exv10w3



 





Exhibit 10.3



FIRST AMENDMENT

TO CREDIT AGREEMENT




               This FIRST AMENDMENT TO CREDIT AGREEMENT (this “Amendment”) is dated as of
August 13, 2004 and entered into by and among COVANTA POWER INTERNATIONAL
HOLDINGS, INC., a Delaware corporation (“Company”), and THE SUBSIDIARIES OF
COMPANY LISTED ON THE SIGNATURE PAGES HEREOF AS BORROWERS (collectively,
Company and such Subsidiaries of Company are “Borrowers” and each a
“Borrower”), COVANTA ENERGY AMERICAS, INC., a Delaware corporation (“CEA”), as
a Loan Party, THE LENDERS PARTY HERETO, and DEUTSCHE BANK AG, NEW YORK BRANCH,
as Administrative Agent for the Lenders (“Administrative Agent”), and is made
with reference to that certain Credit Agreement dated as of March 10, 2004 by
and among Borrowers, the financial institutions parties thereto as Lenders and
Administrative Agent (the “Credit Agreement”). Capitalized terms used herein
without definition shall have the same meanings herein as set forth in the
Credit Agreement (as amended by this Amendment).



RECITALS




               WHEREAS, Borrowers and the undersigned Lenders desire (i) to amend the
Credit Agreement to permit a restructuring of the obligations relating to the
Trezzo waste-to-energy Project, to permit the termination of the power purchase
agreement relating to the Bataan cogeneration Project and to permit a working
capital credit line for the Linan cogeneration Project, and (ii) to make
certain other amendments to the Credit Agreement, subject to the terms and
conditions set forth below;



               NOW, THEREFORE, in consideration of the premises and agreements,
provisions and covenants herein contained, the parties hereto agree as follows:



     SECTION 1. AMENDMENTS TO THE CREDIT AGREEMENT



     1.1 Provisions Relating to Defined Terms.



               A. Subsection 1.1 of the Credit Agreement is hereby amended by inserting
the following new definitions in the appropriate alphabetical order:




          “Bataan Project” means the cogeneration plant Project in Bataan, the
Phillippines.




          “CWTEI” means Covanta Waste to Energy of Italy, Inc., a Delaware
corporation.




          “Euro” means the single currency of participating member states of
the European Monetary Union.



 









 






          “First Amendment” means the First Amendment to Credit Agreement by
and among Borrowers, CEA, Administrative Agent and Lenders, dated as of
August 13, 2004.




          “First Amendment Effective Date” has the meaning assigned to that
term in Section 2 of the First Amendment.




          “Linan JV” means Linan Ogden-Jinjiang Cogeneration Co., Ltd., a
company organized under the laws of the People’s Republic of China.




          “Linan Project” means the cogeneration plan Project in Linan, China.




          “Terminated Trezzo Agreement” means the Ogden Equity Contribution
Agreement dated February 9, 2001, as in effect immediately prior to the
First Amendment Effective Date, relating to the Trezzo Project, pursuant
to which agreement Covanta Energy Group, Inc. was (immediately prior to
the First Amendment Effective Date) obligated to make capital
contributions to Trezzo Project Company in Euros in an amount
approximately equal to the Dollar equivalent of $1,300,000.




          “Trezzo Capitalization Agreement” means a capitalization agreement
in substantially the form delivered to Administrative Agent pursuant to
Section 2.1 of the First Amendment between CWTEI and Trezzo Project
Company, setting forth the terms of the subordinated loans owed to CWTEI
by Trezzo Project Company as modified upon the consummation of the Trezzo
Project Restructuring, and pursuant to which CWTEI is obligated to make
additional subordinated loans to Trezzo Project Company (i) up to 132,653
Euros if Trezzo Project Company’s throughput permit is not increased to a
capacity of 500 tons/day by June 30, 2006 and (ii) up to 990,000 Euros in
the event of an adverse outcome to Trezzo Project Company in its ongoing
arbitration proceedings with Protecma Srl., the EPC contractor for the
Trezzo Project.




          “Trezzo Project” means the waste-to-energy facility Project in
Trezzo, Italy.




          “Trezzo Project Company” means Prima, S.r.l., a company organized
under the laws of Italy.




