Document:

EX-10.1

Exhibit 10.1

EXECUTION VERSION

COVANTA HOLDING CORPORATION

3.25% Cash Convertible Senior Notes due 2014

PURCHASE AGREEMENT

May 18, 2009

Barclays Capital Inc.

Citigroup Global Markets Inc.

J.P. Morgan Securities Inc.

As Representatives of the several

   Initial Purchasers named in Schedule 1 attached hereto,

c/o Barclays Capital Inc.

745 Seventh Avenue

New York, New York 10019

Ladies and Gentlemen:

          Covanta Holding Corporation, a Delaware corporation (the “Company”), proposes to issue and
sell $400,000,000 aggregate principal amount of 3.25% Cash Convertible Senior Notes due 2014 (the
“Firm Notes”) to the initial purchasers (the “Initial Purchasers”) named in Schedule 1
attached to this agreement (this “Agreement”) for whom you are acting as representatives (the
“Representatives”). In addition, the Company proposes to issue and sell to the Initial Purchasers
up to an additional $60,000,000 aggregate principal amount of 3.25% Cash Convertible Senior Notes
due 2014 on the terms set forth in Section 2 (the “Option Notes”). The Firm Notes and the Option
Notes, if purchased, are hereinafter collectively called the “Notes.” The Notes will be issued
pursuant to an indenture (the “Indenture”) to be entered into on the Initial Delivery Date (as
defined in Section 5) by the Company and Wells Fargo Bank, National Association, as trustee (the
“Trustee”). The Notes will be convertible into cash based on the market price of the shares of
common stock of the Company, par value $0.10 per share (the “Common Stock”), in accordance with the
terms of the Notes and the Indenture. This is to confirm the agreement concerning the purchase of
the Notes from the Company by the Initial Purchasers.

          1. Purchase and Resale of the Notes. The Notes will be offered and sold to the Initial
Purchasers without registration under the Securities Act of 1933, as amended (the “Securities
Act”), in reliance on an exemption pursuant to Section 4(2) under the Securities Act. The Company
has prepared a preliminary offering memorandum, dated May 18, 2009 (the “Preliminary Offering
Memorandum”), a pricing term sheet substantially in the form attached hereto as Schedule 2
(the “Pricing Term Sheet”) and an offering memorandum, dated May 18, 2009 (the “Offering
Memorandum”), setting forth information regarding the Company and the Notes. The Preliminary
Offering Memorandum, as supplemented and amended as of the Applicable Time (as defined below),
together with the Pricing Term Sheet and any of the documents listed on Schedule 3 hereto
(other than any “road show”) are collectively referred to as the “Pricing Disclosure Package.” The
Company hereby confirms that it has authorized the use of the Preliminary Offering Memorandum, the
Pricing Disclosure Package, the Offering Memorandum and any other documents listed on Schedule
3 hereto in connection with the

 

 

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offering and resale of the Notes by the Initial Purchasers. “Applicable Time” means 4:30 p.m.
(New York City time) on the date of this Agreement.

          Any reference to the Preliminary Offering Memorandum, the Pricing Disclosure Package or the
Offering Memorandum shall be deemed to refer to and include the Company’s most recent Annual Report
on Form 10-K and all subsequent documents filed with the Securities and Exchange Commission (the
“Commission”) pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended
(the “Exchange Act”), on or prior to the date of the Preliminary Offering Memorandum, the Pricing
Disclosure Package or the Offering Memorandum, as the case may be. Any reference to the
Preliminary Offering Memorandum, Pricing Disclosure Package or the Offering Memorandum, as the case
may be, as amended or supplemented, as of any specified date, shall be deemed to include any
documents filed with the Commission pursuant to Section 13(a) or 15(d) of the Exchange Act after
the date of the Preliminary Offering Memorandum, Pricing Disclosure Package or the Offering
Memorandum, as the case may be, and prior to such specified date. All documents filed under the
Exchange Act and so deemed to be included in the Preliminary Offering Memorandum, Pricing
Disclosure Package or the Offering Memorandum, as the case may be, or any amendment or supplement
thereto are hereinafter called the “Exchange Act Reports.” The Exchange Act Reports, when they
were or are filed with the Commission, conformed or will conform in all material respects to the
applicable requirements of the Exchange Act and the applicable rules and regulations of the
Commission thereunder.

          It is understood and acknowledged that upon original issuance thereof, and until such time as
the same is no longer required under the applicable requirements of the Securities Act, the Notes
shall bear the following legend (along with such other legends as the Initial Purchasers and their
counsel deem necessary):

