta Power Development, Inc. 02-40855 (CB) Covanta Secure Services USA, Inc. 02-40896 (CB) Covanta Waste Solutions, Inc. 02-40897 (CB) Doggie Diner, Inc. 03-13684 (CB) Gulf Coast Catering Company, Inc. 03-13685 (CB) J.R. Jack's Construction Corporation 02-40857 (CB) Lenzar Electro-Optics, Inc. 02-40832 (CB) Logistics Operations, Inc. 03-13688 (CB) Offshore Food Service, Inc. 03-13694 (CB) OFS Equity of Alexandria/Arlington, Inc. 03-13687 (CB) OFS Equity of Babylon, Inc. 03-13690 (CB) OFS Equity of Delaware, Inc. 03-13689 (CB) OFS Equity of Huntington, Inc. 03-13691 (CB) OFS Equity of Indianapolis, Inc. 03-13693 (CB) OFS Equity of Stanislaus, Inc. 03-13692 (CB) Ogden Allied Abatement & Decontamination Service, Inc. 02-40827 (CB) Ogden Allied Maintenance Corp. 02-40828 (CB) Ogden Allied Payroll Services, Inc. 02-40835 (CB) Ogden Attractions, Inc. 02-40836 (CB) Ogden Aviation Distributing Corp. 02-40829 (CB) Ogden Aviation Fueling Company of Virginia, Inc. 02-40837 (CB) Ogden Aviation Security Services of Indiana, Inc. 03-13695 (CB) Ogden Aviation Service Company of Colorado, Inc. 02-40839 (CB) Ogden Aviation Service Company of Pennsylvania, Inc. 02-40834 (CB) Ogden Aviation Service International Corporation 02-40830 (CB) Ogden Aviation Terminal Services, Inc. 03-13696 (CB) Ogden Aviation, Inc. 02-40838 (CB) Ogden Cargo Spain, Inc. 02-40843 (CB) Ogden Central and South America, Inc. 02-40844 (CB) Ogden Cisco, Inc. 03-13698 (CB) Ogden Communications, Inc. 03-13697 (CB) Ogden Constructors, Inc. 02-40858 (CB) Ogden Environmental & Energy Services Co., Inc. 02-40859 (CB) Ogden Facility Holdings, Inc. 02-40845 (CB) Ogden Facility Management Corporation of Anaheim 02-40846 (CB) Ogden Facility Management Corporation of West Virginia 03-13699 (CB) Ogden Film and Theatre, Inc. 02-40847 (CB) Ogden Firehole Entertainment Corp. 02-40848 (CB) Ogden Food Service Corporation of Milwaukee, Inc. 03-13701 (CB) Ogden International Europe, Inc. 02-40849 (CB) Ogden Leisure, Inc. 03-13700 (CB) Ogden Management Services, Inc. 03-13702 (CB) Ogden New York Services, Inc. 02-40826 (CB) Ogden Pipeline Service Corporation 03-13704 (CB) Ogden Services Corporation 02-40850 (CB) Ogden Support Services, Inc. 02-40851 (CB) Ogden Technology Services Corporation 03-13703 (CB) Ogden Transition Corporation 03-13705 (CB) PA Aviation Fuel Holdings, Inc. 02-40852 (CB) Philadelphia Fuel Facilities Corporation 02-40853 (CB) EXHIBITS TO THE LIQUIDATION PLAN EXHIBIT 2 TO THE LIQUIDATION PLAN LIST OF REORGANIZING DEBTORS Reorganizing Debtor Case Number ------------------- ----------- Covanta Acquisition, Inc. 02-40861 (CB) Covanta Alexandria/Arlington, Inc. 02-40929 (CB) Covanta Babylon, Inc. 02-40928 (CB) Covanta Bessemer, Inc. 02-40862 (CB) Covanta Bristol, Inc. 02-40930 (CB) Covanta Cunningham Environmental Support Services, Inc. 02-40863 (CB) Covanta Energy Americas, Inc. 02-40881 (CB) Covanta Energy Construction, Inc. 02-40870 (CB) Covanta Energy Corporation 02-40841 (CB) Covanta Energy Group, Inc. 03-13707 (CB) Covanta Energy International, Inc. 03-13706 (CB) Covanta Energy Resource Corp. 02-40915 (CB) Covanta Energy Services of New Jersey, Inc. 02-40900 (CB) Covanta Energy Services, Inc. 02-40899 (CB) Covanta Energy West, Inc. 02-40871 (CB) Covanta Engineering Services, Inc. 02-40898 (CB) Covanta Fairfax, Inc. 02-40931 (CB) Covanta Geothermal Operations Holdings, Inc. 02-40873 (CB) Covanta Geothermal Operations, Inc. 02-40872 (CB) Covanta Heber Field Energy, Inc. 02-40893 (CB) Covanta Hennepin Energy Resource Co., L.P. 02-40906 (CB) Covanta Hillsborough, Inc. 02-40932 (CB) Covanta Honolulu Resource Recovery Venture 02-40905 (CB) Covanta Huntington Limited Partnership 02-40916 (CB) Covanta Huntington Resource Recovery One Corp. 02-40919 (CB) Covanta Huntington Resource Recovery Seven Corp. 02-40920 (CB) Covanta Huntsville, Inc. 02-40933 (CB) Covanta Hydro Energy, Inc. 02-40894 (CB) Covanta Hydro Operations West, Inc. 02-40875 (CB) Covanta Hydro Operations, Inc. 02-40874 (CB) Covanta Imperial Power Services, Inc. 02-40876 (CB) Covanta Indianapolis, Inc. 02-40934 (CB) Covanta Kent, Inc. 02-40935 (CB) Covanta Lake, Inc. 02-40936 (CB) Covanta Lancaster, Inc. 02-40937 (CB) Covanta Lee, Inc. 02-40938 (CB) Covanta Long Island, Inc. 02-40917 (CB) Covanta Marion Land Corp. 02-40940 (CB) Covanta Marion, Inc. 02-40939 (CB) Covanta Mid-Conn, Inc. 02-40911 (CB) Covanta Montgomery, Inc. 02-40941 (CB) Covanta New Martinsville Hydro-Operations Corp. 02-40877 (CB) Covanta Oahu Waste Energy Recovery, Inc. 02-40912 (CB) Covanta Onondaga Five Corp. 02-40926 (CB) Covanta Onondaga Four Corp. 02-40925 (CB) Covanta Onondaga Limited Partnership 02-40921 (CB) Covanta Onondaga Operations, Inc. 02-40927 (CB) Covanta Onondaga Three Corp. 02-40924 (CB) Covanta Onondaga Two Corp. 02-40923 (CB) Covanta Onondaga, Inc. 02-40922 (CB) Covanta Operations of Union, LLC 02-40909 (CB) Covanta OPW Associates, Inc. 02-40908 (CB) Covanta OPWH, Inc. 02-40907 (CB) Covanta Pasco, Inc. 02-40943 (CB) Covanta Power Equity Corp. 02-40895 (CB) Covanta Power International Holdings, Inc. 03-13708 (CB) Covanta Projects, Inc. 03-13709 (CB) Covanta Projects of Hawaii, Inc. 02-40913 (CB) Covanta Projects of Wallingford, L.P. 02-40903 (CB) Covanta RRS Holdings, Inc. 02-40910 (CB) Covanta Secure Services, Inc. 02-40901 (CB) Covanta SIGC Geothermal Operations, Inc. 02-40883 (CB) Covanta Stanislaus, Inc. 02-40944 (CB) Covanta Systems, Inc. 02-40948 (CB) Covanta Tampa Bay, Inc. 02-40865 (CB) Covanta Tulsa, Inc. 02-40945 (CB) Covanta Union, Inc. 02-40946 (CB) Covanta Wallingford Associates, Inc. 02-40914 (CB) Covanta Warren Energy Resource Co., L.P. 02-40904 (CB) Covanta Waste to Energy of Italy, Inc. 02-40902 (CB) Covanta Waste to Energy, Inc. 02-40949 (CB) Covanta Water Holdings, Inc. 02-40866 (CB) Covanta Water Systems, Inc. 02-40867 (CB) Covanta Water Treatment Services, Inc. 02-40868 (CB) DSS Environmental, Inc. 02-40869 (CB) ERC Energy II, Inc. 02-40890 (CB) ERC Energy, Inc. 02-40891 (CB) Heber Field Energy II, Inc. 02-40892 (CB) Heber Loan Partners 02-40889 (CB) OPI Quezon, Inc. 02-40860 (CB) Three Mountain Operations, Inc. 02-40879 (CB) Three Mountain Power, LLC 02-40880 (CB) EXHIBITS TO THE LIQUIDATION PLAN EXHIBIT 3 TO THE LIQUIDATION PLAN LIST OF LIQUIDATING DEBTORS THAT FILED ON INITIAL PETITION DATE AND SUBSEQUENT PETITION DATE SCHEDULE OF LIQUIDATING DEBTORS FILING ON APRIL 1, 2002 (THE INITIAL PETITION DATE) Liquidating Debtor Case Number ------------------ ----------- Covanta Energy Sao Jeronimo, Inc. 02-40854 (CB) Covanta Financial Services, Inc. 02-40947 (CB) Covanta Huntington, Inc. 02-40918 (CB) Covanta Key Largo, Inc. 02-40864 (CB) Covanta Northwest Puerto Rico, Inc. 02-40942 (CB) Covanta Oil & Gas, Inc. 02-40878 (CB) Covanta Power Development of Bolivia, Inc. 02-40856 (CB) Covanta Power Development, Inc. 02-40855 (CB) Covanta Secure Services USA, Inc. 02-40896 (CB) Covanta Waste Solutions, Inc. 02-40897 (CB) J.R. Jack's Construction Corporation 02-40857 (CB) Lenzar Electro-Optics, Inc. 02-40832 (CB) Ogden Allied Abatement & Decontamination Service, Inc. 02-40827 (CB) Ogden Allied Maintenance Corp. 02-40828 (CB) Ogden Allied Payroll Services, Inc. 02-40835 (CB) Ogden Attractions, Inc. 02-40836 (CB) Ogden Aviation Distributing Corp. 02-40829 (CB) Ogden Aviation Fueling Company of Virginia, Inc. 02-40837 (CB) Ogden Aviation Service Company of Colorado, Inc. 02-40839 (CB) Ogden Aviation Service Company of Pennsylvania, Inc. 02-40834 (CB) Ogden Aviation Service International Corporation 02-40830 (CB) Ogden Aviation, Inc. 02-40838 (CB) Ogden Cargo Spain, Inc. 02-40843 (CB) Ogden Central and South America, Inc. 02-40844 (CB) Ogden Constructors, Inc. 02-40858 (CB) Ogden Environmental & Energy Services Co., Inc. 02-40859 (CB) Ogden Facility Holdings, Inc. 02-40845 (CB) Ogden Facility Management Corporation of Anaheim 02-40846 (CB) Ogden Film and Theatre, Inc. 02-40847 (CB) Ogden Firehole Entertainment Corp. 02-40848 (CB) Ogden International Europe, Inc. 02-40849 (CB) Ogden New York Services, Inc. 02-40826 (CB) Ogden Services Corporation 02-40850 (CB) Ogden Support Services, Inc. 02-40851 (CB) PA Aviation Fuel Holdings, Inc. 02-40852 (CB) Philadelphia Fuel Facilities Corporation 02-40853 (CB) SCHEDULE OF LIQUIDATING DEBTORS FILING ON JUNE 6, 2003 (THE SUBSEQUENT PETITION DATE) Liquidating Debtor Case Number ------------------ ----------- Alpine Food Products, Inc. 03-13679 (CB) BDC Liquidating Corp. 03-13681 (CB) Bouldin Development Corp. 03-13680 (CB) Covanta Equity of Alexandria/Arlington, Inc. 03-13682 (CB) Covanta Equity of Stanislaus, Inc. 03-13683 (CB) Doggie Diner, Inc. 03-13684 (CB) Gulf Coast Catering Company, Inc. 03-13685 (CB) Logistics Operations, Inc. 03-13688 (CB) Offshore Food Service, Inc. 03-13694 (CB) OFS Equity of Alexandria/Arlington, Inc. 03-13687 (CB) OFS Equity of Babylon, Inc. 03-13690 (CB) OFS Equity of Delaware, Inc. 03-13689 (CB) OFS Equity of Huntington, Inc. 03-13691 (CB) OFS Equity of Indianapolis, Inc. 03-13693 (CB) OFS Equity of Stanislaus, Inc. 03-13692 (CB) Ogden Aviation Security Services of Indiana, Inc. 03-13695 (CB) Ogden Aviation Terminal Services, Inc. 03-13696 (CB) Ogden Cisco, Inc. 03-13698 (CB) Ogden Communications, Inc. 03-13697 (CB) Ogden Facility Management Corporation of West Virginia 03-13699 (CB) Ogden Food Service Corporation of Milwaukee, Inc. 03-13701 (CB) Ogden Leisure, Inc. 03-13700 (CB) Ogden Management Services, Inc. 03-13702 (CB) Ogden Pipeline Service Corporation 03-13704 (CB) Ogden Technology Services Corporation 03-13703 (CB) Ogden Transition Corporation 03-13705 (CB) EXHIBITS TO THE LIQUIDATION PLAN EXHIBIT 4 TO THE LIQUIDATION PLAN LIST OF HEBER DEBTORS Heber Debtor Case Number - ------------ ----------- AMOR 14 Corporation 02-40886 (CB) Covanta SIGC Energy, Inc. 02-40885 (CB) Covanta SIGC Energy II, Inc. 02-40884 (CB) Heber Field Company 02-40888 (CB) Heber Geothermal Company 02-40887 (CB) Second Imperial Geothermal Co., L.P. 02-40882 (CB) EX-2.3 5 cov8kex2-3_0909.txt Exhibit 2.3 DRAFT SUBJECT TO COURT APPROVAL UNITED STATES BANKRUPTCY COURT SOUTHERN DISTRICT OF NEW YORK ) In re: ) Chapter 11 ) ) Case Nos. 02-40826 (CB), et al. OGDEN NEW YORK SERVICES, INC., et al.,(1) ) ) (Jointly Administered) Debtors and Debtors In Possession. ) DISCLOSURE STATEMENT WITH RESPECT TO DEBTORS' JOINT PLAN OF REORGANIZATION AND JOINT PLAN OF LIQUIDATION UNDER CHAPTER 11 OF THE BANKRUPTCY CODE THIS PROPOSED DISCLOSURE STATEMENT HAS NOT BEEN APPROVED BY THE BANKRUPTCY COURT FOR USE IN THE SOLICITATION OF ACCEPTANCES OF THE PLANS DISCLOSED PURSUANT TO SECTION 1125(B) OF THE BANKRUPTCY CODE. ACCORDINGLY, THE FILING AND DISSEMINATION OF THIS PROPOSED DISCLOSURE STATEMENT IS NOT INTENDED, NOR SHOULD IT BE CONSTRUED, AS SUCH A SOLICITATION, NOR SHOULD THE INFORMATION CONTAINED HEREIN BE RELIED UPON FOR ANY PURPOSE PRIOR TO A DETERMINATION BY THE BANKRUPTCY COURT THAT THE PROPOSED DISCLOSURE STATEMENT CONTAINS ADEQUATE INFORMATION. ACCEPTANCES OR REJECTIONS MAY NOT BE SOLICITED UNTIL THE BANKRUPTCY COURT HAS APPROVED THIS DISCLOSURE STATEMENT. THIS DISCLOSURE STATEMENT MAY BE REVISED TO REFLECT EVENTS THAT OCCUR AFTER THE DATE HEREOF BUT PRIOR TO THE COURT'S APPROVAL. Dated: September 8, 2003 CLEARY, GOTTLIEB, STEEN & HAMILTON JENNER & BLOCK, LLC Deborah M. Buell (DB 3562) Vincent E. Lazar (VL 7320) James L. Bromley (JB 5125) Christine L. Childers (CC 0092) One Liberty Plaza One IBM Plaza New York, New York 10006 Chicago, IL 60611 (212) 225-2000 (312) 222-9350 Counsel to Debtors and Debtors In Possession - ----------------- (1) A complete list of the Debtors and Debtors In Possession is provided on Exhibit G. DISCLAIMER THE INFORMATION CONTAINED IN THIS DISCLOSURE STATEMENT (THE "DISCLOSURE STATEMENT") AND APPENDICES HERETO RELATES TO CERTAIN DEBTORS' JOINT PLAN OF REORGANIZATION (THE "REORGANIZATION PLAN") AND CERTAIN DEBTORS' JOINT PLAN OF LIQUIDATION (THE "LIQUIDATION PLAN," AND TOGETHER WITH THE REORGANIZATION PLAN, THE "PLANS") AND ARE INCLUDED HEREIN FOR PURPOSES OF SOLICITING ACCEPTANCES OF EACH OF THE PLANS AND MAY NOT BE RELIED UPON FOR ANY PURPOSE OTHER THAN TO DETERMINE HOW TO VOTE ON EACH OF THE PLANS. NO PERSON MAY GIVE ANY INFORMATION OR MAKE ANY REPRESENTATIONS, OTHER THAN THE INFORMATION AND REPRESENTATIONS CONTAINED IN THIS DISCLOSURE STATEMENT, REGARDING THE PLANS OR THE SOLICITATION OF ACCEPTANCES OF THE PLANS. ALL CREDITORS ARE ADVISED AND ENCOURAGED TO READ THIS DISCLOSURE STATEMENT AND THE PLANS IN THEIR ENTIRETY BEFORE VOTING TO ACCEPT OR REJECT THE REORGANIZATION PLAN AND/OR THE LIQUIDATION PLAN. SUMMARIES OF THE PLANS AND STATEMENTS MADE IN THIS DISCLOSURE STATEMENT ARE QUALIFIED IN THEIR ENTIRETY BY REFERENCE TO THE REORGANIZATION PLAN AND/OR THE LIQUIDATION PLAN, OTHER EXHIBITS ANNEXED OR REFERRED TO IN THE PLANS, RESPECTIVELY, AND THIS DISCLOSURE STATEMENT. THE STATEMENTS CONTAINED IN THIS DISCLOSURE STATEMENT ARE MADE ONLY AS OF THE DATE HEREOF, AND THERE CAN BE NO ASSURANCE THAT THE STATEMENTS CONTAINED HEREIN WILL BE CORRECT AT ANY TIME AFTER THE DATE HEREOF. THIS DISCLOSURE STATEMENT HAS BEEN PREPARED IN ACCORDANCE WITH 11 U.S.C. ss. 1125 AND RULE 3016(c) OF THE FEDERAL RULES OF BANKRUPTCY PROCEDURE AND NOT NECESSARILY IN ACCORDANCE WITH FEDERAL OR STATE SECURITIES LAWS OR OTHER LAWS GOVERNING DISCLOSURE OUTSIDE THE CONTEXT OF TITLE 11 OF THE UNITED STATES CODE ss.ss. 101-1330 (THE "BANKRUPTCY CODE"). NEITHER THE SECURITIES TO BE DISTRIBUTED NOR THE DISCLOSURE STATEMENT HAS BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION (THE "SEC") OR ANY STATE SECURITIES COMMISSION, NOR HAS THE SEC APPROVED OR DISAPPROVED OF THE ACCURACY OR ADEQUACY OF THE STATEMENTS CONTAINED HEREIN. AS TO CONTESTED MATTERS, ADVERSARY PROCEEDINGS, AND OTHER ACTIONS OR THREATENED ACTIONS, THIS DISCLOSURE STATEMENT AND APPENDICES HERETO WILL NOT CONSTITUTE OR BE CONSTRUED AS AN ADMISSION OF ANY FACT OR LIABILITY, STIPULATION, OR WAIVER, BUT RATHER AS A STATEMENT MADE IN SETTLEMENT NEGOTIATIONS. THIS DISCLOSURE STATEMENT WILL NOT BE ADMISSIBLE IN ANY NONBANKRUPTCY PROCEEDING NOR WILL IT BE CONSTRUED TO BE CONCLUSIVE ADVICE ON THE TAX, SECURITIES, OR OTHER LEGAL EFFECTS OF THE REORGANIZATION AS TO HOLDERS OF CLAIMS AGAINST, OR EQUITY INTERESTS IN THE DEBTORS. NO PARTY IS AUTHORIZED TO PROVIDE TO ANY OTHER PARTY ANY INFORMATION CONCERNING THE PLANS OTHER THAN THE CONTENTS OF THIS DISCLOSURE STATEMENT. THE DEBTORS HAVE NOT AUTHORIZED ANY REPRESENTATIONS CONCERNING THE DEBTORS OR THE VALUE OF THEIR PROPERTY OTHER THAN THOSE SET FORTH IN THIS DISCLOSURE STATEMENT. HOLDERS OF CLAIMS AND EQUITY INTERESTS SHOULD NOT RELY ON ANY INFORMATION, REPRESENTATIONS OR INDUCEMENTS MADE TO OBTAIN YOUR ACCEPTANCE OF THE PLANS THAT ARE OTHER THAN, OR INCONSISTENT WITH, THE INFORMATION CONTAINED HEREIN AND IN THE PLANS. ADDITIONAL INFORMATION REGARDING THE DEBTORS (AS DEFINED HEREIN) IS CONTAINED IN PUBLIC FILINGS WITH THE SEC. ALTHOUGH DEBTORS HAVE USED THEIR BEST EFFORTS TO ENSURE THE ACCURACY OF THE FINANCIAL INFORMATION PROVIDED IN THIS DISCLOSURE STATEMENT, THE FINANCIAL INFORMATION CONTAINED IN, OR INCORPORATED BY REFERENCE INTO, THIS DISCLOSURE STATEMENT HAS NOT BEEN AUDITED, EXCEPT, TO THE EXTENT INDICATED, THE FINANCIAL STATEMENTS INCLUDED IN COVANTA ENERGY CORPORATION'S ANNUAL REPORT ON FORM 10-K. THE PROJECTIONS PROVIDED IN THIS DISCLOSURE STATEMENT HAVE BEEN PREPARED BY THE DEBTORS' MANAGEMENT. THESE PROJECTIONS, WHILE PRESENTED WITH NUMERICAL SPECIFICITY, ARE NECESSARILY BASED ON A VARIETY OF ESTIMATES AND ASSUMPTIONS WHICH, THOUGH CONSIDERED REASONABLE BY MANAGEMENT, MAY NOT BE REALISTIC AND ARE INHERENTLY SUBJECT TO SIGNIFICANT BUSINESS, ECONOMIC, COMPETITIVE, INDUSTRY, REGULATORY, MARKET AND FINANCIAL UNCERTAINTIES AND CONTINGENCIES, MANY OF WHICH ARE BEYOND THE DEBTORS' CONTROL. THE DEBTORS CAUTION THAT NO REPRESENTATIONS CAN BE MADE AS TO THE ACCURACY OF THESE PROJECTIONS OR TO THE DEBTORS' ABILITY TO ACHIEVE THE PROJECTED RESULTS. SOME ASSUMPTIONS INEVITABLY WILL NOT MATERIALIZE. FURTHER, EVENTS AND CIRCUMSTANCES OCCURING SUBSEQUENT TO THE DATE ON WHICH THESE PROJECTIONS WERE PREPARED MAY BE DIFFERENT FROM THOSE ASSUMED OR, ALTERNATIVELY, MAY HAVE BEEN UNANTICIPATED, AND THUS THE OCCURRENCE OF THESE EVENTS MAY AFFECT FINANCIAL RESULTS IN A MATERIALLY ADVERSE OR MATERIALLY BENEFICIAL MANNER. THE PROJECTIONS, THEREFORE, MAY NOT BE RELIED UPON AS A GUARANTY OR OTHER ASSURANCE OF THE ACTUAL RESULTS THAT WILL OCCUR. SEE SECTION VIII OF THIS DISCLOSURE STATEMENT, "RISK FACTORS," FOR A DISCUSSION OF CERTAIN RISK FACTORS WHICH SHOULD BE CONSIDERED IN CONNECTION WITH A DECISION BY A HOLDER OF AN IMPAIRED CLAIM OR IMPAIRED EQUITY INTEREST TO ACCEPT THE PLANS. SUMMARY OF THE REORGANIZATION PLAN AND THE LIQUIDATION PLAN The following introduction and summary is a general overview only, which is qualified in its entirety by, and should be read in conjunction with, the more detailed discussions, information and financial statements and notes thereto appearing elsewhere in this Disclosure Statement, the Reorganization Plan and the Liquidation Plan. All capitalized terms not defined in this Disclosure Statement have the meanings ascribed to such terms in the Reorganization Plan and the Liquidation Plan, copies of which are annexed hereto in Exhibits A and B. This Disclosure Statement contains, among other things, descriptions and summaries of provisions of the Reorganization Plan being proposed by the Reorganizing Debtors(2) and Heber Debtors(3) and the Liquidation Plan being proposed by the Liquidating Debtors4 (together, the "Debtors"), respectively, as filed with the United States Bankruptcy Court for the Southern District of New York (the "Court") on September 8, 2003. Certain provisions of the Plans, and thus the descriptions and summaries contained herein, are the subjects of continuing negotiations among the Debtors and various parties, have not been finally agreed upon, and may be modified. The Debtors have reserved their rights in the Plans to redesignate Debtors as Reorganizing Debtors, Heber Debtors or Liquidating Debtors at any time prior to ten (10) days prior to the Confirmation Hearing (as defined below). Holders of Claims or Equity Interests (each as defined below) who are entitled to vote on the Reorganization Plan or Liquidation Plan and who are affected by any such redesignation shall have five (5) days from the notice of such redesignation to vote to accept or reject the Reorganization Plan or the Liquidation Plan, as the case may be. The Debtors also have reserved the right to withdraw prior to the Confirmation Hearing one or more Debtors from the Reorganization Plan or the Liquidation Plan, as the case may be, and to thereafter file a plan solely with respect to such Debtor. The Debtors believe that the Debtors' creditors will receive substantially greater and earlier recoveries under the Plans than those that would be achieved in total liquidation or under an alternative plan and, further, that any alternative to confirmation of the Plans, such as total liquidation of the Debtors or attempts by another party in interest to file a plan, could result in significant delays, litigation and costs. FOR THESE REASONS, THE DEBTORS URGE YOU TO RETURN YOUR BALLOT ACCEPTING THE PLANS. A. Overview Covanta Energy Corporation ("Covanta") and its subsidiaries (collectively, the "Subsidiaries" and together with Covanta, the "Company") develop, construct, own and operate for others key infrastructure for the conversion of waste-to-energy, independent power production and the treatment of water and wastewater in the United States and abroad. The Company owns or operates 62 power generation facilities, 46 of which are in the United States and 16 of which are located outside of the United States. The Company's power generation facilities use a variety of fuels, including municipal solid waste, water (hydroelectric), natural gas, coal, geothermal fluid, wood waste, landfill gas, heavy fuel oil and diesel fuel. Until September 1999, and under prior management, the Company was also actively involved in the entertainment and aviation services industries. On April 1, 2002 (the "Initial Petition Date"), Covanta and 123 of its domestic subsidiaries filed voluntary petitions for relief under chapter 11 of the Bankruptcy Code in the Court. On December 16, 2002 (the "Interim Petition Date"), and June 6, 2003 (the "Subsequent Petition Date," and with the Initial Petition Date and the Interim Petition Date, the "Petition Dates") thirty-one (31) additional subsidiaries filed their chapter 11 petitions for relief under the Bankruptcy Code. In addition, four (4) subsidiaries that had filed petitions on the Initial Petition Date have been sold as part of the Company's disposition of non-core assets and are no longer owned by the Company, nor are they part of the bankruptcy proceedings. The pending bankruptcy cases (the "Chapter 11 Cases") are being jointly administered under the caption "In re Ogden New York Services, Inc., et al., Case Nos. 02-40826 (CB), et al." - -------------- (2) A complete list of the Reorganizing Debtors is provided on Exhibit I to the Reorganization Plan. (3) The Heber Debtors are AMOR 14 Corporation, Covanta SIGC Energy, Inc., Covanta SIGC Energy II, Inc., Heber Field Company, Heber Geothermal Company and Second Imperial Geothermal Company, L.P. (4) A complete list of the Liquidating Debtors is provided on Exhibit I to the Liquidation Plan. Until September 1999, and under prior management, the Company was actively involved in the entertainment and aviation services industries. However, after extensive study and evaluation, the Company determined that most of its earnings were generated by the energy business, that the entertainment business was substantially over-leveraged and that the focus on the entertainment and aviation businesses had not proven successful. Accordingly, in September 1999, the Company adopted a restructuring strategy in which it would concentrate on its core energy business while seeking to sell its aviation and entertainment businesses. During 2000 and 2001, the Company divested multiple entertainment and aviation assets and shed tens of millions of dollars of overhead. However, the Company required waivers of financial covenants under its numerous credit agreements and new letter of credit facilities to be used by its core energy business in the event of a downgrade by the credit rating agencies below investment grade. The Company believed that, with a single master credit agreement in place, it could seek access to the capital markets with which it could raise equity or debt that, combined with additional cash from the sale of its remaining entertainment and aviation assets, would meet its liquidity needs, including the timely repayment of outstanding debentures maturing in 2002. By the fall of 2000, the Company and its key banks reached an agreement in principle on the terms of a new master credit facility that would include all then-existing bank credit arrangements and a new revolving and letter of credit facility. Due principally to difficult intercreditor issues to resolve, the new Revolving Credit and Participation Agreement (the "Master Credit Facility") was not executed until March 14, 2001, at which time the Company paid down all their outstanding bank debt. With the Master Credit Facility in place, the Company took steps to access the equity markets and continued to dispose of entertainment and aviation assets. However, these efforts were thwarted in the spring of 2001 by unanticipated events. The sale of the remaining assets from the non-core businesses took longer and yielded less proceeds than anticipated. The energy crisis in California (which led to the substantially delayed payment to the Company of approximately $75 million by two California utilities) and the perception that the independent power sector was overbuilt contributed to a reduction in demand for energy company securities. The delayed payment by the two California utilities also caused the Company to seek cash flow covenant waivers under the Master Credit Facility in June 2001. These waivers were granted, but in consideration for the waivers the Company lost the capacity under the Master Credit Facility to obtain letters of credit that it had intended to provide to third parties in the event of a downgrade in the Company's credit rating. The Company's ability to access the capital markets was further hampered first by a sharp downturn in capital markets for energy companies in the middle of 2001, and subsequently by the events of September 11, 2001, which dampened the capital markets generally, and the collapse of Enron, which brought the energy sector further investor disfavor. In December 2002, the Company publicly stated that it needed further covenant waivers and that it was encountering difficulties in achieving access to short-term liquidity. This resulted in a downgrade of the Company's credit rating below investment grade. Consequently, under its contracts for two waste-to-energy facilities the Company became obligated to provide credit support in the amount of $50 million for each project. On March 1, 2002, the Company availed itself of a grace period to defer for 30 days the payment of approximately $4.6 million of interest on its $100 million principal amount 9.25% Debentures due 2002 (the "9.25% Debentures"). In March 2002, substantial amounts of fees under the Master Credit Facility came due, but could not be paid without violating cash maintenance covenants under the facility. In addition, draw notices totaling approximately $105.2 million were presented on two letters of credit issued on behalf of the Company. Although the bank lenders honored such letters of credit, the Company had insufficient liquidity to reimburse the bank lenders as required under the Master Credit Facility. Furthermore, approximately $148.7 million of the 6% Convertible Debentures and the 5.75% Convertible Debentures were to mature in 2002. Ultimately, the Company concluded that the commencement of the Chapter 11 Cases was in the best interest of all creditors as the best means by which to protect the value of the Company's core business, reorganize its capital structure and complete the disposition of its remaining non-core entertainment and aviation assets. Since the Initial Petition Date, the Debtors have continued their efforts to dispose of non-core businesses. With approval of the Court, the Debtors have sold the remaining aviation fueling assets, their interests in Casino Iguazu ("Casino Iguazu") and La Rural Fairgrounds and Exhibition Center ("La Rural Fairgrounds," and with Casino Iguazu, the "Argentine Assets") in Argentina, their interests in the Corel Centre in Ottawa, Canada (the "Corel Centre") and in the Team and other miscellaneous assets related to the entertainment business. In addition, in order to enhance the value of the Company's core business, on September 23, 2002, management announced a reduction in non-plant personnel, closure of satellite development offices and reduction in all other costs not directly related to maintaining operations at their current high levels. As part of the reduction in force, waste-to-energy and domestic independent power headquarters management were combined and numerous other structural changes were instituted in order to improve management efficiency. B. Events Leading to the Plans Over the course of these proceedings, the Debtors have held discussions with the Creditors Committee, representatives of the Prepetition Lenders and DIP Lenders (together, the "Secured Bank Lenders") and the 9.25% Debenture holders with respect to possible capital and debt structures for the Debtors and the formulation of the Plans. A central element of these discussions and related negotiations, described further in Section VI.C.12, was the possibility for the Debtors and their secured and unsecured creditors to develop a plan of reorganization involving an employee stock ownership plan or "ESOP." After extensive negotiations, significant progress was made toward determining that an ESOP could provide a useful framework for a plan of reorganization. In order to better determine the viability of an ESOP, the Debtors appointed a committee originally consisting of three of Covanta's senior managers (the "ESOP Committee"), whose purpose it was to investigate various issues from the perspective of the ESOP and the employees of the Reorganized Debtors. Upon further investigation, the ESOP Committee concluded that a more definitive determination of the viability of an ESOP required the appointment of an independent fiduciary to represent the ESOP and the interests of employees who would participate in the ESOP in reviewing the terms of any proposed ESOP transaction and subsequently deciding whether the ESOP should participate in such a transaction. In addition, the ESOP Committee determined that it was imperative that any proposed ESOP transaction be structured to comply with all of the applicable fiduciary requirements of the Employee Retirement Income Security Act of 1974, as amended ("ERISA") and that the representation of the ESOP and its participants by an independent fiduciary would be essential to ensuring such compliance. After conducting interviews with a number of potential candidates, the ESOP Committee decided to retain U.S. Trust Company, N.A. ("U.S. Trust"), because of its extensive experience in providing specialized management, fiduciary and consulting services with respect to the formation of ESOPs, to act as independent fiduciary on behalf of the ESOP. The ESOP Committee thereafter negotiated a form of agreement with U.S. Trust for the provision of fiduciary services in connection with a potential ESOP (the "U.S. Trust Agreement"). On July 1, 2003, the Court entered an order (Docket No. 1719) authorizing Covanta to engage U.S. Trust, as well as retain Duff & Phelps ("D&P") as a financial advisor to U.S. Trust, in connection with the potential ESOP transaction. Pursuant to this order, Covanta, the ESOP Committee and U.S. Trust, effective as of July 1, 2003, entered into the U.S. Trust Agreement. Pursuant to the U.S. Trust Agreement, U.S. Trust is authorized to review the terms of the Reorganization Plan and the proposed new corporate structure of the Reorganized Debtors. As part of this review, U.S. Trust's responsibilities are to (i) conduct appropriate due diligence on the Company and the proposed ESOP, (ii) negotiate on behalf of the proposed ESOP the terms governing the contribution of Reorganized Covanta's stock to the proposed ESOP and (iii) determine, on behalf of the proposed ESOP, whether to accept a proposed contribution of Reorganized Covanta's stock to the proposed ESOP. In exercising these responsibilities, U.S. Trust will rely on the opinion of its financial advisor, D&P, that the terms and conditions of the proposed contribution are fair and reasonable to the ESOP from a financial point of view. The Company has agreed to indemnify U.S. Trust for any losses, claims, damages or liabilities, including reasonable attorneys' fees, arising in any manner in connection with the provision of services or exercise of responsibilities under the U.S. Trust Agreement, unless such losses, claims, damages or liabilities are finally adjudged to have resulted from U.S. Trust's bad-faith, self-dealing, breach of fiduciary duty, negligence or willful misconduct. The fee structure of the U.S. Trust Agreement contemplates, in addition to the reimbursement of reasonable expenses, a flat dollar fee of $300,000, payable to U.S. Trust regardless of whether the Reorganization Plan is consummated. The Company has already paid to U.S. Trust $150,000 as compensation for the services it has performed and will continue to perform in connection with the ESOP transaction. The final installment of $150,000 will be paid to U.S. Trust when it is prepared to make a final decision regarding whether or not to accept, on behalf of the ESOP, the proposed contribution of Reorganized Covanta stock. In addition, the U.S. Trust Agreement contemplates the payment to D&P of a reasonable fee, not to exceed $175,000, and reimbursement of reasonable expenses, not to exceed $25,000, in connection with its rendering of the financial opinion. No portion of the fee payable to U.S. Trust is contingent in any way upon the consummation of the Reorganization Plan or an affirmative decision by U.S. Trust to accept the proposed contribution. The ESOP Committee believes the fee structure is a critical component of its efforts to ensure that the ESOP transaction complies with the fiduciary requirements of ERISA. U.S. Trust's decision with respect to whether or not to accept the proposed contribution of Reorganized Covanta stock is crucial to the successful restructuring of the Debtors. The consummation of the Reorganization Plan is predicated on U.S. Trust's acceptance of the contribution on behalf of the ESOP. There is no guarantee that U.S. Trust will decide that the acceptance of such contribution is in the best interests of the ESOP and its participants. The Debtors expect that U.S. Trust will be prepared to make its decision prior to the approval of this Disclosure Statement. However, due to the nature of the services to be performed by U.S. Trust in connection with the ESOP transaction, as well as the potential delay that would result from further negotiations between U.S. Trust and with the Debtors' various creditor constituencies, it is possible that U.S. Trust will not be prepared to make its final decision until a later time. C. General Structure of the Plans Chapter 11 is the principal business reorganization chapter of the Bankruptcy Code. Under chapter 11, a debtor is authorized to reorganize its business for the benefit of its creditors. Upon the filing of a petition for relief under chapter 11, section 362 of the Bankruptcy Code provides for an automatic stay of substantially all actions and proceedings against the debtor and its property, including all attempts to collect claims or enforce liens that arose prior to the commencement of its chapter 11 case. The process of satisfying claims against and interests in the Debtors is set forth in the Reorganization Plan and the Liquidation Plan. Confirmation of the Plans by the Court makes the Plans binding upon the Debtors, any issuer of securities under the Plans, any person or entity acquiring property under the Plans and any creditor of or equity security holder in the Debtors, whether or not such creditor or equity security holder (i) is impaired under or has accepted the Plans or (ii) receives or retains any property under the Plans. Subject to certain limited exceptions and other than as provided in the Reorganization Plan itself or in the order confirming the Plans (the "Confirmation Order"), the confirmation of the Reorganization Plan discharges the Reorganizing Debtors and Heber Debtors from any debt that arose prior to the Effective Date of the Reorganization Plan, substitutes therefor the obligations specified under the confirmed Reorganization Plan, and terminates all rights and interests of equity security holders except to the extent expressly provided therein. The terms of the Reorganization Plan are based upon, among other things, the Debtors' assessment of their ability to achieve the goals of their Business Plan (as defined in Section VI.C.16 herein), make the distributions contemplated under the Reorganization Plan and pay certain of their continuing obligations in the ordinary course of the businesses of the Reorganizing Debtors. In accordance with section 1141(d)(3) of the Bankruptcy Code, the confirmation of the Liquidation Plan does not discharge the Liquidating Debtors from any Claims asserted against them. Under the Reorganization Plan and the Liquidation Plan, Claims against and Interests in the Reorganizing Debtors, Heber Debtors and the Liquidating Debtors, respectively, are divided into Classes according to their relative seniority and other criteria. Each Reorganizing Debtor and Liquidating Debtor is a proponent of the respective Plans within the meaning of section 1129 of the Bankruptcy Code. The Reorganizing Debtors' Estates, Heber Debtors' Estates and the Liquidating Debtors' Estates have been deemed consolidated solely for purposes of administration, procedure and voting. By virtue of this deemed consolidation, in some instances, claims against multiple Reorganizing Debtors, Heber Debtors and Liquidating Debtors have been grouped together into single Classes of Claims. Except to the extent a Reorganizing Debtor, Liquidating Debtor or Heber Debtor expressly assumes an obligation or liability of another Debtor, the Plans will not operate to impose liability on the Reorganizing Debtors, Heber Debtors and Liquidating Debtors for the Claims against any other Debtor or the debts and other obligations of any other Debtor. From and after the Effective Date, each Reorganizing Debtor and Heber Debtor will be separately liable for its own debts and obligations arising on and after the Effective Date. Additionally, from and after the Effective Date, each Liquidating Debtor will be separately liable for its own debts and obligations arising on and after the Effective Date, although, as most of the Liquidating Debtors are non-operating and there is no objective to continue or engage in the conduct of a trade or business, except to the extent reasonably necessary to, and consistent with the liquidating purpose of the Liquidation Plan, the Liquidating Debtors do not anticipate that they will incur any new debts or obligations on or after the Effective Date. After careful review of the Debtors' current and projected operations, estimated recoveries in a complete liquidation scenario, prospects as an ongoing business, and the strategic Business Plan developed by management and discussed more fully in Section VI.C.16, the Debtors have concluded that the recovery to the Debtors' creditors will be maximized by the Reorganizing Debtors and Heber Debtors' continued operation as a going concern and the Liquidating Debtors' dissolution in accordance with applicable law. The Reorganizing Debtors and Heber Debtors believe that their businesses and assets have significant value that would not be realized in a complete liquidation. According to the liquidation valuation analyses prepared by the Reorganizing Debtors and Heber Debtors with the assistance of their financial advisors, the value of each of the estates of the Reorganizing Debtors and Heber Debtors, respectively, is considerably greater as a going concern than in a liquidation. For a complete discussion of the liquidation value of the Reorganizing Debtors and Heber Debtors, please refer to Exhibit E attached hereto. The Debtors believe that this value is further enhanced by segregating the Liquidating Debtors, whose assets are primarily non-core and unrelated to the core businesses of the Reorganizing Debtors and Heber Debtors. Accordingly, the Debtors believe that the structures of the Reorganization Plan and the Liquidation Plan provide the best recoveries possible for holders of Claims against the Debtors and strongly recommend that, if you are entitled to vote, you vote to ACCEPT the Reorganization Plan and the Liquidation Plan. The Debtors believe that any alternative to confirmation of the Plans, such as complete liquidation or attempts by another party in interest to file a plan, could result in significant delays, litigation and costs, as well as significantly reduced recovery by creditors. D. Restructuring of the Debtors The Debtors filed the Reorganization Plan and the Liquidation Plan with the Court on September 8, 2003. The Reorganization Plan is premised upon the economic benefits to be derived from a framework for a restructuring of the Debtors built around the establishment and implementation of an ESOP. By establishing an ESOP to which Reorganized Covanta will contribute all of its stock, the employees of the Reorganized Debtors, as participants in the ESOP, will receive an equity interest in Reorganized Covanta that provides employees an opportunity to profit from the value of Reorganized Covanta Common Stock. In addition, the implementation of the ESOP and Reorganization Plan (which includes reorganized Covanta electing S corporation status for federal income tax purposes) is intended to result in the Debtors realizing a significant increase in available after-tax cash flow through a substantial reduction in federal income tax liabilities that will permit the Debtors to pay down their Allowable Claims, thereby permitting the Reorganizing Debtors to emerge from bankruptcy and permitting the Reorganizing Debtors to benefit the employees participating in the ESOP. Furthermore, the feasibility of the Reorganization Plan is further premised upon an ability to implement the Business Plan for the Reorganizing Debtors. The Business Plan (as defined in Section VI.C.16 herein) and accompanying financial projections through December 31, 2007, which include the preliminary estimated effects of the required adoption of "fresh start" accounting (the "Projections"), are described in detail in Section VI.C.16. While the Company believes that the Business Plan and Projections are reasonable and appropriate, they include a number of assumptions that may differ from actual results and are subject to a number of risk factors. See Section VIII for a discussion of such factors. The Debtors expect to sell their interests in certain geothermal energy projects (each project, a "Geothermal Project") in Heber, California (the "Geothermal Debtor Equity").(5) The Debtors expect to effect such sale pursuant to either Section 363 of the Bankruptcy Code or through a plan of reorganization for the Heber Debtors (the "Heber Plan") to be filed with respect to the Debtor entities to be sold, in either event contemplating selling the Geothermal Debtor Equity on substantially similar economic terms. The Debtors expect to file a Section 363 sale motion on or about September 8, 2003, and reserve the right to - ----------------- (5) Non-debtor affiliates of the Debtors also expect to sell their interest in certain geothermal energy projects operated by Mammoth Pacific, L.P., also a non-debtor. file the Heber Plan based on substantially similar economic terms to the proposed Section 363 sale. Consummation of the the sale of Geothermal Debtor Equity under either a Section 363 sale or the Heber Plan (either, the "Geothermal Sale") would result in the transfer of ownership of certain Reorganizing Debtors and Heber Debtors that own or lease the Geothermal Projects to certain buyers. The Reorganization Plan is premised on the consummation of the Geothermal Sale, as the proceeds of the Geothermal Sale will provide the Reorganized Debtors with funds necessary to emerge from Chapter 11 protection. Additionally, the Liquidation Plan provides for the complete liquidation of the Liquidating Debtors. Substantially all of the Liquidation Assets of the Liquidating Debtors have already been sold. The Debtors have proposed that the Secured Bank Lenders and 9.25% Debenture Holders contribute their Distributions, to which they would otherwise be entitled under the Liquidation Plan (consisting of (i) the proceeds of certain postpetition asset sales and (ii) certain other Claims of the Liquidating Debtors upon which the Secured Bank Lenders and 9.25% Debenture Holders have a first priority secured lien) to Reorganized Covanta. The Debtors further propose that up to $500,000 of the Cash subject to the transfers described in the previous sentence be transferred to the Operating Reserve, which shall be used by the Liquidating Trustee to fund the implementation of the Liquidation Plan. The transfers described above will assist the Reorganized Debtors in their reorganization. Furthermore, to the extent that there are Liquidation Assets that have not already been sold and/or transferred to Reorganized Covanta (the "Residual Liquidation Assets"), the Liquidation Plan provides for the complete liquidation and monetization (or abandonment, as the case may be) of such Residual Liquidation Assets and the complete dissolution of the Liquidating Debtors pursuant to applicable state law. E. Compromises and Settlements Incorporated into the Plans Under the Reorganization Plan and the Liquidation Plan, Claims and Equity Interests are divided into Classes. The Distributions provided for under the Plans are based upon the relative priorities and rights of members of those respective Classes. The Plans also embody the proposed compromise and settlement of claims and causes of action among the creditors in certain Classes. The obligations of Prepetition Borrowers (including Covanta and certain of its subsidiaries under Tranche B of the DIP Facility) under the Master Credit Facility are expected to be approximately $400 million (excluding undrawn letters of credit) together with approximately $34 million in accrued and unpaid fees and interest. These obligations were secured by a first priority lien on substantially all of the Prepetition Borrowers' assets, to the extent permitted, and by a pledge of 100% of the shares of most of Covanta's existing and future domestic subsidiaries, and 65% of the shares of substantially all of Covanta's foreign subsidiaries (the "Prepetition Collateral"). Pursuant to the order of the Court authorizing the DIP Financing Facility (as defined below), the Debtors stipulated, among other things, as to the priority, validity and enforceability of the liens and security interests that had been granted to the Prepetition Lenders prior to the commencement of the Chapter 11 Cases. Accordingly, the Prepetition Lenders are entitled to payment in full of their Allowed Secured Claim up to the full value of their security interest in the assets of the Prepetition Borrowers. However, in connection with the negotiations undertaken in development of the Plans, the Debtors have estimated the Prepetition Lenders' aggregate Allowed Secured Claim in the amount of $434 million, including interest and fees, which amount is subject to final allowance by the Court. In addition, distributions to the Prepetition Lenders are subject to certain priorities vis-a-vis each other as a result of the Intercreditor Agreement, among the Prepetition Lenders and the Company, dated March 14, 2001, (the "Intercreditor Agreement"). Similarly, the Debtors have estimated the 9.25% Debenture Holders' Allowed Secured Claims in the aggregate amount of $105 million, which amount is subject to final allowance by the Court. The proposed settlement of the Loss Sharing Litigation will also be incorporated into the Reorganization Plan and become effective on the Reorganizing Debtors and Heber Debtors' emergence from Chapter 11. Under the settlement, the current synthetic pooling arrangement (i.e. loss sharing under the Intercreditor Agreement) will be replaced with an actual pooling of exposures among the Canadian Loss Sharing Lenders and the Pooled Facility Lenders.(6) This would be accomplished by the Pooled Facility Lenders purchasing a ratable share of the funded exposures of the Canadian Loss Sharing Lenders (and receiving a distribution on such amounts from the Reorganizing Debtors and Heber Debtors under a Chapter 11 Plan).(7) The Canadian Loss Sharing Lenders, in turn, would purchase a like amount of participations in the Tranche B Facility of the DIP Credit Agreement and thereby reduce the Pooled Facility Lenders' existing exposure under that facility and any replacement thereof. - ---------------- (6) Capitalized terms in this paragraph not otherwise defined herein or in the Reorganization Plan shall have the meaning set forth in the Prepetition Credit Agreement. (7) Based upon current projections, the Pooled Facility Lenders will purchase approximately $14 million of the Canadian Loss Sharing Lenders' funded debt. After giving effect to the purchase (and all prior loss sharing payments), the remaining Tranche C Commitments (anticipated to be approximately US $16 million at such time) will be terminated. As described in more detail herein, as part of the overall negotiations of the Reorganization Plan and the Liquidation Plan, the Debtors have proposed that the Secured Bank Lenders and the 9.25% Debenture Holders contribute certain Distributions to Reorganized Covanta. As further described herein, $500,000 of the Distributions or proceeds described above will be used to fund the Operating Reserve established under the Liquidation Plan. The Debtors believe that the transfer of such Distributions and other Liquidation Assets will enhance the value of Reorganized Covanta and inure to the benefit of the Secured Bank Lenders and the 9.25% Debenture Holders via their Distributions under the Reorganization Plan. F. Treatment of Claims and Interests Under the Plans Pursuant to the Plans, certain unclassified Claims, including Administrative Priority Claims (other than the DIP Facility Claims and Claims for compensation and reimbursement) and Priority Tax Claims, will receive payment in Cash (i) on the later of the Effective Date or as soon as practicable after such Claims are Allowed, or (ii) in installments over time (as permitted by the Bankruptcy Code), or (iii) as agreed with the holders of such Claims. The DIP Facility Claims, including those contingent claims relating to letters of credit still outstanding, are included as Administrative Claims and will be paid or otherwise satisfied on the Effective Date in accordance with Section 2.5 of the Reorganization Plan by reinstatement of such contingent obligations under the Reinstated L/C Facility or by replacement by the Exit Financing Facility. While certain DIP Facility Claims will not be paid in full as a result of the reinstatement of these contingent obligations under the Reorganization Plan, acceptance of such treatment by a requisite majority of DIP Lenders, as provided under the DIP Financing Facility, shall be binding on all DIP Lenders. Additionally, the Plans provide that all entities seeking an award by the Court of compensation for services rendered or reimbursement of expenses incurred through and including the Confirmation Date under subsections 503(b)(2), 503(b)(3), 503(b)(4) or 503(b)(5) of the Bankruptcy Code shall file their respective final applications for allowance of compensation for services rendered and reimbursement of expenses incurred by the date that is forty-five (45) days after the Effective Date. All other Claims and Interests are classified separately in various Classes in the Debtors' Chapter 11 Cases and will receive the distributions and recoveries (if any) described in the relevant Plan. The following tables summarize the classification and treatment under the Plans of the Claims and Equity Interests and in each case, reflects the amount and form of consideration that will be distributed in exchange for and in full satisfaction, settlement, release and discharge of such Claims and Interests. The classification and treatment for all Classes are described in more detail under Section VII of this Disclosure Statement. - -------------------------------------------------------------------------------------------------------------------- Class Reorganization Plan Liquidation Plan - -------------------------------------------------------------------------------------------------------------------- - -------------------------------------------------------------------------------------------------------------------- Class 1 Allowed Priority Non-Tax Claims Allowed Priority Non-Tax Claims Treatment of Class 1 Claims is summarized on Treatment of Class 1 Claims is summarized on page xiii page xiii - -------------------------------------------------------------------------------------------------------------------- Class 2 Allowed Project Debt Claims N/A Treatment of Class 2 Claims is summarized on page xiv - -------------------------------------------------------------------------------------------------------------------- Class 2H Allowed Heber Secured Claims N/A Treatment of Class 2H Claims is summarized on page xiv - -------------------------------------------------------------------------------------------------------------------- Class 3 Subclass 3A: Allowed Secured Bank Claims Class 3A: Allowed Liquidation Secured Claims Subclass 3B: Allowed Secured 9.25% Debenture Class 3B: Allowed Secured CSFB Claim against Ogden Claims FMCA Treatment of Class 3 Claims is summarized on Treatment of Class 3 Claims is summarized on page xvi page xvi - -------------------------------------------------------------------------------------------------------------------- Class 4 Allowed Operating Company Unsecured Claims N/A Treatment of Class 4 Claims is summarized on page xix - -------------------------------------------------------------------------------------------------------------------- Class 5 Allowed Covanta Energy Americas Unsecured N/A Claims Treatment of Class 5 Claims is summarized on page xx - -------------------------------------------------------------------------------------------------------------------- Class 6 Allowed Covanta Unsecured Claims N/A Treatment of Class 6 Claims is summarized on page xxi - -------------------------------------------------------------------------------------------------------------------- Class 7 Allowed Heber Unsecured Claims Allowed Unsecured Liquidation Claims Treatment of Class 7 Claims is summarized on Treatment of Class 7 Claims is summarized on page xxiii page xxii - -------------------------------------------------------------------------------------------------------------------- Class 8 Allowed Convenience Claims N/A Treatment of Class 8 Claims is summarized on page xxiv - -------------------------------------------------------------------------------------------------------------------- Class 9 Intercompany Claims Intercompany Claims Treatment of Class 9 Claims is summarized on Treatment of Class 9 Claims is summarized on page xxv page xxv - -------------------------------------------------------------------------------------------------------------------- Class 10 Subordinated Claims N/A Treatment of Class 10 Claims is summarized on page xxvii - -------------------------------------------------------------------------------------------------------------------- Class 11 Equity Interests in Subsidiary Debtors Equity Interests in Liquidating Debtors Treatment of Class 11 Claims is summarized on Treatment of Class 11 Claims is summarized on page xxviii page xxvii - -------------------------------------------------------------------------------------------------------------------- Class 12 Equity Interests in Covanta Huntington, N/A Covanta Onondaga and DSS Environmental Treatment of Class 12 Claims is summarized on page xxix - -------------------------------------------------------------------------------------------------------------------- Class 13 Old Covanta Stock Equity Interests N/A Treatment of Class 13 Claims is summarized on page xxx - -------------------------------------------------------------------------------------------------------------------- Class 14 Equity Interests in the Heber Debtors N/A Treatment of Class 14 Claims is summarized on page xxxi - --------------------------------------------------------------------------------------------------------------------
Class Description Treatment Under Reorganization Plan - ----------------- ----------------------------------- Estimated Allowed Claims: $[_______] Class 1: Each holder of an Allowed Class 1 Claim shall receive, in full settlement, release and Allowed Priority Non-Tax discharge of its Class 1 Claim, either (i) Claims Cash, on the Distribution Date, in an amount equal to such Allowed Claim, or (ii) on such other less favorable terms as the Reorganizing Debtors and Reorganized Debtors and the holder of an Allowed Priority Non-Tax Claim agree. Class 1 Claims are Unimpaired, and the holders of Allowed Class 1 Claims are not entitled to vote to accept or reject the Reorganization Plan. Estimated Percentage Recovery: [_______]% Treatment Under Liquidation Plan -------------------------------- Estimated Allowed Claims: $[_______] In full settlement, release and discharge of its Class 1 Claim, each holder of an Allowed Class 1 Claim in Class 1 shall receive Cash in an amount equal to such Allowed Class 1 Claim on the Initial Liquidation Distribution Date. Class 1 Claims are Unimpaired, and holders of Allowed Class 1 Claims are not entitled to vote to accept or reject the Liquidation Plan. Estimated Percentage Recovery: [________]% Class Description Treatment Under Reorganization Plan - ----------------- ----------------------------------- Estimated Allowed Claims: $[____________] Class 2: On the Effective Date, the legal, equitable and contractual rights of the holders of Allowed Allowed Project Class 2 Claims will be reinstated in full Debt Claims satisfaction, release and discharge of their respective Class 2 Claims and will remain unaltered under the Reorganization Plan, except as the Reorganizing Debtors and the holders of Allowed Class 2 Claims may otherwise agree or as such holders may otherwise consent. Notwithstanding the foregoing, no contractual provisions or applicable law that would entitle the holder of an Allowed Class 2 Claim to demand or receive payment of such Claim prior to the stated maturity of such Claim, terminate any contractual relationship or take such other enforcement action (as may be applicable) from and after the occurrence of a default that occurred prior to the Effective Date shall be enforceable against the Reorganized Debtors. Class 2 Claims are Unimpaired, and the holders of Allowed Class 2 Claims are not entitled to vote to accept or reject the Reorganization Plan. Estimated Percentage Recovery: [________]% Estimated Allowed Claims: $[________] Class 2H: On the Effective Date, to the extent such claims are not paid in full on or prior to the Allowed Heber Effective Date, the legal, equitable and Secured Claims contractual rights of the holders of Allowed Class 2H Claims will be reinstated in full satisfaction, release and discharge of their respective Class 2H Claims and will remain unaltered under the Reorganization Plan, except as the Heber Debtors and the holders of Allowed Class 2H Claims may otherwise agree or as such holders may otherwise consent; provided, however, that that the assets of the Heber Debtors subject to Liens, Claims and encumbrances of holders of Allowed Class 2H Claims may be sold, subject to such Liens, Claims and encumbrances, as part of the Geothermal Sale contemplated by this Reorganization Plan, and provided further that to the extent an Allowed Class 2H Claim is paid in full on or prior to the Effective Date, the Liens, Claims and encumbrances securing such claim shall be released and discharged immediately upon such payment in full. Notwithstanding the foregoing, no contractual provisions or applicable law that would entitle the holder of an Allowed Class 2H Claim to demand or receive payment of such Claim prior to the stated maturity of such Claim, termimate any contractual relationship or take such other enforcement action (as may be applicable) from and after the occurrence of a default that occurred prior to the Effective Date shall be enforceable against the Reorganized Heber Debtors. Class 2H Claims are Unimpaired, and the holders of Allowed Class 2H Claims are not entitled to vote to accept or reject the Reorganization Plan. Estimated Percentage Recovery: [________]% Treatment Under Liquidation Plan -------------------------------- N/A Class Description - ----------------- Class 3: Under the Reorganization Plan, Class 3 is divided into two Subclasses for Distribution Allowed Reorganized purposes: Subclass 3A consists of the Allowed Covanta Secured Claims Secured Bank Claims and Subclass 3B consists of Allowed Secured 9.25% Debenture Claims. Under the Liquidation Plan, Class 3 is also divided into two Subclasses for Distribution purposes: Subclass 3A consists of the Allowed Secured Bank Claims and the Allowed 9.25% Debenture Claims and Subclass 3B consists of the Allowed CSFB Claim. Treatment Under Reorganization Plan ----------------------------------- Estimated Allowed Claims: $[ ] Subclass 3A: Holders of Allowed Subclass 3A Claims shall receive the Subclass 3A Recovery in full Allowed Reorganized settlement, release and discharge of their Covanta Secured Claims-- aggregate Allowed Subclass 3A Claims. The Secured Bank Claims Subclass 3A Recovery shall be distributed among holders of Allowed Subclass 3A Claims as follows: First, in full settlement, release and discharge of the Allowed Priority Bank Claims, the Priority Bank Lenders shall receive first, to the extent available as part of the Subclass 3A Recovery, Excess Distributable Cash in an amount equal to the amount of such Allowed Priority Bank Claims and thereafter New High Yield Secured Notes in a principal amount equal to the remaining amount of such Allowed Priority Bank Claims; Second, immediately after making the Distribution on account of the Allowed Priority Bank Claims, in full settlement, release and discharge of Non-Priority Subclass 3A Claims, the holders of Allowed Non-Priority Subclass 3A Claims shall receive a Pro Rata Subclass Share of the remaining Subclass 3A Recovery where such distribution shall consist of Distributable Cash, New High Yield Secured Notes and New Lender Warrants, which types of Distributions may be further allocated depending on whether the holder of a Subclass 3A Claim is a New Facility Lender, one of the Additional New Lenders or a Non-Participating Lenders; [Notwithstanding anything in the Reorganization Plan to the contrary, immediately prior to any Distribution to holders of Subclass 3A Claims, the settlement of the Loss Sharing Litigation as described on Exhibit __ to the Reorganization Plan shall be deemed effective and implemented for purposes of Distributions under the Reorganization Plan.] Subclass 3A Claims are Impaired, and the holders of Allowed Claims in such Subclass are entitled to vote to accept or reject the Reorganization Plan. The members of Subclass 3A shall vote together with members of Subclass 3B as a single Class. Estimated Percentage Recovery: [_______]% Treatment Under Reorganization Plan ----------------------------------- Estimated Allowed Claims: $[ ] Subclass 3B: On the Distribution Date, holders of Allowed Subclass 3B Claims shall receive the Subclass Allowed Reorganized 3B Recovery in full settlement, release and Covanta Secured discharge of their respective Allowed Subclass Claims--9.25% Debenture 3B Claims. The Subclass 3B Recovery shall be Claims distributed among holders of Allowed Subclass 3B Claims as follows: First, in full settlement, release and discharge of Allowed Subclass 3B Claims, each holder of an Allowed Subclass 3B Claim shall receive its Pro Rata Subclass Share of Distributions of the Subclass 3B Recovery; provided, however, that with respect to the Subclass 3B Recovery, (i) the New Facility Lenders in Subclass 3B, if any, shall receive their Secured Value Distribution first, to the extent available, in the form of Distributable Cash and thereafter in the form of New High Yield Secured Notes; and (ii) the members of the Additional New Lenders in Subclass 3B shall receive their Secured Value Distribution solely in the form of New High Yield Secured Notes plus a Pro Rata Subclass Share of the New Lender Warrants; and provided further that the Non-Participating Lenders in Subclass 3B shall not receive any Distributable Cash or any Distribution of New Lender Warrants. Second, in the event that the parties to the 9.25% Adversary Proceeding reach a settlement to their dispute, the Distributions made to each holder of an Allowed Subclass 3B Claim shall be subject to adjustment and modification in accordance with the provisions of such settlement. Subclass 3B Claims are Impaired, and the holders of Allowed Claims in such Subclass are entitled to vote to accept or reject the Reorganization Plan. The members of Subclass 3B shall vote together with the members of Subclass 3A as a single Class. Estimated Percentage Recovery [__________]% Treatment Under Liquidation Plan -------------------------------- Estimated Allowed Claims: $[____________] Subclass 3A: In full settlement, release and discharge of its Class 3A Claim, (I) (a) each holder of an Allowed Liquidation Allowed Liquidation Secured Claim would be Secured Claims--Secured entitled, absent the Secured Creditor Bank Claims and 9.25% Direction, to receive on any Liquidation Debenture Claims Distribution Date, such holder's Pro Rata Share of the sum of any Net Liquidation Proceeds and Liquidation Assets of the Liquidating Pledgor Debtors existing, but not yet distributed on such Liquidation Distribution Date and (b) on the Effective Date, (i) such holder of a Class 3A Allowed Liquidation Secured Claim shall be deemed to have received, on account of its Subclass 3A Allowed Liquidation Secured Claim, the Distribution it receives as a holder of a Subclass 3A or Subclass 3B Claim under the Reorganization Plan, as applicable, in full satisfaction of its Subclass 3A Claim under the Liquidation Plan and (ii) the Liquidating Trustee and the Liquidating Debtors will implement the Secured Creditor Direction and (II) each holder of an Allowed Liquidation Secured Claim shall be entitled to receive on any Liquidation Distribution Date, such holder's Pro Rata Share of any Net Liquidation Proceeds of any Liquidating Pledgor Debtor's Residual Liquidation Assets. Subclass 3A Claims are Impaired and the holders of Claims in such subclass are entitled to vote to accept or reject the Liquidation Plan. Estimated Percentage Recovery: [________]% Treatment Under Liquidation Plan -------------------------------- Estimated Allowed Claim: $[____________] Subclass 3B: On the Effective Date, or as soon thereafter as practicable, Ogden FMCA shall cause to be transferred, pursuant to Section 6.1(b) of the Allowed Liquidation Liquidation Plan, to CSFB, in its capacity as holder of the Allowed Secured Claims--the CSFB Secured CSFB Claim, the Bank Agreement Ogden FMCA Collateral, in full Claim settlement, release and discharge of its Class 3B Claim. The Class 3B Claim is Impaired and the holder of the Claim in such subclass is entitled to vote to accept or reject the Liquidation Plan. Estimated Percentage Recovery: [________]% Class Description Treatment Under Reorganization Plan Estimated Allowed Claims: $[________] Class 4: On the Distribution Date, each holder of an Allowed Class 4 Claim shall receive, in full Allowed Operating settlement, release and discharge of its Class Company Unsecured Claims 4 Claim, a Distribution of Reorganization Plan Unsecured Notes in the aggregate principal amount equal to the amount of its Allowed Class 4 Claim. With respect to Allowed Class 4 Claims for and to the extent which insurance is available, such Class 4 Claims shall be paid in the ordinary course of the Reorganizing Debtors' business to the extent of such insurance, when any such Claim becomes an Allowed Claim insurance proceeds become available; provided, however, that to the extent insurance is not available or is insufficient, treatment of such Allowed Class 4 Claims shall be as otherwise provided for holders of Class 4 Claims. Additionally, each holder of an Allowed Class 4 Claim shall have the option to elect to be treated as a Class 4 Claim, in which case, at the option of the Reorganizing Debtors, each such holder of an Elective Convenience Claim shall be entitled to receive either (A) payment in Cash, in an amount equal to the lesser opf $2,500 or 75% of such Allowed Class 4 Claim, or (B) the Reorganization Plan Unsecured Notes that such holder would otherwise have been entitled to receive for its Allowed Class 4 Claim pursuant to the Reorganization Plan if such holder had not made such an election. Class 4 Claims are Impaired, and the holders of Allowed Class 4 Claims are entitled to vote to accept or reject the Reorganization Plan. Estimated Percentage Recovery: [________]% Treatment Under Liquidation Plan -------------------------------- N/A Class Description Treatment Under Reorganization Plan - ----------------- ----------------------------------- Estimated Allowed Claims: $[____________] Class 5: On the Distribution Date, each holder of an Allowed Class 5 Claim shall receive, in full Allowed Covanta Energy satisfaction, release and discharge of its Americas Unsecured Claims Class 5 Claim, a Distribution of Reorganization Plan Unsecured Notes in the aggregate principal amount equal to the amount of its Allowed Class 5 Claim. Class 5 Claims are Impaired, and the holders of Allowed Class 5 Claims are entitled to vote to accept or reject the Reorganization Plan. Estimated Percentage Recovery: [________]% Treatment Under Liquidation Plan -------------------------------- N/A Class Description Treatment Under Reorganization Plan Estimated Allowed Claims: $[________] Class 6: On the Distribution Date, each holder of an Allowed Class 6 Claim shall receive, in full satisfaction, release and discharge of its Allowed Covanta Class 6 Claim, (1) Reorganization Plan Warrants Unsecured Claims representing 7 1/2% of the equity of Reorganized Covanta, subject to any agreed upon pro rata dilution imposed on all Reorganization Plan Warrants, as required for ESOP purposes, (2) 5% of the first $80 million of net cash proceeds when realized from the sale of the CPIH assets and which proceeds are distributed to holders of Allowed Class 3 Claims , (3) 10% of Reorganized CPIH Preferred Stock; provided, however, that such Preferred Stock shall only be entitled to distributions to the extent of cash proceeds when realized from the sale of the CPIH assets in excess of $90 million, (4) the waiver by the Prepetition Lenders [and the holders of the 9.25% Debentures] of (i) any Deficiency Claim on account of the Allowed Secured Bank Claim [and the Allowed Secured Claim of the 9.25% Debentures] and (ii) the subordination provisions contained in the Convertible Subordinated Bonds, and (5) all proceeds from any cause of action or claim of the Reorganizing Debtors arising under sections 544, 545, 547, 548, 549 and 550 of the Bankruptcy Code (the "Avoidance Actions"), and the right to pursue any Avoidance Actions on terms to be agreed upon with the Reorganizing Debtors; provided that in no event shall such Avoidance Actions or other actions include claims or causes of action against any of the Prepetition Lenders, DIP Lenders or the holders of the 9.25% Debentures. In the event that the parties to the 9.25% Adversary Proceeding reach a settlement to their dispute, the Distributions made to each holder of an Allowed Class 6 Claim (other than a Class 6 Claim consisting of a 9.25% Deficiency Claim or a Prepetition Lender Deficiency Claim) shall be subject to adjustment and modification in accordance with the provisions of that settlement. With respect to Allowed Class 6 Claims for and to the extent which insurance is available, such Class 6 Claims shall be paid in the ordinary course of the Reorganizing Debtors business to the extent of such insurance, when any such Claim becomes an Allowed Claim and such insurance proceeds become available; provided, however, that to the extent insurance is not available or is insufficient, treatment of such Allowed Class 6 Claims shall be as otherwise provided in the Reorganization Plan. The Committee and the Bondholders Committee have reached a tentative settlement in principle of the 9.25% Debentures Adversary Proceeding. To achieve a consensual settlement, final agreement and approval by the Bondholders Committee remains subject to their approval of the treatment of the 9.25% Debentures Claims under the Reorganization Plan. [Furthermore, the subordination provisions contained in the Convertible Subordinated Bonds shall be enforced against the holders of Convertible Subordinated Bond Claims, such that all Distributions that the holders of Convertible Subordinated Bond Claims would otherwise be entitled to receive under the Reorganization Plan, shall instead be Distributed on a pro rata basis the holders of Allowed Class 6 Claims that are entitled to the benefit of such subordination provisions.] The Plans and this Disclosure Statement may be modified after the date hereof in order to conform them to the terms of this tentative settlement. Estimated Percentage Recovery: [_______]% Treatment Under Liquidation Plan -------------------------------- N/A Class Description Treatment Under Reorganization Plan - ----------------- ----------------------------------- Class 7: Allowed Heber On the Distribution Date, each holder of an Unsecured Claims Allowed Class 7 Claim shall receive, in full satisfaction, release and discharge of its Class 7 Claim, a Cash payment equal to the full amount of its Allowed Class 7 Claim, on the Distribution Date. Class 7 Claims are Unimpaired and the holders of Allowed Class 7 Claims are not entitled to vote to accept or reject the Reorganization Plan. Treatment Under Liquidation Plan Estimated Allowed Claims: $[____________] Allowed Unsecured The holders of Class 7 Claims shall not be Liquidation Claims and entitled to receive any Distribution under the Allowed Insured Claims Liquidation Plan, provided, however, that with respect to Allowed Class 7 Claims for and to the extent to which insurance is available, such Allowed Class 7 Claims shall be paid in the ordinary course of the Liquidating Debtors' business to the extent of such insurance, when any such Claims become Allowed Claims and such insurance proceeds become available; provided, further, that to the extent that insurance is not available or is insufficient, treatment of such Allowed Class 7 Claim shall be as otherwise provided in the Liquidation Plan. Class 7 Claims are Impaired and the holders of Allowed Claims in such Class are conclusively presumed to reject the Liquidation Plan. The votes of holders of Class 7 Claims will not be solicited. Estimated Percentage Recovery: [________]% Class Description Treatment Under Reorganization Plan - ----------------- ----------------------------------- Estimated Allowed Claims: $[____________] Class 8: On the Distribution Date, each holder of an Allowed Class 8 Claim shall receive, in full Allowed Convenience satisfaction, release and discharge of its Claims Class 8 Claim, a paymentin Cash, in an amount equal to seventy-five (75%) of the Allowed amount of such Class 8 Claim. Class 8 Claims are Impaired, and the holders of Allowed Class 8 Claims are entitled to vote to accept or reject the Reorganization Plan. Estimated Percentage Recovery: 75% Treatment Under Liquidation Plan -------------------------------- N/A Class Description Class 9 consists of all Intercompany Claims. Class 9 is subdivided into three Subclasses for Distribution purposes: Class 9: Subclass 9A consists of the Liquidating Debtors Intercompany Claims Intercompany Claims; Subclass 9B consists of the Reorganized Debtors Intercompany Claims; and Subclass 9C consists of the Heber Debtors Intercompany Claims. Treatment Under Reorganization Plan Estimated Allowed Claims: $[____________] Subclass 9A: In full satisfaction, release and discharge of each Liquidating Debtors Intercompany Claim, Liquidating Debtors each such Liquidating Debtors Intercompany Intercompany Claims Claim shall be deemed cancelled or waived in exchange for the Reorganizing Debtors' contribution of the Operating Reserve Deficiency Amount, if any, to the Operating Reserve. Subclass 9B: In the sole discretion of the applicable Reorganizing Debtor or Reorganized Debtor, Reorganized Debtors Reorganizing Debtors Intercompany Claims shall Intercompany Claims be either: (a) preserved and reinstated, (b) released, waived and discharged, or (c) contributed to the capital of the obligor corporation. Subclass 9C: In the full satisfaction, release and discharge of each Heber Debtors Intercompany Claim, each Reorganized Heber such Heber Debtors Intercompany Claim shall be Debtors Intercompany deemed released, waived and discharged. Claims Class 9 Claims are Impaired and holders of Allowed Class 9 Claims are conclusively presumed to reject the Reorganization Plan. The votes of the holders of Allowed Class 9 Claims will not be solicited. Estimated Percentage Recovery: [________]% Treatment Under Liquidation Plan Estimated Allowed Claims: $[____________] On the Effective Date, all Intercompany Claims shall be cancelled, annulled and extinguished. Holders of such claims shall receive no distributions in respect of Class 9 Claims. Class 9 Claims are impaired and holders of Allowed Class 9 Claims are conclusively presumed to reject the Liquidation Plan. The votes of the holders of Allowed Class 9 Claims will not be solicited. Estimated Percentage Recovery: [____________]% Class Description Treatment Under Reorganization Plan Estimated Allowed Claims: $[____________] Class 10: As of the Effective Date, holders of Class 10 Claims shall not receive any Distributions or Subordinated retain any property under the Reorganization Plan Claims in respect of Class 10 Claims, in full satisfaction, release and discharge of such Claims. Class 10 Claims are Impaired and holders of Allowed Class 10 Claims in are conclusively presumed to reject the Reorganization Plan. The votes of holders of Allowed Class 10 Claims will not be solicited. Estimated Percentage Recovery: [________]% Treatment Under Liquidation Plan -------------------------------- N/A Class Description Treatment Under Reorganization Plan - ----------------- ----------------------------------- Estimated Allowed Claims: $[____________] Class 11: Holders of Equity Interests in Subsidiary Debtors shall not receive any Distribution Equity Interests in under the Reorganization Plan, except that any Subsidiary Debtors such Equity Interest in a Subsidiary Debtor shall continue to be held by the Reorganizing Debtor that originally held such Equity Interest, which Equity Interests shall be evidenced by the existing capital stock, partnership and/or membership interests. Class 11 Equity Interests are Impaired and the holders of Allowed Class 11 Equity Interests in such Class are conclusively presumed to reject the Reorganization Plan. The votes of holders of Class 11 Equity Interests will not be solicited. Estimated Percentage Recovery: [________]% Treatment Under Liquidation Plan -------------------------------- Estimated Allowed Claims: $[____________] On the Effective Date, all Equity Interests in the Liquidating Debtors shall not be entitled to receive any Distributions under the Liquidation Plan. Such Equity Interests shall be cancelled, annulled and extinguished. Class 11 Equity Interests are Impaired and the holders of Equity Interests in such Class are conclusively presumed to reject the Liquidation Plan. The votes of holders of Equity Interests in such Class will not be solicited. Estimated Percentage Recovery: [________]% Class Description Treatment Under Reorganization Plan - ----------------- ----------------------------------- Estimated Allowed Claims: $[____________] Class 12: As of the Effective Date, holders of Equity Interests in Covanta Huntington, Covanta Equity Interests in Onondaga and DSS Environmental shall be Covanta Huntington, reinstated, in full satisfaction, release, and Covanta Onondaga and DSS discharge of any Allowed Class 12 Equity Environmental(8) Interests. Class 12 Equity Interests are Unimpaired and the holders of Allowed Class 12 Equity Interests are not entitled to vote to accept or reject the Reorganization Plan. Estimated Percentage Recovery: [________]% Treatment Under Liquidation Plan -------------------------------- N/A - -------------- (8) The treatment of Onondaga Equity Interests is subject to finalization and implementation of the compromise with Onondaga County Resource Recovery Agency described herein. Class Description Treatment Under Reorganization Plan - ----------------- ----------------------------------- Estimated Allowed Claims: $[____________] Class 13: Holders of Allowed Equity Interests in Old Covanta Stock shall not receive any Old Covanta Stock Equity Distribution or retain any property under the Interests Reorganization Plan in respect of Class 13 Equity Interests. All Class 13 Equity Interests in Old Covanta Stock shall be cancelled, annulled and extinguished, in full satisfaction, release and discharge of any Allowed Class 13 Equity Interests. Class 13 Equity Interests are Impaired and holders of Allowed Class 13 Equity Interests are conclusively presumed to reject the Reorganization Plan. The votes of holders of Allowed Class 13 Equity Interests will not be solicited. Estimated Percentage Recovery: [________]% Treatment Under Liquidation Plan -------------------------------- N/A Class Description Class 14 consists of all Equity Interests in the Heber Debtors. Class 14 is subdivided into Class 14: two Subclasses for Distribution purposes: Subclass 14A consists of Equity Interests in Equity Interests in the Covanta SIGC Energy I, Covanta SIGC Energy II, Heber Debtors Heber Field Company and Heber Geothermal Company; Subclass 14B consists of Equity Interests in Amor 14 and Second Imperial Geothermal Company. Treatment Under Reorganization Plan Estimated Allowed Claims: $[____________] Subclass 14A: Holders of Allowed Class 14A Equity Interests shall not receive any Distribution or retain Equity Interests in Covanta any property under the Heber Reorganization SIGC Energy I, Covanta SIGC Plan in respect of Class 14A Equity Interests. Energy II, Heber Field All Class 14A Equity Interests shall be Company and Heber cancelled, annulled and extinguished, in full Geothermal Company satisfaction, release and discharge of any Allowed Class 14A Equity Interests. Subclass 14B: Equity Interests in Amor 14 Holders of Allowed Class 14B Equity Interests and Second Imperial shall not receive any Distribution under the Geothermal Company Heber Reorganization Plan, except that any such Equity Interests shall continue to be held by the Heber Debtor or Reorganizing Debtor that originally held such Equity Interests, which Equity Interests shall continue to be evidenced by the existing capital stock, partnership and/or membership interests. Class 14 Equity Interests are Impaired, and the holders of Allowed Class 14 Equity Interests are conclusively presumed to reject the Reorganization Plan. The votes of holders of Allowed Class 14 Equity Interests will not be solicited. Treatment Under Liquidation Plan -------------------------------- N/A G. Bar Dates and Schedules On June 26, 2002, the Court entered an order (Docket No. 597) (the "General Bar Date Order") establishing August 9, 2002 as the General Bar Date (as defined therein) by which certain entities holding claims against Covanta and the 123 subsidiaries that filed bankruptcy petitions on April 1, 2002 (the "Original Debtors") arising prior to the Initial Petition Date must file proofs of claim. The General Bar Date Order also established September 30, 2002 as the last date by which governmental units (as defined in 11 U.S.C. ss. 101(27)) may file proofs of claim. In addition to serving notice of the General Bar Date Order on all scheduled creditors, the Debtors published notice of the General Bar Date in The Wall Street Journal and the USA Today. On September 20, 2002, the Court entered an order (Docket No. 938) (the "Employee Bar Date Order") establishing November 15, 2002 (the "Employee Bar Date") as the last date for filing claims against the Original Debtors by current or former employees in respect of wages, salaries, commissions, vacation pay, severance pay, sick leave pay, or benefits. Employees were provided notice of the Employee Bar Date by mail. On May 19, 2003, the Court entered an order (Docket No. 1535) (the "Covanta Concerts Bar Date Order") establishing June 27, 2003 as the last date for filing proofs of claims against Covanta Concerts Holdings, Inc. (the "Covanta Concerts Bar Date"). The Debtors sent notice of the Covanta Concerts Bar Date on all scheduled creditors of Covanta Concerts Holdings, Inc. The same order established June 27, 2003 as the last date for holders of 6% Convertible Subordinated Debentures Due 2002 and 5.75% Convertible Subordinated Debentures Due 2002 (collectively, the "Convertible Debentures") to file proofs of claim against Covanta Energy Corporation (the "Convertible Debentures Bar Date"). The Debtors sent notice of the Convertible Debentures Bar Date to all registered holders and other known holders of the Convertible Bonds and published a notice of the same in the Financial Times of London and the Luxemburger Wort. On June 30, 2003, the Court entered an order (Docket No. 1717) (the "New Debtors Bar Date Order") establishing August 14, 2003 as the last date for filing proofs of claim against the New Debtors (as defined herein) (such date, the "New Debtors Bar Date"). Because the Court was closed on August 14 and August 15, 2003 as a result of the blackout that affected the Northeast region of the United States, the New Debtors' Bar Date was changed to August 18, 2003. The New Debtors Bar Date Order also established December 5, 2003 as the last date by which governmental units (as defined in 11 U.S.C. ss. 101(27)) may file proofs of claim against the New Debtors. The Debtors sent notice of the New Debtors' Bar Date to all known creditors of the New Debtors and published notice of the same in The Wall Street Journal and USA Today. A chart describing the various bar dates follows: ----------------------------------------------------------------------- Description of Bar Date Applicable Bar Date ----------------------------------------------------------------------- General Bar Date August 9, 2002 ----------------------------------------------------------------------- Government Bar Date September 30, 2002 ----------------------------------------------------------------------- Employee Bar Date November 15, 2002 ----------------------------------------------------------------------- First Amended Bar Date December 27, 2002 ----------------------------------------------------------------------- Second Amended Bar Date January 13, 2003 ----------------------------------------------------------------------- Covanta Concerts Bar Date June 27, 2003 ----------------------------------------------------------------------- Convertible Debentures Bar Date June 27, 2003 ----------------------------------------------------------------------- New Debtors Bar Date August 18, 2003 ----------------------------------------------------------------------- Third Amended Bar Date October 6, 2003 ----------------------------------------------------------------------- New Debtors Government Bar Date December 5, 2003 ----------------------------------------------------------------------- In accordance with the General Bar Date Order, which granted the Debtors authority to amend the Original Debtors' schedules that were originally filed on or about June 14, 2002 (Docket No. 590) (the "Original Schedules"), the Debtors have filed several amendments to the Original Schedules. On November 22, 2002, the Original Debtors filed their first amendment to the Original Schedules (Docket No. 1107) (the "First Amended Schedules"). The last date for filing proofs of claim in respect of claims for the first time scheduled as contingent, unliquidated or disputed on the First Amended Schedules was December 27, 2002 (the "First Amended Bar Date"). On December 11, 2002, the Original Debtors filed their second amendment to the Original Schedules (Docket No. 1146) (the "Second Amended Schedules"). The last date for filing proofs of claim in respect of claims for the first time scheduled as contingent, unliquidated or disputed on the Second Amended Schedules was January 13, 2003 (the "Second Amended Bar Date"). On August 24 and 25, 2003, the Original Debtors filed the third amendments to their Original Schedules (Docket Nos. 1886-2006) (the "Third Amended Schedules"). The last date for filing proofs of claim in respect of claims scheduled as contingent, unliquidated or disputed on the Third Amended Schedules is October 6, 2003 (the "Third Amended Bar Date"). Finally, on June 22, 2003, the New Debtors filed schedules (the "New Debtor Schedules"). August 18, 2003 was the New Debtors Bar Date. In total, approximately 4,457 proofs of claim in the aggregate amount of approximately $12 billion were filed. The Debtors believe that many of the proofs of claim are invalid, duplicative, untimely, inaccurate or otherwise objectionable. The Debtors are in the process of reviewing such claims, and have filed or are preparing omnibus objections to many of the proofs of claim. Pursuant to the General Bar Date Order, and consistent with 11 U.S.C. ss. 502(b)(9), any proofs of claim filed after the applicable bar date shall be disallowed as untimely unless and until such proofs of claim are deemed timely filed by the Court after notice and hearing. Table of Contents Page I. INTRODUCTION............................................................................................1 II. BANKRUPTCY PLAN VOTING INSTRUCTIONS AND PROCEDURES......................................................1 A. Definitions....................................................................................1 B. Notice to Holders of Claims....................................................................1 C. Voting Record Date.............................................................................2 D. Solicitation Package...........................................................................2 E. General Voting Procedures, Ballots, and Voting Deadline........................................3 F. Special Voting Procedures for the Prepetition Lenders..........................................3 G. Special Voting Procedures for the 9.25% Debenture Holders......................................3 1. Beneficial Noteholders................................................................3 2. Nominees..............................................................................4 H. Voting Procedures fo Unknown Holders...........................................................4 I. Questions About Voting Procedures..............................................................4 J. Procedures for Voting Objections...............................................................5 K. Confirmation Hearing and Deadline for Objections to Confirmation...............................5 L. Additional Copies of Disclosure Statement and Plans............................................7 III. HISTORY OF THE DEBTORS' BUSINESS OPERATIONS.............................................................7 A. Overview of Business Operations................................................................7 1. Description of Principal Business Units...........................................7 2. Description of Geothermal Business................................................9 B. Other Aspects of Business Operations.......................................................10 1. Insurance........................................................................10 2. Environmental Matters............................................................11 3. Prepetition Legal Proceedings....................................................11 4. Employees; Labor Matters; Benefit Plans..........................................13 C. Recent Financial Results......................................................................19 IV. PREPETITION CAPITAL STRUCTURE OF THE DEBTORS...........................................................20 A. Prepetition Credit Facility...................................................................20 B. 9.25% Debentures due 2022.....................................................................21 C. Convertible Debentures........................................................................21 D. Project Debt..................................................................................22 E. Equity Bonds..................................................................................22 F. Equity .....................................................................................22 V. CORPORATE STRUCTURE OF THE DEBTORS.....................................................................22 A. The Debtors' Corporate Structure..............................................................22 B. Management of the Debtors.....................................................................22 VI. THE CHAPTER 11 CASES...................................................................................24 A. Events Leading Up to the Chapter 11 Cases.....................................................24 B. Need for Restructuring and Chapter 11 Relief..................................................24 C. Significant Events During the Bankruptcy Cases................................................25 1. Significant Court Orders.............................................................25 2. DIP Financing Facility...............................................................26 3. Adequate Protection..................................................................27 4. Assumption and Rejection.............................................................28 5. Appointment of Creditors Committee...................................................29 6. Exclusivity..........................................................................29 7. Discussions of Alternative Reorganization Plans......................................30 8. Sale of Geothermal Assets............................................................30 9. Sale of Non-Core Assets..............................................................30 10. Restructuring of Certain Energy Projects.............................................31 11. 9.25% Debenture Adversary Proceeding.................................................33 12. Agreements with the holders of Secured Claims........................................34 13. Proceedings Related to the Team, the Corel Centre and Arrowhead Pond.................35 14. Other Postpetition Litigation........................................................35 15. Summary of Claims Process, Bar Dates and Claims Filed................................38 16. Development and Implementation of the Business Plan..................................39 VII. SUMMARY OF THE PLANS...................................................................................41 A. Overall Structure of the Plans................................................................41 B. Classification and Treatment of Claims and Equity Interests...................................42 1. Treatment of Unclassified Claims.....................................................44 2. Unimpaired Classes of Claims.........................................................48 3. Impaired Classes of Claims and Interests.............................................48 4. Treatment of Classified Claims.......................................................48 C. Confirmability, Modification and Severability of the Plans....................................53 D. Certain Considerations with Respect to Treatment of Class 3 Secured Claims under the Reorganization Plan...........................................................................53 1. The Subclass 3A Distribution.........................................................54 2. Voting Rights with Respect to Class 3 Distributions and the Settlement Agreements...........................................................................54 E. Implementation of the Reorganization Plan.....................................................54 1. Continued Corporate Existence........................................................54 2. Exit Financing.......................................................................55 3. Reorganization Plan Notes and Reorganization Plan Equity Securities..................56 4. Corporate Restructuring..............................................................57 5. Revesting of Corporate Assets........................................................57 6. Directors and Officers of Group......................................................57 7. Certificate of Incorporation and Bylaws..............................................57 8. Employment, Retirement and Other Agreements..........................................57 9. Management Agreements................................................................59 10. Corporate Action.....................................................................59 11. Effective Date Payments and Post-Effective Date Financing............................59 12. New Common Stock, Plan Notes and Collateral Documents; Further Transactions..........59 13. Establishment of ESOP and Election of S Corp Status..................................59 14. Preservation of Causes of Action.....................................................61 15. Cancellation of Existing Equity Securities and Agreements............................61 16. Exclusivity Period...................................................................62 17. Deemed Consolidation for Procedural, Administrative and Voting Purposes..............62 F. Implementation of the Liquidation Plan........................................................62 1. The Secured Creditor Direction and the DIP Lender Direction..........................62 2. Funding of the Implementation of the Liquidation Plan................................63 3. Transfer of Liquidation Assets.......................................................63 4. Distribution of the Bank Agreement Ogden FMCA Collateral.............................63 5. Dissolution of the Liquidating Debtors...............................................63 6. The Liquidating Trustee..............................................................64 7. The Oversight Nominee................................................................67 G. Distributions and Disputed Claims under the Reorganization Plan...............................67 1. Time of Distributions................................................................67 2. Disbursing Agent.....................................................................67 3. Surrender of Securities or Instruments...............................................67 4. Delivery of Distributions............................................................68 5. DeMinimis Distributions..............................................................68 6. No Distribution on Disputed Claims...................................................68 7. Objections to Claims.................................................................68 8. No Distribution Pending Allowance....................................................68 9. Resolution of Disputed Claims and Equity Interests...................................69 10. Estimation of Certain Claims.........................................................69 11. Reserve Account for Disupted Claims..................................................69 12. Allowance of Disputed Claims.........................................................70 13. Release of Funds from Disputed Claims Reserve........................................70 14. Allowance of Certain Claims..........................................................70 H. Distributions and Disputed Claims under the Liquidation Plan..................................71 1. The Secured Creditor Direction and the DIP Lender Direction..........................71 2. Time of Distributions................................................................71 3. Order of Distributions...............................................................72 4. No Distribution Pending Allowance....................................................72 5. Resolution of Disputed Claims........................................................72 6. Estimation of Claims.................................................................72 7. Reserve Account for Disputed Claims..................................................73 8. Allowance of Disputed Claims.........................................................73 9. Allowance of Certain Claims..........................................................73 I. Treatment of Executory Contracts and Unexpired Leases; Bar Date for Rejection Damage Claims .....................................................................................73 1. General Treatment....................................................................73 2. Cure of Defaults.....................................................................74 3. Approval of Assumption of Certain Executory Contracts................................75 4. Approval of Rejection of Executory Contracts and Unexpired Leases....................75 5. Bar Date for Filing Proofs of Claim Relating to Executory Contracts and Unexpired Leases Rejected Pursuant to the Plans......................................75 6. Reservation of Rights Under Insurance Policies and Bonds.............................75 7. Survival of Debtors' Corporate Indemnities...........................................75 J. Effect of Confirmation........................................................................75 1. Revesting of Reorganization Assets...................................................75 2. Discharge under the Plans............................................................76 3. Release of Certain Parties under the Plans...........................................76 4. Exculpation..........................................................................76 5. Injunction under the Plans...........................................................77 6. Rights of Action.....................................................................78 K. Miscellaneous Matters.........................................................................78 1. Liability of the Liquidating Trustee............................................78 2. Limited Liability of the Oversight Nominee...........................................79 3. Setoffs..............................................................................79 4. Satisfaction of Subordination Rights.................................................79 5. Dissolution of the Creditors Committee...............................................79 6. Management of the Reorganized Debtors and Reorganized Heber Debtors..................80 VIII. CERTAIN RISK FACTORS TO BE CONSIDERED..................................................................80 A. General Considerations........................................................................80 B. Certain Bankruptcy Considerations.............................................................80 C. Inherent Uncertainty of Financial Projections.................................................81 D. Sale of Geothermal Debtor Equity..............................................................81 E. Restructuring of WTE Projects.................................................................82 F. Dividends82 G. Impact of Interest............................................................................82 H. Access to Financing...........................................................................82 I. Claims Estimations............................................................................82 J. Environmental Regulation......................................................................83 K. Market for Securities.........................................................................83 L. Assumptions Regarding Value of Debtors' Assets................................................83 M. ESOP/S Corporation Tax Structure; Potential Disallowance of Tax Benefits......................83 1. Second Class of Stock............................................................83 2. IRS Scrutiny.........................................................................84 N. U.S. Trust Acceptance of ESOP Contribution....................................................84 O. Reorganized CPIH Preferred Shares; Certain Contractual Restrictions...........................84 P. International Political Risk..................................................................85 IX. RESALE OF SECURITIES RECEIVED UNDER THE REORGANIZATION PLAN............................................85 A. Issuance of New Equity........................................................................85 B. Subsequent Transfers of Reorganization Plan Notes.............................................85 X. CERTAIN UNITED STATES FEDERAL INCOME TAX CONSEQUENCES OF THE PLAN......................................86 A. United States Federal Income Tax Consequences to the Reorganizing Debtors and Heber Debtors .....................................................................................87 1. Taxation of Reorganized Covanta as an S corporation..................................87 2. Requirements for S corporation Election..............................................88 3. Second Class of Stock................................................................88 4. Qualified Subchapter S Subsidiaries ("QSub").........................................89 5. Cancellation of Indebtedness Income..................................................89 B. United States Federal Income Tax Consequences to the Holders of Claims of the Reorganizing Debtors and Heber Debtors........................................................90 1. Consequences to Holders of Allowed Claims other than the Allowed Secured 9.25% Debenture Claims ("Other Allowed Claims") who receive some combination of Cash, Reorganization Plan Unsecured Notes, New CPIH Funded Debt, New CPIH Preferred Stock, Reorganization Plan Warrants and New High Yield Secured Notes.......91 2. Consequences to Holders of Allowed Secured 9.25% Debenture Claims....................91 3. Holding and Disposing of New CPIH Preferred Stock, Reorganization Plan Warrants and Reorganization Plan Notes...............................................92 C. Backup Withholding and Information Reporting..................................................94 XI. FEASIBILITY OF THE LIQUIDATION PLAN AND THE REORGANIATION PLAN AND THE BEST INTERESTS TEST.............94 A. Feasibility of the Plans......................................................................94 1. The Reorganization Plan..............................................................95 2. The Liquidation Plan.................................................................95 B. Acceptance of the Plans.......................................................................95 C. Best Interests Test...........................................................................96 D. Estimated Valuation of the Reorganized Debtors and Reorganized Heber Debtors..................96 E. Application of the Best Interests Test to the Liquidation Valuation Analysis and the Valuation of the Reorganized Debtors and Reorganized Heber Debtors............................96 F. Confirmation Without Acceptance of All Impaired Classes: The `Cramdown' Alternative..........97 G. Conditions to Confirmation and/or Consummation of the Plans...................................98 1. Conditions to Confirmation...........................................................98 2. Conditions Precedent to the Effective Date of the Reorganization Plan................98 3. Conditions Precedent to the Effective Date of the Liquidation Plan...................99 H. Waiver of Conditions to Confirmation and/or Consummation of the Plans........................100 I. Retention of Jurisdiction....................................................................100 XII. ALTERNATIVES TO CONFIRMATION AND CONSUMMATION OF THE PLANS............................................102 A. Continuation of the Bankruptcy Case..........................................................102 B. Alternative Plans of Reorganization..........................................................102 C. Liquidation Under Chapter 7 or Chapter 11....................................................102 1. Liquidation of the Debtors under Chapter 7..........................................102 2. Liquidation of the Reorganizing Debtors and Heber Debtors under Chapter 11..........102 XIII. VOTING REQUIREMENTS...................................................................................103 A. Parties in Interest Entitled to Vote.........................................................104 B. Classes Impaired Under the Plan..............................................................104 1. Voting Impaired Classes of Claims and Interests.....................................104 2. Non-Voting Impaired Classes of Claims and Interests.................................105 3. Unimpaired Classes of Claims and Interests..........................................105 XIV. CONCLUSION............................................................................................105 A. Hearing on and Objections to Confirmation....................................................105 1. Confirmation Hearing................................................................105 2. Date Set for Filing Objections to Confirmation of the Plans.........................105 B. Recommendation...............................................................................105 GLOSSARY OF DEFINED TERMS.............................................................................107
EXHIBITS - -------- Exhibit A Reorganization Plan Exhibit B Liquidation Plan Exhibit C1 Pro Forma Historical Financial Projections Exhibit C2 Projected Financial Information Exhibit D Reorganization Valuation Analysis Exhibit E Liquidation Valuation Analysis Exhibit F Historical Financial Results Exhibit G List of Debtors and Debtors In Possession DISCLOSURE STATEMENT WITH RESPECT TO JOINT PLAN OF REORGANIZATION AND JOINT PLAN OF LIQUIDATION OF COVANTA ENERGY CORPORATION AND ITS DEBTOR AFFILIATES, DEBTORS AND DEBTORS IN POSSESSION I. INTRODUCTION The Debtors submit this Disclosure Statement pursuant to section 1125 of the Bankruptcy Code, for use in the solicitation of votes on the Reorganization Plan and the Liquidation Plan which were filed with the Court on September 8, 2003, copies of which are attached hereto as Exhibit A and Exhibit B, respectively. This Disclosure Statement sets forth certain information regarding the Debtors' prepetition history, significant events that have occurred during the Chapter 11 Cases, and the anticipated organization, operations and financing of the Reorganizing Debtors and the Heber Debtors and the planned liquidation of the Liquidating Debtors. This Disclosure Statement also describes the terms and provisions of the Plans, including certain alternatives to the Plans, certain effects of confirmation of the Plans, certain risk factors associated with securities to be issued under the Plans, and the manner in which distributions will be made under the Plans. In addition, this Disclosure Statement discusses the confirmation process and the voting procedures that holders of Claims must follow for their votes to be counted. FOR A DESCRIPTION OF THE PLANS AND VARIOUS RISKS AND OTHER FACTORS PERTAINING TO THE PLANS AS THEY RELATE TO HOLDERS OF CLAIMS AND EQUITY INTERESTS, PLEASE SEE SECTION VII (SUMMARY OF THE PLANS) AND SECTION VIII (CERTAIN RISKS TO BE CONSIDERED). THIS DISCLOSURE STATEMENT CONTAINS SUMMARIES OF CERTAIN PROVISIONS OF THE PLANS, CERTAIN STATUTORY PROVISIONS, CERTAIN DOCUMENTS RELATED TO THE PLANS, CERTAIN EVENTS IN THE CHAPTER 11 CASES, AND CERTAIN FINANCIAL INFORMATION. ALTHOUGH THE DEBTORS BELIEVE THAT SUCH SUMMARIES ARE FAIR AND ACCURATE, SUCH SUMMARIES ARE QUALIFIED TO THE EXTENT THAT THEY DO NOT SET FORTH THE ENTIRE TEXT OF SUCH DOCUMENTS OR STATUTORY PROVISIONS. FACTUAL INFORMATION CONTAINED IN THIS DISCLOSURE STATEMENT HAS BEEN PROVIDED BY THE DEBTORS' MANAGEMENT EXCEPT WHERE OTHERWISE SPECIFICALLY NOTED. THE DEBTORS DO NOT WARRANT OR REPRESENT THAT THE INFORMATION CONTAINED HEREIN, INCLUDING THE FINANCIAL INFORMATION, IS WITHOUT ANY MATERIAL INACCURACY OR OMISSION. II. BANKRUPTCY PLAN VOTING INSTRUCTIONS AND PROCEDURES A. Definitions Except as otherwise provided herein, capitalized terms not otherwise defined in this Disclosure Statement have the meanings ascribed to them in the Reorganization Plan and the Liquidation Plan. In addition, all references in this Disclosure Statement to monetary figures refer to United States currency, unless otherwise expressly provided. B. Notice to Holders of Claims This Disclosure Statement is being transmitted to certain holders of Claims for the purpose of soliciting votes on the Reorganization Plan and the Liquidation Plan and to others for informational purposes. The purpose of this Disclosure Statement is to provide adequate information to enable the holder of a Claim to make a reasonably informed decision with respect to the Reorganization Plan and the Liquidation Plan prior to exercising the right to vote to accept or reject either of such Plans. By order entered on October [__], 2003, the Court approved this Disclosure Statement as containing information of a kind and in sufficient and adequate detail to enable holders of Claims that are entitled to vote on the Reorganization Plan and/or the Liquidation Plan to make an informed judgment with respect to acceptance or rejection of each respective Plan. THE COURT'S APPROVAL OF THIS DISCLOSURE STATEMENT DOES NOT CONSTITUTE EITHER A GUARANTY OF THE ACCURACY OR COMPLETENESS OF THE INFORMATION CONTAINED HEREIN OR AN ENDORSEMENT OF EITHER PLAN BY THE COURT. ALL HOLDERS OF CLAIMS ARE ENCOURAGED TO READ THIS DISCLOSURE STATEMENT AND ITS APPENDICES CAREFULLY AND IN THEIR ENTIRETY, AND IF NECESSARY CONSULT WITH COUNSEL, BEFORE DECIDING TO VOTE EITHER TO ACCEPT OR TO REJECT THE REORGANIZATION PLAN OR THE LIQUIDATION PLAN. This Disclosure Statement contains important information about the Reorganization Plan and the Liquidation Plan, considerations pertinent to acceptance or rejection of each Plan and developments concerning the Chapter 11 Cases. THIS DISCLOSURE STATEMENT AND THE OTHER MATERIALS INCLUDED IN THE SOLICITATION PACKAGE ARE THE ONLY DOCUMENTS AUTHORIZED BY THE COURT TO BE USED IN CONNECTION WITH THE SOLICITATION OF VOTES ON THE REORGANIZATION PLAN AND THE LIQUIDATION PLAN. No solicitation of votes may be made except after distribution of this Disclosure Statement and no person has been authorized to distribute any information concerning the Debtors or the Plans other than the information contained herein. CERTAIN OF THE INFORMATION CONTAINED IN THIS DISCLOSURE STATEMENT IS BY ITS NATURE FORWARD-LOOKING AND CONTAINS ESTIMATES, ASSUMPTIONS AND PROJECTIONS THAT MAY BE MATERIALLY DIFFERENT FROM ACTUAL, FUTURE RESULTS. Except with respect to the Projections set forth in Exhibit C2 attached hereto and except as otherwise specifically and expressly stated herein, this Disclosure Statement does not reflect any events that may occur subsequent to the date hereof and that may have a material impact on the information contained in this Disclosure Statement. The Debtors do not intend to update the Projections for the purposes hereof; thus, the Projections will not reflect the impact of any subsequent events not already accounted for in the assumptions underlying the Projections. Further, the Debtors do not anticipate that any amendments or supplements to this Disclosure Statement will be distributed to reflect such occurrences. Accordingly, the delivery of this Disclosure Statement does not under any circumstance imply that the information herein is correct or complete as of any time subsequent to the date hereof. EXCEPT WHERE SPECIFICALLY NOTED, THE FINANCIAL INFORMATION CONTAINED HEREIN HAS NOT BEEN AUDITED BY A CERTIFIED PUBLIC ACCOUNTANT AND HAS NOT BEEN PREPARED IN ACCORDANCE WITH GENERALLY ACCEPTED ACCOUNTING PRINCIPLES. C. Voting Record Date The record date for determining which holders of Claims are entitled to vote on the Plans is [September 27, 2003] (the "Voting Record Date"). D. Solicitation Package Accompanying this Disclosure Statement are, among other things, copies of (1) the Reorganization Plan (Exhibit A); (2) the Liquidation Plan (Exhibit B); (3) Pro-Forma Historical Financial Information (Exhibit C1); (4) the Projections (Exhibit C2); (5) the Reorganization Valuation Analysis of the Reorganizing Debtors and Heber Debtors (Exhibit D); (6) the Liquidation Valuation Analysis of the Liquidating Debtors (Exhibit E); (7) selected historical financial data for the Company (Exhibit F); (8) the notice of, among other things, the time for submitting Ballots to accept or reject the Reorganization Plan or the Liquidation Plan, the date, time and place of the hearing to consider the confirmation of the Plans and related matters, and the time for filing objections to the confirmation of the Plans (the "Confirmation Hearing Notice"); and (9) if you are entitled to vote, one or more Ballots (and return envelopes, without postage,) to be used by you in voting to accept or to reject the Reorganization Plan or the Liquidation Plan. Depending on the Class to which you belong under either the Reorganization Plan or Liquidation Plan, you will receive this Disclosure Statement (along with the respective Plan and, as applicable, certain of the exhibits hereto described above) or a shorter version of this Disclosure Statement comprising of the section herein entitled "Summary of the Reorganization Plan and the Liquidation Plan" on pages i to xxxiii (the "Short-Form Disclosure Statement"). Holders of Claims or Interests in Classes 1, 3 (including Subclasses 3A and 3B), 4, 5, 6, 7, 8 and 12 under the Reorganization Plan and holders of Claims or Interests in Classes 1, 3 (including Subclasses 3A and 3B) and 7 under the Liquidation Plan will receive this Disclosure Statement (along with the respective Plan and, if entitled to vote, respective Ballots). Holders of Claims or Interests in Classes 2, 2H, 10 and 13 of the Reorganization Plan will receive the Short-Form Disclosure Statement (along with the Reorganization Plan). In addition, all parties in the Debtors' most recent notice list filed with the Court will receive this Disclosure Statement (along with the Plans and certain exhibits). Holders of Claims or Interests in Classes 9, 11 and 14 under the Reorganization Plan and Classes 9 and 11 under the Liquidation Plan will not receive either this Disclosure Statement or the Short-Form Disclosure Statement (or any exhibits thereto, including the Plans). The Confirmation Hearing Notice will be sent to all known holders of Claims against or Interests in the Debtors' estates as of the Voting Record Date, as well as to all parties in the Debtors' most recent notice list filed with the Court. E. General Voting Procedures, Ballots, and Voting Deadline After carefully reviewing the Reorganization Plan and the Liquidation Plan, this Disclosure Statement, and (if you are entitled to vote) the detailed instructions accompanying your Ballot, please indicate your acceptance or rejection of a Plan by checking the appropriate box on the enclosed Ballot. Please complete and sign your original Ballot (copies will not be accepted) and return it in the envelope provided. You must provide all of the information requested by the appropriate Ballot(s). Failure to do so may result in the disqualification of your vote on such Ballot(s). The description of the voting procedures contained in this Disclosure Statement represents a summary of the procedures approved by the Court. Each entity entitled to vote should refer to the detailed voting instructions accompanying your Ballot. Each Ballot has been coded to reflect the Class of Claims or Interests it represents. Accordingly, in voting to accept or reject the Reorganization Plan and/or the Liquidation Plan, you must use only the coded Ballot(s) sent to you with this Disclosure Statement. IN ORDER FOR YOUR VOTE TO BE COUNTED, YOUR BALLOT MUST BE PROPERLY COMPLETED AS SET FORTH ABOVE AND IN ACCORDANCE WITH THE VOTING INSTRUCTIONS ON THE BALLOT AND ACTUALLY RECEIVED NO LATER THAN [NOVEMBER 18, 2003 AT 4:00 P.M.] (PREVAILING EASTERN TIME) (THE "VOTING DEADLINE") BY BANKRUPTCY SERVICES, LLC, 757 THIRD AVENUE, THIRD FLOOR, NEW YORK, NEW YORK 10017. BALLOTS RECEIVED AFTER SUCH TIME WILL NOT BE COUNTED, EXCEPT AS OTHERWISE PERMITTED BY ORDER OF THE COURT. BALLOTS SHOULD NOT BE DELIVERED DIRECTLY TO THE DEBTORS, THE COURT, THE CREDITORS COMMITTEE OR COUNSEL TO THE DEBTORS OR THE CREDITORS COMMITTEE. F. Special Voting Procedures for the Prepetition Lenders The votes of the Prepetition Lenders are being solicited directly from each Prepetition Lender, not from the Agent Banks on behalf of the Prepetition Lenders. Accordingly, Prepetition Lenders must submit their own Ballots. The Agent Banks will not vote on behalf of the Prepetition Lenders. G. Special Voting Procedures for the 9.25% Debenture Holders 1. Beneficial Noteholders (a) Any beneficial 9.25% Debenture Holder who holds 9.25% Debentures in its own name as of the Voting Record Date should vote on the Plans by completing and signing the enclosed Ballot and returning it directly to Bankruptcy Services, LLC, at the address set forth in Section II.H herein so that it is RECEIVED on or before the Voting Deadline. (b) Any beneficial 9.25% Debenture Holder who holds 9.25% Debentures in a "street name" through a nominee as of the Voting Record Date should vote on the Plans through such nominee by following these instructions: (i) Use the Ballot for holders of Claims in Subclass 3B of the Reorganization Plan and/or Subclass 3A of the Liquidation Plan, as appropriate; (ii) Complete and sign the Ballot in accordance with the instructions on the Ballot; and (iii) Return the Ballot to your nominee as promptly as possible in sufficient time to allow such nominee to process your Ballot, complete a master ballot, and return such master ballot to the balloting agent by the Voting Deadline. Any Ballot returned to a nominee by a beneficial 9.25% Debenture Holder will not be counted until such nominee properly completes and delivers to the balloting agent a master ballot that reflects the votes of the beneficial 9.25% Debenture Holder. A beneficial 9.25% Debenture Holder who holds through more than one nominee may receive more than one Ballot. In that case, the beneficial 9.25% Debenture Holder should execute a separate Ballot for each block of 9.25% Debentures that it holds through any nominee and return the Ballot to the respective nominee that holds the 9.25% Debentures in record name. A beneficial 9.25% Debenture Holder who holds some of its 9.25% Debentures through a nominee and some of its 9.25% Debentures in its own name as the record holder should follow the procedures in subsection G.1(a) above to vote the 9.25% Debentures held in its own name and the procedures in subsection G.1(b) above to vote the 9.25% Debentures held by the nominee(s). 2. Nominees Any Person (other than a beneficial owner) who is the registered holder of 9.25% Debentures should vote on behalf of the beneficial holder of such 9.25% Debentures by (a) immediately distributing a copy of this Disclosure Statement and accompanying materials (including appropriate Ballots) to all beneficial 9.25% Debenture Holders for whom it holds 9.25% Debentures; (b) promptly collecting all such Ballots from the beneficial 9.25% Debenture Holders; (c) compiling and validating the votes of all its beneficial holders on one or more master ballots; and (d) transmitting the master ballot(s) to Bankruptcy Services, LLC at the address set forth in Section II.H herein so that they are RECEIVED on or before the Voting Deadline. H. Voting Procedures for Unknown Holders With respect to all holders of impaired Claims against and impaired Interests in the Debtors' estates who are entitled to vote on either the Reorganization Plan or the Liquidation Plan, but that cannot be identified or located by the Debtors, the Debtors will post copies of this Disclosure Statement, the Short-Form Disclosure Statement, the Reorganization Plan and the Liquidation Plan on Covanta's website at www.covantaenergy.com (Corporate Restructuring), and will publish notice of the Confirmation Hearing in the WALL STREET JOURNAL (National Edition) and USA TODAY (National Edition), once no later than 15 business days after entry of the order approving this Disclosure Statement and the Short-Form Disclosure Statement. Upon being contacted by holders who previously could not be identified or located, the Debtors will promptly provide each such holder with copies of either this Disclosure Statement or the Short-Form Disclosure Statement (and relevant exhibits thereto), as appropriate, after such holder has adequately evidenced its Claim against or Interest in the Debtors' estates. I. Questions About Voting Procedures If (1) you have any questions about (a) the procedure for voting your Claim or Interest, (b) the packet of materials that you have received, or (c) the amount of your Claim or Interest or (2) you wish to obtain, at your own expense, unless otherwise specifically required by Federal Rule of Bankruptcy Procedure 3017(d), an additional copy of the Reorganization Plan, the Liquidation Plan, this Disclosure Statement, the Short-Form Disclosure Statement or any appendices or exhibits to such documents please contact: Bankruptcy Services, LLC 757 Third Ave, Third Floor New York, NY 10017 Telephone: 646-282-2500 Facsimile: 646-282-2501 NO INQUIRIES CONCERNING VOTING PROCEDURES SHOULD BE DIRECTED TO COUNSEL TO THE DEBTORS, THE UNITED STATES TRUSTEE, THE AGENTS TO THE PREPETITION LENDERS AND DIP LENDERS, THE INFORMAL COMMITTEE OF THE HOLDERS OF THE 9.25% DEBENTURES OR THE CREDITORS COMMITTEE. FOR FURTHER INFORMATION AND INSTRUCTION ON VOTING TO ACCEPT OR REJECT THE REORGANIZATION AND/OR LIQUIDATION PLAN, SEE SECTION [XIII] (VOTING REQUIREMENTS). J. Procedures for Voting Objections Any objections to Claims for purposes of voting to accept or reject the Plans must be filed on or before [October 20, 2003] at 4:00 p.m. (prevailing Eastern time) or as otherwise provided by the Court. If such an objection is timely filed, the Ballot for the holder of such Claim will not be counted in accordance with Federal Rule of Bankruptcy Procedure 3018(a), unless temporarily allowed by the Court for voting purposes after notice and hearing. In the event that an objection is filed, or the Debtors have scheduled a Claim as zero, disputed, unliquidated or contingent in the Schedules and the affected creditor believes that it should be entitled to vote on a Plan, then such creditor must serve on the Debtors and file with the Court a motion for an order pursuant to Federal Rule of Bankruptcy Procedure 3018(a) ("Rule 3018(a) Motion"), seeking temporary allowance of such Claim for voting purposes. A Rule 3018(a) Motion must be filed and served, with evidence in support thereof, on or before [November 10, 2003] at 4:00 p.m. (Prevailing Eastern Time) (the "Rule 3018(a) Motion Deadline"). With regard to any timely Rule 3018(a) Motion, the Debtors will have until [November 17, 2003] at 4:00 p.m. (prevailing Eastern time) to file a response. A hearing regarding timely filed Rule 3018(a) Motions, if any, will be held on [November 19, 2003] at 2:00 p.m. (prevailing Eastern time). K. Confirmation Hearing and Deadline for Objections to Confirmation Pursuant to section 1128 of the Bankruptcy Code and Federal Rule of Bankruptcy Procedure 3017(c), the Court has scheduled the Confirmation Hearing for December 3, 2003, at 2:00 p.m. (prevailing Eastern time) before the Honorable Cornelius Blackshear, United States Bankruptcy Judge, at the United States Bankruptcy Court for the Southern District of New York, Alexander Hamilton Custom House, One Bowling Green, New York, NY 10004-1408 (the "Confirmation Hearing"). The Confirmation Hearing may be adjourned from time to time by the Court without prior notice except for the announcement of the adjournment date made at the hearing or at any subsequently adjourned hearing. The Court has directed that the discovery cut-off date relating to confirmation of the Plans will be [November 12, 2003 at 4:00 p.m. (prevailing Eastern time)] and that objections, if any, to confirmation of either Plan be filed with the Clerk of the Court and served so that they are RECEIVED on or before [November 18, 2003, at 4:00 p.m.] (prevailing Eastern time) (the "Confirmation Objection Deadline") by: Counsel for the Debtors Cleary, Gottlieb, Steen & Hamilton One Liberty Plaza New York, New York 10006 Attn: Deborah M. Buell, Esq. James L. Bromley, Esq. and Jenner & Block, LLC One IBM Plaza Chicago, IL 60611-7603 Attn: Vincent E. Lazar, Esq. Christine L. Childers, Esq. Office of the United States Trustee Office of the United States Trustee US Department of Justice Southern District of New York 33 Whitehall Street, 21st Floor New York, NY 10004 Attn: Brian Masumoto, Esq. Counsel to the Agents of the Debtors' prepetition and DIP lenders O'Melveny & Myers LLP 30 Rockefeller Plaza New York, NY 10112 Attn: Sandeep Qusba, Esq. Counsel to the Trustee for the holders of the 9.25% Debentures Dorsey & Whitney LLP 50 South Sixth Street Minneapolis, MN 55402-1498 Attn: Christopher Lenhart, Esq. Counsel for the Informal Committee of the holders of the 9.25% Debentures Akin Gump Strauss Hauer & Feld, L.L.P. 590 Madison Avenue New York, NY 10022 Attn: Fred S. Hodara, Esq. Counsel for the Official Committee of Unsecured Creditors Arnold & Porter 399 Park Avenue New York, New York 10022 Attn: Daniel M. Lewis, Esq. Michael J. Canning, Esq. Responses or objections, if any, to confirmation of the Plans: (a) shall be in writing; (b) shall state the name and address of the objector and its interest in the Debtors; (c) shall state, if appropriate, the amount and nature of the objector's Claim or Interest; (d) shall state the grounds for the responses or objections and the legal basis therefor; (e) shall reference with specificity the text of the Plan(s) to which the responses or objections are made, and shall provide proposed language changes or insertions to the Plan(s) to resolve the responses or objections. If a response or objection to the confirmation of the Plan(s) is not timely filed and served before the Confirmation Objection Deadline, the responding or objecting party shall be barred from objecting to confirmation of the Plans and be precluded from being heard at the Confirmation Hearing. L. Additional Copies of Disclosure Statement and Plans Additional copies of the Disclosure Statement, the Short-Form Disclosure Statement and the Plans may be obtained from the Debtors' website at http://www.covantaenergy.com (Corporate Restructuring). III. HISTORY OF THE DEBTORS' BUSINESS OPERATIONS A. Overview of Business Operations 1. Description of Principal Business Units Covanta is a holding company whose Subsidiaries, among other activities, develop, construct, own and operate key infrastructure for the conversion of waste-to-energy, independent power production and the treatment of water and wastewater in the United States and abroad. The Company's power generation facilities use a variety of fuels, including municipal solid waste, water (hydroelectric), natural gas, coal, geothermal fluid, wood waste, landfill gas, heavy fuel oil and diesel fuel. Prior to September 1999, the Company conducted its business through operating groups in three principal business units: Energy, Entertainment and Aviation. In September 1999, the Company adopted a plan to discontinue its Entertainment and Aviation operations, pursue the sale or other disposition of these businesses, pay down corporate debt and concentrate on businesses previously conducted through its Covanta Energy Group, Inc. (f/k/a Ogden Energy Group, Inc.) subsidiary. As of the date hereof, the Company's plan to sell discontinued businesses has been largely completed, apart from the disposition of businesses associated with the Arrowhead Pond of Anaheim arena in Anaheim, California ("Arrowhead Pond"). Arrowhead Pond will be dealt with pursuant to the terms of the Liquidation Plan. Currently, the Company's principal business units are Domestic Energy and Water, International Energy and Other. (a) Domestic Energy and Water Business The Company's domestic business is composed of the design, construction and long-term operation of key infrastructure for municipalities and others in waste-to-energy, independent power production and water and waste water. (1) Waste-to-Energy Projects The Company's largest operations are in waste-to-energy ("WTE") projects, and it currently operates 26 WTE projects, the majority of which were developed and structured contractually as part of competitive procurements conducted by municipal entities. The waste-to-energy plants combust municipal solid waste as a means of environmentally sound disposal and produce energy that is typically sold as electricity to utilities and other electricity purchasers. The Company processes approximately five percent of the municipal solid waste produced in the United States and therefore represents a vital part of the nation's solid waste disposal industry. The essential purpose of the Company's WTE projects is to provide waste disposal services, typically to municipal clients who sponsored the projects ("Client Communities"). Generally, waste-to-energy projects provide these services pursuant to long term service contracts ("Service Agreements"). The electricity or steam is sold pursuant to long-term power purchase agreements ("PPAs") with local utilities or industrial customers, with one exception, and most of the resulting revenues reduce the overall cost of waste disposal services to the Client Communities. Each Service Agreement is different to reflect the specific needs and concerns of the Client Community, applicable regulatory requirements and other factors. The terms of the Service Agreements are each 20 or more years, with the majority now in the second half of the applicable term. Financing for the Company's domestic WTE projects is generally accomplished through tax-exempt and taxable revenue bonds issued by or on behalf of the Client Community. If the facility is owned by a Covanta subsidiary, the Client Community loans the bond proceeds to the subsidiary to pay for facility construction and pays to the subsidiary amounts necessary to pay debt service. For such facilities, project-related debt is included as "project debt (short and long term)" in the Company's consolidated financial statements. Generally, such debt is secured by the revenues pledged under the respective indentures and is collateralized by the assets of Covanta's subsidiary and with the only recourse to Covanta being related to construction and operating performance defaults. The domestic market for the Company's WTE services has largely matured and is heavily regulated. Other than expansion opportunities for existing projects in connection with which the Company's municipal clients have encountered significantly increased waste volumes without corresponding competitively-priced landfill availability, new opportunities for domestic projects are expected to be scarce for the foreseeable future. (2) Water and Wastewater Projects The Company's water and wastewater ("Water") operations, composed of desalinization, wastewater treatment and purification plants, are its newest business. The Water operations are conducted through wholly-owned subsidiaries which design, construct, maintain, and operate Water treatment facilities and distribution and collection networks for municipalities in the United States. Currently, the Company operates and maintains eight Water facilities in New York, has designed and built and now operates and maintains a water treatment facility and associated transmission and pumping equipment in Alabama and is completing a desalinization project on behalf of the Tampa Bay Water Authority in Florida. (3) Independent Power Projects Since 1989, the Company has been engaged in developing, owning and/or operating twenty independent power production ("IPP") facilities utilizing a variety of energy sources including water (hydroelectric), natural gas, coal, geothermal fluid, landfill gas, heavy fuel oil and diesel fuel. The electrical output from each facility, with one exception, is sold to local utilities. The Company's revenue from the IPP facilities is derived primarily from the sale of energy and capacity. The Heber Debtors' businesses are in connection with the ownership and operation of the Geothermal Projects, which are IPP facilities that convert geothermal fluid into energy. For further discussion of the Heber Debtors' IPP facilities, see Section III.A.2 herein. The regulatory framework for selling power to utilities from independent power facilities (including waste-to-energy facilities) after current contracts expire is in flux, given the energy crisis in California in 2000-2001 and the over-capacity of generation at the present time. Various states and Congress are considering a wide variety of changes to regulatory frameworks, but none has been established definitively at present. (b) International Energy Business As with its domestic business, the Company conducts its international energy businesses through wholly-owned subsidiaries. Internationally, the largest element of the Company's energy business is its 26.25% ownership in, and operation of the 470 MW (net) pulverized coal-fired electrical generating facility in Quezon Province, The Philippines. The Company has interests in other fossil-fuel generating projects in Asia, a waste-to-energy project in Italy and two small hydroelectric projects in Costa Rica. In general, these projects provide returns primarily from equity distributions and, to a lesser extent, operating fees. The projects sell the electricity and steam they generate under long-term contracts or market concessions to utilities, governmental agencies providing power distribution, creditworthy industrial users, or local governmental units. In select cases, such sales of electricity and steam may be provided under short-term arrangements as well. Similarly, the Company seeks to obtain long-term contracts for fuel supply from reliable sources. The ownership and operation of facilities in foreign countries entails significant political and financial uncertainties and other structuring issues that typically are not involved in such activities in the United States. Key international risk factors include government-sponsored efforts to renegotiate contracts, unexpected changes in electricity tariffs, conditions in financial markets, currency exchange rates, currency repatriation restrictions, currency convertibility, changes in laws and regulations and political, economic or military instability, civil unrest and expropriation. Such risks have the potential to cause substantial delays or material impairment to the value of the project being developed or business being operated. (c) Other Businesses On December 31, 2001, the Company sold the major portion of its aviation fueling business. The sale included all of the Company's aviation fueling operations at 19 airports in the United States, Canada and Panama. On March 28, 2002, the Company sold its interests in a power plant and an operating and maintenance contractor based in Thailand. Since the Initial Petition Date, the Debtors, with the approval of the Court, have sold or otherwise disposed of its interests in the Argentine Assets, its interests in the Corel Centre and the Team, the remaining aviation fueling and fuel facility management business related to three airports operated by the Port Authority of New York and New Jersey (the "Aviation Fueling Assets"), and other miscellaneous assets related to the entertainment businesses. To date, the Company still holds entertainment assets relating to the businesses associated with the Arrowhead Pond. 2. Description of Geothermal Business Certain Reorganizing Debtors and Heber Debtors are in the business, either directly or indirectly, of owning and/or operating Geothermal Projects, each of which extracts and converts geothermal fluids into energy in Southern California. Such Debtors and Geothermal Projects include: o SIGC Parties: Covanta Energy Americas, Inc. (the "SIGC Seller") owns equity interests (collectively, the "SIGC Interests") in Covanta SIGC Energy, Inc. ("SIGC Energy I") and Covanta SIGC Energy II, Inc. ("SIGC Energy II"), which entities, in turn, collectively own all equity interests in Heber AMOR 14 Corporation ("AMOR," and with SIGC Energy I and SIGC Energy II, the "Heber Debtor Holding Companies") and all the partnership interests in Second Imperial Geothermal Company, L.P. (the "SIGC Project Company");(9) The SIGC Project Company is the sole lessee of a nominal 48-megawatt geothermal electric power plant (the "SIGC Project"), which is operated by Covanta SIGC Geothermal Operations, Inc. (the "SIGC Operator"). The output of the facility is sold under a long term PPA with the Southern California Edison Company ("SCE"). - ----------------- (9) SIGC Energy I indirectly owns, through its wholly-owned subsidiary AMOR, a 74.999% general partnership interest and a 0.001% limited partnership interest in SIGC Project Company. Covanta SIGC Energy II, Inc. directly owns a 24.999% general partnership interest and a 0.001% limited partnership interest in SIGC Project Company. o HGC Parties: Heber Loan Partners ("HGC One Seller"), ERC Energy, Inc. ("HGC Two Seller") and ERC Energy II, Inc. ("HGC Three Seller," and collectively, the "HGC Sellers") own partnership interests (collectively, the "HGC Interests") in Heber Geothermal Company (the "HGC Project Company"). The HGC Project Company owns a nominal 52-megawatt geothermal electric plant (the "HGC Project"), which is operated by the Covanta Imperial Power Service, Inc. (the "HGC Operator"). The output of the HGC Project is sold under a long term PPA with the SCE. o HFC Parties: Covanta Heber Field Energy, Inc. ("HFC One Seller") and Heber Field Energy II, Inc. ("HFC Two Seller," and with the SIGC Seller, the HGC Sellers and HFC One Seller, the "Heber Sellers") own partnership interests (collectively, the "HFC Interests") in Heber Field Company (the "HFC Project Company," and together with SIGC Project Company and HGC Project Company, the "Heber Debtor Project Companies"). The HFC Project Company owns a geothermal fluid facility (the "HFC Project"), which is operated by Covanta Geothermal Operations, Inc. (the "HFC Operator," and with the SIGC Operator and HGC Operator, the "Debtor Operators"). The HFC Project is adjacent to and supplies geothermal fluid to both HGC and SIGC Projects in connection with their respective facilities. HFC Project Company is the lessee of more than 200 royalty leases, which make up the Heber Known Geothermal Resource Area. HFC Project Company's rights in the leases and the geothermal leases themselves are valid so long as geothermal brine is produced. A royalty is paid to the geothermal lease lessors each month. In addition, Covanta Power Pacific, Inc., a non-debtor affiliate ("CPPI"), owns equity interests (collectively, the "MP Interests") in non-debtor affiliates Pacific Geothermal Company and Mammoth Geothermal Company, which entities, in turn, collectively own 50% of the partnership interests in Mammoth Pacific, L.P. (the "MP Project Company," and together with the Heber Debtor Project Companies, the "Project Companies"). The MP Project Company owns a nominal 40-megawatt geothermal electric power plant, comprised of three plants (the "MPLP Facilities"). The MPLP Facilities are located on the eastern slopes of the Sierra Nevada Mountains at Casa Diablo Hot Springs in California. The MPLP Facilities have contractual rights to the geothermal fluid resource for a term not less than the term of the PPAs. All three MPLP Facilities sell energy and capacity to SCE under long term PPAs and have recently entered into PPA amendments calling for a five-year fixed-price for the energy sold. Covanta Power Plant Operations, also a non-Debtor subsidiary, provides management services to MPLP on a cost-reimbursement basis. Geothermal Debtor Equity is comprised of the SIGC Interests, HGC Interests and HFC Interests. B. Other Aspects of Business Operations 1. Insurance The Company maintains certain insurance policies essential to the continued operations of the Company. The terms of these policies are characteristic of insurance policies typically maintained by corporate entities that are similar in size and nature to the Company. A summary of the Company's policies and coverage are as follows: Commercial General Liability Insurance and Excess Liability Insurance includes coverage for third party liability and contractual liability coverage resulting from negligence of the insured. Property Insurance includes all-risk coverage on a replacement cost basis for physical damage to all buildings and equipment including boilers and machinery, owned, leased or otherwise under the control of the Company; and includes coverage for business interruption and extra expenses likely to be incurred in the event of a property loss. Automobile Liability Insurance is provided for all owned, non-owned and hired automobiles with coverage for both bodily injury and property damage in compliance with the laws of the jurisdiction in which the vehicle is licensed. Workers' Compensation Insurance provides coverage for all employees throughout the United States in accordance with the laws of each state in which the Company conducts its business. Directors and Officers Liability Insurance provides coverage for both Directors and Officers liability for wrongful acts actually or allegedly caused by the insured subject to standard exclusions. Political Risk Insurance provides coverage for the Company's equity investments in certain of its international projects. The company also maintains crime insurance and fiduciary liability insurance on certain of its foreign locations. 2. Environmental Matters Covanta's business activities in the United States are pervasively regulated pursuant to federal, state and local environmental laws. Federal laws, such as the Clean Air Act and Clean Water Act, and their state counterparts, govern discharges of pollutants to air and water. Other federal, state and local laws comprehensively govern the generation, transportation, storage, treatment and disposal of solid and hazardous waste, and also regulate the storage and handling of petroleum products (such laws and the regulations thereunder, "Environmental Regulatory Laws"). The Environmental Regulatory Laws and other federal, state and local laws, such as the Comprehensive Environmental Response Compensation and Liability Act ("CERCLA" or "Superfund") (collectively, "Environmental Remediation Laws") make Covanta potentially liable on a joint and several basis for any onsite or offsite environmental contamination which may be associated with the Company's activities and the activities at sites, including landfills which the Company's subsidiaries have owned, operated or leased or at which there has been disposal of residue or other waste handled or processed by such subsidiaries or at which there has been disposal of waste generated by the Company's activities. Some state and local laws also impose liabilities for injury to persons or property caused by site contamination. Some Service Agreements provide for indemnification of the operating subsidiaries from some such liabilities. In addition, other subsidiaries involved in landfill gas projects have access rights to landfills pursuant to certain leases at landfill sites which permit the installation, operation and maintenance of landfill gas collection systems. A portion of these landfill sites is and has been a federally-designated "Superfund" site. Each of these leases provide for indemnification of the Company subsidiary from some liabilities associated with these sites. The Environmental Regulatory Laws require that many permits be obtained before the commencement of construction and operation of waste-to-energy, independent power and water and wastewater projects, and further require that permits be maintained throughout the operating life of the facility. There can be no assurance that all required permits will be issued or re-issued, and the process of obtaining such permits can often cause lengthy delays, including delays caused by third-party appeals challenging permit issuance. Failure to meet conditions of these permits or of the Environmental Regulatory Laws and the corresponding regulations can subject an operating subsidiary to regulatory enforcement actions by the appropriate governmental unit, which could include fines, penalties, damages or other sanctions, such as orders requiring certain remedial actions or limiting or prohibiting operation. To date, Covanta has not incurred material penalties, been required to incur material capital costs or additional expenses, nor been subjected to material restrictions on its operations as a result of violations of environmental laws, regulations or permits. 3. Prepetition Legal Proceedings The following discussion regarding legal proceedings purports only to identify those legal proceedings commenced prior to the Initial Petition Date that the Debtors, in their reasonable judgment, considered prepetition to be material in nature, unless otherwise noted. Covanta's Form 10-K Annual Report for the fiscal year ended December 31, 2002, accessible on http://investors.covantaenergy.com, also contains information about these legal proceedings. On June 8, 2001, the EPA named Ogden Martin Systems of Haverhill, Inc., now known as Covanta Haverhill, Inc., as one of 2,000 potentially responsible parties ("PRPs") at the Beede Waste Oil Superfund Site, Plaistow, New Hampshire (the "Site") in connection with alleged waste disposal by PRPs on the Site. The EPA alleges that the costs of response actions completed or underway at the Site total about $17 million and estimates that the total cost of cleanup of the Site will be about $65 million. Covanta is participating in PRP group discussions towards settlement of the EPA's claims. Covanta's share of liability, if any, cannot be determined at this time as a result of uncertainties regarding the source and scope of contamination, the large number of PRPs and the varying degrees of responsibility among various classes of PRPs. Covanta Haverhill, Inc., is not a Debtor. On April 9, 2001, Ogden Ground Services, Inc. ("Ogden Ground") and Ogden Aviation, Inc., together with approximately 250 other parties, were named by Metropolitan Dade County, Florida (the "County") as PRPs, pursuant to CERCLA, RCRA and state law, with respect to an environmental cleanup at the Miami Dade International Airport. The County alleges that it has expended over $200 million in response and investigation costs and expects to spend an additional $250 million to complete necessary response actions. The lawsuit is currently subject to a tolling agreement between PRPs and the County. Covanta's share of liability, if any, cannot be determined at this time because of uncertainties regarding the source and scope of the contamination, the large number of PRPs and the varying degrees of responsibility among various classes of PRPs. Covanta's liability, if any, arises from its agreement to indemnify various transferees of its divested airport operations with respect to certain known and potential liabilities that may arise out of such operations, and in certain instances to remain liable for certain potential liabilities that were not assumed by the transferee. Ogden Ground has been sold, and the transferee of its businesses is subject to Covanta's indemnification agreement. The Debtors believe that the indemnity of Ogden Ground's transferee, as well as any other such indemnity, are prepetition unsecured obligations. Ogden Aviation, Inc. is a Liquidating Debtor and the above matter is expected to have no impact on the Reorganized Company (as defined herein). On May 25, 2000 the California Regional Water Quality Control Board, Central Valley Region (the "Board"), issued a cleanup and abatement order to Pacific-Ultrapower Chinese Station ("Chinese Station"), a general partnership in which one of Covanta's subsidiaries owns 50%. The order is in connection with Chinese Station's neighboring property owner's use of ash generated by Chinese Station's Jamestown, California power plant. Chinese Station completed the cleanup in mid-2001 and submitted its Clean Closure Report to the Board on November 2, 2001. The Board and other state agencies continue to investigate alleged civil and criminal violations associated with the management of the material. Chinese Station believes it has valid defenses, and a petition for review of the order is pending. Settlement discussions in this matter are underway. Chinese Station and Covanta's subsidiary that owns a partnership interest in Chinese station are not Debtors. On January 4, 2000 and January 21, 2000, United Air Lines, Inc. ("United") and American Airlines, Inc. ("American"), respectively, named Ogden New York Services, Inc. ("Ogden New York"), in two separate lawsuits filed in the Supreme Court of the State of New York, which have been consolidated for joint trial. The lawsuits seek judgment declaring that Ogden New York is responsible for petroleum contamination at airport terminals formerly or currently leased by United and American at New York's Kennedy International Airport. United seeks approximately $1.9 million in certain costs and legal expenses, as well as certain declaratory relief, against Ogden New York and four airlines, including American. American seeks approximately $74.5 million in certain costs and legal fees from Ogden New York and United. Covanta disputes the allegations and believes that the damages sought are overstated in view of the airlines' responsibility for the alleged contamination and that Covanta has defenses under its respective leases and Port Authority permits. Ogden New York is a Liquidating Debtor, and as a result, the such Debtor's Chapter 11 filing has stayed the matters, which are expected to have no impact on the Reorganized Company (as defined herein). On December 23, 1999, an aviation subsidiary of Covanta was named as a third-party defendant in an action filed in the Superior Court of the State of New Jersey alleging that the aviation subsidiary generated hazardous substances at a reclamation facility known as the Swope Oil and Chemical Company Site. Third-party plaintiffs seek contribution and indemnification from the aviation subsidiary and over 90 other third parties, as PRPs, for costs incurred and to be incurred in the cleanup. This action was stayed pending the outcome of first- and second-party claims. The aviation subsidiary's share of liability, if any, cannot be determined at this time because of uncertainties regarding the source and scope of contamination, the large number of PRPs and the varying degrees of responsibility among various classes of PRPs. This matter is expected to have no impact on the Reorganized Company (as defined herein). In 1985, Covanta, a Reorganizing Debtor, sold its interests in several manufacturing subsidiaries, some of which allegedly used asbestos in their manufacturing processes, and one of which was Avondale Shipyards, now a subsidiary of Northrop Grumman Corporation. Some of these former subsidiaries have been and continue to be parties to asbestos-related litigation. In 2001, Covanta was named a party, with 45 other defendants, to one such case. Before the Debtor's bankruptcy filing, Covanta had filed for its dismissal from the case, which is now stayed directly against Covanta by the Chapter 11 Cases. Also, eleven proofs of claim seeking unliquidated amounts have been filed against Covanta in the Chapter 11 Cases based on what appears to be purported asbestos-related injuries that may relate to the operations of former Covanta subsidiaries. Covanta believes that these claims lack merit and plans to object vigorously to such claims. 