          “Trezzo Project Restructuring” means, collectively: (i) the
incurrence by Trezzo Project Company of Indebtedness in an amount up to
77,000,000 Euros to refinance certain existing obligations related to the
Trezzo Project outstanding immediately prior to the First Amendment
Effective Date and to fund working capital purposes; (ii) the granting of
Liens by CWTEI on its equity interests in Trezzo Project Company and on
its rights (including its rights with respect to subordinated loans
advanced to Trezzo Project Company) under the Trezzo Capitalization
Agreement, in each case to secure the Indebtedness described in clause
(i) of this definition; (iii) the termination of the Terminated Trezzo
Agreement; (iv) the execution and delivery by CWTEI and Trezzo Project
Company of the Trezzo Capitalization Agreement; (v) either the creation
of an escrow account by CWTEI of not more than 1,122,000 Euros to secure
its obligations under the Trezzo Capitalization Agreement or the posting
of a letter of credit in the maximum amount of 1,122,000 Euros to secure
such obligations; and (vi) the



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repayment in cash by Trezzo Project Company of not less than
1,282,000 Euros of the approximately 2,250,000 Euro principal amount of
subordinated loans owed to CWTEI.




          “Trezzo Project Restructuring Conditions” means, collectively: (i)
the consummation of the Trezzo Project Restructuring; (ii) delivery by
Company to Administrative Agent of an Officer’s Certificate certifying
(a) that the requirements of the Trezzo Project Restructuring set forth
in clauses (i) through (vi) of the definition of “Trezzo Project
Restructuring” have been met, (b) that Covanta, Borrowers and each of
their respective Subsidiaries have no outstanding or further obligations
to Trezzo Project Company under the Terminated Trezzo Agreement, (c) that
Borrowers and their respective Subsidiaries have no obligations to make
any Investments in Trezzo Project Company or related to the Trezzo
Project after consummation of the Trezzo Project Restructuring, other
than the Investments required under the Trezzo Capitalization Agreement
described in the definition of “Trezzo Capitalization Agreement”, and (d)
that the Indebtedness described in clause (i) of the definition of
“Trezzo Project Restructuring” is non-recourse to Borrowers and their
Subsidiaries except with respect to the Liens described in clause (ii) of
the definition of “Trezzo Project Restructuring”; (iii) delivery by
Company to Administrative Agent of written evidence in form and substance
satisfactory to Administrative Agent that the Indebtedness described in
clause (i) of the definition of “Trezzo Project Restructuring” is
non-recourse to Borrowers and their Subsidiaries except with respect to
the Liens described in clause (ii) of the definition of “Trezzo Project
Restructuring”; (iv) written acknowledgement by Trezzo Project Company
(in form and substance satisfactory to Administrative Agent) that it has
no claims against Covanta, Borrower or any of their respective
Subsidiaries arising out of or relating to the Terminated Trezzo
Agreement; and (v) Administrative Agent’s satisfaction with the form and
substance of the documentation implementing the Trezzo Project
Restructuring.



     1.2 Provisions Relating to Negative Covenants.



               A. Subsection 6.1 of the Credit Agreement is hereby amended by (i)
deleting the “and” at the end of paragraph (ix) thereof, (ii) deleting the “.”
at the end of paragraph (x) thereof and substituting therefor “; and” and (iii)
adding at the end thereof the following new paragraph (xi):




          “(xi) After the First Amendment Effective Date, Linan JV may become
and remain liable with respect to Indebtedness under a working capital
credit line denominated in local Chinese currency, so long as (a) the
Dollar equivalent amount of such Indebtedness at any time outstanding
shall not exceed $600,000, (b) the holder or obligee of such Indebtedness
shall have no recourse to any Borrower or any Subsidiary of any Borrower
(or any of their assets) other than Linan JV, and (c) the holder or
obligee shall have no recourse to any assets of Linan JV and its
Subsidiaries other than assets subject to Liens permitted under
subsection 6.2A(xi).”.