THE SALE OF THIS NOTE HAS NOT BEEN REGISTERED UNDER THE U.S. SECURITIES ACT OF 1933, AS
AMENDED (THE “SECURITIES ACT”), AND ACCORDINGLY, UNTIL SUCH TIME AS COVANTA HOLDING
CORPORATION (THE “COMPANY”) HAS INSTRUCTED THE TRUSTEE THAT THIS LEGEND NO LONGER APPLIES,
THIS NOTE MAY NOT BE OFFERED OR SOLD EXCEPT AS SET FORTH IN THE FOLLOWING SENTENCE. BY ITS
ACQUISITION HEREOF, THE HOLDER AGREES (1) THAT IT WILL NOT WITHIN THE LATER OF (X) ONE YEAR
AFTER THE LAST DATE OF ORIGINAL ISSUANCE OF NOTES (INCLUDING THROUGH THE EXERCISE OF THE
OVER-ALLOTMENT OPTION PURSUANT TO THE PURCHASE AGREEMENT DATED AS OF MAY 18, 2009, AMONG THE
COMPANY AND THE INITIAL PURCHASERS SPECIFIED THEREIN) AND (Y) 90 DAYS AFTER IT CEASES TO BE
AN AFFILIATE (WITHIN THE MEANING OF RULE 144 UNDER THE SECURITIES ACT) OF THE COMPANY,
OFFER, RESELL, PLEDGE OR OTHERWISE TRANSFER THE NOTES EVIDENCED HEREBY EXCEPT (A) TO THE
COMPANY; (B) UNDER A REGISTRATION STATEMENT THAT HAS BEEN DECLARED EFFECTIVE UNDER THE
SECURITIES ACT; (C) TO A PERSON THE SELLER REASONABLY BELIEVES IS A QUALIFIED INSTITUTIONAL
BUYER (AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT) THAT IS PURCHASING FOR ITS OWN
ACCOUNT OR FOR THE ACCOUNT OF ANOTHER QUALIFIED INSTITUTIONAL

 

 

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BUYER AND TO WHOM NOTICE IS GIVEN THAT THE TRANSFER IS BEING MADE IN RELIANCE ON RULE 144A,
ALL IN COMPLIANCE WITH RULE 144A (IF AVAILABLE); OR (D) UNDER ANY OTHER AVAILABLE EXEMPTION
FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT; AND (2) THAT IT WILL, PRIOR TO ANY
TRANSFER OF THIS NOTE WITHIN THE LATER OF (X) SIX MONTHS (OR, IF THE COMPANY HAS NOT
SATISFIED THE CURRENT PUBLIC INFORMATION REQUIREMENTS OF RULE 144, ONE YEAR) AFTER THE LAST
DATE OF ORIGINAL ISSUANCE OF NOTES (INCLUDING THROUGH THE EXERCISE OF THE OVER-ALLOTMENT
OPTION) AND (Y) 90 DAYS AFTER IT CEASES TO BE AN AFFILIATE (WITHIN THE MEANING OF RULE 144
ADOPTED UNDER THE SECURITIES ACT) OF THE COMPANY, FURNISH TO THE TRUSTEE AND THE COMPANY
SUCH CERTIFICATIONS, LEGAL OPINIONS OR OTHER INFORMATION AS THEY MAY REQUIRE AND MAY RELY
UPON TO CONFIRM THAT SUCH TRANSFER IS BEING MADE PURSUANT TO AN EXEMPTION FROM, OR IN A
TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT. IN ANY
EVENT, NO AFFILIATE OF THE COMPANY MAY RESELL THIS NOTE OTHER THAN IN CONFORMITY WITH RULE
144 BEFORE ONE YEAR AFTER THE LAST DATE OF ORIGINAL ISSUANCE OF NOTES (INCLUDING THROUGH THE
EXERCISE OF THE OVER-ALLOTMENT OPTION).

          You have advised the Company that you will make offers (the “Exempt Resales”) of the Notes
purchased by you hereunder on the terms set forth in each of the Pricing Disclosure Package and the
Offering Memorandum, as amended or supplemented, solely to persons (the “Eligible Purchasers”) whom
you reasonably believe to be “qualified institutional buyers” as defined in Rule 144A under the
Securities Act (“QIBs”).

          2. Representations, Warranties and Agreements of the Company. The Company represents,
warrants and agrees that:

     (a) When the Notes are issued and delivered pursuant to this Agreement, the Notes will
not be of the same class (within the meaning of Rule 144A under the Securities Act) as
securities of the Company that are listed on a United States national securities exchange
registered or that are quoted in a United States automated inter-dealer quotation system.

     (b) Assuming that your representations and warranties in Section 4(a) are true, the
purchase and resale of the Notes pursuant hereto (including pursuant to the Exempt Resales)
is exempt from the registration requirements of the Securities Act. No form of general
solicitation or general advertising within the meaning of Regulation D (including, but not
limited to, advertisements, articles, notices or other communications published in any
newspaper, magazine or similar medium or broadcast over television or radio, or any seminar
or meeting whose attendees have been invited by any general solicitation or general
advertising) was used by the Company or any of its representatives (other than the Initial
Purchasers, as to whom the Company makes no representation) in connection with the offer and
resale of the Notes.

 

 

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     (c) Each of the Preliminary Offering Memorandum, the Pricing Disclosure Package and the
Offering Memorandum, each as of its respective date, contains all the information specified
in, and meeting the requirements of, Rule 144A(d)(4) under the Securities Act.

     (d) The Preliminary Offering Memorandum, the Pricing Disclosure Package and the
Offering Memorandum have been prepared by the Company for use by the Initial Purchasers in
connection with the Exempt Resales. No order or decree preventing the use of the
Preliminary Offering Memorandum, the Pricing Disclosure Package or the Offering Memorandum,
or any order asserting that the transactions contemplated by this Agreement are subject to
the registration requirements of the Securities Act, has been issued, and no proceeding for
that purpose has commenced or is pending or, to the knowledge of the Company is
contemplated.

