Document:

SECOND AMENDMENT
                             TO DEBTOR-IN-POSSESSION
                                CREDIT AGREEMENT

                  This SECOND AMENDMENT TO DEBTOR-IN-POSSESSION CREDIT AGREEMENT
(this "Amendment") is dated as of May 10, 2002 and entered into by and among
COVANTA ENERGY CORPORATION, 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"), THE SUBSIDIARIES OF COMPANY LISTED ON THE SIGNATURE PAGES HEREOF
AS SUBSIDIARY GUARANTORS (collectively, the "Subsidiary Guarantors"), THE
LENDERS PARTY HERETO, BANK OF AMERICA, N.A., as Administrative Agent for the
Lenders ("Administrative Agent"), and DEUTSCHE BANK AG, NEW YORK BRANCH, as
Documentation Agent for the Lenders ("Documentation Agent"), and is made with
reference to that certain Debtor-in-Possession Credit Agreement dated as of
April 1, 2002, as amended by that certain First Amendment to Credit Agreement
and Security Agreement dated as of April 3, 2002 (as so amended, the "Credit
Agreement"), by and among Borrowers, the financial institutions parties thereto
as Lenders, Documentation Agent and Administrative Agent. 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
make certain corrections and amendments to the Credit Agreement as set forth
below, and (ii) to approve a new Monthly Budget and the changes from the Interim
Borrowing Order contained in the Final Borrowing Order, in each case 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
deleting the definitions of "Cash Balance", "Equity Bonds", "Existing L/C
Issuer", "Material Adverse Effect" and "Project Cash Collateral Order" in their
entirety and inserting the following new definitions in the appropriate
alphabetical order:

                  "Material Adverse Effect" means (i) a material adverse effect
         upon the business, operations, properties, assets, condition (financial
         or otherwise) or prospects of Borrowers, taken as a whole, or Company
         and its Subsidiaries, taken as a whole, or (ii) the impairment of the
         ability of Loan Parties taken as a whole to perform, or of
         Administrative Agent or Lenders to enforce, the Obligations.

                  "Project Cash Collateral Order" means (i) the "Final Order (I)
         Authorizing the Use of Cash Collateral Pursuant to 11 U.S.C. ss. 363,
         And (II) Granting Adequate Protection Pursuant To 11 U.S.C. ss.ss. 363
         and 364", entered by the Bankruptcy Court in the Chapter 11 Cases on
         April 18, 2002, and (ii) any other orders in form and substance
         satisfactory to Agents regarding the use of Cash collateral of
         Borrowers entered by the Bankruptcy Court in the Chapter 11 Cases as a
         result of motions and applications filed by one or more Persons with
         the Bankruptcy Court on or after the Petition Date, as any such order
         described in clause (i) or (ii) may be amended, supplemented or
         otherwise modified from time to time with the express written consent
         or joinder of Agents (and, if such amendment, supplement or other
         modification is material and adverse to the interests of Borrowers
         and/or Lenders, Requisite Lenders) and approved by the Bankruptcy
         Court.

                  "Shell Subsidiary" has the meaning assigned to that term in
         the Prepetition Credit Agreement as in effect on the Effective Date.

                  B. Subsection 1.1 of the Credit Agreement is hereby further
amended by adding immediately prior to the "." at the end of the definition of
"Project" the following proviso:

         "; provided, however, that a Project shall cease to be a Project at
         such time that Company or any of its Subsidiaries ceases to have any
         existing or future rights or obligations (whether direct or indirect,
         contingent or matured) associated therewith".

                  C. Subsection 1.1 of the Credit Agreement is hereby further
amended by deleting the word "above" in clause (ii)(b) of the definition of
"Foreign Cash Equivalents".

                  D. Subsection 1.1 of the Credit Agreement is hereby further
amended by deleting the reference to "Prepetition Agents" in the definition of
"NHL Priority Loan Letter Agreement" and substituting therefor "Prepetition
Agent".

                  E. Subsection 1.1 of the Credit Agreement is hereby further
amended by adding immediately prior to the phrase "Supermajority Tranche A
Lenders agree in writing" each time it appears in the definition of "Stated
Maturity Date" the phrase "Company requests and".

                  F. Subsection 1.1 of the Credit Agreement is hereby further
amended by (i) deleting the "a" immediately preceding the reference to "plan of
reorganization" in clause (ii) of the definition of "Termination Date", (ii)
deleting the phrase "forty-five (45) days" contained in clause (vi) of the
definition of "Termination Date" and substituting therefor "sixty (60) days",
and (ii) deleting clauses (viii) and (ix) of the definition of "Termination
Date" in their entirety and substituting therefor the following:

         " and (viii) the date of termination of exclusivity under any of the
         Chapter 11 Cases without the prior written approval of Requisite
         Lenders, unless such termination occurs (a) within 180 days of the
         Petition Date to permit the filing of a competing plan of
         reorganization by the official committee of unsecured creditors in the
         Chapter 11 Cases, or (b) more than 180 days after the Petition Date to
         permit the official committee of unsecured creditors in the Chapter 11
         Cases to file a plan of reorganization, in each case so long as the DIP
         Lenders, on the one hand, and Borrowers, on the other hand, but no
         other parties, also have the right to file a plan of reorganization
         upon and after such termination.".

     1.2 Provisions relating to Terms of Commitments and Loans.

                  A. Subsection 2.4A(ii) of the Credit Agreement is hereby
amended by (i) adding immediately after the reference to "Tranche A Letter of
Credit Sublimit" in clause (1)(x) of the last sentence of such subsection the
phrase "(or, if all Tranche A Commitments exceeding the Tranche A Letter of
Credit Usage would be cancelled as a result of such Commitment reduction, the
Tranche A Letter of Credit Usage)", and (ii) adding immediately prior to the "."
at the end thereof the following proviso:

         "; provided, however, that notwithstanding the foregoing provisions of
         this sentence, the Borrowers may terminate all of the Tranche A
         Commitments and all of the Tranche B Commitments if simultaneously with
         such termination (I) the unpaid principal amount of, and accrued
         interest on, any funded amounts under any Letters of Credit and any
         Tranche A Loans and Tranche B Loans is paid in full in cash, and (II)
         all Letters of Credit then outstanding shall be cash collateralized (or
         supported by standby letters of credit or letters of credit in form and
         substance (and issued by financial institutions) satisfactory to the
         issuers thereof, or canceled in connection with the issuance of
         replacement letters of credit to the beneficiaries thereof) in an
         amount equal to the maximum available amount that may at any time on or
         after such date be drawn under all such Letters of Credit (whether or
         not any beneficiary under any such Letter of Credit shall have
         presented, or shall be entitled at such time to present, the drafts or
         other documents or certificates required to draw under such Letter of
         Credit)".

                  B. Subsection 2.5A of the Credit Agreement is hereby amended
by (i) deleting the phrase "provided, further, that during the period prior to
the date that is 90 days after the appointment of an official committee for the
unsecured creditors, proceeds of the Tranche A Loans not to exceed $75,000"
contained therein and substituting therefor the following:

         "provided, further, that, subject to subsection 2.10, during the period
         prior to the date that is 120 days (to the extent permitted under the
         Final Borrowing Order) after the appointment of an official committee
         for the unsecured creditors, proceeds of the Loans, the Letters of
         Credit and cash Collateral not to exceed $125,000".

                  C. Subsection 2.10 of the Credit Agreement is hereby amended
by:

                (i) adding the words "by the Company or any official committee"
         immediately after the words "expenses incurred" in clause (i) thereof;

               (ii) deleting the reference to "$2,000,000" contained therein and
         substituting therefor "$2,500,000";

              (iii) adding immediately after the reference to "726" contained
         therein the phrase "(subject, in the case of Sections 506(c) and 726,
         to the terms of the Final Borrowing Order)"; and

              (iv) deleting the last proviso of the first sentence of such
         subsection in its entirety and substituting therefor the following:

                  "provided further, however, that in no event shall there be
                  paid from proceeds of the Loans, the Letters of Credit or any
                  cash Collateral any fees and expenses incurred in challenging
                  liens or claims as described in subsection 10.19C, except
                  that, subject to the Carve-Outs, the professionals for an
                  official creditors' committee may be paid (to the extent
                  allowed by the Bankruptcy Court) fees and expenses incurred
                  during the period prior to the date that is 120 days (to the
                  extent permitted under the Final Borrowing Order) after the
                  appointment of such committee in analyzing such liens or
                  claims in an amount not to exceed $125,000, to the extent
                  permitted under the Final Borrowing Order.".

1.3      Provisions Relating to Conditions Precedent.

                  A. Subsection 4.2B(v) of the Credit Agreement is hereby
amended by deleting the reference to "45 days" contained therein and
substituting therefor "60 days".

                  B. Subsection 4.2B(xi) of the Credit Agreement is hereby
further amended by adding immediately after the reference to "55 days" contained
therein the phrase "(or 75 days, in the case of clause (f) of this subsection
4.2B(xi))".

     1.4 Provisions Relating to Representations and Warranties.

                  A. Subsection 5.4 of the Credit Agreement is hereby amended by
deleting the "and" at the end of clause (i) thereof and substituting therefor
"or".

                  B. Subsection 5.15A of the Credit Agreement is hereby amended
by adding the following sentence as the third to last paragraph thereof:

         "The foregoing Lien priorities are subject in each case to the Final
         Borrowing Order and the Project Cash Collateral Order.".

                  C. Subsection 5.17 of the Credit Agreement is hereby amended
by adding at the end thereof the following sentence:

         "Nothing in this subsection 5.17 shall be construed as waiving or
         otherwise prejudicing the rights of the official committee for the
         unsecured creditors appointed in the Chapter 11 Cases as described in
         subsection 10.19C.".

     1.5 Provisions Relating to Affirmative Covenants.

                  A. Subsection 6.1(xxi) of the Credit Agreement is hereby
amended by deleting the reference to "March 31, 2002" and substituting therefor
"April 1, 2002".

                  B. Subsection 6.1(xxii) of the Credit Agreement is hereby
amended by adding immediately prior to the phrase "satisfactory to Agents and
Requisite Lenders" contained therein the word "reasonably".

