Document:

Exhibit 10.1 Term Loan Amendment

EXHIBIT 10.1

EXECUTION COPY
    
FIRST AMENDMENT
FIRST AMENDMENT, dated as of March 12, 2013 (this “Amendment”), to the CREDIT AND GUARANTY AGREEMENT, dated as of March 28, 2012 (as further amended, restated, supplemented or otherwise modified from time to time heretofore, the “Existing Credit Agreement” and as amended by this Amendment, the “Amended Credit Agreement”) by and among COVANTA ENERGY CORPORATION, a Delaware corporation (the “Company”), COVANTA HOLDING CORPORATION, a Delaware corporation (“Holding”), certain Subsidiaries of Company, as guarantors, the Lenders party thereto from time to time, BANK OF AMERICA, N.A., as Administrative Agent, Collateral Agent and Issuing Bank (the “Administrative Agent”), MORGAN STANLEY SENIOR FUNDING, INC., as Syndication Agent and BARCLAYS BANK PLC, CRÉDIT AGRICOLE CORPORATE AND INVESTMENT BANK and JPMORGAN CHASE BANK, N.A., as Co-Documentation Agents.
W I T N E S S E T H :
WHEREAS, the Company and Holding have requested that the Existing Credit Agreement be amended in the manner provided for herein; and
WHEREAS, (a) existing Term Lenders which consent to this Amendment (the “Consenting Term Lenders”) shall have the pricing of their Term Loans adjusted on the 2013 Repricing Date in accordance with this Amendment; (b) existing Term Lenders which do not consent to this Amendment (the “Non-Consenting Term Lenders”) shall have their Term Loans assigned to certain Persons (the “New Lenders”) on the 2013 Repricing Date in accordance with Section 2.23 of the Amended Credit Agreement and such New Lenders shall become Lenders under the Amended Credit Agreement and hold a portion of the Term Loans and (c) the consent of the Requisite Lenders is required pursuant to Section 2.23 of the Existing Credit Agreement to effectuate the assignment contemplated by the preceding clause (b);
NOW, THEREFORE, the parties hereto hereby agree as follows:
SECTION 1. Defined Terms.  Unless otherwise defined herein, terms defined in the Amended Credit Agreement and used herein shall have the meanings given to them in the Amended Credit Agreement.
SECTION 2. Amendments.
(a)Section 1.1 of the Existing Credit Agreement is hereby amended by adding the following definition in proper alphabetical order:
“2013 Repricing Date” as defined in the Amendment Agreement No. 1.
“Amendment Agreement No. 1” means that certain Amendment to this Agreement, dated as of March 12, 2013, by and among Holdings, the Company, each Guarantor Subsidiary, the Administrative Agent and the other parties thereto.

(b)Section 1.1 of the Existing Credit Agreement is hereby amended by deleting clause (ii) of the definition of “Applicable Margin” contained therein in its entirety and replacing it with the following: 

(ii) with respect to the Term Loans 2.75% per annum for Eurodollar Rate Loans and 1.75% per annum for Base Rate Loans.

(c)Section 1.1 of the Existing Credit Agreement is hereby amended by deleting the proviso at the end of the definition of “Eurodollar Rate” and replacing it with the following:

provided that solely in the case of the Term Loans, the Eurodollar Rate shall be no less than 0.75% per annum at any time.

(d)Section 1.1 of the Existing Credit Agreement is hereby amended by deleting the word “(i)” and clause (ii) of the definition of “Pricing Grid” and deleting the last paragraph therein and replacing it with the following:
At any time Company has not submitted to Administrative Agent the applicable information as and when required under Section 5.1(c)(i), the Applicable Margin for the Revolving Loans or Swing Line Loans, as applicable, shall be determined as if the Leverage Ratio were in excess of 3.25:1:00 until such time as each failure is cured.  Within one (1) Business Day of receipt of the applicable information under Section 5.1(c)(i), Administrative Agent shall give each Lender electronic, telefacsimile or telephonic notice (confirmed in writing) of the Applicable Margin in effect from such date.  
(e)Section 2.11(f) of the Existing Credit Agreement is hereby amended by deleting the proviso at the end of the second sentence and replace it with the following:
provided that Company shall be subject to the requirements of this Section 2.11(f) only until (but including) the date that is six months following the 2013 Repricing Date.

SECTION 3.  Conditions to Effectiveness.  This Amendment (other than the amendments to be effectuated pursuant to Section 2 of this Amendment) shall become effective on the date that each of the following conditions shall have been satisfied (or waived by the Requisite Lenders):

(a)the Administrative Agent shall have received this Amendment, executed and delivered by a duly authorized officer of (i) Holding, the Company and each of its Guarantor Subsidiaries, as applicable and (ii) the Requisite Lenders and all Consenting Term Lenders and acknowledged by the Administrative Agent; and

(b)the Administrative Agent shall have received the Acknowledgement and Confirmation, substantially in the form of Exhibit A hereto, executed and delivered by an authorized officer of Holding, the Company and each of its Guarantor Subsidiaries, as applicable.

SECTION 4.  Conditions to Effectiveness of Section 2.  Section 2 of this Amendment shall become effective on the date (the “2013 Repricing Date”) occurring on or after March 29, 2013 that each of the following conditions shall have been satisfied (or waived by the Requisite Lenders): 

(a)each New Lender has become a party to the Credit Agreement and this Amendment;

(b)the Administrative Agent shall have received from the Company payment of all fees and expenses required to be paid to the Administrative Agent on or before the 2013 Repricing Date; and

(c)immediately before and after giving effect to Section 2 of this Amendment, each of the representations and warranties made by the Credit Parties and set forth in each Credit Document shall be true and correct in all material respects with the same effect as if made on the 2013 Repricing Date (unless stated to relate solely to an earlier date, in which case such representations and warranties shall have been true and correct in all material respects as of such earlier date), in each case other than representations and warranties which are subject to a materiality qualifier, in which case such representations and warranties shall be (or shall have been) true and correct; and

(d)no Default or Event of Default shall have occurred and be continuing, or would result from the effectiveness of this Amendment on the 2013 Repricing Date. 

SECTION 5.  New Lenders.  Each New Lender, the Administrative Agent and each Credit Party acknowledges and agrees that on the 2013 Repricing Date, upon the execution and delivery of an Assignment Agreement by each New Lender, it (i) shall become a “Lender” under, and for all purposes of, the Amended Credit Agreement and the other Credit Documents with a Term Loan in an amount as set forth on its signature page to this Amendment, (ii) shall be subject to and bound by the terms thereof and (iii) shall perform all the obligations of and shall have all rights of a Lender thereunder.  Each Non-Consenting Term Lender which does not execute such Assignment Agreement shall be deemed to have executed and delivered to such Assignment Agreement in accordance with Section 2.23 of the Amended Credit Agreement.

SECTION 6.  No Other Amendment or Waivers; Confirmation.  Except as expressly provided hereby, all of the terms and provisions of the Existing Credit Agreement and the other Credit Documents are and shall remain in full force and effect.  The amendments contained herein shall not be construed as an amendment of any other provision of the Existing Credit Agreement or the other Credit Documents or for any purpose except as expressly set forth herein or a consent to any further or future action on the part of any Credit Party that would require the waiver or consent of the Administrative Agent or the Lenders.  This Amendment shall constitute a Credit Document for purposes of the Amended Credit Agreement and from and after the 2013 Repricing Date, all references to the Credit Agreement in any Credit Document and all references to “this Agreement”, “hereunder”, “hereof” or words of like import referring to the Credit Agreement in the Amended Credit Agreement shall, unless expressly provided otherwise, refer to the Amended Credit Agreement. 

SECTION 7.  APPLICABLE LAW; WAIVER OF JURY TRIAL.  THIS AMENDMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK.  EACH PARTY HERETO HEREBY AGREES AS SET FORTH IN SECTION 10.17 OF THE EXISTING CREDIT AGREEMENT AS IF SUCH SECTION WERE SET FORTH IN FULL HEREIN. 

SECTOIN 8.  Miscellaneous. (a)  This Amendment may be executed in counterparts (and by different parties hereto in different counterparts), each of which shall constitute an original, but all of which when taken together shall constitute a single contract.  Delivery of an executed counterpart of a signature page of this Amendment by telecopy or other electronic imaging means shall be effective as delivery of a manually executed counterpart of this Agreement.

(b) The provisions of this Amendment shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns permitted hereby (including permitted assignees of its Loans in whole or in part prior to effectiveness hereof).

SECTION 9. Headings.  Section headings herein are included herein for convenience of reference only and shall not constitute a part hereof for any other purpose or be given any substantive effect.

[Signature Pages Follow]

Covanta - First Amendment

IN WITNESS WHEREOF, the parties hereto have caused this First Amendment to be duly executed and delivered by their proper and duly authorized officers as of the day and year first above written.