               B. Subsection 6.2A of the Credit Agreement is hereby amended by (i)
deleting the “and” at the end of paragraph (ix) thereof, (ii) deleting the “.”
at the end of paragraph (x)



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thereof and substituting therefor “;” and (iii) adding at the end thereof
the following new paragraphs (xi) and (xii):




          “(xi) Linan JV may grant Liens on its assets (including bank
accounts) to secure its obligations with respect to Indebtedness
permitted under subsection 6.1(xi); and




          (xii) CWTEI may (a) grant Liens upon consummation of the Trezzo
Project Restructuring on the collateral described in clause (ii) of the
definition of “Trezzo Project Restructuring”, to secure Indebtedness
incurred by Trezzo Project Company described in clause (i) of the
definition of “Trezzo Project Restructuring”, (b) establish the cash
escrow account described in clause (v) of the definition of “Trezzo
Project Restructuring”, and (c) in lieu of establishing the escrow
account described in clause (b), grant Liens on cash to secure the letter
of credit described in clause (v) of the definition of “Trezzo Project
Restructuring”, in the case of either clause (b) or (c) to secure its
obligations under the Trezzo Capitalization Agreement.”.



               C. Subsection 6.3 of the Credit Agreement is hereby amended by (i)
deleting the “and” at the end of paragraph (viii) thereof, (ii) inserting
immediately before clause (b) of paragraph (ix) thereof “, and” , (iii)
deleting from paragraph (ix) thereof the phrase “and (c) in an aggregate amount
not to exceed $1,600,000 in the Trezzo waste-to-energy Project,”, (iv) deleting
the “.” at the end of paragraph (ix) thereof and substituting therefor “; and”,
and (v) adding at the end thereof the following new paragraph (x):




          “(x) CWTEI may make and own Investments consisting of subordinated
loans to Trezzo Project Company made pursuant to the terms of (and
required under) the Trezzo Capitalization Agreement, in an aggregate
amount advanced not to exceed 1,122,000 Euros.”.



               D. Subsection 6.4 of the Credit Agreement is hereby amended by (i)
deleting the “and” at the end of paragraph (vi) thereof, (ii) deleting the “.”
at the end of paragraph (vii) thereof and substituting therefor “;” and (iii)
adding at the end thereof the following new paragraphs (viii) and (ix):




          “(viii) CWTEI may become and remain liable with respect to the
Trezzo Capitalization Agreement concurrently with the consummation of the
Trezzo Project Restructuring, so long as the Trezzo Project Restructuring
Conditions are satisfied; and




          (ix) CWTEI may, concurrently with the consummation of the Trezzo
Project Restructuring, become and remain liable under arrangements with
respect to either (a) the cash escrow account or (b) the issuance and
reimbursement of drawings under the letter of credit, in either case
described in clause (v) of the definition of “Trezzo Project
Restructuring”, so long as the Trezzo Project Restructuring Conditions
are satisfied.”.



     1.3 Provisions Relating to Events of Default.



               Subsection 7.14 of the Credit Agreement is hereby amended by adding
immediately prior to the “;” at the end thereof the following new proviso:



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               “provided, however, that termination by Company and its Subsidiaries of
the Power Supply and Purchase Agreement dated June 28, 1993 in effect on
the Closing Date relating to the Bataan Project shall not constitute an
Event of Default under this subsection 7.14 (regardless of whether such
termination occurred prior to the First Amendment Effective Date), so
long as such termination is pursuant to the contractual right of
pre-termination in such agreement and Company and its Subsidiaries
exercise best efforts thereafter to collect any applicable termination
penalty or other obligations owed to Company or any of its Subsidiaries
by the counterparty to such agreement”.



     SECTION 2. CONDITIONS TO EFFECTIVENESS



               Section 1 of this Amendment shall only become effective upon the first
date on which all of the following conditions precedent shall have been
satisfied (the date of satisfaction of such conditions being referred to herein
as the “First Amendment Effective Date”):



     2.1 Trezzo Restructuring Documents. Administrative Agent shall have
received copies of, and shall be satisfied with the form and substance of, the
principal documents relating to the Trezzo Project Restructuring, and
Administrative Agent shall have received written acknowledgement in form and
substance satisfactory to Administrative Agent from Covanta and its
Subsidiaries (other than Borrowers and their Subsidiaries) (i) that the Trezzo
Project Restructuring shall not give rise to any obligations under any Existing
IPP International Project Guaranty and (ii) that Covanta and such Subsidiaries,
immediately after giving effect to the Trezzo Project Restructuring, have no
outstanding claims against any Borrower or any Subsidiary of any Borrower
arising under or relating to the guaranties described in clause (i) of the
definition of Existing IPP International Project Guaranties.



     2.2 Payment of Expenses. Borrowers shall have paid in full all
outstanding statements for fees and expenses of O’Melveny & Myers LLP, to the
extent submitted to Company prior to 12:00 Noon (New York City time) on August
12, 2004.