                  C. Subsection 6.8A of the Credit Agreement is hereby amended
by deleting the phrase "subsections 5.20C(i) and 5.20C(ii)" and substituting
therefor "subsection 5.20C(i) or 5.20C(ii)".

     1.6 Provisions Relating to Negative Covenants.

                  A. Subsection 7.2C of the Credit Agreement is hereby amended
by (i) deleting the word "and" immediately preceding clause (b) thereof and
substituting a "," therefor, and (ii) adding immediately prior to the "." at the
end thereof the phrase ", (c) those encumbrances and restrictions in effect and
existing on the Petition Date, and (d) those encumbrances and restrictions
contemplated in any Project Cash Collateral Order".

                  B. Subsection 7.5 of the Credit Agreement is hereby amended by
adding the words "the Final Borrowing Order," immediately prior to the words
"the Project Cash Collateral Order" in the two places the latter words appear in
clause (c) thereof.

                  C. Subsection 7.6B of the Credit Agreement is hereby amended
by deleting the reference to "March 31, 2002" and substituting therefor "April
1, 2002".

                  D. Subsection 7.7(ix) of the Credit Agreement is hereby
amended by deleting the reference to "applicable Opt-Out Lenders" and
substituting therefor "Opt-Out Lender".

                  E. Subsection 7.8 of the Credit Agreement is hereby amended by
deleting the first sentence thereof in its entirety and substituting therefor
the following sentence:

         "Borrowers shall not, and shall not permit their respective
         Subsidiaries to, make cash expenditures in respect of bonus, retention,
         severance or similar arrangements with respect to any of their
         respective officers, employees, directors or advisors, except that
         Borrowers and their respective Subsidiaries may make cash expenditures
         in an amounts not exceeding the amounts disclosed in writing to Agents
         and Lenders pursuant to subsection 4.1U and disclosed to counsel to the
         official committee of unsecured creditors appointed in the Chapter 11
         Cases on or before the entry of the Final Borrowing Order, so long as
         (x) the other terms of the bonus, retention, severance or similar
         arrangements or plans are reasonably acceptable to Agents and Requisite
         Lenders, and (y) Borrowers are in compliance with the terms of the
         "Amended Order Pursuant to Sections 363(b) and 105(a) of Bankruptcy
         Code Authorizing Debtors to Make Payments and Transfers Necessary to
         Pay Bonus Obligations and Vacation Obligations", including the fifth
         ordering paragraph thereof."

     1.7 Provisions Relating to Events of Default.

                  A. Subsection 8.6(a) of the Credit Agreement is hereby amended
by adding immediately after the word "otherwise" in clause (i) thereof the
phrase "(except as provided in the Final Borrowing Order)".

                  B. Subsection 8.6(b) of the Credit Agreement is hereby amended
by adding immediately prior to the reference to "term, covenant or agreement"
contained therein the word "material".

                  C. Subsection 8.6(d) of the Credit Agreement is hereby amended
by deleting the phrase "forty-five (45) days" contained therein and substituting
therefor "sixty (60) days".

                  D. Subsection 8.14 of the Credit Agreement is hereby amended
by adding immediately prior to the phrase "satisfactory to Agents and Requisite
Lenders" contained therein the word "reasonably".

                  E. Subsection 8.15 of the Credit Agreement is hereby amended
by adding immediately after the phrase "on a post-Petition basis" the phrase ",
unless such Material Contract is replaced within ten (10) days after such
termination with a contract that is reasonably acceptable to the Requisite
Lenders and on substantially the same economic terms as the relevant Material
Contract being terminated".

                  F. Section 8 of the Credit Agreement is hereby amended by
deleting the reference to "reply" in clause (ii) of the penultimate sentence
thereof and substituting therefor "replevin".

     1.8 Miscellaneous Provisions.

                  A. Subsection 10.2 of the Credit Agreement is hereby amended
by deleting the reference to "all costs and expenses" in clause (viii) thereof
and substituting therefor "all the actual costs and reasonable expenses".

                  B. Subsection 10.3 of the Credit Agreement is hereby amended
by deleting the word "or" immediately prior to the reference to "the Chapter 11
Cases" contained in clause (i) of the second paragraph thereof and substituting
therefor "and".

                  C. Subsection 10.4 of the Credit Agreement is hereby amended
by adding immediately after the reference to "Loan Documents" contained therein
the phrase "(but in any event excluding any Prepetition Obligations)".

                  D. Subsection 10.9B of the Credit Agreement is hereby amended
by adding immediately after the reference to "10.5" contained therein the phrase
", 10.17".

                  E. Subsection 10.16V of the Credit Agreement is hereby amended
by deleting therefrom the phrase "OR TO BRING PROCEEDINGS AGAINST SUCH BORROWER
IN THE BANKRUPTCY COURTS OF ANY OTHER JURISDICTION".

                  F. Subsection 10.19C of the Credit Agreement is hereby amended
by deleting deleting such subsection in its entirety and substituting therefor
the following:

         "Nothing in subsection 10.19A or 10.19B shall be construed as waiving
         or otherwise prejudicing the rights of the official committee for the
         unsecured creditors appointed in the Chapter 11 Cases to challenge the
         validity, enforceability, nonavoidability, perfection or priority of
         the Liens or claims of the Prepetition Agent and/or the Prepetition
         Lenders and/or any other holder of prepetition secured indebtedness
         against one or more of the Borrowers (as defined in the Prepetition
         Credit Agreement), Grantors (as defined in the prepetition Security
         Agreement) or Subsidiary Guarantors (as defined in the Prepetition
         Credit Agreement) and their Prepetition Obligations or other
         prepetition secured indebtedness during the period prior to the date
         that is 120 days (to the extent permitted under the Final Borrowing
         Order) after the appointment of such committee.".

                  G. Subsection 10.19D of the Credit Agreement is hereby amended
by (i) deleting the reference to "Interim Borrowing Orders" contained therein
and substituting therefor "Interim Borrowing Order", and (ii) adding immediately
prior to the "." at the end thereof the phrase "(subject to the terms of the
Final Borrowing Order)".

                  H. Subsection 10.19E of the Credit Agreement is hereby amended
by deleting therefrom the phrase ", or except as permitted in the Interim
Borrowing Order or Final Borrowing Order or the Project Cash Collateral Order,
to seek use of cash collateral".

     1.9 Amendments to Schedules.

                  A. The Credit Agreement is hereby further amended by adding at
the end of Schedule 5.6 thereof the following new sentence:

                  "On April 1, 2002, Company and certain of its Subsidiaries
         commenced the Chapter 11 Cases in United States Bankruptcy Court for
         the Southern District of New York.".

                  B. The Credit Agreement is hereby further amended by deleting
Schedule 1.1B therefrom in its entirety.

     SECTION 2. APPROVAL OF MONTHLY BUDGET AND FINAL BORROWING ORDER

                  Each of the undersigned Lenders hereby (i) confirms that the
consolidated cash flow projections for Company and its Subsidiaries attached
hereto as Annex A are in form and substance satisfactory to such Lender for
purposes of clause (iv) of the definition of "Final Borrowing Order", (ii)
agrees that the Monthly Budget shall be deemed restated by such consolidated
cash flow projections for the time period covered thereby, and (iii) consents to
the Final Borrowing Order, in the form attached hereto as Annex B, and to the
amendments and modifications from the form of the Interim Borrowing Order
represented by such Final Borrowing Order.

                  SECTION 3. BORROWER'S 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. Subject to compliance with
any applicable provisions of the Bankruptcy Code, each Loan Party 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 (the "Amended Agreement").

                  3.2 Authorization of Agreements. The execution and delivery of
this Amendment has been duly authorized by all necessary corporate action on the
part of each Loan Party and the performance of the Amended Agreement has been
duly authorized by all necessary corporate action on the part of each Loan
Party.

                  3.3 No Conflict. The execution and delivery by each Loan Party
of this Amendment and the performance by each Borrower of the Amended Agreement
do not and will not (i) violate any provision of any law or any governmental
rule or regulation applicable to Company or any of its Subsidiaries, the
Organizational Documents of Company or any of its Subsidiaries or any order,
judgment or decree of any court or other Government Authority binding on 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 (which Contractual Obligation is enforceable on a
post-Petition Date basis) of Company or any of its Subsidiaries or an applicable
order of the Bankruptcy Court, (iii) result in or require the creation or
imposition of any Lien upon any of the properties or assets of 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 Company or any of
its Subsidiaries, except for the entry of the Final Borrowing Order.

                  3.4 Governmental Consents. The execution and delivery by each
Loan Party of this Amendment and the performance by each Loan Party of the
Amended Agreement do not and will not require any Governmental Authorization,
except for the entry of the Final Borrowing Order.

                  3.5 Binding Obligation. This Amendment has been duly executed
and delivered by each Loan Party, and each of this Amendment and the Amended
Agreement is the legally valid and binding obligations 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 5 of
the Credit Agreement are and will be true, correct and complete in all material
respects on and as of the Second Amendment Effective Date (as hereinafter
defined) 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 Notice to Committee. Notice of this Amendment has been
given to and received by counsel to the official committee of unsecured
creditors in the Chapter 11 Cases.

                  3.8 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 Subsidiary Guarantor hereby (i) acknowledges
that such Loan Party 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, (ii) ratifies and confirms the effectiveness of the First Amendment in
all respects, and (iii) confirms that the provisions of the First Amendment are
binding on each of the Borrowers.

     SECTION 5. MISCELLANEOUS

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

                  A. On and after the Second 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 any 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 10.2 of the Credit Agreement
incurred by Administrative Agent, Documentation Agent or the Lenders and their
respective counsel (including, without limitation, O'Melveny & Myers LLP and
Ernst & Young Corporate Finance LLC) 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. This Amendment shall 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 "Second Amendment Effective Date"): (i) Borrower, each
Subsidiary Guarantor and Lenders constituting Requisite Lenders shall have each
executed a counterpart hereof; (ii) Company, Administrative Agent and
Documentation Agent shall have received written or telephonic notification of
such execution and authorization of delivery of such counterparts; (iii) the
Final Borrowing Order in substantially the form attached hereto as Annex B shall
have been entered by the Bankruptcy Court, shall be in full force and effect and
shall be unstayed by the Bankruptcy Court or any other court of competent
jurisdiction; and (iv) Company shall have paid in full all outstanding
statements for fees and expenses of O'Melveny & Myers LLP and Ernst & Young
Corporate Finance LLC, to the extent submitted to Company prior to 12:00 Noon
(New York City time) on May 6, 2002.