COVANTA ENERGY CORPORATION, A DELAWARE CORPORATION, AND EACH OF ITS SUBSIDIARIES LISTED ON ANNEX A HERETO
By:_/s/ Bradford J. Helgeson__________
      Name: Bradford J. Helgeson
      Title: Vice President & Treasurer

COVANTA HOLDING CORPORATION, A DELAWARE CORPORATION

By:_/s/ Bradford J. Helgeson__________
      Name: Bradford J. Helgeson
      Title: Vice President & Treasurer

Covanta - First Amendment

BANK OF AMERICA, N.A., as Administrative Agent,    Collateral Agent, Swing Line Lender and Issuing Bank
By:_/s/ Maria F. Maia_________________
      Name: Maria F. Maia
      Title: Managing Director

Covanta - First Amendment

All other executed lender consents are on file

with Simpson Thacher & Bartlett LLP.

Covanta - First Amendment

ANNEX A
	
		
	1.
	Capital Compost & Waste Reduction Services, LLC, a New York limited liability company
By its Sole Member Covanta Berkshire Operations, Inc.

	2.
	Covanta 4Recovery I, LLC (f/k/a Covanta 4Recovery LLC), a Delaware limited liability company
By its Sole Member Covanta ARC LLC

	3.
	Covanta 4Recovery II, LLC (f/k/a TransRiver II, LLC), a Delaware limited liability company
By its Sole Member Covanta 4Recovery I, LLC

	4.
	Covanta 4Recovery, L.P. (f/k/a TransRiver Marketing Company, L.P.), a Delaware limited partnership
By its General Partner and Managing Partner Covanta 4Recovery I, LLC
By its Limited Partners Covanta 4Recovery I, LLC and Covanta 4Recovery II, LLC

	5.
	Covanta 4Recovery Portsmouth LLC (f/k/a TransRiver Portsmouth LLC), a Virginia limited liability company
By its Sole Member Covanta 4Recovery, L.P. by its General Partner Covanta 4Recovery I, LLC and by its Limited Partners Covanta 4Recovery I, LLC and Covanta 4Recovery II, LLC

	6.
	Covanta 4Recovery Transfer Systems LLC (f/k/a TransRiver Transfer Systems LLC), a Delaware limited liability company
By its Sole Member Covanta 4Recovery, L.P. by its General Partner Covanta 4Recovery I, LLC and by its Limited Partners Covanta 4Recovery I, LLC and Covanta 4Recovery II, LLC

	7.
	Covanta 4Recovery Waste LLC (f/k/a TransRiver Waste LLC), a Delaware limited liability company
By its Sole Member Covanta 4Recovery, L.P. by its General Partner Covanta 4Recovery I, LLC and by its Limited Partners Covanta 4Recovery I, LLC and Covanta 4Recovery II, LLC 

	8.
	Covanta Abington Transfer Solutions LLC, a Delaware limited liability company
By its Sole Member Covanta ES, Inc.

	9.
	Covanta Alexandria/Arlington, Inc., a Virginia corporation

	10.
	Covanta ARC Company, a Delaware general partnership
By its General Partners Covanta Ref-Fuel Management LLC and Covanta Ref-Fuel Management II, LLC
By its Managing Partner Covanta Ref-Fuel Management LLC

	11.
	Covanta ARC Holdings, LLC, a Delaware limited liability company
By its Sole Member Covanta Energy Corporation

	12.
	Covanta ARC LLC, a Delaware limited liability company
By its Sole Member Covanta Ref-Fuel Holdings LLC

	13.
	Covanta B-3, LLC, a New York limited liability company
By its Sole Member and Manager Covanta Berkshire Operations, Inc.

	14.
	Covanta Berkshire Holdings, Inc., a New York corporation

	15.
	Covanta Berkshire Operations, Inc., a New York corporation

	16.
	Covanta Capital District II LLC, a Delaware limited liability company
By its Sole Member Covanta Capital District LLC

	17.
	Covanta Capital District LLC, a Delaware limited liability company
By its Sole Member Covanta ARC LLC

	18.
	Covanta Capital District, L.P., a Delaware limited partnership
By its General Partner and Managing Partner Covanta Capital District LLC
By its Limited Partners Covanta Capital District LLC and Covanta Capital District II LLC

	19.
	Covanta Company of SEMASS, L.P., a Delaware Limited Partnership
By its Managing Partner Covanta Operations of SEMASS LLC

	20.
	Covanta Dade Metals Recovery LLC, a Florida limited liability company
By its Sole Member Covanta Pasco, Inc.

	21.
	Covanta Development Company LLC, a Delaware limited liability company
By its Sole Member Covanta ARC Company

	
		
	22.
	Covanta Energy Americas, Inc., a Delaware corporation

	23.
	Covanta Energy Asia, Inc., a Delaware corporation

	24.
	Covanta Energy Europe, Inc., a Delaware corporation

	25.
	Covanta Energy Group, Inc., a Delaware corporation

	26.
	Covanta Energy Marketing LLC, a Delaware limited liability company
By its Sole Member Covanta Energy Corporation

	27.
	Covanta Energy Resource Corp., a Delaware corporation

	28.
	Covanta Energy Services, Inc., a Delaware corporation

	29.
	Covanta Engineering Services, Inc., a New Jersey corporation

	30.
	Covanta ES, Inc., a Delaware corporation

	31.
	Covanta Fairfax, Inc., a Virginia corporation

	32.
	Covanta Harrisburg, Inc., a Delaware corporation

	33.
	Covanta Haverhill, Inc., a Massachusetts corporation

	34.
	Covanta Haverhill Associates, a Massachusetts general partnership
By its General Partner and Managing Venturer Covanta Haverhill, Inc.

	35.
	Covanta Haverhill Properties, Inc., a Massachusetts corporation

	36.
	Covanta Hawaii Energy LLC, a Hawaii limited liability company
By its Sole Member Covanta Projects of Hawaii, Inc.

	37.
	Covanta Hempstead Company, a New York general partnership
By its General Partners Covanta Hempstead LLC and Covanta Hempstead II, LLC
By its Managing Partner Covanta Hempstead LLC

	38.
	Covanta Hempstead II, LLC, a Delaware limited liability company
By its Sole Member Covanta Hempstead LLC

	39.
	Covanta Hempstead LLC, a Delaware limited liability company
By its Sole Member Covanta ARC LLC

	40.
	Covanta Hennepin Energy Resource Co., Limited Partnership, a Delaware limited partnership
By its General Partner Covanta Energy Resource Corp.

	41.
	Covanta Hillsborough, Inc., a Florida corporation

	42.
	Covanta Honolulu Resource Recovery Venture, a Hawaii General Partnership
By its General Partners and Executive Committee Covanta Oahu Waste Energy Recovery, Inc. and Covanta Projects of Hawaii Inc.

	43.
	Covanta Hudson Valley Renewable Energy LLC, a Delaware limited liability company
By its Sole Member Covanta ES, Inc.

	44.
	Covanta Huntsville, Inc., an Alabama corporation

	45.
	Covanta Indianapolis, Inc., an Indiana corporation

	46.
	Covanta Kent, Inc., a Michigan corporation

	47.
	Covanta Lancaster, Inc., a Pennsylvania corporation

	48.
	Covanta Lee, Inc., a Florida corporation

	49.
	Covanta Long Beach Renewable Energy Corp., a Delaware corporation

	50.
	Covanta Long Island, Inc., a Delaware corporation

	51.
	Covanta MacArthur Renewable Energy, Inc., a New York corporation

	52.
	Covanta Marion Land Corp., an Oregon corporation

	53.
	Covanta Marion, Inc., an Oregon corporation

	54.
	Covanta Mid-Conn, Inc., a Connecticut corporation

	55.
	Covanta Montgomery, Inc., Maryland corporation

	56.
	Covanta Niagara LLC, a Delaware limited liability company
By its Sole Member Covanta ARC LLC

	57.
	Covanta Niagara II, LLC, a Delaware limited liability company
By its Sole Member Covanta Niagara LLC

	58.
	Covanta Niagara, L.P., a Delaware limited partnership
By its Managing Partner Covanta Niagara LLC

	
		
	59.
	Covanta Oahu Waste Energy Recovery, Inc., a California corporation

	60.
	Covanta Omega Lease, Inc., a Delaware corporation

	61.
	Covanta Onondaga Operations, Inc., a Delaware corporation

	62.
	Covanta Operations of SEMASS LLC, a Delaware limited liability company
By its Sole Member Covanta ARC LLC

	63.
	Covanta Operations of SEMASS II, LLC, a Delaware limited liability company
By its Sole Member Covanta Operations of SEMASS LLC

	64.
	Covanta Operations of Union LLC, a New Jersey limited liability company
By its Sole Members and Managers Covanta Projects, Inc. and Covanta Waste to Energy, LLC

	65.
	Covanta OPW Associates, Inc., a Connecticut corporation

	66.
	Covanta OPWH, Inc., a Delaware corporation

	67.
	Covanta Palm Beach Renewable Energy LLC, a Delaware limited liability company
By its Sole Member Covanta Energy Corporation

	68.
	Covanta Pasco, Inc., a Florida corporation

	69.
	Covanta Pinellas, Inc., a Florida corporation

	70.
	Covanta Pittsfield, LLC, a New York limited liability company
By its Sole Member and Manager Covanta Berkshire Operations, Inc.