4. Employees; Labor Matters; Benefit Plans (a) Employees As of April 1, 2002, the Company employed approximately 3,200 full-time employees worldwide, of which approximately 2,900 were employed in the United States. As of September 1, 2003, the Company employed approximately 2,400 full-time employees worldwide, of which approximately 2,000 were employed in the United States. The reduction in force was generally the result of the Company's sale of various non-core assets, as well as the Company's decision in September 2002, within its core energy business, to reduce the number of non-plant personnel and close satellite development offices in order to enhance its value. As part of this reduction in force, waste-to-energy, water and domestic independent power headquarters management were combined and numerous other structural changes were instituted to improve management efficiency. Of the Company's employees in the United States, approximately 20% are unionized. Currently, the Company is a party to eight (8) collective bargaining agreements: three (3) of these agreements are scheduled to expire in 2004, one (1) in 2005 and one (1) in 2006. With respect to the remaining three (3) agreements, each of which has recently expired, the Company is currently in negotiations with the applicable collective bargaining representatives and the Company currently expects to reach agreement with each such representative to extend each such agreement on its current or similar terms. In addition, the Company is currently negotiating with a collective bargaining representative regarding the terms of a collective bargaining agreement with respect to certain of the Company's employees at the Edison Bataan Cogeneration facility in the Philippines. (b) Defined Benefit Pension Plans (1) The Covanta Energy Pension Plan The Debtors maintain the Covanta Energy Pension Plan (the "Pension Plan") for certain of their employees. The Pension Plan is a tax-qualified defined benefit pension plan covered by Title IV of ERISA, pursuant to which benefits are payable upon a participant's retirement from the Debtors, disability, or death. Based on the plan's most recent actuarial report, the Pension Plan is currently underfunded by approximately $24 million. The Debtors intend to continue the Pension Plan after the Effective Date and to administer and operate the Pension Plan in accordance with its terms and the applicable provisions of ERISA and the Internal Revenue Code of 1986, as amended (the "IRC"), including the minimum funding standards of ERISA and the IRC and to pay all insurance premiums payable to the Pension Benefit Guaranty Corporation (the "PBGC"), a wholly-owned United States government corporation that administers the defined benefit pension plan termination insurance program under Title IV of ERISA. The Projections include a reasonable estimate of the cash contributions necessary for the Reorganized Debtors to satisfy their minimum funding obligations under ERISA. (2) The Service Employees International Union Pension Trust for Employees of Allied Plant Maintenance Company, Inc. Defined Benefit Pension Plan Ogden Plant Maintenance Company, Inc. (formerly known as Allied Plant Maintenance Company, Inc.), a non-Debtor, sponsors the Service Employees International Union Pension Trust for Employees of Allied Plant Maintenance Company, Inc. Defined Benefit Pension Plan (the "SEIU Pension Plan") for certain of its employees represented by the Service Employees International Union Local 22. The SEIU Pension Plan is a tax-qualified defined benefit pension plan covered by Title IV of ERISA, pursuant to which benefits are payable upon a participant's retirement. No active employees of the Company currently participate in the SEIU Pension Plan. The SEIU Pension Plan was "frozen," effective as of July 7, 1995, and no service since that date has been recognized for any purpose thereunder. At such time, all participants became 100% vested in their accrued benefits. The SEIU Pension Plan is currently underfunded by approximately $560,000, based on the plan's most recent actuarial report. Currently, the Debtors intend to continue to maintain the SEIU Pension Plan after the Effective Date as a frozen plan and to meet their obligations to such plan under ERISA and the IRC and to the PBGC. (c) Defined Contribution Retirement Plans (1) The Covanta Energy Savings Plan The Debtors maintain the Covanta Energy Savings Plan (the "Savings Plan") for certain of their employees. The Savings Plan is a defined contribution retirement plan intended to be qualified under Section 401 of the IRC. Under the Savings Plan, the Debtors make pre-tax salary deferral contributions (from 1% to 20% of a participant's pay for each pay period) on behalf of each participant at such participant's election. In addition, the Debtors match 100% of a participant's contributions up to the first 3% of such participant's pay for the payroll period and 50% of a participant's contribution up to the next 2% (in excess of 3% but not more than 5%) of such participant's pay for the relevant payroll period. Each participant determines how his or her contributions are invested amongst the available investment alternatives. The Debtors intend to continue the Savings Plan after the Effective Date and to meet their obligations with respect to the plan under ERISA and the IRC. (2) The Resource Recovery 401(k) Plan The Debtors maintain the Resource Recovery 401(k) Plan (the "Resource 401(k) Plan") for certain of their employees. The Resource 401(k) Plan is a defined contribution retirement plan intended to be qualified under Section 401 of the IRC. Pursuant to the Resource 401(k) Plan, the Debtors make pre-tax salary deferral contributions (from 1% to 15% of a participant's pay for each period) on behalf of each participant at such participant's election. In addition, the Debtors match 100% of a participant's contribution up to the first 3% of such participant's pay for the payroll period and have discretion to make additional contributions to participants' accounts. Each participant determines how his or her contributions are invested amongst the available investment alternatives. Currently, both employee and employer contributions to the Resource 401(k) Plan are "frozen" and participants are not accruing any additional benefits. The Debtors currently intend to merge the outstanding Resource 401(k) Plan account balances into the Savings Plan and expect to have any requisite Internal Revenue Service (the "IRS") approval to do so in the near future. (3) The Covanta Energy Group Security Fund The Debtors maintain the Covanta Energy Group Security Fund (the "Security Fund") for certain of their union employees, who are not eligible to participate in the Savings Plan, at the (i) Marion waste-to-energy facility in Marion County, Oregon; (ii) Hennepin waste-to-energy facility in Hennepin County, Minnesota; (iii) Bristol waste-to-energy facility in Bristol, Connecticut and (iv) New Martinsville, West Virginia Hydro Facility. Currently, the Security Fund has one hundred nineteen (119) participants. The Security Fund is a defined contribution retirement plan intended to be qualified under Section 401 of the IRC. Pursuant to the Security Fund, the Debtors make pre-tax salary deferral contributions (from 1% to 15% of a participant's pay for each period) on behalf of each participant at such participant's election. In addition, the Debtors generally contribute five cents per hour to each participant's account for all hours worked by such participant (in some instances, such contributions are limited to a standard 40 hour work week). Each participant determines how his or her contributions are invested amongst the available investment alternatives. The Debtors intend to continue the Security Fund after the Effective Date and to meet their obligations with respect to the plan under ERISA and the IRC. (4) The Hennepin Money Purchase Plan The Debtors maintain the Hennepin Money Purchase Plan (the "Hennepin Plan") for certain eligible union employees at the Hennepin waste-to-energy facility. Currently, the Hennepin Plan has seventy-five (75) participants. The Hennepin Plan is a defined contribution retirement plan intended to be qualified under Section 401 of the IRC. Pursuant to the Hennepin Plan, the Debtors make annual contributions equal to an adjustable percentage of the compensation of all participants. The Hennepin Plan does not provide for employee contributions. Each participant determines how contributions made on his or her behalf are invested amongst the available investment alternatives. The Debtors intend to continue the Hennepin Plan after the Effective Date and to meet their obligations with respect to the plan under ERISA and the IRC. (5) The Metropolitan 401(k) Plan The Debtors have satisfied all outstanding obligations arising under the Metropolitan 401(k) Plan. No benefits are currently accruing under the Metropolitan 401(k) Plan and, as a result, the plan currently has no assets. The Debtors are in the process of formally terminating the Metropolitan 401(k) Plan. (6) The Resource Recovery Pension Plan The Debtors maintain the Resource Recovery Pension Plan (the "Resource Pension Plan") for certain eligible employees of Ogden Resource Recovery Support Services, Inc. The Resource Pension Plan is a defined contribution retirement plan intended to be qualified under Section 401 of the IRC. Pursuant to the Resource Pension Plan, the Debtors make annual contributions at a rate of 3% of the compensation of all participants. The Resource Pension Plan does not provide for employee contributions. Each participant determines how contributions made on his or her behalf are invested amongst the available investment alternatives. The Resource Pension Plan was amended, effective December 31, 2001, to freeze the plan and employer contributions were discontinued accordingly at such time. Since December 31, 2001, participants have not accrued any new benefits under the Resource Pension Plan. The Debtors currently intend to continue the Resource Pension Plan and to meet their obligations with respect to the plan under ERISA and the IRC. (7) The Ogden Environmental and Energy Services 401(k) Plan The Debtors maintain the Ogden Environmental and Energy Services 401(k) and Profit Sharing Plan (the "Energy Services 401(k) Plan"). The Energy Services 401(k) Plan was "frozen" on November 17, 2000 and currently, no active employees participate therein. The Debtors are currently in the process of terminating the Energy Services 401(k) Plan and distributing outstanding participant account balances thereunder. (d) The Supplementary Benefit Plan of Ogden Projects, Inc. Since the 1980s, Ogden Projects, Inc. (now known as Covanta Projects, Inc.), a Debtor, has sponsored the Supplementary Benefit Plan of Ogden Projects, Inc. (the "Supplementary Plan") which provides for supplemental pension benefits and profit sharing and employer-matching contributions to eligible employees of the Company's energy business. The Supplementary Plan is an unfunded, non-qualified plan. Eligible employees are those employees who participate in a certain pension plan (the Pension Plan) and profit sharing plan (the Savings Plan) maintained by Covanta Projects, Inc. each of which is intended to be qualified under Section 401 of the IRC (together, the "Qualified Plans"). As of the Supplementary Plan's latest valuation date there were fifty-six (56) participants. The purpose of the Supplementary Plan is to equalize the pension benefit and contribution formula applicable to the employees participating in the Qualified Plans whose pension benefits and allocated profit sharing or employer contributions are limited as a result of certain IRC provisions. Pursuant to the Supplementary Plan, participants are paid retirement benefits in an amount equal to the excess of the retirement benefits that would have been paid to such participants under the Pension Plan in the absence of the limitations of Section 415 of the IRC on the amount of benefits that may be provided under tax-qualified plans over the retirement benefits actually paid under the Pension Plan. Retirement benefits payable under the Supplementary Plan are determined at the same time and in the same manner as the retirement benefits payable under the Pension Plan and will be payable in a single cash lump sum. Such benefits are payable at retirement to eligible participants beginning at age 55 (depending on length of service). With respect to profit sharing and excess employer contributions made pursuant to the Supplementary Plan, the committee administering the Savings Plan, in the ordinary course of business, determines annually the total percentage of an employee's compensation that is eligible for Company contributions under the Savings Plan. The Company then makes an annual contribution (not to exceed such pre-established percentage), either in the form of a profit-sharing or employer matching contribution to the Savings Plan for each eligible employee based upon the performance of the Company's energy business for that year and subject to the limitations imposed by the IRC on the maximum amount of an employee's compensation that may be taken into account when making such contributions. Pursuant to the profit sharing and Company match components of the Supplementary Plan, an employee whose allocated contributions under the Savings Plan are limited as a result of the IRC are paid, in cash, the amount by which the percentage of annual contributions authorized by the committee exceeds the amounts that are actually allocated to such employee's account under the Savings Plan. Distributions with respect to the profit sharing and Company match components of the Supplementary Plan are made to participants on an annual basis. By order of the Court dated September 18, 2002 (Docket No. 932), the Debtors obtained authorization to continue to make all payments necessary to satisfy in full all obligations owing to eligible employees under the Supplementary Plan. Accordingly, the Debtors have continued to fulfill such obligations and currently intend to continue the Supplementary Plan following the Effective Date. (e) Additional Non-Qualified Pension Plans Certain of the Debtors sponsor certain pension plans for eligible employees that are not intended to be qualified under the IRC (collectively, the "Non-Qualified Plans"). The Non-Qualified Plans include (i) the Resource Recovery Senior Management Pension Plan (the "Resource Plan"), which is sponsored by Covanta Energy Services, Inc. (f/k/a Ogden Resource Recovery Support Services, Inc.), (ii) the Ogden Select Savings Plan (the "Select Plan"), which is sponsored by Ogden Services Corporation and (iii) the Ogden Energy Select Savings Plan (the "Energy Select Plan") which is sponsored by Covanta Energy Group. Inc. Each of the Non-Qualified Plans is a defined contribution plan and is maintained as a "top-hat" plan for purposes of ERISA, exempt from substantially all of ERISA's requirements. The assets of each of the Non-Qualified Plans are held in grantor trusts (typically known as "rabbi trusts") structured to permit the deferral of income tax on participants' benefits under the Non-Qualified Plans. Pursuant to an order of the Court dated September 18, 2002 (Docket No. 938), the Debtors obtained authorization to honor and pay in full all obligations under the Non-Qualified Plans as such obligations have become due or will become due during the Chapter 11 Cases. (1) The Resource Plan There are a total of two hundred twelve (212) participants in the Resource Plan. Two hundred five (205) of these participants are currently employed by the Company, while the remaining seven (7) are former employees currently receiving benefit distributions. Pursuant to the terms of the Resource Plan, Covanta Energy Services, Inc. is responsible for making annual contributions for the benefit of each participant equal to 3% of such participant's annual base pay. All contributions to the Resource Plan are currently held in a grantor trust administered by T. Rowe Price, the current assets of which are valued at approximately $1.6 million. The Resource Plan was frozen on December 31, 2001 and no contributions have been made to it since that date. The Debtors intend to continue the Resource Plan after the Effective Date. (2) The Select Plan The purpose of the Select Plan is to enable eligible employees to enhance their retirement security by permitting them to elect to defer receipt of a portion of their compensation to a later date or event. The Select Plan was "frozen" in 1999 and no new contributions have been made to the plan since. Since September 18, 2002, all participants in the Select Plan have received final distribution of their account balances and, consequently, the Company has no outstanding obligations thereunder. The Company is currently in the process of formally terminating the Select Plan. (3) The Energy Select Plan The purpose of the Energy Select Plan is to enable eligible employees to enhance their retirement security by permitting them to elect to defer receipt of a portion of their compensation (from 1% to 10% of their annual compensation and up to 100% of any discretionary profit sharing payment they receive) to a later date or event. A total of approximately twenty-five (25) active or former employees participate in the Energy Select Plan. Approximately twenty (20) of these employees are actively employed by Covanta Energy Group, Inc., while the remaining five (5) are not actively employed by the Company but are currently entitled to payment of deferred vested benefits. Deferral contributions to the Energy Select Plan remain in a grantor trust administered by T. Rowe Price, the assets of which are currently valued at approximately $765,000. The Energy Select Plan was frozen on December 31, 2001 and no contributions have been made to it since that date. The Debtors intend to continue the Energy Select Plan after the Effective Date. (f) The Key Employee Retention Plan (the "KERP") On September 18, 2002, the Court approved an order (Docket No. 932), approving the Company's Key Employee Retention Plan, consisting of the Key Employee Severance Plan (the "Severance Plan"), the Special Retention Bonus Plan (the "Retention Plan") and the Long-Term Incentive Plan (the "LTIP"). (1) The Severance Plan At the time of its Court approval, seventy-four (74) employees of the Debtors, including key executives, were eligible to participate in the Severance Plan. A participant whose employment terminates Without Cause or for Mutual Benefit (as those terms are defined in the KERP) following the Initial Petition Date are eligible to receive a severance benefit pursuant to the Severance Plan. In addition, to receive payment of severance benefits under the Severance Plan, a participant is required to sign a general release of claims against the Company (other than claims for indemnification under indemnification agreements, the Company's Certificate of Incorporation or By-Laws or applicable law and claims for accrued benefits under the Company's employee benefit plans) and comply with certain additional covenants including confidentiality covenants, non-solicitation and non-disparagement covenants and litigation support commitments. Cash severance benefits are paid in a single lump sum payment. The amount of benefit depends upon the participant's position and ranges from (i) the greater of (x) 50% of a participant's base salary and (y) two (2) weeks' base salary per year of service (not to exceed fifty-two (52) weeks) to (ii) 200% of a participant's base salary (a benefit for which only the CEO of the Company is eligible). A participant in the Severance Plan is also entitled to receive continued medical and dental coverage, provided that such participant pays the regular employee co-payments, for the period corresponding to the percentage of salary payable as cash severance benefits, subject to an eighteen (18) month cap. A participant's right to continue to receive medical or dental coverage ceases immediately if such participant is offered or becomes eligible for coverage under a medical or dental plan of any subsequent employer. In addition, payments under the Severance Plan are to be reduced if the aggregate amount paid to a participant triggers the federal excise tax on parachute payments. (2) The Retention Plan At the time of its Court approval, seventy-two (72) employees, including key executives, were eligible to participate in the Retention Plan. Under the Retention Plan, eligible employees will receive a base award under certain limited circumstances, from an aggregate pool of $3.6 million, equal to a percentage of base salary, ranging from 10% to 75% depending upon the employee's position. Awards have, and will continue to, become vested and payable in three installments as described below, subject in each case to the participant's continued employment with the Company until the applicable vesting date. The first installment of 33.3% of the awards vested and was paid to participants on or about September 30, 2002. The second installment of 33.3% of the awards becomes vested and payable on the earlier of (i) September 30, 2003 and (ii) the consummation of the Reorganization Plan. The remaining 33.4% of the awards will become vested and payable on the date of the consummation of the Reorganization Plan. In the event a participant's employment with the Company is terminated by the Company Without Cause or by the participant for Mutual Benefit, or due to the participant's death or disability, a pro rata share of such participant's unpaid award would become immediately vested and payable, unless the unpaid portion is the full, final installment, in which case the remaining portion of the award is payable on the date of the consummation of the Reorganization Plan. In the event of any other termination prior to a vesting date, the unpaid portion of any award is forfeited. (3) The LTIP The LTIP covers six (6) senior executives and up to two (2) additional key management employees selected by the Compensation Committee of Covanta's Board of Directors, based on the advice of Covanta's chief executive officer (the "CEO"). The LTIP was implemented to provide incentives to Covanta's senior management to remain with the Debtors throughout the reorganization process and to devote all of their attention and energy to the preservation of the value of the business and assets of the Debtors during the chapter 11 proceedings. Under the LTIP, a participant is entitled to receive payment of his award only if such participant's employment with the Company is terminated by the Company Without Cause or by the participant for Mutual Benefit prior to the one-year anniversary of the date of entry of the Court's order confirming the Reorganization Plan and provided such participant executes a general waiver and release of all claims under all prepetition agreements, other than claims for indemnification under indemnification agreements, Covanta's Certificate of Incorporation or By-Laws or applicable law and claims for accrued benefits under Covanta's employee benefit plans. Pursuant to the LTIP, an eligible participant who satisfies these conditions will generally be entitled to receive a cash payment upon the termination of such participant's employment and a general release by the Company of all claims against such participant. The amount of any cash payment to a participant in satisfaction of his or her LTIP award varies depending upon such participant's position, and is generally equal to 150% to 200% of the sum of such participant's (i) salary and (ii) "average bonus" (calculated pursuant to the terms of the LTIP as the sum of (x) the average annual bonus paid to the participant for the two fiscal years immediately preceding the participant's termination and (y) 30% of such participant's salary), minus any amounts the participant is entitled to receive pursuant to the Severance Plan. The maximum aggregate payout under the LTIP is approximately $8.1 million. (g) The Broad Based Severance Plan On September 18, 2002, the Court approved the Company's Broad-Based Severance Plan (the "Broad Severance Plan") for rank-and-file employees. By establishing and implementing the Broad Severance Plan, the Debtors formalized their prior severance practice (subject to certain modifications) in order to establish clear guidelines and to encourage the retention of employees during the Chapter 11 Cases. The Broad Severance Plan authorizes the Company to make severance payments to certain eligible full-time employees whose employment with the Company is terminated involuntarily without Cause (as defined in the Broad Severance Plan) in connection with a job or department elimination, office closing, reduction in force or other appropriate circumstances as determined by the administrator of the Broad Severance Plan. An employee whose employment with the Company is terminated for any other reason is not eligible for severance benefits under the Broad Severance Plan. In addition, any full-time employee who, as of the date of such employee's termination (i) is party to any severance, termination, employment or other agreement with the Company that provides for severance benefits or benefits of a similar nature to severance benefits under any circumstances, (ii) is eligible to participate in or otherwise covered under any other plan or arrangement of the Company, such as the KERP, that provides for severance benefits or benefits of a similar nature to severance benefits under any circumstances or (iii) is covered by any collective bargaining agreement in connection with his or her employment with the Company, is ineligible to participate in the Broad Severance Plan. In order for an eligible employee to receive severance benefits pursuant to the Broad Severance Plan, he or she must execute and deliver a general release of all claims against the Company. The severance benefit payable to an employee pursuant to the Broad Severance Plan is equal to continued payment of such employee's base salary (as defined in the Broad Severance Plan) for a number of calendar weeks equal to the greater of (i) the product of (x) two (2) multiplied by (y) each year of service completed by such employee prior to his or her date of termination and (ii) four (4) weeks, provided that the salary pay continuation period shall in no event exceed twenty-six (26) weeks. In addition, participants receive continued medical and dental coverage, provided that such participants pay the regular employee co-payments, for the period the cash severance benefits are payable. A participant's right to continue to receive medical or dental coverage ceases immediately if such participant is offered or becomes eligible for coverage under a medical or dental plan of any subsequent employer. The Debtors intend to continue the Broad Severance Plan after the Effective Date. (h) Retiree Medical Programs In 1992, the Company, pursuant to a resolution of its Board of Directors, terminated its then existing post-retirement medical, dental and life insurance coverage on a going-forward basis, but grandfathered the coverage of those individuals who were generally either then (i) retired, (ii) eligible for early retirement or (iii) specifically designated by the Board of Directors as eligible to continue to receive such post-retirement coverage. Currently, the Company provides post-retirement medical, and in certain cases, dental and life insurance coverage to a small population of its retired employees and only two (2) active employees are eligible to receive post-retirement benefits in the future. Throughout the course of these Chapter 11 Cases, the Company has generally provided two different levels of post-retirement medical, dental and life insurance coverage depending upon the beneficiary's position. Former senior executives of the Company, commonly referred to as "core retirees" because of the senior positions they held with the Company, (as well as their eligible dependents) are entitled to coverage that generally covers the full cost of reasonable and customary medical, dental and vision care expenses (the "Core Retiree Program"). In certain instances, core retirees are required to pay a contribution for such coverage equal to the contributions for active senior executives. Upon attainment of age 65, the Core Retiree Program becomes coordinated with Medicare, which becomes the primary insurer. Typically the Company will reimburse participants for their Medicare Part B premiums. Certain core retirees are also entitled to life insurance coverage that is commonly equal to two (2) times such retiree's annual base salary and bonus. Certain other retirees of the Company (as well as their eligible dependents) are entitled to coverage that generally covers a portion of the cost for medical, and in some instances dental, expenses (the "Non-Core Retiree Program," and together with the Core Retiree Program, the "Retiree Medical Programs") at the same levels as for similarly situated active employees. Such retirees are generally responsible for paying a monthly contribution for coverage under the Non-Core Retiree Program, the amount of which is reviewed periodically by the Company and remains subject to change to reflect increased costs of such coverage. Upon attainment of age 65, the Non-Core Retiree Program is coordinated with Medicare, which becomes the primary insurer. Certain retirees who participate in the Non-Core Retiree Program are also entitled to varying levels of term life insurance coverage. The Company is in the process of adjusting certain of the post-retirement medical benefits it currently provides to retirees pursuant to the Core Retiree Program. Please see Section VII.E.8. hereof for a discussion of such adjustments, as well as the Debtors' general intentions with respect to the Retiree Medical Programs and life insurance coverage following the Effective Date. (i) Employment Agreements Pursuant to applicable provisions of the Bankruptcy Code, the Plans currently contemplate the rejection of all existing prepetition employment agreements. (j) Workers' Compensation Program The Debtors currently maintain workers' compensation programs in all states in which they operate pursuant to the applicable requirements of local law to provide employees with workers' compensation coverage for claims arising from or related to their employment with the Debtors. Until October 2002, Debtor's workers' compensation program was part of a larger insurance program that has been in place since August 1985 (the former workers' compensation program). Under the former workers' compensation program, the insurer provided coverage to workers asserting claims arising from or related to their employment by Debtors or former affiliates of these Debtors. Through payment agreements between Debtor and the insurer, Debtor reimbursed the insurer for certain amounts as required by the terms of the policies. The Debtor's obligation to reimburse these amounts was secured through letters of credit and a bond. In October 2002, Debtor's workers' compensation program changed. The current workers' compensation program is secured by cash and a letter of credit. The current workers' compensation program expires in October 2003. Debtors are currently considering renewal options. At all times, Debtors will maintain workers' compensation coverage for claims as required by applicable state law. C. Recent Financial Results Set forth in Exhibit F are the following selected historical financial statements for the Company: (i) audited statements of consolidated operations and comprehensive loss for the years ended December 31, 2002, 2001 and 2000 and unaudited statements of consolidated operations and comprehensive loss for the six and three month periods ended June 30, 2003 and 2002; (ii) audited consolidated balance sheets as of December 31, 2002 and 2001 and unaudited consolidated balance sheets as of June 30, 2003; (iii) audited statements of shareholders' equity (deficit) for the years ended December 31, 2002, 2001 and 2000 and unaudited statements of shareholders' equity (deficit) for the six-month period ended June 30, 2003; and (iv) audited statements of consolidated cash flows for the years ended December 31, 2002, 2001 and 2000 and unaudited statements of consolidated cash flows on a consolidated basis for the six-month periods ended June 30, 2003 and 2002. The notes that accompany the financial statements attached were replicated from the Form 10-K Annual Report for the period ended December 31, 2002 and the Form 10-Q Quarterly Report for the period ended June 30, 2003. Covanta filed a voluntary petition for reorganization relief under chapter 11 of the Bankruptcy Code in April 2002. Since that time, the Company's consolidated financial statements, including those attached hereto in Exhibit F, have been prepared in accordance with The American Institute of Certified Public Accountants Statement of Position 90-7, "Financial Reporting by Entities in Reorganization under the Bankruptcy Code" ("SOP 90-7"), on a going concern basis. Continuing as a going concern contemplates continuity of operations, realization of assets, and payment of liabilities in the ordinary course of business. The accompanying consolidated financial statements appropriately do not reflect adjustments that might result if the Company is unable to continue as a going concern. SOP 90-7 requires the segregation of liabilities subject to compromise by the Court as of the bankruptcy filing date, and identification of all transactions and events that are directly associated with the reorganization of the Company. Accordingly, all prepetition liabilities believed to be subject to compromise have been segregated in the consolidated balance sheet and classified as liabilities subject to compromise, at the estimated amount of allowable claims. Liabilities not believed to be subject to compromise are separately classified as current and non-current. Revenues, expenses, including professional fees, realized gains and losses, and provisions for losses resulting from the reorganization are reported separately. In addition, pursuant to SOP 90-7, the accounting for the effects of the reorganization will occur once the Plans are confirmed by the Court and there are no remaining contingencies material to completing the implementation of the respective Plans. These "fresh start" accounting principles pursuant to SOP 90-7 provide, among other things, for the Company to determine the value to be assigned to the equity of the reorganized Company as of a date selected for financial reporting purposes. Accordingly, the accompanying consolidated financial statements do not reflect: (a) the requirements of SOP 90-7 for fresh start accounting; (b) the realizable value of assets on a liquidation basis or their availability to satisfy liabilities; (c) aggregate prepetition liability amounts that may be allowed for unrecorded claims or contingencies, or their status or priority; (d) the effect of any changes to the Debtors' capital structure or in the Debtors' business operations as the result of an approved plan of reorganization or liquidation; or (e) adjustments to the carrying value of assets (including goodwill and other intangibles) or liability amounts that may be necessary as the result of future actions by the Court. IV. PREPETITION CAPITAL STRUCTURE OF THE DEBTORS Prior to the Initial Petition Date, the Company's capital structure consisted primarily of: its common stock and its Series A Cumulative Convertible Preferred Stock (which was listed on the New York Stock Exchange under the ticker symbol COV); letters of credit issued under the Master Credit Facility, of which approximately $105.2 million had been funded; $100 million of 9.25% Debentures due 2022; $63.7 million of 5.75% Convertible Debentures due 2002; $85 million of 6% Convertible Debentures due 2002; and project-level debt consisting primarily of revenue bonds. A. Prepetition Credit Facility The Company entered into the Master Credit Facility with its bank group on March 14, 2001. The Master Credit Facility provided the Company with a credit line of approximately $799 million, which consisted of a $146 million secured revolving loan and coverage for $633 million in letter of credit exposure, and coverage for other contingent liabilities, principally in connection with various entertainment and energy facilities. The Master Credit Facility was secured by a first priority lien on substantially all of the assets of Covanta and substantially all of the assets of its existing and future domestic subsidiaries, and by a pledge of 100% of the shares of substantially all of Covanta's existing and future domestic subsidiaries, and 65% of the shares of substantially all of Covanta's foreign subsidiaries. In conjunction with the Master Credit Facility, the Company also entered into the Intercreditor Agreement with the "pooled" lenders participating fully in the Master Credit Facility and certain "opt-out" lenders who elected not to participate in the Master Credit Facility, but agreed to extend the maturity dates of their facilities and to conform relevant financial covenants to those under the Master Credit Facility. The Intercreditor Agreement, among other things, set forth certain priorities amongst the lenders and established certain arrangements including loss sharing arrangements and ratable paydowns among the various lenders. As of the Initial Petition Date, approximately $105.2 million of funded debt with respect to two funded letters of credit was outstanding under the Master Credit Facility, as well as approximately $518 million in contingent letters of credit. After the Initial Petition Date, an additional $125.1 million of the letters of credit were drawn and $76.1 million of claims arose in connection with other contingent liabilities covered by the Master Credit Facility. On May 15, 2002, pursuant to the Final DIP Order (defined below), $240.8 million of the outstanding letters of credit were replaced with letters of credit issued under the DIP Financing Facility (defined below). The Master Credit Facility was scheduled to mature on May 31, 2002. B. 9.25% Debentures due 2022 In March 1992 the Company issued and sold $100 million in aggregate principal amount of the 9.25% Debentures. The 9.25% Debentures were issued pursuant to an Indenture dated as of March 1, 1992 between Ogden Corporation and The Bank of New York, as Trustee. Wells Fargo is the current Trustee for the 9.25% Debentures. The proceeds from the 9.25% Debentures were used to reduce outstanding indebtedness and for general corporate purposes. On May 15, 2002, pursuant to the Final DIP Order (Docket No. 311), the Debtors, the Prepetition Lenders, and the Informal Committee of 9.25% Debenture Holders stipulated that the claims of the holders of 9.25% Debentures were secured claims. On August 6, 2002, the Creditors Committee filed an adversary proceeding challenging the status of the liens securing the 9.25% Debentures. For a more detailed discussion of the adversary proceeding, see Section VI.D.11. C. Convertible Debentures In 1987, the Company issued and sold $85 million in aggregate principal amount of 6% convertible subordinated debentures due June 1, 2002 (the "6% Convertible Debentures"). The 6% Convertible Debentures were registered and sold in a public offering. They were issued in bearer form (the "6% Convertible Bearer Debentures") and in fully registered form (the "6% Convertible Registered Debentures"). The 6% Convertible Bearer Debentures are dated June 18, 1987 and each 6% Convertible Registered Debentures is dated the date of its authentication. Deutsche Bank Trust Company is the fiscal agent for all the 6% Convertible Debentures pursuant to a fiscal agency agreement dated June 1, 1987. The proceeds from the 6% Convertible Debentures were used to reduce outstanding indebtedness and for general corporate purposes. The 6% Convertible Debentures are convertible into Covanta common stock at the rate of one share for each $39.077 principal amount of debentures, and are redeemable at Covanta's option at 100% of face value. In 1987, the Company issued and sold $75 million in aggregate principal amount of 5.75% convertible subordinated debentures due October 20, 2002 (the "5.75% Convertible Debentures"). The 5.75% Convertible Debentures were registered and sold in a public offering. They were issued in bearer form (the "5.75% Convertible Bearer Debentures") and in fully registered form (the "5.75% Convertible Registered Debentures"). The 5.75% Convertible Bearer Debentures are dated October 20, 1987 and each 5.75% Convertible Registered Debentures is dated the date of its authentication. Deutsche Bank Trust Company is the fiscal agent for all the 5.75% Convertible Debentures, pursuant to a fiscal agency agreement dated October 15, 1987. The proceeds from the 5.75% Convertible Debentures were used for general corporate purposes. The 5.75% Convertible Debentures are convertible into Covanta common stock at the rate of one share for each $41.772 principal amount of debentures, and are redeemable at Covanta's option at 100% of face value. Prior to 1998, the Company purchased on the open market and subsequently cancelled $11.3 million of the 5.75% convertible debentures. D. Project Debt The project debt associated with the financing of the Company's waste-to-energy facilities is generally arranged by the relevant municipality through the issuance of tax-exempt and taxable revenue bonds. For those waste-to-energy facilities owned by an operating subsidiary of the Company, the relevant municipality generally is obligated to pay amounts to Covanta's operating subsidiary sufficient to cover debt service on project debt. Generally, such project debt is secured by the revenues pledged under the respective indentures and is collateralized by the assets of Covanta's operating subsidiary and otherwise provides no recourse to Covanta, subject to construction and operating performance guarantees and commitments. E. Equity Bonds Certain non-project tax-exempt bonds (the "Equity Bonds") in the aggregate amount of approximately $126 million were issued by five separate Debtor subsidiaries to Covanta. Covanta arranged for liquidity and credit support for each Equity Bond in the form of letters of credit that were issued under the Master Credit Facility. Shortly after the Initial Petition Date, the obligations under each of the Equity Bonds were accelerated and the bondholders were paid with the proceeds of draws on the applicable letters of credit. The amount of those draws represents prepetition secured debt of the Company. F. Equity Covanta had 49,827,651 shares of common stock and 33,049 shares of Series A cumulative convertible preferred stock outstanding as of June 30, 2002. The Company's shares were traded on the New York Stock Exchange under the symbol "COV" until April 1, 2002. The removal from listing and registration on the New York Stock Exchange became effective at the opening of the trading session of May 17, 2002 pursuant to the order of the SEC. V. CORPORATE STRUCTURE OF THE DEBTORS A. The Debtors' Corporate Structure Covanta is the parent holding company of the 150 debtor subsidiaries. Together with the Company's non-debtor subsidiaries, the Debtors develop, construct, own and operate for others key infrastructure for the conversion of waste-to-energy, independent power production and the treatment of water and wastewater in the United States and abroad. Of the entities that have filed as Debtors, 88 will be reorganized pursuant to the Reorganization Plan and 63 will be liquidated pursuant to the Liquidation Plan. The Reorganization Plan distinguishes between four categories of Debtors under such Plan: Covanta, the ultimate parent company; Operating Company Debtors, which are entities that own operating assets that will remain part of the Reorganizing Debtors' business after the Effective Date; Intermediate Holding Company Debtors which own no assets other than stock of the Operating Company Debtors; and the Heber Debtors, who own, directly or indirectly, certain businesses in connection with the Geothermal Projects. B. Management of the Debtors The current management team of Covanta is comprised of highly capable and seasoned professionals with substantial experience. The following contains brief background descriptions and lists the members of Covanta's management team as of September 8, 2003: Name Position - ---- -------- Scott G. Mackin President and Chief Executive Officer Bruce W. Stone Senior Vice President, Business Development and Construction Jeffrey R. Horowitz Senior Vice President, General Counsel and Secretary Anthony J. Orlando Senior Vice President, Business and Financial Management John M. Klett Senior Vice President, Domestic Operations William J. Keneally Senior Vice President and Chief Accounting Officer Paul B. Clements Senior Vice President, International Business Management and Operations B. Kent Burton Senior Vice President Policy and International Government Relations Stephen M. Gansler Senior Vice President, Human Resources Louis M. Walters Vice President and Treasurer Timothy J. Simpson Vice President, Associate General Counsel Seth Myones Vice President, Business Management, Covanta Waste to Energy, Inc.
Scott G. Mackin has served as President and Chief Executive Officer of Covanta since September 1999. Prior thereto he served as Executive Vice President of Covanta from January 1997 to September 1999 and as President and Chief Operating Officer of Covanta Energy Group, Inc., a Covanta subsidiary, since January 1991. Mr. Mackin joined the Company in 1986. Bruce W. Stone was named Senior Vice President, Business Development and Construction in March 2003. From January 2001 until March 2003, Mr. Stone served as Covanta's Executive Vice President and Chief Administrative Officer. Previously, Mr. Stone served as Executive Vice President and Managing Director of Covanta Energy Group, Inc., a Covanta subsidiary, a position he held starting in January 1991. Mr. Stone joined the Company in 1975. Jeffrey R. Horowitz was named Senior Vice President, General Counsel and Secretary of Covanta in August 2001. From June 2001 to August 2001, Mr. Horowitz served as Senior Vice President for Legal Affairs and Secretary and prior to that time as Executive Vice President, General Counsel and Secretary of Covanta Energy Group, Inc, a Covanta subsidiary. Mr. Horowitz joined the Company in 1991. Anthony J. Orlando was named Senior Vice President, Business and Financial Management in March 2003. From January 2001 until March 2003, Mr. Orlando served as Covanta's Senior Vice President, Waste to Energy. Previously he served as Executive Vice President of Covanta Energy Group, Inc., a Covanta subsidiary. Mr. Orlando joined the Company in 1987. John M. Klett was named Senior Vice President, Domestic Operations in March 2003. Prior thereto he served as Executive Vice President of Covanta Waste to Energy, Inc. for more than ten years, during which time he has been responsible for all Covanta Waste to Energy, Inc. facility operations and maintenance. Mr. Klett joined the Company in 1986. William J. Keneally was named Senior Vice President and Chief Accounting Officer of Covanta in April, 2002. Mr. Keneally joined the Company in 2002. Paul B. Clements was named Senior Vice President, International Business Management and Operations in March 2003. From January 2001 until March 2003, Mr. Clements served as Covanta's Senior Vice President, Independent Power Operations. Mr. Clements previously served as Executive Vice President of Covanta Energy Group, Inc., and President of Covanta Energy West, Inc., both of which are Covanta subsidiaries. Mr. Clements joined the Company in 1988. B. Kent Burton has served as Senior Vice President - Policy and International Government Relations of Covanta since May 1999. From May 1997 to May 1999 he served as Vice President - Policy and Communications of Covanta and prior thereto he served as Senior Vice President of the Covanta Energy Group, Inc., a Covanta subsidiary, in political affairs and lobbying activities. Mr. Burton joined the Company in 1997. Stephen M. Gansler was named Senior Vice President, Human Resources of Covanta in March 2003. Mr. Gansler joined the Company in 2001 and served as Vice President, Human Resources of Covanta from March 2001 to March 2003. Mr. Gansler joined the Company in 2001. Louis M. Walters was named Vice President and Treasurer of Covanta in 2001. Mr. Walters served as Treasurer of Covanta Energy Group, Inc. from January 2000 to 2001. Mr. Walters joined the Company in 2000. Timothy J. Simpson has served as Vice President, Associate General Counsel and Assistant Secretary of Covanta Energy Corporation since June 2001. Prior thereto he served as Senior Vice President, Associate General Counsel and Assistant Secretary of Covanta Energy Group, Inc., a Covanta subsidiary. Mr. Simpson joined the Company in 1992. Seth Myones has served as Vice President, Business Management, of Covanta Waste to Energy, Inc., a Covanta subsidiary, since September 2001. From 1994 through September 2001, Mr. Myones served as Vice President of several subsidiaries in the Company's waste-to-energy business. Mr. Myones joined the Company in 1989. VI. THE CHAPTER 11 CASES A. Events Leading Up to the Chapter 11 Cases Prior to September 1999, Covanta had incurred very substantial obligations to financial institutions for letters of credit, including particularly obligations relating to the Corel Centre and Arrowhead Pond (together, the "Arenas"). In February 2000, while it was working to sell its aviation and entertainment assets, the Company also began to negotiate with its lenders. The Company had approximately $140 million of funded debt, as well as exposure to significant additional contingent liabilities arising from the outstanding letters of credit. By the third quarter of 2000, it reached agreement on principal terms with its key lenders. However, delays ensued in completing the Master Credit Facility, principally due to complicated intercreditor issues pertaining to certain liabilities, including certain of those in connection with its entertainment businesses. In March 2001, the Company paid the funded debt in full and completed and entered into the Master Credit Facility, in which, among other things, it agreed to maintain stated liquidity levels and to discharge or otherwise provide for its obligations with its banks by May 31, 2002. The Company planned thereafter to seek debt or equity financing from the capital markets in 2001and to complete the sales of its remaining entertainment and aviation businesses. At the time the Master Credit Facility was executed, Covanta believed that it would be able to meet the liquidity covenants in the Master Credit Facility, timely discharge its obligations on maturity of the Master Credit Facility and repay or refinance the Convertible Debentures from cash generated by operations, the proceeds from the sale of its non-core businesses and access to the capital markets. Shortly after the Master Credit Facility was executed, however, the State of California's energy crisis escalated. As of March 31, 2001, Covanta had outstanding approximately $74 million of gross accounts receivable from the California electric utilities, including Pacific Gas & Electric Company, which filed for bankruptcy on April 6, 2001. The delay in payment of these receivables forced the Company to request waivers from the banks from cash flow covenants. These were granted in consideration of the elimination of access to letters of credit for the Company's core operations in the event of a credit rating agency downgrade below investment grade. In addition, beginning in June 2001, there was a growing belief in the equity markets that the power industry was substantially overbuilt, that demand for new facilities would drop and that energy prices would erode. These factors, along with reductions in energy prices in various regions of the United States, contributed to a downturn in the market for new issues of energy company securities. B. Need for Restructuring and Chapter 11 Relief In mid-to-late 2001, Covanta began a wide-ranging review of strategic alternatives given the very substantial maturities of debt in 2002. To this end, in the last six months of 2001 and the first quarter of 2002, Covanta sought potential minority equity investors, conducted a broad-based solicitation for indications of interest in acquiring Covanta among potential strategic and financial buyers and investigated a combined private and public placement of equity securities. These efforts were made more difficult by the December 2, 2001 bankruptcy filing by Enron Corporation (with certain of its subsidiaries and affiliates), at the time the largest energy company in the United States in terms of market capitalization. The Enron bankruptcy, although caused by very different factors than those impacting Covanta, highlighted the significant downturn in the energy sector during 2001, with a significant negative effect on the credit and equity markets for energy companies. Although Covanta had been seeking either to be acquired or to obtain a sizable equity investment, equity investment, no potential acquirer or investor was prepared at that time to commit to a transaction, in particular given the sizable financial obligations regarding the Company's remaining entertainment operations. Furthermore, the sale of certain non-core assets was progressing more slowly and yielding substantially less proceeds than had been anticipated. On December 21, 2001, in connection with a further amendment to the Master Credit Facility, Covanta issued a press release stating its need for further covenant waivers and that it was encountering difficulties achieving access to short-term liquidity. Following this release, Covanta's debt rating by Moody's and Standard & Poor's was reduced below investment grade on December 27, 2001 and January 16, 2002, respectively. These downgrades further adversely impacted Covanta's access to capital markets. They also triggered Covanta's contingent obligations to provide $100 million in additional letters of credit in connection with two waste-to-energy projects, and the draw during March of 2002 of approximately $105.2 million in letters of credit related to the Centre and the Team. In addition, Covanta was facing the maturity of the 6% Convertible Debentures in June 2002 and the 5.75% Convertible Debentures in October 2002. On March 1, 2002, Covanta availed itself of the 30-day grace period provided under the terms of the 9.25% Debentures, and did not make the interest payment due at that time. On April 1, 2002, Covanta and 123 of its domestic subsidiaries filed their respective voluntary petitions for reorganization under the Bankruptcy Code in the Court. Since April 1, 2002, thirty-one (31) additional subsidiaries have filed petitions for reorganization under Chapter 11 of the Bankruptcy Code. In addition, four (4) subsidiaries involved in the aviation fueling business that had filed petitions on April 1, 2002 were sold as part of the Company's disposition of non-core assets, are no longer owned by the Company and the bankruptcy cases filed by these four (4) entities have been dismissed. While the Debtors are authorized to operate in the ordinary course of business, transactions out of the ordinary course of business require Court approval. In addition, the Court has supervised the Debtors' retention of attorneys, accountants, financial advisors and other professionals as required by the Bankruptcy Code. An immediate effect of the filing of the Debtors' bankruptcy petitions was the imposition of the automatic stay under section 362(a) of the Bankruptcy Code which, with limited exceptions, enjoined the commencement or continuation of all collection efforts by creditors, the enforcement of liens against property of the Debtors and the continuation of litigation against the Debtors. This relief provided the Debtors with the "breathing room" necessary to assess and reorganize its business. The automatic stay remains in effect, unless modified by the Court or applicable law, until the Effective Date of the Plans. C. Significant Events During the Bankruptcy Cases 1. Significant Court Orders The Debtors have obtained numerous orders from the Court that are intended to enable the Debtors to operate in the normal course of business during the Chapter 11 Cases. Among other things, these orders authorize: (i) the retention of professionals to represent and assist the Reorganizing Debtors, Heber Debtors and the Liquidating Debtors in these Chapter 11 Cases, (ii) the use and operation of the Debtors' consolidated cash management system during the Chapter 11 Cases in substantially the same manner as it was operated prior to the commencement of the Chapter 11 Cases, (iii) the payment of prepetition employee salaries, wages, health and welfare benefits, retirement benefits and other employee obligations, (iv) the payment of prepetition obligations to certain critical vendors to aid the Debtors in maintaining the operation of their businesses, (v) the use of cash collateral and the grant of adequate protection to creditors in connection with such use, (vi) the adoption of certain employee benefit plans, including a key employee retention plan and a broad-based severance plan, and (vii) the obtaining of postpetition financing. 2. DIP Financing Facility In connection with their bankruptcy petitions, the Debtors entered into a Debtor In Possession Credit Agreement with the DIP Lenders as of April 1, 2002 (as amended from time to time, the "DIP Financing Facility"). On April 5, 2002, the Court issued an interim order (Docket No. 65), approving the DIP Financing Facility and on May 15, 2002, a final order approving the DIP Financing Facility (Docket No. 311) (the "DIP Final Order"). Following significant litigation, on August 2, 2002, the Court issued an order (Docket No. 733), that overruled objections by holders of minority interests in two Debtor limited partnerships who disputed the inclusion of the limited partnerships in the DIP Financing Facility. Although the holders of such interests at one of the limited partnerships appealed the order, they reached an agreement with the Company that in effect deferred the appeal. The DIP Financing Facility's current terms are described below. The DIP Financing Facility consisted initially of a $48.2 million tranche to be utilized for cash borrowings, subject to availability within advance limits in effect from time to time and the issuance of new letters of credit ("Tranche A") and an approximately $240.8 million tranche to be used solely to continue, replace, reissue or renew certain outstanding letters of credit from the Master Credit Facility ("Tranche B"). The DIP Financing Facility is secured by all of the Company's domestic assets not subject to liens of others, 100% of the stock of most of Covanta's domestic subsidiaries and 65% of the stock of certain of its foreign subsidiaries. Obligations under the DIP Financing Facility were granted senior status to other prepetition secured claims and the DIP Financing Facility became the operative debt agreement with Covanta's bank lenders. Currently the DIP Financing Facility expires on October 1, 2003. The Debtors expect the maturity date to be extended through April 1, 2004. (a) First Amendment to Intercreditor Agreement In conjunction with the DIP Financing Facility, the Company also entered into an amendment of the Intercreditor Agreement with the DIP Lenders and certain other lenders (the "Intercreditor Amendment"), dated as of April 1, 2002. The Intercreditor Amendment, among other things, included new definitions and conforming changes corresponding to the DIP Financing Facility and the chapter 11 filings, and modified certain arrangements and formulas established with respect to distribution of the collateral to various lenders and lender groups. (b) First Amendment to DIP Financing Facility On April 1, 2002, the Debtors and the DIP Lenders entered into an amendment to the DIP Financing Facility (the "First Amendment") that provided for, among other things, the designation of the letters of credit associated with the Equity Bonds as "Non-Rolled Tranche B Letters of Credit," and as such, prepetition secured obligations. The First Amendment also provided for the designation of obligations concerning the loss sharing arrangements under the Intercreditor Amendment, which were initially considered Tranche A obligations, as "Tranche C Obligations" and as such, prepetition obligations. The DIP Lenders' commitment amount under Tranche A was reduced to reflect such designation. (c) Second Amendment to DIP Financing Facility On May 10, 2002, the Debtors and the DIP Lenders entered into the second amendment to the DIP Financing Facility (the "Second Amendment") that provided for, among other things, the approval of the monthly budget and the Final Borrowing Order of the Court. (d) Third Amendment to DIP Financing Facility On October 4, 2002, the Debtors and the DIP Lenders entered into the third amendment to the DIP Financing Facility (the "Third Amendment") that provided for, among other things, reduction of the advance limit for cash borrowings to $14 million, approval for the payment of the expenses and fees incurred by the official committee of creditors. The Third Amendment also provided for certain insurance premium financing arrangements, for the commencement of voluntary bankruptcy proceedings by Ogden Spain, S.A., for the liquidation of Ogden Entertainment Services of Spain and for the approval of certain designated non-material asset sales. Certain modifications to the agreements relating to the Tampa Bay Water Project were also allowed under the Third Amendment, as were reductions in the "Advance Limits" schedule to the DIP Financing Facility, providing the monthly limitations of the amounts available for borrowing under Tranche A. (e) Fourth Amendment to DIP Financing Facility On December 10, 2002, the Debtors and the DIP Lenders entered into the fourth amendment to the DIP Financing Facility (the "Fourth Amendment") that provided for, among other things, approval of certain transactions relating to the cancellation of the $5.3 million letter of credit issued by Covanta to support certain obligations at the MCI Center, a multi-purpose arena located in Washington D.C. The Fourth Amendment also provided for the acknowledgement of the superior priority of a tax lien by Lake County, Florida on property held by Covanta Lake, and for the release of prepetition liens upon the sale of the remaining Aviation Fueling Assets, and for additional investments in the Trezzo (Italy) Waste-to Energy Project. (f) Fifth Amendment to DIP Financing Facility On December 18, 2002, the Debtors and the DIP Lenders entered into the fifth amendment to the DIP Financing Facility that provided for, among other things, approval of the participation of the Debtors in a tax transaction relating to the Team. (This tax transaction was never completed.) (g) Sixth Amendment to DIP Financing Facility On March 25, 2003, the Debtors and the DIP Lenders entered into the sixth amendment to the DIP Financing Facility (the "Sixth Amendment") that provided for, among other things, the extension of the termination date of the DIP Financing Facility through October 1, 2003 (the Company expects this date to be further extended through April 1, 2004). The Sixth Amendment provided for a reduction in the "Tranche A Letter of Credit Sublimit" from $14,200,000 to $12,200,000. It also allowed for the release of prepetition liens upon the sale of the Island Power Corporation and permitted Covanta to engage in certain tax related restructurings. (h) Seventh Amendment to DIP Financing Facility On May 23, 2003, the Debtors and the DIP Lenders entered into the seventh amendment to the DIP Financing Facility that provided for, among other things, approval for the restructuring of the obligations relating to the Hennepin waste-to-energy project and to permit amendments to the corresponding Tranche A and Tranche B Letters of Credit. (i) Eighth Amendment to DIP Facility On August 25, 2003, the Debtors and the DIP Lenders entered into the eighth amendment to the DIP Financing Facility that provided for, among other things, approval of the sale of the Corel Centre. 3. Adequate Protection In addition to the various provisions discussed above, the Final DIP Order provides that, in respect of only the Prepetition Liens, the Prepetition Lenders are granted adequate protection in the event that there is any postpetition diminution in the value of their respective interests the Prepetition Collateral resulting from (i) the Debtors' granting of priming liens on and security interests in the Prepetition Collateral in favor of the DIP Agents and DIP Lenders, (ii) the Debtors use of the Prepetition Lenders' cash collateral, the use of the Prepetition Collateral (other than the cash collateral), and (iii) the imposition of the automatic stay. Such adequate protection consists of the following: (a) The Prepetition Agents and the Prepetition Lenders are granted valid, perfected and non-voidable replacement security interests in and liens upon (the "Replacement Liens") all property of each of the Debtors, and all proceeds and products thereof. The Replacement Liens are subject to certain carve-outs; the liens granted pursuant to the Final DIP Order to the DIP Agents to secure the obligations of the Debtors under the DIP Financing Facility, valid, enforceable, perfected and non-voidable liens and security interests that existed on the Initial Petition Date (other than the Prepetition Liens and the Project Replacement Liens); and each estate's interest in the proceeds of any avoidance action pursuant to sections 544 to 550 of the Bankruptcy Code. (b) The Prepetition Agents and the Prepetition Lenders are granted superpriority claims with priority over all administrative expenses ordered pursuant to the Bankruptcy Code, other than fees and expenses arising under section 726(b) of the Bankruptcy Code which are less than $1 million in aggregate. Such superpriority status is subject only to the superpriority claims granted to DIP Agents and DIP Lenders in respect of the obligations of the Debtors under the DIP Financing Facility; each estate's interest in the proceeds of any avoidance action pursuant to sections 544 to 550 of the Bankruptcy Code; and certain carve-outs. (c) The Debtors are authorized and directed to pay in cash on a monthly basis all reasonable accrued fees and all costs, charges and expenses of Akin, Gump, Strauss, Hauer & Feld, L.L.P and Raymond James & Co. (subsequently replaced by Jeffries & Co.), in their respective capacity as advisors to the informal committee of Debenture Holders and Wells Fargo Bank Minnesota, N.A., in its capacity as indenture trustee for the 9.25% Debentures and Dorsey & Whitney, in its capacity as counsel to the Indenture Trustee, in connection with the Chapter 11 Cases, on the same terms and conditions that apply to the DIP Lenders. In addition, by order dated May 13, 2002, General Electric Capital Corporation and certain of its affiliates (collectively "GECC") was granted adequate protection in the event that there is any postpetition diminution in the value of its interests in property (including cash collateral) used by the Debtors post-petition. Among other things, GECC generally was granted valid, perfected and non-voidable replacement security interests in and liens upon all property of each of the Debtors in which GECC held a security interest pre-petition, subject to certain carve-outs; the Debtor Heber Field Company was required to make monthly payments to GECC consisting of (i) all interest owed to GECC under its pre-petition agreements with GECC, and (ii) 33.33% of monthly cash flow in excess of certain operating and other expenses; the Debtor Second Imperial Geothermal Company, L.P. was required to make most payments required under its pre-petition agreements with GECC (with certain limited exceptions); and the Debtors were authorized and directed to reimburse GECC for its reasonable legal expenses. 4. Assumption and Rejection As debtors in possession, the Debtors have the right, subject to Court approval and certain other limitations, to assume or to reject executory contracts and unexpired leases. Contracts or leases that are assumed may be assigned to a third party as provided under the Bankruptcy Code. During these Chapter 11 Cases, the Debtors obtained several orders of the Court either assuming, or assuming and assigning, certain executory contracts and unexpired leases. For example, in connection with the sale of the Aviation Fueling Assets, on December 18, 2002, the Court entered an order (Docket No. 1203), assigning certain contracts and leases relating to that business to Allied Aviation Holdings, Inc., the purchaser of the Aviation Fueling Assets. Pursuant to the order approving the sale, the Debtors were relieved of any liability for breach of any such assigned contract, whether occurring before or after such assignment. The Court has also entered orders authorizing the rejection of certain contracts. For example, the Debtors rejected the lease relating to its former headquarters at 2 Penn Plaza in New York, New York and rejected a number of contracts related to a construction project in Nevada. The treatment of contracts or leases that have not been assumed or rejected by order of the Court as of the date hereof, is discussed in Section 9 of the Reorganizing Plan and Section 8 of the Liquidating Plan. Reorganizing Covanta and certain other Reorganizing Debtors listed on Schedule 9.1A of the Reorganization Plan, on the Effective Date all executory contracts and unexpired leases shall be deemed rejected other than those executory contracts or unexpired leases that are specifically designated as assumed on the Rejecting Debtors' Schedule of Assumed Contracts and Leases (to be filed prior to the Confirmation Hearing), or as otherwise provided in Section 9.1(a) of the Reorganization Plan. For the Heber Debtors and the Reorganizing Debtors listed on Schedule 9.1B of the Reorganization Plan, on the Effective Date all executory contracts and unexpired leases shall be deemed assumed other than those executory contracts or unexpired leases that are specifically designated as rejected on the Assuming Debtors' Schedule of Rejected Contracts and Leases (to be filed prior to the Confirmation Hearing), or as otherwise provided in Section 9.1(b) of the Reorganization Plan. For Liquidating Debtors, on the Effective Date all executory contracts and unexpired leases shall be deemed rejected other than those executory contracts or unexpired leases that are specifically designated on Schedule 8 of the Liquidation Plan, or as otherwise provided in Section 8 of the Liquidation Plan. 5. Appointment of Creditors Committee On April 9, 2002 the United States Trustee for the Southern District of New York appointed an Official Committee of Unsecured Creditors (the "Creditors Committee") in accordance with the applicable provisions of the Bankruptcy Code. The Creditors Committee is represented by Arnold & Porter. The Creditors Committee's financial advisor is Houlihan Lokey Howard and Zukin. The Creditors Committee currently consists of the following members: Federal Insurance Company c/o Chubb & Son 15 Mountain View Road Warren, NJ 07059 Attn: Richard E. Towle V.P. and Manager Broad Street Resources, Inc. 66 Society Street Charleston, SC 29401 Attn: John J. Kruse The General Electric Company (GE Power Systems Division) 1 River Road Schenectady, NY 12345 Attn: Anthony Walsh Pacific Enterprises Energy Management Services 101 Ash Street San Diego, CA 92101 Attn: Anthony L. Molnar Boiler Tube Co. of America 506 Charlotte Highway Lyman, SC 293656 Attn: John McCauley Prescott Group Capital Management, LLC 1924 South Utica Suite 1120 Tulsa, OK 74104 Attn: Philip Frohlien, Jeff Watkins 6. Exclusivity Pursuant to an order entered on March 27, 2003 (Docket No. 1391), the Court extended the Debtors' exclusivity period during which the Debtors may file a plan of reorganization (the "Exclusivity Period") through July 31, 2003 and the exclusive right to solicit acceptances thereto through September 23, 2003. On July 16, 2003 the Court entered an order (Docket No. 1746), extending the Exclusivity Period to and including August 14, 2003 with the exclusive right to solicit acceptances thereto through September 23, 2003. At a hearing before the Court on August 13, 2003, the Court extended the Exclusivity Period to and including September 4, 2003. On September 8, 2003, the Court entered an order (Docket No. 2055) extending the Exclusivity Period to and including September 10, 2003. 7. Discussions of Alternative Reorganization Plans Contemporaneously with the commencement of the Chapter 11 Cases, the Company executed a non-binding letter of intent with the investment firm of Kohlberg Kravis Roberts & Co. ("KKR"). KKR pursuant to which KKR would acquire the Company. After conducting further due diligence, KKR made a further proposal in the third quarter of 2002, substantially along the lines of the letter of intent. The Company sought to negotiate this proposal with KKR to improve its terms for all creditors. Since KKR's proposal was contingent upon the Company's secured bank creditors providing new debt upon emergence, KKR conducted negotiations primarily with the Company's secured bank creditors. In February 2003, KKR reduced the value of its offer and, consequently, the Debtors believe that KKR's revised proposal would have resulted in recoveries that are inferior to what creditors would obtain in the proposed Plans. KKR, the Company and the secured bank creditors have terminated discussions, although KKR has expressed a continuing interest in the Company should other structures not be achieved. In addition, in June and July 2003, the Debtors engaged in initial, non-binding discussions with another potential investor concerning a potential investment in the Company pursuant to a plan of reorganization. Following several weeks of due diligence and discussions involving the Debtors, the potential investor and the creditor constituencies, it was determined that the potential transaction would not be pursued because the Secured Bank Lenders and potential investor could not agree on arrangements for providing liquidity for the Company post-emergence. 