                [Remainder of this page intentionally left blank]

<PAGE>
                  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 ENERGY CORPORATION

                                  By: /s/ JEFFREY R. HOROWITZ
                                      ----------------------------------------
                                          Jeffrey R. Horowitz
                                          Authorized Officer

                                  Each of the entities named on Schedule A
                                  annexed hereto, as Borrowers

                                  By: /s/ JEFFREY R. HOROWITZ
                                      ----------------------------------------
                                          Jeffrey R. Horowitz
                                          Authorized Officer

                                  Each of the entities named on Schedule B
                                  annexed hereto, as Borrowers

                                  By: /s/ SCOTT G. MACKIN
                                      ----------------------------------------
                                          Scott G. Mackin
                                          Authorized Officer

<PAGE>

SUBSIDIARY GUARANTORS:

                                  Each of the entities named on Schedule C
                                  annexed hereto, as Subsidiary Guarantors

                                  By: /s/ JEFFREY R. HOROWITZ
                                      ----------------------------------------
                                          Jeffrey R. Horowitz
                                          Authorized Officer

<PAGE>

                                  Each of the entities named on Schedule D
                                  annexed hereto, as Subsidiary Guarantors

                                  By: /s/ SCOTT G. MACKIN
                                      ----------------------------------------
                                          Scott G. Mackin
                                          Authorized Officer

<PAGE>

AGENTS AND LENDERS:

                                  BANK OF AMERICA, N.A.,
                                  as Administrative Agent and Co-Arranger and
                                  as a Lender

                                  By: /s/ MICHAEL R. HEREDIA
                                      ----------------------------------------
                                          Michael R. Heredia
                                          Managing Director

<PAGE>

                                  DEUTSCHE BANK AG, NEW YORK BRANCH,
                                  as Documentation Agent and Co-Arranger and
                                  as a Lender

                                  By: /s/ KEITH C. BRAUN
                                      ----------------------------------------
                                          Keith C. Braun
                                          Director

                                  By: /s/ CLARK G. PETERSON
                                      ----------------------------------------
                                          Clark G. Peterson
                                          Vice President

<PAGE>

                                  BAYERISCHE HYPO-UND VEREINSBANK AG,
                                  as a Lender

                                  By: /s/ JOHN W. SWEENEY
                                      ----------------------------------------
                                       Name:   John W. Sweeney
                                       Title:  Director

                                  By: /s/ SALVATORE ESPOSITO
                                      ----------------------------------------
                                       Name:   Salvatore Esposito
                                       Title:  Director

<PAGE>

                                  BNP PARIBAS,
                                  as a Lender

                                  By: /s/ BARBARA EPPOLITO
                                      ----------------------------------------
                                       Name:   Barbara Eppolito
                                       Title:  Vice President

                                  By: /s/ ALBERT A. YOUNG, JR.
                                      ----------------------------------------
                                       Name:   Albert A. Young, Jr.
                                       Title:  Managing Director

<PAGE>

                                  COMMERZBANK AG, NEW YORK AND GRAND
                                  CAYMAN BRANCHES, as a Lender

                                  By: /s/ ROBERT DONOHUE
                                      ----------------------------------------
                                       Name:   Robert Donohue
                                       Title:  Senior Vice President

                                  By: /s/ PETER DOYLE
                                      ----------------------------------------
                                       Name:   Peter Doyle
                                       Title:  Vice President

<PAGE>

                                  HSBC BANK USA,
                                  as a Lender

                                  By: /s/ CAROL A. KRAUS
                                      ----------------------------------------
                                       Name:   Carol A. Kraus
                                       Title:  HSBC Bank USA Vice President

<PAGE>

                                  ROYAL BANK OF SCOTLAND, plc,
                                  as a Lender

                                  By: /s/ JULIAN DAKIN
                                      ----------------------------------------
                                       Name:   Julian Dakin
                                       Title:  Vice President

<PAGE>

                                  THE BANK OF NEW YORK,
                                  as a Lender

                                  By: /s/ PETER W. HELT
                                      ----------------------------------------
                                       Name:   Peter W. Helt
                                       Title:  Vice President

<PAGE>

                                  THE BANK OF NOVA SCOTIA,
                                  as a Lender

                                  By: /s/ JOSEPH J. FARRICIELLI, JR.
                                      ----------------------------------------
                                       Name:   Joseph J. Farricielli, Jr.
                                       Title:  Director

<PAGE>

                                  UBS AG, STAMFORD BRANCH
                                  as a Lender

                                  By: /s/ KELLY SMITH
                                      ----------------------------------------
                                       Name:   Kelly Smith
                                       Title:  Director
                                               Recovery Management

                                  By: /s/ BARBARA EZELL-MCMICHAEL
                                      ----------------------------------------
                                       Name:   Barabra Ezell-McMichael
                                       Title:  Associate Director
                                               Banking Products Services US

<PAGE>

                                  WESTDEUTSCHE LANDESBANK,
                                  GIROZENTRALE, NEW YORK BRANCH
                                  as a Lender

                                  By: /s/ ALAN S. BOOKSPAN
                                      ----------------------------------------
                                       Name:   Alan S. Bookspan
                                       Title:  Director

                                  By: /s/ WALTER T. DUFFY III.
                                      ----------------------------------------
                                       Name:   Walter T. Duffy III
                                       Title:  Associate Director

<PAGE>

                                   Schedule A
                                   ----------
                                 Other Borrowers

1.       AMOR 14 Corp.
2.       Covanta Acquisition, Inc.
3.       Covanta Alexandria/Arlington, Inc.
4.       Covanta Babylon, Inc.
5.       Covanta Bessemer, Inc.
6.       Covanta Bristol, Inc.
7.       Covanta Cunningham Environmental Support, Inc.
8.       Covanta Energy Americas, Inc.
9.       Covanta Energy Construction, Inc.
10.      Covanta Energy Resource Corp.
11.      Covanta Energy Sao Jeronimo, Inc.
12.      Covanta Energy Services, Inc.
13.      Covanta Energy West, Inc.
14.      Covanta Engineering Services, Inc.
15.      Covanta Fairfax, Inc.
16.      Covanta Financial Services, Inc.
17.      Covanta Geothermal Operations Holdings, Inc.
18.      Covanta Geothermal Operations, Inc.
19.      Covanta Heber Field Energy, Inc.
20.      Covanta Hennepin Energy Resource Co., L.P.
21.      Covanta Hillsborough, Inc.
22.      Covanta Honolulu Resource Recovery Venture
23.      Covanta Huntington Limited Partnership
24.      Covanta Huntington Resource Recovery One Corp.
25.      Covanta Huntington Resource Recovery Seven Corp.
26.      Covanta Huntington, Inc.
27.      Covanta Huntsville, Inc.
28.      Covanta Hydro Energy, Inc.
29.      Covanta Hydro Operations West, Inc.
30.      Covanta Hydro Operations, Inc.
31.      Covanta Imperial Power Services, Inc.
32.      Covanta Indianapolis, Inc.
33.      Covanta Kent, Inc.
34.      Covanta Key Largo, Inc.
35.      Covanta Lake, Inc.
36.      Covanta Lancaster, Inc.
37.      Covanta Lee, Inc.
38.      Covanta Long Island, Inc.
39.      Covanta Marion Land Corp.
40.      Covanta Marion, Inc.
41.      Covanta Mid-Conn., Inc.
42.      Covanta Montgomery, Inc.
43.      Covanta New Martinsville Hydro-Operations Corp.
44.      Covanta Northwest Puerto Rico, Inc.
45.      Covanta Oahu Waste Energy Recovery, Inc.
46.      Covanta Oil & Gas, Inc.
47.      Covanta Onondaga Five Corp.
48.      Covanta Onondaga Four Corp.
49.      Covanta Onondaga Limited Partnership
50.      Covanta Onondaga Operations, Inc.
51.      Covanta Onondaga Three Corp.
52.      Covanta Onondaga Two Corp.
53.      Covanta Onondaga, Inc.
54.      Ogden Services Corporation
55.      Covanta Operations of Union LLC
56.      Covanta OPW Associates, Inc.
57.      Covanta OPWH, Inc.
58.      Covanta Pasco, Inc.
59.      Covanta Plant Services of New Jersey, Inc.
60.      Covanta Power Development of Bolivia, Inc.
61.      Covanta Power Development, Inc.
62.      Covanta Power Equity Corp.
63.      Covanta Projects of Hawaii, Inc.
64.      Covanta Projects of Wallingford, LP
65.      Covanta RRS Holdings, Inc.
66.      Covanta Secure Services USA, Inc.
67.      Covanta Secure Services, Inc.
68.      Covanta SIGC Energy II, Inc.
69.      Covanta SIGC Energy, Inc.
70.      Covanta SIGC Geothermal Operations, Inc.
71.      Covanta Stanislaus, Inc.
72.      Covanta Systems, Inc.
73.      Covanta Tampa Bay, Inc.
74.      Covanta Tulsa, Inc.
75.      Covanta Union, Inc.
76.      Covanta Wallingford Associates, Inc.
77.      Covanta Warren Energy Resources Co., LP
78.      Covanta Waste Solutions, Inc.
79.      Covanta Waste to Energy of Italy, Inc.
80.      Covanta Waste to Energy, Inc.
81.      Covanta Water Holdings, Inc.
82.      Covanta Water Systems, Inc.
83.      Covanta Water Treatment Services, Inc.
84.      DSS Environmental, Inc.
85.      ERC Energy II, Inc.
86.      ERC Energy, Inc.
87.      Heber Field Company
88.      Heber Field Energy II, Inc.
89.      Heber Geothermal Company
90.      Heber Loan Partners
91.      J.R. Jacks Construction Corp.
92.      Ogden Constructors, Inc.
93.      Ogden Environmental & Energy Services Co., Inc.
94.      OPI Quezon, Inc.
95.      Second Imperial Geothermal Co., L.P.
96.      Three Mountain Operations, Inc.
97.      Three Mountain Power LLC