     (e) The Pricing Disclosure Package did not, as of the Applicable Time, and will not, as
of the applicable Delivery Date, contain an untrue statement of a material fact or omit to
state a material fact necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading; provided that no representation or
warranty is made as to information contained in or omitted from the Pricing Disclosure
Package in reliance upon and in conformity with written information furnished to the Company
through the Representatives by or on behalf of any Initial Purchaser specifically for
inclusion therein, which information is specified in Section 9(e).

     (f) The Offering Memorandum will not, as of its date and as of the applicable Delivery
Date, contain an untrue statement of a material fact or omit to state a material fact
necessary to make the statements therein, in the light of the circumstances under which they
were made, not misleading; provided that no representation or warranty is made as to
information contained in or omitted from the Offering Memorandum in reliance upon and in
conformity with written information furnished to the Company through the Representatives by
or on behalf of any Initial Purchaser specifically for inclusion therein, which information
is specified in Section 9(e).

     (g) The Company has not made any offer to sell or solicitation of an offer to buy the
Notes that would constitute a “free writing prospectus” (if the offering of the Notes was
made pursuant to a registered offering under the Securities Act), as defined in Rule 405
under the Securities Act (a “Free Writing Offering Document”) without the prior consent of
the Representatives; any such Free Writing Offering Document the use of which has been
previously consented to by the Initial Purchasers is set forth substantially in form and
substance as attached hereto on Schedule 3. Each Free Writing Offering Document,
when taken together with the Pricing Disclosure Package, did not, as of the Applicable Time,
and will not, as of the applicable Delivery Date, contain an untrue statement of a material
fact or omit to state a material fact necessary to make the statements therein, in the light
of the circumstances under which they were made, not misleading; provided that no
representation or warranty is made as to information contained therein or omitted therefrom
in reliance upon and in conformity with written information furnished to the Company through
the Representatives by or on behalf of any

 

 

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Initial Purchaser specifically for inclusion therein, which information is specified in
Section 9(e).

     (h) The Exchange Act Reports did not, when filed with the Commission, contain an untrue
statement of a material fact or omit to state a material fact required to be stated therein
or necessary to make the statements therein, in the light of the circumstances under which
they were made, not misleading; provided that the foregoing representation and warranty is
given on the basis that any statement contained in an Exchange Act Report shall be deemed
not to be contained therein if the statement has been modified or superseded by any
statement in a subsequently filed Exchange Act Report or in any amendment or supplement
thereto.

     (i) Each of the Company and its subsidiaries (as defined in Section 18) has been duly
organized, is validly existing and in good standing as a corporation or other business
entity under the laws of its jurisdiction of organization and is qualified to do business
and in good standing as a foreign corporation or other business entity in each jurisdiction
in which its ownership or lease of property or the conduct of its businesses requires such
qualification, except where the failure to be so qualified or in good standing would not, in
the aggregate, reasonably be expected to have a material adverse effect on the financial
condition, results of operations, stockholders’ equity, properties or business of the
Company and its subsidiaries taken as a whole (a “Material Adverse Effect”); each of the
Company and its subsidiaries has all power and authority necessary to own or hold its
properties and to conduct the businesses in which it is engaged. Schedule 4-A hereto
sets forth a true and correct list of all subsidiaries owned or controlled by the Company
that would be required to be disclosed under Item 601(b)(21) of Regulation S-K. None of the
subsidiaries of the Company (other than the subsidiaries listed on Schedule 4-B
hereto (collectively, the “Significant Subsidiaries”)) is a “significant subsidiary” (as
defined in Rule 405).

     (j) The Company has an authorized capitalization as set forth in each of the Pricing
Disclosure Package and the Offering Memorandum, and all of the issued and outstanding shares
of capital stock of the Company have been duly authorized and validly issued, are fully paid
and non-assessable, conform in all material respects to the description thereof contained or
incorporated by reference in each of the Pricing Disclosure Package and the Offering
Memorandum and were issued in compliance with federal and, to the best knowledge of the
Company, state securities laws and not in violation of any preemptive right, resale right,
right of first refusal or similar right. All of the Company’s options, warrants and other
rights to purchase or exchange any securities for shares of the Company’s capital stock have
been duly authorized and validly issued, conform in all material respects to the description
thereof contained in each of the Pricing Disclosure Package and the Offering Memorandum and
were issued in compliance with federal and, to the best knowledge of the Company, state
securities laws. All of the issued shares of capital stock of each subsidiary of the Company
have been duly authorized and validly issued, are fully paid and non-assessable and are
owned directly or indirectly by the Company, free and clear of all liens, encumbrances,
equities or claims, except for such liens, encumbrances, equities or claims created pursuant
to the Credit and Guaranty Agreement, dated as of February 9, 2007, among the Company,
Covanta Energy

 

 

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Corporation, certain of its subsidiaries, the lenders party thereto from time to time
and JPMorgan Chase Bank, N.A., as administrative agent, or as would not, in the aggregate,
reasonably be expected to have a Material Adverse Effect.