8. Sale of Geothermal Assets The Reorganization Plan presumes the sale of the Geothermal Debtor Equity, and the use of certain of the proceeds of the Geothermal Sale as part of the funding for the Reorganizing Debtors' emergence from Chapter 11 protection. As discussed above, the Debtors contemplate effecting the Geothermal Sale either by a Section 363 sale or through the Heber Plan, pursuant to which the Debtors would sell the Geothermal Debtor Equity. The Heber Plan would involve (a) the sale of the Geothermal Debtor Equity, and transfer of ownership of the Heber Debtor Holding Companies and the Heber Debtor Project Companies, to the eventual buyers; (b) the continuation of first-priority lien of GECC on certain of the assets of the Heber Debtor Holding Companies and the Heber Debtor Project Companies after consummation of the Geothermal Sale, leaving unimpaired GECC; (c) the agreement of the DIP Lenders to reduced distributions on their claims against the Heber Debtors in full satisfaction of such claims; (d) distributions to all creditors other than GECC according to the priority scheme under the Code; and (e) distribution of all remaining proceeds of the Geothermal Sale to the Reorganizing Debtors. These features of a Heber Plan would preserve and enhance the value of the Reorganizing Debtors' continuing operations by allowing for necessary financing of exit costs, and benefit creditors. 9. Sale of Non-Core Assets During these Chapter 11 Cases, the Debtors have disposed of a number of non-core assets that are not necessary to the Reorganizing Debtors and Heber Debtors' ongoing businesses. Pursuant to an order of the Court (Docket No. 832), on August 29, 2002, Debtor Ogden Central and South America, Inc. sold its interests in Casino Iguazu. In addition, pursuant to an order of the Court (Docket No. 1127), on December 3, 2002, Ogden Central and South America, Inc. and Ogden Services Corporation, each Debtors in these Chapter 11 Cases, closed the sale of all issued and outstanding shares of capital stock in Ogden Argentina S.A., thereby disposing of the Company's interest in the La Rural Fairgrounds. On December 31, 2002, pursuant to an order by the Court (Docket No. 1203), the Company sold its remaining Aviation Fueling Assets, consisting of fueling operations at the three major New York City area airports. As part of this sale, PA Aviation Fuel Holdings, Inc., one of the Debtors in these Chapter 11 Cases, sold all of the issued and outstanding shares of capital stock in the following four entities: Ogden Aviation Service Company of New Jersey, Inc., Ogden Aviation Service Company of New York, Inc., LaGuardia Fuel Facilities Corporation and Newark Automotive Fuel Facilities Corporation (collectively, the "Allied Acquired Companies"). Pursuant to the order approving the sale, the bankruptcy cases of the Allied Acquired Companies were dismissed. In addition, as part of the sale, Ogden New York Services, Inc. sold substantially all of its assets and business operations and certain obligations and liabilities relating thereto. Ogden New York Services retained certain environmental liabilities relating to the John F. Kennedy International Airport, as more fully described in the order approving the sale. On August 5, 2003 Covanta assumed an Amended Option and Usufruct Agreement pertaining to AA 2000, an Argentine airport, which is by and between Eduardo Eurnekian and Ogden Corporation in an attempt to transfer Ogden's equity to Eurnekian or designee in exchange for a cash payment to Covanta for approximately $2,500,000. The assumption of the Amended Option and Usufruct Agreement was approved by the Court on July 24, 2003. Please see Section VI.C.12 for a discussion of the disposition proceedings in connection with the Team and Arenas. 10. Restructuring of Certain Energy Projects The Chapter 11 Cases have provided the Reorganizing Debtors with the opportunity to reevaluate operations, including those within their core business segments, to determine which projects will contribute positively to their restructuring efforts. As part of this review, the Reorganizing Debtors have engaged in negotiations with various municipalities and other parties in interest with the goal of enhancing financial performance or reducing risk associated with certain of its projects. The Reorganizing Debtors and contract parties have reached agreement with respect to, or are in the process of discussing, material restructuring of their mutual obligations in connection with five (5) WTE projects, as further summarized below (the Reorganizing Debtors also are involved in material litigation with respect to two (2) additional WTE facilities, described in Section VI.C.14 below). Each of these restructurings has been or will need to be approved by the Court, and the executory contracts related thereto will be modified and assumed, pursuant to the Reorganization Plan or otherwise approved by separate order of the Court. However, with several of these projects, aspects of the potential restructurings remain subject to conditions subsequent and there can be no guarantee that all these conditions will be satisfied on or before the Effective Date. As a result, the Reorganizing Debtors have expressly reserved their rights, in the event that such conditions subsequent fail to occur on or before the Effective Date, to reject the executory contracts associated therewith, to designate certain Debtors currently identified as Reorganizing Debtors as Liquidating Debtors, or to withdraw the applicable Plan solely as to such Debtor's estates. (a) Hennepin County, Minnesota On June 11, 2003, the Debtors received Court approval to restructure certain agreements relating to the Debtors' WTE project at Hennepin, Minnesota. The key elements of the restructuring are: (i) the purchase by Hennepin County of the ownership interests of GECC in the operating facility, (ii) the termination of certain leases, the existing Service Agreement and certain financing and other agreements; (iii) entry into a new Service Agreement, guarantee and security agreement, which, among other things, reduces the County's payment obligations to the Company's operating subsidiary under the Service Agreement and requires the Company's operating subsidiary to provide a letter of credit in an amount not less than that provided to GECC; (iv) the refinancing of bonds issued in connection with the development and construction of the project; and (v) assumption and assignment to Hennepin County of certain interests in the project's electricity sale agreement. The restructuring was completed on July 8, 2003. (b) Union County, New Jersey On June 19, 2003, Debtor Covanta Union, Inc. ("Covanta Union") received Court approval to restructure certain agreements relating to the Debtors' WTE project at Rahway, Union County, New Jersey (the "Union Facility"), and to settle certain disputes with the Union County Utilities Authority (the "Union Authority") related to Covanta Union's operation of the Union Facility. The restructuring facilitates the Union Authority's implementation of a solid waste flow control program and accounts for the impact of recent court decisions upon the agreements between Covanta Union and the Union Authority. Key elements of the restructuring include: (i) modifying the existing project agreements between Covanta Union and the Union Authority and (ii) executing a settlement agreement and a release and waiver with the Union Authority resolving disputes that had arisen between Covanta Union and the Union Authority regarding unpaid fees. (c) Warren County, New Jersey The Debtor Covanta Warren Energy Resource Co., Limited Partnership ("Covanta Warren") and the Pollution Control Financing Authority of Warren County ("Warren Authority") have been engaged in discussions and negotiations for an extended period of time concerning a potential restructuring of the parties' rights and obligations under various agreements related to Covanta Warren's operation of a WTE facility located in Oxford Township, Warren County, New Jersey (the "Warren Facility"). Those negotiations were in part precipitated by a 1997 federal Court of Appeals decision invalidating certain of the State of New Jersey's waste-flow laws, which resulted in significantly reduced revenues for the Warren Facility. Since 1999, the State of New Jersey has been voluntarily making all debt service payments with respect to the project bonds issued to finance construction of the Warren Facility, and Covanta Warren has been operating the Warren Facility pursuant to a letter agreement with the Warren Authority which modifies the existing Service Agreement for the Warren Facility. Although discussions continue, to date Covanta Warren and the Warren Authority have been unable to reach an agreement to restructure the contractual arrangements governing Covanta Warren's operation of the Warren Facility. In the event the parties are unable to timely reach agreement upon and consummate a restructuring of the contractual arrangements governing Covanta Warren's operation of the Warren Facility, the Debtors may, among other things, elect to litigate with counterparties to certain agreements with Covanta Warren, assume or reject one or more executory contracts related to the Warren Facility, recharacterize Covanta Warren as a Liquidating Debtor, and/or withdraw Covanta Warren as a Reorganizing Debtor and subsequently file a separate plan of reorganization for Covanta Warren. In such an event, creditors of Covanta Warren may not receive any recovery on account of their claims. The Debtors are not able to determine at this time whether a failure to timely consummate a restructuring transaction with respect to Covanta Warren would impair the other Debtors' ability to confirm and consummate the Plans, or the terms of any exit financing available to such other Debtors. (d) Onondaga County, New York Shortly before the Initial Petition Date, the Onondaga County Resource Recovery Agency ("OCRRA") purported to terminate the Service Agreement between OCRRA and Covanta Onondaga, LP ("Covanta Onondaga") based upon Covanta's failure to provide a letter of credit following its downgrade by rating agencies. Covanta Onondaga challenged that purported termination by OCRRA. The dispute between Covanta Onondaga and OCRRA concerning that termination, as well as disputes concerning which court would decide that dispute, led to contentious litigation in state court and several bankruptcy, district and appellate federal courts. The Debtors have been engaged in lengthy negotiations with the OCRRA and certain bondholders and limited partners in connection with a WTE facility that the Debtors operate in Onondaga County, New York (the "Onondaga Facility"). The parties have reached a non-binding agreement to provide for the continued operation of the Onondaga Facility, to restructure the debt related to the Onondaga Facility, and to resolve their disputes. The proposed restructuring will provide for the continued operation of the Onondaga Facility by Covanta Onondaga, as well as numerous modifications to agreements relating to the Onondaga Facility, including: (i) the restructuring of the bonds issued to finance development and construction of the Onondaga Facility; (ii) reduction in the amount of the service fee payable to Covanta Onondaga; (iii) elimination of the requirement that Covanta provide letter of credit support, and a reduction in the maximum amount of the parent company guarantee; and (iv) material amendments to the agreements between Covanta Onondaga's third party limited partners and the other Debtors. The parties are in the process of documenting the agreement and seeking several necessary approvals including the approval of the Court for the modifications to the necessary agreements to implement the restructuring. In the event the parties are unable to timely consummate the restructuring described above, the Debtors may, among other things, elect to litigate with counterparties to certain agreements with Covanta Onondaga, assume or reject one or more executory contracts related to the Onondaga Facility, recharacterize Covanta Onondaga as a Liquidating Debtor, and/or withdraw Covanta Onondaga as a Reorganizing Debtor and subsequently file a separate plan of reorganization for Covanta Onondaga. In such an event, creditors of Covanta Onondoga may not receive any recovery on account of their claims. The Debtors are not able to determine at this time whether a failure to timely consummate a restructuring transaction with respect to Covanta Onondoga would impair the other Debtors' ability to confirm and consummate the Plans, or the terms of any exit financing available to such other Debtors. (e) City of Tulsa, Oklahoma The Debtor Covanta Tulsa, Inc. ("Covanta Tulsa") operates a WTE facility located in Tulsa, Oklahoma (the "Tulsa Facility") pursuant to a Service Agreement with the Tulsa Authority for Recovery of Energy ("Tulsa Authority") which expires in 2007. Covanta leases the facility from the CIT Group/Capital Finance, Inc. ("CIT") under a long-term lease presently expiring in 2012 (the "CIT Lease"). Covanta Tulsa and CIT have been engaged in negotiations to restructure the contractual arrangements between Covanta Tulsa and CIT related to Covanta Tulsa's operation of the Tulsa Facility. To date Covanta Tulsa and CIT have been unable to reach an agreement to restructure such contractual arrangements. In the event Covanta Tulsa is unable to timely reach agreement upon and consummate a restructuring of its agreements with CIT, the Debtors may, among other things, assume or reject one or more executory contracts related to the Tulsa Facility, recharacterize Covanta Tulsa as a Liquidating Debtor, and/or withdraw Covanta Tulsa as a Reorganizing Debtor and subsequently file a separate plan of reorganization for Covanta Tulsa. In such an event, creditors of Covanta Tulsa may not receive any recovery on account of their claims. The Debtors are not able to determine at this time whether a failure to timely consummate a restructuring transaction with respect to Covanta Tulsa would impair the other Debtors' ability to confirm and consummate the Plans, or the terms of any exit financing available to such other Debtors. 11. 9.25% Debenture Adversary Proceeding On May 15, 2002, pursuant to the Final DIP Order, the Debtors, the Prepetition Lenders and the Informal Committee of 9.25% Debenture Holders (the "Bondholders Committee") stipulated that the 9.25% Debenture Holders were secured parties. The Final DIP Order includes a provision reserving the Creditors Committee's right to challenge the secured status of the 9.25% Debenture Holders. On August 6, 2002, pursuant to 11 U.S.C. ss.ss. 1103(c)(5) and 1109(b), the Creditors Committee commenced an adversary proceeding against Wells Fargo Bank Minnesota, N.A. ("9.25% Indenture Trustee"), as trustee (Adv. No. 02-3004) (the "9.25% Adversary Proceeding"), challenging the secured status of the 9.25% Debenture Holders. The Bondholders Committee was later added as a defendant-intervenor. The Debtors have not been named as parties in the 9.25% Adversary Proceeding. Among other things, the Creditors Committee's complaint (as amended) alleges that the applicable provisions of the Indenture, dated as of March 1, 1992 (the "9.25% Indenture"), under which the debentures were issued that would otherwise trigger Covanta Energy Corporation's obligation to grant a lien to secure the 9.25% Debenture Holders has never been satisfied. The complaint also alleges that the 9.25% Debenture Holders never properly entered into a security agreement or perfected their lien. Furthermore, the complaint alleges that to the extent any lien was granted, it was granted during the 90 days prior to the Initial Petition Date and is therefore avoidable as a preferential transfer under 11 U.S.C. ss. 547. On October 22, 2002, the 9.25% Indenture Trustee filed a motion (Docket No. 3), to dismiss the Creditors Committee's complaint, arguing that the Creditors Committee did not have standing to prosecute the 9.25% Adversary Proceeding, on the basis of United States Supreme Court's decision in Hartford Underwriters Ins. Co. v. Union Planters Bank, N.A., 530 U.S. 1 (2000). The Court denied the motion to dismiss. The 9.25% Indenture Trustee has filed an appeal of the Court's decision. The appeal is currently pending before [______]. As requested by the Debtors and as ordered by the Court (Docket No. 41), on May 7, 2003, the parties to the 9.25% Adversary Proceeding commenced a mediation that resulted in an agreement in principle to settle the 9.25% Adversary Proceeding. The parties are working to finalize that agreement in a stipulation that will be submitted to the Court. This potential settlement could affect the ultimate percentage recovery of the 9.25% Debenture Holders and the holders of Allowed Class 6 Claims. 12. Agreements with the holders of Secured Claims Throughout the course of these proceedings, the Debtors have engaged in extensive discussions with the Agent Banks, the Secured Bank Lenders and the 9.25% Debenture Holders regarding the treatment of their Allowed Secured Claims and the overall resolution of these Chapter 11 Cases. In particular, the Debtors and these parties are currently discussing, and expect to enter into, the following proposed agreements that have been incorporated into the Reorganization Plan and the Liquidation Plan: (a) In order to facilitate the ongoing operations of the Reorganized Debtors, the Reorganization Plan contemplates that the DIP Lenders will agree to the reinstatement of certain letters of credit that had been issued pursuant to Tranche B of the DIP Financing Facility in the aggregate face amount of $176 million. (b) Certain of the Secured Bank Lenders and the 9.25% Debenture Holders would enter into the Exit Financing Agreements that will provide in the aggregate commitments for the issuance of additional letters of credit in an amount up to $87 million and new revolving lines of credit in an aggregate amount of up to $50 million for purposes of further supporting the Reorganizing Debtors' ongoing business operations. (c) The Debtors have estimated the Prepetition Lenders' aggregate Allowed Secured Claim in the amount of $434 million, including interest and fees, which amount is subject to final allowance by the Court. As explained in more detail below, the Prepetition Lenders would accept a Distribution under the Reorganization Plan while waiving any Distribution under the Liquidation Plan. Similarly, the Debtors have estimated the 9.25% Debenture Holders' Allowed Secured Claims in the aggregate amount of $105 million, which amount is subject to final allowance by the Court. As explained in more detail below, the 9.25% Debenture Holders would accept a Distribution under the Reorganization Plan while waiving any Distribution under the Liquidation. (d) Additionally, the Liquidation Plan currently contemplates that the holders of Class 3A Claims under the Liquidation Plan waive their right to any Distributions under the Liquidation Plan, and instead are deemed to direct that such Distributions (comprised of certain Liquidation Proceeds and other Claims) be contributed to Reorganized Covanta. More specifically, under this formulation, the Secured Bank Lenders, in their capacity as Prepetition Lenders, and the 9.25% Debenture Holders, would be deemed to direct that (i) the Distribution of Liquidation Proceeds to which they would otherwise be entitled, and (ii) certain other Liquidation Assets, on which they have a lien, be transferred to Reorganized Covanta. Similarly, as further part of this contemplated compromise, the Secured Bank Lenders, in their capacity as DIP Lenders, would be deemed to direct that certain Liquidation Assets or Collateral held by the Liquidating Non-Pledgor Debtors, upon which the DIP Lenders have a first priority lien and otherwise are entitled to the proceeds of under the Liquidation Plan, also be contributed to Reorganized Covanta, in lieu of the receipt by the DIP Lenders of any Distributions under the Liquidation Plan. Up to $500,000 of the Liquidation Proceeds described above will be used to fund the implementation of the Liquidation Plan. Ultimately, the acceptance of the Distributions of the secured parties listed above under the Reorganization Plan and waiver of their Distributions under the Liquidation Plan will ultimately enhance the value of Reorganized Covanta and inure to the benefit of such secured parties via their Distributions under the Reorganization Plan. (e) In connection with the Intercreditor Agreement, certain of the Prepetition Lenders were entitled to receive priority recoveries and ratable paydowns with respect to their Claims against the Debtors (the "Priority Bank Claims"). In order to account for the priority rights arising under the Intercreditor Agreement, the Reorganization Plan includes certain provisions that relate solely to the Distribution among holders of Subclass 3A Claims. Specifically, as a first step in making a Subclass 3A Distribution, the Reorganization Plan provides that the holders of Allowed Priority Bank Claims will receive first, to the extent available, Excess Distributable Cash, and thereafter New High Yield Secured Notes in an amount equal to the Allowed Priority Bank Claims in full settlement, release and discharge of such Claims. After payment in full of these Priority Bank Claims, the Reorganization Plan then provides that the holders of Allowed Non-Priority Subclass 3A Claims shall receive a Distribution consisting of a Pro Rata Share of the remaining Subclass 3A Recovery. (f) Under the proposed settlement of the Loss Sharing Litigation, the current synthetic pooling arrangment (i.e. loss sharing under the Intercreditor Agreement) will be replaced with an actual pooling of exposures among the Canadian Loss Sharing Lenders and the Pooled Facility Lenders. 13. Proceedings Related to the Team, the Corel Centre and Arrowhead Pond (a) The Team and the Corel Centre On January 9, 2003, the Ottawa Senators Hockey Club Corporation and certain of its affiliates (the "Team") filed for protection with the Ontario Superior Court of Justice (the "Canadian Court") and was granted protection under Canada's Companies' Creditors Arrangement Act ("CCAA"). PricewaterhouseCoopers Inc. was appointed as monitor under the CCAA insolvency proceedings and is supervising endeavors to sell the Team's franchise under the direction of the Ontario Superior Court of Justice. On April 25, 2003, the monitor entered into an asset purchase agreement with Capital Sports & Entertainment Inc. ("CSE") pursuant to which CSE agreed to purchase the Team's franchise and certain related assets, which the Canadian Court approved on May 9, 2003. On May 27, 2003, upon a motion by Covanta as senior secured creditor to Palladium Corporation ("Palladium"), the Canadian Court appointed Ernst & Young Inc. as interim receiver of Palladium, the owner of the Corel Centre. On June 4, 2003, the interim receiver entered into an asset purchase agreement with Capital Sports Properties Inc. ("CSP"), an affiliate of CSE, pursuant to which CSP agreed to purchase the Corel Centre and certain related assets, which the Canadian Court approved on June 20, 2003. The transactions to purchase the Team and the Corel Centre were consummated on August 26, 2003. Upon closing, the Company received approximately CDN$27.5 million and obtained releases from certain guarantees provided to lenders to the Team. (b) Arrowhead Pond Since 1999, Covanta has been soliciting potential buyers for the management rights to the Arrowhead Pond. Several different parties had expressed initial interest, with some parties submitting bids that were later withdrawn; however, no final agreement has yet been reached with any party. Covanta continues to pursue options for the sale of the management rights to the Arrowhead Pond. 14. Other Postpetition Litigation (a) Lake County, Florida In late 2000, Lake County, Florida ("Lake County") commenced a lawsuit in Florida state court against Covanta Lake, Inc. ("Covanta Lake") relating to the WTE facility operated by Covanta in Lake County, Florida (the "Lake Facility"). In the lawsuit, the County sought to have its Service Agreement with Covanta Lake declared void and in violation of the Florida Constitution. That lawsuit was stayed by the commencement of the Chapter 11 Cases. Lake County subsequently filed a proof of claim seeking in excess of $70 million from Covanta Lake and Covanta. After several months of negotiations that failed to produce a settlement between Covanta Lake and Lake County, on June, 20, 2003, Covanta Lake filed a motion with the Court (Docket No. 1627), seeking entry of an order (i) authorizing Covanta Lake to assume, effective upon confirmation of a plan of reorganization for Covanta Lake, its Service Agreement with Lake County, (ii) finding no cure amounts due under the Service Agreement, and (iii) seeking a declaration that the Service Agreement is valid, enforceable and constitutional, and remains in full force and effect. Contemporaneously with filing the motion, an adversary complaint was filed asserting that Lake County is in arrears to Covanta Lake in the amount of more than $8.5 million. Lake County has filed an answer to Covanta Lake's complaint, and expedited discovery is underway. The Court is scheduled to conduct a trial with respect to both the motion to assume and the adversary proceeding in November 2003, although certain aspects of the litigation may be decided prior to that trial. In the event the parties are unable to consensually resolve their differences, and depending upon (among other things) the timing, nature and outcome of the litigation with Lake County, the Debtors may determine to, among other things, assume or reject one or more executory contracts related to the Lake Facility, recharacterize Covanta Lake as a Liquidating Debtor, and/or withdraw Covanta Lake as a Reorganizing Debtor and subsequently file a separate plan of reorganization for Covanta Lake. In such an event, creditors of Covanta Lake may not receive any recovery on account of their claims. The Debtors are not able to determine at this time whether a failure to resolve the litigation or timely consummate a restructuring transaction with respect to Covanta Lake would impair the other Debtors' ability to confirm and consummate the Plans, or the terms of any exit financing available to such other Debtors. (b) Onondaga County, New York Prior to the Initial Petition Date, Covanta Onondaga commenced litigation challenging an effort by OCRRA to terminate its Service Agreement with Covanta Onondaga. Subsequent to the Initial Petition Date, Covanta Onondaga sought to remove that litigation from New York state court to the Court. On August 13, 2002 the U.S. District Court (NDNY) granted OCRRA's motion to remand the matter to state court and denied Covanta Onondaga's motion to transfer the matter to the Court. After Covanta Onondaga sought a ruling from the Court that the automatic stay applied to the state court litigation, OCRRA obtained another order from the U.S. District Court (NDNY) enjoining Covanta Onondaga and the Court from ruling on Covanta Onondaga's request (which order Covanta Onondaga appealed), and then sought in late 2002 a ruling from the state court declaring that its termination of the Service Agreement had been effective. The U.S. Court of Appeals for the Second Circuit eventually enjoined OCRRA from proceeding with the state court litigation pending disposition of Covanta Onondaga's appeal, and reversed the District Court's injunction in January 2003. The Court thereafter ruled that OCRRA's efforts in state court violated the automatic stay, and enjoined OCRRA from proceeding further with such efforts. OCRRA filed requests with the Court asking that the automatic stay be lifted to permit the state court action to proceed, which requests were twice denied. OCRRA has appealed all of these Court orders, and those appeals are now pending. The appeals have been stayed pending the parties' tentative settlement, described in Section IV.C.9 above. As noted in Section IV.C.9 above, in the event the parties are unable to timely consummate the restructuring described therein, the Debtors may, among other things, elect to litigate with counterparties to certain agreements with Covanta Onondaga, assume or reject one or more executory contracts relating to the Onondaga Facility, recharacterize Covanta Onondaga as a Liquidating Debtor, and/or withdraw Covanta Onondaga as a Reorganizing Debtor and subsequently file a separate plan of reorganization for Covanta Onondaga. The Debtors are not able to determine at this time whether a failure to timely consummate the Covanta Onondaga restructuring transaction described in Section IV.C.9 above would impair the other Debtors' ability to confirm and consummate the Plans, or the terms of any exit financing available to such other Debtors. (c) Allied Aviation Litigation In December 2001, Ogden Allied Maintenance Corporation and Covanta entered into an agreement with Allied Aviation Holdings Corporation ("Allied") and others by which Allied acquired the Company's aviation fueling businesses. In December 2002, Ogden New York Services, Inc., PA Aviation Fuel Holdings, Inc., and Covanta entered into an agreement by which Allied acquired the Debtors' Aviation Fueling business. Following the acquisitions, disputes arose between the Company and Allied. In the adversary entitled Covanta Energy Corp. et al., v. Allied Aviation Holdings Corp. et al., Adv. No. 03-3008 (CB) the Debtors assert, among other things, that Allied (i) has come into possession of tax refunds in excess of $2 million (Canadian) that are the property of the Debtors' estates, (ii) has received certain payments relating to the operations of Ogden New York Services, Inc. in excess of $850,000 that are the property of the Debtors' estates, (iii) has not reimbursed the Debtors for certain transition services, (iv)has failed to indemnify the Debtors for certain costs, and (v) has failed to provide coverage for certain retirees in breach of its contractual obligations. Allied has filed an answer to the Debtors' complaint, asserting that the Debtors breached certain agreements, and also filed a motion to dismiss the Debtors' complaint, claiming that the matters alleged in the complaint must be mediated and arbitrated, pursuant to the parties' agreements, rather than litigated before the Court. On August 27, 2003, the Court ordered that the parties mediate their dispute. The Debtor does not believe that the outcome of the litigation will not have a material impact upon the Debtors' ability to confirm and consummate the Plans. (d) Town of Babylon, New York The Town of Babylon, New York (the "Town") filed a proof of claim against Covanta Babylon, Inc. ("Covanta Babylon") for approximately $13.4 million in prepetition damages and $5.5 million in postpetition damages, alleging that Covanta Babylon has accepted less waste than required under the Service Agreement between the Town and Covanta Babylon. The Town also filed a motion to modify the automatic stay in order to permit it to commence arbitration against the Company. The Company has filed an objection to the Town's claim and the motion to modify the stay. The Court has issued a temporary restraining order barring the Town from proceeding with the arbitration. The parties have agreed that disputes between the parties shall be resolved before the Court. The Company believes that it is in full compliance with the express requirements of the contract and was entitled to adjust the amount of waste it is required to accept to reflect the energy content of the waste delivered. It therefore believes it has valid defenses to the Town's claim. In the event the parties are unable to consensually resolve their differences, and depending upon (among other things) the outcome of the litigation with the Town, the Debtors may, among other things, assume or reject one or more executory contracts related to the Babylon Facility, recharacterize Covanta Babylon as a Liquidating Debtor, and/or withdraw Covanta Babylon as a Reorganizing Debtor and subsequently file a separate plan of reorganization for Covanta Babylon. In such an event, creditors of Covanta Babylon may not receive any recovery on account of their claims. The Debtors are not able to determine at this time whether a failure to resolve the litigation or timely consummate a restructuring transaction with respect to Covanta Babylon would impair the other Debtors' ability to confirm and consummate the Plans, or the terms of any exit financing available to such other Debtors. (e) Martin County Coal Corporation Litigation Motions for relief from the Chapter 11 automatic stay have been filed with the Court by a group of plaintiffs, led by Martin County Coal Corporation, to join Ogden Environmental and Energy Services ("OEES"), a Liquidating Debtor subsidiary of Covanta, as a third party defendant to several pending Kentucky state court litigations arising from an October 2000 failure of a mine waste impoundment that resulted in the release of approximately 250 million gallons of coal slurry. Plaintiffs allege that OEES is liable to Martin County Coal in an unspecified amount for contribution and/or indemnification arising from an independent contractor agreement to perform engineering and technological services with respect to the impoundment from 1994 to 1996. OEES had not been a party to the underlying litigation to date, some of which had been pending for two (2) years. On April 30, 2003, the Court entered an agreed-upon order by which Plaintiffs may liquidate their claims (if any) against OEES, but may not recover or execute judgment against OEES. (f) Heber Royalty Holder Claims The HFC Project Company is the lessee under more than 200 leases with landowners in Imperial County, California, pursuant to which the HFC Project Company leases the right to extract geothermal fluids used to run two power plants owned or leased by the HGC Project Company and the SIGC Project Company. The HFC Project Company also enjoys easement, access and other rights with respect to the leased property. Approximately 100 lessors have formed a group and filed proofs of claim in the Debtors' bankruptcy proceedings seeking more than $68 million from the HFC Project Company, HGC Project Company and/or SIGC Project Company for alleged underpayment of royalties owed to them under their leases, easement violations and violations of "most favored nations" clauses, and also an increase in the prospective royalty rates used to pay them. Following several months of negotiations, in July 2003 the Debtors and the lessor group reached an agreement in principle, subject to Court approval, under which the Debtors have agreed to pay members of the lessor group approximately $3.4 million (including attorneys' fees) upon emergence from bankruptcy (or under certain other circumstances, including sale of the projects). Under that tentative settlement, prospective royalty rates would remain the same as the royalty rates historically paid to the lessors, and any disputes relating to individual easement or most favored nation clause violations would be resolved on a case-by-case basis. [The Debtors have filed a motion with the Court (Docket No. ____) seeking approval of the compromise with the lessor group, and that motion is set for hearing on October [ ], 2003. In the motion, the Debtors also seek permission to enter into individual settlement agreements on substantially similar terms with lessors that are not members of the lessor group.] 15. Summary of Claims Process, Bar Dates and Claims Filed (a) Schedules and Statements of Financial Affairs On June 14, 2002 the Debtors filed with the Court their Original Schedules setting forth, among other things, the assets and liabilities of the Debtors as shown by their books and records, subject to the assumptions contained in certain notes filed in connection therewith. On November 22, 2002, the Debtors filed their First Amended Schedules with the Court (Docket No. 1107). On December 11, 2002, the Debtors filed their Second Amended Schedules with the Court (Docket No. 1146). On December 16, 2002, Covanta Concerts Holdings, Inc. filed its schedules (Docket no. 2 in case 02-16322). On June 22, 2003, the Debtors filed schedules setting forth, among other things, the assets and liabilities for the New Debtors with the Court (Docket No. 1631-1691). The Debtors filed their Third Amended Schedules (Docket Nos. 1886-2006), in order to (i) reclassify the claims of a number of scheduled creditors by transferring those creditors' claims from one debtor's schedules to the applicable schedule for a different debtor's case, (ii) reflect that certain schedule creditors whose claims were listed in the Original Schedules as contingent, unliquidated and/or disputed are no longer contingent, unliquidated or disputed, and (iii) add additional creditors. (b) Claims Bar Dates On June 26, 2002, the Court entered the General Bar Date Order establishing August 9, 2002 as the General Bar Date in the Chapter 11 Cases of the Original Debtors and approved the form and manner of notice to be provided with respect of the General Bar Date, and set deadlines for the Debtors to mail and publish notices of the General Bar Date. In accordance with the General Bar Date Order, on or before June 28, 2002, the Debtors' notice agent, Bankruptcy Services L.L.C. (the "Notice Agent"), gave notice of the General Bar Date by mailing to all scheduled creditors the notice of the General Bar Date approved by the Court and a proof of claim form substantially similar to Official Form No. 10. In addition, the Debtors published notice of the General Bar Date in the Wall Street Journal and the USA Today on August 11, 2002. On September 20, 2002, the Court entered the Employee Bar Date Order establishing November 15, 2003 as the Employee Bar Date. Employees were provided notice of the Employee Bar Date by mail. On May 19, 2003, the Court entered the Covanta Concerts Bar Date Order establishing June 27, 2003 as the Covanta Concerts Bar Date. The same order established June 27, 2003 as the Convertible Debentures Bar Date. The Notice Agent mailed notice of the Convertible Debentures Bar Date to all registered holders and other known holders of the Convertible Debentures and published a notice of the same in the Financial Times of London and the Luxemburger Wort, as contemplated under the relevant fiscal agency agreement. On June 30, 2003, the Court entered an order establishing August 14, 2003 as the New Debtors' Bar Date. Because the Court was closed on August 14 and 15, 2003, as a result of the blackout that affected the Northeast region of the United States, the New Debtors' Bar Date was changed to August 18, 2003. The Notice Agent sent notice of the New Debtor's Bar Date to all known creditors of the New Debtors and published notice of the same in The Wall Street Journal and USA Today. In accordance with the General Bar Date Order, which granted the Debtors authority to amend the Original Schedules, the Debtors have filed several amendments to the Original Schedules. On November 22, 2002, the Original Debtors filed the First Amendment Schedules, and established December 27, 2002 as the First Amended Bar Date. On December 11, 2002, the Original Debtors filed the Second Amended Schedules, and established January 13, 2003 as the Second Amended Bar Date. On August 24 and 25, 2003, the Original Debtors filed the Third Amended Schedules, and established October 6, 2003 as the Third Amended Bar Date. Finally, on June 22, 2003, the New Debtors filed the New Debtors Schedules, and established August 18, 2003 as the New Debtors Bar Date. (c) Proofs of Claim As of September 8, 2003, approximately 4,457 proofs of claim in the aggregate amount of approximately $12 billion were filed. The Debtors believe that the aggregate amount of Claims against the Debtors that ultimately will be allowed is significantly less that the amount asserted by the claimants in their proofs of claim. (d) Claims Administration Prior to the commencement of these cases, the Debtors maintained, in the ordinary course of business, books and records that reflected, among other things, the Debtors' liabilities and the amounts thereof owed to their creditors. The Debtors have conducted a review of the proofs of claim filed in the Chapter 11 Cases, including any supporting documentation, the Claims set forth therein, and the Debtors' books and records to determine the validity of the Claims asserted against the Debtors. Based on their reviews, the Debtors determined that certain Claims asserted against the Debtors were objectionable. The Debtors have filed with the Court certain omnibus objections to Claims and will continue to do so. To date, the Debtors' objections to proofs of claim have for the most part sought to reclassify the numerous proofs of claim filed in the Debtors' lead case (Case No. 02-40826) to other Debtors' cases. The Debtors also have filed objections to a number of duplicate claims, as well as certain claims the Debtors believe to be invalid. BECAUSE THE DEADLINE UNDER THE PLANS FOR OBJECTING TO CLAIMS IS AFTER THE DATE ON WHICH VOTING ON THE PLANS WILL BE CONCLUDED, CREDITORS SHOULD NOT RELY ON THE ABSENCE OF AN OBJECTION TO THEIR PROOF OF CLAIM IN DETERMINING WHETHER TO VOTE TO ACCEPT OR REJECT THE PLANS, OR ANY INDICATION THAT THE DEBTORS OR OTHER PARTY IN INTEREST WILL NOT OBJECT TO THE AMOUNT, PRIORITY, SECURITY OR ALLOWABILITY OF SUCH CLAIM. 16. Development and Implementation of the Business Plan Commencing in September 1999, the Company implemented a strategic plan to sell or dispose of its non-core assets and, at the same time, underwent a significant change in senior management. From 2000 to 2001, the Company was successful in disposing of a number of its non-core operations, although it was not possible to dispose of the Arenas and the significant contingent liabilities associated therewith, and the Aviation Fueling Assets, as the events of September 11, 2001 impacted the closing of a sale thereof. When the Debtors filed for bankruptcy in 2002, management was provided a means to dispose of the Arenas, by converting the significant contingent liabilities associated thereto into funded debt. Management was also provided opportunity to achieve an orderly exit from the remaining non-core operations. During the pendency of the Chapter 11 Cases, the Company's primary objectives have been to dispose of those remaining non-core assets and to maintain the successful operation of its core WTE Projects, IPPs, and Water Projects (collectively, the "Core Operations"). Since the Initial Petition Date, the Core Operations have continued to perform well. In 2002 the waste-to-energy projects achieved records in all major performance categories. The facilities processed over 10.27 million tons of waste (112,000 tons more than any previous year) and sold over 4.966 gwh of electricity (128,000 mwh more than the previous year). The waste-to-energy projects operating performance through June 2003 is on track to surpass last year's production levels. As of June 30, 2003, the waste-to-energy projects have processed over 5.18 million tons of waste and have sold over 2,434 gwh of electricity. These production levels represent a waste processing performance of 240,000 tons more than last year's production level through June as well as a net energy generation increase of 378,000 mwh. The domestic independent power project facilities also performed well in 2002 and 2003, meeting their key production goals and posting a net electrical production of 822.7 gwh through June 2003. In 2002 and 2003 the Company conducted its typical comprehensive scheduled maintenance and plant preservation program, including semi-annual boiler maintenance outages as well as several major turbine/generator overhauls. In order to adequately evaluate the long-term prospects of the Core Operations and to develop its business plan, the Company undertook a thorough and detailed process including the development of long-term operating and financial forecasts by the management teams at the individual project facilities. The development of the business plan was performed as part of the Company's regular and recurring budgeting process, with additional years of operation added to the focus. The executive management team conducted intensive reviews of the individual project operating and financial forecasts. Factors affecting each project-specific forecast were refined and key assumptions used to establish the forecast were finalized. Concurrently, the corporate forecast was established after extensive review by the Company's executive management and advisors. It includes projections for operational and administrative overhead at a level consistent with the Company's business plan, other non-facility costs and the Company's capital structure. The existing facility financial forecasts were consolidated with the potential WTE expansion projects and the corporate forecast to establish the business plan. The proforma financial projects in Exhibit C reflect the initial years of the business plan forecast. These efforts culminated in the Company's strategic business plan (the "Business Plan"), of which the primary components are: (i) maintenance of the Core Operations; (ii) disposal of the remaining non-core assets; and (iii) corporate overhead cost consistent with the business plan. (a) Maintenance of Core Operations The Company took steps at the onset of the Chapter 11 Cases to insure that its clients, partners and vendors understood the nature of the bankruptcy proceedings and that the Company intended to continue its tradition of operating excellence. As noted above, the Company has continued to achieve operational success at its Core Operations during the Chapter 11 Cases. With few exceptions, the Business Plan was based on continued operation and/or ownership of the Company's existing Core Operations. The financial forecast was based on the continuation of the Company's historical operational performance and reasonable projections as to future factors that may affect revenues and expenses, including client community desire to extend existing Service Agreements upon concluding the initial term and market conditions that will affect such things as waste disposal pricing, energy pricing, commodity pricing, labor cost and insurance cost. Further, where client communities of publicly owned facilities intend to expand their existing facility, the Company has included a reasonable financial forecast relating to potential expansion projects. (b) Disposal of Remaining Non-Core Operations As of the Initial Petition Date the Company had the following significant non-core assets remaining: the Aviation Fueling Assets and the Arenas. During the course of the Chapter 11 Cases, the Company has been actively working to dispose of those assets in a structured environment. The Business Plan assumes that those and the other non-core operations will not be part of Reorganized Covanta. Since the Initial Petition Date, the Company has sold and resolved a number of other issues pertaining to the non-core operations, including: (i) the sale, or disposal otherwise, of its interests in the Argentine Assets, its interests in the Team and Corel Centre, the Aviation Fueling Assets and certain equipment, furniture and fixtures at former non-core operations; (ii) the collection of deferred purchase prices; and (iii) the settlement of certain claims held by Covanta. For a more detailed discussion of the sale of the non-core operations, see Section VI.C.8. (c) Corporate Overhead Costs Shortly after the Initial Petition Date, the Company re-evaluated its corporate overhead structure and embarked on a reorganization to eliminate organizational redundancy and streamline overall costs. The Company also focused on more tightly aligning its corporate functions with the requirements and expectations of the ongoing Waste to Energy, Independent Power and water projects. This effort cumulated in a reduction in force in September 2002 that eliminated 87 corporate positions (approximately 25% of non-plant personnel), the closure of satellite development offices and the reduction in all other costs not related directly to maintaining operations at their current high levels. As part of the reduction in force, waste-to-energy and domestic independent power headquarters management were combined and numerous other structural changes were instituted to improve management efficiency. These changes reduced annual overhead cost by approximately $20 million. The reduction did not affect the staffing at any of the facilities. VII. SUMMARY OF THE PLANS THIS SECTION CONTAINS A SUMMARY OF THE STRUCTURE OF, CLASSIFICATION AND TREATMENT OF CLAIMS AND INTERESTS IN AND IMPLEMENTATION OF THE REORGANIZATION PLAN AND THE LIQUIDATION PLAN, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO BOTH PLANS, WHICH ACCOMPANY THIS DISCLOSURE STATEMENT, AND TO THE EXHIBITS ATTACHED THERETO OR REFERRED TO THEREIN. CAPITALIZED TERMS NOT DEFINED HEREIN SHALL HAVE THE RESPECTIVE MEANINGS SET FORTH IN THE PLANS. THE STATEMENTS CONTAINED IN THIS DISCLOSURE STATEMENT INCLUDE SUMMARIES OF THE PROVISIONS CONTAINED IN THE PLANS AND IN DOCUMENTS REFERRED TO THEREIN. THE STATEMENTS CONTAINED IN THIS DISCLOSURE STATEMENT DO NOT PURPORT TO BE PRECISE OR COMPLETE STATEMENTS OF ALL THE TERMS AND PROVISIONS OF THE PLANS OR DOCUMENTS REFERRED TO THEREIN, AND REFERENCE IS MADE TO THE PLANS AND TO SUCH DOCUMENTS FOR THE FULL AND COMPLETE STATEMENTS OF SUCH TERMS AND PROVISIONS. THE PLANS THEMSELVES AND THE DOCUMENTS REFERRED TO THEREIN, WHICH ARE OR WILL HAVE BEEN FILED WITH THE COURT, WILL CONTROL THE TREATMENT OF CREDITORS AND HOLDERS OF EQUITY INTERESTS UNDER THE PLANS AND WILL, UPON THE EFFECTIVE DATE OF THE PLANS, BE BINDING UPON HOLDERS OF CLAIMS AGAINST, OR INTERESTS IN THE REORGANIZED DEBTORS, REORGANIZED HEBER DEBTORS AND/OR LIQUIDATION TRUSTS, AS APPLICABLE, AND OTHER PARTIES IN INTEREST, REGARDLESS OF WHETHER OR HOW THEY HAVE VOTED ON THE PLANS. A. Overall Structure of the Plans The Debtors have formulated a Reorganization Plan and a Liquidation Plan that taken together facilitate the successful resolution of these Chapter 11 Cases. The overriding purpose of the Reorganization Plan is to enable the Reorganizing Debtors to emerge from chapter 11 as a scaled down enterprise focused on its current core business operations in the waste-to-energy, domestic independent power production and water and waste-water treatment market segments. The Reorganization Plan is premised upon the establishment of an ESOP that will own all the stock of Reorganized Covanta on the Effective Date. Establishment of the ESOP will generate value by resulting in favorable tax treatment for the Reorganized Debtors under applicable federal tax law, and this value will be shared among the holders of Allowed Claims receiving Distributions under the Reorganization Plan and the ESOP as owner of Reorganized Covanta's stock. The goal of preserving and enhancing the value of the Reorganizing Debtors' continuing operations is further advanced by the Liquidation Plan, pursuant to which the assets which have been deemed to be Non-Core Assets will be sold or liquidated. The assets identified as Non-Core Assets are generally those associated with those entities that have been designated as the Liquidating Debtors. Substantially all of such assets have already been sold in postpetition transactions approved by the Court. Upon consummation of the Liquidation Plan, any remaining assets of a Liquidating Debtor will be contributed to a Liquidation Trust, as described below, and the Liquidating Debtors will be wound down and dissolved by the Liquidating Trustee in accordance with applicable law. Upon the exhaustion of Liquidation Assets in the Liquidation Trust and the complete distribution of any Liquidation Proceeds, if any, to holders of Claims, the Liquidation Plan requires the Liquidation Trustee to close each of the Liquidating Debtors' Chapter 11 Cases with the Court. It should be noted that the proceeds that were generated from postpetition sales and many of the Liquidation Assets of the Liquidating Debtors will not be transferred to the Liquidation Trust, but rather transferred to Reorganized Covanta in accordance with the Liquidation Plan's Secured Creditor Direction and DIP Lender Direction. Each of the Reorganization Plan and the Liquidation Plan constitute separate plans for each of the respective Debtors thereunder. Each of the Plans constitutes a joint plan for the Debtors that are the subject thereof. Pursuant to the Plans, the Reorganizing Debtors, Heber Debtors and the Liquidating Debtors, respectively, have been deemed consolidated solely for purposes of plan administration, procedure and voting. As a result, certain Classes have been established pursuant to the Plans as containing Claims against multiple Debtors. If the Plans are confirmed by the Court and consummated, Classes of Claims against and Equity Interests in the Debtors will receive the treatment described in the Plans and this Disclosure Statement. A description of the Claims and Equity Interests included in each Class of Claims and Equity Interests, the treatment of those Classes under the Plans, the terms of the Plan Notes and Reorganization Plan Equity Securities and Reorganization Plan Warrants and other property (if any) to be distributed to holders of Allowed Claims in those Classes under the Reorganization Plan are described below. The amounts and forms of distributions under the Plans are based upon, among other things, the requirements of applicable law and the Debtors' assessment of their ability to achieve the goals set forth in their Business Plan. B. Classification and Treatment of Claims and Equity Interests Section 1122 of the Bankruptcy Code requires that a plan of reorganization classify the claims of a debtor's creditors and the interests of its equity holders. The Bankruptcy Code also provides that, except for certain claims classified for administrative convenience, a plan of reorganization may place a claim of a creditor or an interest of an equity holder in a particular class only if such claim or interest is substantially similar to the other claims or interests in such class. The Bankruptcy Code also requires that a plan of reorganization provide the same treatment for each claim or interest of a particular class unless the holder of a particular claim or interest agrees to a less favorable treatment of its claim or interest. The Debtors believe that they have complied with such standard. If the Court finds otherwise, however, it could deny confirmation of either Plan if the Claimholders affected do not consent to the treatment afforded them under the respective Plan. The Plans classify Claims and Equity Interests in the following Classes: - ------------------------------------------------------------------------------------------------------------------ Class Reorganization Plan Liquidation Plan - ------------------------------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------------------------------ Class 1 Allowed Priority Non-Tax Claims, which Allowed Priority Non-Tax Claims, which consists consists of all such Claims against each of of all such Claims against each of the the Reorganizing Debtors. Liquidating Debtors. - ------------------------------------------------------------------------------------------------------------------ Class 2 Allowed Project Debt Claims, which consists of N/A the Allowed Secured Claims against the Operating Company Reorganizing Debtors that are secured by Liens on such Reorganizing Debtors' tangible and intangible assets, but excluding the Claims of the Prepetition Lenders and the DIP Lenders. - ------------------------------------------------------------------------------------------------------------------ Class 2H Allowed Heber Secured Claims, which consists of any Secured Claim against a Heber Debtor that is Secured by a Lien on such Heber Debtor's tangible or intangible assets and any Claim against __________ based on a guarantee of a Secured Claim described in the preceding clause of this definition; provided, however, that Heber Secured Claims do not include the Claims of the DIP Lenders, or Intercompany Claims. - ------------------------------------------------------------------------------------------------------------------ Class 3 Subclass 3A: Allowed Secured Bank Claims Class 3A: Allowed Liquidation Secured Claims, which consists of the Secured Bank Subclass 3B: Allowed Secured 9.25% Debenture Claims and the 9.25% Debentures Claims Claims. against each of the Liquidating Pledgor Debtors. Class 3B: Allowed Secured CSFB Claim against Ogden FMCA. - ------------------------------------------------------------------------------------------------------------------ Class 4 Allowed Operating Company Unsecured Claims N/A which consists of all Allowed Unsecured Claims against Operating Company Reorganizing Debtors. - ------------------------------------------------------------------------------------------------------------------ Class 5 Allowed Covanta energy americas unsecured N/A Claims, which consists of all Allowed Unsecured Claims against Covanta Energy Americas. - ------------------------------------------------------------------------------------------------------------------ Class 6 Allowed Covanta Unsecured Claims, which N/A consists of all Allowed Unsecured Claims against Reorganized Covanta and any Intermediate Holding Company Debtor and the 9.25% Deficiency Claims and Prepetition Lender Deficiency Claims. - ------------------------------------------------------------------------------------------------------------------ Class 7 Allowed Heber Unsecured Claims, which consists Allowed Unsecured Liquidation Claims, which of all Allowed Unsecured Claims against a consists of all Allowed Unsecured Liquidation Heber Debtor. Claims against the Liquidating Debtors - ------------------------------------------------------------------------------------------------------------------ Class 8 Class 8 consists of all Allowed Convenience N/A Claims. Convenience Claims are those Unsecured Claims against any Operating Company Reorganizing Debtor in an amount less than $2,500. - ------------------------------------------------------------------------------------------------------------------ Class 9 Intercompany Claims, which consists of Claims Intercompany Claims, which consists of Claims by any by any Reorganizing Debtor, Heber Debtor or Reorganizing Debtor or Liquidating Debtor against any Liquidating Debtor against any Reorganizing Liquidating Debtor. Debtor or Heber Debtor. - ------------------------------------------------------------------------------------------------------------------ Class 10 Convertible Subordinated Bondholder Claims, N/A which consists of all Allowed Claims against Reorganized Covanta by the holders of the Convertible Subordinated Bonds. - ------------------------------------------------------------------------------------------------------------------ Class 11 Equity Interests in Subsidiary Debtors, which Equity Interests in Liquidating Debtors, which consists of the Equity Interests held by any consists of the Equity Interests held in any Reorganizing Debtor in any of the Subsidiary Liquidating Debtors. Debtors. - ------------------------------------------------------------------------------------------------------------------ Class 12 Equity Interests in Covanta Huntington, N/A Covanta Onondaga and DSS Environmental. - ------------------------------------------------------------------------------------------------------------------ Class 13 Old Covanta Stock Equity Interests, which N/A consists of all Equity Interests of holders of Old Covanta Stock. - ------------------------------------------------------------------------------------------------------------------ Class 14 Equity Interests in Heber Debtors N/A - ------------------------------------------------------------------------------------------------------------------
The Debtors believe that they have classified all Claims and Equity Interests in compliance with the requirements of section 1122 of the Bankruptcy Code. If a holder of a Claim or Equity Interest challenges such classification of Claims or Equity Interests and the Court finds that a different classification is required for the Plans to be confirmed, the Debtors, to the extent permitted by the Court, intend to make such modifications to the classifications of Claims or Equity Interests under the Plans to provide for whatever classification might be required by the Court for confirmation. UNLESS SUCH MODIFICATION OF CLASSIFICATION ADVERSELY AFFECTS THE TREATMENT OF A HOLDER OF A CLAIM OR EQUITY INTEREST AND REQUIRES RESOLICITATION, ACCEPTANCE OF EITHER PLAN BY ANY HOLDER OF A CLAIM OR EQUITY INTEREST PURSUANT TO THIS SOLICITATION WILL BE DEEMED TO BE A CONSENT TO EACH PLAN'S TREATMENT OF SUCH HOLDER OF A CLAIM OR EQUITY INTEREST, RESPECTIVELY, REGARDLESS OF THE CLASS AS TO WHICH SUCH HOLDER IS ULTIMATELY DEEMED TO BE A MEMBER. 1. Treatment of Unclassified Claims (a) Administrative Expense Claims Generally Administrative Expense Claims consist primarily of the costs and expenses of administration of the Chapter 11 Cases. They include, but are not limited to, Claims arising under the DIP Financing Facility, the cost of operating the Debtors' businesses since the Initial Petition Date, the outstanding unpaid fees and expenses of the professionals retained by the Debtors and the Creditors Committee as approved by the Court, and the payments necessary to cure prepetition defaults on unexpired leases and executory contracts that are being assumed under the Plans ("Cure"). All payments to professionals in connection with the Chapter 11 Cases for compensation and reimbursement of expenses, and all payments to reimburse expenses of members of the Creditors Committee, will be made in accordance with the procedures established by the Bankruptcy Code and the Bankruptcy Rules and are subject to approval of the Court as reasonable. The Debtors currently anticipate that all Administrative Expense Claims representing (i) Claims against all the Debtors, generally, arising under the DIP Financing Facility and (ii) claims against the Debtors generally for unpaid professional fees and expenses will be paid by the Reorganizing Debtors in accordance with the Reorganization Plan. All Administrative Expense Claims are subject to the Administrative Expense Claim Bar Date, which is thirty (30) days following the Effective Date, except for the following limited claims: (a) United States Trustee Claims; (b) postpetition liabilities incurred and payable in the ordinary course of business by any Reorganizing Debtor; or (c) fees and expenses incurred by (i) Retained Professionals, (ii) persons employed by the Debtors or serving as independent contractors to the Debtors in connection with their reorganization and/or liquidation efforts, or (iii) Bankruptcy Services LLC. To the extent that the Administrative Expense Bar Date applies, failure to file a timely request for payment of an Administrative Expense Claim prior to the Administrative Expense Bar Date shall result in the Administrative Expense Claim being forever barred and discharged. All Retained Professionals and other entities seeking an award by the Court of compensation for services rendered or reimbursement of expenses incurred through and including the Effective Date under subsections 503(b)(2), 503(b)(3), 503(b)(4) or 503(b)(5) of the Bankruptcy Code must file a timely request for payment on or before the date that is forty-five (45) days after the Effective Date. Any such request for payment of compensation for services rendered or reimbursement of expenses incurred that is not filed by the applicable deadline shall be barred. As of September 8, 2003, there was no outstanding balance under the DIP Financing Facility, although the Debtors might make draws from the DIP Credit Facility prior to the Effective Date. Assuming that the Plans are consummated on or before December 31, 2003, the Reorganizing Debtors and Heber Debtors believe that their available cash resources (including funds that will become available pursuant to the contemplated sale of the Geothermal Business) will be sufficient to enable them to pay all Allowed Administrative Expense Claims as of the Effective Date, any professional fees that remain unpaid as of the Effective Date, and all amounts outstanding, if any, under the DIP Financing Facility at such time. Moreover, the Debtors believe that the aggregate amount of Administrative Expense Claims that may become Allowed after the Effective Date will not exceed the Reorganized Debtors, Reorganized Heber Debtors and/or the Liquidating Trustee's ability to pay such Claims when they are Allowed and/or otherwise become due. The procedures governing allowance and payment of Administrative Claims of (i) the Reorganizing Debtors and Heber Debtors are described in Section VII.E below and (ii) the Liquidating Debtors are described in Section VII.F below. (i) Administrative Expense Claims under the Reorganization Plan Subject to the provisions of Article 2.2 of the Reorganization Plan, on the first Distribution Date occurring after the later of (a) the date an Administrative Claim becomes an Allowed Administrative Expense Claim or (b) the date an Administrative Expense Claim becomes payable pursuant to any agreement between a Reorganizing Debtor (or a Reorganized Debtor) and the holder of such Administrative Expense Claim, an Allowed Administrative Claimholder in the Reorganizing Debtors and Heber Debtors' Chapter 11 Cases shall receive, in full satisfaction, settlement, release, and discharge of and in exchange for such Administrative Expense Claim, (i) Cash equal to the unpaid portion of such Allowed Administrative Expense Claim or (ii) such other treatment as to which the Reorganizing Debtors or Heber Debtors (or the Reorganized Debtors or Reorganized Heber Debtors) and such Claimholder shall have agreed upon in writing; provided, however, that Allowed Administrative Expense Claims with respect to liabilities incurred by the Reorganizing Debtors or Heber Debtors in the ordinary course of business during the Chapter 11 Cases shall be paid in the ordinary course of business in accordance with the terms and conditions of any agreements relating thereto. (ii) Contingent Administrative Expense Claims under the DIP Financing Facility On the Effective Date, any outstanding letters of credit issued under Tranche B of the DIP Financing Facility are expected to be replaced with new letters of credit to be issued under the Reinstated L/C Facility. Once such new letters of credit have been issued (and any funded amounts under the DIP Financing Facility have been repaid), the DIP Financing Facility shall be deemed terminated (subject in all respects to any carve-out approved by the Court in the Final Order approving the DIP Financing Facility), and the DIP Lenders shall take all necessary action to confirm the removal of any liens on the properties of the applicable Reorganizing Debtors or Heber Debtors securing the DIP Financing Facility. To the extent that Claims arising under the DIP Financing Facility will not be paid in full as a result of reinstatement of contingent obligations under the Reinstated L/C Facility, acceptance of reinstatement as provided for under the Reorganization Plan by a requisite majority of DIP Lenders as contemplated under the DIP Financing Facility shall be binding on all DIP Lenders in full satisfaction of their Administrative Claim. (iii) Administrative Expense Claim Bar Date Administrative Expense Claims must be filed with the Court and served on counsel for the Debtors prior to the Administrative Expense Claim Bar Date, which is thirty (30) days following the Effective Date. The Administrative Expense Claim Bar Date applies to all holders of Administrative Expense Claims except for holders of the following limited types of claims: (a) United States Trustee Claims; (b) postpetition liabilities incurred and payable in the ordinary course of business by any Reorganizing Debtor; and (c) fees and expenses incurred by (i) Retained Professionals and (ii) persons employed by the Reorganizing Debtors or Heber Debtors or serving as independent contractors to the Reorganizing Debtors or Heber Debtors in connection with their reorganization efforts, including without limitation the Balloting Agent. (iv) Administrative Claims for Compensation and Reimbursement All Retained Professionals, or Persons employed by the Reorganizing Debtors or Heber Debtors or serving as independent contractors to the Reorganizing Debtors or Heber Debtors or any other Persons seeking an award by the Court of compensation for services rendered or reimbursement of expenses incurred through and including the Effective Date under subsections 503(b)(2), 503(b)(3), 503(b)(4) or 503(b)(5) of the Bankruptcy Code must file and serve on counsel for the Reorganizing Debtors and Heber Debtors and as otherwise required by the Court and Bankruptcy Code their respective final applications for allowance of compensation for services rendered and reimbursement of expenses incurred on or before the date that is forty-five (45) days after the Effective Date. All such Allowed Administrative Expense Claims shall be paid in full by the Reorganized Debtors or Reorganized Heber Debtors on the Distribution Date, or upon such other terms as may be mutually agreed upon between the holder of such an Allowed Administrative Expense Claim and the Reorganized Debtors or Reorganized Heber Debtors. Any Person who requests compensation or expense reimbursement for a Substantial Contribution Claim must file an application with the clerk of the Court, on or before the Administrative Expense Bar Date, and serve such application on counsel for the Reorganized Debtors and Reorganized Heber Debtors and as otherwise required by the Court and the Bankruptcy Code on or before such date. (v) Administrative Expense Claims under the Liquidation Plan Except to the extent that the applicable Liquidating Debtor and any holder of an Allowed Administrative Expense Claim agree to a less favorable treatment and as set forth in Sections 2.3 and 2.5 of the Liquidation Plan, each holder of an Allowed Administrative Expense Claims against a Liquidating Debtor, in full satisfaction of such Claims shall be paid Cash in an amount equal to such Claims on the Initial Liquidation Distribution Date from the Operating Reserve provided that any such liabilities not incurred in the ordinary couse of business were approved and authorized by a Final Order of the Court; provided, however, that Allowed Administrative Expense Claims representing liabilities incurred in the ordinary course of business by such Liquidating Debtor, as a debtor-in-possession, shall be paid by the Liquidating Trustee from the Operating Reserve, in the ordinary course of business, consistent with past practice and in accordance with the terms and subject to the conditions of any agreements governing, instruments evidencing, or other documents relating to such transactions. To the extent that the Administrative Expense Claim Bar Date applies, failure to file a timely request for payment of an Administrative Expense Claim prior to the Administrative Expense Claim Bar Date shall result in the Administrative Expense Claim being forever barred and discharged. (b) Priority Tax Claims (i) Priority Tax Claims under the Reorganization Plan Priority Tax Claims are those tax Claims entitled to priority pursuant to section 507(a)(8) of the Bankruptcy Code. The Reorganization Plan provides that Priority Tax Claims, if any, are Unimpaired. Specifically, subject to the consent of the requisite New Facility Lenders, each holder of an Allowed Priority Tax Claim will receive Cash equal to the unpaid portion of such Allowed Priority Tax Claim on or as soon as practical after the later of: (i) thirty (30) days after the Effective Date, or (ii) thirty (30) days after the date on which such Priority Tax Claim becomes Allowed; provided, however, that at the option of the Reorganized Debtors or Reorganized Heber Debtors, a Reorganized Debtor or Reorganized Heber Debtor may pay Allowed Priority Tax Claims over a period not exceeding six (6) years after the date of assessment of the Priority Tax Claims as provided in subsection 1129(a)(9)(C) of the Bankruptcy Code. If a Reorganized Debtor or Reorganized Heber Debtor elects this option as to any Allowed Priority Tax Claim, then the payment of simple interest on the unpaid portion of such Claim shall be made in equal semiannual installments with the first interest payment due on the latest of: (i) six (6) months after the Effective Date, (ii) six (6) months after the date on which such Priority Tax Claim becomes an Allowed Claim, or (iii) such other time as may be agreed to by the holder of such Priority Tax Claim and the Reorganized Debtor. Simple interest shall be paid on the unpaid portion of such Allowed Priority Tax Claim, without penalty of any kind, at the statutory rate of interest provided for such taxes under applicable nonbankruptcy law. Under the Reorganization Plan, no holder of an Allowed Priority Tax Claim will be entitled to any payments on account of any pre-Effective Date interest accrued on, or penalty arising after the Petition Date with respect to or in connection with, an Allowed Priority Tax Claim. Any such Claim or demand for any such accrued postpetition interest or penalty will be discharged upon confirmation of the Reorganization Plan in accordance with section 1141(d)(1) of the Bankruptcy Code, and the holder of a Priority Tax Claim will be precluded from assessing or attempting to collect such accrued interest or penalty from the Reorganized Debtors or Reorganized Heber Debtors or its property. (ii) Priority Tax Claims under the Liquidation Plan Subject to the consent of the requisite New Facility Lenders, each holder of an Allowed Priority Tax Claim against a Liquidating Debtor will receive in full satisfaction, settlement, release and discharge of and in exchange for such Allowed Priority Tax Claim, Cash equal to the unpaid portion of such Allowed Priority Tax Claim on or as soon as practical after the later of: (i) thirty (30) days after the Effective Date, or (ii) thirty (30) days after the date on which such Priority Tax Claim becomes Allowed provided, however, that at the option of the Liquidating Trustee, the Liquidating Trustee may pay Allowed Priority Tax Claims over a period of six (6) years after the date of assessment of the Priority Tax Claim as provided in subsection 1129(a)(9)(C) of the Bankruptcy Code, provided, further, that in no event shall the Liquidating Trustee extend such date of repayment beyond the Final Liquidation Determination Date. If the Liquidating Trustee elects this option as to any Allowed Priority Tax Claim, then the Liquidating Trustee shall make payment of simple interest on the unpaid portion of such Claim semiannually without penalty of any kind, at the statutory rate of interest provided for such taxes under applicable nonbankruptcy law, with the first interest payment due on the latest of: (i) six (6) months after the Effective Date, (ii) six (6) months after the date on which such Priority Tax Claim becomes an Allowed Claim, or (iii) such other time as may be agreed to by the holder of such Priority Tax Claim and the Liquidating Trustee, provided, however, that the Liquidating Trustee shall reserve the right to pay any Allowed Priority Tax Claim, or any remaining balance of such Allowed Priority Tax Claim, in full, at any time on or after the Effective Date, without premium or penalty. 2. Unimpaired Classes of Claims The Classes listed below are Unimpaired by the Plans Reorganization Plan Liquidation Plan - ------------------- ---------------- Class 1: Allowed Priority Non-Tax Claims Class 1: Allowed Priority Class 2: Allowed Project Debt Claims Non-Tax Claims Class 2H: Allowed Heber Secured Claims Class 7: Allowed Heber Unsecured Claims Class 12: Allowed Equity Interests in Covanta Huntington, Covanta Onondaga and DSS Environmental 3. Impaired Classes of Claims and Interests The Classes listed below are Impaired by the Plans. Reorganization Plan Liquidation Plan - ------------------- ---------------- Class 3: Allowed Covanta Secured Claims Class 3: Allowed Liquidation Secured Claims Class 4: Allowed Operating Company Unsecured Claims Class 7: Allowed Unsecured Liquidation Claims Class 5: Allowed Intermediate Holding Company Class 9: Intercompany Claims Unsecured Claims Class 11: Equity Interests in Liquidating Debtors Class 5: Allowed Covanta Energy Unsecured Claims Class 8: Allowed Convenience Class Claims Class 9: Intercompany Claims Class 10: Subordinated Claims Class 11: Equity Interests in Subsidiary Debtors Class 13: Old Covanta Stock Equity Interests Class 14: Equity Interests in the Heber Debtors