	71.
	Covanta Plymouth Energy Corp., a Delaware corporation

	72.
	Covanta Plymouth GP Corp., a Delaware corporation

	73.
	Covanta Plymouth Investments Corp., a Delaware corporation

	74.
	Covanta Plymouth, Inc., a Delaware corporation

	75.
	Covanta Power Development of Mauritius, Inc., a Delaware corporation

	76.
	Covanta Power Development, Inc., a Delaware corporation

	77.
	Covanta Power International Holdings, Inc., a Delaware corporation

	78.
	Covanta Power LLC, a Delaware limited liability company
By its Sole Member Covanta Energy Corporation

	79.
	Covanta Projects of Hawaii, Inc., a Hawaii corporation

	80.
	Covanta Projects of Wallingford, L.P., a Delaware limited partnership
By its General Partner Covanta OPW Associates, Inc.
By its Limited Partner Covanta Wallingford Associates, Inc.

	81.
	Covanta Projects, Inc., a Delaware corporation

	82.
	Covanta Ref-Fuel Finance LLC (f/k/a Ref-Fuel Corp.), a Delaware limited liability company
By its Sole Member Covanta ARC Holdings, LLC

	83.
	Covanta Ref-Fuel Holdings LLC, a Delaware limited liability company
By its Sole Members MSW Energy Hudson LLC and MSW Energy Erie LLC

	84.
	Covanta Ref-Fuel II LLC, a Delaware limited liability company
By its Sole Member MSW Energy Holdings II LLC

	85.
	Covanta Ref-Fuel LLC (f/k/a Ref-Fuel LLC), a Delaware limited liability company
By its Sole Member Covanta Ref-Fuel Finance, LLC

	86.
	Covanta Ref-Fuel Management II, LLC, a Delaware limited liability company
By its Sole Member Covanta Ref-Fuel Management LLC

	87.
	Covanta Ref-Fuel Management LLC, a Delaware limited liability company
By its Sole Member Covanta ARC LLC

	88.
	Covanta Renewable Energy Detroit, LLC, a Delaware limited liability company
By its Sole Member Covanta RRS Holdings, Inc.

	89.
	Covanta Renewable Fuels LLC, a Delaware limited liability company
By its Sole Member Covanta Energy Corporation

	90.
	Covanta Research & Technology, LLC, a Delaware limited liability company
By its Sole Member Covanta Energy Corporation

	91.
	Covanta RRS Holdings, Inc., a Delaware corporation

	
		
	92.
	Covanta SBR Associates, a Massachusetts general partnership
By its Managing Partner Covanta Omega Lease, Inc.

	93.
	Covanta SECONN LLC, a Delaware limited liability company
By its Sole Member Covanta ARC LLC

	94.
	Covanta SEMASS LLC, a Delaware limited liability company
By its Sole Member Covanta ARC LLC

	95.
	Covanta SEMASS II, LLC, a Delaware limited liability company
By its Sole Member Covanta SEMASS LLC

	96.
	Covanta SEMASS, L.P., a Delaware limited partnership
By its Managing Partner Covanta Operations of SEMASS LLC

	97.
	Covanta Southeastern Florida Renewable Energy LLC, a Delaware limited liability company
By its Sole Member Covanta Pasco, Inc.

	98.
	Covanta Stanislaus, Inc., a California corporation

	99.
	Covanta Sustainable Solutions, LLC (f/k/a Covanta Secure Services, LLC), a Delaware limited liability company
By its Sole Member Covanta 4Recovery, L.P. by its General Partner Covanta 4Recovery I, LLC and by its Limited Partners Covanta 4Recovery I, LLC and Covanta 4Recovery II, LLC

	100.
	Covanta Systems, LLC, a Delaware limited liability company
By its Sole Member Covanta Waste to Energy, LLC

	101.
	Covanta Wallingford Associates, Inc., a Connecticut corporation

	102.
	Covanta Warren Energy Resources Co., Limited Partnership, a Delaware limited partnership
By its General Partner Covanta Warren Holdings I, Inc.

	103.
	Covanta Warren Holdings I, Inc., a Virginia corporation

	104.
	Covanta Warren Holdings II, Inc., a California corporation

	105.
	Covanta Waste to Energy of Italy, Inc., a Delaware corporation

	106.
	Covanta Waste to Energy, LLC, a Delaware limited liability company
By its Sole Member Covanta Projects, Inc.

	107.
	Covanta WBH, LLC, a Delaware limited liability company
By its Sole Member Covanta Lancaster, Inc.

	108.
	Covanta York Renewable Energy LLC, a Delaware limited liability company
By its Sole Member and Manager Covanta ES, Inc.

	109.
	DSS Environmental, Inc., a New York corporation

	110.
	ECOvanta, LLC, a Delaware limited liability company
By its Sole Member Covanta 4Recovery I, LLC

	111.
	Haverhill Power, LLC, a Delaware limited liability company
By its Sole Member Covanta Haverhill, Inc.

	112.
	LMI, Inc., a Massachusetts corporation

	113.
	M O'Connor LLC, a Delaware limited liability company
By its Sole Member Covanta ES, Inc.

	114.
	Mount Kisco Transfer Station, Inc., a New York corporation

	115.
	MSW Energy Erie, LLC, a Delaware limited liability company
By its Sole Member and Manager MWS Energy Holdings LLC

	116.
	MSW Energy Finance Co. II, Inc., a Delaware corporation

	117.
	MSW Energy Finance Co., Inc., a Delaware corporation

	118.
	MSW Energy Holdings II LLC, a Delaware limited liability company
By its Sole Member and Manager Covanta ARC Holdings, Inc.

	119.
	MSW Energy Holdings LLC, a Delaware limited liability company
By its Sole Member and Managing Member Covanta ARC Holdings, Inc.

	120.
	MSW Energy Hudson LLC, a Delaware limited liability company
By its Sole Member MSW Energy Holdings LLC

	121.
	MSW I Sub, LLC, a Delaware limited liability company
By its Sole Member Covanta ARC Holdings, LLC

	
		
	122.
	OPI Quezon, LLC, a Delaware limited liability company
By its Sole Member Covanta Power International Holdings, Inc.

	123.
	Peabody Monofill Associates, Inc., a Massachusetts corporation

	124.
	Recycling Industries Transfer Station, LLC, a New York limited liability company
By its Sole Member and Manager Covanta 4Recovery, L.P. by its General Partner Covanta 4Recovery I, LLC and by its Limited Partners Covanta 4Recovery I, LLC and Covanta 4Recovery II, LLC

	125.
	SEMASS Partnership, a Massachusetts limited partnership
By its Managing General Partner Covanta Company of SEMASS, L.P.
By its Managing Partner Covanta SEMASS LLC

	126.
	TransRiver Philadelphia LLC, a Delaware limited liability company
By its Sole Member and Manager Covanta 4Recovery, L.P. by its General Partner Covanta 4Recovery I, LLC and by its Limited Partners Covanta 4Recovery I, LLC and Covanta 4Recovery II, LLC

EXHIBIT A
FORM OF ACKNOWLEDGMENT AND CONFIRMATION
1.    Reference is made to (i) the First Amendment, dated as of March [_], 2013 (the “First Amendment”) and (ii) the CREDIT AND GUARANTY AGREEMENT, dated as of March 28, 2012 (as it may be amended, restated, supplemented or otherwise modified from time to time, the “Existing Credit Agreement”) by and among COVANTA ENERGY CORPORATION, a Delaware corporation (the “Company”), COVANTA HOLDING CORPORATION, A Delaware corporation (“Holding”), certain subsidiaries of Company, as guarantors, the Lenders party thereto from time to time, each lender from time to time party thereto (the “Lenders”), BANK OF AMERICA, N.A., as Administrative Agent, Collateral Agent and Issuing Bank (the “Administrative Agent”), MORGAN STANLEY SENIOR FUNDING, INC., as Syndication Agent and BARCLAYS BANK PLC, CRÉDIT AGRICOLE CORPORATE AND INVESTMENT BANK and JPMORGAN CHASE BANK, N.A., as Co-Documentation Agents. 
2.    The Existing Credit Agreement is being amended pursuant to the First Amendment.  Each of the parties hereto hereby agrees, with respect to each Credit Document to which it is a party: 
(a)    all of its obligations, liabilities and indebtedness under such Credit Document shall remain in full force and effect on a continuous basis after giving effect to the First Amendment; and 
(b)    all of the Liens and security interests created and arising under such Credit Documents remain in full force and effect on a continuous basis, and the perfected status and priority of each such Lien and security interest continues in full force and effect on a continuous basis, unimpaired, uninterrupted and undischarged, after giving effect to the First Amendment, as collateral security for its obligations, liabilities and indebtedness under the Existing Credit Agreement and under its guarantees in the Credit Documents.
3.    THIS ACKNOWLEDGMENT AND CONFIRMATION SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK.
4.    This Acknowledgment and Confirmation may be executed in counterparts (and by different parties hereto in different counterparts), each of which shall constitute an original, but all of which when taken together shall constitute a single document.  Delivery of an executed counterpart of a signature page of this Acknowledgment and Confirmation by telecopy or other electronic imaging means shall be effective as delivery of a manually executed counterpart of this Acknowledgment and Confirmation.