     2.3 Amendment Fee. Borrowers shall have paid to Administrative Agent, for
distribution to each Lender that has executed and delivered a counterpart to
this Amendment prior to 12:00 Noon (New York City time) on August 13, 2004, an
amendment fee equal to 0.1% of such Lender’s Loan Exposure on and as of such
date.



     SECTION 3. BORROWERS’ REPRESENTATIONS AND WARRANTIES



               In order to induce the Lenders to enter into this Amendment and to amend
the Credit Agreement in the manner provided herein, Borrowers represent and
warrant to each Lender that the following statements are true, correct and
complete:



     3.1 Corporate Power and Authority. Each Loan Party that is party thereto
has all requisite corporate power and authority to enter into this Amendment
and to carry out the transactions contemplated by, and perform its obligations
under, the Credit Agreement as amended by this Amendment (collectively, the
“Amended Agreement”).



     3.2 Authorization of Agreements. The execution and delivery of this
Amendment have been duly authorized by all necessary corporate action on the
part of each Loan Party that is



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party thereto and the performance of this Amendment and the Amended
Agreement has been duly authorized by all necessary corporate action on the
part of each Loan Party that is party thereto.



     3.3 No Conflict. The execution and delivery by each Loan Party that is
party to this Amendment and the performance by each Borrower of this Amendment
and the Amended Agreement do not and will not (i) violate any provision of any
law or any governmental rule or regulation applicable to CEA, Company or any of
its Subsidiaries, the Organizational Documents of CEA, Company or any of its
Subsidiaries or any order, judgment or decree of any court or other Government
Authority binding on CEA, Company or any of its Subsidiaries, (ii) conflict
with, result in a breach of or constitute (with due notice or lapse of time or
both) a default under any Contractual Obligation of CEA, Company or any of its
Subsidiaries, (iii) result in or require the creation or imposition of any Lien
upon any of the properties or assets of CEA, Company or any of its
Subsidiaries, or (iv) require any approval of stockholders or any approval or
consent of any Person under any Contractual Obligation of CEA, Company or any
of its Subsidiaries.



     3.4 Governmental Consents. The execution and delivery by each Loan Party
that is party to this Amendment and the performance by each Borrower of this
Amendment and the Amended Agreement do not and will not require any
Governmental Authorization.



     3.5 Binding Obligation. This Amendment has been duly executed and
delivered by each Loan Party that is party thereto, and each of this Amendment
and the Amended Agreement is the legally valid and binding obligation of each
Loan Party enforceable against each Loan Party in accordance with its
respective terms, except as may be limited by bankruptcy, insolvency,
reorganization, moratorium or similar laws relating to or limiting creditors’
rights generally or by equitable principles relating to enforceability.



     3.6 Incorporation of Representations and Warranties From Credit Agreement.
The representations and warranties contained in Section 4 of the Credit
Agreement are and will be true, correct and complete in all material respects
on and as of the First Amendment Effective Date to the same extent as though
made on and as of that date, except to the extent such representations and
warranties specifically relate to an earlier date, in which case they were
true, correct and complete in all material respects on and as of such earlier
date.



     3.7 Absence of Default. As of the date hereof after giving effect hereto,
there exists no Event of Default or Potential Event of Default under the Credit
Agreement.



     SECTION 4. ACKNOWLEDGEMENT AND CONSENT



               Each Borrower and CEA hereby acknowledges that it has read this Amendment
and consents to the terms hereof and further hereby confirms and agrees that,
notwithstanding the effectiveness of this Amendment, the obligations of such
Loan Party under each of the Loan Documents to which such Loan Party is a party
shall not be impaired and each of the Loan Documents to which such Loan Party
is a party are, and shall continue to be, in full force and effect and are
hereby confirmed and ratified in all respects.



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     SECTION 5. MISCELLANEOUS





	5.1	 	Reference to and Effect on the Credit Agreement and the Other
Loan Documents.





               A. On and after the First Amendment Effective Date, each reference in the
Credit Agreement to “this Agreement”, “hereunder”, “hereof”, “herein” or words
of like import referring to the Credit Agreement, and each reference in the
other Loan Documents to the “Credit Agreement”, “thereunder”, “thereof” or
words of like import referring to the Credit Agreement shall mean and be a
reference to the Credit Agreement as amended by this Amendment.