4. Treatment of Classified Claims Pursuant to section 1122 of the Bankruptcy Code, set forth below is a designation of classes of Claims against and Equity Interests in each of the Debtors. All Claims and Equity Interests, except Administrative Claims and Priority Tax Claims, are placed in the Classes set forth below. In accordance with section 1123(a)(1) of the Bankruptcy Code, Administrative Expense Claims and Priority Tax Claims of the kinds specified in sections 507(a)(1) and 507(a)(8) of the Bankruptcy Code have not been classified, and their treatment is set forth in Article II of each Plan. A Claim or Equity Interest is placed in a particular Class only to the extent that the Claim or Equity Interest falls within the description of that Class and is classified in other Classes to the extent that any portion of the Claim or Equity Interest falls within the description of such other Classes. A Claim or Equity Interest is also placed in a particular Class only for the purpose of voting on, and receiving distributions pursuant to, the Plans only to the extent that such Claim or Equity Interest is an Allowed Claim or an Allowed Equity Interest in that Class and such Claim or Equity Interest has not been paid, released or otherwise settled prior to the Effective Date. (a) Unimpaired Classes of Claims under the Reorganization Plan and Liquidation Plan (as applicable). (i) Class 1 - Allowed Priority Non-Tax Claims. Each holder of an Allowed Class 1 Claim shall receive, in full settlement, release and discharge of its Class 1 Claim, either (i) Cash, on the Distribution Date, in an amount equal to such Allowed Claim, or (ii) on such other less favorable terms as the Reorganizing Debtors and Reorganized Debtors and the holder of an Allowed Priority Non-Tax Claim agree. (ii) Class 2 - Allowed Project Debt Claims. On the Effective Date, the legal, equitable and contractual rights of the holders of Allowed Class 2 Claims will be reinstated in full satisfaction, release and discharge of their respective Class 2 Claims and will remain unaltered under the Reorganization Plan, except as the Reorganizing Debtors and the holders of Allowed Class 2 Claims may otherwise agree or as such holders may otherwise consent. Notwithstanding the foregoing, no contractual provisions or applicable law that would entitle the holder of an Allowed Class 2 Claim to demand or receive payment of such Claim prior to the stated maturity of such Claim, terminate any contractual relationship or take such other enforcement action (as may be applicable) from and after the occurrence of a default that occurred prior to the Effective Date shall be enforceable against the Reorganized Debtors. (iii) Class 2H - Allowed Heber Secured Claims. On the Effective Date, to the extent such claims are not paid in full on or prior to the Effective Date, the legal, equitable and contractual rights of the holders of Allowed Class 2H Claims will be reinstated in full satisfaction, release and discharge of their respective Class 2H Claims and will remain unaltered under the Reorganization Plan, except as the Heber Debtors and the holders of Allowed Class 2H Claims may otherwise agree or as such holders may otherwise consent; provided, however, that that the assets of the Heber Debtors subject to Liens, Claims and encumbrances of holders of Allowed Class 2H Claims may be sold, subject to such Liens, Claims and encumbrances, as part of the Geothermal Sale contemplated by this Reorganization Plan, and provided further that to the extent an Allowed Class 2H Claim is paid in full on or prior to the Effective Date, the Liens, Claims and encumbrances securing such claim shall be released and discharged immediately upon such payment in full. Notwithstanding the foregoing, no contractual provisions or applicable law that would entitle the holder of an Allowed Class 2 Claim to demand or receive payment of such Claim prior to the stated maturity of such Claim, terminate any contractual relationship or take such other enforcement action (as may be applicable) from and after the occurrence of a default that occurred prior to the Effective Date shall be enforceable against the Reorganized Heber Debtors. (iv) Class 7 - Allowed Heber Unsecured Claims. On the Distribution Date, each holder of an Allowed Class 7 Claim shall receive, in full satisfaction, release and discharge of its Class 7 Claim, a Cash payment equal to the full amount of its Allowed Class 7 Claim, on the Distribution Date. (v) Class 12 - Allowed Equity Interests in Covanta Huntington, Covanta Onondaga and DSS Environmental. As of the Effective Date, holders of Equity Interests in Covanta Huntington, Covanta Onondaga and DSS Environmental shall be reinstated, in full satisfaction, release, and discharge of any Allowed Class 12 Equity Interests. (b) Impaired Classes of Claims under the Reorganization Plan and Liquidation Plan (as applicable). (i) Class 3 - Allowed Reorganized Covanta Secured Claims. (A) Reorganization Plan: Class 3 consists of all Allowed Reorganized Covanta Secured Claims. Class 3 is divided into two Subclasses for Distribution purposes: Subclass 3A consists of the Allowed Secured Bank Claims and Subclass 3B consists of Allowed Secured 9.25% Debenture Claims. Allowed Class 3 Claims are all deemed secured by the same Prepetition Collateral for the purpose of the Plans. Accordingly, pursuant to the Reorganization Plan, an Initial Distribution of the Secured Class 3 Total Distribution is made between Subclass 3A and Subclass 3B, with each Subclass receiving in the aggregate its Pro Rata Share based upon the Allowed Subclass 3A Claim Amount and the Allowed Subclass 3B Claim Amount, respectively. The Secured Class 3 Total Distribution consists of the following types of consideration: [(i) Distributable Cash, (ii) Excess Distributable Cash (if any), (iii) the New High Yield Secured Notes, (iv) New Secured CPIH Notes, (v) Reorganized CPIH Preferred Stock, (vi) New Lender Warrants, and (vii) [Additional Class 3 Warrants.] As explained above, the Initial Distribution between Subclass 3A and Subclass 3B is made on a pro rata basis. However, the Reorganization Plan provides that only those holders of Allowed Class 3 Claims that participate as New Facility Lenders will receive Distributable Cash as part of their Class 3 Distribution. Accordingly, Distributable Cash will be included in the Initial Distribution to Subclass 3A or Subclass 3B only to the extent that the Allowed Subclass 3A Claim Amount or Allowed Subclass 3B Claim Amount relates to an Allowed Subclass 3A Claim or Subclass 3B Claim, as the case may be, that is held by a New Facility Lender. Similarly, the Reorganization Plan provides that only those holders of Allowed Class 3 Claims that are Additional New Lenders will receive New Lender Warrants together with their New High Yield Secured Notes as part of their Class 3 Distribution. Accordingly, New Lender Warrants will be included in the Initial Distribution to Subclass 3A or Subclass 3B only to the extent that the Allowed Subclass 3A Claim Amount or Allowed Subclass 3B Claim Amount relates to an Allowed Subclass 3A Claim or Subclass 3B Claim, as the case may be, that is held by one of the Additional New Lenders. After implementing the Initial Distribution, the Reorganization Plan provides for Distribution among holders of Allowed Claims in Subclass 3A and Subclass 3B as follows: Distribution Among Holders of Allowed Subclass 3A Claims: --------------------------------------------------------- First, the Priority Bank Lenders shall receive first, to the extent available as part of the Subclass 3A Recovery, Excess Distributable Cash in an amount equal to the amount of such Allowed Priority Bank Claims and thereafter New High Yield Secured Notes in a principal amount equal to the remaining amount of such Allowed Priority Bank Claims; Second, immediately after making the Distribution on account of the Allowed Priority Bank Claims, in full settlement, release and discharge of Non-Priority Subclass 3A Claims, the holders of Allowed Non-Priority Subclass 3A Claims shall receive a Pro Rata Subclass Share of the remaining Subclass 3A Recovery; where such distribution shall consist of Distributable Cash, New High Yield Secured Notes and New Lender Warrants, which types of Distributions may be further allocated depending on whether the holder of a Subclass 3A Claim is a New Facility Lender, one of the Additional New Lenders or a Non-Participating Lender. Distribution Among Holders of Allowed Subclass 3B Claims: -------------------------------------------------------- First, each holder of an Allowed Subclass 3B Claim shall receive its Pro Rata Subclass Share of Distributions of the Subclass 3B Recovery; provided, however, that with respect to the Subclass 3B Recovery, (i) the New Facility Lenders in Subclass 3B, if any, shall receive their Secured Value Distribution first, to the extent available, in the form of Distributable Cash and thereafter in the form of New High Yield Secured Notes; and (ii) the members of the Additional New Lenders in Subclass 3B shall receive their Secured Value Distribution solely in the form of New High Yield Secured Notes plus a Pro Rata Subclass Share of the New Lender Warrants; and provided further that the Non-Participating Lenders in Subclass 3B shall not receive any Distributable Cash or any Distribution of New Lender Warrants. Second, in the event that the parties to the 9.25% Adversary Proceeding reach a settlement to their dispute, the Distributions made to each holder of an Allowed Subclass 3B Claim shall be subject to adjustment and modification in accordance with the provisions of that settlement. (B) Liquidation Plan: 1. Class 3A. Allowed Liquidation Secured Claims, consisting of Secured Bank Claims and the 9.25% Debenture Claims: Under the Liquidation Plan, each holder of an Allowed Liquidation Secured Claim would be entitled, assuming its security interest is valid and absent the Secured Creditor Direction (further described below), to receive on any Liquidation Distribution Date, such holder's Pro Rata Share of any Net Liquidation Proceeds and Liquidation Assets of the Liquidating Pledgor Debtors. On the Effective Date, each holder of an Allowed Class 3A Liquidation Secured Claim shall be deemed to have received, an account of its Class 3A Allowed Liquidation Secured Claim, the distribution it receives as a holder of a Class 3A or 3B Claim under the Reorganization Plan, as applicable, in full satisfaction of its Class 3A Claim, and the Liquidating Trustee and the Liquidating Debtors will implement the Secured Creditor Direction. Furthermore, to the extent that any Liquidating Pledgor Debtors have any Residual Liquidation Assets, which the Liquidating Trustee determines in its sole discretion can profitably be sold or monetized, then the holders of Class 3A Claims under the Liquidation Plan, shall be entitled to their Pro Rata Share of the Net Liquidation Proceeds on the succeeding Liquidation Distribution Date resulting from such sale, after the payment of the Liquidation Expenses attributable to such sale. 2. Class 3B. Class 3B consists of the Allowed Secured CSFB Claims against Ogden FMCA: On the Effective Date, or as soon thereafter as practicable, Ogden FMCA shall cause to be transferred, pursuant to Section 6.1(b) of the Liquidation Plan, to CSFB, in its capacity as holder of the Allowed Secured CSFB Claim, the Ogden FMCA Collateral. (ii) Class 4 - Allowed Operating Company Unsecured Claims. On the Distribution Date, each holder of an Allowed Class 4 Claim shall be entitled to receive a Distribution of Reorganization Plan Unsecured Notes in the aggregate principal amount equal to the amount of its Allowed Class 4 Claim. With respect to Allowed Class 4 Claims for and to the extent which insurance is available, such Class 4 Claims shall be paid in the ordinary course of the Reorganizing Debtors business to the extent of such insurance, when any such Claim becomes an Allowed Claim and such insurance proceeds become available; provided, however, that to the extent insurance is not available or is insufficient, treatment of such Allowed Class 4 Claims shall be as otherwise provided pursuant to the Reorganization Plan. Furthermore, each holder of an Allowed Class 4 Claim shall have the option to elect for treatment as holder of a Class 4 Claim, in which case, at the option of the Reorganizing Debtors, each such holder of an Elective Convenience Claim shall be entitled to receive either (A) payment in Cash, in an amount equal to the lesser of $2,500 or 75% of such Allowed Class 4 Claim, or (B) the Reorganization Plan Unsecured Notes that such holder would otherwise have been entitled to receive for its Allowed Class 4 Claim pursuant to the Reorganization Plan if such holder had not made such an election. (iii) Class 5 -Allowed Covanta Energy Americas Unsecured Claims. On the Distribution Date, each holder of an Allowed Class 5 Claim shall receive, in full satisfaction, release and discharge of its Class 5 Claim, a Distribution of Reorganization Plan Unsecured Notes in the aggregate principal amount equal to the amount of its Allowed Class 5 Claim. (iv) Class 6 - Allowed Covanta Unsecured Claims. On the Distribution Date, each holder of an Allowed Class 6 Claim shall receive, in full satisfaction, release and discharge of its Class 6 Claim, (1) Reorganization Plan Warrants representing 7 1/2% of the equity of Reorganized Covanta, subject to any agreed upon pro rata dilution imposed on all Reorganization Plan Warrants, as required for ESOP purposes, (2) 5% of the first $80 million of net cash proceeds when realized from the sale of the CPIH assets and which proceeds are distributed to holders of Allowed Class 3 Claims , (3) 10% of Reorganized CPIH Preferred Stock; provided, however, that such Preferred Stock shall only be entitled to distributions to the extent of cash proceeds when realized from the sale of the CPIH assets in excess of $90 million, (4) the waiver by the Prepetition Lenders [and the holders of the 9.25% Debentures] of (i) any Deficiency Claim on account of the Allowed Secured Bank Claim [and the Allowed Secured Claim of the 9.25% Debentures] and (ii) the subordination provisions contained in the Convertible Subordinated Bonds, and (5) all proceeds from any cause of action or claim of the Reorganizing Debtors arising under sections 544, 545, 547, 548, 549 and 550 of the Bankruptcy Code (the "Avoidance Actions"), and the right to pursue any Avoidance Actions on terms to be agreed upon with the Reorganizing Debtors; provided that in no event shall such Avoidance Actions or other actions include claims or causes of action against any of the Prepetition Lenders, DIP Lenders or the holders of the 9.25% Debentures. In the event that the parties to the 9.25% Adversary Proceeding reach a settlement to their dispute, the Distributions made to each holder of an Allowed Class 6 Claim (other than a Class 6 Claim consisting of a 9.25% Deficiency Claim or a Prepetition Lender Deficiency Claim) shall be subject to adjustment and modification in accordance with the provisions of that settlement. With respect to Allowed Class 6 Claims for and to the extent which insurance is available, such Class 6 Claims shall be paid in the ordinary course of the Reorganizing Debtors business to the extent of such insurance, when any such Claim becomes an Allowed Claim and such insurance proceeds become available; provided, however, that to the extent insurance is not available or is insufficient, treatment of such Allowed Class 6 Claims shall be as otherwise provided in the Reorganization Plan. The Committee and the Bondholders Committee have reached a tentative settlement in principle of the 9.25% Debentures Adversary Proceeding. To achieve a consensual settlement, final agreement and approval by the Bondholders Committee remains subject to their approval of the treatment of the 9.25% Debentures Claims under the Reorganization Plan. [Furthermore, the subordination provisions contained in the Convertible Subordinated Bonds shall be enforced against the holders of Convertible Subordinated Bond Claims, such that all Distributions that the holders of Convertible Subordinated Bond Claims would otherwise be entitled to receive under the Reorganization Plan, shall instead be Distribute don a pro rata basis the holders of Allowed Class 6 Claims that are entitled to the benefit of such subordination provisions.] The Plans and this Disclosure Statement may be modified after the date hereof in order to conform them to the terms of this tentative settlement. (iv) Class 7 - Allowed Unsecured Liquidation Claims. On the Distribution Date, each holder of an Allowed Class 7 Claim shall receive, in full satisfaction, release and discharge of its Class 7 Claim, a Cash payment equal to the full amount of its Allowed Class 7 Claim, on the Distribution Date. (v) Class 8 - Allowed Convenience Claims. On the Distribution Date, each holder of an Allowed Class 8 Claim shall receive, in full satisfaction, release and discharge of its Class 8 Claim, a paymentin Cash, in an amount equal to seventy-five (75%) of the Allowed amount of such Class 8 Claim. (vi) Class 9 - Intercompany Claims. (A) Reorganization Plan: Under the Reorganization Plan, Class 9 consists of all Intercompany Claims and is subdivided into three Subclasses for Distribution purposes: Subclass 9A consists of the Liquidating Debtors Intercompany Claims; Subclass 9B consists of the Reorganized Debtors Intercompany Claims; and Subclass 9C consists of the Heber Debtors Intercompany Claims. On the Effective Date, all Subclass 9A Claims shall be deemed cancelled or waived in exchange for the Reorganizing Debtors' contribution of the Operating Reserve Deficiency Amount, if any, to the Operating Reserve. On the Effective Date, all Subclass 9B Claims shall be, in the sole discretion of the applicable Reorganizing Debtor or Reorganized Debtor, either be: (a) preserved and reinstated, (b) released waived and discharged, or (c) contributed to the capital of the obligor corporation. On the Effective Date, each Subclass 9C Claims shall be deemed released, waived and discharged. (B) Liquidation Plan: Under the Liquidation Plan, Class 9 consists of all Intercompany Claims. On the Effective Date, all Intercompany Claims under the Liquidation Plan shall be cancelled, annulled and extinguished. (vii) Class 10 -Subordinated Claims. As of the Effective Date, holders of Class 10 Claims shall not receive any Distributions or retain any property under the Reorganization Plan in respect of Class 10 Claims, in full satisfaction, release and discharge of such Claims. All instruments evidencing Subordinated Claims shall be cancelled, annulled or extinguished. (viii) Class 11 - Equity Interests in Subsidiary Debtors and Liquidating Debtors. The holders of Equity Interests in each Subsidiary Debtor and Liquidating Debtor shall not be entitled to receive any Distribution or retain any property under the Plans, except that any such Equity Interest in a Subsidiary Debtor shall continue to be held by the Reorganizing Debtors that originally held such Equity Interest, which Equity Interest shall be evidenced by existing capital stock, partnership and/or membership interests. (ix) Class 13 - Old Covanta Stock Equity Interests. Holders of Allowed Equity Interests in Old Covanta Stock shall not receive any Distribution or retain any property under the Reorganization Plan in respect of Class 13 Equity Interests. All Class 13 Equity Interests in Old Covanta Stock shall be cancelled, annulled and extinguished, in full satisfaction, release and discharge of any Allowed Class 13 Equity Interests. (xi) Class 14 - Equity Interests in Heber Debtors. Class 14 consists of all Equity Interests in the Heber Debtors. Class 14 is subdivided into two Subclasses for Distribution purposes: Subclass 14A consists Equity Interests in Covanta SIGC Energy I, Covanta SIGC Energy II, Heber Field Company and Heber Geothermal Company; Subclass 14B consists of Equity Interests in Amor 14 and Second Imperial Geothermal Company. Holders of Allowed Class 14A Equity Interests shall not receive any Distribution or retain any property under the Heber Reorganization Plan in respect of Class 12 Equity Interests. All Class 12 Equity Interests shall be cancelled, annulled and extinguished, in full satisfaction, release and discharge of any Allowed Class 12 Equity Interests. Holders of Allowed Class 14B Equity Interests shall not receive any Distribution under the Heber Reorganization Plan, except that any such Equity Interests shall continue to be held by the Heber Debtor or Reorganizing Debtor that originally held such Equity Interests, which Equity Interests shall continue to be evidenced by the existing capital stock, partnership and/or membership interests. C. Confirmability, Modification and Severability of the Plans The confirmation requirements of section 1129 of the Bankruptcy Code must be satisfied separately with respect to each Reorganizing Debtor and each Liquidating Debtor. Subject to the provisions of Section 5.5 of the Reorganization Plan and Section 5.5 of the Liquidation Plan, the Reorganizing Debtors, Heber Debtors and Liquidating Debtors reserve the right, in accordance with the Bankruptcy Code and the Bankruptcy Rules, to amend or modify the Plans at any time prior to the entry of the Confirmation Order. Additionally, the Reorganizing Debtors, Heber Debtors and Liquidating Debtors reserve the right to alter, amend, modify, revoke or withdraw the Plans as they apply to any particular Reorganizing Debtor or Liquidating Debtor. After the entry of the Confirmation Order, the Reorganizing Debtors or Liquidating Debtors may, upon order of the Court, amend or modify this Reorganization Plan, in accordance with section 1127(b) of the Bankruptcy Code, or remedy any defect or omission or reconcile any inconsistency in the Plans in such manner as may be necessary to carry out the purpose and intent of the Plans. A holder of an Allowed Claim or Allowed Equity Interest that is deemed to have accepted the Plans shall be deemed to have accepted the Plans as modified if the proposed modification does not materially and adversely change the treatment of the Claim or Equity Interest of such holder. The Debtors have reserved their rights in the Plans to redesignate Debtors as Reorganizing Debtors, Heber Debtors or Liquidating Debtors at any time prior to ten (10) days prior to the Confirmation Hearing. Holders of Claims or Equity Interests who are entitled to vote on the Reorganization Plan or Liquidation Plan and who are affected by any such redesignation shall have five (5) days from the notice of such redesignation to vote to accept or reject the Reorganization Plan or the Liquidation Plan, as the case may be. The Debtors also have reserved the right to withdraw prior to the Confirmation Hearing one or more Debtors from the Reorganization Plan or the Liquidation Plan, as the case may be, and to thereafter file a plan solely with respect to such Debtor. If, prior to the Confirmation Date, any term or provision of either of the Plans is determined by the Court to be invalid, void or unenforceable, the Court will have the power to alter and interpret such term or provision to make it valid or enforceable to the maximum extent practicable, consistent with the original purpose of the term or provision held to be invalid, void or unenforceable, and such term or provision will then be applicable as altered or interpreted. Notwithstanding any such holding, alteration or interpretation, the remainder of the terms and provisions of the Plans will remain in full force and effect and will in no way be affected, impaired or invalidated by such holding alteration or interpretation. The Confirmation Order will constitute a judicial interpretation that each term and provision of the Plans, as it may have been altered or interpreted in accordance with the forgoing, is valid and enforceable pursuant to its terms. Additionally, if the Court determines that either of the Plans, as it applies to any particular Debtor, is not confirmable pursuant to section 1129 of the Bankruptcy Code (and cannot be altered or interpreted in a way that makes it confirmable), such determination shall not limit or affect (a) the confirmability of the Plans as they apply to any other Debtor or (b) the Debtors' ability to modify the Plans, as they apply to any particular Debtor, to satisfy the confirmation requirements of section 1129 of the Bankruptcy Code. D. Certain Considerations with Respect to Treatment of Class 3 Secured Claims under the Reorganization Plan The Prepetition Lenders and the 9.25% Debenture Holders both assert their Claims are secured by the same Prepetition Collateral consisting of substantially all of the assets of Covanta and all of its existing and future domestic subsidiaries, to the extent permitted, and by a pledge of 100% of the shares of substantially all of Covanta's existing and future domestic subsidiaries, and 65% of the shares of substantially all of Covanta's foreign subsidiaries. Accordingly, the Allowed Secured Claims of the Prepetition Lenders and the 9.25% Debenture holders have been classified together as Secured Claims in Class 3 pursuant to the Reorganization Plan. While the Claims of the Prepetition Lenders and the 9.25% Debenture Holders have been classified together because they share in the same Prepetition Collateral, there are nonetheless some differences in their respective rights and interests in these Chapter 11 Cases, as described further below. Consequently, the Reorganization Plan establishes separate Subclasses for the Prepetition Lenders and the 9.25% Debenture Holders, placing them in Subclass 3A and 3B, respectively, in order to properly implement redistributions and third party settlements that only relate to Claims within these separate Subclasses. As a result, the Reorganization Plan provides for treatment of Allowed Class 3 Claims on two levels - on the Class level and the Subclass level. In the first instance, all holders of Allowed Class 3 Claims are treated equally as members of the same Class, as a result of their Claims being secured by the same Prepetition Collateral. In that regard, all holders of Allowed Secured Claims in Class 3 will initially receive a Pro Rata Share of Distributions consisting of a mix of Reorganization Plan Notes, Reorganization Plan Equity Securities and Reorganization Plan Warrants, Distributable Cash and Excess Distributable Cash, if available. The aggregate Distribution to Class 3 is initially divided between Subclass 3A and Subclass 3B strictly on a pro-rata basis, based upon the respective aggregate amount of the Allowed Secured Claims in each Subclass. Then, as described further below, the Reorganization Plan implements certain redistributions on the level of both Subclass 3A and Subclass 3B. As a result, of these redistributions, certain members of Subclass 3A will receive enhanced recoveries, with the result that the percentage recovery for the members of Class 3, while based on an initial pro-rata Distribution, will ultimately vary from Subclass 3A to Subclass 3B, as well as from one member of Subclass 3A to another. Additionally, in the event that the parties to the 9.25% Adversary Proceeding reach a settlement to their dispute, members of Subclass 3B may waive their rights to receive a certain portion of their Distribution. 1. The Subclass 3A Distribution Pursuant to the terms of an Intercreditor Agreement by and among the Debtors and the Prepetition Lenders, certain of the Prepetition Lenders were entitled to receive priority recoveries and ratable paydowns with respect to the Priority Bank Claims. In order to account for the priority rights arising under the Intercreditor Agreement, the Reorganization Plan includes certain provisions that relate solely to the Distribution among holders of Subclass 3A Claims. Specifically, as a first step in making a Subclass 3A Distribution, the Reorganization Plan provides that the holders of Allowed Priority Bank Claims will receive first, to the extent available, Excess Distributable Cash, and thereafter New High Yield Secured Notes in an amount equal to the Allowed Priority Bank Claims in full settlement, release and discharge of such Claims. After payment in full of these Priority Bank Claims, the Reorganization Plan then provides that the holders of Allowed Non-Priority Subclass 3A Claims shall receive a Distribution consisting of a Pro Rata Share of the remaining Subclass 3A Recovery. The Subclass 3A Distribution will be made in full settlement, release and discharge of all Claims of the Prepetition Lenders arising in connection with the Prepetition Credit Agreement and the Intercreditor Agreement. 2. Voting Rights with Respect to Class 3 Distributions and the Settlement Agreements Since Class 3 Claims are Impaired under the Reorganization Plan, the holders of Allowed Claims in Class 3 are entitled to vote to accept or reject the Reorganization Plan. The members of Subclasses 3A and 3B shall vote together as a single Class for purposes of accepting or rejecting the Secured Class 3 Total Distribution under the Reorganization Plan. E. Implementation of the Reorganization Plan 1. Continued Corporate Existence Each of the Reorganized Debtors and Reorganized Heber Debtors will continue to exist after the Effective Date as a separate corporate entity, with all the powers of a corporation under applicable law in the jurisdiction in which each applicable Reorganized Debtor or Reorganized Heber Debtor is incorporated and pursuant to the respective certificate of incorporation and bylaws in effect prior to the Effective Date, except to the extent such certificate of incorporation and bylaws are amended pursuant to the Reorganization Plan. 2. Exit Financing (a) Domestic Facilities Upon emergence from the Chapter 11 Cases, the Reorganizing Debtors, other than those identified as CPIH Borrowers (defined below) and those Reorganizing Debtors that are subject to existing contractual restrictions prohibiting such a transition (the "Domestic Borrowers") expect to enter into a new credit facility with certain of the Prepetition Lenders, Additional New Lenders and potentially third party banks and financial institutions acceptable to the Agents of the bank group, of up to $127 million, which will consist of (i) a revolving credit line of $40 million consisting of commitments solely for cash borrowings (the "New Revolver Facility") and, (ii) a revolving credit line of $87 million, consisting of commitments solely for the issuance of letters of credit to support obligations to be identified, including commitments for the continuation of, or the issuance of replacement letters of credit to replace, extend or continue, all outstanding Tranche A letters of credit under the DIP Financing Facility (the "New L/C Facility"). Additionally, the Domestic Borrowers expect to enter into a revolving credit line of approximately $176.0 million with their Prepetition Lenders, consisting of commitments solely for the continuation of, or the issuance of replacement letters of credit to replace, extend or continue, outstanding Tranche B letters of credit under the DIP Financing Facility (the "Existing L/C Facility") (together with the New Revolver Facility and the New L/C Facility, the "Domestic Facilities"). The Domestic Facilities shall be guaranteed by the CPIH Borrowers on a joint and several basis (the "CPIH Borrower Guaranty"). The New Revolver Facility will be used to finance the Domestic Borrowers' working capital needs and other general corporate purposes. The New L/C Facility will be used for the purposes described above, and the Existing L/C Facility will be issued solely to replace, extend or continue existing letters of credit. The New Revolver Facility, the New L/C Facility and the Domestic Borrower Guaranty (as defined herein) will be secured by a first priority perfected lien on all existing and future personal, mixed and real property of the Domestic Borrowers, subject to existing contractual restrictions, valid, enforceable and perfected third party liens on project assets and certain other permitted liens. They will constitute senior obligations of the Domestic Borrowers and rank pari passu with each other and the Domestic Borrower Guaranty (described below). The Existing L/C Facility will be secured by a lien on the foregoing collateral junior and subordinate only to the liens in favor of the New Revolver Facility, New L/C Facility and Domestic Borrower Guaranty. (b) CPIH Facilities Upon emerging from bankruptcy, Covanta Power International Holdings Inc. ("CPIH") and each of its subsidiaries (including certain domestic entities holding the equity interests in Covanta's foreign subsidiaries) holding the assets and operations of the international independent power project business (the "CPIH Borrowers") expect to enter into a new credit facility with certain members of the Company's prepetition bank group and the Additional New Lenders, of up to $90 million, which will consist of (i) a revolving credit line of up to $10 million, consisting solely of cash borrowings (the "CPIH Revolver Facility"), and (ii) funded debt of $80 million representing a like amount of prepetition funded secured loans (the "CPIH Term Loan Facility") (together with the CPIH Revolver Facility, the "CPIH Facilities"). The CPIH Revolver Facility will be guaranteed by the Domestic Borrowers on a joint and several basis (the "Domestic Borrower Guaranty"). The CPIH Revolver Facility will be used to finance the CPIH Borrowers' working capital needs and other general corporate purposes. The CPIH Term Loan Facility will be used to replace pre-existing secured debt of Covanta. The CPIH Revolver Facility and the CPIH Borrower Guaranty will be secured by first priority perfected liens on all existing and future personal, mixed and real property of the CPIH Borrowers, subject to existing contractual restrictions, valid, enforceable and perfected third party liens on the project assets and certain other permitted liens. The obligations under the CPIH Revolver Facility and the CPIH Borrower Guaranty will constitute senior secured obligations of the CPIH Borrowers and will rank pari passu with each other. The CPIH Term Loan Facility will have a lien on the foregoing collateral junior and subordinate only to the liens in favor of the CPIH Revolver Facility and the CPIH Borrower Guaranty. (c) Documentation; Court approval Documents evidencing the Domestic Facilities and the CPIH Facilities, will be filed by the Debtors with the Court as part of the Plan Supplement no later than five (5) days prior to the last day for voting with respect to the Reorganization Plan. In the Confirmation Order the Court will approve the Domestic Facilities and the CPIH Facilities in substantially the same form filed with the Court and authorize the Reorganizing Debtors to execute the same together with such other documents as the Domestic Facilities and the CPIH Facilities Lenders may reasonably require in order to effectuate the treatment afforded to such parties under the Domestic Facilities and the CPIH Facilities. 3. Reorganization Plan Notes and Reorganization Plan Equity Securities and Warrants Pursuant to the Reorganization Plan, the Reorganizing Debtors will issue Reorganization Plan Notes, Reorganization Plan Equity Securities and Reorganization Plan Warrants for Distribution to holders of Allowed Claims as described in Section VII.E.3. The material terms of the Reorganization Plan Notes, Reorganization Plan Equity Securities and Reorganization Plan Warrants are as follows: (a) Securities to be issued to holders of Allowed Claims by Reorganized Covanta New High Yield Secured Notes: New High Yield Secured Notes will be issued initially in an aggregate principal amount of $[200 million accreting to an aggregate principal amount of $225 million upon maturity seven (7) years after the Effective Date]. A semi-annual cash coupon of $9.25 million will be payable on the outstanding New High Yield Secured Notes. The New High Yield Secured Notes will be secured by a third priority lien on the Post-Confirmation Collateral. Reorganization Plan Unsecured Notes: Reorganization Plan Unsecured Notes will be issued in a principal amount equal to the aggregate amount of Allowed Class 4 Claims and Allowed Class 5 Claims with a maturity date eight (8) years after the Effective Date. Interest will be payable semi-annually at an interest rate of 7.5%. Annual amortization payments of approximately $4.8 million (paid at end of year) will be paid beginning in year 2, with the balance due on maturity. Tax Notes: Tax Notes will be issued in an aggregate principal amount equal to the aggregate amount of Allowed Priority Tax Claims with a maturity six (6) years after the Effective Date. Interest will be payable semi-annually at an interest rate of no more than [ ]. Reorganization Plan Warrants: The Reorganization Plan Warrants will be issued by Reorganized Covanta on the Effective Date in accordance with the terms of the Reorganization Plan, which shall entitle a holder to receive upon maturity ten (10) years following the Effective Date an amount in cash, notes or stock equal to the excess in the value of a single share of Reorganized Covanta Common Stock as of such maturity date over the fair market value of a single share of Reorganized Covanta Common Stock on the Effective Date, subject to certain restrictions on transfer and other terms and conditions of the Reorganization Plan Warrant Agreement contained in the Plan Supplement. (b) Securities to be issued to holders of Allowed Claims by Reorganized CPIH New CPIH Funded Debt: New CPIH Funded Debt will be issued in an aggregate principal amount of $80 million with a maturity date five (5) years after the Effective Date. The New CPIH Funded Debt will be obligations of CPIH, secured by a second priority security interest in substantially all the assets of CPIH and its domestic subsidiaries, subject to contractual and statutory limitations, but will be non-recourse to the Reorganized Debtors other than CPIH and its subsidiaries. Reorganized CPIH Preferred Stock: Reorganized CPIH Preferred Stock will be issued with an aggregate liquidation preference of [$30 million]. The Reorganized CPIH Preferred Stock will grant voting rights, conversion rights and other features on terms and conditions as set forth in the form of CPIH Preferred Stock certificate contained in the Plan Supplement. 4. Corporate Restructuring The Reorganizing Debtors will undertake a corporate restructuring pursuant to which all Reorganizing Debtors that own or operate businesses outside of the United States shall become direct or indirect subsidiaries of CPIH. 5. Revesting of Corporate Assets The Reorganized Debtors and Reorganized Heber Debtors shall be revested with the assets of their bankruptcy estates (except for leases and executing contracts that have not yet been assumed or rejected, which shall only be deemed vested if and when they are assumed) on the Effective Date. Assets revested in the Reorganizing Debtors and Heber Debtors shall include all ownership interest of any Reorganizing Debtor in any Subsidiary Debtor, by virtue of the deemed consolidation of the Reorganizing Debtors and Heber Debtors for purposes of the Reorganization Plan, subject to the terms of the corporate restructuring described below. 6. Heber Debtors Coversion Into Limited Liability Companies On the second business day prior to the Effective Date, the Heber Debtors that are stock corporations shall be authorized to convert into limited liability companies. 7. Directors and Officers of Group (a) On the Effective Date, the operation of the Reorganized Debtors shall become the general responsibility of their respective boards of directors who shall, thereafter, have the responsibility for the overall management, control and operation of the Reorganized Debtors. (b) The board of directors of Reorganized Covanta shall consist initially of those persons identified in a filing submitted to the Court by the Reorganizing Debtors prior to the Confirmation Hearing. [Board members will serve an initial term for a period from the Effective Date through the date of the annual meeting that first occurs after a date which is one (1) year after the Effective Date and for one (1) year terms thereafter (with subsequent terms subject to election by [shareholder vote/ESOP Committee/ESOP trustee]) with each such term expiring at the conclusion of the next annual meeting of stockholders.] (c) The officers of the Reorganized Debtors and the directors of the Reorganized Debtors other than Reorganized Covanta that are in office immediately before the Effective Date shall continue to serve immediately after the Effective Date in their respective capacities. Such persons shall be deemed elected pursuant to the Confirmation Order, and such elections shall be effective on and after the Effective Date, without any requirement of further action by stockholders or other owners of the Reorganized Debtors. 8. Certificate of Incorporation and Bylaws The certificates of incorporation and bylaws of the Reorganized Debtors and Reorganized Heber Debtors will be amended as may be required in order that they are consistent with the provisions of the Reorganization Plan and the Bankruptcy Code. On the Effective Date, the Reorganized Debtors and Reorganized Heber Debtors are authorized to, and shall, without the need for any further corporate action, adopt and, as applicable, file their respective amended organizational documents with the applicable Secretary of State. The amended organizational documents shall prohibit the issuance of nonvoting equity securities, as required by sections 1123(a) and (b) of the Bankruptcy Code, subject to further amendment as permitted by applicable law. Any modification to the certificate of incorporation of any of the Reorganized Debtors and Reorganized Heber Debtors as originally filed may be filed after the Confirmation Date and may become effective on or prior to the Effective Date. 9. Employment, Retirement and Other Agreements Employment Agreements Pursuant to applicable provisions of the Bankruptcy Code, the Plans currently contemplate the rejection of all existing prepetition employment agreements. Retirement Plans Following the Effective Date, the Reorganized Debtors intend to continue the Pension Plan and meet the minimum funding standards under ERISA and the IRC, administer and operate the Pension Plan in accordance with its terms and the applicable provisions of ERISA and the IRC and pay all insurance premiums with respect to the PBGC. In addition, the Reorganized Debtors currently intend to continue the SEIU Pension Plan after the Effective Date. For a more in-depth discussion of the Pension Plan and SEIU Pension Plan please refer to Section III.A. Following the Effective Date, the Reorganized Debtors intend to continue the (i) Savings Plan, (ii) Security Fund, (iii) Hennepin Plan, (iv) Resource Pension Plan, (v) Supplementary Plan, (vi) Resource Plan and (vii) Energy Select Plan. In addition, the Reorganized Debtors intend to merge outstanding participant account balances in the Resource 401(k) Plan into the Savings Plan and expect such merger to have become effective prior to the consummation of the Reorganization Plan. The Reorganized Debtors are currently in the process of terminating the (i) Metropolitan 401(k) Plan, (ii) Energy Services 401(k) Plan and (iii) Select Plan since no obligations or liabilities currently exist thereunder and expect such terminations to have been completed prior to the consummation of the Reorganization Plan. For a more in-depth discussion of each of these plans please refer to Section III.A. Retiree Medical Programs Following the Effective Date, the Reorganized Debtors, with certain adjustments and exceptions as discussed below, intend to continue the Retiree Medical Programs for those participants currently eligible to receive post-retirement benefits. With respect to the medical coverage provided to participants in the Core Retiree Program, the Debtors are currently in the process of adjusting the levels of such coverage so that post-retirement medical benefits provided thereunder are equivalent in scope to the medical benefits currently afforded active senior executives of the Company. The Company is in the process of providing each of the affected retirees with written notice of such adjustment. The rate of contribution for such retirees will generally remain at the same cost. With respect to certain of these retirees, however, the Company is in the process of advising such retirees that the retiree medical coverage they currently receive is not covered by section 1114 of the Bankruptcy Code and, as a result, such retirees will be solely responsible for the cost associated with the continuation of such coverage. The Reorganized Debtors intend to continue to maintain the dental benefits provided for under the Core Retiree Program, as applicable and the life insurance benefits provided to core retirees, as applicable, at the levels and for the duration of the periods that the Reorganized Debtors and Reorganized Heber Debtors are otherwise obligated to provide such benefits. Following the Effective Date, the Reorganized Debtors will continue to maintain the benefits provided under the Non-Core Retiree Program and the life insurance benefits provided to applicable retirees at the levels and for the duration of the periods that the Reorganized Debtors are otherwise obligated to provide such benefits. Notwithstanding anything herein to the contrary, the Reorganized Debtors will continue to maintain all of their existing rights with respect to the Retiree Medical Programs, including the right to amend, modify or terminate the Retiree Medical Programs. Other Agreements Other than as set forth herein or as otherwise prohibited by applicable law, to the extent the Reorganized Debtors have in place as of the Effective Date any severance, change in control, retirement, indemnification and other agreements (excluding any existing employment agreements) with their active directors, officers and employees who will continue in such capacities or a similar capacity following the Effective Date, or retirement income plans, welfare benefit plans and other plans for such persons, such agreements, programs and plans will remain in place after the Effective Date and the Reorganized Debtors will continue to honor such agreements, programs and plans. Such agreements, programs and plans also may include equity, bonus and other incentive plans in which officers and other employees of the Reorganized Debtors may be eligible to participate, subject in each case to the Reorganized Debtors rights to amend, terminate or modify such agreements, programs and plans at any time as permitted by the terms and provisions thereof or applicable non-bankruptcy law. 10. Management Agreements On the Effective Date and pursuant to the Reorganization Plan, management of the Reorganized Debtors shall be entitled to receive a cash incentive bonus in an amount equal to 2 1/2% of the amount (if any) by which the difference between (x) Free Cash and (y) Exit Cost is greater than Distributable Cash. For these purposes, "Free Cash" means the total amount of domestic cash held by the Reorganized Debtors on the Effective Date immediately prior to giving effect to any distributions or transactions contemplated by the Reorganization Plan. However, Free Cash does not include any cash that the Reorganizing Debtors and Heber Debtors are restricted from using pursuant to the terms of any agreements to which they are party, including any project financing or operating agreements nor does it include post-confirmation working capital in the amount of $10 million. For these purposes, "Distributable Cash" means an amount of cash equal to the lesser of (i) $60 million and (ii) the amount of (x) Free Cash minus (y) Exit Costs. The terms of certain post-Effective Date management incentive, employment and non-competition agreements are currently under discussion by the Company and its various creditor constituencies. 11. Corporate Action Each of the matters provided for under the Reorganization Plan involving the corporate structure of the Reorganizing Debtors and Heber Debtors or corporate action to be taken by or required of the Reorganizing Debtors and Heber Debtors will, as of the Effective Date, be deemed to have occurred and be effective as provided herein, and will be authorized and approved and, to the extent taken prior to the Effective Date, ratified in all respects without any requirement of further action by stockholders, creditors, or directors of the Reorganizing Debtors and Heber Debtors. 12. Effective Date Payments and Post-Effective Date Financing All Cash necessary for the Reorganized Debtors to make payments pursuant to the Reorganization Plan will be obtained from the Reorganized Debtors' cash balances and operations and borrowings under the Exit Financing Agreements. On the Effective Date, the Reorganized Debtors are authorized to enter into and shall enter into the Exit Financing Agreements and effect all transactions and take any actions provided for in or contemplated by the Exit Financing Agreement, including without limitation, the payments of all fees and other amounts contemplated by the Exit Financing Agreements. 13. New Common Stock, Plan Notes and Collateral Documents; Further Transactions On the Effective Date, in accordance with the terms and conditions of the Reorganization Plan and without the need for any further corporate action, Reorganized Covanta is authorized to issue the (i) the New High Yield Secured Notes, (ii) the Reorganization Plan Unsecured Note, (iii) the Reorganized Covanta Common Stock and (iv) the Reorganization Plan Warrants; and Reorganized CPIH is authorized to issue the (i) New CPIH Funded Debt and (ii) Reorganized CPIH Preferred Stock. On the Effective Date, in accordance with the provisions of the Reorganization Plan, the Reorganized Debtors shall execute and deliver the new collateral documents providing a security interest with respect to the Post-Confirmation Collateral securing the obligations under the Exit Financing Agreements. 14. Establishment of ESOP and Election of S Corp Status In order to emerge from the Chapter 11 Cases as a viable going concern entity while at the same time awarding the employees of the Reorganized Debtors with an equity interest in Reorganized Covanta, on or before the Effective Date Reorganized Covanta intends to (i) establish and implement an ESOP to which it will contribute all of the outstanding shares of Reorganized Covanta stock, and (ii) take all steps necessary to elect S corporation status effective as of January 1, 2004. In addition to the potential economic benefit offered to employees through participation in the ESOP structure, the establishment and implementation of an ESOP, in conjunction with Reorganized Covanta's conversion to an S corporation, will maximize recovery for other parties in interest to the Debtors' Chapter 11 Cases by minimizing the Reorganized Debtors' current tax liabilities in a manner that will result in significantly increased cash flow and permit the Reorganized Debtors exitto pay down a larger portion of their Allowable Claims, thereby allowing the Debtors to emerge from bankruptcy and benefit the employees participating in the ESOP. In brief, an ESOP is a tax-qualified employee benefit plan (for purposes of Section 401(a) of the IRC), similar to other types of employee defined contribution plans (such as a profit-sharing or "401(k)" plan), designed primarily to invest in the stock of the employer. The Reorganization Plan contemplates a contributory ESOP to which Reorganized Covanta would contribute 100% of the outstanding shares of its stock upon the confirmation of the Reorganization Plan. In order to be effective, the independent fiduciary, U.S. Trust, must decide, after consultation with its financial advisor, D&P, whether the acceptance of such a contribution would be in the best interests of the ESOP and its beneficiaries, i.e., the employees of the Reorganized Debtors who are eligible to participate therein. The ESOP will serve as an additional employee benefit and will not reduce any benefits participants currently receive under other pre-existing employee benefit plans, including the Savings Plan or other retirement plans that will be maintained by the Reorganized Debtors, except to the extent contribution limitations under the IRC apply. Generally, all domestic salaried and hourly full-time employees of the Reorganized Debtors who have attained the age of twenty-one (21) and who have performed at least one (1) year of continuous service for the Reorganized Debtors will be eligible to participate in the ESOP, unless such employee is represented by a collective bargaining unit. The ESOP will be administered by the ESOP Committee which shall have the authority to make all decisions, not otherwise required by applicable law to be made by the independent fiduciary, concerning the administration and interpretation of the ESOP. Following the initial contribution to the ESOP of 100% of the outstanding stock of Reorganized Covanta, Reorganized Covanta intends to make recurrent annual contributions of stock to the ESOP equal in amount to [20]% of the then outstanding stock of Reorganized Covanta. Both the initial and annual contributions made to the ESOP on behalf of a participant, when combined with any other contributions made in the same plan year on behalf of such participant (either by the participant or any of the Reorganized Debtors) to any other tax-qualified defined contribution plan maintained or sponsored by the Reorganized Debtors must not exceed, in the aggregate, the lesser of $40,000 or 100% of such participant's annual compensation. In addition, if the initial contribution or any annual contribution were to exceed an amount equal to 25% of the aggregate annual compensation of all covered participants, Reorganized Covanta would be required to pay a 10% excise tax on the amount of such excess. All contributions will be contributed to participants' accounts in proportion to such participants' annual eligible compensation (as defined in the governing ESOP plan document), taking into account a maximum annual per participant compensation of $200,000 (subject to annual adjustment by IRS for cost of living increases). Participants will fully vest in their respective accounts upon the earlier of (i) completion of five (5) years of participation in the ESOP, (ii) death or (iii) disability. In the event a participant's employment with the Reorganized Debtors is terminated for any reason other than death or disability prior to vesting, the shares held in such participant's account will be immediately forfeited and used to offset future annual recurrent contributions. Generally, any participant who has attained age fifty-five (55) and completed at least ten (10) years of participation in the ESOP shall be permitted, for the six (6) year period thereafter, to direct the ESOP to reinvest at least 25% of such participant's account balance among at least three (3) diverse investment alternatives. It is currently contemplated that the ESOP will raise cash, to the extent necessary to meet such diversification obligations and for the period the stock of Reorganized Covanta is not publicly traded, by either selling the shares held in the participant's account back to Reorganized Covanta, an affiliate of Reorganized Covanta or a third party. Valuations for such a sale, as well as annual valuations to be performed for annual reports to participants, the Department of Labor and the IRS, shall be based upon an independent third-party's appraisal during the period Reorganized Covanta stock is not publicly traded. Distribution of an account balance to a participant will be made, in the event of (i) a termination of such participant's employment following such participant's having attained normal retirement age (with at least five (5) years of service), at the end of the calendar year beginning after such termination of employment and (ii) any other termination of such participant's employment, at the end of the calendar year following the fifth calendar year beginning after such termination of employment. This effectively means that participant distributions will not be made until the completion of the first ten (10) years of the ESOP's existence. In addition, because of certain limitations imposed by the IRC upon the number of permissible Subchapter S corporation shareholders, all participant distributions will be made in cash, for an amount equal to the fair market value of a participant's account as of the date of such distribution, rather than shares of Reorganized Covanta's stock. In order to raise cash to honor such distribution obligations, it is currently contemplated that the ESOP will, for the period Reorganized Covanta stock is not publicly traded, sell the shares of Reorganized Covanta stock held in a participant's account either back to Reorganized Covanta, an affiliate of Reorganized Covanta or a third party. Sales to affiliates and third parties must recognize and adhere to the shareholder limits referenced above, including limitations on the number and nature of permissible shareholders, as well as recognize the tax effect any such sale will have upon the purchaser. In the event any dividends are to be paid on shares of Reorganized Covanta stock held in a participant's account, such dividends shall be used to acquire additional shares of Reorganized Covanta stock, which shall then be allocated to such participant's account. Such additional shares shall be first acquired from departing participants entitled to account distributions. With respect to voting rights, participants shall be entitled to vote shares allocated to their accounts with respect to any corporate matter involving the voting of such shares with respect to the approval or disapproval of any corporate merger or consolidation, recapitalization, reclassification, liquidation, dissolution, sale of substantially all the assets of a trade or business or such similar transaction. The independent fiduciary shall vote the shares held by the ESOP on all other matters, including election of members of Reorganized Covanta's Board of Directors. Reorganized Covanta shall have the right to amend, modify or terminate the ESOP at any time, subject to the requirement that no participant's accrued benefit be reduced. The ESOP has been structured with the intent that it be qualified under Section 401 of the IRC. Accordingly, Covanta intends to request a determination letter from the Internal Revenue Service with respect to the ESOP's qualified status. Although Covanta expects to receive an affirmative determination letter from the IRS and intends to make such modifications as the IRS may require in connection therewith, there can be no assurance that a favorable determination letter will be received. 15. Preservation of Causes of Action On and after the Effective Date, the Reorganized Debtors and Reorganized Heber Debtors will retain and have the exclusive right to enforce any and all present or future rights, claims or causes of action against any Person and rights of the Reorganized Debtors and Reorganized Heber Debtors that arose before or after the Petition Date, including, but not limited to, (a) rights, claims, causes of action, avoiding powers, suits and proceedings arising under sections 544, 545, 548, 549, 550 and 553 of the Bankruptcy Code and (b) those rights, claims and causes of action transferred to the Reorganized Debtors and Reorganized Heber Debtors pursuant to the Secured Creditor Direction and the DIP Lender Direction. The Reorganized Debtors and Reorganized Heber Debtors may pursue, abandon, settle or release any or all such rights of action, as they deem appropriate, without the need to obtain approval or any other or further relief from the Court. The Reorganized Debtors and Reorganized Heber Debtors may, in their discretion, offset any such claim held against a Person against any payment due such Person under the Reorganization Plan; provided, however, that any claims of any of the Reorganized Debtors and Reorganized Heber Debtors arising before the Petition Date shall first be offset against Claims against any of the Reorganized Debtors and Reorganized Heber Debtors arising before the Petition Date. 16. Cancellation of Existing Equity Securities and Agreements Except for purposes of evidencing a right to distributions under the Reorganization Plan or otherwise provided under the Reorganization Plan, on the Effective Date, all the agreements and other documents evidencing (i) any Claims or rights of any holder of a Claim against the applicable Reorganizing Debtor, including all indentures and notes evidencing such Claims and (ii) any options or warrants to purchase Equity Interests, obligating Reorganizing Covanta to issue, transfer or sell Equity Interests or any other capital stock of Reorganizing Covanta, shall be cancelled; provided, however, that notwithstanding the foregoing, the Reorganized Debtors and Reorganized Heber Debtors shall remain obligated with respect to liens, security interests or encumbrances in property of the Reorganized Debtors and Reorganized Heber Debtors that have been granted pursuant to any executory contracts that have been assumed in accordance with Article IX of the Reorganization Plan or pursuant to the Exit Financing Agreements. 17. Exclusivity Period The Debtors will retain the exclusive right to amend or modify the Plan, and to solicit acceptances of any amendments to or modifications of the Plan, through and until the Effective Date. 18. Deemed Consolidation for Procedural, Administrative and Voting Purposes The Reorganization Plan does not provide for the substantive consolidation of the Reorganizing Debtors' or Heber Debtors' Estates. Subject to the occurrence of the Effective Date, the Reorganizing Debtors and Heber Debtors shall be deemed consolidated for the following purposes under the Reorganization Plan: (i) as provided with respect to Class 11 Claims, no Distributions shall be made under the Reorganization Plan on account of Equity Interests in Subsidiary Debtors; and (ii) in some instances, Claims against more than one Reorganizing Debtor have been grouped together into a single Class of Claims for voting and distribution purposes. Such deemed consolidation is for purposes of Reorganization Plan administration and procedure and will not affect: (i) the legal and organizational structure of each Reorganized Debtors and Reorganized Heber Debtors; (ii) the ownership interest of any Reorganizing Debtor in any Subsidiary Debtor and (iii) pre and post-Petition Date guarantees, Liens and security interests that are required to be maintained (a) in connection with executory contracts or unexpired leases that were entered into during the Chapter 11 Cases or that have been or will be assumed or (b) pursuant to the Reorganization Plan or the instruments and documents issued in connection with the Reorganization Plan (including without limitation, the Exit Financing Agreements). F. Implementation of the Liquidation Plan 1. The Secured Creditor Direction and the DIP Lender Direction Based upon the Debtors' extensive negotiations with the Secured Bank Lenders and the 9.25% Debenture Holders and the compromises reached by the Debtors generally in their Chapter 11 Cases, further described in Section VII.D. above, the Debtors have proposed that the Secured Bank Lenders and the 9.25% Debenture Holders contribute their Distributions, to which they would otherwise be entitled under the Liquidation Plan (consisting of (i) the proceeds of certain postpetition asset sales and (ii) certain other Claims of the Liquidating Debtors upon which the Secured Bank Lenders and 9.25% Debenture Holders have a first priority secured lien) to Reorganized Covanta. The transfers described above are referred to in the Liquidation Plan as the Secured Creditor Direction and the DIP Lender Direction. Under the Secured Creditor Direction and the DIP Lender Direction, the Secured Bank Lenders and the 9.25% Debenture Holders are deemed to direct that the Distributions (consisting of the collateral referred to above) to which they are otherwise entitled to under the Liquidation Plan be transferred to Reorganized Covanta. Furthermore, as the Secured Bank Lenders and 9.25% Debenture Holders hold Claims under both Plans, the Secured Creditor Direction and the DIP Lender Direction is intended to enhance the value of Reorganized Covanta and thus, derivatively inure to the benefit of the such creditors via their Distributions under the Reorganization Plan. It is estimated that (i) the amount of Cash proceeds to be transferred pursuant to the Secured Creditor Direction and the DIP Lender Direction is approximately $10,639,000 and (ii) the approximate value of all other Liquidation Assets transferred pursuant to the Secured Creditor Direction and the DIP Lender Direction is $1,999,318. The Debtors further propose that up to $500,000 of the Cash subject to the transfers described above be transferred to the Operating Reserve, which shall be used by the Liquidating Trustee to fund the implementation of the Liquidation Plan. The Liquidating Debtors believe that after the transfers contemplated by the Secured Creditor Direction and the DIP Lender Direction, there will be de minimis Liquidation Assets, if any, remaining with the Liquidating Debtors and thereby transferred to the Liquidating Trust pursuant to the Liquidation Plan. 2. Funding of the Implementation of the Liquidation Plan As described in Section VIII.F.1 above, the Debtors currently contemplate that on the Effective Date, the Liquidating Debtors and the Liquidating Trustee will implement the Secured Creditor Direction and the DIP Lender Direction. The Secured Creditor Direction and the DIP Lender Direction will operate to fund the implementation of the Liquidation Plan by requiring that $500,000 of the Liquidation Proceeds that would otherwise be transferred to Reorganized Covanta will remain in the accounts of the Liquidating Debtors and shall be transferred by the Liquidating Trustee to the Operating Reserve, provided, however, to the extent that the sum of all the Cash in the accounts of the Liquidating Debtors is less than $500,000 on the Effective Date, then (i) the Liquidating Trustee shall transfer the sum of all such Cash in the Liquidating Debtors' accounts to the Operating Reserve and (ii) Reorganized Covanta shall transfer the Operating Reserve Deficiency Amount to the Operating Reserve. The Liquidating Debtors believe that $500,000 is sufficient to fund the implementation of the Liquidation Plan, in accordance with Section 9.14(b) of the Liquidation Plan. 3. Transfer of Liquidation Assets On the Effective Date, each Liquidating Debtor shall irrevocably transfer and assign its Residual Liquidation Assets, if any, or cause such Residual Liquidation Assets to be transferred and assigned to the Liquidating Trust, to hold in trust for the benefit of all holders of Allowed Claims with respect to each such Liquidating Debtor pursuant to the terms hereof and of the Liquidating Trust Agreement, provided, however, that prior to the transfers contemplated hereby, the Liquidating Trustee and Liquidating Debtors, as applicable, shall make the transfers contemplated by the Secured Creditor Distribution and the DIP Lender Direction to Reorganized Covanta and to the Operating Reserve. In accordance with section 1141 of the Bankruptcy Code and except as otherwise provided by this Liquidation Plan or the Liquidating Trust Agreement, upon the Effective Date, title to the Residual Liquidation Assets shall pass to the Liquidating Trust free and clear of all Claims and Equity Interests. The Liquidating Trustee shall pay, or otherwise make Distributions on account of, all Claims against the Liquidating Debtors whose Residual Liquidation Assets were contributed to such Liquidating Trust strictly in accordance with the Liquidation Plan. The Liquidation Debtors do not believe that the Residual Liquidation Assets, if any, will provide value for a distribution to creditors. 4. Distribution of the Bank Agreement Ogden FMCA Collateral. The Liquidation Plan provides that on the Effective Date, or as soon thereafter as practicable, Ogden FMCA shall cause to be transferred to CSFB, as holder of the Allowed Secured CSFB Claim, the Bank Agreement Ogden FMCA Collateral free and clear of all Claims and Equity Interests, in accordance with section 1141 of the Bankruptcy Code. 5. Dissolution of the Liquidating Debtors Following the transfers contemplated above and pursuant to the DIP Lender Direction, each Liquidating Debtor shall be dissolved by the Liquidation Trustee pursuant to applicable state law. The Liquidating Trustee shall have all the power to wind up the affairs of each Liquidating Debtor under applicable state laws (including the filing of certificates of dissolution) in addition to all the rights, powers and responsibilities conferred by Bankruptcy Code, the Liquidation Plan, the Confirmation Order and the Liquidating Trust Agreement. 