     (k) The Company has all requisite corporate power and authority to execute, deliver and
perform its obligations under the Notes and the Indenture; the Notes have been duly
authorized and, when issued and delivered by the Company and paid for by the Initial
Purchasers pursuant to this Agreement and duly authenticated by the Trustee, will have been
duly executed, authenticated, issued and delivered and will constitute valid and legally
binding obligations of the Company entitled to the benefits provided by the Indenture, and
will be enforceable against the Company in accordance with their terms, except to the extent
that such enforceability may be limited by applicable bankruptcy, insolvency, fraudulent
conveyance, reorganization, moratorium and similar laws affecting creditors’ rights
generally and by general equity principles (whether considered in a proceeding in equity or
at law); the Indenture has been duly authorized by the Company and, when executed and
delivered by the Company, and assuming the due authorization, execution and delivery of the
Indenture by the Trustee, will constitute a valid and legally binding agreement of the
Company, enforceable against the Company in accordance with its terms, except to the extent
that such enforceability may be limited by applicable bankruptcy, insolvency, fraudulent
conveyance, reorganization, moratorium and similar laws affecting creditors’ rights
generally and by general equity principles (whether considered in a proceeding in equity or
at law); and the Notes and the Indenture will conform in all material respects to the
descriptions thereof in each of the Pricing Disclosure Package and the Offering Memorandum.

     (l) The Company has all requisite corporate power and authority to execute, deliver and
perform its obligations under this Agreement. This Agreement has been duly and validly
authorized, executed and delivered by the Company.

     (m) The execution, delivery and performance of this Agreement by the Company, the
issuance of the Notes, the consummation of the other transactions contemplated hereby and
the application of the proceeds from the sale of the Notes as described under “Use of
Proceeds” in each of the Pricing Disclosure Package and the Offering Memorandum will not
(i) conflict with or result in a breach or violation of any of the terms or provisions of,
impose any lien, charge or encumbrance upon any property or assets of the Company and its
subsidiaries, or constitute a default under, any indenture, mortgage, deed of trust, loan
agreement, license or other agreement or instrument to which the Company or any of its
subsidiaries is a party or by which the Company or any of its subsidiaries is bound or to
which any of the property or assets of the Company or any of its subsidiaries is subject,
except as would not, in the aggregate, reasonably be expected to have a Material Adverse
Effect or a material adverse effect on the performance of this Agreement, the issuance of
the Notes or consummation of the other transactions contemplated hereby, (ii) result in any
violation of the provisions of the charter or by-laws (or similar organizational documents)
of the Company or any of its subsidiaries; or (iii) result in any violation of any statute
or any order, rule or regulation of any court or governmental agency or body having
jurisdiction over the Company or any of its subsidiaries or any of their properties or
assets.

 

 

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     (n) No consent, approval, authorization or order of, or filing or registration with,
any court or governmental agency or body having jurisdiction over the Company or any of its
subsidiaries or any of their properties or assets is required for the execution, delivery
and performance of this Agreement by the Company, the issuance of the Notes, the
consummation of the other transactions contemplated hereby and the application of the
proceeds from the sale of the Notes as described under “Use of Proceeds” in each of the
Pricing Disclosure Package and the Offering Memorandum, except for such consents, approvals,
authorizations, registrations or qualifications as may be required under applicable state or
foreign securities laws in connection with the purchase and sale of the Notes by the Initial
Purchasers.

     (o) Except as described in each of the most recent Pricing Disclosure Package and the
Offering Memorandum, there are no contracts, agreements or understandings between the
Company and any person granting such person the right (other than rights which have been
waived in writing or otherwise satisfied) to require the Company to file a registration
statement under the Securities Act with respect to any securities of the Company owned or to
be owned by such person.

     (p) Neither the Company nor any other person acting on behalf of the Company has sold
or issued any securities that would be integrated with the offering of the Notes
contemplated by this Agreement pursuant to the Securities Act, the rules and regulations
promulgated by the Commission or the interpretations thereof by the Commission.

     (q) Except as described in each of the Pricing Disclosure Package and the Offering
Memorandum, (i) neither the Company nor any of its subsidiaries has sustained, since the
date of the latest audited financial statements included or incorporated by reference in the
Pricing Disclosure Package, any loss or interference with its business from fire, explosion,
flood or other calamity, whether or not covered by insurance, or from any labor dispute or
court or governmental action, order or decree, and (ii) since such date, there has not been
any change in the capital stock of the Company or the long-term debt of the Company or any
of its subsidiaries or any adverse change, or any development involving a prospective
adverse change, in or affecting the financial condition, results of operations,
stockholders’ equity, properties, management or business of the Company and its subsidiaries
taken as a whole, in each case except as would not, in the aggregate, reasonably be expected
to have a Material Adverse Effect.

     (r) Since the date as of which information is given in the Pricing Disclosure Package
and except as described in each of the Pricing Disclosure Package and the Offering
Memorandum, the Company has not (i) incurred any material liability or obligation, direct or
contingent, other than liabilities and obligations that were incurred in the ordinary course
of business, (ii) entered into any material transaction not in the ordinary course of
business or (iii) declared or paid any dividend on its capital stock.