[rest of page intentionally left blank]

IN WITNESS WHEREOF, the parties hereto have caused this Acknowledgement and Confirmation to be duly executed and delivered by their proper and duly authorized officers as of the day and year first above written.

COVANTA ENERGY CORPORATION, A DELAWARE CORPORATION, AND EACH OF ITS SUBSIDIARIES LISTED ON ANNEX A HERETO
By:______________________________
      Name: 
      Title: 

COVANTA HOLDING CORPORATION, A DELAWARE CORPORATION

By:______________________________
      Name: 
      Title: 

Signature Page - Acknowledgement and Confirmation

ANNEX A

	
		
	1.
	Capital Compost & Waste Reduction Services, LLC, a New York limited liability company
By its Sole Member Covanta Berkshire Operations, Inc.

	2.
	Covanta 4Recovery I, LLC (f/k/a Covanta 4Recovery LLC), a Delaware limited liability company
By its Sole Member Covanta ARC LLC

	3.
	Covanta 4Recovery II, LLC (f/k/a TransRiver II, LLC), a Delaware limited liability company
By its Sole Member Covanta 4Recovery I, LLC

	4.
	Covanta 4Recovery, L.P. (f/k/a TransRiver Marketing Company, L.P.), a Delaware limited partnership
By its General Partner and Managing Partner Covanta 4Recovery I, LLC
By its Limited Partners Covanta 4Recovery I, LLC and Covanta 4Recovery II, LLC

	5.
	Covanta 4Recovery Portsmouth LLC (f/k/a TransRiver Portsmouth LLC), a Virginia limited liability company
By its Sole Member Covanta 4Recovery, L.P. by its General Partner Covanta 4Recovery I, LLC and by its Limited Partners Covanta 4Recovery I, LLC and Covanta 4Recovery II, LLC

	6.
	Covanta 4Recovery Transfer Systems LLC (f/k/a TransRiver Transfer Systems LLC), a Delaware limited liability company
By its Sole Member Covanta 4Recovery, L.P. by its General Partner Covanta 4Recovery I, LLC and by its Limited Partners Covanta 4Recovery I, LLC and Covanta 4Recovery II, LLC

	7.
	Covanta 4Recovery Waste LLC (f/k/a TransRiver Waste LLC), a Delaware limited liability company
By its Sole Member Covanta 4Recovery, L.P. by its General Partner Covanta 4Recovery I, LLC and by its Limited Partners Covanta 4Recovery I, LLC and Covanta 4Recovery II, LLC 

	8.
	Covanta Abington Transfer Solutions LLC, a Delaware limited liability company
By its Sole Member Covanta ES, Inc.

	9.
	Covanta Alexandria/Arlington, Inc., a Virginia corporation

	10.
	Covanta ARC Company, a Delaware general partnership
By its General Partners Covanta Ref-Fuel Management LLC and Covanta Ref-Fuel Management II, LLC
By its Managing Partner Covanta Ref-Fuel Management LLC

	11.
	Covanta ARC Holdings, LLC, a Delaware limited liability company
By its Sole Member Covanta Energy Corporation

	12.
	Covanta ARC LLC, a Delaware limited liability company
By its Sole Member Covanta Ref-Fuel Holdings LLC

	13.
	Covanta B-3, LLC, a New York limited liability company
By its Sole Member and Manager Covanta Berkshire Operations, Inc.

	14.
	Covanta Berkshire Holdings, Inc., a New York corporation

	15.
	Covanta Berkshire Operations, Inc., a New York corporation

	16.
	Covanta Capital District II LLC, a Delaware limited liability company
By its Sole Member Covanta Capital District LLC

	17.
	Covanta Capital District LLC, a Delaware limited liability company
By its Sole Member Covanta ARC LLC

	18.
	Covanta Capital District, L.P., a Delaware limited partnership
By its General Partner and Managing Partner Covanta Capital District LLC
By its Limited Partners Covanta Capital District LLC and Covanta Capital District II LLC

	19.
	Covanta Company of SEMASS, L.P., a Delaware Limited Partnership
By its Managing Partner Covanta Operations of SEMASS LLC

	20.
	Covanta Dade Metals Recovery LLC, a Florida limited liability company
By its Sole Member Covanta Pasco, Inc.

	21.
	Covanta Development Company LLC, a Delaware limited liability company
By its Sole Member Covanta ARC Company

	
		
	22.
	Covanta Energy Americas, Inc., a Delaware corporation

	23.
	Covanta Energy Asia, Inc., a Delaware corporation

	24.
	Covanta Energy Europe, Inc., a Delaware corporation

	25.
	Covanta Energy Group, Inc., a Delaware corporation

	26.
	Covanta Energy Marketing LLC, a Delaware limited liability company
By its Sole Member Covanta Energy Corporation

	27.
	Covanta Energy Resource Corp., a Delaware corporation

	28.
	Covanta Energy Services, Inc., a Delaware corporation

	29.
	Covanta Engineering Services, Inc., a New Jersey corporation

	30.
	Covanta ES, Inc., a Delaware corporation

	31.
	Covanta Fairfax, Inc., a Virginia corporation

	32.
	Covanta Harrisburg, Inc., a Delaware corporation

	33.
	Covanta Haverhill, Inc., a Massachusetts corporation

	34.
	Covanta Haverhill Associates, a Massachusetts general partnership
By its General Partner and Managing Venturer Covanta Haverhill, Inc.

	35.
	Covanta Haverhill Properties, Inc., a Massachusetts corporation

	36.
	Covanta Hawaii Energy LLC, a Hawaii limited liability company
By its Sole Member Covanta Projects of Hawaii, Inc.

	37.
	Covanta Hempstead Company, a New York general partnership
By its General Partners Covanta Hempstead LLC and Covanta Hempstead II, LLC
By its Managing Partner Covanta Hempstead LLC

	38.
	Covanta Hempstead II, LLC, a Delaware limited liability company
By its Sole Member Covanta Hempstead LLC

	39.
	Covanta Hempstead LLC, a Delaware limited liability company
By its Sole Member Covanta ARC LLC

	40.
	Covanta Hennepin Energy Resource Co., Limited Partnership, a Delaware limited partnership
By its General Partner Covanta Energy Resource Corp.

	41.
	Covanta Hillsborough, Inc., a Florida corporation

	42.
	Covanta Honolulu Resource Recovery Venture, a Hawaii General Partnership
By its General Partners and Executive Committee Covanta Oahu Waste Energy Recovery, Inc. and Covanta Projects of Hawaii Inc.

	43.
	Covanta Hudson Valley Renewable Energy LLC, a Delaware limited liability company
By its Sole Member Covanta ES, Inc.

	44.
	Covanta Huntsville, Inc., an Alabama corporation

	45.
	Covanta Indianapolis, Inc., an Indiana corporation

	46.
	Covanta Kent, Inc., a Michigan corporation

	47.
	Covanta Lancaster, Inc., a Pennsylvania corporation

	48.
	Covanta Lee, Inc., a Florida corporation

	49.
	Covanta Long Beach Renewable Energy Corp., a Delaware corporation

	50.
	Covanta Long Island, Inc., a Delaware corporation

	51.
	Covanta MacArthur Renewable Energy, Inc., a New York corporation

	52.
	Covanta Marion Land Corp., an Oregon corporation

	53.
	Covanta Marion, Inc., an Oregon corporation

	54.
	Covanta Mid-Conn, Inc., a Connecticut corporation

	55.
	Covanta Montgomery, Inc., Maryland corporation

	56.
	Covanta Niagara LLC, a Delaware limited liability company
By its Sole Member Covanta ARC LLC

	
		
	57.
	Covanta Niagara II, LLC, a Delaware limited liability company
By its Sole Member Covanta Niagara LLC

	58.
	Covanta Niagara, L.P., a Delaware limited partnership
By its Managing Partner Covanta Niagara LLC

	59.
	Covanta Oahu Waste Energy Recovery, Inc., a California corporation

	60.
	Covanta Omega Lease, Inc., a Delaware corporation

	61.
	Covanta Onondaga Operations, Inc., a Delaware corporation

	62.
	Covanta Operations of SEMASS LLC, a Delaware limited liability company
By its Sole Member Covanta ARC LLC

	63.
	Covanta Operations of SEMASS II, LLC, a Delaware limited liability company
By its Sole Member Covanta Operations of SEMASS LLC

	64.
	Covanta Operations of Union LLC, a New Jersey limited liability company
By its Sole Members and Managers Covanta Projects, Inc. and Covanta Waste to Energy, LLC

	65.
	Covanta OPW Associates, Inc., a Connecticut corporation

	66.
	Covanta OPWH, Inc., a Delaware corporation

	67.
	Covanta Palm Beach Renewable Energy LLC, a Delaware limited liability company
By its Sole Member Covanta Energy Corporation

	68.
	Covanta Pasco, Inc., a Florida corporation

	69.
	Covanta Pinellas, Inc., a Florida corporation

	70.
	Covanta Pittsfield, LLC, a New York limited liability company
By its Sole Member and Manager Covanta Berkshire Operations, Inc.