<PAGE>

                                   Schedule B
                                   ----------
                                 Other Borrowers

1.       Ogden Facility Management Corporation of Anaheim
2.       LaGuardia Fuel Facilities Corp.
3.       Lenzar Electro-Optics, Inc.
4.       Newark Automotive Fuel Facilities Corporation, Inc.
5.       Ogden Allied Abatement & Decontamination Service, Inc.
6.       Ogden Allied Maintenance Corp.
7.       Ogden Allied Payroll Services, Inc.
8.       Ogden Attractions, Inc.
9.       Ogden Aviation Distributing Corp.
10.      Ogden Aviation Fueling Company of Virginia, Inc.
11.      Ogden Aviation Service Company of Colorado, Inc.
12.      Ogden Aviation Service Company of New Jersey, Inc.
13.      Ogden Aviation Service Company of New York, Inc.
14.      Ogden Aviation Service Company of Pennsylvania, Inc.
15.      Ogden Aviation Service International Corporation
16.      Ogden Aviation, Inc.
17.      Ogden Cargo Spain, Inc.
18.      Ogden Central and South America, Inc.
19.      Ogden Facility Holdings, Inc.
20.      Ogden Film and Theatre, Inc.
21.      Ogden Firehole Entertainment Corp.
22.      Ogden International Europe, Inc.
23.      Ogden New York Services, Inc.
24.      Ogden Support Services, Inc.
25.      PA Aviation Fuel Holdings, Inc.
26.      Philadelphia Fuel Facilities Corporation

<PAGE>

                                   Schedule C
                                   ----------
                              Subsidiary Guarantors

1.       Covanta Energy Group, Inc.
2.       Covanta Energy International, Inc.
3.       Covanta Equity of Stanislaus, Inc.
4.       Covanta Haverhill Properties, Inc.
5.       Covanta Haverhill, Inc.
6.       Covanta Omega Lease, Inc.
7.       Covanta Power International Holdings, Inc.
8.       Covanta Projects, Inc.
9.       Haverhill Power, Inc.
10.      LMI, Inc.
11.      Michigan Waste Energy, Inc.
12.      OFS Equity of Alexandria/Arlington, Inc.
13.      OFS Equity of Babylon, Inc.
14.      OFS Equity of Delaware, Inc.
15.      OFS Equity of Huntington, Inc.
16.      OFS Equity of Indianapolis, Inc.
17.      OFS Equity of Stanislaus, Inc.
18.      Ogden Management Services, Inc.
19.      Covanta Equity of Alexandria/Arlington, Inc.

<PAGE>

                                  Schedule D
                                  ----------
                              Subsidiary Guarantors

1.       Ogden Technology Services Corporation
2.       Ogden Transition Corporation

<PAGE>

                                     ANNEX A

                       Consolidated Cash Flow Projections
                       ----------------------------------

See attached.

<PAGE>

                                     ANNEX B

                          Form of Final Borrowing Order
                          -----------------------------

See attached.THIRD AMENDMENT AND LIMITED WAIVER
                             TO DEBTOR-IN-POSSESSION
                                CREDIT AGREEMENT

                  This THIRD AMENDMENT AND LIMITED WAIVER TO
DEBTOR-IN-POSSESSION CREDIT AGREEMENT (this "Amendment") is dated as of October
4, 2002 and entered into by and among COVANTA ENERGY CORPORATION, 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"), THE SUBSIDIARIES OF COMPANY
LISTED ON THE SIGNATURE PAGES HEREOF AS SUBSIDIARY GUARANTORS (collectively, the
"Subsidiary Guarantors"), THE LENDERS PARTY HERETO, BANK OF AMERICA, N.A., as
Administrative Agent for the Lenders ("Administrative Agent"), and DEUTSCHE BANK
AG, NEW YORK BRANCH, as Documentation Agent for the Lenders ("Documentation
Agent"), and is made with reference to that certain Debtor-in-Possession Credit
Agreement dated as of April 1, 2002, as amended by that certain First Amendment
to Credit Agreement and Security Agreement dated as of April 3, 2002 and that
certain Second Amendment to Credit Agreement dated as of May 10, 2002 (as so
amended, the "Credit Agreement"), by and among Borrowers, the financial
institutions parties thereto as Lenders, Documentation Agent and Administrative
Agent. 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
make certain amendments to the Credit Agreement, and (ii) to waive certain
existing Events of Default, in each case 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; LIMITED WAIVER

             1.1  Provisions Relating to Defined Terms.

                  A. Subsection 1.1 of the Credit Agreement is hereby amended by
deleting the definitions of "Advance Limit" and "Material Contract" in their
entirety and inserting the following new definitions in the appropriate
alphabetical order:

                  "Advance Limit" means, with respect to Tranche A Loans (other
         than Tranche A Loss Sharing Loans and Tranche A Loans made pursuant to
         subsection 3.3B), as of any date of determination during any calendar
         month set forth below, the aggregate amount set forth below for such
         calendar month:

         Calendar Month                                Advance Limit
-------------------------------------         ----------------------------------
         September 2002                                       $14,000,000
         October 2002                                         $14,000,000
         November 2002                                        $24,000,000
         December 2002                                        $14,000,000
         January 2003                                         $14,000,000
         February 2003                                        $14,000,000
         March 2003                                           $14,000,000
         April 2003                                           $14,000,000

         "; provided, however, that in the event of any Ottawa Disposition,
         each of the amounts in the table set forth above (as such amounts may
         have been previously reduced pursuant to any provision of this
         Agreement (including this proviso) shall be reduced by the excess, if
         any, of (a) 75% of the Ottawa Disposition Proceeds from such Ottawa
         Disposition over (b) the greater of (1) zero and (2) the amount, if
         any, by which the Tranche A Commitments (excluding the portion
         representing the Tranche A Letter of Credit Sublimit then in effect)
         exceed the Advance Limit then in effect (prior to giving effect to any
         reduction to the Advance Limit resulting from such Ottawa
         Disposition); and provided further, however, that in no event shall
         the Advance Limit then in effect be reduced below $5,000,000 pursuant
         to the immediately preceding proviso.

                  "CTB" means Covanta Tampa Bay, Inc.

                  "Designated Non-Material Asset Sales" means, collectively, the
         sales of the Subsidiaries, divisions or businesses of Company and its
         Subsidiaries (including the equity interests of certain Subsidiaries
         and their assets or of Company's or any of its Subsidiaries' interests
         in Projects) described on Annex A to the Third Amendment.

                  "Haripur DSR Liens" means Liens securing the debt service
         reserve requirements of certain Borrowers for the Haripur Project in an
         aggregate amount not to exceed $3,540,850.

                  "Hydranautics" means Hydranautics, Inc.

                  "Hydranautics L/C" means that certain bond or letter of credit
         issued for the account of Hydranautics for the benefit of Tampa Bay,
         Inc. to secure CTB's performance under the Tampa Bay O&M Contract, in
         the maximum stated amount of $8,500,000.

                  "Insurance Premium Financers" means Persons who are
         non-Affiliates of Company that advance insurance premiums for Company
         and its Subsidiaries pursuant to Insurance Premium Financing
         Arrangements.

                  "Insurance Premium Financing Arrangements" means,
         collectively, such agreements as Company and its Subsidiaries shall
         enter into after the Third Amendment Effective Date and prior to
         December 1, 2002 with Insurance Premium Financers pursuant to which
         such Insurance Premium Financers shall advance insurance premiums for
         Company and its Subsidiaries in an aggregate amount not to exceed
         $33,000,000 at any time and any orders entered by the Bankruptcy Court
         in connection therewith. Such Insurance Premium Financing Arrangements
         (i) shall provide for the benefit of such Insurance Premium Financers a
         security interest in no property of Company or any of its Subsidiaries
         other than gross unearned premiums for the insurance policies, (ii)
         shall not purport to prohibit any portion of the Liens created in favor
         of Administrative Agent (for the benefit of Lenders) pursuant to the
         Collateral Documents or authorized by the Interim Borrowing Order or
         Final Borrowing Order, (iii) shall provide that the Insurance Premium
         Financers shall not be entitled to a cash payment on the Reorganization
         Effective Date (except for regularly scheduled monthly payments of
         principal and interest), (iv) shall not contain any provision or
         contemplate any transaction prohibited by this Agreement and shall
         otherwise be in form and substance reasonably satisfactory to Agents,
         and (v) may provide that the security interests granted to Insurance
         Premium Financers in connection with Insurance Premium Financing
         Arrangements shall rank prior to the Liens of Lenders under this
         Agreement.

                  "Material Contract" means (i) the principal lease agreement,
         if any, and the principal service or operating agreement, if any, with
         respect to each waste-to-energy Project and the principal lease
         agreement, if any, with respect to each independent power plant Project
         to which Company or any of its Subsidiaries is a party, each of which
         is in existence as of the Closing Date and is described on Schedule
         1.1C annexed hereto, (ii) the Tampa Bay Hydranautics Subcontract, (iii)
         the Tampa Bay O&M Contract, and (iv) any other contract or other
         arrangement to which Company or any of its Subsidiaries is a party
         (other than the Loan Documents) for which breach, nonperformance,
         cancellation or failure to renew would reasonably be expected to have a
         Material Adverse Effect.

                  "Ottawa Disposition" means (i) any sale, transfer, assignment
         or other disposition of all or a portion of the ownership interests or
         assets of the Senators Hockey Club or its Subsidiaries, (ii) any sale,
         transfer, assignment or other disposition of the Senators Lease, or
         (iii) any restructuring or refinancing of the obligations owed to, or
         of the interests of, Company and its Subsidiaries relating to the
         Senators Hockey Club and/or the Senators Lease.