6. The Liquidating Trustee (a) The Liquidating Trustee shall be designated by the Liquidating Debtors in the Notice of Designation, which shall be filed with the Bankruptcy Court on or before thirty (30) days prior to the Confirmation Hearing. The Liquidating Trustee's appointment shall become effective upon the occurrence of the Effective Date. (b) Compensation of the Liquidating Trustee for Dissolution Expenses. The Liquidating Trustee shall be paid for all reasonable and necessary Dissolution Expenses (including the reasonable and necessary fees and expenses of Retained Liquidation Professionals) out of the Operating Reserve in the following manner. On or before any Liquidating Trustee Billing Date, the Liquidating Trustee shall send the Liquidating Trustee Fee Notice and any Retained Liquidation Professional Fee Notices to the Oversight Nominee. Fifteen (15) days after sending the Liquidating Trustee Fee Notice and any Retained Liquidation Professional Fee Notices to the Oversight Nominee, the Liquidating Trustee shall be entitled to withdraw from the Operating Reserve the Dissolution Expenses claimed in such Liquidating Trustee Fee Notice and such Retained Liquidation Professional Fee Notice, provided, however, that if the Oversight Nominee sends a Fee Dispute Notice within such fifteen (15) day period to the Liquidating Trustee or a Retained Professional, then the Liquidating Trustee shall only be entitled to withdraw any undisputed portion of such Dissolution Expenses from the Operating Reserve on such date. As to the disputed portion of such Dissolution Expenses, within five (5) days receipt of the Fee Dispute Notice, the Liquidating Trustee or applicable Retained Liquidation Professional must either (a) notify the Oversight Nominee that it will reduce the Dissolution Expenses in accordance with the Fee Dispute Notice or (b) commence a proceeding in the Court to determine the reasonableness, accuracy or proper scope of the disputed Dissolution Expenses. The Liquidating Trustee shall be paid for all Liquidation Expenses in the manner specified in Section 9.3 of the Liquidation Plan. (c) Recovery or Realization of Liquidation Proceeds. To the extent that the Liquidating Trustee determines in its sole discretion that it could profitably realize Liquidation Proceeds from the sale, transfer, collection or monetization of any Residual Liquidation Assets, which shall not include any of the Liquidation Assets transferred to Reorganized Covanta pursuant to the Secured Creditor Direction or the DIP Lender Direction, then the Liquidating Trustee shall liquidate such Residual Liquidation Assets in accordance with the provisions of the Liquidation Plan. Alternatively, if the Liquidating Trustee determines that it would not be profitable to pursue the sale, transfer, collection or monetization of any Residual Liquidation Assets of any respective Liquidating Debtor, then the Liquidating Trustee shall abandon such assets in accordance with Section 9.10 of the Liquidation Plan. All Liquidation Expenses incurred by the Liquidating Trustee in the sale, transfer, collection or monetization of Residual Liquidation Assets shall be paid only from the recoveries thereon. (d) Distributions. On the Liquidation Distribution Date following the realization of any Liquidation Proceeds from the sale, transfer, collection or monetization of any Residual Liquidation Assets, the Liquidating Trustee shall distribute any Net Liquidation Proceeds to the holders of Allowed Claims in accordance with the Liquidation Plan. The Liquidating Trustee shall provide notice to the Oversight Nominee in the Liquidation Trustee Billing Notice of (i) the realization of any Liquidation Proceeds; and (ii) any planned Distribution of any Net Liquidation Proceeds to be made on the next Liquidation Distribution Date. (e) Engagement of Professionals. The Liquidating Trustee shall obtain the approval of the Oversight Nominee prior to retention and engagement of any Retained Liquidation Professionals. Such approval shall not be unreasonably delayed or withheld. Each Retained Liquidation Professional shall submit its Retained Liquidation Professional Fee Notice to the Liquidating Trustee five (5) days prior to the Liquidating Trustee Billing Date. The fees and expenses of such professionals shall be (i) paid by the Liquidating Trustee out of the Operating Reserve so long as such fees and expenses constitute Dissolution Expenses and (ii) paid from the sale, transfer, collection or monetization of any Liquidation Assets, so long as the fees and expenses constitute Liquidation Expenses. The fees and expenses of Retained Liquidation Professionals are subject to the approval of the Oversight Nominee and any disputes concerning the fees and expenses of Retained Professionals will be dealt with in accordance with Section 9.2 of the Liquidation Plan. (f) Status of the Liquidating Trustee. Effective on the Effective Date, the Liquidating Trustee shall be the representative of each particular Liquidating Debtor's Estate as that term is used in section 1123(b)(3)(B) of the Bankruptcy Code and shall have the rights and powers provided for in the Liquidating Trust Agreement. In its capacity as the representative of an Estate, the Liquidating Trustee shall be the successor-in-interest to each Liquidating Debtor with respect to any action commenced by such Liquidating Debtor prior to the Confirmation Date, except with respect to the Claims of the Liquidating Pledgor Debtors and the Liquidating Non-Pledgor Debtors that are contributed to Reorganized Covanta pursuant to the Secured Creditor Direction or the DIP Lender Direction. All such actions and any and all other claims or interests constituting Residual Liquidation Assets, and all claims, rights and interests thereunder shall be retained and enforced by the Liquidating Trustee as the representative of such Estate pursuant to section 1123(b)(3)(B) of the Bankruptcy Code (except as provided for in the Secured Creditor Direction and the DIP Lender Direction). The Liquidating Trustee shall be a party in interest as to all matters over which the Court has jurisdiction. (g) Authority. Subject to the limitations contained in the Liquidation Plan, the Liquidating Trustee shall have the following powers, and authorities, and duty, by way of illustration and not of limitation: (i) Manage, sell and convert all or any portion of the Liquidation Assets to Cash and distribute the Net Liquidation Proceeds as specified in the Liquidation Plan; (ii) Release, convey or assign any right, title or interest in or about the Residual Liquidation Assets or any portion thereof; (iii) Pay and discharge any costs, expenses, fees of Retained Liquidation Professionals or obligations deemed necessary to preserve or enhance the value of the Residual Liquidation Assets, discharge duties under the Liquidation Plan or perform the purposes of the Liquidation Plan; (iv) Open and maintain bank accounts and deposit funds and draw checks and make disbursements in accordance with the Liquidation Plan; (v) Engage and have such attorneys, accountants, agents, tax specialists, financial advisors, other professionals, and clerical assistance as may, in the discretion of the Liquidating Trustee, be deemed necessary for the purposes specified under the Liquidation Plan; (vi) Sue and be sued and file or pursue objections to Claims and seek to estimate them; (vii) Enforce, waive or release rights, privileges or immunities of any kind; (viii) In general, without in any manner limiting any of the foregoing, deal with the Residual Liquidation Assets or any part or parts thereof in all other ways as would be lawful for any person owning the same to deal therewith, whether similar to or different from the ways specified in the Liquidation Plan; (ix) Abandon any Residual Liquidation Assets in accordance with Section 9.10 of the Liquidation Plan; (x) File certificates of dissolution and take any other action necessary to dissolve and wind up the affairs of the Liquidating Debtors in accordance with applicable state law; (xi) As soon as is practicable after the Final Distribution Date of each Liquidating Debtor, ask the Court to enter the Final Order closing the Chapter 11 Case of each such Liquidating Debtor; and (xii) Without limitation, do any and all things necessary to accomplish the purposes of the Liquidation Plan. (h) Objectives. In selling the Residual Liquidation Assets, or otherwise monetizing them, the Liquidating Trustee shall use his or her best efforts to maximize the amount of Liquidation Proceeds derived therefrom. The Liquidating Trustee shall cause all Residual Liquidation Assets not otherwise abandoned to be sold or otherwise monetized by the second anniversary of the Effective Date. (i) Distributions. The Liquidating Trustee shall be responsible for making Distributions described in the Liquidation Plan, and shall coordinate as necessary, to make the transfers of the Distributions and other Liquidation Assets as contemplated by the Secured Creditor Direction and the DIP Lender Direction. (j) Abandonment. The Liquidating Trustee may abandon, on thirty (30) days' written notice to the Oversight Nominee and United States Trustee, any property which he or she determines in its reasonable discretion to be of de minimis value to the Liquidating Trust, including any pending adversary proceeding or other legal action commenced or commenceable by the Liquidating Trust. If either the Oversight Nominee or United States Trustee provides a written objection to the Liquidating Trustee prior to expiration of such thirty-day period with respect to the proposed abandonment of such property, then such property may be abandoned only pursuant to an application made to the Court. (k) Resignation. The Liquidating Trustee may resign at any time by giving at least thirty (30) days' written notice to the Oversight Nominee and the United States Trustee. In case of the resignation, removal or death of a Liquidating Trustee, a successor shall thereupon be appointed by agreement of the Oversight Nominee and the United States Trustee. (l) Reserves. The Liquidating Trustee shall establish and maintain the Disputed Claims Reserve and the Operating Reserve. (i) The Disputed Claims Reserve. Upon (i) the Liquidating Trustee's determination that Disputed Claims have been asserted against a Liquidating Debtor and (ii) the Liquidating Trustee's identification of Liquidation Proceeds that are not Collateral, the Liquidating Trustee shall establish the Disputed Claims Reserve, in order to make disbursements to each holder of a Disputed Claim against the applicable Liquidating Debtor, as provided in Article VII of the Liquidation Plan, whose Claim is or becomes an Allowed Claim, as the case may be, in the amount specified in the Final Order allowing such Disputed Claim on the Liquidation Distribution Date occurring after such order becomes a Final Order (ii) The Operating Reserve. On the Effective Date, the Liquidating Trustee shall establish the Operating Reserve in order to pay all Administrative Expense Claims, Priority Tax Claims, Priority Non-Tax Claims and any Oversight Nominee Expenses and Dissolution Expenses. The Operating Reserve shall be funded in an amount not to exceed $500,000.00, pursuant to the Secured Creditor Direction and to the extent necessary, Reorganized Covanta's payment of any Operating Reserve Deficiency Amount, if any. Upon the latest to occur of (i) the entry of the Final Order closing each of the Liquidating Debtors' Chapter 11 Cases, (ii) the Final Liquidation Determination Date and (iii) the final payment of any Dissolution Expenses and Oversight Nominee Expenses, to the extent that there is any Cash in the Operating Reserve, the Liquidating Trustee shall contribute such Cash to Reorganized Covanta. (m) Statements. The Liquidating Trustee shall maintain a record of the names and addresses of all holders of Allowed Unsecured Liquidation Claims against the applicable Liquidating Debtor for purposes of mailing Distributions to them. The Liquidating Trustee may rely on the name and address set forth in the applicable Liquidating Debtor's schedules filed with the Court, except to the extent a different name and/or address shall be set forth in a proof of claim filed by such holder in the cases, and the Liquidating Trustee may rely on the names and addresses in such schedules and/or proof of claim as being true and correct unless and until notified in writing. The Liquidating Trustee shall file all tax returns and other filings with Governmental Authorities on behalf of the Liquidation Trust and the Assets it holds. (n) Further Authorization. The Liquidating Trustee shall be entitled to seek such orders, judgments, injunctions and rulings as they deem necessary to carry out the intentions and purposes, and to give full effect to the provisions, of this Liquidation Plan. 7. The Oversight Nominee (a) Appointment of the Oversight Nominee. The Oversight Nominee shall be designated by the Liquidating Debtors in the Notice of Designation, which shall be filed with the Bankruptcy Court on or before thirty (30) days prior to the Confirmation Hearing. The appointment of the Oversight Nominee shall become effective upon the occurrence of the Effective Date. (b) Authority and Responsibility of the Oversight Nominee. The Oversight Nominee shall have the authority and responsibility to review the activities and performance of the Liquidating Trustee, and shall have the authority to remove and replace the Liquidating Trustee. It shall have such further authority as may be specifically granted or necessarily implied by the Liquidation Plan. (c) The Oversight Nominee Expenses. The Oversight Nominee Expenses shall be paid by the Liquidating Trustee out of the Operating Reserve. G. Distributions and Disputed Claims under the Reorganization Plan 1. Time of Distributions Except as otherwise provided under the Reorganization Plan or ordered by the Court, distributions under the Reorganization Plan will be made on the Distribution Date. 2. Disbursing Agent Reorganized Covanta and such other Persons as may be selected by Reorganized Covanta and approved by the Court shall act as Disbursing Agents under the Reorganization Plan. No Court approval shall be required to use the Indenture Trustee for the 9.25% Debentures as a Disbursing Agent for distributions to holders of 9.25% Debentures or for using Bank of America, N.A., as a Disbursing Agent for distributions to the Prepetition Lenders. A Disbursing Agent shall not be required to give any bond or surety or other security for the performance of its duties unless otherwise ordered by the Court, and, in the event that a Disbursing Agent is so otherwise ordered, the costs and expenses that are directly related to procuring any such bond or surety shall be borne by the Reorganized Debtors and Reorganized Heber Debtors. The Disbursing Agent shall be empowered to (i) effect all actions and execute all agreements, instruments and other documents necessary to perform its duties under the Reorganization Plan, (ii) make all Distributions contemplated thereby, (iii) employ professionals to represent it with respect to its responsibilities, and (iv) exercise such other powers as may be vested in the Disbursing Agent by order of the Court, pursuant to the Reorganization Plan, or as deemed by the Disbursing Agent to be necessary and proper to implement the provisions thereof. 3. Surrender of Securities or Instruments As a condition to receiving any distribution under the Reorganization Plan, each holder of an Allowed Claim represented by a certificated instrument or note must surrender such instrument or note held by it to the Disbursing Agent or its designee, unless such certificated instrument or note is being reinstated or being left unimpaired under the Reorganization Plan. Any holder of such instrument or note that fails to (i) surrender such instrument or note or (ii) execute and deliver an affidavit of loss and/or indemnity reasonably satisfactory to the Disbursing Agent and furnish a bond in form, substance and amount reasonably satisfactory to the Disbursing Agent before the first anniversary of the Effective Date, shall be deemed to have forfeited all rights and Claims and may not participate in any distribution under the Reorganization Plan in respect of such Claim. Any other holder of an Allowed Claim who fails to take such action reasonably required by the Disbursing Agent or its designee to receive its Distribution thereunder before the first anniversary of the Effective Date, or such earlier time as otherwise provided for in the Reorganization Plan, may not participate in any Distribution under the Reorganization Plan in respect of such Claim. Any Distribution forfeited under the Reorganization Plan shall become property of the applicable Reorganized Debtor, or in the case of Cash Distributions made on behalf of Heber Debtors, shall become the property of Reorganized Covanta. 4. Delivery of Distributions Distributions to holders of Allowed Claims shall be made at the address of each such holder as set forth on the Schedules filed with the Court unless superseded by the address as set forth on the proofs of claim filed by such holders or other writing notifying the applicable Reorganized Debtor of a change of address. If any holder's Distribution is returned as undeliverable, no further Distributions to such holder shall be made unless and until the applicable Reorganized Debtor or Reorganized Heber Debtoris notified of such holder's then current address, at which time all missed Distributions shall be made on or before one hundred and twenty (120) days after the date such undeliverable Distribution was initially made. After such date, all unclaimed property shall, in the applicable Reorganized Debtor's discretion, be used to satisfy the costs of administering and fully consummating the Reorganization Plan or become property of the applicable Reorganized Debtor (or in the case of the Reorganized Heber Debtors, shall become the property of the Reorganized Debtors), and the holder of any such Claim shall not be entitled to any other or further distribution under the Reorganization Plan on account of such Claim. 5. DeMinimis Distributions Unless written request addressed to the Reorganized Debtors, Reorganized Heber Debtors or Disbursing Agent is received within one hundred and twenty (120) days after the Effective Date, the Disbursing Agent or such other entity designated by such Reorganized Debtor or Reorganized Heber Debtoras a Disbursing Agent on or after the Effective Date will not be required to distribute Cash, Reorganization Plan Notes or Reorganization Plan Equity Securities and Reorganization Plan Warrants to the holder of an Allowed Claim in an Impaired Class if the amount of Cash or the Estimated Recovery Value of such Reorganization Plan Notes and Reorganization Equity Securities combined to be distributed on any Distribution Date under the Reorganization Plan on account of such Claim is less than $50. Any holder of an Allowed Claim on account of which the amount of Cash or the combined Estimated Recovery Value of Reorganization Plan Notes and Reorganization Plan Equity Securities and Reorganization Plan Warrants to be distributed is less than $50 will have its Claim for such Distribution discharged and will be forever barred from asserting any such Claim against the Reorganized Debtors, Reorganized Heber Debtors or their respective property. Any Cash, Reorganization Plan Notes or Reorganization Equity Securities not distributed pursuant to Section 7.8 of the Reorganization Plan will become the property of the Reorganized Debtors and Reorganized Heber Debtors free of any Liens, encumbrances or restrictions thereon (or, in the case of Cash not distributed by the Reorganized Heber Debtors, shall become the property of the Reorganized Debtors). 6. No Distribution on Disputed Claims Under the Reorganization Plan, no payments or distributions will be made with respect to all or any portion of a Disputed Claim unless and until all objections to such Disputed Claim have been settled or withdrawn or have been determined by a Final Order and the Disputed Claim, or some portion thereof, has become an Allowed Claim. 7. Objections to Claims Unless otherwise ordered by the Court after notice and a hearing, the Reorganizing Debtors, Heber Debtors, reorganized Heber Debtors or Reorganized Debtors shall have the exclusive right to make and file objections to Claims (other than Administrative Expense Claims) and shall serve a copy of each objection upon the holder of the Claim to which the objection is made as soon as practicable, but in no event later than one hundred and twenty (120) days after the Effective Date; provided, however, that the period for making objections may be automatically extended by the Reorganizing Debtors and Heber Debtors, without any further application to, or approval by, the Court, for up to an additional thirty (30) days. The foregoing deadlines for filing objections to Claims shall not apply to Claims for tort damages as to which objections may be filed at any time. 8. No Distribution Pending Allowance Notwithstanding any other provision of the Reorganization Plan, no Cash, Reorganization Plan Notes or Reorganization Plan Equity Securities and Warrants shall be distributed under the Reorganization Plan on account of any Disputed Claim, unless and until all objections to such Disputed Claim have been settled or withdrawn or have been determined by Final Order and the Disputed Claim, or some portion thereof, has become an Allowed Claim. 9. Resolution of Disputed Claims and Equity Interests Unless otherwise ordered by the Court after notice and a hearing, the Reorganizing Debtors or Reorganized Debtors, or the Heber Debtors or Reorganized Heber Debtors, as the case may be, shall have the exclusive right to make and file objections to Claims (other than Administrative Expense Claims) and shall serve a copy of each objection upon the holder of the Claim to which the objection is made as soon as practicable, but in no event later than one hundred and twenty (120) days after the Effective Date; provided, however, that such one hundred and twenty (120) day period may be automatically extended by the Reorganizing Debtors or Heber Debtors, without any further application to, or approval by, the Court, for up to an additional thirty (30) days. The foregoing deadlines for filing objections to Claims shall not apply to Claims for tort damages and, accordingly, no such deadline shall be imposed by this Reorganization Plan. Notwithstanding any authority to the contrary, an objection to a Claim shall be deemed properly served on the holder thereof if the Reorganizing Debtors or Heber Debtors effect service in any of the following manners: (i) in accordance with Rule 4 of the Federal Rules of Civil Procedure, as modified and made applicable by Bankruptcy Rule 7004; (ii) by first class mail, postage prepaid, on the signatory on the proof of claim or interest or other representative identified in the proof of claim or interest or any attachment thereto; or (iii) by first class mail, postage, on any counsel that has appeared on the holder's behalf in the Chapter 11 Cases. Except with respect to Administrative Expense Claims as to which the Administrative Expense Claim Bar Date does not apply, Administrative Expense Claims must be filed with the Court and served on counsel for the Reorganizing Debtors and Heber Debtors on or before the Administrative Expense Claim Bar Date. The Reorganizing Debtors, Reorganized Debtors, Heber Debtors, Reorganized Heber Debtors or any other party in interest permitted under the Bankruptcy Code may make and file objections to any such Administrative Expense Claim and shall serve a copy of each objection upon the holder of the Claim to which the objection is made as soon as practicable, but in no event later than one hundred and eighty (180) days after the Effective Date. In the event the Reorganizing Debtors or Reorganized Debtors or the Heber Debtors or Reorganized Heber Debtors file any such objection, the Court shall determine the Allowed amount of any such Administrative Expense Claim. Notwithstanding the foregoing, no request for payment of an Administrative Expense Claim need be filed with respect to an Administrative Expense Claim which is paid or payable by the Reorganizing Debtors or Heber Debtors in the ordinary course of business. 10. Estimation of Certain Claims The Reorganizing Debtors may, at any time, request that the Court estimate any contingent, unliquidated or Disputed Claim pursuant to section 502(c) of the Bankruptcy Code, regardless of whether the Reorganizing Debtors or Heber Debtors previously objected to such Claim or whether the Court has ruled on any such objection, and the Court will retain jurisdiction to estimate any Claim at any time during litigation concerning any objection to any Claim. In the event that the Court estimates any Disputed Claim, that estimated amount may constitute either the Allowed amount of such Claim or a maximum limitation on such Claim, as determined by the Court. If the estimated amount constitutes a maximum limitation on such Claim, the Reorganizing Debtors or Heber Debtors may elect to pursue a supplemental proceeding to object to any ultimate payment of such Claim. All of the aforementioned Claims objection, estimation and resolution procedures are cumulative and not necessary exclusive of one another. 11. Reserve Account for Disputed Claims On and after the Effective Date, the Disbursing Agent shall hold in one or more Disputed Claims Reserves, for each Class in which there are any Disputed Claims, Cash, Reorganization Plan Notes or Reorganization Plan Equity Securities and Reorganization Plan Warrants in an aggregate amount sufficient to pay to each holder of a Disputed Claim the amount of Cash, Reorganization Plan Notes or Reorganization Plan Equity Securities and Reorganization Plan Warrants that such holder would have been entitled to receive pro rata under this Reorganization Plan if such Claim had been an Allowed Claim in such Class; provided, however that with respect to Disputed Claims in Class 4, the Reorganized Debtors and Reorganized Heber Debtors shall not be required to establish a Disputed Claims Reserve but instead shall issue new Reorganization Plan Unsecured Notes if and when any Disputed Claim in Class 4 becomes an Allowed Claim. Cash withheld and reserved for payments to holders of Disputed Claims in any Class shall be held and deposited by the Disbursing Agent in one or more segregated interest-bearing reserve accounts for each Class of Claims in which there are Disputed Claims entitled to receive Cash, to be used to satisfy the Disputed Claims if and when such Disputed Claims become Allowed Claims. 12. Allowance of Disputed Claims With respect to any Disputed Claim that is subsequently deemed Allowed, on the Distribution Date for any such Claim the Reorganizing Debtors or Heber Debtors shall distribute from the Disputed Claims Reserve Account corresponding to the Class in which such Claim is classified to the holder of such Allowed Claim the amount of Cash, Reorganization Plan Notes or Reorganization Plan Equity Securities and Reorganization Plan Warrants that such holder would have been entitled to recover pro rata under the Reorganization Plan if such Claim had been an Allowed Claim on the Effective Date, together with such claimholder's Pro Rata Class Share of net interest, if any, on such Allowed Claim. For purposes of the immediately preceding sentence, such holder's Pro Rata Class Share of net interest shall be calculated by multiplying the amount of interest on deposit in the applicable Disputed Claims Reserve account on the date immediately preceding the date on which such Allowed Claim is to be paid by a fraction, the numerator of which shall equal the amount of such Allowed Claim and the denominator of which shall equal the amount of all Claims for which deposits are being held in the applicable Disputed Claims Reserve account on the date immediately preceding the date on which such Allowed Claim is to be paid. 13. Release of Funds from Disputed Claims Reserve If at any time or from time to time after the Effective Date, there shall be Cash, Reorganization Plan Notes or Reorganization Plan Equity Securities and Warrants in a Disputed Claims Reserve account in an amount in excess of the Reorganizing Debtors' or Heber Debtors maximum remaining payment obligations to the then existing holders of Disputed Claims in the Class of Claims corresponding to such Disputed Claims Reserve account under this Reorganization Plan, such excess funds, and the Pro Rata Class Share of net interest in respect thereof, shall become available for Distribution to the holders of Allowed Claims in the Class corresponding to the Disputed Claims Reserve Account at issue in accordance with this Reorganization Plan. 14. Allowance of Certain Claims (a) Professional Claims and Substantial Contribution Claims (i) Under the Reorganization Plan, all Retained Professionals and other entities seeking an award by the Court of compensation for services rendered or reimbursement of expenses incurred through and including the Effective Date under subsections 503(b)(2), 503(b)(3), 503(b)(4) or 503(b)(5) of the Bankruptcy Code must file their respective final applications for allowance of compensation for services rendered and reimbursement of expenses no later than forty-five (45) days after the Effective Date. Subject to the Court determination that any such Claim is Allowed, the Reorganized Debtors and Reorganized Heber Debtors shall pay in full any such Allowed Administrative Expense Claims on the Distribution Date, or upon such other less favorable terms as may be mutually agreed upon between the holder of such an Allowed Administrative Expense Claim and the Reorganizing Debtors and Heber Debtors or, on and after the Effective Date, the Reorganized Debtors and Reorganized Heber Debtors, and, in each case, approved by the Court after notice and a hearing. Any request for payment of an Administrative Expense Claim of the type which is not filed by the applicable deadline shall be barred. (ii) Any Person who requests compensation or expense reimbursement for a Substantial Contribution Claim in the Chapter 11 Cases must file an application with the clerk of the Court, on or before the Administrative Expense Bar Date, which is thirty (30) days after the Effective Date, and serve such application on counsel for the Reorganized Debtors and Reorganized Heber Debtors and as otherwise required by the Court and the Bankruptcy Code on or before such date. Failure to file a Substantial Contribution Claim on or before such date will result in that Person being forever barred from seeking compensation or expense reimbursement for such Substantial Contribution Claim. (iii) All other requests for payment of an Administrative Expense Claim (other than as set forth above) that are subject to the Administrative Expense Claim Bar Date must be filed with the Court and served on counsel for the Reorganizing Debtors and Heber Debtors and as otherwise required by the Court and Bankruptcy Code on or before the Administrative Expense Bar Date. Unless the Reorganizing Debtors, Heber Debtors, Reorganized Debtors, Reorganized Heber Debtors or any other party in interest in the Chapter 11 Cases objects to an Administrative Expense Claim by the Claims Objection Deadline, such Administrative Expense Claim shall be deemed Allowed in the amount filed. In the event that the Reorganizing Debtors, Heber Debtors, Reorganized Debtors, reorganized Heber Debtors or any other party in interest in the Chapter 11 Cases objects to an Administrative Expense Claim, the Court shall determine the Allowed amount of such Administrative Expense Claim. Notwithstanding the foregoing, no request for payment of an Administrative Expense Claim need be filed with respect to an Administrative Expense Claim which is incurred and payable by the Reorganizing Debtors, Heber Debtors, Reorganized Debtors or Reorganized Heber Debtors in the ordinary course of business. (b) DIP Financing Facility Claims On the Effective Date, the Reorganizing Debtors shall pay all funded and additional amounts outstanding under the DIP Financing Facility and all commitments thereunder shall automatically and irrevocably terminate; provided, however, that on the Effective Date, all outstanding and unfunded letters of credit issued under Tranche A of the DIP Financing Facility shall be replaced by letters of credit to be issued under the New Revolver Facility and, subject to acceptance by the requisite number of Tranche B DIP Lenders in accordance with section 2.13 of the DIP Financing Facility, all outstanding letters of credit issued under Tranche B of the DIP Financing Facility shall be replaced or otherwise continued by letters of credit to be issued under the Reinstated L/C Facility. Once all such payments have been received by the DIP Lenders and all commitments thereunder have been terminated and such letters of credit have been issued under the New Revolver Facility or the Reinstated L/C Facility, the DIP Financing Facility shall be terminated with respect to the Reorganizing Debtors (subject in all respects to any carve-out approved by the Court in the Final Order approving the DIP Financing Facility and any other terms of the DIP Financing Facility and the Final Order that by their express terms survive the termination of the Facility), and the DIP Lenders shall take all necessary to confirm the removal of any liens on the properties of the applicable Reorganizing Debtors securing the DIP Financing Facility at the sole cost of the Reorganized Debtors. To the extent that Claims arising under Tranche B of the DIP Financing Facility will not be paid in full as a result of reinstatement and continuation of such letters of credit under the Reinstated L/C Facility, acceptance of such treatment in full satisfaction of their Administrative Claim by the requisite majority of DIP Lenders as provided under section 2.13 of the DIP Financing Facility shall be binding on all DIP Lenders. On the Effective Date applicable to the Heber Debtors, regardless of the amounts outstanding underthe DIP Financing Facility, the DIP Financing Facility shall terminate with respect to the Heber Debtors and the DIP Lenders shall release the Heber Debtors from any claims and security interests thereunder and security interests granted in support of the DIP Financing Facility over Equity Interests in, and assets of, the Heber Debtors; provided, however, that such releases shall be contingent upon the receipt by the DIP Lenders of the proceeds of the sale of the Heber Debtors or their assets to the extent of the funded amounts and additional amounts outstanding under the DIP Financing Facility. H. Distributions and Disputed Claims under the Liquidation Plan 1. The Secured Creditor Direction and the DIP Lender Direction As previously described herein, the Debtors currently contemplate that on the Effective Date, the Liquidating Debtors and the Liquidating Trustee will implement the Secured Creditor Direction and the DIP Lender Direction. In accordance therewith, on the Effective Date, any Liquidation Assets or Distributions subject to the Secured Creditor Direction or the DIP Lender Direction will be transferred to Reorganized Covanta, to the extent that such Distributions or Liquidation Assets have not already been so transferred, provided, however, that up to $500,000 shall remain in the accounts of the Liquidating Debtors, and shall be transferred to the Operating Reserve by the Liquidating Trustee in order to fund the Liquidation Plan. Any Residual Liquidation Assets which are not subject to the Secured Creditor Direction or the DIP Lender Direction will be dealt with in accordance with paragraph H.3 below. 2. Time of Distributions Except as otherwise provided for in the Liquidation Plan, by the Secured Creditor Distribution or the DIP Lender Direction or ordered by the Court, distributions under the Liquidation Plan will be made on (i) the Initial Liquidation Distribution Date, as to Administrative Expense Claims, Priority Tax Claims and Priority Non-Tax Claims from the Operating Reserve or (ii) any subsequent Liquidation Distribution Date. The Initial Liquidation Distribution Date shall occur on the later of the Effective Date (or soon thereafter as reasonably practicable) and the First Business Day after the date that is thirty (30) calendar days after the date a Claim becomes Allowed. Each subsequent Liquidation Distribution Date shall occur on the last Business Day of each calendar quarter if, on such date, prior to the distribution to holders of Allowed Claims, there are any Net Liquidation Proceeds. 3. Order of Distributions Distributions will be made from the Liquidation Trust to the holders of Claims against the Liquidating Debtors, upon the realization of any Net Liquidation Proceeds from the Residual Liquidation Assets contained in the Liquidation Trust, not otherwise subject to the Secured Creditor Direction or the DIP Lender Direction. To the extent that the Liquidating Trustee is able to extract any Net Liquidation Proceeds from the Residual Liquidation Assets, such Net Liquidation Proceeds shall be distributed in the following manner: (i) the Liquidating Trustee shall first deduct and pay itself any Liquidation Expenses incurred in extracting such Net Liquidation Proceeds and (ii) the Liquidating Trustee shall distribute any remaining Net Liquidation Proceeds pro rata to (a) the holders of Class 3A Claims, to the extent that the Net Liquidation Proceeds are attributable to a Liquidating Pledgor Debtor; and (b) to the DIP Lenders, to the extent that the Net Liquidation Proceeds are attributable to a Liquidating Non-Pledgor Debtor. 4. No Distribution Pending Allowance Notwithstanding any other provision of the Liquidation Plan, no Net Liquidation Proceeds or other Distribution shall be distributed under the Liquidation Plan on account of any Disputed Claim, unless and until all objections have been settled or withdrawn or have been determined by a Final Order and the Disputed Claim or some portion thereof, has become an Allowed Claim. 5. Resolution of Disputed Claims and Equity Interests (a) Unless otherwise ordered by the Court after notice and a hearing, the Liquidating Trustee shall have the exclusive right to make and file objections to Claims (other than Administrative Expense Claims) and shall serve a copy of each objection upon the holder of the Claim to which the objection is made as soon as practicable, but in no event later than one hundred and twenty (120) days after the Effective Date; provided, however, that such one hundred and twenty (120) day period may be automatically extended by the Liquidating Trustee, without any further application to, or approval by, the Court, for an additional thirty (30) days. The foregoing deadlines for filing objections to Claims shall not apply to filing objections to Claims for tort damages and, accordingly, no such deadline shall be imposed by the Liquidation Plan. (b) Except with respect to Administrative Expense Claims as to which the Administrative Expense Claim Bar Date does not apply, Administrative Expense Claims must be filed with the Court and served on counsel for the Liquidating Debtors (if prior to the Effective Date) and counsel for the Liquidating Trustee (if after the Effective Date) on or before the Administrative Expense Claim Bar Date. The Liquidating Debtors, the Liquidating Trustee or any other party in interest permitted under the Bankruptcy Code may make and file objections to any such Administrative Expense Claim and shall serve a copy of each objection upon the holder of the Claim to which the objection is made as soon as practicable, but in no event later than the Claims Objection Deadline. In the event the Liquidating Debtors or the Liquidating Trustee file any such objection, the Court shall determine the Allowed amount of any such Administrative Expense Claim. Notwithstanding the foregoing, no request for payment of an Administrative Expense Claim need be filed with respect to an Administrative Expense Claim which is paid or payable by the Liquidating Debtors or the Liquidating Trustee in the ordinary course of business. 6. Estimation of Claims The Liquidating Trustee may, at any time request that the Court estimate any contingent, unliquidated or Disputed Claim pursuant to section 502(c) of the Bankruptcy Code, regardless of whether the Liquidating Debtors previously objected to such Claim or whether the Court has ruled on any such objection, and the Court will retain jurisdiction to estimate any Claim at any time during litigation concerning any objection to any Claim. In the event that the Court estimates any Disputed Claim, that estimated amount may constitute either the Allowed amount of such Claim or a maximum limitation on such Claim, as determined by the Court. If the estimated amount constitutes a maximum limitation on such Claim, the Liquidating Trustee may elect to pursue any supplemental proceedings to object to any ultimate payment of such Claim. All of the aforementioned Claims objection, estimation and resolution procedures are cumulative and not necessary exclusive of one another. 7. Reserve Account for Disputed Claims Upon (i) the Liquidating Trustee's determination that Disputed Claims have been asserted against a Liquidating Debtor and (ii) the Liquidating Trustee's identification of Liquidation Proceeds that are not Collateral, the Liquidating Trustee shall establish the Disputed Claims Reserve in accordance with Section 9.14(a) of the Liquidation Plan and hold in the Disputed Claims Reserve, for each Class in which such Disputed Claims exist, Cash in an aggregate amount sufficient to pay to each holder of a Disputed Claim the amount of Cash that such holder would have been entitled to receive under the Liquidation Plan if such Claim had been an Allowed Claim in such Class. Cash withheld and reserved for payments to holders of Disputed Claims in any Class shall be held and deposited by the Liquidating Trustee in one or more segregated interest-bearing reserve accounts for each Class of Claims in which there are Disputed Claims entitled to receive Cash, to be used to satisfy the Disputed Claims if and when such Disputed Claims become Allowed Claims. 8. Allowance of Disputed Claims As to each Liquidating Debtor, to the extent that a Disputed Claim ultimately becomes an Allowed Claim, payments and distributions on account of such Allowed Claim shall be made in accordance with the provisions of the Liquidation Plan governing the Class of Claims to which such Claim belongs. On the succeeding Liquidation Distribution Date, after the date that the order or judgment of the Court allowing such Claim becomes a Final Order, any property that would have been distributed prior to the date on which a Disputed Claim becomes an Allowed Claim shall be distributed on the next Liquidation Distribution Date, together with such claimholder's Pro Rata Class share of net interest, if any, on such Allowed Claim. 9. Allowance of Certain Claims (a) Professional Claims, Substantial Contribution Claims and DIP Financing Facility Claims In accordance with Section VII.G, hereof, the Reorganizing Debtors and Heber Debtors shall pay and/or satisfy all Claims asserted against the Debtors generally, with respect to (i) all Retained Professionals (other than Retained Liquidation Professionals) and other entities seeking an award by the Court of compensation for services rendered or reimbursement of expenses incurred through and including the Effective Date under subsections 503(b)(2), 503(b)(3), 503(b)(4) or 503(b)(5) of the Bankruptcy Code, including any Person making a Substantial Contribution Claim and (ii) all amounts outstanding under the DIP Financing Facility. (b) Other Administrative Claims All other requests for payment of an Administrative Claim against a Liquidating Debtor (other than those seeking an award by the Court of compensation for services rendered or reimbursement of expenses incurred through and including the Confirmation Date under subsections 503(b)(2), 503(b)(3), 503(b)(4) or 503(b)(5) of the Bankruptcy Code) must be filed with the Court and served on the Liquidating Trustee no later than the Administrative Claims Bar Date, which is thirty (30) days following the Effective Date. Unless the Liquidating Trustee objects to an Administrative Expense Claim by the Claims Objection Deadline, such Administrative Expense Claim shall be deemed Allowed in the amount filed. In the event that the Liquidating Trustee objects to an Administrative Expense Claim, the Court shall determine the Allowed amount of such Administrative Expense Claim. Notwithstanding the foregoing, no request for payment of an Administrative Expense Claim need be filed with respect to an Administrative Expense Claim which is paid or payable by the Liquidating Trustee in the ordinary course of business. I. Treatment of Executory Contracts and Unexpired Leases; Bar Date for Rejection Damage Claims 1. General Treatment. (a) Reorganizing Debtors and Heber Debtors: For Reorganizing Covanta and certain other Reorganizing Debtors listed on Exhibit 9.1A of the Reorganization Plan (collectively, the "Rejecting Debtors"), on the Effective Date all executory contracts and unexpired leases to which each of the Rejecting Debtor is a party shall be deemed rejected, except for any executory contract or unexpired lease of the Rejecting Debtors that (i) has been previously assumed or rejected pursuant to a Final Order of the Court, (ii) is specifically designated as a contract or lease on the Rejecting Debtors' Schedule of Assumed Contracts and Leases, to be filed prior to the Confirmation Hearing, or (iii) is the subject of a separate motion to assume or reject filed under section 365 of the Bankruptcy Code by the Reorganizing Debtors and Heber Debtors prior to the Confirmation Hearing. For Reorganizing Debtors listed on Exhibit 9.1B and each Heber Debtor of the Reorganization Plan (collectively, the "Assuming Debtors"), on the Effective Date all executory contracts and unexpired leases to which each of the Assuming Debtors is a party shall be deemed assumed, except for any executory contract or unexpired lease of the Assuming Debtors that (i) has been previously assumed or rejected pursuant to a Final Order of the Court, (ii) is specifically designated as a contract or lease on the Assuming Debtors' Schedule of Rejected Contracts and Leases, to be filed prior to the Confirmation Hearing, or (iii) is the subject of a separate motion to assume or reject filed under section 365 of the Bankruptcy Code by the Reorganizing Debtors and Heber Debtors prior to the Confirmation Hearing. Each executory contract and unexpired lease listed or to be listed on the Rejecting Debtors' Schedule of Assumed Contracts and Leases or the Assuming Debtors' Schedule of Rejected Contracts and Leases (collectively, the "Contract Schedules") shall include modifications, amendments, supplements, restatements or other agreements, including guarantees thereof, made directly or indirectly by any Reorganizing Debtor in any agreement, instrument or other document that in any manner affects such executory contract or unexpired lease, without regard to whether such agreement, instrument or other document is listed on the Contract Schedules. The mere listing of a document on the Contract Schedules shall not constitute an admission by the Reorganizing Debtors or Heber Debtors that such document is an executory contract or unexpired lease or that the Reorganizing Debtors and Heber Debtors have any liability thereunder. (b) Liquidating Debtors: For Liquidating Debtors, on the Effective Date all executory contracts and unexpired leases shall be deemed rejected other than those executory contracts or unexpired leases that are or have been (a) specifically designated as assumed on the Schedule of Assumed Contracts and Leases; (b) previously assumed or rejected pursuant to a Final Order of the Court; or (c) subject to a separate motion to assume or reject filed under section 365 of the Bankruptcy Code by the applicable Liquidating Debtor prior to the Confirmation Date. Each of the executory contracts and unexpired leases listed on the Schedule of Assumed Contracts and Leases shall be deemed to be assumed by the applicable Liquidating Debtor and assigned to Reorganized Covanta on the Effective Date. 2. Cure of Defaults. (c) Except to the extent that (i) a different treatment has been agreed to by the nondebtor party or parties to any executory contract or unexpired lease to be assumed pursuant to Section 9.1 of the Reorganization Plan or Section 8.2 of the Liquidation Plan, or (ii) any executory contract or unexpired lease shall have been assumed pursuant to an order of the Court which order shall have approved the cure amounts with respect thereto, the applicable Debtor shall, pursuant to the provisions of sections 1123(a)(5)(G) and 1123(b)(2) of the Bankruptcy Code and consistent with the requirements of section 365 of the Bankruptcy Code, within thirty (30) days after the Confirmation Date, file with the Court and serve a pleading listing the cure amounts of all executory contracts or unexpired leases to be assumed. The parties to such executory contracts or unexpired leases to be assumed by the applicable Debtor shall have fifteen (15) days from service of such pleading to object to the cure amounts listed by the applicable Debtor. Service of such pleading shall be sufficient if served on the other party to the contract or lease at the address indicated on (i) the contract or lease, (ii) any proof of claim filed by such other party in respect of such contract or lease, or (iii) the Debtors' books and records, including the Schedules; provided, however, that if a pleading served by a Debtor to one of the foregoing addresses is promptly returned as undeliverable, the Reorganizing Debtor shall attempt reservice of the pleading on an alternative address, if any, from the above listed sources. If any objections are filed, the Court shall hold a hearing. Prior to assumption, the applicable Debtor shall retain its right to reject any of its executory contracts or unexpired leases, including contracts or leases that are subject to a dispute concerning amounts necessary to cure any defaults. Notwithstanding the foregoing or anything in Section 9.3 of the Reorganization Plan or Section 8.3 of the Liquidation Plan, at all times through the date that is five (5) Business Days after the Court enters an order resolving and fixing the amount of a disputed cure amount, the Debtors shall have the right to reject such executory contract or unexpired lease. 3. Approval of Assumption of Certain Executory Contracts. Subject to Sections 9.1 and 9.2 of the Reorganization Plan and Section 8.1 and 8.2 of the Liquidation Plan, the executory contracts and unexpired leases on the Rejecting Debtors' Schedule of Assumed Contracts, the executory contracts and unexpired leases of the Assuming Debtors other than those listed on the Assuming Debtors' Schedule of Rejected Contracts and Leases, the executory contracts and unexpired leases listed on the Liquidating Debtors' Schedule of Assumed Contracts. Except as may otherwise be ordered by the Court, the Reorganizing Debtors and Heber Debtors shall have the right to cause any assumed executory contract or unexpired lease to vest in the Reorganized Debtor or Reorganized Heber Debtor designated for such purpose by the Reorganizing Debtors and Heber Debtors. 4. Approval of Rejection of Executory Contracts and Unexpired Leases. Entry of the Confirmation Order shall constitute the approval, pursuant to section 365(a) of the Bankruptcy Code, of the rejection of any executory contracts and unexpired leases to be rejected as and to the extent provided in the Plans. 5. Bar Date for Filing Proofs of Claim Relating to Executory Contracts and Unexpired Leases Rejected Pursuant to the Plans. Claims arising out of the rejection of an executory contract or unexpired lease pursuant to each Plan must be filed with the Court no later than the later of (i) twenty (20) days after the Effective Date and (ii) thirty (30) days after the entry of an order rejecting such executory contract or lease. Any Claims not filed within such time period will be forever barred from assertion against any of the applicable Debtors and/or their corresponding Estates. 6. Reservation of Rights Under Insurance Policies and Bonds. The enforceability by beneficiaries of (i) any insurance policies that may cover Claims against any Debtor, or (ii) any bonds issued to assure the performance of any Debtor, is not affected by the Plans, nor shall anything contained therein constitute or be deemed to constitute a waiver of any cause of action that the Debtors or any entity may hold against any insurers or issuers of bonds under any such policies of insurance or bonds. To the extent any insurance policy or bond is deemed to be an executory contract, such insurance policy or bond shall be deemed assumed in accordance with Article IX of the Reorganization Plan or Article VIII of the Liquidation Plan as applicable. Notwithstanding the foregoing, the Debtors do not assume any payment or other obligations to any insurers or issuers of bonds, and any agreements or provisions of policies or bonds imposing payment or other obligations upon the Debtors shall only be assumed as provided pursuant to a separate order of the Court. 7. Survival of Debtors' Corporate Indemnities. Any obligations of any of the Debtors pursuant to the applicable Debtor's corporate charters and bylaws or agreements entered into any time prior to the Effective Date, to indemnify the Specified Personnel, with respect to all present and future actions, suits and proceedings against such Debtor or such Specified Personnel, based upon any act or omission for or on behalf of such Debtor, shall not be discharged or impaired by confirmation of the Plans. Such obligations shall be deemed and treated as executory contracts to be assumed by the applicable Debtor pursuant to the Plans, and shall continue as obligations of the applicable Debtor. To the extent a Debtor is entitled to assert a Claim against Specified Personnel (whether directly or derivatively) and such Specified Personnel is entitled to indemnification, such Claim against Specified Personnel is released, waived and discharged. J. Effect of Confirmation 1. Revesting of Reorganization Assets Upon the Effective Date, pursuant to sections 1141(b) and (c) of the Bankruptcy Code, except for leases and executory contracts that have not yet been assumed or rejected (which leases and contracts shall be deemed vested when and if assumed), all property of each Reorganizing Debtor's Estate shall vest in the applicable Reorganized Debtor or Reorganized Heber Debtor free and clear of all Claims, Liens, encumbrances, charges and other interests, except as provided in the Reorganization Plan or pursuant to any of the Plan Documents. Each Reorganized Debtor and Reorganized Heber Debtor may operate its businesses and may use, acquire and dispose of property free of any restrictions of the Bankruptcy Code or the Bankruptcy Rules and in all respects as if there were no pending cases under any chapter or provision of the Bankruptcy Code, except as provided in the Reorganization Plan. 2. Discharge under the Plans (a) Discharge under the Reorganization Plan. Upon the Effective Date and in consideration of the distributions to be made under the Reorganization Plan, except as otherwise expressly provided in the Reorganization Plan, each holder (as well as any trustees and agents on behalf of each holder) of a Claim or Equity Interest of such holder shall be deemed to have forever waived, released and discharged each of the Reorganizing Debtors and Heber Debtors, to the fullest extent permitted by section 1141 of the Bankruptcy Code, of and from any and all Claims, Equity Interests, rights and liabilities (other than the right to enforce the Reorganizing Debtors, Heber Debtors, Reorganized Debtors or Reorganized Heber Debtors' obligations under the Reorganization Plan or Plan Documents) that arose prior to the Confirmation Date, whether existing in law or equity, whether based on fraud, contract or otherwise, liquidated or unliquidated, fixed or contingent, matured or unmatured, known or unknown, foreseen or unforeseen, then existing or thereafter arising, whether based in whole or in part on any act, omission or occurrence taking place on or before the Confirmation Date. Upon the Effective Date, all such Persons shall be forever precluded and enjoined, pursuant to section 524 of the Bankruptcy Code, from prosecuting or asserting any such discharged Claim against or canceled Equity Interest in each of the Reorganizing Debtors and Heber Debtors. (b) Discharge under the Liquidation Plan. Pursuant to section 1141(d)(3) of the Bankruptcy Code, occurrence of the Confirmation Date will not discharge Claims against the Liquidating Debtors; provided, however, that no holder of a Claim against any Liquidating Debtor may, on account of such Claim, seek or receive any payment or other distribution from, or seek recourse against, any Liquidating Debtor, Reorganizing Debtor, their respective successors or their respective property, except as otherwise provided in the Liquidation Plan. 3. Release of Certain Parties under the Plans (a) Releases under the Reorganization Plan. On the Effective Date, the Debtors, on behalf of themselves and their Estates, shall be deemed to release unconditionally, all claims, obligations suits, judgments, damages, rights, causes of action and liabilities whatsoever against the Reorganizing Debtors or Heber Debtors' present or former officers, directors, employees, partners, members, advisors, attorneys, financial advisors, accountants, investment bankers and other professionals, and the Committee's members, advisors, attorneys, financial advisors, investment bankers, accountants and other professionals, in each case whether known or unknown, foreseen or unforeseen, existing or hereafter arising, in law, equity or otherwise, based in whole or in part upon actions taken with respect to any omission, transaction, event, or other occurrence taking place on or prior to the Effective Date in any way relating to the Reorganizing Debtors, Heber Debtors, the Chapter 11 Cases, or the Reorganization Plan. (b) Releases under the Liquidation Plan. On the Effective Date, the Liquidating Debtors, on behalf of themselves and their Estates, shall be deemed to release unconditionally all of the Reorganizing Debtors and Heber Debtors and such parties' respective officers, directors, employees, affiliates, advisors, attorneys, financial advisors, accountants, and other professionals from any and all claims, obligations, suits, judgments, damages, rights, causes of action, and liabilities whatsoever, whether known or unknown, foreseen or unforeseen, existing or hereafter arising, in law, equity or otherwise, based in whole or in part upon actions taken in their respective capacities described above with respect to any omission, transaction, event or other occurrence taking place on or prior to the Effective Date in any way relating to the Liquidating Debtors, the Chapter 11 Cases, the Reorganization Plan or this Liquidation Plan. 4. Exculpation As more fully described in the Plans, as of the Effective Date, none of (i) the Liquidating Debtors, Reorganizing Debtors, Heber Debtors or Reorganized Debtors or their respective officers, directors and employees, (ii) the Specified Personnel, (iii) the Creditors Committee and any subcommittee thereof, (iv) the Agent Banks, the DIP Agents and the steering committee for the holders of the Secured Bank Claims, (v) the Liquidating Trustee, (vi) the accountants, financial advisors, investment bankers, and attorneys for the Liquidating Debtors, Reorganizing Debtors, Heber Debtors, Reorganized Debtors or Reorganized Heber Debtors, and (vii) the directors, officers, employee, partners, members, agents, representatives, accountants, financial advisors, investment bankers, attorneys, or affiliates for any of the persons or entities described in (i), (iii), (iv), (v) or (vi) of this section shall have or incur any liability to any holder of a Claim or an Interest, or any other party in interest, or any of their respective agents, employees, representatives, financial advisors, attorneys, or affiliates, or any of their successors or assigns, for any act or omission in connection with, relating to, or arising out of the commencement or conduct, the Chapter 11 Cases; formulating, negotiating or implementing the Plans; formulating, negotiating or implementing the Geothermal Sale under the Reorganization Plan; the solicitation or acceptances of the Plans; the pursuit of confirmation of the Plans; the confirmation, consummation or administration of the Plans or the property to be distributed under the Plans, except for their gross negligence or willful misconduct, and in all respects shall be entitled to rely upon the advice of counsel with respect to their duties and responsibilities under the Plans. 5. Injunction under the Plans The satisfaction, release, and discharge pursuant to Article XI of the Reorganization Plan shall act as an injunction against any Person commencing or continuing any action, employment of process, or act to collect, offset, or recover any Claim or Cause of Action satisfied, released, or discharged under the Reorganization Plan to the fullest extent authorized or provided by the Bankruptcy Code, including, without limitation, to the extent provided for or authorized by sections 524 and 1141 thereof. (a) Injunction under the Reorganization Plan. Section 11.9 of the Reorganization Plan provides that upon the Effective Date with respect to the Reorganization Plan and except as otherwise provided in the Reorganization Plan or in the Confirmation Order, all persons who have held, hold, or may hold Claims against or Equity Interests in the Reorganizing Debtors or Heber Debtors, and all other parties in interest in the Chapter 11 Cases, along with their respective present or former employees, agents, officers, directors or principals, shall be permanently enjoined on and after the Effective Date from directly or indirectly (i) commencing or continuing in any manner any action or other proceeding of any kind to collect or recover any property on account of any such Claim or Equity Interest against any such Reorganizing Debtor, Heber Debtor, Reorganized Debtor, Reorganizing Heber Debtor or Person entitled to exculpation under Section 11.7 hereof, (ii) enforcing, attaching, collecting or recovering by any manner or means of any judgment, award, decree, or order to collect or recover any property on account of any such Claim or Equity Interest against any such Reorganizing Debtor, Heber Debtor, Reorganized Debtors or Reorganzing Heber Debtor, (iii) creating, perfecting, or enforcing any encumbrance of any kind against any such Reorganizing Debtor, Heber Debtor, Reorganized Debtors or Reorganzing Heber Debtor on account of such Claim or Equity Interest, (iv) except for recoupment, asserting any right of setoff or subrogation of any kind against any obligation due any such Reorganizing Debtor, Heber Debtor, Reorganized Debtors or Reorganzing Heber Debtor or against the property or interests in property of any such Reorganizing Debtor, Heber Debtor, Reorganized Debtors or Reorganzing Heber Debtor on account of any such Claim or Equity Interest, (v) commencing or continuing any action against the Reorganized Debtors or Reorganized Heber Debtors in any manner or forum in respect of such Claim or Equity Interest that does not comply or is inconsistent with the Plan, and (vi) taking any actions to interfere with the implementation or consummation of the Reorganization Plan; provided that nothing in the Reorganization Plan shall prohibit any holder of a Claim from prosecuting a properly completed and filed proof of claim in the Chapter 11 Cases. In no event shall the Reorganized Debtors, Reorganizing Heber Debtors or Person entitled to exculpation under Section 11.7 hereof have any liability or obligation for any Claim against or Equity Interest in any of the Reorganizing Debtors or Heber Debtors arising prior to the Effective Date, other than in accordance with the provisions of the Reorganization Plan. In addition, except as otherwise provided in the Reorganization Plan or the Confirmation Order, on and after the Effective Date, any individual, firm, corporation, limited liability company, partnership, company, trust or other entity, including any successor of such entity, shall be permanently enjoined from commencing or continuing in any manner, any litigation against the Reorganized Debtors, Reorganized Heber Debtors or Person entitled to exculpation under Section 11.7 hereof on account of or in respect of any of the Reorganizing Debtors and Heber Debtors' prepetition liabilities or other liabilities satisfied pursuant to the Reorganization Plan. By accepting Distributions pursuant to the Reorganization Plan, each holder of an Allowed Claim or Allowed Equity Interest receiving Distributions pursuant to the Reorganization Plan will be deemed to have specifically consented to the injunctions set forth in Section 11.9 of the Reorganization Plan. 6. Rights of Action On and after the Effective Date, and except as may otherwise be agreed to by the Debtors, the Reorganized Debtors will retain and have the exclusive right to enforce any and all present or future rights, claims or causes of action against any Person and rights of the Reorganized Debtors and Reorganized Heber Debtors that arose before or after the applicable Petition Date, including, but not limited to (a) rights, claims, causes of action, avoiding powers suits and proceedings arising under sections 544, 545, 548, 549, 550, and 553 of the Bankruptcy Code; (b) the Heber Debtors' right to enforce any and all present or future rights, claims or causes of action against any Person and the rights of the Heber Debtors that arose before or after the applicable Petition Date, including, but not limited to, rights, claims, causes of action, avoiding powers suits and proceedings arising under sections 544, 545, 548, 549, 550, and 553 of the Bankruptcy Code, which shall be assigned to the Reorganized ; and (c) those rights, claims and causes of action transferred to Reorganized Covanta pursuant to the Secured Creditor Direction and the DIP Lender Direction, as provided by the Liquidation Plan. The Reorganized Debtors and Reorganized Heber Debtors may pursue, abandon, settle or release any or all such rights of action, as they deem appropriate, without the need to obtain approval or any other or further relief from the Court. The Reorganized Debtors and Reorganized Heber Debtors may, in their discretion, offset any such claim held against a Person against any payment due such Person under the Reorganization Plan; provided, however, that any claims of any of the Reorganized Debtors and Reorganized Heber Debtors arising before the applicable Petition Date shall first be offset against Claims against any of the Reorganized Debtors and Reorganized Heber Debtors arising before the applicable Petition Date. K. Miscellaneous Matters 1. Liability of the Liquidating Trustee (a) Limited Liability. The Liquidating Trustee shall not be liable for any act he or she may do or omit to do while acting in good faith and in the exercise of his or her best judgment, and the fact that such act or omission was advised by an authorized attorney (or other Retained Liquidation Professional) for the Liquidating Trustee shall be conclusive evidence of such good faith and best judgment; provided, however, that nothing contained in subparagraph VII.I.5.(a) of the Liquidation Plan shall affect the liability of any of the Liquidating Trustee for gross negligence or willful misconduct. (b) No Recourse. No recourse shall ever be had under the Liquidation Plan, directly or indirectly, against the Liquidating Trustee, personally or against any agent, attorney, accountant or professional for the Liquidating Trustee, by legal or equitable proceedings or by virtue of any statute or otherwise, nor upon any promise, contract, instrument, undertaking, obligation, covenant or agreement whatsoever executed by the Liquidating Trustee under the Liquidation Plan, or by reason of the creation of any indebtedness by the Liquidating Trustee under the Liquidation Plan for any purpose authorized by the Liquidation Plan, it being expressly understood and agreed that all such liabilities, covenants, and agreements of the Liquidating Trustee, whether in writing or otherwise, shall be enforceable only against and be satisfied only out of the Residual Liquidation Assets or such part thereof as shall, under the terms of any such agreement, be liable therefore or shall be evidence only of a right of payment out of the Residual Liquidation Assets, provided, however, that nothing contained in this subparagraph [VII.I.5.(b)] shall affect the liability of any of the parties listed above for gross negligence or willful misconduct. 2. Limited Liability of the Oversight Nominee The Oversight Nominee shall not be liable for anything other than its own acts as shall constitute willful misconduct or gross negligence of its duties. None of the Oversight Nominee's designees, agents, representatives or employees, shall incur or be under any liability or obligation by reason of any act done or omitted to be done, by the Oversight Nominee or its designee, agent, representative or employee. The Oversight Nominee may, in connection with the performance of functions, and in its sole and absolute discretion, consult with counsel, accountants and its agents, and shall not be liable for anything done or omitted or suffered to be done in accordance with such advice or opinions. If the Oversight Nominee determines not to consult with counsel, accountants or its agents, such determination shall not be deemed to impose any liability on the Oversight Nominee. 3. Setoffs Each Reorganizing Debtor may, in accordance with the provisions of the Reorganization Plan, Section 553 of the Bankruptcy Code and applicable non-bankruptcy law, set off against any Allowed Claim and the Distributions to be made pursuant to the Reorganization Plan on account of such Allowed Claim (before any Distribution is made on account of such Allowed Claim), the Claims, rights and causes of action of any nature that such Reorganizing Debtor may hold against the holder of such Allowed Claim; provided, however, that neither the failure to effect such a setoff nor the allowance of any Claim hereunder shall constitute a waiver or release by the applicable Reorganizing Debtor of any such Claims, rights and causes of action that the applicable Reorganizing Debtor may possess against such holder; and provided, further that any Claims of each Reorganizing Debtor arising before the applicable Petition Date shall only be setoff against Claims against such Reorganizing Debtor arising before the applicable Petition Date. 4. Satisfaction of Subordination Rights All Claims against the Debtors and all rights and claims between or among Claimholders relating in any manner whatsoever to distributions on account of Claims against the Debtors, based upon any subordination rights, whether asserted or unasserted, legal or equitable, shall be deemed satisfied by the Distributions under the Plans to Claims having such subordination rights, and such subordination rights shall be deemed waived, released, discharged, and terminated as of the Effective Date. Distributions to the various Classes of Claims hereunder shall not be subject to levy, garnishment, attachment, or like legal process by any Claimholder by reason of any subordination rights or otherwise, so that each Claimholder shall have and receive the benefit of the distributions in the manner set forth in the Plan. 5. Dissolution of the Creditors Committee Effective on the Effective Date, the Committee shall be dissolved and the members thereof shall be released and discharged of and from all further authority, duties, responsibilities, and obligations related to and arising from and in connection with the Chapter 11 Cases, and the retention or employment of the Committee's attorneys, accountants, and other agents, shall terminate. 