	71.
	Covanta Plymouth Energy Corp., a Delaware corporation

	72.
	Covanta Plymouth GP Corp., a Delaware corporation

	73.
	Covanta Plymouth Investments Corp., a Delaware corporation

	74.
	Covanta Plymouth, Inc., a Delaware corporation

	75.
	Covanta Power Development of Mauritius, Inc., a Delaware corporation

	76.
	Covanta Power Development, Inc., a Delaware corporation

	77.
	Covanta Power International Holdings, Inc., a Delaware corporation

	78.
	Covanta Power LLC, a Delaware limited liability company
By its Sole Member Covanta Energy Corporation

	79.
	Covanta Projects of Hawaii, Inc., a Hawaii corporation

	80.
	Covanta Projects of Wallingford, L.P., a Delaware limited partnership
By its General Partner Covanta OPW Associates, Inc.
By its Limited Partner Covanta Wallingford Associates, Inc.

	81.
	Covanta Projects, Inc., a Delaware corporation

	82.
	Covanta Ref-Fuel Finance LLC (f/k/a Ref-Fuel Corp.), a Delaware limited liability company
By its Sole Member Covanta ARC Holdings, LLC

	83.
	Covanta Ref-Fuel Holdings LLC, a Delaware limited liability company
By its Sole Members MSW Energy Hudson LLC and MSW Energy Erie LLC

	84.
	Covanta Ref-Fuel II LLC, a Delaware limited liability company
By its Sole Member MSW Energy Holdings II LLC

	85.
	Covanta Ref-Fuel LLC (f/k/a Ref-Fuel LLC), a Delaware limited liability company
By its Sole Member Covanta Ref-Fuel Finance, LLC

	86.
	Covanta Ref-Fuel Management II, LLC, a Delaware limited liability company
By its Sole Member Covanta Ref-Fuel Management LLC

	87.
	Covanta Ref-Fuel Management LLC, a Delaware limited liability company
By its Sole Member Covanta ARC LLC

	
		
	88.
	Covanta Renewable Energy Detroit, LLC, a Delaware limited liability company
By its Sole Member Covanta RRS Holdings, Inc.

	89.
	Covanta Renewable Fuels LLC, a Delaware limited liability company
By its Sole Member Covanta Energy Corporation

	90.
	Covanta Research & Technology, LLC, a Delaware limited liability company
By its Sole Member Covanta Energy Corporation

	91.
	Covanta RRS Holdings, Inc., a Delaware corporation

	92.
	Covanta SBR Associates, a Massachusetts general partnership
By its Managing Partner Covanta Omega Lease, Inc.

	93.
	Covanta SECONN LLC, a Delaware limited liability company
By its Sole Member Covanta ARC LLC

	94.
	Covanta SEMASS LLC, a Delaware limited liability company
By its Sole Member Covanta ARC LLC

	95.
	Covanta SEMASS II, LLC, a Delaware limited liability company
By its Sole Member Covanta SEMASS LLC

	96.
	Covanta SEMASS, L.P., a Delaware limited partnership
By its Managing Partner Covanta Operations of SEMASS LLC

	97.
	Covanta Southeastern Florida Renewable Energy LLC, a Delaware limited liability company
By its Sole Member Covanta Pasco, Inc.

	98.
	Covanta Stanislaus, Inc., a California corporation

	99.
	Covanta Sustainable Solutions, LLC (f/k/a Covanta Secure Services, LLC), a Delaware limited liability company
By its Sole Member Covanta 4Recovery, L.P. by its General Partner Covanta 4Recovery I, LLC and by its Limited Partners Covanta 4Recovery I, LLC and Covanta 4Recovery II, LLC

	100.
	Covanta Systems, LLC, a Delaware limited liability company
By its Sole Member Covanta Waste to Energy, LLC

	101.
	Covanta Wallingford Associates, Inc., a Connecticut corporation

	102.
	Covanta Warren Energy Resources Co., Limited Partnership, a Delaware limited partnership
By its General Partner Covanta Warren Holdings I, Inc.

	103.
	Covanta Warren Holdings I, Inc., a Virginia corporation

	104.
	Covanta Warren Holdings II, Inc., a California corporation

	105.
	Covanta Waste to Energy of Italy, Inc., a Delaware corporation

	106.
	Covanta Waste to Energy, LLC, a Delaware limited liability company
By its Sole Member Covanta Projects, Inc.

	107.
	Covanta WBH, LLC, a Delaware limited liability company
By its Sole Member Covanta Lancaster, Inc.

	108.
	Covanta York Renewable Energy LLC, a Delaware limited liability company
By its Sole Member and Manager Covanta ES, Inc.

	109.
	DSS Environmental, Inc., a New York corporation

	110.
	ECOvanta, LLC, a Delaware limited liability company
By its Sole Member Covanta 4Recovery I, LLC

	111.
	Haverhill Power, LLC, a Delaware limited liability company
By its Sole Member Covanta Haverhill, Inc.

	112.
	LMI, Inc., a Massachusetts corporation

	113.
	M O'Connor LLC, a Delaware limited liability company
By its Sole Member Covanta ES, Inc.

	114.
	Mount Kisco Transfer Station, Inc., a New York corporation

	115.
	MSW Energy Erie, LLC, a Delaware limited liability company
By its Sole Member and Manager MWS Energy Holdings LLC

	116.
	MSW Energy Finance Co. II, Inc., a Delaware corporation

	
		
	117.
	MSW Energy Finance Co., Inc., a Delaware corporation

	118.
	MSW Energy Holdings II LLC, a Delaware limited liability company
By its Sole Member and Manager Covanta ARC Holdings, Inc.

	119.
	MSW Energy Holdings LLC, a Delaware limited liability company
By its Sole Member and Managing Member Covanta ARC Holdings, Inc.

	120.
	MSW Energy Hudson LLC, a Delaware limited liability company
By its Sole Member MSW Energy Holdings LLC

	121.
	MSW I Sub, LLC, a Delaware limited liability company
By its Sole Member Covanta ARC Holdings, LLC

	122.
	OPI Quezon, LLC, a Delaware limited liability company
By its Sole Member Covanta Power International Holdings, Inc.

	123.
	Peabody Monofill Associates, Inc., a Massachusetts corporation

	124.
	Recycling Industries Transfer Station, LLC, a New York limited liability company
By its Sole Member and Manager Covanta 4Recovery, L.P. by its General Partner Covanta 4Recovery I, LLC and by its Limited Partners Covanta 4Recovery I, LLC and Covanta 4Recovery II, LLC

	125.
	SEMASS Partnership, a Massachusetts limited partnership
By its Managing General Partner Covanta Company of SEMASS, L.P.
By its Managing Partner Covanta SEMASS LLC

	126.
	TransRiver Philadelphia LLC, a Delaware limited liability company
By its Sole Member and Manager Covanta 4Recovery, L.P. by its General Partner Covanta 4Recovery I, LLC and by its Limited Partners Covanta 4Recovery I, LLC and Covanta 4Recovery II, LLCExhibit10.15.3 020213

Exhibit 10.15.3

NONQUALIFIED STOCK OPTION AGREEMENT

This AGREEMENT (the "Agreement") is made as of <ISSUE DATE> (the "Date of Grant") by and between MACY'S, INC., a Delaware corporation (the "Company"), and «NAME» (the "Optionee").

1.    Grant of Stock Option.  Subject to and upon the terms, conditions, and restrictions set forth in this Agreement and in the Company's 2009 Omnibus Incentive Compensation Plan (the "Plan"), as amended from time to time, the Company hereby grants to the Optionee as of the Date of Grant a stock option (the "Option") to purchase «SHARES» Common Shares (the "Optioned Shares").  The Option may be exercised from time to time in accordance with the terms of this Agreement.  The price at which the Optioned Shares may be purchased pursuant to this Option shall be <$GRANT PRICE> per share subject to adjustment as hereinafter provided (the "Option Price").  The Option is intended to be a nonqualified stock option and shall not be treated as an "incentive stock option" within the meaning of that term under Section 422 of the Code, or any successor provision thereto.