               B. Except as specifically amended by this Amendment, the Credit Agreement
and the other Loan Documents shall remain in full force and effect and are
hereby ratified and confirmed.



               C. The execution, delivery and performance of this Amendment shall not
constitute a waiver of any provision of, or operate as a waiver of any right,
power or remedy of Administrative Agent or any Lender under, the Credit
Agreement or any of the other Loan Documents.



     5.2 Fees and Expenses. Each Borrower acknowledges that all costs, fees
and expenses as described in subsection 9.2 of the Credit Agreement incurred by
Administrative Agent or the Lenders and counsel to Administrative Agent with
respect to this Amendment and the documents and transactions contemplated
hereby shall be for the account of Borrowers.



     5.3 Headings. Section and subsection headings in this Amendment are
included herein for convenience of reference only and shall not constitute a
part of this Amendment for any other purpose or be given any substantive
effect.



     5.4 Applicable Law. THIS AMENDMENT AND THE RIGHTS AND OBLIGATIONS OF THE
PARTIES HEREUNDER SHALL BE GOVERNED BY, AND SHALL BE CONSTRUED AND ENFORCED IN
ACCORDANCE WITH, THE INTERNAL LAWS OF THE STATE OF NEW YORK (INCLUDING WITHOUT
LIMITATION SECTION 5-1401 OF THE GENERAL OBLIGATIONS LAW OF THE STATE OF NEW
YORK), WITHOUT REGARD TO CONFLICTS OF LAWS PRINCIPLES.



     5.5 Counterparts; Effectiveness. This Amendment may be executed in any
number of counterparts and by different parties hereto in separate
counterparts, each of which when so executed and delivered shall be deemed an
original, but all such counterparts together shall constitute but one and the
same instrument; signature pages may be detached from multiple separate
counterparts and attached to a single counterpart so that all signature pages
are physically attached to the same document.



               Executed counterparts hereof may be delivered by telefacsimile. The
effectiveness of any such signatures shall, subject to applicable law, have the
same force and effect as an original copy with manual signatures and shall be
binding on all Loan Parties, Administrative Agent and Lenders. Administrative
Agent may also require that any such



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signatures be confirmed by a manually-signed copy thereof; provided,
however, that the failure to request or deliver any such manually-signed copy
shall not affect the effectiveness of any facsimile signature.



               This Amendment (other than Section 1 hereof, the effectiveness of which
shall be governed by Section 2 hereof) shall become effective upon the first
date on which: (i) Borrowers, CEA and Requisite Lenders shall have each
executed a counterpart hereof, and (ii) Company and Administrative Agent shall
have received written or telephonic notification of such execution and
authorization of delivery of such counterparts.



[Remainder of this page intentionally left blank]




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               IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
duly executed and delivered by their respective officers thereunto duly
authorized as of the date first written above.



	 	 	 
	BORROWERS:	 	 
	 	 	
COVANTA POWER INTERNATIONAL HOLDINGS, INC.
	 	 	
By: /s/ George Brown



Name: George Brown

Title:  Authorized Officer
	 	 	
COVANTA POWER DEVELOPMENT, INC.

COVANTA POWER DEVELOPMENT OF BOLIVIA, INC.

COVANTA WASTE TO ENERGY OF ITALY, INC.

OPI QUEZON, INC.
	 	 	
By: /s/ Timothy J. Simpson



Name: Timothy J. Simpson

Title:  Authorized Officer
	OTHER LOAN PARTIES:	 	 
	 	 	
COVANTA ENERGY AMERICAS, INC.,

as a Loan Party
	 	 	
By:/s/ Timothy J. Simpson



Name: Timothy J. Simpson

Title: Authorized Officer















 








	 	 	 
	ADMINISTRATIVE AGENT AND LENDERS:

	 	DEUTSCHE BANK AG, NEW YORK BRANCH,
as Administrative Agent and Lender
	 
	 	 
	

	 	By: DB Service New Jersey, Inc.
	

	 	By: /s/ Alice L. Wagner
	

	 	
 
	

	 	Name: Alice L. Wagner
	

	 	Title: Vice President
	 
	

	 	By: /s/ Deborah O'Keeffe
	

	 	
 
	

	 	Name: Deborah O'Keeffe
	

	 	Title: Vice President








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