     (s) The statements set forth or incorporated by reference in each of the Pricing
Disclosure Package and the Offering Memorandum under the caption “Description of the Notes,”
insofar as they purport to constitute a summary of the material terms of the

 

 

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Notes, under the caption “Description of Registrant’s Securities to be Registered” in
Form 8-A/A filed with the Commission on November 17, 2006, insofar as they purport to
constitute a summary of the material terms of the Common Stock, under the caption
“Description of Concurrent Cash Convertible Note Hedge Transactions and Warrant
Transactions,” insofar as they purport to constitute a summary of the material terms of the
cash convertible note hedge transactions and the warrant transactions, under the caption
“Certain United States Federal Income Tax Considerations,” insofar as they purport to
describe the provisions of the documents and matters referred to therein, and under the
caption “Plan of Distribution,” insofar as they purport to describe the provisions of the
documents referred to therein, fairly summarize in all material respects the matters
referred to therein.

     (t) The historical financial statements of the Company and its subsidiaries (including
the related notes and supporting schedules) included or incorporated by reference in the
Pricing Disclosure Package and the Offering Memorandum present fairly in all material
respects the financial condition, results of operations and cash flows of the entities
purported to be shown thereby at the dates and for the periods indicated and have been
prepared in conformity with accounting principles generally accepted in the United States
applied on a consistent basis throughout the periods involved.

     (u) Ernst & Young LLP, who have certified certain financial statements of the Company
and its consolidated subsidiaries, whose report appears or is incorporated by reference in
each of the Pricing Disclosure Package and the Offering Memorandum and who have delivered
the initial letter referred to in Section 8(h) hereof, are independent public accountants as
required by the Securities Act and the rules and regulations of the Commission thereunder.

     (v) The Company and each of its subsidiaries have good and marketable title in fee
simple to all real property and good and marketable title to all personal property owned by
them, in each case, free and clear of all liens, encumbrances and defects, except such as
are described in each of the Pricing Disclosure Package and the Offering Memorandum or such
as would not reasonably be expected to result in a Material Adverse Effect; and all assets
held under lease by the Company and its subsidiaries are held by them under valid,
subsisting and enforceable leases, with such exceptions as would not reasonably be expected
to result in a Material Adverse Effect.

     (w) The Company and each of its subsidiaries carry, or are covered by, insurance from
insurers of recognized financial responsibility in such amounts and covering such risks as
the Company reasonably believes (i) is commercially adequate for the conduct of their
respective businesses and the value of their respective properties and (ii) is customary for
companies engaged in similar businesses in similar industries. All policies of insurance of
the Company and its subsidiaries are in full force and effect; the Company and its
subsidiaries are in compliance with the terms of such policies in all material respects; and
neither the Company nor any of its subsidiaries has received notice from any insurer or
agent of such insurer that material capital improvements or other material expenditures are
required or necessary to be made in order to continue such insurance.

 

 

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     (x) The Company is not, and as of the applicable Delivery Date (as defined in Section
5) and after giving effect to the offer and sale of the Notes and the application of the
proceeds therefrom as described under “Use of Proceeds” in each of the Pricing Disclosure
Package and the Offering Memorandum will not be, an “investment company” within the meaning
of the Investment Company Act of 1940, as amended, and the rules and regulations of the
Commission thereunder.

     (y) Except as described in each of the Pricing Disclosure Package and the Offering
Memorandum, there are no legal or governmental proceedings pending to which the Company or
any of its subsidiaries is a party or of which any property or assets of the Company or any
of its subsidiaries is the subject that would, in the aggregate, reasonably be expected to
have a Material Adverse Effect or would, in the aggregate, reasonably be expected to have a
material adverse effect on the performance of this Agreement, the issuance of the Notes or
consummation of the other transactions contemplated hereby; and to the Company’s knowledge,
no such proceedings are threatened or contemplated by governmental authorities or others.

     (z) There are no material legal or governmental proceedings or contracts or other
material documents of a character that would be required to be described in a registration
statement filed under the Securities Act or, in the case of documents, to be filed as
exhibits to such registration statement pursuant to Item 601(10) of Regulation S-K, that are
not described in each of the Pricing Disclosure Package and the Offering Memorandum.

     (aa) No relationship, direct or indirect, exists that would be required to be described
in a registration statement filed under the Securities Act between or among the Company, on
the one hand, and the directors, officers, stockholders, customers or suppliers of the
Company, on the other hand, that is not described in each of the Pricing Disclosure Package
and the Offering Memorandum.

     (bb) No labor disturbance by the employees of the Company or its subsidiaries exists
or, to the knowledge of the Company, is imminent that would reasonably be expected to have a
Material Adverse Effect.