                  "Ottawa Disposition Proceeds" means, in respect of any Ottawa
         Disposition, the total Cash payments (including any Cash received by
         way of deferred payment pursuant to, or by monetization of, a note
         receivable or otherwise, but only as and when so received) received by
         Borrowers and their respective Subsidiaries in connection with such
         Ottawa Disposition net of any bona fide direct costs incurred in
         connection with such Ottawa Disposition, including (i) income taxes
         reasonably estimated to be actually payable prior to the earlier of (a)
         the date which is one year from the date of such Ottawa Disposition and
         (b) the Stated Maturity Date (determined on the date of such Ottawa
         Disposition) as a result of any gain recognized in connection with such
         Ottawa Disposition, (ii) additional Taxes actually payable upon the
         closing of such Ottawa Disposition (including any transfer Taxes or
         Taxes on gross receipts), and (iii) reasonable out-of-pocket fees and
         expenses (including reasonable legal fees) paid to Persons other than
         Company and its Subsidiaries and their respective Affiliates and
         counsel and advisors in connection with such Ottawa Disposition
         (including fees necessary to obtain any required consents of such
         Persons to such Ottawa Disposition).

                  "Reorganization Effective Date" means the effective date of a
         confirmed plan of reorganization in the Chapter 11 Cases pursuant to
         section 1129(a)(9) of the Bankruptcy Code.

                  "Tampa Bay Hydranautics Subcontract" means that certain
         Technical Services and Operating Assistance Contract dated as of July
         7, 2002 by and between CTB and Hydranautics, in the form delivered to
         Administrative Agent on or prior to the Third Amendment Effective Date,
         and as such contract may thereafter be amended, supplemented or
         otherwise modified from time to time to the extent permitted under
         subsection 7.4(vi).

                  "Tampa Bay O&M Contract" means that certain Operation,
         Maintenance, Repair and Replacement Agreement for a Seawater
         Desalination Plant by and between CTB and Tampa Bay, Inc., in the form
         delivered to Administrative Agent on or prior to the Third Amendment
         Effective Date, and as such contract may thereafter be amended,
         supplemented or otherwise modified from time to time to the extent
         permitted under subsection 7.14A.

                  "Third Amendment" means the Third Amendment and Limited Waiver
         to this Agreement dated as of October 4, 2002.

                  "Third Amendment Effective Date" has the meaning assigned to
         that term in Section 4.5 of the Third Amendment.

                  "Virginia DEQ Liens" means Liens created in favor of the
         Department of Environmental Quality of the Commonwealth of Virginia on
         cash deposits made by certain Borrowers in an aggregate amount not to
         exceed (a) in the case of cash deposits securing performance of closure
         obligations for the Alexandria, Virginia waste-to-energy Project,
         $303,180 minus the maximum available amount of surety bonds outstanding
         from time to time, if any, supporting such closure obligations, and (b)
         in the case of cash deposits securing performance of closure
         obligations for the Fairfax, Virginia waste-to-energy Project,
         $1,200,000 minus the maximum available amount of surety bonds
         outstanding from time to time, if any, supporting such closure
         obligations.

                  B. The definition of "Asset Sale" in subsection 1.1 of the
Credit Agreement is hereby amended by inserting the phrase "and any Designated
Non-Material Asset Sale" immediately after the phrase "shall include any
Approved Asset Sale" contained therein.

             1.2  Provisions Relating to Use of Proceeds and Priority of
                  Obligations.

                  A. Subsection 2.5A of the Credit Agreement is hereby amended
by deleting therefrom the following phrase:

         "during the period prior to the date that is 120 days (to the extent
         permitted under the Final Borrowing Order) after the appointment of an
         official committee for the unsecured creditors, proceeds of the Loans,
         the Letters of Credit and cash Collateral not to exceed $120,000 may be
         used to pay reasonable fees and expenses of an official committee of
         creditors, if any, appointed in the Chapter 11 Cases to analyze the
         Prepetition Obligations and any Liens securing such claims"

and substituting therefor the following:

         "during the period from the date of the appointment of the official
         committee for the unsecured creditors in the Chapter 11 Cases to
         September 25, 2002, proceeds of the Loans, the Letters of Credit and
         cash Collateral not to exceed $345,000 may be used to pay reasonable
         fees and expenses of such official committee of creditors (such fees
         and expenses being referred to hereinafter as "Investigation Expenses")
         to, among other things, analyze and investigate the Prepetition
         Obligations and any Liens securing such claims (including such fees and
         expenses incurred in preparing any pleadings seeking authority to
         commence on behalf of the Debtors any adversary proceeding, and the
         further use of cash Collateral in connection therewith, filed prior to
         September 25, 2002)".

                  B. Subsection 2.5A of the Credit Agreement is hereby further
amended by inserting the following sentence immediately prior to the last
sentence of such subsection:

         "Subject to the foregoing restrictions, proceeds of Loans and cash
         Collateral not to exceed $500,000 (exclusive of amounts permitted
         hereunder to be applied to Investigation Expenses) in the aggregate may
         be used to pay reasonable fees and expenses of professionals for the
         official committee of creditors appointed in the Chapter 11 Cases to
         prosecute, after September 25, 2002, the claims of such committee,
         acting on behalf of Debtors, against the holders of Company's 9.25%
         Debentures and their trustee, as such claims are described in the
         complaint filed as part of adversary case number 02-03004 (subject to
         the requirements for Bankruptcy Court approval of the payment of such
         fees and expenses under the Bankruptcy Code and the rights of Lenders
         to object thereto).".

                  C. Subsection 2.5A of the Credit Agreement is hereby further
amended by adding at the end thereof the following sentence:

         "Notwithstanding anything contained herein to the contrary, (i) in no
         event shall any portion of the $500,000 referred to in subsection 2.5A
         as permitted to be used by the official committee of creditors
         appointed in the Chapter 11 Cases be used to pursue any claim or
         prosecute any action against the Lenders, the Prepetition Lenders or
         the Agents (other than Administrative Agent solely in its capacity as
         collateral agent for the holders of Company's 9.25% Debentures), and
         (ii) in no event shall any consent, authorization or lack of
         prohibition contained herein with respect to the right of such
         committee to use cash Collateral to prosecute any action (other than
         the express authorization in this subsection 2.5A with respect to
         Investigation Expenses) in any way be deemed to confer on such
         committee any right to use cash Collateral to pursue any adversary
         action, suit, arbitration, proceeding or other litigation of any type
         against the Lenders, the Prepetition Lenders or the Agents (other than
         Administrative Agent solely in its capacity as collateral agent for the
         holders of Company's 9.25% Debentures) now or at any time in the future
         (it being understood that the references to the Lenders, the
         Prepetition Lenders and the Agents in clauses (i) and (ii) of this
         sentence shall not be construed to include the holders of Company's
         9.25% Debentures or their trustee, in such capacities).".

                  D. Subsection 2.10 of the Credit Agreement is hereby amended
by deleting the last proviso in the first sentence thereof in its entirety and
substituting therefor the following proviso:

         "provided further, however, that in no event shall there be paid from
         proceeds of the Loans, the Letters of Credit or any cash Collateral any
         fees or expenses incurred in challenging liens or claims as described
         in subsection 10.19C, except that, subject to the Carve-Outs, the
         professionals for an official creditors' committee may be paid the
         reasonable fees and expenses described in the last proviso of the first
         sentence of subsection 2.5A and in the penultimate sentence of such
         subsection, subject in each case to the limitations contained in such
         subsection.".

                  E. Subsection 2.10 of the Credit Agreement is hereby further
amended by adding immediately prior to the "." at the end thereof the phrase
"(it being understood that Virginia DEQ Liens, the Haripur DSR Liens and the
claims of Insurance Premium Financers for unpaid amounts owing to them under the
Insurance Premium Financing Arrangements as of the Reorganization Effective
Date, if a breach under such Insurance Premium Financing Arrangements has
occurred and is continuing on such date, shall not be deemed to breach this
subsection 2.10 so long as such Virginia DEQ Liens, such Haripur DSR Liens and
such Insurance Premium Financing Arrangements do not otherwise breach any other
provision of this Agreement)".

             1.3  Provisions Relating to Negative Covenants.

                  A. Subsection 7.1 of the Credit Agreement is hereby amended by
(i) deleting the word "and" at the end of clause (vii) thereof, (ii) deleting
the "." at the end of clause (viii) thereof and substituting therefor "; and",
and (iii) adding at the end thereof the following new clause (ix):

                  "(ix) after the Third Amendment Effective Date, Company may
         become and remain liable with respect to Indebtedness consisting solely
         of its obligations under Insurance Premium Financing Arrangements,
         which obligations shall not exceed $33,000,000 at any time."

                  B. Subsection 7.2A of the Credit Agreement is hereby amended
by (i) deleting the word "and" at the end of clause (v) thereof, (ii) deleting
the "." at the end of clause (vi) thereof and substituting therefor ";", and
(iii) adding at the end thereof the following new clauses (vii), (viii) and
(ix):

                  "(vii) Liens created pursuant to Insurance Premium Financing
         Arrangements otherwise permitted under this Agreement, so long as such
         Liens attach only to gross unearned premiums for the insurance
         policies;

                  (viii) Virginia DEQ Liens; provided that the terms of such
         Virginia DEQ Liens, and the documentation therefor, shall be reasonably
         satisfactory to Agents; and

                  (ix) Haripur DSR Liens; provided that the terms of such
         Haripur DSR Liens, and the documentation therefor, shall be reasonably
         satisfactory to Agents."

C. Subsection 7.4 of the Credit Agreement is hereby amended by (i) deleting the
word "and" at the end of clause (iv) thereof, (ii) deleting the "." at the end
of clause (v) thereof and substituting therefor "; and", and (iii) adding at the
end thereof the following new clause (vi):

                  "(vi) CTB may become and remain liable under the terms of the
         Tampa Bay Hydranautics Subcontract to reimburse Hydranautics for the
         amount of any drawing under the Hydranautics L/C that results from any
         reason other than the fault of Hydranautics; provided that no
         amendment, supplement or modification that would reasonably be expected
         to be adverse to the interests of Lenders shall be made to the Tampa
         Bay Hydranautics Subcontract without the prior written consent of
         Requisite Lenders."