2.    Term of Option.  The term of the Option (the “Term”) shall commence on the Date of Grant and, unless earlier terminated in accordance with Section 7 hereof, shall expire at the close of business on the date which is ten (10) years from the Date of Grant.

3.    Right to Exercise.  Subject to the expiration or earlier termination of the Option as provided herein, on <DATE> and on each of the first, second and third anniversary of such date, the number of Optioned Shares equal to twenty-five percent (25%) multiplied by the initial number of Optioned Shares specified in this Agreement shall vest (become exercisable) on a cumulative basis until the Option is fully exercisable. To the extent the Option is exercisable, it may be exercised in whole or in part.  In no event shall the Optionee be entitled to acquire a fraction of an Optioned Share pursuant to this Option.  

4.    Limitations on Transfer of Option.  

(a)  The Option granted hereby shall be neither transferable nor assignable by the Optionee other than 

(i) upon death, by will or by the laws of descent and distribution, 
(ii) pursuant to a qualified domestic relations order, or 
(iii) to a fully revocable trust to which the Optionee is treated as the owner for federal income tax purposes, 

and may be exercised, during the lifetime of the Optionee, only by the Optionee, or in the event of his or her legal incapacity, by his or her guardian or legal representative acting on behalf of the Optionee in a fiduciary capacity under state law and court supervision.  

(b)  Notwithstanding Section 4(a), the Option or any interest therein may be transferred by the Optionee, without payment of consideration therefore by the transferee, to any one or more members of the immediate family of the Optionee (as defined in Rule 16a-1(e) under the Securities Exchange Act of 1934), or to one or more trusts established solely for the benefit of one or more members of the immediate family of the Optionee or to one or more partnerships in which the only partners are such members of the immediate family of the Optionee.  No transfer under this Section 4(b) will be effective until notice of such transfer is delivered to the Company describing the terms and conditions of the proposed transfer, and the Company determines that the proposed transfer complies with the terms of the Plan and this Agreement and with any terms and conditions made applicable to the transfer by the Company or Board at the time of the proposed transfer.  Any transferee under this Section 4(b) shall be subject to the same terms and conditions hereunder as would apply to the Optionee and to such other terms and conditions made applicable to the transferee pursuant to this Agreement or by the Board.  Any purported transfer that does not comply with the requirements of this Section 4(b) shall be void and unenforceable against the Company and the purported transferee shall not obtain any rights to or interest in the Option.

(c)  Notwithstanding anything to the contrary contained in any Non-Qualified Stock Option Agreement previously entered into between the Company and the Optionee covering the grant of stock options by the Company to the Optionee, all such stock options previously granted to Optionee by the Company shall be transferable consistent with the terms and conditions applicable to the transfer of the Option as contained herein.

1

5.    Notice of Exercise; Payment.  To the extent then exercisable, the Option may be exercised by written notice to the Company stating the number of Optioned Shares for which the Option is being exercised and the intended manner of payment.  As a further condition precedent to the exercise of this Option, the Optionee shall comply with all regulations and the requirements of any regulatory authority having control of, or supervision over, the issuance of Common Shares and in connection therewith shall execute any documents which the Board shall in its sole discretion deem necessary or advisable.

(a)  Payment equal to the aggregate Option Price of the Optioned Shares being exercised shall be tendered in full with the notice of exercise to the Company in cash in the form of currency or check or other cash equivalent acceptable to the Company.  As soon as practicable after receipt of such notice, but in any event no later than thirty (30) days after receipt, the Company shall direct the due issuance of the Optioned Shares so purchased.  

(b)  With the agreement of the Company, the requirement of payment in cash shall be deemed satisfied if the Optionee makes arrangements that are satisfactory to the Company with a broker that is a member of the National Association of Securities Dealers, Inc. to sell a sufficient number of Optioned Shares which are being purchased pursuant to the exercise, so that the net proceeds of the sale transaction will at least equal the amount of the aggregate Option Price, plus interest at the “applicable Federal rate” within the meaning of that term under Section 1274 of the Code, or any successor provision thereto, for the period from the date of exercise to the date of payment, and pursuant to which the broker undertakes to deliver to the Company the amount of the aggregate Option Price, plus such interest, not later than the date on which the sale transaction will settle in the ordinary course of business (this payment mechanism is referred to as the “Cashless Exercise Program”).  

(c)  In the event that the Company does not have a Cashless Exercise Program in effect at the time the Company receives notice of exercise from the Optionee, the Optionee may also tender the Option Price by (i) the actual or constructive transfer to the Company of nonforfeitable, non-restricted Common Shares that have been owned by the Optionee for more than six (6) months prior to the date of exercise, or (ii) by any combination of the foregoing methods of payment, including a partial tender in cash and a partial tender in nonforfeitable, nonrestricted Common Shares.  Nonforfeitable, nonrestricted Common Shares that are transferred by the Optionee in payment of all or any part of the Option Price shall be valued on the basis of their Market Value per Share.  

6.    Termination of Agreement.  Except as provided in Section 7 below, this Agreement and the Option granted hereby shall terminate automatically and without further notice, and, accordingly, any and all rights granted to Optionee and any and all obligations undertaken by the Company hereunder with regard to any vested but unexercised Optioned Shares shall terminate at the end of the Term of the Option.  Optioned Shares that are not exercised prior to the end of the Term of the Option are immediately forfeited and may no longer be exercised.

7.    Vesting and Exercisability Following Certain Events.  Subject to Section 6 above, the Optionee (or his or her guardian, legal representative, estate or beneficiary, as applicable) shall have the right to exercise the Option following the occurrence of certain events, as follows:

(a)  Termination of Employment Without Cause.  Except as otherwise provided in Sections 7(c) through 7(i) below, or as provided on a case-by-case basis by the Board, if the Optionee's employment with the Company is terminated without Cause (as hereafter defined in Section 21), any vested, but unexercised Optioned Shares shall continue to be exercisable through the earlier to occur of ninety (90) days following the effective date of such termination of employment or the expiration of the Term of the Option.  Any Optioned Shares that were not vested as of the effective date of such termination are forfeited. 

(b)  Termination of Employment for Cause.  In the event that the Optionee's employment with the Company is terminated for Cause (as hereafter defined in Section 21), all Optioned Shares (vested or unvested) shall immediately be forfeited as of the effective date of such termination.

(c)  Death During Active Employment of Optionee Under Age 55 or With Less Than 10 Years of Vesting Service.  If the Optionee is under the age of 55, or at any age with less than ten (10) years of vesting service, and dies while in the employ of the Company, all unvested Optioned Shares vest and become immediately exercisable in full.  Those Optioned Shares and any other vested, but unexercised Optioned Shares shall continue to be exercisable through the earlier to occur of three (3) years after the Optionee's death or the expiration of the Term of the Option.  

(d)  Death During Active Employment of Optionee Age 55-61 With at Least 10 Years of Vesting Service. If the Optionee is age 55 to 61 with at least ten (10) years of vesting service and dies while in the employ of the Company, all unvested Optioned Shares vest and become immediately exercisable in full.  Those Optioned Shares shall continue to be exercisable through the earlier to occur of three (3) years after the Optionee's death or the expiration of the Term of the Option. 

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Any vested, but unexercised Optioned Shares as of the date of death shall continue to be exercisable through the expiration of the Term of the Option.

(e)  Death During Active Employment of Optionee Age 62 or Over With at Least 10 Years of Vesting Service.  If the Optionee is age 62 or over with at least ten (10) years of vesting service and dies while in the employ of the Company, all unvested Optioned Shares vest and become immediately exercisable in full. Those Optioned Shares and any vested, but unexercised Optioned Shares as of the date of death shall continue to be exercisable through the expiration of the Term of the Option.  

(f)  Death Within 90 Days Following Termination of Employment of Optionee Under Age 55 or With Less Than 10 Years of Vesting Service.  If the Optionee is under the age of 55, or at any age with less than ten (10) years of vesting service, and dies within ninety (90) days after termination of employment, all vested, but unexercised Optioned Shares as of the date of death shall continue to be exercisable through the earlier to occur of ninety (90) days after the date of the Optionee's death or the expiration of the Term of the Option. Provided, however, that if the Optionee's death occurs within one (1) year of the Date of Grant, the Option shall terminate upon the date of death.
 