6. Management of the Reorganized Debtors and Reorganized Heber Debtors On the Effective Date, the existing officers of the Reorganized Debtors that are in office immediately before the Effective Date shall remain as officers and shall continue to serve immediately after the Effective Date in their respective capacities until such time as they may resign, be removed or be replaced by the board of directors of the Reorganized Debtors. The officers and directors of the Heber Debtors that are in office immediately before the Effective Date shall resign as of the Effective Date. The Buyers under the Geothermal Sale shall designate and appoint the new officers and directors of the Reorganized Heber Debtors. VIII. CERTAIN RISK FACTORS TO BE CONSIDERED The holder of a Claim against the Debtors should read and carefully consider the following factors, as well as the other information set forth in this Disclosure Statement (and the documents delivered together herewith and/or incorporated by reference herein), before deciding whether to vote to accept or to reject the Plans. These factors should not, however, be regarded as constituting the only risks involved in connection with the Plans and their implementation. A. General Considerations The formulation of a reorganization plan is the principal purpose of a chapter 11 case. The Plans set forth the means for satisfying the holders of Claims against and Equity Interests in the Debtors. Certain Claims may receive partial distributions pursuant to the Plans, and in some instances, no distributions at all. See Section VII.B--"Classification and Treatment of Claims and Equity Interests," above. The recapitalization of the Debtors realizes the going concern value of the Debtors for their holders of Claims and Equity Interests. Moreover, reorganization of the Reorganizing Debtors and Heber Debtors' business and operations under the proposed Reorganizing Plan also avoids the potentially adverse impact of a liquidation on the holders of Claims and Equity Interests and the Reorganizing Debtors and Heber Debtors' employees, and many of its customers, trade vendors, suppliers of goods and services, and lessors. B. Certain Bankruptcy Considerations The Debtors are parties to various contractual arrangements under which the commencement of the Chapter 11 Cases and the other transactions contemplated by the Plans could, subject to the Debtors' rights and powers under the Bankruptcy Code, (and in particular, sections 105, 362 and 365 of the Bankruptcy Code) (i) result in a breach, violation, default or conflict, (ii) give other parties thereto rights of termination or cancellation, or (iii) have other adverse consequences for the Debtors, Reorganized Debtors or Reorganized Heber Debtors. The magnitude of any such adverse consequences may depend upon, among other factors, the diligence and vigor with which other parties to such contracts may seek to assert any such rights and pursue any such remedies in respect of such matters, and the ability of the Debtors, Reorganized Debtors or Reorganized Heber Debtors to resolve such matters on acceptable terms through negotiations with such other parties or otherwise. The Debtors do not believe that any material enforceable breach of or default under any such agreement has occurred. There can be no assurance that the requisite acceptances to confirm the Plans will be obtained. Even if the requisite acceptances are received, there can be no assurance that the Court will confirm the Plans. A non-accepting creditor or equity security holder of the Debtors might challenge the adequacy of the Disclosure Statement or the balloting procedures and results as not being in compliance with the Bankruptcy Code and/or Bankruptcy Rules. Even if the Court were to determine that the Disclosure Statement and the balloting procedures and results were appropriate, the Court could still decline to confirm the Plan if it were to find that any of the statutory requirements for confirmation had not been met. Section 1129 of the Bankruptcy Code sets forth the requirements for confirmation and requires, among other things, a finding by the Court that the confirmation of the Plans is not likely to be followed by a liquidation or a need for further financial reorganization and that the value of distributions to non-accepting holders of claims and interests within a particular class under the Plans will not be less than the value of distributions such holders would receive if the Debtors were liquidated under Chapter 7 of the Bankruptcy Code. While there can be no assurance that the Court will conclude that these requirements have been met, the Debtors believe that the Plans will not be followed by a need for further financial reorganization and that non-accepting holders within each class under the Plans will receive distributions at least as great as would be received following a liquidation pursuant to Chapter 7 of the Bankruptcy Code when taking into consideration all administrative claims and costs associated with any such Chapter 7 case. The confirmation and consummation of the Plans are also subject to certain conditions. If the Plans, or a plan determined not to require resolicitation of any Classes of Claims or Equity Interests by the Court, were not to be confirmed, it is unclear whether the restructuring could be implemented and what distribution holders of Claims and Equity Interests ultimately would receive with respect to their Claims and Equity Interests. If an alternative reorganization could not be agreed to, it is possible that the Debtors would have to liquidate their assets, in which case it is likely that holders of Claims would receive substantially less than the treatment they will receive pursuant to the Plans. If a complete liquidation or protracted reorganization were to occur, there is a risk that there would be little, if any, value available for distribution to the holders of Claims and Equity Interests. See Exhibits D and E attached to this Disclosure Statement for a hypothetical liquidation valuation analysis of each individual Debtor. The continuation of the Chapter 11 Cases, particularly if the Plans are not approved or confirmed in the timeframe currently contemplated, could further adversely affect the Debtors' operations and relationships with customers, employees, regulators and other parties. If confirmation and consummation of the Plans do not occur expeditiously, the Chapter 11 Cases could result in, among other things, increased costs for professional fees and similar expenses. In addition, further delay could make it more difficult to retain and attract management and other key personnel and would require senior management to spend a significant amount of time and effort dealing with reorganization instead of business operations. C. Inherent Uncertainty of Financial Projections The Projections attached as Exhibit C2 to this Disclosure Statement cover Reorganized Covanta, its Reorganized Debtor and Reorganizing Heber Debtor subsidiaries and its non-debtor subsidiaries (collectively, the "Reorganized Company") operations through December 31, 2007. These Projections are based on numerous assumptions including the timing, confirmation and consummation of the Plans in accordance with their terms, the anticipated future performance of the Reorganized Debtors, industry performance, general business and economic conditions, the continued exemption from federal income taxation afforded by the ESOP/S corporation structure, the restructuring of certain projects and the resolution of litigation relating to projects as described above and other matters, many of which are beyond the control of the Reorganized Debtors and Reorganized Heber Debtors and some or all of which may not materialize. In addition, unanticipated events and circumstances occurring subsequent to the date that this Disclosure Statement was approved by the Court may affect the actual financial results of the Reorganized Debtors and Reorganized Heber Debtors' operations. These variations may be material and may adversely affect the ability of the Reorganized Debtors and Reorganized Heber Debtors to make payments with respect to post-Effective Date indebtedness. Because the actual results achieved throughout the periods covered by the Projections may vary from the projected results, the Projections should not be relied upon as a guaranty, representation or other assurance of the actual results that will occur. Except with respect to the Projections and except as otherwise specifically and expressly stated herein, this Disclosure Statement does not reflect any events that may occur subsequent to the date hereof and that may have a material impact on the information contained in this Disclosure Statement. The Reorganized Company does not intend to update the Projections; thus, the Projections will not reflect the impact of any subsequent events not already accounted for in the assumptions underlying the Projections. D. Sale of Geothermal Debtor Equity In order to fund the cost of emerging from Chapter 11 protection, the Debtors have determined to pursue a sale of the Geothermal Debtor Equity through the Geothermal Sale. The Geothermal Sale is an integral part of the Reorganization Plan and the Reorganizing Debtors' successful emergence from Chapter 11 protection. Failure to sell the Geothermal Debtor Equity will likely result in insufficient funding to consummate the Reorganization Plan without further agreement from the Secured Bank Lenders. The Debtors believe that the Geothermal Debtor Equity is valuable and attractive and anticipate that they will successfully complete such a transaction. Nevertheless, there can be no assurance that the Debtors will successfully sell the Geothermal Debtor Equity, which might prevent consummation of the Reorganization Plan. E. WTE Projects Restructuring and Litigation As discussed in Section VI.C.9 above, certain of the Reorganizing Debtors and contract parties have reached agreements with respect to, or are in the process of discussing, material restructuring of their mutual obligations in connection with several WTE projects. One such Reorganizing Debtor (Covanta Onondaga) has reached agreements in principle and is in the process of documenting the proposed restructurings. Another two (2) Reorganizing Debtors (Covanta Warren and Covanta Tulsa) are negotiating the restructuring of their respective obligations with relevant contract parties, but have not yet reached any agreement in principle with such contract parties. In addition, and as dicussed in Section VI.C.13 above, two (2) other Reorganizing Debtors operating WTE facilities (Covanta Babylon and Covanta Lake) are involved in material litigation with contract counterparties. In the event any of these projects is either unable to consummate a restructuring of its material obligations or achieves an unsuccessful result in its material litigation, as the case may be, the Debtors may, among other things, reject one or more executory contracts related to such Debtor's facility, recharacterize such Debtor as a Liquidating Debtor, and/or withdraw such Debtor as a Reorganizing Debtor and subsequently file a separate plan of reorganization for such Debtor. In such an event, creditors of the relevant Debtor may not receive any recovery on account of their claims. The Debtors cannot guarantee that each of these Debtors will successfully restructure, receive Court approval of such restructuring, or achieve a successful result in its litigation, as the case may be. Furthermore, the Debtors cannot guarantee that one or more such events, if they occur, would not impair the other Debtors' ability to confirm and consummate the Plans or the terms of any exit financing available to such other Debtors. F. Dividends The Reorganized Debtors do not anticipate that dividends will be paid with respect to the New Common Stock in the foreseeable future. G. Impact of Interest A significant portion of the Reorganized Debtors' debt upon emergence, including the New Credit Facility, will have interest rates that vary with prevailing short-term rates. To the extent that either short-term rates or long-term rates in the future exceed those forecasted by the Reorganized Debtors, interest costs will increase, which could have an adverse effect on the Reorganized Debtors. H. Access to Financing The Reorganizing Debtors' ability to consummate the Plan and obtain sufficient Cash resources for post-Effective Date working capital depend upon successful consummation of the Geothermal Sale as well as implementation of the Exit Financing Agreements, including the New CPIH Revolver Facility and the New Revolver Facility. The Reorganizing Debtors believe that they will be able to successfully complete these transactions, although there can be no assurance that the Geothermal Sale will be consummated or that sufficient commitments for the New CPIH Revolver Facility and the New Revolver Facility will be obtained. Further, the Company assumes that it will be able to refinance the Exit Financing Agreements before maturity, although there can be no assurance of such refinancing. I. Claims Estimations There can be no assurance that the estimated Claim amounts set forth herein are correct, and the actual allowed amounts of Claims may differ from the estimates. The estimated amounts are subject to certain risks, uncertainties and assumptions. Should one or more of these risks or uncertainties materialize, or should underlying assumptions prove incorrect, the actual allowed amounts of Claims may vary from those estimated herein. J. Environmental Regulation The Company's operations are subject to various federal, state and local environmental laws and regulations, including the Clean Air Act, the Clean Water Act, CERCLA or Superfund and RCRA. Although the Company's operations are occasionally subject to proceedings and orders pertaining to emissions into the environment and other environmental violations, which may result in fines, penalties, damages or other sanctions, the Company believes that it is in substantial compliance with existing environmental laws and regulations. The Company may be identified, along with other entities, as being among parties potentially responsible for contribution to costs associated with the correction and remediation of environmental conditions at disposal site subject to CERCLA and/or analogous state laws. In certain instances the Company may be exposed to joint and several liability for remedial action or damages. The Company's ultimate liability in connection with such environmental claims will depend on many factors, including its volumetric share of waste, the total cost of remediation, the financial viability of other companies that also sent waste to a given site and, in the case of divested operations, its contractual arrangement with the purchaser of such operations. K. Market for Securities There can be no assurance that an active market for any of the securities to be distributed pursuant to the Plan, including the High Yield Notes and the Reorganized CPIH Preferred Securities, will develop and no assurance can be given as to the prices at which such securities might be traded. L. Assumptions Regarding Value of Debtors' Assets Pursuant to SOP 90-7, the Projections incorporate "Fresh Start Reporting" principles which the Reorganized Debtors will be required to adopt upon emergence from bankruptcy. These Fresh Start Reporting principles require, among other things, that the Reorganized Debtors' assets and liabilities be recorded at fair value ("Fresh Start Reporting Adjustments"). The Fresh Start Reporting Adjustments included in the Projections are preliminary estimates to adjust the Reorganized Debtors' capital structure and its assets and liabilities to their estimated fair values in accordance with the Reorganization Plan and the Valuation Analysis in Exhibit D. These estimated Fresh Start Reporting Adjustments are subject to change and the Debtors can give no assurance that they will not change materially. A material change to the Fresh Start Reporting Adjustment could materially impact the Reorganized Debtors' net income. M. ESOP/S Corporation Tax Structure; Potential Disallowance of Tax Benefits 1. Second Class of Stock The Reorganization Plan has been structured with the intention that Reorganized Covanta will qualify as an S corporation wholly owned by an ESOP with the result that Reorganized Covanta's future U.S. federal income tax liabilities would be substantially reduced. While the Company believes the ESOP/S corporation structure meets all requirements for such qualification, no ruling from the IRS or opinion of counsel has been received with respect to such qualification and there is no assurance that the IRS will not successfully challenge such structure. In the event Reorganized Covanta does not qualify as an S corporation, it would incur significant amounts of tax liabilities that would result in substantial shortfalls in Reorganized Covanta's ability to service its debt and otherwise meet its obligations. Reorganized Covanta intends to elect to be taxed as an S corporation as of January 1, 2004. Covanta believes that that it will satisfy all of the requirements for qualification as an S corporation upon consummation of the Plan of Reorganization. However, among the requirements for qualification for S corporation status is that the stock of the corporation be owned by qualifying stockholders, such as individuals or tax-exempt entities, and that the corporation has only one class of stock outstanding. The ESOP, a tax-exempt entity, is a qualifying stockholder, and it will own all of the outstanding stock of Reorganized Covanta. Nevertheless, based on the amount of Covanta Notes and Reorganization Plan Warrants, the IRS could take the position that the Covanta Notes, in whole or in part, or the Reorganization Plan Warrants, constitute a second class of stock for purposes of the S corporation rules. There is consequently a risk that the IRS would be successful in asserting that the Covanta Notes and/or Reorganization Plan Warrants should be characterized as a second class of stock. If that were to occur, Reorganized Covanta would not qualify for S corporation treatment and would incur significant amounts of unanticipated tax liabilities that would result in substantial shortfalls in the Reorganizing Debtors' ability to service their debt and otherwise meet their obligations. See generally Section X, Certain U.S. Federal Income Tax Consequences of the Plan. 2. IRS Review In recent months, the IRS has issued revenue rulings and temporary and proposed regulations regarding arrangements involving certain ESOPs holding stock in S corporations. The focus of the IRS' recent efforts has been on arrangements used to avoid the IRC's requirement that an ESOP owning stock in an S corporation provide meaningful benefits to a broad group of rank-and-file employees of the S corporation; the intent of which is to prevent the owners of closely-held S corporations from using ESOPs to shelter their personal service income from tax through the ESOP. No assurance can be given that the IRS will not take additional action to target a broader scope of ESOP/S corporation structures. In fact, in a recent revenue ruling (IRS Revenue Ruling 2003-6) the IRS has indicated its intent to develop further guidance to address other abusive arrangements involving S corporation ESOPs. It is the Company's belief that the Reorganized Covanta ESOP, as structured, does not implicate recent IRS regulations. Unlike the circumstances described in recent IRS rulings, the ESOP contemplates that a broad group of over 1,500 employees will receive substantial equity value in Reorganized Covanta; a benefit such employees would not receive had the Company sought the implementation of a plan of liquidation. Because of the uncertainty surrounding the IRS's scrutiny of such transactions there can be no guarantee that it will not try to disqualify the Reorganization Plan's ESOP structure. If the IRS were in fact to pursue such an attack it may seek to rely on the argument that a significant portion of the benefits of the structure are being realized by the creditors of the Company (as a result of the increased cash flow available to pay down their debt) at the expense of the ESOP whose involvement in the Reorganization Plan as the sole stockholder of Reorganized Covanta generates significant economic value for all parties in interest. Similarly, the IRS might contend that in light of Reorganized Covanta's outstanding debt and its issuance of the Reorganization Plan Warrants, the special rule permitting an ESOP to avoid paying unrelated business tax on its allocable share of S corporation earnings is being put to an unintended use, with the result that its benefits should be denied to Reorganized Covanta. There is no existing specific authority on which the IRS could rely in formulating such arguments, and as noted above, under the ESOP/S corporation structure substantial benefits are being extended to a broad group of employees who, absent such structure, might not otherwise have realized such benefits. Though there can be no assurance that a court would not be persuaded by the IRS arguments or that legislative or administrative action could not be taken that would curtail the benefits of the structure for Reorganized Covanta, the Company believes that, under current law, the IRS's arguments would not prevail. N. U.S. Trust Acceptance of ESOP Contribution The Reorganizing Debtors' ability to consummate the Reorganization Plan depends upon acceptance by U.S. Trust, as Trustee on behalf of the proposed ESOP, of the proposed contribution of Reorganized Covanta stock to the ESOP. As part of this decision making process, U.S. Trust is also responsible for negotiating on behalf of the ESOP the terms and conditions governing such contribution. There can be no assurance that U.S. Trust will not impose conditions on its acceptance of the contribution that will be undesirable to the Debtors, the Committee, the Secured Bank Lenders and/or the 9.25% Debenture Holders, and that, if unacceptable to any or all of such parties, would prevent the successful creation of the ESOP and consummation of the Reorganization Plan. O. Reorganized CPIH Preferred Shares; Certain Contractual Restrictions. Certain project contracts of Covanta's foreign affiliates contain change-of-control provisions that may limit the ability of Reorganized CPIH to issue to third parties equity securities of CPIH and/or grant certain control or management rights over CPIH, without consent from counterparties to the foreign projects. Should the preferred shares effectively transfer control of CPIH to their holders, a violation of the change-of-control provisions of certain international projects could be triggered. P. International Political Risk The ownership and operation of facilities in foreign countries in connection with the Company's international business entails significant political and financial uncertainties that typically are not involved in such activities in the United States. Key international risk factors include governmentally-sponsored efforts to renegotiate long-term contracts, non-payment of fees and other monies owed to the Company, unexpected changes in electricity tariffs, conditions in financial markets, currency exchange rates, currency repatriation restrictions, currency convertability, changes in laws and regulations and political, economic or military instability, civil unrest and expropriation. Such risks have the potential to cause substantial delays or material impairment to the value of the Company's international businesses. IX. RESALE OF SECURITIES RECEIVED UNDER THE REORGANIZATION PLAN A. Issuance of New Debt and Equity Reorganized Covanta does not believe that registration under the Securities Act of 1933 (the "Securities Act") or comparable state laws is required with respect to the Reorganization Plan Notes or the Reorganization Plan Equities Securities to be distributed to holders of Claims (including, without limitation, to the holders of (i) Reorganized Covanta Secured Claim, (ii) Operating Company Unsecured Claims, (iii) Intermediate Holding Company Unsecured Claims or (iv) Covanta Unsecured Claims on account of and in exchange for such Claims. Section 1145(a)(1) of the Bankruptcy Code exempts the offer and sale of securities under a plan of reorganization from registration under section 5 of the Securities Act and state laws if three principal requirements are satisfied: (i) the securities must be offered and sold under a plan of reorganization and must be securities of the debtor, of an affiliate participating in joint plan with the debtor, or of a successor to the debtor under the plan; (ii) the recipients of the securities must hold claims against or interests in the debtor; and (iii) the securities must be issued in exchange (or principally in exchange) for the recipient's claim against or interest in the debtor. The Reorganizing Debtors believe that the offer and sale of the Reorganization Plan Notes and the Reorganization Plan Equity Securities under the Reorganization Plan to holders of Claims (including those identified in the immediately preceding paragraph) satisfy the requirements of section 1145(a)(1) of the Bankruptcy Code and are, therefore, exempt from registration under the Securities Act and state securities laws. B. Subsequent Transfers of Reorganization Plan Notes To the extent that the Reorganization Plan Notes or the Reorganization Plan Equity Securities are issued under the Reorganization Plan and are covered by section 1145(a)(1) of the Bankruptcy Code, they may be resold by the holders thereof without registration unless, as more fully described below, the holder is an "underwriter" with respect to such securities. Generally, section 1145(b)(1) of the Bankruptcy Code defines an "underwriter" as any person who: (i) purchases a claim against, an interest in, or a claim for an administrative expense against the debtor, if such purchase is with a view to distributing any security received in exchange for such a claim or interest; (ii) offers to sell securities offered under a plan for the holders of such securities; (iii) offers to buy such securities from the holders of such securities, if the offer to buy is: (A) with a view to distributing such securities; and (B) under an agreement made in connection with the plan, the consummation of the plan, or with the offer or sale of securities under the plan; or (iv) is an "issuer" with respect to the securities, as the term "issuer" is defined in section 2(11) of the Securities Act. Under section 2(11) of the Securities Act, an "issuer" includes any person directly or indirectly controlling or controlled by the issuer, or any person under direct or indirect common control of the issuer. To the extent that Persons who receive Reorganization Plan Notes or Reorganization Plan Equity Securities pursuant to the Reorganization Plan are deemed to be "underwriters" as defined in section 1145(b) of the Bankruptcy Code, resales by such Persons would not be exempted by section 1145 of the Bankruptcy Code from registration under the Securities Act or other applicable law. Such Persons would, however, be permitted to sell such Reorganization Plan Notes or Reorganization Plan Equity Securities without registration if they are able to comply with the provisions of Rule 144 under the Securities Act. These rules permit the public sale of securities received by such Person if current information regarding the issuer is publicly available and if volume limitations and certain other conditions are met. Whether or not any particular person would be deemed to be an "underwriter" with respect to the Reorganization Plan Notes or Reorganization Plan Equity Securities to be issued pursuant to the Reorganization Plan would depend upon various facts and circumstances applicable to that person. Accordingly, the Reorganizing Debtors and Heber Debtors express no view as to whether any particular Person receiving Reorganization Plan Notes or Reorganization Plan Equity Securities under the Reorganization Plan would be an "underwriter" with respect to such Reorganization Plan Notes or other securities. Given the complex and subjective nature of the question of whether a particular holder may be an underwriter, the Reorganizing Debtors make no representation concerning the right of any Person to trade in the Reorganization Plan Notes or Reorganization Plan Equity Securities. The Reorganizing Debtors recommend that potential recipients of the Reorganization Plan Notes or Reorganization Plan Equity Securities consult their own counsel concerning whether they may freely trade Reorganization Plan Notes or Reorganization Plan Equity Securities or Reorganization Plan Equity Securities without compliance with the Securities Act, the Exchange Act or similar state and federal laws. X. CERTAIN UNITED STATES FEDERAL INCOME TAX CONSEQUENCES OF THE PLAN A summary description of certain material United States federal income tax consequences of the Reorganization Plan is provided below. This description is for informational purposes only and, due to a lack of definitive judicial or administrative authority or interpretation, substantial uncertainties exist with respect to various tax consequences of the Reorganization Plan as discussed herein. Only the principal United States federal income tax consequences of the Reorganization Plan to the Reorganizing Debtors and Heber Debtors and to Holders of Claims who are entitled to vote or to accept or reject the Reorganization Plan are described below. No opinion of counsel has been sought or obtained with respect to any tax consequences of the Reorganization Plan. Except for a determination letter with respect to the ESOP's compliance with the requirements of Code Sections 401(a), 501(a) and 4975(e)(7), no rulings or determinations of the Internal Revenue Service (the "IRS") or any other tax authorities have been sought or obtained with respect to any tax consequences of the Reorganization Plan, and the discussion below is not binding upon the IRS or such other authorities. No representations are being made regarding the particular tax consequences of the confirmation and consummation of the Reorganization Plan to the Reorganizing Debtors and Heber Debtors or any Holder of a Claim. No assurance can be given that the IRS would not assert, or that a court would not sustain, a different position from any discussed herein. The discussion of United States federal income tax consequences below is based on the Internal Revenue Code of 1986, as amended (the "Code"), Treasury Regulations, judicial authorities, published positions of the IRS and other applicable authorities, all as in effect on the date of this document and all of which are subject to change or differing interpretations (possibly with retroactive effect). The following discussion does not address foreign, state or local tax consequences of the Reorganization Plan, nor does it purport to address the United States federal income tax consequences of the Reorganization Plan to special classes of taxpayers. Furthermore, the following discussion does not address United States federal taxes other than income taxes. EACH HOLDER IS STRONGLY URGED TO CONSULT ITS OWN TAX ADVISOR REGARDING THE UNITED STATES FEDERAL, STATE AND LOCAL AND ANY FOREIGN TAX CONSEQUENCES OF THE TRANSACTIONS DESCRIBED HEREIN AND IN THE REORGANIZATION PLAN. A. United States Federal Income Tax Consequences to the Reorganizing Debtors and Heber Debtors 1. Taxation of Reorganized Covanta as an S corporation Upon implementation of the Reorganization Plan, on the Effective Date, all the outstanding Old Covanta Stock will be cancelled for no consideration and Reorganized Covanta will issue one hundred percent of the Reorganized Covanta Common Stock to an ESOP in accordance with the Reorganization Plan. Reorganized Covanta intends to elect to be treated as an S corporation as of January 1, 2004. Generally, the income of an S corporation is not subject to corporate income tax but passes through to its shareholders. Losses incurred by an S corporation flow through to its shareholders up to the amount of each shareholder's adjusted basis in his stock and debt, if any, of the S corporation. The ESOP, a tax-exempt organization, will be the only shareholder of Reorganized Covanta. In general, an ESOP is not subject to United States federal income taxation, except with respect to such ESOP's "unrelated business taxable income." Under a special statutory provision, income of an S corporation allocated to an ESOP shareholder is not treated as "unrelated business taxable income" in the hands of the ESOP. Accordingly, the ESOP will not be subject to United States federal income taxation with respect to such income. It is expected that Reorganized Covanta will generate large amounts of taxable income in the taxable periods following the Effective Date. Consequently, if Reorganized Covanta were not to qualify for S corporation treatment, or if the IRS were to successfully challenge the S corporation status of Reorganized Covanta, Reorganized Covanta would incur significant amounts of federal income taxes on such income. It is expected that Reorganized Covanta would not have the financial capability to satisfy such tax liabilities and its outstanding debt obligations. Although generally S corporations are not subject to corporate income taxes, they are subject to corporate income taxes on built-in gains. These special rules are only relevant for S corporations that were previously taxed as C corporations, such as Reorganized Covanta. If, within ten (10) years of Reorganized Covanta's conversion to an S corporation, Reorganized Covanta sells assets with built-in gains attributable to unrealized appreciation that existed on the date Reorganized Covanta converted to an S corporation, Reorganized Covanta would be subject to corporate tax on such gains. The total amount of such built-in gains that can become subject to corporate income tax cannot exceed Covanta's net unrealized built-in gain. Net unrealized built-in gain is the amount by which the fair market value of all assets of Reorganized Covanta on the first day of its taxable year as an S corporation exceeds the aggregate adjusted basis of those assets at that time. If Reorganized Covanta recognizes built-in losses (attributable to unrealized depreciation that existed on the date Covanta converted to an S corporation) in the same taxable year it recognizes built-in gains, the losses can offset the gains. Recognized built-in losses cannot, however, be carried forward to another taxable year. Reorganized Covanta's net recognized built-in gain subject to corporate income tax for any taxable year is limited to the amount of taxable income Reorganized Covanta would have reported if it were a C corporation. Although in general, most states automatically follow the federal treatment of an S corporation, certain states do not recognize an S corporation election or impose an entity-level tax at a reduced rate on an S corporation. It is expected that Reorganized Covanta will be subject to state corporate income taxes in certain jurisdictions. 2. Requirements for S Corporation Election In general, in order to qualify as an S corporation, a corporation must meet certain requirements. An S corporation cannot have more than 75 shareholders. Only certain specified categories of persons, including tax-exempt organizations such as an ESOP, are eligible to be an S corporation shareholder. Reorganized Covanta will be permitted to have only one shareholder, the ESOP, and therefore this requirement should be met. Second, an S corporation can only have one class of stock (except for common stock with different voting rights). Reorganized Covanta will have only one class of stock outstanding, the Reorganized Covanta Common Stock, and will not be permitted to issue additional classes of stock. Under certain circumstances, however, other forms of instruments such as debt or warrant-type instruments may be treated as a second class of stock. A recharacterization of debt or Reorganization Plan Warrants that will be issued by Reorganized Covanta as a second class of stock would result in Reorganized Covanta being disqualified as an S corporation. See "Second Class of Stock" discussion below. Reorganized Covanta could also be disqualified as an S corporation if it has passive investment income in excess of 25 percent of its gross receipts for two consecutive tax years. It is not expected that Reorganized Covanta will have significant amounts of passive investment income. An S corporation election for a particular taxable year (i) may not be made after the first two and a half months of that year and (ii) may only be made if the corporation is eligible for S corporation status as of the beginning of that taxable year. Covanta has the calendar year as its taxable year. Reorganized Covanta intends to make an S corporation election effective as of January 1, 2004. In order for Reorganized Covanta to make the S corporation election effective as of January 1, 2004, it is necessary for Reorganized Covanta to meet all requirements necessary to qualify as an S corporation as of January 1, 2004. In particular, it is necessary for the Reorganized Covanta Common Stock to be owned by the ESOP as of January 1, 2004 for Covanta's S corporation election to be effective as of that date. During any period that Reorganized Covanta's S corporation election is not in effect, Reorganized Covanta will be subject to corporate income tax. 3. Second Class of Stock In addition to the Reorganized Covanta Common Stock, Reorganized Covanta will issue the Reorganization Plan Unsecured Notes and the New High Yield Secured Notes (together, "Covanta Notes") and the Reorganization Plan Warrants. If these instruments are treated as a second class of stock, Reorganized Covanta would be disqualified as an S corporation. (a) The Covanta Notes Under the Treasury Regulations, debt generally will not be treated as a second class of stock for S corporation purposes, unless (i) the debt is appropriately characterized as equity under general tax law principles and (ii) a principal purpose of issuing the debt is to circumvent the limitations on eligible shareholders of an S corporation. A significant number of Holders of the Covanta Notes would be ineligible to be S corporation shareholders. In addition, in light of the amount of debt that Reorganized Covanta will have outstanding as compared to its equity, the IRS could argue that Reorganized Covanta is thinly capitalized and that under general principles of tax law, all or some of the Covanta Notes are more appropriately characterized as a second class of equity. In general, the IRS and the courts have not developed a precise test for distinguishing debt from equity. A number of characteristics, however, traditionally have been used to identify debt. In addition to the absence of thin capitalization, the most important of these are: (i) the return of principal on or before a fixed maturity date; (ii) an interest rate that is not contingent upon either a discretionary action of the issuing corporation's board of directors or the corporation's earnings; (iii) the existence of a claim that is superior to that of the shareholders of the issuer and on a parity with at least the claim of some other creditors of the issuer; (iv) a lack of participation by the Holder of the instrument in the management of the issuer; and (v) the ability of the issuing corporation to meet its obligations. Reorganized Covanta will treat the Covanta Notes as debt for all purposes. Moreover, assuming the Reorganization Plan is approved, the Bankruptcy Court will make a finding that the Reorganization Plan is feasible indicating its belief that it is reasonable to conclude that Reorganized Covanta can repay or refinance the Covanta Notes in the ordinary course of business. However, such treatment and/or determination is not binding on the IRS, there can be no assurance that the IRS would not be successful in challenging such a finding and asserting that certain of the Covanta Notes should be treated as a second class of equity. The IRS may also contend that the issuance of the Reorganization Plan Warrants to Holders of the Covanta Notes, which entitle the Holders to a significant portion of the appreciation in value of the equity of Reorganized Covanta, should be taken into account in assessing whether the Covanta Notes should be reclassified as equity. The Covanta Notes and Reorganization Plan Warrants are separate instruments, the Notes can be transferred independently of the Reorganization Plan Warrants, and the Reorganization Plan Warrants are not held in the same ratio as any class or classes of Covanta Notes. As such, the Reorganization Plan Warrants arguably should not be considered in assessing the classification of the Covanta Notes. Nonetheless, there can be no assurance that such an argument would prevail and the IRS would not be successful in asserting that the Covanta Notes should be treated, in whole or in part, as a second class of stock. (b) Reorganization Plan Warrants The Treasury Regulations provide special rules for determining whether a call option, warrant, or similar instrument (a "call option") is treated as a second class of stock for S corporation purposes. It is unclear whether the Reorganization Plan Warrants, which provide Reorganized Covanta with the right to settle in cash, as well as stock, will be treated as a call option subject to these rules. Under the rules, a call option is treated as a second class of stock if, taking into account all the facts and circumstances, the call option is substantially certain to be exercised and has a strike price substantially below the fair market value of the underlying stock on the date the call option is issued, transferred by a person who is eligible to be an S corporation shareholder to a person who is not eligible to be an S corporation shareholder, or materially modified (each such date, a "testing date"). Applicable Treasury Regulations provide for a safe harbor such that if on any testing date, the strike price of the call option is at least 90 percent of the underlying stock's fair market value on that date, the call option is not treated as a second class of stock. Failure of an option to meet this safe harbor will not necessarily result in the option being treated as a second class of stock, but rather such option then needs to be tested under the general rules, as described above. It is expected that the Reorganization Plan Warrants, upon issuance, will qualify for this safe harbor. The Reorganization Plan Warrants by their terms are not transferable in a way that would cause a new testing date to occur. Therefore, if the special rules under the Treasury Regulations were applicable to the Reorganization Plan Warrants, the Reorganization Plan Warrants should not be considered to constitute a second class of stock. Alternatively, were the Reorganization Plan Warrants determined not to be call options covered by the Treasury Regulations, the IRS could attempt to recharacterize the Reorganization Plan Warrants as a second class of stock under general principles of tax law. While the company would argue that the Reorganization Plan Warrants should not be treated more stringently than an actual call option, which entitles the holder to acquire stock of the company, there is no assurance that such an argument would prevail and that the IRS would not be successful in recharacterizing the Reorganization Plan Warrants as a second class of stock. 4. Qualified Subchapter S Subsidiaries ("QSub") At the same time Reorganized Covanta will elect S corporation status, it will elect to treat most of its domestic subsidiaries as QSubs. Because, in general, this election is only available with respect to wholly-owned subsidiaries of an S corporation that are eligible domestic corporations, Reorganized Covanta will not be able to elect QSub status for its foreign subsidiaries. A QSub election can be made for a chain of subsidiaries. Once a first-tier subsidiary becomes a QSub, the S corporation is treated as owning directly all of the stock of a second-tier subsidiary held by such first-tier subsidiary, and therefore may make a QSub election with respect to the second-tier subsidiary. However, it is not possible to make a QSub election for a second-tier subsidiary if the first-tier subsidiary remains a C corporation. Immediately before the S corporation and the QSub elections are deemed effective, the Subsidiaries for which a valid QSub election will be made, will be deemed to have liquidated for U.S. federal income tax purposes. While it is anticipated that such liquidations will generally be done on a tax-free basis, in one instance the deemed liquidation will give rise to the recognition of taxable gain that will cause a tax liability to be incurred for state corporate income tax. After the QSub elections become effective, the separate existence of the QSubs will be ignored for United States federal income tax purposes. All assets, liabilities and items of income, deduction and credit of the QSubs will be treated as assets, liabilities and items of income, deduction and credit of Reorganized Covanta. The consolidated group for United States federal income tax purposes of which Covanta is the parent will no longer exist. By making QSub elections for most of the domestic Subsidiaries, Reorganized Covanta will be able to extend the beneficial tax consequences of being an S corporation that is wholly-owned by an ESOP to most of the activities of its domestic subsidiaries. 5. Cancellation of Indebtedness Income. Upon implementation of the Reorganization Plan, the amount of Reorganized Covanta's aggregate outstanding indebtedness will be reduced. In general, the discharge of a debt obligation in exchange for an amount of cash and other property, including new debt obligations, having a fair market value (or, in the case of a new debt instrument, an "issue price") less than the "adjusted issue price" of the debt gives rise to cancellation of indebtedness ("COD") income to the debtor. However, COD income is not taxable to the debtor if the debt discharge occurs in a Title 11 bankruptcy case. Instead, under the Code, such COD income will reduce certain of the debtor's tax attributes, generally in the following order: (a) net operating losses ("NOLs") and NOL carryforwards; (b) general business credit carryforwards; (c) minimum tax credit carryforwards; (d) capital loss carryforwards; (e) the tax basis of the debtor's depreciable and nondepreciable assets (but not below the amount of its liabilities immediately after the discharge); and (f) foreign tax credit carryforwards. The reduction in tax attributes occurs only after the tax for the year of the debt discharge has been determined (i.e., such attributes may be available to offset taxable income that accrues between the date of discharge and the end of Covanta's taxable year). Any excess COD income over the amount of available tax attributes is not subject to United States federal income tax and has no other United States federal income tax impact. After reduction for the COD income generated by the Reorganization Plan, Covanta does not expect to have significant amounts of remaining tax attributes. B. United States Federal Income Tax Consequences to the Holders of Claims of the Reorganizing Debtors and Heber Debtors The following is a summary of the principal U.S. federal income tax consequences of the Reorganization Plan that may be relevant to a beneficial holder of a Claim that is a citizen or resident of the United States or a domestic corporation or otherwise subject to U.S. federal income tax on a net income basis in respect of the Claim (a "Holder"). The discussion does not deal with special classes of Holders, such as dealers in securities or currencies, banks, financial institutions, insurance companies, tax-exempt organizations, persons holding Claims as a position in a "straddle" or conversion transaction, or as part of a "synthetic security" or other integrated financial transaction or persons that have a functional currency other than the U.S. dollar. Moreover, this summary does not address the U.S. federal estate and gift tax or alternative minimum tax consequences of the Reorganization Plan or of the ownership or retirement of the Reorganization Plan Warrants, the New CPIH Preferred Stock or the Reorganization Plan Notes issued pursuant to the Reorganization Plan and does not address the U.S. federal income tax treatment of Holders that acquire such Reorganization Plan Warrants, Equity Securities or Notes subsequent to the Effective Date of the Reorganization Plan. This discussion assumes that the Reorganization Plan Warrants, the New CPIH Preferred Stock, and the Reorganization Plan Notes will be held as "capital assets" within the meaning of Section 1221 of the Code. For U.S. federal income tax purposes, the treatment of Holders and the character and amount of income, gain or loss recognized as a consequence of the Reorganization Plan will depend upon, among other factors, whether the Claims, the Reorganization Plan Warrants, the New CPIH Preferred Stock, and the Reorganization Plan Notes constitute "securities in a corporation a party to a reorganization" for the purposes of Code 354 ("Section 354 Securities"). The rules for determining whether an obligation constitutes a "security" for purposes of Code Section 354 are unclear. The term security is not defined in the Code or the Treasury Regulations and has not been clearly defined by judicial decisions. The test as to whether a debt instrument is a security involves an overall evaluation of the nature of the debt instrument and the extent of the investor's proprietary interest in the issuer. One of the most significant factors considered in determining whether a particular debt instrument is a security is its original term. Generally, debt instruments with a term of less than five (5) years are not likely, except in certain circumstances, to be considered securities. Debt instruments with a term of ten (10) years or more are highly likely to be considered securities, while debt instruments with an initial term at issuance of five (5) to ten (10) years are often considered securities, but their status is unclear. Under Code Section 354 and applicable Treasury Regulations, call options that provide the holder with a right to acquire stock generally would be treated as Section 354 Securities. However, it would appear that options that may be settled in cash at the discretion of the issuer are not likely to be treated as Section 354 Securities. In addition, claims arising out of the extension of trade credit have been held not to be securities. If an instrument is a "security" under Code Section 354, it is necessary to consider whether such instrument is a security "in a corporation a party to a reorganization" in order to determine whether such a security is a Section 354 Security. A subsidiary of a corporation engaging in a recapitalization is not a "party to the reorganization" with the result that its securities would not constitute Section 354 Securities. In light of the foregoing, and, taking into account the reasons for the exchange and more generally the risks borne by Holders of New High Yield Secured Notes, Covanta intends to take the position that (i) the Allowed Secured 9.25% Debenture Claims, with an initial term of twenty (20) years, and (ii) the New High Yield Secured Notes, with an initial term of seven (7) years, are Section 354 Securities. Covanta also intends to take the position that the Reorganization Plan Warrants received in exchange for Allowed Claims are not Section 354 Securities, and none of the other Allowed Claims or other consideration to be received in exchange for Allowed Claims as part of the Reorganization Plan will be Section 354 Securities. Each Holder is urged to consult its tax advisor regarding the status of its Claim, or any portion thereof, or of consideration received in exchange for an Allowed Claim as part of the Reorganization Plan as a Section 354 Security. 1. Consequences to Holders of Allowed Claims other than Allowed Secured 9.25% Debenture Claims ("Other Allowed Claims") who receive some combination of Cash, Reorganization Plan Unsecured Notes, New CPIH Funded Debt, New CPIH Preferred Stock, Reorganization Plan Warrants and New High Yield Secured Notes. The exchange of Other Allowed Claims for some combination of Cash, Reorganization Plan Unsecured Notes, New CPIH Funded Debt, New High Yield Secured Notes, New CPIH Preferred Stock, and Reorganization Plan Warrants will be a fully taxable transaction. The tax consequences of such transaction to any specific Holder will differ and will depend on factors specific to each such Holder, including but not limited to: (i) whether the Holder's Other Allowed Claim constitutes a claim for principal or interest, (ii) the origin of the Other Allowed Claim, (iii) the type of consideration received in exchange for the claim, (iv) whether the Holder reports income on the accrual or cash basis method, and (v) whether the Holder has taken a bad debt deduction or otherwise recognized a loss with respect to the Other Allowed Claim. However, as a general matter, Holders of Other Allowed Claims will recognize gain or loss in an amount equal to the difference between the amount realized on the exchange and their adjusted tax basis in the Other Allowed Claims tendered upon the consummation of the Plan. Any such gain or loss should constitute ordinary income or loss unless such Other Allowed Claim is a capital asset. If the Other Allowed Claim is a capital asset, and it has been held for more than one year, such Holder will realize long-term capital gain or loss (other amounts attributable to market discount and amounts received attributable to accrued but unpaid interest). A Holder's adjusted tax basis in an Other Allowed Claim generally will equal the amount paid for such Other Allowed Claim, increased by the amount of any market discount previously taken into account by the Holder and reduced by the amount of any amortizable bond premium previously amortized by the Holder with respect to the Other Allowed Claim. The amount realized in the exchange will be the fair market value of the New CPIH Preferred Stock, Reorganization Plan Warrants, and New CPIH Funded Debt received plus the issue price of the Covanta Notes received (determined as described below under "-Holding and Disposing of New CPIH Preferred Stock, Reorganization Plan Warrants and Reorganization Plan Notes - Issue Price of the Reorganization Plan Notes.") plus the amount of Cash received, if any (other than amounts received attributable to accrued interest, which will be taxed as such). In general, if a Holder acquired the Other Allowed Claim with market discount, any gain realized by a Holder will be treated as ordinary income to the extent of the portion of the market discount that has accrued while such Other Allowed Claims were held by the Holder, unless the Holder has elected to include market discount in income currently as it accrues. A Holder's tax basis in any New CPIH Preferred Stock, Reorganization Plan Warrant, or New CPIH Funded Debt will be the fair market value of such New CPIH Preferred Stock, Reorganization Plan Warrant or Note at the time of the exchange. A Holder's tax basis in any Covanta Note received will equal the issue price of such Note, as determined below under "- Holding and Disposing of New CPIH Preferred Stock, Reorganization Plan Warrants and Reorganization Plan Notes - - Issue Price of the Reorganization Plan Notes." The holding period for any New CPIH Preferred Stock, Reorganization Plan Warrant or Reorganization Plan Note received generally will begin the day following the issuance of such New CPIH Preferred Stock, Reorganization Plan Warrant or Reorganization Plan Note. 2. Consequences to Holders of Allowed Secured 9.25% Debenture Claims. Covanta intends to take the position that the exchange of Allowed Secured 9.25% Debenture Claims for New High Yield Secured Notes and any other consideration constitutes a recapitalization that qualifies as a tax-free reorganization with meaning of Code Section 368(a)(1)(E). If the exchange qualifies as a recapitalization, a Holder that receives New High Yield Secured Notes and any other consideration will not recognize loss on the exchange, and will recognize gain only to extent of the lesser of (i) the amount of gain realized on the exchange and (ii) the amount of "boot" received on the exchange. Any Cash, Reorganization Plan Unsecured Notes, New CPIH Funded Debt, New CPIH Preferred Stock, or Reorganization Plan Warrants received in the exchange will be treated as boot, in an amount equal to their fair market value. The amount of gain realized on the exchange, if any, will equal the excess of the Holder's amount realized on the exchange over the Holder's adjusted tax basis in its Allowed Secured 9.25% Debenture Claims. A Holder's amount realized will equal the sum of (i) the issue price of the New High Yield Secured Notes received, determined as described below under "- Holding and Disposing of New CPIH Preferred Stock, Reorganization Plan Warrants and Reorganization Plan Notes - Issue Price of the Reorganization Plan Notes," and (ii) the fair market value of other consideration received in the exchange. A Holder's adjusted tax basis in the Allowed Secured 9.25% Debenture Claims generally equals the amount paid for such Claim, increased by the amount of any market discount previously taken into account by the Holder and reduced by the amount of any amortizable bond premium previously amortized by the Holder with respect to the Certificates. Subject to the application of the market discount rules, as discussed below, any gain recognized on the exchange will be capital gain. A Holder's tax basis in the New High Yield Secured Notes received will be the same as such Holder's tax basis in the Allowed Secured 9.25% Debenture Claims exchanged, decreased by the amount of Cash received, if any, and the fair market value of any other consideration received and increased by the amount of any gain recognized by the Holder in respect of the exchange. A Holder's holding period for the New High Yield Secured Notes will include its holding period for the Allowed Secured 9.25% Debenture Claims. A Holder's tax basis in other consideration will be the fair market value of such other consideration at the time of the exchange. The holding period for any Reorganization Plan Warrant, New CPIH Preferred Stock or New CPIH Funded Debt received generally will begin the day following the issuance of such Reorganization Plan Warrant, Stock, or Notes. If a Holder acquired the Allowed Secured 9.25% Debenture Claims with market discount, any gain recognized by the Holder on the recapitalization will be treated as ordinary income to the extent of the portion of the market discount that has accrued while such Allowed Secured 9.25% Debenture Claims were held by the Holder, unless the Holder has elected to include market discount in income currently as it accrues. 3. Holding and Disposing of New CPIH Preferred Stock, Reorganization Plan Warrants and Reorganization Plan Notes (a) Issue price of the Reorganization Plan Notes. The issue price of the Covanta Notes depends on whether a substantial amount of the Covanta Notes or the Allowed Claims for which they are exchanged are treated as "traded on an established market" within the meaning of the applicable Treasury Regulations. The issue price of the New CPIH Secured Notes depends on whether a substantial amount of the New Secured CPIH Notes are treated as "traded on an established market" within the meaning of the applicable Treasury Regulations. Reorganization Plan Notes are treated as "traded on an established market" if, at any time during the 60-day period ending 30 days after the issue date, such Notes are traded or listed on a national securities exchange, interdealer quotation system, certain foreign exchanges, or price quotations are readily available from dealers, brokers or traders. If an Allowed Claim or the Covanta Notes for which such Claim is exchanged were traded on an established market, the issue price of the Covanta Notes would equal the fair market value of either the Allowed Claim or the Covanta Notes for which such Claim is exchanged. If a New CPIH Secured Note were traded on an established market, the issue price of the New CPIH Secured Note would equal the fair market value of such New CPIH Secured Note. If neither the Allowed Claim, the Covanta Notes for which such Claim is exchanged, nor the New CPIH Secured Note are traded on an established market, then the Reorganization Plan Notes would have an issue price equal to their stated principal amount so long as there is "adequate stated interest" within the meaning of Code Section 1274(c)(2). Covanta expects the Reorganization Plan Notes to have adequate stated interest. Covanta does not expect the Allowed Claims or the Reorganization Plan Notes to be traded on an established market, within the meaning of the applicable Treasury Regulations, and, accordingly, intends to treat the Reorganization Plan Notes as having an issue price equal to their stated principal amount. (b) Qualified Stated Interest and Original Issue Discount In general, for U.S. federal income tax purposes, a Holder will have to include qualified stated interest on the Reorganization Plan Notes in gross income in accordance with its usual method of tax accounting. Qualified stated interest is stated interest that is unconditionally payable in cash or in property at least annually at a single fixed rate. All interest payments on the Reorganization Plan Notes will be treated as qualified stated interest. If the issue price of the Reorganization Plan Notes is less than their "stated redemption price at maturity" by more than a de minimis amount (1/4 of 1 percent of the Reorganization Plan Notes' stated redemption price at maturity multiplied by the number of complete years to their stated maturity), the Reorganization Plan Notes will be treated as issued with OID for U.S. federal income tax purposes. As described above under "- Holding and Disposing of New CPIH Preferred Stock, Reorganization Plan Warrants and Reorganization Plan Notes - Issue Price of the Reorganization Plan Notes," Covanta expects that issue price of the Reorganization Plan Notes to be equal to their stated principal amount which, in applicable Treasury Regulations, is defined as all payments due under the debt instrument, excluding any amount of stated interest. The Reorganization Plan Notes' stated redemption price at maturity is the sum of all payments due under the Reorganization Plan Notes other than payments of qualified stated interest. Because Covanta expects all stated interest on the Reorganization Plan Notes to be qualified stated interest, it is expected that the issue price of the Reorganization Plan Notes will be equal to their stated redemption price at maturity so that they will not be issued with OID. (c) Market Discount and Bond Premium Any Holder that received New High Yield Secured Notes in an exchange that qualifies as a recapitalization and has a tax basis in such New High Yield Secured Notes that is less than the issue price of such Notes will be subject to the market discount rules (unless the amount of the excess of the issue price over the basis is less than a specified de minimis amount, in which case market discount is considered to be zero). Any Holder that received Reorganized Plan Unsecured Notes or New CPIH Funded Debt in an exchange and has a tax basis in such Notes that is less than the issue price of such Notes will be subject to the market discount rules (unless the amount of the excess of the issue price over the basis is less than a specified de minimis amount, in which case market discount is considered to be zero). In general, if a note is purchased with market discount, a Holder may elect (but is not required) to take market discount into income over the remaining life of a note, either on a ratable or economic yield basis. In addition, a Holder who acquired its Allowed Secured 9.25% Debenture Claims at a market discount may be required to carry over to the New High Yield Secured Notes any accrued market discount with respect to the Allowed Secured 9.25% Debenture Claims to the extent that the accrued market discount was not previously included in income. If any Holder receives Reorganization Plan Notes in an exchange and has a tax basis in such Reorganization Plan Notes that exceeds such Reorganization Plan Note's stated redemption price at maturity, the New High Yield Secured Notes will have bond premium to the extent of that excess. A Holder generally may elect to amortize the premium on the constant yield to maturity method as a reduction of the Holder's interest income from the Reorganization Plan Note. (d) Sale, Exchange or Redemption of Reorganization Plan Notes Upon a sale, exchange, redemption or other taxable disposition of Reorganization Plan Notes, a Holder generally will recognize gain or loss in an amount equal to the difference between the amount such Holder realizes on the disposition and its adjusted tax basis in the Reorganization Plan Notes. Subject to the application of the market discount rules, as discussed above, gain or loss recognized upon such a disposition generally will be capital gain or loss, and will be long-term gain or loss if a Holder's holding period exceeds one (1) year. (e) Consequences of Holding Reorganization Plan Warrants The Reorganization Plan Warrants should generally be treated as call options for U.S. federal income tax purposes. Accordingly, a Holder of Reorganization Plan Warrants would realize capital gain or loss upon the lapse or settlement at maturity in an amount equal to the difference between the amount realized, if any, and the Holder's tax basis for such Reorganization Plan Warrants. If settled in cash, a Holder will recognize capital gain or loss equal to the difference between the cash received and the Holder's adjusted tax basis in the Reorganization Plan Warrants. Such capital gain or loss will be long-term if the Holder's holding period is more than one (1) year and will be short-term if the holding period is equal to or less than one (1) year. (f) Dividends Received on New CPIH Preferred Stock Generally, a distribution by CPIH with respect to the New CPIH Preferred Stock will be treated as a dividend to the extent of CPIH current or accumulated earnings and profits as of the year of distribution, then as a tax-free return of capital to the extent of a Holder's tax basis in the Reorganized CPIH Preferred Stock that such Holder holds and thereafter as a gain from the sale or exchange of such stock. (g) Sale of New CPIH Preferred Stock and Reorganization Plan Warrants Upon the sale or exchange of New CPIH Preferred Stock or Reorganization Plan Warrants, a Holder generally will recognize capital gain or loss equal to the difference between (i) the amount of cash and the fair market value of any property received upon the sale or exchange and (ii) such Holder's adjusted tax basis in the New CPIH Preferred Stock and Reorganization Plan Warrants. Such capital gain or loss will be long-term if the Holder's holding period is more than one (1) year and will be short-term if the holding period is equal to or less than one (1) year. C. Backup Withholding and Information Reporting In general, information reporting requirements will apply to payments in respect of the Reorganization Notes within the United States if you are not a corporation. To avoid the imposition of backup withholding on such payments, a Holder should complete an IRS Form W-9 (which can be obtained at the website of the IRS at www.irs.gov) and either (i) provide its correct taxpayer identification number ("TIN"), which is a Holder's social security number for an individual Holder, and certain other information, or (ii) establish a basis for an exemption from backup withholding. Certain Holders (including, among others, corporations, individual retirement accounts and certain foreign persons) are exempt from these backup withholding and information reporting requirements, but may be required to establish their entitlement to an exemption. If the payment agent for the Reorganization Notes is not provided with the correct TIN or an adequate basis for exemption, a Holder may be subject to a backup withholding tax on payments received in respect of the Reorganization Plan Notes. If backup withholding results in an overpayment of taxes, a refund or credit may be obtained, provided that the required information is provided to the IRS. XI. FEASIBILITY OF THE LIQUIDATION PLAN AND THE REORGANIATION PLAN AND THE BEST INTERESTS TEST A. Feasibility of the Plans To confirm the Reorganization Plan, the Court must find that confirmation of the Reorganization Plan are not likely to be followed by the liquidation or the need for further financial reorganization of the Reorganizing Debtors and Heber Debtors, unless and to the extent liquidation is contemplated by either of such Plan. This requirement is imposed by section 1129(a)(11) of the Bankruptcy Code and is referred to as the "feasibility" requirement. The Reorganizing Debtors and Heber Debtors believe that they will be able to timely perform all obligations described in the Reorganization Plan, and, therefore, that the Plan is feasible. Because substantially all of the assets of the Liquidating Debtors have been sold and any further liquidation of the Residual Liquidation Assets, if any, is provided for in the Liquidation Plan, the Liquidating Debtors believe that the Liquidating Plan meets the feasibility requirement. 1. The Reorganization Plan To demonstrate the feasibility of the Reorganization Plan, the Reorganizing Debtors and Heber Debtors have prepared financial Projections through December 31, 2007, as set forth in Exhibit C2 attached to this Disclosure Statement. The Projections indicate that the Reorganizing Debtors and Heber Debtors should have sufficient cash flow to pay and service its debt obligations and to fund their operations. Accordingly, the Reorganizing Debtors and Heber Debtors believe that the Reorganization Plan satisfies the feasibility requirement of section 1129(a)(11) of the Bankruptcy Code. As noted in the Projections, however, the Reorganizing Debtors and Heber Debtors caution that no representations can be made as to the accuracy of the Projections or as to the Reorganizing Debtors and Heber Debtors' ability to achieve the projected results. Many of the assumptions upon which the Projections are based are subject to uncertainties outside the control of the Reorganizing Debtors and Heber Debtors. Some assumptions inevitably will not materialize, and events and circumstances occurring after the date on which the Projections were prepared may be different from those assumed or may be unanticipated, and may adversely affect the Reorganizing Debtors and Heber Debtors' financial results. Therefore, the actual results may vary from the projected results and the variations may be material and adverse. See Section XI.A.1, for a discussion of certain risk factors that may affect financial feasibility of the Reorganization Plan. 2. The Liquidation Plan The Liquidation Plan contemplates that any remaining Residual Liquidation Assets of the Liquidating Debtors that have not already been sold, will be abandoned (to the extent that such Residual Liquidation Assets have de minimis value) or monetized (to the extent that such Residual Assets have greater than de minimis value) and all the proceeds of the Liquidation Assets will be distributed pursuant to the terms of the Liquidation Plan. Because no further financial reorganization of the Liquidating Debtors will be possible, the Liquidating Debtors believe that the Liquidation Plan meets the feasibility requirement. In addition, based on the funding of the Operating Reserve from certain Net Liquidation Proceeds in the amount of $500,000, the Liquidating Debtors believe that sufficient funds will exist at confirmation to make all payments required by the Liquidation Plan. THE PROJECTIONS WERE NOT PREPARED WITH A VIEW TOWARD COMPLIANCE WITH THE GUIDELINES ESTABLISHED BY THE AMERICAN INSTITUTE OF CERTIFIED PUBLIC ACCOUNTANTS, THE PRACTICES RECOGNIZED TO BE IN ACCORDANCE WITH GENERALLY ACCEPTED ACCOUNTING PRINCIPLES, OR THE RULES AND REGULATIONS OF THE SECURITIES AND EXCHANGE COMMISSION REGARDING PROJECTIONS. FURTHERMORE, THE PROJECTIONS HAVE NOT BEEN AUDITED BY THE DEBTORS' INDEPENDENT ACCOUNTANTS. ALTHOUGH PRESENTED WITH NUMERICAL SPECIFICITY, THE PROJECTIONS ARE BASED UPON A VARIETY OF ASSUMPTIONS, SOME OF WHICH IN THE PAST HAVE NOT BEEN ACHIEVED AND WHICH MAY NOT BE REALIZED IN THE FUTURE, AND ARE SUBJECT TO SIGNIFICANT BUSINESS, ECONOMIC AND COMPETITIVE UNCERTAINTIES AND CONTINGENCIES, MANY OF WHICH ARE BEYOND THE CONTROL OF THE DEBTORS. CONSEQUENTLY, THE PROJECTIONS SHOULD NOT BE REGARDED AS A REPRESENTATION OR WARRANTY BY THE DEBTORS, OR ANY OTHER PERSON, THAT THE PROJECTIONS WILL BE REALIZED. ACTUAL RESULTS MAY VARY MATERIALLY FROM THOSE PRESENTED IN THE PROJECTIONS. B. Acceptance of the Plans As a condition to confirmation, the Bankruptcy Code requires that each Class of Impaired Claims and Interests vote to accept the Plans, except under certain circumstances. Section 1126(c) of the Bankruptcy Code defines acceptance of a plan by a class of impaired claims as acceptance by holders of at least two-thirds in dollar amount and more than one-half in number of claims in that class, but for that purpose counts only those who actually vote to accept or to reject the Plan. Thus, a Class of Claims will have voted to accept a plan only if two-thirds in amount and a majority in number actually voting cast their Ballots in favor of acceptance. Under section 1126(d) of the Bankruptcy Code, a Class of Interests has accepted a plan if holders of such Interests holding at least two-thirds in amount actually voting have voted to accept a plan. Holders of claims or interests who fail to vote are not counted as either accepting or rejecting a plan. C. Best Interests Test Even if a plan is accepted by each class of holders of claims and interests, the Bankruptcy Code requires a Court to determine that the plan is in the "best interests" of all holders of claims and interests that are impaired by the plan and that have not accepted the plan. The "best interests" test, as set forth in section 1129(a)(7) of the Bankruptcy Code, requires a Court to find either that (i) all members of an impaired class of claims or interests have accepted the plan or (ii) the plan will provide a member who has not accepted the plan with a recovery of property of a value, as of the effective date of the plan, that is not less than the amount that such holder would recover if the debtor were liquidated under chapter 7 of the Bankruptcy Code. To calculate the probable distribution to members of each impaired class of holders of claims and interests if the debtor were liquidated under chapter 7, a Court must first determine the aggregate dollar amount that would be generated from the debtor's assets if its chapter 11 case were converted to a chapter 7 case under the Bankruptcy Code. This "liquidation value" would consist primarily of the proceeds from a forced sale of the debtor's assets by a chapter 7 trustee. The amount of liquidation value available to unsecured creditors would be reduced by the costs of liquidation under chapter 7 of the Bankruptcy Code, including the compensation of a trustee, as well as of counsel and other professionals retained by the trustee, asset disposition expenses, additional administrative claims and other wind-down expenses. The liquidation itself would trigger certain priority payments that otherwise would be due in the ordinary course of business. Those priority claims would be paid in full from the liquidation proceeds before the balance would be made available to pay general unsecured claims or to make any distribution in respect of equity interests. The liquidation also would prompt the rejection of a large number of executory contracts and thereby create a significantly higher number of unsecured claims. The foregoing types of claims and such other claims which may rise in the liquidation cases or result from the pending Chapter 11 Cases would be paid in full from the liquidation proceeds before the balance of those proceeds would be made available to pay prepetition claims. Once the court ascertains the recoveries in liquidation of secured creditors and priority claimants, it must determine the probable distribution to general unsecured creditors and equity security holders from the remaining available proceeds in liquidation. If such probable distribution has a value greater than the distributions to be received by such creditors and equity security holders under a debtor's plan, then such plan is not in the best interests of creditors and equity security holders. D. Estimated Valuation of the Reorganized Debtors and Reorganized Heber Debtors A copy of the Reorganization Valuation Analysis is attached to this Disclosure Statement as Exhibit D. E. Application of the Best Interests Test to the Liquidation Valuation Analysis and the Valuation of the Reorganized Debtors and Reorganized Heber Debtors A Liquidation Valuation Analysis prepared with respect to each of the Debtors is attached as Exhibit E to this Disclosure Statement. The Debtors believe that any liquidation analysis is speculative. For example, the liquidation analysis necessarily contains an estimate of the amount of Claims which will ultimately become Allowed Claims. In preparing the Liquidation Valuation Analysis, the Debtors have projected an amount of Allowed Claims based upon a review of their scheduled claims. Additions were made to the scheduled claims to adjust for estimated claims related to postpetition obligations, pension liabilities and other employee-related obligations, post-retirement obligations and certain lease damage claims. No order or finding has been entered by the Court estimating or otherwise fixing the amount of Claims at the projected amounts of Allowed Claims set forth in the Liquidation Valuation Analysis. The estimate of the amount of Allowed Claims set forth in the Liquidation Valuation Analysis should not be relied on for any other purpose, including, without limitation, any determination of the value of any distribution to be made on account of Allowed Claims and Interests under the Plans. In addition, as noted above, the valuation analysis of the Reorganized Debtors and Reorganized Heber Debtors also contains numerous estimates and assumptions. For example, the value of the Reorganized Covanta Common Stock cannot be determined with precision due to the absence of a public market for the Reorganized Covanta Common Stock. Notwithstanding the difficulties in quantifying recoveries to creditors with precision, the Debtors believe that, (i) after taking into account the Liquidation Valuation Analysis and the valuation analysis of the Reorganized Debtors and Reorganized Heber Debtors and (ii) after consideration of the effects that a chapter 7 liquidation would have on the ultimate proceeds available for distribution to creditors in the Chapter 11 Cases, including: (a) the increased costs and expenses of a liquidation under chapter 7 arising from fees payable to a trustee in bankruptcy and professional advisors to such trustee; (b) the substantial increases in claims which would be satisfied on a priority basis or on parity with creditors in the Chapter 11 Cases; and (c) the significantly lower proceeds likely to be realized from a liquidation of the Debtors' assets under a chapter 7 liquidation, the Plan meets the "best interests" test of section 1129(a)(7) of the Bankruptcy Code. The Debtors believe that the members of each impaired class will receive at least as much under the Plans than they would in a liquidation in a hypothetical chapter 7 case. Creditors will receive a better recovery through the distributions contemplated by the Plans because the continued operation of the Reorganizing Debtors and Heber Debtors as going concerns rather than a forced liquidation and an orderly liquidation of the Liquidating Debtors of Covanta's non-core Assets by a Liquidating Trustee that is already familiar with such Liquidating Debtors and such Assets will allow the realization of more value for the Debtors' assets. Moreover, creditors such as the Debtors' employees would retain their jobs and most likely make few if any other claims against the estate. Lastly, in the event of liquidation, the aggregate amount of unsecured claims will no doubt increase significantly, and such claims will be subordinated to priority claims that will be created. Also, a chapter 7 liquidation would give rise to additional administrative claims. For example, employees will file claims for wages, pensions and other benefits, some of which will be entitled to priority. The resulting increase in both general unsecured and priority claims will no doubt decrease percentage recoveries to unsecured creditors of all Debtors. All of these factors lead to the conclusion that recoveries under the Plans would be at least as much, and in many cases significantly greater, than the recoveries available in a chapter 7 liquidation. F. Confirmation Without Acceptance of All Impaired Classes: The `Cramdown' Alternative Section 1129(b) of the Bankruptcy Code provides that a plan can be confirmed even if it has not been accepted by all impaired classes, as long as at least one impaired class of Claims has accepted it. The Court may confirm the Plans at the request of the Debtors notwithstanding the Plans' rejection (or deemed rejection) by impaired Classes as long as the Plans "do not discriminate unfairly" and are "fair and equitable" as to each impaired Class that has not accepted them. A plan does not discriminate unfairly within the meaning of the Bankruptcy Code if a dissenting class is treated equally with respect to other classes of equal rank. A plan is fair and equitable as to a class of secured claims that rejects such plan if the plan provides (1)(a) that the holders of claims included in the rejecting class retain the liens securing those claims whether the property subject to those liens is retained by the debtor or transferred to another entity, to the extent of the allowed amount of such claims, and (b) that each holder of a claim of such class receives on account of that claim deferred cash payments totaling at least the allowed amount of that claim, of a value, as of the effective date of the plan, of at least the value of the holder's interest in the estate's interest in such property; (2) for the sale, subject to section 363(k) of the Bankruptcy Code, of any property that is subject to the liens securing the claims included in the rejecting class, free and clear of the liens, with the liens to attach to the proceeds of the sale, and the treatment of the liens on proceeds under clause (1) or (2) of this paragraph; or (3) for the realization by such holders of the indubitable equivalent of such claims. A plan is fair and equitable as to a class of unsecured claims which rejects a plan if the plan provides (1) for each holder of a claim included in the rejecting class to receive or retain on account of that claim property that has a value, as of the effective date of the plan, equal to the allowed amount of such claim; or (2) that the holder of any claim or interest that is junior to the claims of such rejecting class will not receive or retain on account of such junior claim or interest any property at all. A plan is fair and equitable as to a class of equity interests that rejects a plan if the plan provides (1) that each holder of an interest included in the rejecting class receive or retain on account of that interest property that has a value, as of the effective date of the plan, equal to the greatest of the allowed amount of any fixed liquidation preference to which such holder is entitled, any fixed redemption price to which such holder is entitled, or the value of such interest; or (2) that the holder of any interest that is junior to the interest of such rejecting class will not receive or retain under the plan on account of such junior interest any property at all. Because (i) holders of Unsecured Liquidation Claims against the Liquidating Debtors in Class 7, (ii) holders of Equity Interests in the Subsidiary Debtors and the Liquidating Debtors in Class 11 and (iii) holders of Old Covanta Stock Equity Interests in Class 12 are receiving no distribution on account of such Claims and Interests under the Plans, their votes are not being solicited and they are deemed to have rejected the Plans pursuant to section 1126(g) of the Bankruptcy Code. Accordingly, the Debtors are seeking confirmation of the Plans pursuant to section 1129(b) of the Bankruptcy Code with respect to such Classes and may seek confirmation pursuant thereto as to other Classes if such Classes vote to reject the Plans. G. Conditions to Confirmation and/or Consummation of the Plans 1. Conditions to Confirmation The following are conditions precedent to confirmation of the Plans. These conditions may be satisfied or waived by the Debtors in accordance with Article X of the Reorganization Plan and Article XI of the Liquidation Plan: (a) The entry of a Final Order finding that the Disclosure Statement contains adequate information pursuant to section 1125 of the Bankruptcy Code; (b) The proposed Confirmation Order shall be in form and substance, reasonably acceptable to the Reorganizing Debtors, Heber Debtors and the Liquidating Debtors; (c) All provisions, terms and conditions of the Reorganization Plan are approved in the Confirmation Order; (d) The Confirmation Order shall contain a finding that any Intercompany Claim held by a Reorganizing Debtor, Liquidating Debtor or Heber Debtor is the exclusive property of such Reorganizing Debtor, Liquidating Debtor or Heber Debtor pursuant to section 541 of the Bankruptcy Code; (e) The Confirmation Order shall contain a ruling that each of the Liquidating Debtors Claims against (i) the Reorganizing Debtors and Heber Debtors and any of their respective present or former officers, directors, employees, attorneys, accountants, financial advisors, investment bankers or agents and (ii) the other persons or entities identified in Section 11.10 of the Reorganization Plan and Section 12.9 of the Liquidation Plan will be fully settled and released as of the Effective Date; (f) The Confirmation Order shall contain a ruling that each of the Reorganizing Debtors and Heber Debtors Claims against (i) the Reorganizing Debtors and Heber Debtors and any of their respective present or former officers, directors, employees, attorneys, accountants, financial advisors, investment bankers or agents and (ii) the other persons or entities identified in Section 11.10 of the Reorganization Plan will be fully settled and released or, with respect to Claims against the Reorganizing Debtors or Heber Debtors, treated in accordance with Sections 4.9(b)(II) and 4.9(v)(III) of the Reorganization Plan; and (g) The Confirmation Order shall contain a finding that the Geothermal Sale shall be deemed to be incorporated into and consummated under the Reorganization Plan for all purposes including, without limitations, section 1146 of the Bankruptcy Code. 2. Conditions Precedent to the Effective Date of the Reorganization Plan The Effective Date of the Reorganization Plan shall occur on or prior to [ ], 2003, unless such date is extended by the Reorganizing Debtors and Heber Debtors. Each of the following is a condition precedent to the occurrence of the Effective Date under the Reorganization Plan, each of which may be satisfied or waived in accordance with Section 10.3 of the Reorganization Plan: (a) The Confirmation Order (i) shall have been entered by the Court and become a Final Order, (ii) be in form and substance satisfactory to the Reorganizing Debtors, Heber Debtors and the Liquidating Debtors, and (iii) provide that the Liquidating Debtors, the Reorganizing Debtors, Heber Debtors, the Reorganized Debtors and Reorganized Heber Debtors are authorized and directed to take all actions necessary or appropriate to enter into, implement and consummate the contracts, instruments, releases, leases, indentures and other agreements or documents created in connection with the Liquidation Plan, and the Reorganization Plan; (b) The conditions precedent to the Effective Date of the Liquidation Plan shall have been satisfied or waived in accordance with the terms and provisions of the Liquidation Plan; (c) All conditions precedent to the closing of the Geothermal Sale or an alternative sale of some or all of the Heber Debtors or their assets shall have been satisfied; (d) All documents, instruments and agreements necessary to implement the ESOP for Reorganized Covanta shall have been executed and delivered by the parties thereto; (e) All regulatory approval necessary or desireable to effectuate the Reorganization Plan and the transctions contemplated hereunder shall have been obtained; (f) Reorganized Covanta Common Stock shall have been delivered to the ESOP in accordance with the terms of this Reorganization Plan, Reorganized Covanta shall have delivered the Reorganization Plan Equity Securities and Warrants as contemplated hereunder and the equity securities of all the other Reorganized Debtors shall have been deemed to revert to ownership by the same entity by which they were held prior to the applicable Petition Date; (g) Reorganized Covanta shall have taken all steps necessary in its discretion to enable its conversion to an S corporation effective as of January 1, 2004; (h) The Exit Financing Agreements shall have been executed and delivered by the parties thereto, and shall be in full force and effect in accordance with the terms thereof; (i) The Reorganized Debtors shall have sufficient Cash (i) to make payment of the estimated Exit Costs, including, without limitation, all Allowed Administrative Expense Claims, Allowed Priority Non-Tax Claims, Allowed Convenience Claims, (ii) to transfer Cash such that CPIH shall have $2 million in accounts under its control and (iii) to deposit Cash in the Disputed Claims Reserve in respect of any Administrative Expense Claims and Priority Non-Tax Claims that are Disputed Claims; (j) All documents, instruments and agreements provided for under, or necessary to implement, the Reorganization Plan shall have been executed and delivered by the parties thereto, in form and substance satisfactory to the Reorganizing Debtors and Heber Debtors, unless such execution or delivery has been waived by the parties thereby. 