D. Subsection 7.7 of the Credit Agreement is hereby amended by (i) deleting the
word "and" at the end of clause (viii) thereof, (ii) deleting the "." at the end
of clause (ix) thereof and substituting therefor ";", and (iii) adding at the
end thereof the following new clauses (x), (xi) and (xii):

                  "(x) Company and its Subsidiaries may make Designated
         Non-Material Asset Sales, provided that (a) the fair market value of
         the assets (net of related liabilities assumed by the purchaser) sold
         in such Designated Non-Material Asset Sales shall not exceed $5,000,000
         in the aggregate, (b) the consideration (including any earnout or other
         contingent payments) received for such assets shall be in an amount at
         least equal to the fair market value thereof, at least 75% of the
         consideration received shall be cash, any non-cash consideration
         received shall be reasonably satisfactory to Agents, and the terms of
         any earnout or other contingent payments shall be subject to the
         consent of Agents, (c) the principal documentation for such Designated
         Non-Material Asset Sale and any earnout or contingent payments relating
         thereto shall have been delivered to Agents, (d) the transaction costs
         and expenses incurred by Borrowers and their respective Subsidiaries in
         connection with such Designated Non-Material Asset Sales shall not
         exceed $2,000,000 in the aggregate, (e) upon consummation of any
         Designated Non-Material Asset Sale, none of the Borrowers or any of
         their respective Subsidiaries shall have any debts or other
         obligations, contingent or otherwise, relating to the sold
         Subsidiaries, divisions, businesses or assets (other than Contingent
         Obligations in respect of customary and appropriate indemnification and
         purchase price adjustment obligations incurred in connection with such
         Designated Non-Material Asset Sale), and (f) all of the Net Asset Sale
         Proceeds from any such Designated Non-Material Asset Sale shall be
         applied as a Mandatory Payment in accordance with the applicable
         provisions of subsection 2.4A (it being understood that prior to any
         such Designated Non-Material Asset Sale Company shall have provided
         evidence reasonably satisfactory to Agents that Company and its
         Subsidiaries have made arrangements to effect such application on a
         timely basis);

                  (xi) Ogden Spain S.A., a Foreign Subsidiary, may commence
         voluntary bankruptcy proceedings in Spain in accordance with applicable
         law; provided that (a) at the time of commencement of such bankruptcy
         proceedings, Ogden Spain S.A. shall not be engaged in any business
         activities and shall have no material assets other than the net
         intercompany receivable against Company, (b) the aggregate amount of
         costs (including legal costs) incurred by Borrowers and their
         respective Subsidiaries in connection with such bankruptcy proceedings
         shall not exceed $225,000, and (c) Administrative Agent shall have
         received an Officer's Certificate from Company certifying as to the
         foregoing; and

                  (xii) Ogden Entertainment Services of Spain S.A., a Foreign
         Subsidiary, may be liquidated in accordance with applicable law;
         provided that (a) at the time of such liquidation, such Foreign
         Subsidiary shall not be engaged in any business activities, (b)
         Borrowers and their respective Subsidiaries shall have in the aggregate
         no more than $90,000 of debts or other obligations, contingent or
         otherwise, relating to such Foreign Subsidiary and the assets being
         liquidated, (c) the aggregate amount of costs (including legal costs)
         incurred by Borrowers and their respective Subsidiaries in connection
         with such liquidation shall not exceed $30,000, and (d) Administrative
         Agent shall have received an Officer's Certificate from Company
         certifying as to the foregoing."

                  E. Subsection 7.13 of the Credit Agreement is hereby amended
by adding immediately prior to the "." at the end thereof the following new
proviso:

         "; provided, however, that Virginia DEQ Liens, Haripur DSR Liens and
         the claims of Insurance Premium Financers for unpaid amounts owing to
         them under Insurance Premium Financing Arrangements as of the
         Reorganization Effective Date, if a breach under such Insurance Premium
         Financing Arrangements has occurred and is continuing on such date,
         shall not be deemed to breach this subsection 7.13 so long as such
         Virginia DEQ Liens, such Haripur DSR Liens and such Insurance Premium
         Financing Arrangements do not otherwise breach any other provision of
         this Agreement."

                  F. Subsection 7.14A of the Credit Agreement is hereby amended
by adding immediately prior to the "." at the end thereof the following new
proviso:

         "; provided, however, that CTB may make the modifications to the
         principal operating agreement for the Tampa Bay Water Project contained
         in the Tampa Bay O&M Contract, and assume such contract, in each case
         with the approval of the Bankruptcy Court."

                  G. Subsection 7.14B of the Credit Agreement is hereby amended
by adding at the end thereof the following sentence:

         "To the extent one or more orders of the Bankruptcy Court are issued to
         approve Virginia DEQ Liens, Haripur DSR Liens and Insurance Premium
         Financing Arrangements otherwise permitted under this Agreement, such
         orders and the applications for such orders shall not be deemed to
         violate this subsection 7.14B, and such orders and the modifications to
         the Final Borrowing Order which result therefrom shall be deemed for
         all purposes of this Agreement to have the approval of Agents and
         Requisite Lenders."

             1.4  Miscellaneous Provisions.

                  Subsection 10.19C of the Credit Agreement is hereby amended by
adding immediately prior to the "." at the end thereof the phrase ", except as
provided by Court order and consented to by Agents".

             1.5  Provisions Relating to Events of Default.

                  Subsection 8.6(a) of the Credit Agreement is hereby amended by
adding immediately prior to the ";" at the end of clause (vii) thereof the
phrase "(except that one or more orders or rulings may be entered by the
Bankruptcy Court to approve Virginia DEQ Liens, Haripur DSR Liens and Insurance
Premium Financing Arrangements, to the extent such Virginia DEQ Liens, Haripur
DSR Liens and Insurance Premium Financing Arrangements and any other aspects of
such orders or rulings do not otherwise breach any other provision of this
Agreement)".

              1.6 Schedules to the Credit Agreement.

                  Schedule 3.1A(i) to the Credit Agreement is hereby amended by
deleting it in its entirety and substituting therefor a new Schedule 3.1A(i), in
the form attached hereto as Annex B.

             1.7  Limited Waivers.

                  A. Subject to Section 1.6B, Lenders hereby waive (i) any
Events of Default arising from any breach of subsection 7.6A(i) of the Credit
Agreement to the extent but only to the extent that such breach arose solely
from Borrowers making cash expenditures of a type which would be classified
under the line item labeled "IPP West Disbursements - Non-Filing Entities" under
the heading "Core Energy Operations" (such expenditures, the "Cumulative IPP
West Expenditures") exceeding the amount permitted under subsection 7.6A(i) of
the Credit Agreement for the period ending August 31, 2002 and/or the period
ending September 30, 2002, and (ii) any Events of Default in existence prior to
the Third Amendment Effective Date arising from (a) any breach of subsections
6.1(iii), 6.1(iv), 6.1(xx) or 6.1(xxi) of the Credit Agreement, (b) any breach
of subsection 6.1(v) of the Credit Agreement to the extent and only to the
extent that such breach arose solely from Company's failure to deliver
Compliance Certificates demonstrating in reasonable detail compliance during and
at the end of each of the applicable accounting periods with the restrictions
contained in subsection 7.6B of the Credit Agreement, and (c) any breach of
subsection 6.1(ii) of the Credit Agreement, to the extent and only to the extent
that such breach arose solely from Company's failure to deliver notice of the
Events of Default described in this Section 1.6A.

                  B. The waivers contained in Section 1.6A shall cease to be
effective if (i) Borrowers fail to deliver all of the financial statements,
schedules and other information required to be delivered under subsections
6.1(iii), 6.1(iv), 6.1(xx) and 6.1(xxi) of the Credit Agreement prior to (a)
October 15, 2002 in the case of the financial statements and other information
required to be delivered under subsection 6.1(iii) for the Fiscal Quarter ending
June 30, 2002 (it being understood that, for purposes of the waiver contained in
Section 1.6A, the information required to be delivered for the Fiscal Quarter
ending June 30, 2002 shall not include (w) management's discussion and analysis
of, or any footnotes to, the financial statements for such Fiscal Quarter, (x)
the adjustments required under SOP 90-7, (y) any statements from an officer of
Company certifying the information contained in such financial statements, and
(z) the adjustments for evaluating intangibles and goodwill under FAS 142, so
long as prior to November 15, 2002 Company shall have delivered (1) such
management discussion and analysis and such footnotes, (2) revised financial
statements for such Fiscal Quarter to the extent required to reflect adjustments
required under SOP 90-7 and adjustments for evaluating intangibles and goodwill
under FAS 142, and (3) a written statement of the chief accounting officer or
chief financial officer of Company certifying the information contained in such
financial statements and describing in reasonable detail all of the revisions to
such financial statements that resulted from including the foregoing
adjustments), and (b) November 15, 2002 in all other cases, (ii) as of November
30, 2002, Borrowers shall have failed to demonstrate to Administrative Agent in
reasonable detail that they were in full compliance with subsection 7.6B of the
Credit Agreement for all periods ending on or prior to September 30, 2002, or
(iii) Cumulative IPP West Expenditures through August 31, 2002 or September 30,
2002 exceed in either case the sum of the correlative amounts for the line item
labeled "IPP West Disbursements - Non-Filing Entities" under the heading "Core
Energy Operations" set forth in the Monthly Budget for such month by more than
$250,000.

                  C. Without limiting the generality of the provisions of
subsection 10.6 of the Credit Agreement, the limited waivers set forth above
shall be limited precisely as written, and nothing herein shall be deemed to (a)
constitute a waiver of compliance by Company with respect to (i) subsection
6.1(ii), 6.1(iii), 6.1(iv), 6.1(v), 6.1(xx), 6.1(xxi), 7.6A(i) or 7.6B of the
Credit Agreement in any other instance, or (ii) any other term, provision or
condition of the Credit Agreement, or (b) prejudice any right or remedy that any
Agent or any Lender may now have or may have in the future under or in
connection with the Credit Agreement. Except as specifically waived by this
limited waiver, the Credit Agreement shall remain in full force and effect and
is hereby ratified and confirmed as hereby amended.

        SECTION 2. BORROWER'S 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:

                  2.1 Corporate Power and Authority. Subject to compliance with
the Final Borrowing Order and any applicable provisions of the Bankruptcy Code,
each Loan Party 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 (the
"Amended Agreement").

                  2.2 Authorization of Agreements. The execution and delivery of
this Amendment has been duly authorized by all necessary corporate action on the
part of each Loan Party and the performance of the Amended Agreement has been
duly authorized by all necessary corporate action on the part of each Loan
Party.