(g)  Retirement.  If the Optionee retires under a Company sponsored IRS qualified retirement plan

(i) at age 55 through 61 with at least ten (10) years of vesting service, then

(1)  any vested, but unexercised Optioned Shares as of the effective date of such retirement shall continue to be exercisable through the expiration of the Term of the Option; and

(2)  any Optioned Shares that were not vested as of the effective date of such retirement are forfeited; and

(ii) at age 62 or over with at least ten (10) years of vesting service, then

(1)  any vested, but unexercised Optioned Shares as of the effective date of such retirement shall continue to be exercisable through the expiration of the Term of the Option; and

(2)  any Optioned Shares that were not vested as of the effective date of such retirement shall continue to vest in accordance with Section 3 above, and shall be exercisable through the expiration of the Term of the Option.

The provisions of this Section 7(g) continue to apply if the Optionee dies following retirement.

(h)    Violation of Restrictive Covenants.  Notwithstanding the provisions of Section 7(g) above, all Optioned Shares (vested and unvested) shall be forfeited immediately and may no longer be exercised upon the occurrence of any of the following events:

		
	(i)
	following a voluntary retirement and prior to the later to occur of (a) expiration of the Term of the Option or (b) two years following retirement, the Optionee renders personal services to a Competing Business (as hereafter defined in Section 21) in any manner, including, without limitation, as employee, agent, consultant, advisor, independent contractor, proprietor, partner, officer, director, manager, owner, financer, joint venturer or otherwise; or

		
	(ii)
	following a voluntary or involuntary retirement and prior to the later to occur of (a) the expiration of the Term of the Option or (b) two years following retirement, the Optionee directly or indirectly solicits or otherwise entices any of the Company's employees to resign from their employment with the Company, whether individually or as a group; or 

		
	(iii)
	at any time following a voluntary or involuntary retirement, the Optionee discloses or provides to any third party, or uses, modifies, copies or adapts any of the Company's Confidential Information (as hereafter defined in Section 21).

For purposes of this Section 7(h), an involuntary retirement occurs when the employment of an Optionee who satisfies the age and years of service criteria described in Section 7(g) above is terminated by the Company without Cause (as hereafter defined in Section 21) or is terminated by the Optionee with Good Reason (as hereafter defined in Section 21) within the 24-month 

3

period following a Change in Control (as hereafter defined in Section 21).  If there are no Optioned Shares outstanding at the time a restricted covenant is violated, the Company may pursue other legal remedies.

(i)  Disability.  If the Optionee becomes permanently and totally disabled while an active employee of the Company, all unvested Optioned Shares vest and become immediately exercisable in full.  Those Optioned Shares and any other vested, but unexercised Optioned Shares shall continue to be exercisable through the expiration of the Term of the Option.

(j)  Termination Following a Change in Control.  If, within the twenty-four (24) month period following a Change in Control (as hereafter defined in Section 21), the Optionee's employment is terminated by the Company without Cause (as hereafter defined in Section 21) or if the Optionee voluntarily terminates employment with Good Reason (as hereafter defined in Section 21), then all unvested Optioned Shares vest and become immediately exercisable in full.  Those Optioned Shares and any other vested, but unexercised Optioned Shares shall continue to be exercisable through the earlier to occur of ninety (90) days following termination of employment or expiration of the Term of the Option.  Provided, however, that if the Optionee is over age 55 and has at least ten (10) years of vesting service as of the effective date of such termination, the provisions of Section 7(g) and Section 7(h) governing exercisability and/or forfeiture of vested, but unexercised Optioned Shares following retirement shall apply.

For the purposes of this Agreement, the continuous employment of the Optionee with the Company shall not be deemed to have been interrupted, and the Optionee shall not be deemed to have ceased to be an employee of the Company, by reason of the transfer of his employment among the Company, its Subsidiaries, divisions and affiliates, or a leave of absence approved by the Company.

8.    Clawback.  Optionee acknowledges that any incentive-based compensation received by Optionee from the Company hereunder or otherwise (including any proceeds realized from any exercise of an option and/or sale of the Optioned Shares) shall be subject to recovery by the Company in the circumstances and manner provided in any Incentive-Based Compensation Recovery Policy that may be adopted or implemented by the Company and in effect from time to time on or after the date hereof, and Optionee shall effectuate any such recovery at such time and in such manner as the Company may specify.  For purposes of this Agreement, the term "Incentive-Based Compensation Recovery Policy" means and includes any policy of the type contemplated by Section 10D of the Securities Exchange Act, any rules or regulations of the Securities and Exchange Commission adopted pursuant thereto, or any related rules or listing standards of any national securities exchange or national securities association applicable to the Company. 

9.    No Employment Contract.  Nothing contained in this Agreement shall confer upon the Optionee any right with respect to continuance of employment by the Company, nor limit or affect in any manner the right of the Company to terminate the employment or adjust the compensation of the Optionee.

10.    Taxes and Withholding.  If the Company shall be required to withhold any federal, state, local or foreign tax in connection with the exercise of the Option, and the amounts available to the Company for such withholding are insufficient, it shall be a condition to such exercise that the Optionee pay the tax or make provisions that are satisfactory to the Company for the payment thereof.  In the case of the exercise of an Option that has been transferred pursuant to Section 4(b), no Optioned Shares shall be issued by the Company unless the exercise of the Option is accompanied by sufficient payment, as determined by the Company, to satisfy any applicable withholding tax obligations or by other arrangements satisfactory to the Company to provide for such payment.  

11.    Compliance with Law.  The Company shall make reasonable efforts to comply with all applicable federal and state securities laws; provided, however, notwithstanding any other provision of this Agreement, the Option shall not be exercisable if the exercise thereof would result in a violation of any such law.

12.    Adjustments.  The Board may make or provide for such adjustments in the number of Optioned Shares covered by this Option, in the Option Price applicable to such Option, and in the kind of shares covered thereby, as the Board may determine is equitably required to prevent dilution or enlargement of the Optionee's rights that otherwise would result from a) any stock dividend, stock split, combination of shares, recapitalization, or other change in the capital structure of the Company, b) any merger, consolidation, spin-off, split-off, spin-out, split-up, reorganiza-tion, partial or complete liquidation, or other distribution of assets or issuance of rights or warrants to purchase securities, or c) any other corporate transaction or event having an effect similar to any of the foregoing; provided however, that no such adjustment in the number of Optioned Shares will be made unless such adjustment would change by more than 5% the number of Optioned Shares issuable upon exercise of this Option; provided, further, however, that any adjustment which by reason of this Section 12 is not required to be made currently will be carried forward and taken into account in any subsequent adjustment.  In the event of any such 

4

transaction or event, the Board may provide in substitution for this Option such alternative consideration as it may determine to be equitable in the circumstances and may require in connection therewith the surrender of this Option.

13    Availability of Common Shares.  The Company shall at all times until the expiration of the Option reserve and keep available, either in its treasury or out of its authorized but unissued Common Shares, the full number of Optioned Shares deliverable upon the exercise of this Option.

14.    Relation to Other Benefits.  Any economic or other benefit to the Optionee under this Agreement shall not be taken into account in determining any benefits to which the Optionee may be entitled under any profit-sharing, retirement or other benefit or compensation plan maintained by the Company and shall not affect the amount of any life insurance coverage available to any beneficiary under any life insurance plan covering employees of the Company.

15.    Amendments.  Any amendment to the Plan shall be deemed to be an amendment to this Agreement to the extent that the amendment is applicable hereto; provided, however, that no amendment shall adversely affect the rights of the Optionee under this Agreement without the Optionee's consent.

16.    Severability.  In the event that one or more of the provisions of this Agreement shall be invalidated for any reason by a court of competent jurisdiction, any provision so invalidated shall be deemed to be separable from the other provisions hereof, and the remaining provisions hereof shall continue to be valid and fully enforceable.

17.    Relation to Plan.

(a)  General. This Agreement is subject to the terms and conditions of the Plan.  In the event of any inconsistent provisions between this Agreement and the Plan, the Plan shall govern.  Capitalized terms used herein without definition shall have the meanings assigned to them in the Plan.  The Board acting pursuant to the Plan shall, except as expressly provided otherwise herein, have the right to determine the response to any questions which arise in connection with this Option or its exercise.  All references in this Agreement to the “Company” shall be deemed to include, unless the context in which it is used suggests otherwise, its subsidiaries, divisions and affiliates.

(b)  Compliance with Section 409A of the Code.  The Company and the Optionee acknowledge that, to the extent applicable, it is intended that the options covered by this option agreement comply with the provisions of Section 409A of the Code, and the options shall be administered in a manner consistent with this intent.  Any amendments made to comply with Section 409A of the Code may be retroactive to the extent permitted by Section 409A of the Code and may be made by the Company without the consent of the Optionee.  Any reference herein to Section 409A of the Code will also include any proposed, temporary or final regulations, or any other guidance, promulgated with respect to such Section by the U.S. Department of the Treasury or the Internal Revenue Service.