3. Conditions Precedent to the Effective Date of the Liquidation Plan The Effective Date of the Liquidation Plan shall occur on or prior to [ ], 2003, unless such date is extended by the Liquidating Debtors. The Liquidating Debtors intend that the Effective Date of the Liquidation Plan will be the Effective Date of the Reorganization Plan. The following are conditions precedent to the occurrence of the Effective Date under the Liquidation Plan, each of which may be satisfied or waived in accordance with Section 11.2 of the Liquidation Plan (a) The Confirmation Order (i) shall have been entered by the Court and become a Final Order, (ii) be in form and substance satisfactory to the Reorganizing Debtors, Heber Debtors and the Liquidating Debtors, and (iii) provide that the Liquidating Debtors, the Reorganizing Debtors, the Reorganized Debtors and the Reorganized Heber Debtors are authorized and directed to take all actions necessary or appropriate to enter into, implement and consummate the contracts, instruments, releases, leases, indentures and other agreements or documents created in connection with the Liquidation Plan and the Reorganization Plan; (b) The Liquidating Trustee has entered into the Liquidating Trustee Agreement with the Liquidating Debtors and is willing to serve in such capacity and the terms of its service and compensation shall have been approved by the Court at the Confirmation Hearing; (c) The conditions precedent to the Effective Date of the Reorganization Plan shall have been satisfied or waived; (d) The Liquidating Debtors, the Reorganizing Debtors and Heber Debtors shall be authorized and directed to take all actions necessary or appropriate to enter into, implement and consummate the contracts, instruments, releases, leases, indentures and the agreements or documents created in connection with the Liquidation Plan and the Reorganization Plan; and (e) All actions, documents and agreements necessary to implement the Liquidation Plan and the Reorganization Plan shall have been effected or executed. H. Waiver of Conditions to Confirmation and/or Consummation of the Plans The conditions set forth in Article X of the Reorganization Plan and Article XI of the Liquidation Plan may be waived by the Reorganizing Debtors, Heber Debtors or Liquidating Debtors respectively as provided in those Articles, without leave of, or notice to the Court and without a formal action other than proceeding with conformation of the Plans or emergence from bankruptcy. The failure to satisfy or waive any condition to the Confirmation Date or the Effective Date may be asserted by the Debtors in their sole discretion regardless of the circumstances giving rise to the failure of such condition to be satisfied (including any action or inaction by the Debtors in their sole discretion). The failure of the Debtors in their sole discretion to exercise any of the foregoing rights will not be deemed a waiver of any other rights, and each such right will be deemed an ongoing right, which may be asserted at any time. I. Retention of Jurisdiction Pursuant to sections 105(a) and 1142 of the Bankruptcy Code, the Court will retain exclusive jurisdiction of all matters arising under, arising out of, and related to, the Chapter 11 Cases and the Plans, for, among other things, the following non-exclusive purposes: (i) to determine the allowance or classification of Claims and to hear and determine any objections thereto; (ii) to hear and determine any motions for the assumption, assumption and assignment or rejection of executory contracts or unexpired leases, and the allowance of any Claims resulting therefrom; (iii) to determine any and all motions, adversary proceedings, applications, contested matters and other litigated matters in connection with the Chapter 11 Cases that may be pending in the Court on, or initiated after, the Effective Date; (iv) to enter and implement such orders as may be appropriate in the event the Confirmation Order is for any reason stayed, revoked, modified, or vacated; (v) to issue such orders in aid of the execution, implementation and consummation of the Plans to the extent authorized by section 1142 of the Bankruptcy Code or otherwise; (vi) to construe and take any action to enforce the Plans; (vii) to reconcile any inconsistency in any order of the Court, including, without limitation, the Confirmation Order; (viii) to modify the Plans pursuant to section 1127 of the Bankruptcy Code, or to remedy any apparent non-material defect or omissions in the Plans, or to reconcile any non-material inconsistency in the Plans so as to carry out their intent and purposes; (ix) to hear and determine all applications for compensation and reimbursement of expenses of professionals under sections 330, 331, and 503(b) of the Bankruptcy Code; (x) to resolve any disputes over the reasonableness, accuracy and proper scope of any Dissolution Expenses of the Liquidating Trustee; (xi) to determine any other requests for payment of Priority Tax Claims, Priority Non-Tax Claims or Administrative Expense Claims; (xii) to hear and determine disputes arising in connection with the interpretation, implementation, or enforcement of the Plans; (xiii) to hear and determine all matters relating to the 9.25% Debentures Adversary Proceeding, including any disputes arising in connection with the interpretation, implementation or enforcement of any settlement agreement related thereto; (xiv) to consider and act on the compromise and settlement or payment of any Claim against the Debtors; (xv) to recover all assets of the Debtors and property of their Estates, wherever located; (xvi) to determine all questions and disputes regarding title to the assets of the Debtors or their Estates; (xvii) to construe and take any action authorized by the Bankruptcy Code and requested by any Debtor, the Liquidating Trustee or any other party in interest to enforce the Plans and the documents filed in connection with the Plans, and to issue orders as may be necessary for the implementation, execution and consummation of the Plans; (xviii) to issue injunctions, enter and implement other orders or to take such other actions as may be necessary or appropriate to restrain interference by any entity with the consummation, implementation or enforcement of the Plans or the Confirmation Order; (xix) to remedy any breach or default occurring under the Plans; (xx) to resolve and finally determine all disputes that may relate to, impact on or arise in connection with, the Plans; (xxi) to hear and determine matters concerning state, local, and federal taxes in accordance with sections 346, 505, 1129 and 1146 of the Bankruptcy Code (including any requests for expedited determinations under section 505(b) of the Bankruptcy Code filed, or to be filed, with respect to tax returns for any and all taxable periods ending after the Petition Date through, and including, the final Distribution Date or Final Liquidation Distribution Date, as applicable); (xxii) to determine such other matters and for such other purposes as may be provided in the Confirmation Order; (xxiii) to hear any other matter consistent with the provisions of the Bankruptcy Code; and (xxiv) to enter a final decree closing the Chapter 11 Cases. Unless otherwise specifically provided herein or in a prior order of the Court, the Court will have exclusive jurisdiction to hear and determine disputes concerning Claims, Equity Interests, Retained Actions. XII. ALTERNATIVES TO CONFIRMATION AND CONSUMMATION OF THE PLANS The Debtors believe that the Plans afford holders of Claims the potential for the greatest realization on the Debtors' assets and, therefore, are in the best interests of such holders. If the Plans are not confirmed, however, the theoretical alternatives include: (a) continuation of the pending Chapter 11 Cases; (b) an alternative plan or plans of reorganization; or (c) liquidation of the Debtors under chapter 7 or liquidation of the Reorganizing Debtors and Heber Debtors under chapter 11 of the Bankruptcy Code. A. Continuation of the Bankruptcy Case If the Debtors remain in chapter 11, they could continue to operate their businesses and manage their properties as debtors in possession, but they would remain subject to the restrictions imposed by the Bankruptcy Code. It is not clear whether the Debtors could survive as a going concern in protracted Chapter 11 Cases. The Debtors could have difficulty sustaining the high costs and the erosion of market confidence that may be caused if the Debtors remain chapter 11 debtors in possession. In addition, certain material agreements, such as the DIP Financing Facility, are currently due to expire by their terms on October 1, 2003. B. Alternative Plans of Reorganization If the Plans are not confirmed, the Debtors, or, after the expiration of the Debtors' exclusive period in which to propose and solicit a reorganization plans, any other party in interest in the Chapter 11 Cases, could propose a different plan or plans. Such plans might involve either a reorganization and continuation of the Debtors' businesses, or an orderly liquidation of its assets, or a combination of both. C. Liquidation Under Chapter 7 or Chapter 11 1. Liquidation of the Debtors under Chapter 7 If no plan is confirmed, the Debtors' Chapter 11 Cases may be converted to a case under chapter 7 of the Bankruptcy Code. In a chapter 7 case, a trustee or trustees would be appointed to liquidate the assets of the Debtors. It is impossible to predict precisely how the proceeds of the liquidation, if any, would be distributed to the respective holders of Claims against the Debtors. However, the Debtors believe that creditors would lose the substantially higher going concern value if the Debtors were forced to liquidate, as well as incur substantial tax obligations. In addition, the Debtors believe that in liquidation under chapter 7, before creditors received any distribution, additional administrative expenses involved in the appointment of a trustee or trustees and attorneys, accountants and other professionals to assist such trustees would cause a substantial diminution in the value of the Estates. The assets available for distribution to creditors would be reduced by such additional expenses and by Claims, some of which would be entitled to priority, which would arise by reason of the liquidation and from the rejection of leases and other executory contracts in connection with the cessation of operations and the failure to realize the greater going concern value of the Debtors' assets. 2. Liquidation of the Reorganizing Debtors and Heber Debtors under Chapter 11 The Reorganizing Debtors and Heber Debtors could be liquidated pursuant to a chapter 11 plan. In a liquidation under chapter 11, the Reorganizing Debtors and Heber Debtors' assets could be sold in an orderly fashion that may be conducted over a more extended period of time than in a liquidation under chapter 7. Thus, a chapter 11 liquidation might result in larger recoveries than a chapter 7 liquidation, but the potential delay in distributions could result in lower present values received and higher administrative costs, as well as incur substantial tax obligations. Because a trustee is not required in a chapter 11 case, expenses for professional fees could be lower than in a chapter 7 case, in which a trustee must be appointed. Any distribution to the holders of Claims and interests under a chapter 11 liquidation plan could potentially be delayed. As to the Liquidating Debtors, whose assets are primarily non-core and unnecessary for the Reorganizing Debtors and Heber Debtors going forward, that Chapter 11 liquidation will maximize the value of the Liquidating Debtors for the benefit of the holders of Claims and interests. The Debtors' Liquidation Valuation Analysis, prepared with its accountants and financial advisors, is premised upon a hypothetical liquidation in a chapter 7 case and is attached as Exhibit E to this Disclosure Statement. In the analysis, the Debtors have taken into account the nature, status, and underlying value of their assets, the ultimate realizable value of their assets, and the extent to which such assets are subject to liens and security interests. The likely form of any liquidation would be the sale of individual assets. Based on this analysis, it is likely that a chapter 7 liquidation of the Debtors' assets would produce less value for distribution to creditors than that recoverable in each instance under the Plans. In the opinion of the Debtors, the recoveries projected to be available in a chapter 7 liquidation are not likely to afford holders of Claims and holders of Interests as great a realization potential as do the Plans. XIII. VOTING REQUIREMENTS On October [ ], 2003, the Court entered an order (the "Solicitation Procedures Order"), among other things, approving this Disclosure Statement and the Short-Form Disclosure Statement, setting voting procedures and scheduling the Confirmation Hearing. A copy of the Confirmation Hearing Notice is enclosed with this Disclosure Statement. The Confirmation Hearing Notice sets forth in detail, among other things, the voting deadlines and objection deadlines with respect to the Plans. The Confirmation Hearing Notice and the instructions attached to the Ballots should be read in connection with this section of this Disclosure Statement. If you have any questions about (i) the procedure for voting your Claim or Interest or with respect to the packet of materials that you have received, (ii) the amount of your Claim or your Interest holdings, or (iii) if you wish to obtain, at your own expense, unless otherwise specifically required by Federal Rule of Bankruptcy Procedure 3017(d), an additional copy of the Plan, this Disclosure Statement or any appendices or exhibits to such documents, please contact: Bankruptcy Services LLC 757 Third Avenue, 3rd Floor New York, New York 10017 The Court may confirm the Plans only if it determines that the Plans comply with the technical requirements of chapter 11 of the Bankruptcy Code and that the disclosures by the Debtors concerning the Plans have been adequate and have included information concerning all payments made or promised by the Debtors in connection with the Plans and the Chapter 11 Cases. In addition, the Court must determine that the Plans have been proposed in good faith and not by any means forbidden by law, and under Federal Rule of Bankruptcy Procedure 3020(b)(2), it may do so without receiving evidence if no objection is timely filed. In particular, the Bankruptcy Code requires the Court to find, among other things, that (a) the Plans have been accepted by the requisite votes of all Classes of impaired Claims and Interests unless approval will be sought under section 1129(b) of the Bankruptcy Code in spite of the nonacceptance by one or more such Classes, (b) the Plan is "feasible," which means that there is a reasonable probability that the Debtors will be able to perform their obligations under the Plans and continue to operate their businesses without further financial reorganization or liquidation, and (c) the Plans are in the "best interests" of all Claimholders and Interestholders, which means that such holders will receive at least as much under the Plans as they would receive in a liquidation under chapter 7 of the Bankruptcy Code. The Court must find that all conditions mentioned above are met before it can confirm the Plans. Thus, even if all the Classes of impaired Claims against the Debtors accept the Plan by the requisite votes, the Court must still make an independent finding that the Plans satisfy these requirements of the Bankruptcy Code, that the Plans are feasible, and that the Plans are in the best interests of the holders of Claims and Equity Interests against and in the Debtors. UNLESS THE BALLOT BEING FURNISHED IS TIMELY SUBMITTED TO THE VOTING AGENT ON OR PRIOR TO [NOVEMBER 18, 2003 AT 4:00 P.M.] (PREVAILING EASTERN TIME) TOGETHER WITH ANY OTHER DOCUMENTS REQUIRED BY SUCH BALLOT, THE DEBTORS MAY, IN THEIR SOLE DISCRETION, REJECT SUCH BALLOT AS INVALID AND, THEREFORE, DECLINE TO COUNT IT AS AN ACCEPTANCE OR REJECTION OF THE PLAN. IN NO CASE SHOULD A BALLOT OR ANY OF THE CERTIFICATES BE DELIVERED TO THE DEBTORS OR ANY OF THEIR ADVISORS. A. Parties in Interest Entitled to Vote Under section 1124 of the Bankruptcy Code, a class of claims or interests is deemed to be "impaired" under a plan unless (a) the plan leaves unaltered the legal, equitable, and contractual rights to which such claim or interest entitles the holder thereof or (b) notwithstanding any legal right to an accelerated payment of such claim or interest, the plan cures all existing defaults (other than defaults resulting from the occurrence of events of bankruptcy) and reinstates the maturity of such claim or interest as it existed before the default. In general, a holder of a claim or interest may vote to accept or to reject a plan if (1) no party in interest has objected to such claim or interest, and (2) the claim or interest is impaired by the Plans. If the holder of an impaired claim or impaired interest will not receive any distribution under the plan in respect of such claim or interest, the Bankruptcy Code deems such holder to have rejected the plan. If the claim or interest is not impaired, the Bankruptcy Code deems that the holder of such claim or interest has accepted the plan and the plan proponent need not solicit such holder's vote. Except for Classes 9, 10, 11, 13 and 14 of the Reorganization Plan and Classes 7, 9 and 11 of the Liquidation Plan (which are presumed to have rejected the Plans), the holder of a Claim that is "impaired" under the Plans is entitled to vote to accept or reject the Plans if (1) the Plans provide a distribution in respect of such Claim and (2) (a) the Claim has been scheduled by the respective Debtor (and such Claim is not scheduled as disputed, contingent, or unliquidated), (b) such Claimholder has timely filed a Proof of Claim as to which no objection has been filed, or (c) such Claimholder has timely filed a motion pursuant to Federal Rule of Bankruptcy Procedure 3018(a) seeking temporary allowance of such Claim for voting purposes only and the Debtor has not opposed the Motion, or objected to the Claim, in which case the holder's vote will be counted only upon order of the Court. A vote may be disregarded if the Court determines, pursuant to section 1126(e) of the Bankruptcy Code, that it was not solicited or procured in good faith or in accordance with the provisions of the Bankruptcy Code. The Solicitation Procedures Order also sets forth assumptions and procedures for tabulating Ballots, including Ballots that are not completed fully or correctly. B. Classes Impaired Under the Plans 1. Voting Impaired Classes of Claims and Interests The following Classes are impaired under, and entitled to vote to accept or reject, the Reorganization Plan: Class 3 Class 4 Class 5 Class 6 Class 8 The following Class is impaired under, and entitled to vote to accept or reject, the Liquidation Plan. Class 3 2. Non-Voting Impaired Classes of Claims and Interests The Classes listed below are not entitled to receive or retain any property under the Plans. Under section 1126(g) of the Bankruptcy Code, Claimholders and Interestholders in such Classes are deemed to reject the Plans, and the votes of such Claimholders and Interestholders will not be solicited: Classes 9, 10, 11, 13 and 14 of the Reorganization Plan and Classes 7, 9 and 11 of the Liquidation Plan. 3. Unimpaired Classes of Claims and Interests All other Classes are Unimpaired under the Plans and deemed under section 1126(f) of the Bankruptcy Code to have accepted the Plans. Their votes to accept or reject the Plans will not be solicited. Acceptances of the Plans are being solicited only from those who hold Claims in an Impaired Class whose members will receive a distribution under the Plans. XIV. CONCLUSION A. Hearing on and Objections to Confirmation 1. Confirmation Hearing The hearing on confirmation of the Plans has been scheduled for December 3, 2003 at 2:00 p.m. (prevailing Eastern time). Such hearing may be adjourned from time to time by announcing such adjournment in open court, all without notice to parties in interest, provided, however, that the Debtors will file with the Court a notice of such adjournment and will post a notice of adjournment on Covanta's website at www.covantaenergy.com (corporate restructuring). The Plans may be modified by the Debtors pursuant to section 1127 of the Bankruptcy Code prior to, during, or as a result of that hearing, without further notice to parties in interest. 2. Date Set for Filing Objections to Confirmation of the Plans The time by which all objections to confirmation of the Plan must be filed with the Court and received by the parties listed in the Confirmation Hearing Notice has been set for [November 18, 2003, at 4:00 p.m. (prevailing Eastern time)]. A copy of the Confirmation Hearing Notice is enclosed with this Disclosure Statement. B. Recommendation The Plans provides for an equitable and early distribution to creditors of the Debtors, preserves the value of the business as a going concern, and preserves the jobs of its employees. The Debtors believe that any alternative to confirmation of the Plans, such as a total liquidation of all the Debtors or attempts by another party in interest to file a plan, could result in significant delays, litigation, and costs, as well as the loss of jobs by the employees. Moreover, the Debtors believe that their creditors will receive greater and earlier recoveries under the Plans than those that would be achieved in liquidation or under an alternative plan. FOR THESE REASONS, THE DEBTORS URGE YOU TO RETURN YOUR BALLOT ACCEPTING THE PLANS. Dated: September 8, 2003 COVANTA ENERGY CORPORATION AND ITS SUBSIDIARIES THAT ARE ALSO DEBTORS AND DEBTORS IN POSSESSION IN THE CHAPTER 11 CASES Debtors and Debtors in Possession By: /s/ Scott G. Mackin ---------------------------------------- President and Chief Executive Officer Covanta Energy Corporation and President of Ogden New York Services, Inc. and authorized signatory for each of the other Debtors GLOSSARY OF DEFINED TERMS 4 401(k)...........................................................................................................61 5 5.75% Convertible Bearer Debentures..............................................................................22 5.75% Convertible Debentures.....................................................................................22 5.75% Convertible Registered Debentures..........................................................................22 6 6% Convertible Bearer Debentures.................................................................................22 6% Convertible Debentures........................................................................................22 6% Convertible Registered Debentures.............................................................................22 9 9.25% Adversary Proceeding.......................................................................................34 9.25% Debenture Claims...............................as defined in the Reorganization Plan and the Liquidation Plan 9.25% Debentures..................................................................................................v 9.25% Debentures Adversary Proceeding................as defined in the Reorganization Plan and the Liquidation Plan 9.25% Indenture..................................................................................................34 9.25% Indenture Trustee..........................................................................................34 9.25% Settlement Agreement...........................as defined in the Reorganization Plan and the Liquidation Plan A Additional Class 3 Warrants...................................................as defined in the Reorganization Plan Additional New Lenders........................................................as defined in the Reorganization Plan Administrative Expense Claim Bar Date................as defined in the Reorganization Plan and the Liquidation Plan Administrative Expense Claims........................as defined in the Reorganization Plan and the Liquidation Plan Agent Banks..........................................as defined in the Reorganization Plan and the Liquidation Plan Allied...........................................................................................................37 Allied Acquired Companies........................................................................................31 Allowed..............................................as defined in the Reorganization Plan and the Liquidation Plan Allowed Administrative Expense Claim.................as defined in the Reorganization Plan and the Liquidation Plan Allowed Priority Tax Claim...........................as defined in the Reorganization Plan and the Liquidation Plan American.........................................................................................................12 AMOR..............................................................................................................9 Arenas...........................................................................................................25 Argentine Assets.................................................................................................vi Arrowhead Pond....................................................................................................7 Assuming Debtors.................................................................................................76 Assuming Debtors' Schedule of Rejected Contracts and Leases...................as defined in the Reorganization Plan Aviation Fueling Assets...........................................................................................9 B Balloting Agent......................................as defined in the Reorganization Plan and the Liquidation Plan Ballots..............................................as defined in the Reorganization Plan and the Liquidation Plan Bank Agreement Ogden FMCA Collateral.............................................as defined in the Liquidation Plan Bankruptcy Code..................................................................................................ii Bankruptcy Rules.....................................as defined in the Reorganization Plan and the Liquidation Plan Board............................................................................................................12 Bondholders Committee............................................................................................34 Broad Severance Plan.............................................................................................18 Business Day.........................................as defined in the Reorganization Plan and the Liquidation Plan Business Plan....................................................................................................41 C Canadian Court...................................................................................................36 Cash.................................................as defined in the Reorganization Plan and the Liquidation Plan Casino Iguazu....................................................................................................vi CCAA.............................................................................................................36 CEO..............................................................................................................18 CERCLA...........................................................................................................11 Chapter 11 Cases..................................................................................................v Chinese Station..................................................................................................12 CIT..............................................................................................................34 CIT Lease........................................................................................................34 Claims...............................................as defined in the Reorganization Plan and the Liquidation Plan Claims Objection Deadline............................as defined in the Reorganization Plan and the Liquidation Plan Client Communities................................................................................................8 COD..............................................................................................................90 Code.............................................................................................................87 Collateral.......................................................................as defined in the Liquidation Plan Committee's..........................................as defined in the Reorganization Plan and the Liquidation Plan Company..........................................................................................................iv Confirmation Date....................................as defined in the Reorganization Plan and the Liquidation Plan Confirmation Hearing.....................................as defined in the Reorganization Plan and Liquidation Plan Confirmation Hearing Notice.......................................................................................2 Confirmation Objection Deadline...................................................................................5 Confirmation Order..............................................................................................vii Contract Schedules...............................................................................................76 Convenience Claims............................................................as defined in the Reorganization Plan Convertible Debentures........................................................................................xxxii Convertible Debentures Bar Date...............................................................................xxxii Core Operations..................................................................................................40 Core Retiree Program.............................................................................................19 Corel Centre.....................................................................................................vi County...........................................................................................................12 Court............................................................................................................iv Covanta..........................................................................................................iv Covanta Babylon..................................................................................................38 Covanta Concerts Bar Date.....................................................................................xxxii Covanta Concerts Bar Date Order...............................................................................xxxii Covanta Energy Americas, Inc..................................................as defined in the Reorganization Plan Covanta Huntington............................................................as defined in the Reorganization Plan Covanta Lake.....................................................................................................36 Covanta Notes....................................................................................................89 Covanta Onondaga..........................................................33. as defined in the Reorganization Plan Covanta Tulsa....................................................................................................34 Covanta Union....................................................................................................32 Covanta Unsecured Claims......................................................as defined in the Reorganization Plan Covanta Warren...................................................................................................33 CPIH.............................................................................................................57 CPIH Borrower Guaranty...........................................................................................57 CPIH Borrowers...................................................................................................57 CPIH Facilities..................................................................................................57 CPIH Revolver Facility...........................................................................................57 CPIH Term Loan Facility..........................................................................................57 CPPI.............................................................................................................10 Creditors Committee..............................................................................................29 CSE..............................................................................................................36 CSFB.............................................................................as defined in the Liquidation Plan CSP..............................................................................................................36 Cure.............................................................................................................45 D D&P..............................................................................................................vi DE Shaw New Lender............................................................as defined in the Reorganization Plan Debtor Operators.................................................................................................10 Debtors..........................................................................................................iv Designated DIP Collateral........................................................................................63 DIP Agents...........................................as defined in the Reorganization Plan and the Liquidation Plan DIP Final Order..................................................................................................26 DIP Financing Facility...........................................................................................26 Disbursing Agent..............................................................as defined in the Reorganization Plan Disclosure Statement.............................................................................................ii Disputed Claim................................................................as defined in the Reorganization Plan Disputed Claims..................................................................as defined in the Liquidation Plan Disputed Claims Reserves.................................as defined in the Reorganization Plan and Liquidation Plan Dissolution Expenses.............................................................as defined in the Liquidation Plan Distributable Cash...............................................................................................61 Distribution Date.............................................................as defined in the Reorganization Plan Distributions........................................as defined in the Reorganization Plan and the Liquidation Plan Domestic Borrower Guaranty.......................................................................................57 Domestic Borrowers...............................................................................................56 Domestic Facilities..............................................................................................57 DSS Environmental.............................................................as defined in the Reorganization Plan E Effective Date.......................................as defined in the Reorganization Plan and the Liquidation Plan Elective Convenience Claim....................................................as defined in the Reorganization Plan Employee Bar Date.............................................................................................xxxii Employee Bar Date Order.......................................................................................xxxii Energy Select Plan...............................................................................................16 Energy Services 401(k) Plan......................................................................................15 Environmental Regulatory Laws....................................................................................11 Environmental Remediation Laws...................................................................................11 Equity Bonds.....................................................................................................22 Equity Interests.....................................as defined in the Reorganization Plan and the Liquidation Plan ERISA............................................................................................................vi ESOP.............................................................................................................vi ESOP Committee...................................................................................................vi Estates..............................................as defined in the Reorganization Plan and the Liquidation Plan Estimated Recovery Value......................................................as defined in the Reorganization Plan Excess Distributable Cash.....................................................as defined in the Reorganization Plan Exclusivity Period...............................................................................................30 Existing L/C Facility............................................................................................57 Exit Costs....................................................................as defined in the Reorganization Plan Exit Facility Agent...........................................................as defined in the Reorganization Plan Exit Financing Agreements.....................................................as defined in the Reorganization Plan F Fee Dispute Notice...............................................................as defined in the Liquidation Plan Final Liquidation Determination Date.............................................as defined in the Liquidation Plan Final Liquidation Distribution Date..............................................as defined in the Liquidation Plan Final Order..........................................as defined in the Reorganization Plan and the Liquidation Plan Financial Reporting by Entities in Reorganization under the Bankruptcy Code......................................20 First Amended Bar Date.......................................................................................xxxiii First Amended Schedules......................................................................................xxxiii First Amendment..................................................................................................27 Fourth Amendment.................................................................................................27 Free Cash........................................................................................................61 Fresh Start Reporting Adjustments................................................................................84 G General Bar Date Order........................................................................................xxxii Geothermal Debtor Equity.........................................................................................ix Geothermal Project.............................................................................................viii Geothermal Sale..................................................................................................ix H Heber Debtor Holding Companies....................................................................................9 Heber Debtor Project Companies...................................................................................10 Heber Debtors....................................................................as defined in the Liquidation Plan Heber Debtors Intercompany Claims.............................................as defined in the Reorganization Plan Heber Plan.......................................................................................................ix Heber Secured Claims..........................................................as defined in the Reorganization Plan Heber Sellers....................................................................................................10 Heber Unsecured Claims........................................................as defined in the Reorganization Plan Hennepin Plan....................................................................................................15 HFC Interests....................................................................................................10 HFC One Seller...................................................................................................10 HFC Operator.....................................................................................................10 HFC Project......................................................................................................10 HFC Project Company..............................................................................................10 HFC Two Seller...................................................................................................10 HGC Interests....................................................................................................10 HGC One Seller...................................................................................................10 HGC Operator.....................................................................................................10 HGC Project......................................................................................................10 HGC Project Company..............................................................................................10 HGC Sellers......................................................................................................10 HGC Three Seller.................................................................................................10 HGC Two Seller...................................................................................................10 Holder...........................................................................................................91 I Impaired.............................................as defined in the Reorganization Plan and the Liquidation Plan In re Ogden New York Services, Inc., et al........................................................................v Indenture Trustee.............................................................as defined in the Reorganization Plan Initial Distribution..........................................................as defined in the Reorganization Plan Initial Liquidation Distribution Date............................................as defined in the Liquidation Plan Initial Petition Date............................................................................................iv Intercompany Claims..................................as defined in the Reorganization Plan and the Liquidation Plan Intercreditor Agreement..........................................................................................ix Intercreditor Amendment..........................................................................................27 Interim Petition Date............................................................................................iv Intermediate Holding Company Debtors..........................................as defined in the Reorganization Plan IPP...............................................................................................................8 IRC..............................................................................................................13 IRS..............................................................................................................14 K KERP.............................................................................................................17 KKR..............................................................................................................30 L La Rural Fairgrounds.............................................................................................vi Lake County......................................................................................................36 Lake Facility....................................................................................................36 Liens................................................as defined in the Reorganization Plan and the Liquidation Plan Liquidating Debtors..............................................................as defined in the Liquidation Plan Liquidating Debtors Intercompany Claims..............as defined in the Reorganization Plan and the Liquidation Plan Liquidating Non-Pledgor Debtors..................................................as defined in the Liquidation Plan Liquidating Pledgor Debtors......................................................as defined in the Liquidation Plan Liquidating Trust................................................................as defined in the Liquidation Plan Liquidating Trustee..............................................................as defined in the Liquidation Plan Liquidating Trustee Billing Date.................................................as defined in the Liquidation Plan Liquidating Trustee Fee Notice...................................................as defined in the Liquidation Plan Liquidation Distribution Date....................................................as defined in the Liquidation Plan Liquidation Expenses.............................................................as defined in the Liquidation Plan Liquidation Plan.................................................................................................ii Liquidation Secured Claims.......................................................as defined in the Liquidation Plan Loss Sharing Litigation..............................as defined in the Reorganization Plan and the Liquidation Plan LTIP.............................................................................................................17 M Master Credit Facility............................................................................................v MP Interests.....................................................................................................10 MP Project Company...............................................................................................10 MPLP Facilities..................................................................................................10 N Net Liquidation Proceeds.........................................................as defined in the Liquidation Plan New CPIH Funded Debt.............................................................................................58 New CPIH Revolver Facility....................................................as defined in the Reorganization Plan New Debtor Schedules.........................................................................................xxxiii New Debtors Bar Date..........................................................................................xxxii New Facility Lenders..........................................................as defined in the Reorganization Plan New High Yield Secured Notes.....................................................................................58 New L/C Facility.................................................................................................57 New Lender Warrants...........................................................as defined in the Reorganization Plan New Revolver Facility............................................................................................57 NOLs.............................................................................................................90 Non-Core Retiree Program.........................................................................................19 Non-Participating Lenders.....................................................as defined in the Reorganization Plan Non-Priority Subclass 3A Claims...............................................as defined in the Reorganization Plan Non-Qualified Plans..............................................................................................16 Non-Rolled Tranche B Letters of Credit...........................................................................27 Notice Agent.....................................................................................................39 Notice of Designation............................................................as defined in the Liquidation Plan O OCRRA............................................................................................................33 OEES.............................................................................................................38 Ogden Ground.....................................................................................................12 Ogden New York...................................................................................................12 Old Covanta Stock.............................................................as defined in the Reorganization Plan Onondaga Facility................................................................................................33 Operating Company Unsecured Claims............................................as defined in the Reorganization Plan Operating Reserve................................................................as defined in the Liquidation Plan Operating Reserve Payment Amount.....................as defined in the Reorganization Plan and the Liquidation Plan opt-out..........................................................................................................21 Original Debtors..............................................................................................xxxii Original Schedules............................................................................................xxxii Other Allowed Claims..........................................................................................xxxix Oversight Nominee................................................................as defined in the Liquidation Plan Oversight Nominee Expenses.......................................................as defined in the Liquidation Plan P Palladium........................................................................................................36 PBGC.............................................................................................................14 Pension Plan.....................................................................................................13 Person...............................................as defined in the Reorganization Plan and the Liquidation Plan Petition Date....................................................................................................iv Plan Documents................................................................as defined in the Reorganization Plan Plans............................................................................................................ii pooled...........................................................................................................21 Post-Confirmation Collateral..................................................as defined in the Reorganization Plan PPAs..............................................................................................................8 Prepetition Collateral...........................................................................................ix Prepetition Credit Agreement.........................as defined in the Reorganization Plan and the Liquidation Plan Prepetition Lenders..................................as defined in the Reorganization Plan and the Liquidation Plan Priority Bank Claims.............................................................................................35 Priority Bank Lenders.........................................................as defined in the Reorganization Plan Priority Non-Tax Claims.......................................................as defined in the Reorganization Plan Priority Tax Claims..............................................................................................47 Pro Rata Class Share.................................as defined in the Reorganization Plan and the Liquidation Plan Project Companies................................................................................................10 Project Debt Claims...........................................................as defined in the Reorganization Plan Projections....................................................................................................viii PRPs.............................................................................................................12 Q QSub........................................................................................................xxxviii Qualified Plans..................................................................................................16 R Reinstated L/C Facility.......................................................as defined in the Reorganization Plan Rejecting Debtors................................................................................................76 Reorganization Plan..............................................................................................ii Reorganization Plan Equity Securities and Warrants............................as defined in the Reorganization Plan Reorganization Plan Notes.....................................................as defined in the Reorganization Plan Reorganization Plan Unsecured Notes...........................................as defined in the Reorganization Plan Reorganization Plan Warrants..................................................as defined in the Reorganization Plan Reorganized Company..............................................................................................83 Reorganized Covanta..................................as defined in the Reorganization Plan and the Liquidation Plan Reorganized Covanta Common Stock..............................................as defined in the Reorganization Plan Reorganized Covanta Secured Claims............................................as defined in the Reorganization Plan Reorganized CPIH Preferred Stock..............................................as defined in the Reorganization Plan Reorganized Debtors...........................................................as defined in the Reorganization Plan Reorganized Heber Debtor......................................................as defined in the Reorganization Plan Reorganizing Debtors..........................................................as defined in the Reorganization Plan Reorganizing Debtors Intercompany Claims.............as defined in the Reorganization Plan and the Liquidation Plan Replacement Liens................................................................................................28 Residual Liquidation Assets......................................................................................ix Resource 401(k) Plan.............................................................................................14 Resource Pension Plan............................................................................................15 Resource Plan....................................................................................................16 Retained Liquidation Professional................................................as defined in the Liquidation Plan Retained Liquidation Professional Fee Notices....................................as defined in the Liquidation Plan Retained Professional.........................................................as defined in the Reorganization Plan Retained Professionals...........................................................as defined in the Liquidation Plan Retention Plan...................................................................................................17 Retiree Medical Programs.........................................................................................19 Risk Factors....................................................................................................iii Rule 3018(a) Motion...............................................................................................5 Rule 3018(a) Motion Deadline......................................................................................5 S Savings Plan.....................................................................................................14 SCE..............................................................................................................10 Schedule of Assumed Contracts and Leases.........................................as defined in the Liquidation Plan Schedules............................................as defined in the Reorganization Plan and the Liquidation Plan SEC..............................................................................................................ii Second Amended Bar Date......................................................................................xxxiii Second Amended Schedules.....................................................................................xxxiii Second Amendment.................................................................................................27 Section 354 Securities...........................................................................................91 Secured Claim.................................................................as defined in the Reorganization Plan Secured Class 3 Total Distribution............................................as defined in the Reorganization Plan Secured Creditor Direction...................................................as defined in the Reorganization Plan Secured Value Distribution....................................................as defined in the Reorganization Plan Securities Act...................................................................................................87 Security Fund....................................................................................................14 SEIU Pension Plan................................................................................................14 Select Plan......................................................................................................16 Service Agreements................................................................................................8 Severance Plan...................................................................................................17 Short-Form Disclosure Statement...................................................................................3 SIGC Energy I.....................................................................................................9 SIGC Energy II....................................................................................................9 SIGC Interests....................................................................................................9 SIGC Operator....................................................................................................10 SIGC Project......................................................................................................9 SIGC Project Company..............................................................................................9 SIGC Seller.......................................................................................................9 Site.............................................................................................................12 Sixth Amendment..................................................................................................28 Solicitation Procedures Order...................................................................................105 SOP 90-7.........................................................................................................20 Specified Personnel..................................as defined in the Reorganization Plan and the Liquidation Plan Subclass 3A Recovery.................................as defined in the Reorganization Plan and the Liquidation Plan Subclass 3B Recovery.................................as defined in the Reorganization Plan and the Liquidation Plan Subordinated Claims..................................as defined in the Reorganization Plan and the Liquidation Plan Subsequent Petition Date.........................................................................................iv Subsidiaries.....................................................................................................iv Subsidiary Debtors...................................as defined in the Reorganization Plan and the Liquidation Plan Substantial Contribution Claims......................as defined in the Reorganization Plan and the Liquidation Plan Superfund........................................................................................................11 Supplementary Plan...............................................................................................15 T Team.............................................................................................................36 The Disputed Claims Reserve......................................................as defined in the Liquidation Plan the Effective Date............................................................as defined in the Reorganization Plan Third Amended Bar Date.......................................................................................xxxiii Third Amended Schedules......................................................................................xxxiii Third Amendment..................................................................................................27 TIN..............................................................................................................94 Town.............................................................................................................38 Tranche A........................................................................................................26 Tranche A Letter of Credit Sublimit..............................................................................28 Tranche B........................................................................................................26 Tranche C Obligations............................................................................................27 Tulsa Authority..................................................................................................34 U U.S. Trust.......................................................................................................vi U.S. Trust Agreement.............................................................................................vi Unimpaired...........................................as defined in the Reorganization Plan and the Liquidation Plan Union Authority..................................................................................................32 Union Facility...................................................................................................32 United...........................................................................................................12 United States Trustee................................as defined in the Reorganization Plan and the Liquidation Plan United States Trustee Claims.........................as defined in the Reorganization Plan and the Liquidation Plan Unsecured Liquidation Claims..................................................as defined in the Reorganization Plan V Voting Deadline...................................................................................................3 Voting Record Date................................................................................................2 W Warren Authority.................................................................................................33 Warren Facility..................................................................................................33 Water.............................................................................................................8 WTE...............................................................................................................7
EXHIBIT A PLAN OF REORGANIZATION EXHIBIT B PLAN OF LIQUIDATION EXHIBIT C1 PRO FORMA HISTORICAL FINANCIAL INFORMATION [TO BE INSERTED] EXHIBIT C2 PROJECTED FINANCIAL INFORMATION [TO BE INSERTED] EXHIBIT D REORGANIZATION VALUATION ANALYSIS [TO BE INSERTED] EXHIBIT E LIQUIDATION VALUATION ANALYSIS [TO BE INSERTED] EXHIBIT F HISTORICAL FINANCIAL RESULTS [TO BE INSERTED] EXHIBIT G LIST OF DEBTORS AND DEBTORS IN POSSESSION Reorganizing Debtors Debtor Case Number - ------ ----------- 1. Covanta Acquisition, Inc. 02-40861 (CB) 2. Covanta Alexandria/Arlington, Inc. 02-40929 (CB) 3. Covanta Babylon, Inc. 02-40928 (CB) 4. Covanta Bessemer, Inc. 02-40862 (CB) 5. Covanta Bristol, Inc. 02-40930 (CB) 6. Covanta Cunningham Environmental Support Services, Inc. 02-40863 (CB) 7. Covanta Energy Americas, Inc. 02-40881 (CB) 8. Covanta Energy Construction, Inc. 02-40870 (CB) 9. Covanta Energy Corporation 02-40841 (CB) 10. Covanta Energy Group, Inc. 03-13707 (CB) 11. Covanta Energy International, Inc. 03-13706 (CB) 12. Covanta Energy Resource Corp. 02-40915 (CB) 13. Covanta Energy Services of New Jersey, Inc. 02-40900 (CB) 14. Covanta Energy Services, Inc. 02-40899 (CB) 15. Covanta Energy West, Inc. 02-40871 (CB) 16. Covanta Engineering Services, Inc. 02-40898 (CB) 17. Covanta Fairfax, Inc. 02-40931 (CB) 18. Covanta Geothermal Operations Holdings, Inc. 02-40873 (CB) 19. Covanta Geothermal Operations, Inc. 02-40872 (CB) 20. Covanta Heber Field Energy, Inc. 02-40893 (CB) 21. Covanta Hennepin Energy Resource Co., L.P. 02-40906 (CB) 22. Covanta Hillsborough, Inc. 02-40932 (CB) 23. Covanta Honolulu Resource Recovery Venture 02-40905 (CB) 24. Covanta Huntington Limited Partnership 02-40916 (CB) 25. Covanta Huntington Resource Recovery One Corp. 02-40919 (CB) 26. Covanta Huntington Resource Recovery Seven Corp. 02-40920 (CB) 27. Covanta Huntsville, Inc. 02-40933 (CB) 28. Covanta Hydro Energy, Inc. 02-40894 (CB) 29. Covanta Hydro Operations West, Inc. 02-40875 (CB) 30. Covanta Hydro Operations, Inc. 02-40874 (CB) 31. Covanta Imperial Power Services, Inc. 02-40876 (CB) 32. Covanta Indianapolis, Inc. 02-40934 (CB) 33. Covanta Kent, Inc. 02-40935 (CB) 34. Covanta Lake, Inc. 02-40936 (CB) 35. Covanta Lancaster, Inc. 02-40937 (CB) 36. Covanta Lee, Inc. 02-40938 (CB) 37. Covanta Long Island, Inc. 02-40917 (CB) 38. Covanta Marion Land Corp. 02-40940 (CB) 39. Covanta Marion, Inc. 02-40939 (CB) 40. Covanta Mid-Conn, Inc. 02-40911 (CB) 41. Covanta Montgomery, Inc. 02-40941 (CB) 42. Covanta New Martinsville Hydro-Operations Corp. 02-40877 (CB) 43. Covanta Oahu Waste Energy Recovery, Inc. 02-40912 (CB) 44. Covanta Onondaga Five Corp. 02-40926 (CB) 45. Covanta Onondaga Four Corp. 02-40925 (CB) 46. Covanta Onondaga Limited Partnership 02-40921 (CB) 47. Covanta Onondaga Operations, Inc. 02-40927 (CB) 48. Covanta Onondaga Three Corp. 02-40924 (CB) 49. Covanta Onondaga Two Corp. 02-40923 (CB) 50. Covanta Onondaga, Inc. 02-40922 (CB) 51. Covanta Operations of Union, LLC 02-40909 (CB) 52. Covanta OPW Associates, Inc. 02-40908 (CB) 53. Covanta OPWH, Inc. 02-40907 (CB) 54. Covanta Pasco, Inc. 02-40943 (CB) 55. Covanta Power Equity Corp. 02-40895 (CB) 56. Covanta Power International Holdings, Inc. 03-13708 (CB) 57. Covanta Projects, Inc. 03-13709 (CB) 58. Covanta Projects of Hawaii, Inc. 02-40913 (CB) 59. Covanta Projects of Wallingford, L.P. 02-40903 (CB) 60. Covanta RRS Holdings, Inc. 02-40910 (CB) 61. Covanta Secure Services, Inc. 02-40901 (CB) 62. Covanta SIGC Geothermal Operations, Inc. 02-40883 (CB) 63. Covanta Stanislaus, Inc. 02-40944 (CB) 64. Covanta Systems, Inc. 02-40948 (CB) 65. Covanta Tampa Bay, Inc. 02-40865 (CB) 66. Covanta Tulsa, Inc. 02-40945 (CB) 67. Covanta Union, Inc. 02-40946 (CB) 68. Covanta Wallingford Associates, Inc. 02-40914 (CB) 69. Covanta Warren Energy Resource Co., L.P. 02-40904 (CB) 70. Covanta Waste to Energy of Italy, Inc. 02-40902 (CB) 71. Covanta Waste to Energy, Inc. 02-40949 (CB) 72. Covanta Water Holdings, Inc. 02-40866 (CB) 73. Covanta Water Systems, Inc. 02-40867 (CB) 74. Covanta Water Treatment Services, Inc. 02-40868 (CB) 75. DSS Environmental, Inc. 02-40869 (CB) 76. ERC Energy II, Inc. 02-40890 (CB) 77. ERC Energy, Inc. 02-40891 (CB) 78. Heber Field Energy II, Inc. 02-40892 (CB) 79. Heber Loan Partners 02-40889 (CB) 80. OPI Quezon, Inc. 02-40860 (CB) 81. Three Mountain Operations, Inc. 02-40879 (CB) 82. Three Mountain Power, LLC 02-40880 (CB) Liquidating Debtors Debtor Case Number - ------ ----------- 1. Alpine Food Products, Inc. 03-13679 (CB) 2. BDC Liquidating Corp. 03-13681 (CB) 3. Bouldin Development Corp. 03-13680 (CB) 4. Covanta Concerts Holdings, Inc. 02-16332 (CB) 5. Covanta Energy Sao Jeronimo, Inc. 02-40854 (CB) 6. Covanta Equity of Alexandria/Arlington, Inc. 03-13682 (CB) 7. Covanta Equity of Stanislaus, Inc. 03-13683 (CB) 8. Covanta Financial Services, Inc. 02-40947 (CB) 9. Covanta Huntington, Inc. 02-40918 (CB) 10. Covanta Key Largo, Inc. 02-40864 (CB) 11. Covanta Northwest Puerto Rico, Inc. 02-40942 (CB) 12. Covanta Oil & Gas, Inc. 02-40878 (CB) 13. Covanta Power Development of Bolivia, Inc. 02-40856 (CB) 14. Covanta Power Development, Inc. 02-40855 (CB) 15. Covanta Secure Services USA, Inc. 02-40896 (CB) 16. Covanta Waste Solutions, Inc. 02-40897 (CB) 17. Doggie Diner, Inc. 03-13684 (CB) 18. Gulf Coast Catering Company, Inc. 03-13685 (CB) 19. J.R. Jack's Construction Corporation 02-40857 (CB) 20. Lenzar Electro-Optics, Inc. 02-40832 (CB) 21. Logistics Operations, Inc. 03-13688 (CB) 22. Offshore Food Service, Inc. 03-13694 (CB) 23. OFS Equity of Alexandria/Arlington, Inc. 03-13687 (CB) 24. OFS Equity of Babylon, Inc. 03-13690 (CB) 25. OFS Equity of Delaware, Inc. 03-13689 (CB) 26. OFS Equity of Huntington, Inc. 03-13691 (CB) 27. OFS Equity of Indianapolis, Inc. 03-13693 (CB) 28. OFS Equity of Stanislaus, Inc. 03-13692 (CB) 29. Ogden Allied Abatement & Decontamination Service, Inc. 02-40827 (CB) 30. Ogden Allied Maintenance Corp. 02-40828 (CB) 31. Ogden Allied Payroll Services, Inc. 02-40835 (CB) 32. Ogden Attractions, Inc. 02-40836 (CB) 33. Ogden Aviation Distributing Corp. 02-40829 (CB) 34. Ogden Aviation Fueling Company of Virginia, Inc. 02-40837 (CB) 35. Ogden Aviation Security Services of Indiana, Inc. 03-13695 (CB) 36. Ogden Aviation Service Company of Colorado, Inc. 02-40839 (CB) 37. Ogden Aviation Service Company of Pennsylvania, Inc. 02-40834 (CB) 38. Ogden Aviation Service International Corporation 02-40830 (CB) 39. Ogden Aviation Terminal Services, Inc. 03-13696 (CB) 40. Ogden Aviation, Inc. 02-40838 (CB) 41. Ogden Cargo Spain, Inc. 02-40843 (CB) 42. Ogden Central and South America, Inc. 02-40844 (CB) 43. Ogden Cisco, Inc. 03-13698 (CB) 44. Ogden Communications, Inc. 03-13697 (CB) 45. Ogden Constructors, Inc. 02-40858 (CB) 46. Ogden Environmental & Energy Services Co., Inc. 02-40859 (CB) 47. Ogden Facility Holdings, Inc. 02-40845 (CB) 48. Ogden Facility Management Corporation of Anaheim 02-40846 (CB) 49. Ogden Facility Management Corporation of West Virginia 03-13699 (CB) 50. Ogden Film and Theatre, Inc. 02-40847 (CB) 51. Ogden Firehole Entertainment Corp. 02-40848 (CB) 52. Ogden Food Service Corporation of Milwaukee, Inc. 03-13701 (CB) 53. Ogden International Europe, Inc. 02-40849 (CB) 54. Ogden Leisure, Inc. 03-13700 (CB) 55. Ogden Management Services, Inc. 03-13702 (CB) 56. Ogden New York Services, Inc. 02-40826 (CB) 57. Ogden Pipeline Service Corporation 03-13704 (CB) 58. Ogden Services Corporation 02-40850 (CB) 59. Ogden Support Services, Inc. 02-40851 (CB) 60. Ogden Technology Services Corporation 03-13703 (CB) 61. Ogden Transition Corporation 03-13705 (CB) 62. PA Aviation Fuel Holdings, Inc. 02-40852 (CB) 63. Philadelphia Fuel Facilities Corporation 02-40853 (CB) Heber Debtors Debtor Case Number - ------ ----------- 1. AMOR 14 Corporation 02-40886 (CB) 2. Covanta SIGC Energy, Inc. 02-40885 (CB) 3. Covanta SIGC Energy II, Inc. 02-40884 (CB) 4. Heber Field Company 02-40888 (CB) 5. Heber Geothermal Company 02-40887 (CB) 6. Second Imperial Geothermal Co., L.P. 02-40882 (CB) -----END PRIVACY-ENHANCED MESSAGE-----