                  2.3 No Conflict. The execution and delivery by each Loan Party
of this Amendment and the performance by each Borrower of the Amended Agreement
do not and will not (i) violate any provision of any law or any governmental
rule or regulation applicable to Company or any of its Subsidiaries, the
Organizational Documents of Company or any of its Subsidiaries or any order,
judgment or decree of any court or other Government Authority binding on 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 (which Contractual Obligation is enforceable on a
post-Petition Date basis) of Company or any of its Subsidiaries or an applicable
order of the Bankruptcy Court, (iii) result in or require the creation or
imposition of any Lien upon any of the properties or assets of 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 Company or any of
its Subsidiaries.

                  2.4 Governmental Consents. The execution and delivery by each
Loan Party of this Amendment and the performance by each Loan Party of the
Amended Agreement do not and will not require any Governmental Authorization.

                  2.5 Binding Obligation. This Amendment has been duly executed
and delivered by each Loan Party, and each of this Amendment and the Amended
Agreement is the legally valid and binding obligations 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.

                  2.6 Incorporation of Representations and Warranties From
Credit Agreement. The representations and warranties contained in Section 5 of
the Credit Agreement are and will be true, correct and complete in all material
respects on and as of the Third 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.

                  2.7 Notice to Committee. Notice of this Amendment has been
given to and received by counsel to the official committee of unsecured
creditors in the Chapter 11 Cases and the informal committee of holders of
Company's 9.25% Debentures.

                  2.8 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 3. ACKNOWLEDGEMENT AND CONSENT

                  Each Borrower and Subsidiary Guarantor hereby (i) acknowledges
that such Loan Party 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, (ii) ratifies and confirms the effectiveness of the First Amendment
and the Second Amendment in all respects, and (iii) confirms that the provisions
of the First Amendment and the Second Amendment are binding on each of the
Borrowers.

       SECTION 4. MISCELLANEOUS

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

                  A. On and after the Third 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. Except as specifically provided in Section 1.6 of this
Amendment, 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 any Agent or any Lender under, the Credit Agreement or any of
the other Loan Documents.

                  4.2 Fees and Expenses. Each Borrower acknowledges that all
costs, fees and expenses as described in subsection 10.2 of the Credit Agreement
incurred by Administrative Agent, Documentation Agent or the Lenders and their
respective counsel (including, without limitation, O'Melveny & Myers LLP and
Ernst & Young Corporate Finance LLC) with respect to this Amendment and the
documents and transactions contemplated hereby shall be for the account of
Borrowers.

                  4.3 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.

                  4.4 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.

                  4.5 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. This Amendment shall 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 "Third Amendment Effective Date"): (i) Borrower, each
Subsidiary Guarantor and Lenders constituting Requisite Lenders shall have each
executed a counterpart hereof; (ii) Company, Administrative Agent and
Documentation Agent shall have received written or telephonic notification of
such execution and authorization of delivery of such counterparts; (iii) Company
shall have paid in full all outstanding statements for fees and expenses of
O'Melveny & Myers LLP and Ernst & Young Corporate Finance LLC, to the extent
submitted to Company prior to 12:00 Noon (New York City time) on September 27,
2002; (iv) Company shall have paid to Administrative Agent, for distribution to
each Lender that has executed and delivered a counterpart to this Third
Amendment prior to 12:00 Noon (New York City time) on October 4, 2002, an
amendment fee equal to 0.125% of the sum of such Lender's Tranche A Loan
Exposure and Tranche B Loan Exposure, in each case calculated as of the Third
Amendment Effective Date, and (v) Agents shall have received substantially final
drafts of the Tampa Bay Hydranautics Subcontract and the Tampa Bay O&M
Agreement, which shall not contain any provision or contemplate any transaction
prohibited by the Amended Agreement and shall otherwise be in form and substance
reasonably satisfactory to Agents.

                [Remainder of this page intentionally left blank]

<PAGE>
                  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 ENERGY CORPORATION

                              By: /s/ JEFFREY R. HOROWITZ
                                  ----------------------------------------
                                      Jeffrey R. Horowitz
                                      Authorized Officer

                              Each of the entities named on Schedule A
                              annexed hereto, as Borrowers

                              By: /s/ JEFFREY R. HOROWITZ
                                  ----------------------------------------
                                      Jeffrey R. Horowitz
                                      Authorized Officer

                              Each of the entities named on Schedule B annexed
                              hereto, as Borrowers

                              By: /s/ SCOTT G. MACKIN
                                  ----------------------------------------
                                      Scott G. Mackin
                                      Authorized Officer

<PAGE>

SUBSIDIARY GUARANTORS:

                              Each of the entities named on Schedule C annexed
                              hereto,  as Subsidiary Guarantors

                              By: /s/ JEFFREY R. HOROWITZ
                                  ----------------------------------------
                                      Jeffrey R. Horowitz
                                      Authorized Officer

<PAGE>

                              Each of the entities named on Schedule D annexed
                              hereto, as Subsidiary Guarantors

                              By: /s/ SCOTT G. MACKIN
                                  ----------------------------------------
                                      Scott G. Mackin
                                      Authorized Officer

<PAGE>

AGENTS AND LENDERS:

                              BANK OF AMERICA, N.A.,
                              as Administrative Agent and Co-Arranger
                              and as a Lender

                              By: /s/ MICHAEL R. HEREDIA
                                  ----------------------------------------
                                      Michael R. Heredia
                                      Managing Director

<PAGE>

                              DEUTSCHE BANK AG, NEW YORK BRANCH,
                              as Documentation Agent and Co-Arranger and
                              as a Lender

                              By: /s/ KEITH C. BRAUN
                                  ----------------------------------------
                                      Keith C. Braun
                                      Director

                              By: /s/ MARK B. COHEN
                                  ----------------------------------------
                                      Mark B. Cohen
                                      Managing Director
                                      Head of Workout

<PAGE>

                              BAYERISCHE HYPO-UND VEREINSBANK AG,
                              as a Lender

                              By: /s/ JOHN W. SWEENEY
                                  ----------------------------------------
                                   Name:   John W. Sweeney
                                   Title:  Director

                              By: /s/ SALVATORE ESPOSITO
                                  ----------------------------------------
                                   Name:   Salvatore Esposito
                                   Title:  Director

<PAGE>

                              BNP PARIBAS,
                              as a Lender

                              By: /s/ EDWARD V. CANALE
                                  ----------------------------------------
                                   Name:   Edward V. Canale
                                   Title:  Managing Director

                              By: /s/ ALBERT A. YOUNG, JR.
                                  ----------------------------------------
                                   Name:   Albert A. Young, Jr.
                                   Title:  Managing Director

<PAGE>

                              COMMERZBANK AG, NEW YORK AND GRAND CAYMAN
                              BRANCHES, as a Lender

                              By: /s/ ROBERT DONOHUE
                                  ----------------------------------------
                                   Name:   Robert Donohue
                                   Title:  Senior Vice President

                              By: /s/ PETER DOYLE
                                  ----------------------------------------
                                   Name:   Peter Doyle
                                   Title:  Vice President

<PAGE>

                              CREDIT LYONNAIS NEW YORK BRANCH,
                              as a Lender

                              By: /s/ JAMES B. HALLOCK
                                  ---------------------------------------
                                   Name:   James B. Hallock
                                   Title:  Vice President

<PAGE>

                              MIZUHO CORPORATE BANK, LTD., NEW YORK BRANCH
                              as a Lender

                              By: /s/ VICTOR CHEONG
                                  ---------------------------------------
                                   Name:   Victor Cheong
                                   Title:  Vice President

<PAGE>

                              FLEET NATIONAL BANK,
                              as a Lender

                              By: /s/ MICHAEL F. O'NEILL
                                  ---------------------------------------
                                   Name:   Michael F. O'Neill
                                   Title:  Senior Workout Officer

<PAGE>

                              HSBC BANK USA,
                              as a Lender

                              By: /s/ CAROL A. KRAUS
                                  ---------------------------------------
                                   Name:   Carol A. Kraus
                                   Title:  HSBC Bank USA Vice President

<PAGE>

                              IIB BANK LTD, IFSC BRANCH
                              as a Lender

                              By: /s/  NIALL MURRAY
                                  ---------------------------------------
                                   Name:   Niall Murray
                                   Title:  Authorized Signatory

                              By: /s/ BRIAN DUNNE
                                  ---------------------------------------
                                   Name:   Brian Dunne
                                   Title:  Authorized Signatory

<PAGE>

                              SANPAOLO IMI S.p.A.,
                              as a Lender

                              By: /s/ CARLO PERISCO
                                  ---------------------------------------
                                   Name:   Carlo Perisco
                                   Title:  G.M.

                              By: /s/ ROBERT WURSTER
                                  ---------------------------------------
                                   Name:   Robert Wurster
                                   Title:  SUP

<PAGE>

                              BANC OF AMERICA SECURITIES LLC, as Agent for
                              BANK OF AMERICA, N.A.,
                              as a Lender

                              By: /s/ PETER SANTRY
                                  ---------------------------------------
                                   Name:   Peter Santry
                                   Title:

<PAGE>

                              THE BANK OF NEW YORK,
                              as a Lender

                              By: /s/ PETER W. HELT
                                  ---------------------------------------
                                   Name:   Peter W. Helt
                                   Title:  Vice President

<PAGE>

                              THE BANK OF NOVA SCOTIA,
                              as a Lender

                              By: /s/ JOSEPH J. FARRICIELLI, JR.
                                  ---------------------------------------
                                   Name:   Joseph J. Farricielli, Jr.
                                   Title:  Director

<PAGE>

                              THE HUNTINGTON NATIONAL BANK,
                              as a Lender

                              By: /s/ DAVID F. ISLER
                                  ---------------------------------------
                                   Name:   David F. Isler
                                   Title:  Senior Vice President

<PAGE>

                              THE TORONTO-DOMINION BANK,
                              as a Lender

                              By: /s/ MARK A. BAIRD
                                  ---------------------------------------
                                   Name:   Mark A. Baird
                                   Title:  MGR. CR. ADMIN.