18.    Successors and Assigns.  Subject to Section 4 hereof, the provisions of this Agreement shall inure to the benefit of, and be binding upon, the successors, administrators, heirs, legal representatives and assigns of the Optionee including any transferee pursuant to Section 4(b), and the successors and assigns of the Company; provided, however, that a transferee pursuant to Section 4(b) shall not transfer the Option other than by will or by the laws of descent and distribution unless the Company consents in writing to such transfer.

19.    Governing Law.  The interpretation, performance, and enforcement of this Agreement shall be governed by the laws of the State of Delaware, without giving effect to the principles of conflict of laws thereof.

20.    Notices.  Any notice to the Company provided for herein shall be in writing to the Company, marked to the attention of the Corporate Controller at 7 West Seventh Street, Cincinnati, Ohio 45202 and any notice to the Optionee shall be addressed to said Optionee at his or her address currently on file with the Company.  Except as otherwise provided herein, any written notice shall be deemed to be duly given if and when delivered personally or deposited in the United States mail, first class registered mail, postage and fees prepaid, and addressed as aforesaid.  Any party may change the address to which notices are to be given hereunder by written notice to the other party as herein specified (provided that for this purpose any mailed notice shall be deemed given on the third business day following deposit of the same in the United States mail).

21.    Definitions.

(a)  “Cause” shall mean the Optionee shall have committed prior to termination of employment any of the following acts:

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(i)  an intentional act of fraud, embezzlement, theft, or any other material violation of law in connection with the Optionee's duties or in the course of the Optionee's employment;

(ii)  intentional wrongful damage to material assets of the Company;

(iii)  intentional wrongful disclosure of material confidential information of the Company;

(iv)  intentional wrongful engagement in any competitive activity that would constitute a material breach of the duty of loyalty; 

(v)  intentional breach of any stated material employment policy of the Company; or

(vi)  intentional neglect by the Optionee of the Optionee's duties and responsibilities.

(b)  “Competing Business” shall mean

(i)  any of the following named companies, or any other business into which such company is merged, consolidated, or otherwise combined, and the subsidiaries, affiliates and successors of each such company:

	
			
	Abercrombie & Fitch
	The Gap
	Ross Stores

	Bed, Bath & Beyond
	J.C. Penney
	Saks

	Belk
	Kohl's
	Sears

	Burlington Coat Factory
	L Brands (formerly Limited Brands)
	Target

	Bon-Ton Stores
	Nordstrom
	TJX

	Dillard's
	Neiman-Marcus
	Walmart

or

(ii) any business or enterprise engaged in the business of retail sales that (1) had annual revenues for its most recently completed fiscal year of at least $2.5 billion; and (2) both (i) offers a category or categories of merchandise (e.g., Fine Jewelry, Cosmetics, Kids, Big Ticket, Housewares, Men's, Dresses), any of which are offered by the Company (and its subsidiaries, divisions or controlled affiliates), and (ii) the revenue derived by such other retailer during such retailer's most recently ended fiscal year from such category or categories of merchandise represent(s), in the aggregate, more than 50% of the Company's (and its subsidiaries, divisions or controlled affiliates) total revenues for the most recently completed fiscal year derived from the same category or categories of merchandise.

(c)  “Confidential Information” shall mean any data or information that is material to the Company and not generally known to the public, including, without limitation: (i) price, cost and sales data; (ii) the identities and locations of vendors and consultants furnishing materials and services to the Company and the terms of vendor or consultant contracts or arrangements; (iii) lists and other information regarding customers and suppliers; (iv) financial information that has not been released to the public; (v) future business plans, marketing or licensing strategies, and advertising campaigns; or (vi) information about the Company's employees and executives, as well as the Company's talent strategies including but not limited to compensation, retention and recruiting initiatives.

(d) “Change in Control” shall mean the occurrence of any of the following events:

(i)  The acquisition by any individual, entity or group (within the meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) (a “Person”) of beneficial ownership (within the meaning of Rule 13d-3 promulgated under the Exchange Act) of 30% or more of the combined voting power of the then-outstanding securities of the Company entitled to vote generally in the election of directors (the “Voting Stock”); provided, however, that for purposes of this subsection (i), the following acquisitions will not constitute a Change of Control:  

		
	(A)
	any acquisition of Voting Stock directly from the Company that is approved by a majority of the Incumbent Board (as defined in subsection (ii) below); 

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	(B)
	any acquisition of Voting Stock by any entity in which the Company, directly or indirectly, beneficially owns 50% or more ownership or other equity interest (a “Subsidiary”); 

		
	(C)
	any acquisition of Voting Stock by any employee benefit plan (or related trust) sponsored or maintained by the Company or any Subsidiary; or 

		
	(D)
	 any acquisition of Voting Stock by any Person pursuant to a transaction that complies with clauses (A), (B) and (C) of subsection (iii) below; 

provided further, that:  

(X) if any Person is or becomes the beneficial owner of 30% or more of the Voting Stock as a result of a transaction described in clause (A) of this subsection (i), and such Person thereafter becomes the beneficial owner of any additional shares of Voting Stock, and after obtaining such additional beneficial ownership beneficially owns 30% or more of the Voting Stock, other than in an acquisition of Voting Stock directly from the Company that is approved by a majority of the Incumbent Board or other than as a result of a stock dividend, stock split or similar transaction effected by the Company in which all holders of Voting Stock are treated equally, such subsequent acquisition will be treated as a Change in Control; and 

(Y) a Change in Control will not be deemed to have occurred if a Person is or becomes the beneficial owner of 30% or more of the Voting Stock as a result of a reduction in the number of shares of Voting Stock outstanding pursuant to a transaction or series of transactions approved by a majority of the Incumbent Board unless and until such Person thereafter becomes the beneficial owner of any additional shares of Voting Stock, and after obtaining such additional beneficial ownership beneficially owns 30% or more of the Voting Stock, other than as a result of a stock dividend, stock split or similar transaction effected by the Company in which all holders of Voting Stock are treated equally; or 

(ii)  Individuals who, on the effective date of the Plan, constitute the Board of Directors of the Company (as modified by this subsection (ii), the “Incumbent Board”) cease for any reason to constitute at least a majority of the Board of Directors of the Company (the “Board”); provided, however, that any individual becoming a director after the effective date of the Plan whose election, or nomination for election by the Company's shareholders, was approved by a vote of at least two-thirds of the directors then comprising the Incumbent Board (either by a specific vote or by approval of the proxy statement of the Company in which such person is named as a nominee for director, without objection to such nomination) shall be considered as though such individual were a member of the Incumbent Board such effective date, but excluding, for this purpose, any such individual whose initial assumption of office occurs as a result of an actual or threatened election contest with respect to the election or removal of directors or other actual or threatened solicitation of proxies or consents by or on behalf of a Person other than the Board; or

(iii)  The consummation of a reorganization, merger or consolidation or sale or other disposition of all or substantially all of the assets of the Company (each, a “Business Combination”), unless, in each case, immediately following such Business Combination, (A) all or substantially all of the individuals and entities who were the beneficial owners, respectively, of the Voting Stock immediately prior to such Business Combination beneficially own, directly or indirectly, more than 50% of, respectively, the then-outstanding shares of common stock and the combined voting power of the then-outstanding voting securities entitled to vote generally in the election of directors, as the case may be, of the entity resulting from such Business Combination (including, without limitation, an entity that as a result of such transaction owns the Company or all or substantially all of the Company's assets either directly or through one or more subsidiaries) in substantially the same proportions relative to each other as their ownership, immediately prior to such Business Combination, of the Voting Stock, (B) no Person (excluding any employee benefit plan (or related trust) sponsored or maintained by the Company or any Subsidiary or such entity resulting from such Business Combination) beneficially owns, directly or indirectly, 30% or more of, respectively, the combined voting power of the then-outstanding securities entitled to vote generally in the election of directors of the entity resulting from such Business Combination except to the extent that such ownership existed prior to the Business Combination, and (C) at least a majority of the members of the board of directors of the corporation resulting from such Business Combination were members of the Incumbent Board at the time of the execution of the initial agreement, or of the action of the Board, providing for such Business Combination; or

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(iv)  Approval by the shareholders of the Company of a complete liquidation or dissolution of the Company.

(e)  “Good Reason” shall mean:

(i)  a material diminution in the Optionee's base compensation;

(ii)  a material diminution in the Optionee's authority, duties or responsibilities;

(iii)  a material change in the geographic location at which the Optionee must perform the Grantee's services; or

(iv)  any other action or inaction that constitutes a material breach by the Company of an agreement under which the Optionee provides services.

IN WITNESS WHEREOF, the Company has caused this Agreement to be executed on its behalf by its duly authorized officer, and Optionee has also executed this Agreement in duplicate, as of the day and year first above written.

MACY’S, INC.

By: ___________________________________
      Dennis J. Broderick
Title: Executive Vice President and General Counsel

______________________________________
_______________________, Optionee

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