     (cc) (i) Each “employee benefit plan” (within the meaning of Section 3(3) of the
Employee Retirement Security Act of 1974, as amended (“ERISA”)) for which the Company or any
member of its “Controlled Group” (defined as any organization which is a member of a
controlled group of corporations within the meaning of Section 414 of the Internal Revenue
Code of 1986, as amended (the “Code”)) would have any liability (each a “Plan”) has been
maintained in compliance with its terms and with the requirements of all applicable
statutes, rules and regulations including ERISA and the Code; (ii) with respect to each
Plan: (a) no “reportable event” (within the meaning of Section 4043(c) of ERISA, including,
without limitation, any failure to make a required minimum funding payment as described in
Pension Benefit Guaranty Corporation (“PBGC”) Regulation Section 4043.25) has occurred or is
reasonably expected to occur; (b) no prohibited transaction, within the meaning of Section
406 of ERISA or Section 4975 of the Code, has occurred with respect to any Plan excluding
transactions effected pursuant to a

 

 

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statutory or administrative exemption; (c) no Plan has failed (whether or not waived),
or is reasonably expected to fail, to satisfy the minimum funding standards (within the
meaning of Section 302 of ERISA or Section 412 of the Code) applicable to such Plan; (d) no
Plan is, or is reasonably expected to be, in “at-risk status” (within the meaning of Section
303(i) of ERISA) or “endangered status” or “critical status” (within the meaning of Section
305 of ERISA); and (e) neither the Company or any member of its Controlled Group has
incurred, or reasonably expects to incur, any liability under Title IV of ERISA (other than
contributions to the Plan or premiums to the PBGC in the ordinary course and without
default) in respect of a Plan (including a “multiemployer plan”, within the meaning of
Section 4001(c)(3) of ERISA); and (iii) each Plan that is intended to be qualified under
Section 401(a) of the Code is so qualified and nothing has occurred, whether by action or by
failure to act, which would cause the loss of such qualification.

     (dd) The Company and each of its subsidiaries have filed all federal, state, local and
foreign income and franchise tax returns required to be filed through the date hereof,
subject to permitted extensions, and have paid all taxes due thereon, and no tax deficiency
has been determined adversely to the Company or any of its subsidiaries, nor does the
Company have any knowledge of any tax deficiencies that would, in the aggregate, reasonably
be expected to have a Material Adverse Effect.

     (ee) Neither the Company nor any of its subsidiaries (i) is in violation of its charter
or by-laws (or similar organizational documents), (ii) is in default, and no event has
occurred that, with notice or lapse of time or both, would constitute such a default, in the
due performance or observance of any term, covenant or condition contained in any indenture,
mortgage, deed of trust, loan agreement, license or other agreement or instrument to which
it is a party or by which it is bound or to which any of its properties or assets is subject
or (iii) is in violation of any statute or any order, rule or regulation of any court or
governmental agency or body having jurisdiction over it or its property or assets or has
failed to obtain any license, permit, certificate, franchise or other governmental
authorization or permit necessary to the ownership of its property or to the conduct of its
business, except in the case of clauses (ii) and (iii), to the extent any such conflict,
breach, violation or default would not, in the aggregate, reasonably be expected to have a
Material Adverse Effect.

     (ff) The Company and each of its subsidiaries (i) make and keep accurate books and
records and (ii) maintain a system of internal accounting controls sufficient to provide
reasonable assurance that (A) transactions are executed in accordance with management’s
general or specific authorization, (B) transactions are recorded as necessary to permit
preparation of the Company’s financial statements in conformity with accounting principles
generally accepted in the United States and to maintain accountability for its assets, (C)
access to the Company’s assets is permitted only in accordance with management’s general or
specific authorization and (D) the recorded accountability for the Company’s assets is
compared with existing assets at reasonable intervals and appropriate action is taken with
respect to any differences.

     (gg) (i) The Company and each of its subsidiaries have established and maintain
disclosure controls and procedures (as such term is defined in Rule 13a-15

 

 

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under the Exchange Act), (ii) such disclosure controls and procedures are designed to
ensure that the information required to be disclosed by the Company and its subsidiaries in
the reports they will file or submit under the Exchange Act is accumulated and communicated
to management of the Company and its subsidiaries, including their respective principal
executive officers and principal financial officers, as appropriate, to allow timely
decisions regarding required disclosure to be made and (iii) such disclosure controls and
procedures are effective in all material respects to perform the functions for which they
were established.

     (hh) There is and has been no failure on the part of the Company and any of the
Company’s directors or officers, in their capacities as such, to comply in all material
respects with the applicable provisions of the Sarbanes-Oxley Act of 2002 and the rules and
regulations promulgated in connection therewith.

     (ii) The Company and each of its subsidiaries have such permits, licenses, patents,
franchises, certificates of need and other approvals or authorizations of governmental or
regulatory authorities (“Permits”) as are necessary under applicable law to own their
properties and conduct their businesses in the manner described in each of the Pricing
Disclosure Package and the Offering Memorandum, except for any of the foregoing that would
not, in the aggregate, reasonably be expected to have a Material Adverse Effect or except as
described in each of the Pricing Disclosure Package and the Offering Memorandum; each of the
Company and its subsidiaries has fulfilled and performed all of its material obligations
with respect to the Permits; none of the Company or its subsidiaries is aware of any
proceedings relating to the revocation or material modification thereof, except for any of
the foregoing that would not reasonably be expected to have a Material Adverse Effect or
except as described in each of the Pricing Disclosure Package and the Offering Memorandum.