<PAGE>

                              UBS AG, STAMFORD BRANCH
                              as a Lender

                              By: /s/ KELLY SMITH
                                  ---------------------------------------
                                   Name:   Kelly Smith
                                   Title:  Director
                                           Recovery Management

                              By: /s/ WILLIAM A. ROCHE
                                  ---------------------------------------
                                   Name:   William A. Roche
                                   Title:  Executive Director
                                           Recovery Management

<PAGE>

                              WESTLB AG, NEW YORK BRANCH
                              (formerly known as Westdeutsche Landesbank
                              Girozentrale,  New York Branch) as a Lender

                              By: /s/ ALAN S. BOOKSPAN
                                  ---------------------------------------
                                   Name:   Alan S. Bookspan
                                   Title:  Director

                              By: /s/ DUNCAN M. ROBERTSON
                                  ---------------------------------------
                                   Name:   Duncan M. Robertson
                                   Title:  Director

<PAGE>

                                   Schedule A
                                   ----------
                                 Other Borrowers

1.       AMOR 14 Corp.
2.       Covanta Acquisition, Inc.
3.       Covanta Alexandria/Arlington, Inc.
4.       Covanta Babylon, Inc.
5.       Covanta Bessemer, Inc.
6.       Covanta Bristol, Inc.
7.       Covanta Cunningham Environmental Support, Inc.
8.       Covanta Energy Americas, Inc.
9.       Covanta Energy Construction, Inc.
10.      Covanta Energy Resource Corp.
11.      Covanta Energy Sao Jeronimo, Inc.
12.      Covanta Energy Services, Inc.
13.      Covanta Energy West, Inc.
14.      Covanta Engineering Services, Inc.
15.      Covanta Fairfax, Inc.
16.      Covanta Financial Services, Inc.
17.      Covanta Geothermal Operations Holdings, Inc.
18.      Covanta Geothermal Operations, Inc.
19.      Covanta Heber Field Energy, Inc.
20.      Covanta Hennepin Energy Resource Co., L.P.
21.      Covanta Hillsborough, Inc.
22.      Covanta Honolulu Resource Recovery Venture
23.      Covanta Huntington Limited Partnership
24.      Covanta Huntington Resource Recovery One Corp.
25.      Covanta Huntington Resource Recovery Seven Corp.
26.      Covanta Huntington, Inc.
27.      Covanta Huntsville, Inc.
28.      Covanta Hydro Energy, Inc.
29.      Covanta Hydro Operations West, Inc.
30.      Covanta Hydro Operations, Inc.
31.      Covanta Imperial Power Services, Inc.
32.      Covanta Indianapolis, Inc.
33.      Covanta Kent, Inc.
34.      Covanta Key Largo, Inc.
35.      Covanta Lake, Inc.
36.      Covanta Lancaster, Inc.
37.      Covanta Lee, Inc.
38.      Covanta Long Island, Inc.
39.      Covanta Marion Land Corp.
40.      Covanta Marion, Inc.
41.      Covanta Mid-Conn., Inc.
42.      Covanta Montgomery, Inc.
43.      Covanta New Martinsville Hydro-Operations Corp.
44.      Covanta Northwest Puerto Rico, Inc.
45.      Covanta Oahu Waste Energy Recovery, Inc.
46.      Covanta Oil & Gas, Inc.
47.      Covanta Onondaga Five Corp.
48.      Covanta Onondaga Four Corp.
49.      Covanta Onondaga Limited Partnership
50.      Covanta Onondaga Operations, Inc.
51.      Covanta Onondaga Three Corp.
52.      Covanta Onondaga Two Corp.
53.      Covanta Onondaga, Inc.
54.      Ogden Services Corporation
55.      Covanta Operations of Union LLC
56.      Covanta OPW Associates, Inc.
57.      Covanta OPWH, Inc.
58.      Covanta Pasco, Inc.
59.      Covanta Plant Services of New Jersey, Inc.
60.      Covanta Power Development of Bolivia, Inc.
61.      Covanta Power Development, Inc.
62.      Covanta Power Equity Corp.
63.      Covanta Projects of Hawaii, Inc.
64.      Covanta Projects of Wallingford, LP
65.      Covanta RRS Holdings, Inc.
66.      Covanta Secure Services USA, Inc.
67.      Covanta Secure Services, Inc.
68.      Covanta SIGC Energy II, Inc.
69.      Covanta SIGC Energy, Inc.
70.      Covanta SIGC Geothermal Operations, Inc.
71.      Covanta Stanislaus, Inc.
72.      Covanta Systems, Inc.
73.      Covanta Tampa Bay, Inc.
74.      Covanta Tulsa, Inc.
75.      Covanta Union, Inc.
76.      Covanta Wallingford Associates, Inc.
77.      Covanta Warren Energy Resources Co., LP
78.      Covanta Waste Solutions, Inc.
79.      Covanta Waste to Energy of Italy, Inc.
80.      Covanta Waste to Energy, Inc.
81.      Covanta Water Holdings, Inc.
82.      Covanta Water Systems, Inc.
83.      Covanta Water Treatment Services, Inc.
84.      DSS Environmental, Inc.
85.      ERC Energy II, Inc.
86.      ERC Energy, Inc.
87.      Heber Field Company
88.      Heber Field Energy II, Inc.
89.      Heber Geothermal Company
90.      Heber Loan Partners
91.      J.R. Jacks Construction Corp.
92.      Ogden Constructors, Inc.
93.      Ogden Environmental & Energy Services Co., Inc.
94.      OPI Quezon, Inc.
95.      Second Imperial Geothermal Co., L.P.
96.      Three Mountain Operations, Inc.
97.      Three Mountain Power LLC

<PAGE>

                                   Schedule B
                                   ----------
                                 Other Borrowers

1.       Ogden Facility Management Corporation of Anaheim
2.       LaGuardia Fuel Facilities Corp.
3.       Lenzar Electro-Optics, Inc.
4.       Newark Automotive Fuel Facilities Corporation, Inc.
5.       Ogden Allied Abatement & Decontamination Service, Inc.
6.       Ogden Allied Maintenance Corp.
7.       Ogden Allied Payroll Services, Inc.
8.       Ogden Attractions, Inc.
9.       Ogden Aviation Distributing Corp.
10.      Ogden Aviation Fueling Company of Virginia, Inc.
11.      Ogden Aviation Service Company of Colorado, Inc.
12.      Ogden Aviation Service Company of New Jersey, Inc.
13.      Ogden Aviation Service Company of New York, Inc.
14.      Ogden Aviation Service Company of Pennsylvania, Inc.
15.      Ogden Aviation Service International Corporation
16.      Ogden Aviation, Inc.
17.      Ogden Cargo Spain, Inc.
18.      Ogden Central and South America, Inc.
19.      Ogden Facility Holdings, Inc.
20.      Ogden Film and Theatre, Inc.
21.      Ogden Firehole Entertainment Corp.
22.      Ogden International Europe, Inc.
23.      Ogden New York Services, Inc.
24.      Ogden Support Services, Inc.
25.      PA Aviation Fuel Holdings, Inc.
26.      Philadelphia Fuel Facilities Corporation

<PAGE>

                                   Schedule C
                                   ----------
                              Subsidiary Guarantors

1.       Covanta Energy Group, Inc.
2.       Covanta Energy International, Inc.
3.       Covanta Equity of Stanislaus, Inc.
4.       Covanta Haverhill Properties, Inc.
5.       Covanta Haverhill, Inc.
6.       Covanta Omega Lease, Inc.
7.       Covanta Power International Holdings, Inc.
8.       Covanta Projects, Inc.
9.       Haverhill Power, Inc.
10.      LMI, Inc.
11.      Michigan Waste Energy, Inc.
12.      OFS Equity of Alexandria/Arlington, Inc.
13.      OFS Equity of Babylon, Inc.
14.      OFS Equity of Delaware, Inc.
15.      OFS Equity of Huntington, Inc.
16.      OFS Equity of Indianapolis, Inc.
17.      OFS Equity of Stanislaus, Inc.
18.      Ogden Management Services, Inc.
19.      Covanta Equity of Alexandria/Arlington, Inc.

<PAGE>

                                   Schedule D
                                   ----------
                              Subsidiary Guarantors

1.       Ogden Technology Services Corporation
2.       Ogden Transition Corporation

<PAGE>
                                     ANNEX A

                       Designated Non-Material Asset Sales

--------------------------------------------------------------------------------
        ASSET                            DESCRIPTION
--------------------------------------------------------------------------------
Empressa Valle Hermosa S.A.     Sale of 12% equity interest in this entity
                                in Bolivia.
--------------------------------------------------------------------------------
Island Power Corporation        Sale of 40% equity interest in
                                this entity, which owns a power plant in
                                Occidental Mindoro that sells electricity to the
                                island's National Power Corporation.
--------------------------------------------------------------------------------
Sao Jeronimo Investors, Ltda.   Transfer of 90% equity interest in this entity,
                                a partner in a consortium to build a power
                                project in Brazil. Project is in development
                                stages and permits are being obtained.
--------------------------------------------------------------------------------
El Gorguel Energia S.L.         Sale of 100% of all interests in this entity in
                                Spain involved in beginning stages of
                                development of energy project.
--------------------------------------------------------------------------------
Covanta Energy Do Brasil Ltda   Transfer of 100% of all partnership interests
                                (and assumption of all liabilities by purchaser)
                                in this entity that operated a development
                                office in Brazil.
--------------------------------------------------------------------------------
Graecor
Beteilingungsverwultungs GmbH   Sale of 100% of all interests in this shell
                                entity in Austria.
--------------------------------------------------------------------------------
Ogden and LCI Ltd (Isle of Man) Sale of 100% of all interests in the two Isle of
                                Man shell entities and the two South African
Ogden and LCI Management Ltd    entities in related transactions to a single
(Isle of Man)                   purchaser.

Culemborg Metropole Casino
(Proprietary) Ltd. (South
Africa)

Ogden Entertainment of Capetown
Ltd. (South Africa)
--------------------------------------------------------------------------------

<PAGE>

                                     ANNEX B

                                Schedule 3.1A(i)
                                ----------------
                     Tranche A Letter of Credit Obligations
                     --------------------------------------

See Attached.

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