     (jj) The Company and each of its subsidiaries own or possess adequate rights to use all
material patents, patent applications, trademarks, service marks, trade names, trademark
registrations, service mark registrations, copyrights, licenses, know-how, software, systems
and technology (including trade secrets and other unpatented and/or unpatentable proprietary
or confidential information, systems or procedures) necessary for the conduct of their
respective businesses and have no reason to believe that the conduct of their respective
businesses will conflict with, and have not received any notice of any claim of conflict
with, any such rights of others, except for any failure to own or possess such adequate
rights or any such conflict that would not reasonably be expected to result in a Material
Adverse Effect.

     (kk) The Company and each of its subsidiaries (i) are, and at all times prior hereto
were, in compliance with all laws, regulations, ordinances, rules, orders, judgments,
decrees, permits or other legal requirements of any governmental authority, including
without limitation any international, national, state, provincial, regional, or local
authority, relating to the protection of human health or safety, the environment, or natural
resources, or to hazardous or toxic substances or wastes, pollutants or contaminants
(“Environmental Laws”) applicable to such entity, which compliance includes, without
limitation, obtaining, maintaining and complying with all permits and

 

 

12

authorizations and approvals required by Environmental Laws to conduct their respective
businesses, and (ii) have not received notice of any actual or alleged violation of
Environmental Laws, or of any potential liability for or other obligation concerning the
presence, disposal or release of hazardous or toxic substances or wastes, pollutants or
contaminants, except in the case of clause (i) or (ii) where such non-compliance, violation,
liability, or other obligation would not, in the aggregate, reasonably be expected to have a
Material Adverse Effect. Except as described in each of the Pricing Disclosure Package and
the Offering Memorandum, (A) there are no proceedings that are pending, or known to be
contemplated, against the Company or any of its subsidiaries under Environmental Laws in
which a governmental authority is also a party, other than such proceedings regarding which
it is reasonably believed no monetary sanctions of $100,000 or more will be imposed, (B) the
Company and its subsidiaries are not aware of any issues regarding compliance with
Environmental Laws, or liabilities or other obligations under Environmental Laws or
concerning hazardous or toxic substances or wastes, pollutants or contaminants, that would
reasonably be expected to have a material effect on the capital expenditures, earnings or
competitive position of the Company and its subsidiaries and (C) none of the Company and
its subsidiaries anticipates material capital expenditures relating to Environmental Laws.

     (ll) The Company is in compliance in all respects with all presently applicable state
and local laws and regulations relating to the safety of its operations, including the
Operational Safety and Health Act of 1970, as amended, and the regulations thereunder,
except where such non-compliance would not reasonably be expected to have a Material Adverse
Effect.

     (mm) For each of the insurance Subsidiaries of the Company chartered as an insurance
company under state law other than Valor Insurance Company, Incorporated (the “Insurance
Subsidiaries”), the Company has delivered true, correct and complete copies of the statutory
financial statements (including the annual reports filed in each state in which one of such
Insurance Subsidiaries is admitted or approved) for each such Insurance Subsidiary for the
years 2006 through 2008. All such statements shall be referred to as “Insurance Subsidiary
Statements”; the Insurance Subsidiary Statements present fairly in all material respects, on
a consistent basis and in accordance with practices prescribed or permitted by the
appropriate regulatory agencies of each state in which the Insurance Subsidiary Statements
have been filed or may be required to be filed, the financial position at the end of each
such referenced period and results of each such Insurance Subsidiary’s operations for each
such referenced period; the exhibits and schedules included in the Insurance Subsidiary
Statements are fairly stated in all material respects in relation to the subject Insurance
Subsidiary and the Insurance Subsidiary Statements comply in all material respects with
applicable regulatory requirements.

     (nn) Each of the Insurance Subsidiaries is duly licensed as an insurance company under
the applicable insurance laws and the rules, regulations and interpretations of the
insurance regulatory authorities thereunder of each jurisdiction in which the conduct of its
existing business as described in the Pricing Disclosure Package and the Offering Memorandum
requires such licensing, except for such jurisdictions in

 

 

13

which the failure to be so licensed would not, individually or in the aggregate, be
reasonably expected to result in a Material Adverse Effect.

     (oo) Each subsidiary of the Company that owns, leases or operates an electric
generation facility located within the United States that makes sales at wholesale (i)
either (A) has been granted by the Federal Energy Regulatory Commission (“FERC”) “exempt
wholesale generator” or “EWG” (within the meaning of FERC regulations) status, (B) owns a
facility that is a “Qualifying Facility” (“QF”) as defined under the Public Utility
Regulatory Policies Act of 1978, as amended, and the current rules and regulations
promulgated thereunder (“PURPA”), or (C) operates a facility owned by a state or
municipality of a state and is thus exempt from the Federal Power Act (“FPA”) under Section
201(f) of the FPA; and (ii) other than Covanta Mid-Connecticut, Inc. (which operates a
facility that is owned by the Connecticut Resource Recovery Authority, a public
instrumentality and political subdivision of the State of Connecticut established by
statute), either (A) has received an order from the FERC that is in full force and effect
and not subject to any pending challenge, investigation, complaint, or other proceeding
(other than generic proceedings generally applicable in the industry) (x) authorizing such
subsidiary to engage in wholesale sales of energy, capacity and/or ancillary services
pursuant to Section 205 of the FPA and (y) granting blanket authorizations to issue
securities and to assume liabilities pursuant to Section 204 of the FPA or (B) with respect
to any subsidiary that owns, leases or operates a QF, such facility is a QF under PURPA and
is exempt from regulation under Section 204 of the FPA, and exempt from Sections 205 and 206
of the FPA with respect to current sales from the facilities.

     (pp) Neither the Company, nor any of its subsidiaries, is subject to (i) regulation as
a “public utility”, “public service company” or “utility holding company” (or any similar
designation) by any state in the United States, including regulation of rates for utility
service, securities issuances or other transactions, or (ii) regulation by any local, state,
federal or foreign governmental authority requiring any notice, consent or approval for the
issuance of the Notes in the manner contemplated in this Agreement.

     (qq) Other than the Insurance Subsidiaries, no subsidiary of the Company is currently
prohibited, directly or indirectly, from paying any dividends to the Company, from making
any other distribution on such subsidiary’s capital stock, from repaying to the Company any
loans or advances to such subsidiary from the Company or from transferring any of such
subsidiary’s property or assets to the Company or any other subsidiary of the Company,
except as described in each of the Pricing Disclosure Package and the Offering Memorandum.

     (rr) Neither the Company nor any of its subsidiaries, nor, to the knowledge of the
Company, any director, officer, agent, employee or other person associated with or acting on
behalf of the Company or any of its subsidiaries, has (i) used any corporate funds for any
unlawful contribution, gift, entertainment or other unlawful expense relating to political
activity; (ii) made any direct or indirect unlawful payment to any foreign or domestic
government official or employee from corporate funds; (iii) violated or is in violation of
any provision of the U.S. Foreign Corrupt Practices Act of 1977; or

 

 

14

(iv) made any bribe, rebate, payoff, influence payment, kickback or other unlawful
payment.

     (ss) The operations of the Company and its subsidiaries are and have been conducted at
all times in compliance with applicable financial recordkeeping and reporting requirements
of the Currency and Foreign Transactions Reporting Act of 1970, as amended, the money
laundering statutes of all jurisdictions, the rules and regulations thereunder and any
related or similar rules, regulations or guidelines, issued, administered or enforced by any
governmental agency (collectively, the “Money Laundering Laws”) and no action, suit or
proceeding by or before any court or governmental agency, authority or body or any
arbitrator involving the Company or any of its subsidiaries with respect to the Money
Laundering Laws is pending or, to the knowledge of the Company, threatened, except, in each
case, as would not reasonably be expected to have a Material Adverse Effect.

     (tt) Neither the Company nor any of its subsidiaries nor, to the knowledge of the
Company, any director, officer, agent, employee or affiliate of the Company or any of its
subsidiaries is currently subject to any U.S. sanctions administered by the Office of
Foreign Assets Control of the U.S. Treasury Department (“OFAC”); and the Company will not
directly or indirectly use the proceeds of the offering, or lend, contribute or otherwise
make available such proceeds to any subsidiary, joint venture partner or other person or
entity, for the purpose of financing the activities of any person currently subject to any
U.S. sanctions administered by OFAC.

     (uu) The Company has not distributed and, prior to the later to occur of any Delivery
Date and completion of the distribution of the Notes, will not distribute any offering
material in connection with the offering and sale of the Notes other than the Pricing
Disclosure Package, the Offering Memorandum and any Free Writing Offering Document to which
the Representatives have consented in accordance with Section 6(f).

     (vv) The Company and its affiliates have not taken and will not take, directly or
indirectly, any action designed to or that has constituted or that could reasonably be
expected to cause or result in the stabilization or manipulation of the price of any
securities of the Company in connection with the offering of the Notes.

     (ww) No forward-looking statement (within the meaning of Section 27A of the Securities
Act and Section 21E of the Exchange Act) contained in the Pricing Disclosure Package or the
Offering Memorandum has been made or reaffirmed without a reasonable basis or has been
disclosed other than in good faith.

          Any certificate signed by any officer of the Company and delivered to the Representatives or
counsel for the Initial Purchasers in connection with the offering of the Notes shall be deemed a
representation and warranty by the Company, as to matters covered thereby, but only as of the date
thereof, to each Initial Purchaser.

          3. Purchase of the Notes by the Initial Purchasers. On the basis of the representations and
warranties contained in, and subject to the terms and conditions of, this

 

 

15

Agreement, the Company agrees to issue and sell to the several Initial Purchasers, and each of
the Initial Purchasers, severally and not jointly, agrees to purchase from the Company the
principal amount of the Firm Notes set forth opposite that Initial Purchaser’s name in Schedule
1 hereto, plus any additional principal amount of Notes which such Initial Purchaser may become
obligated to purchase pursuant to the provisions of Section 10 hereof.

          In addition, the Company grants to the Initial Purchasers an option to purchase up to an
additional $60,000,000 aggregate principal amount of Option Notes, solely to cover over-allotments,
if any. On the basis of the representations and warranties contained in, and subject to the terms
and conditions of, this Agreement, each Initial Purchaser agrees, to the extent such option is
exercised, severally and not jointly, to purchase the principal amount of Option Notes that bears
the same proportion to the aggregate principal amount of Option Notes to be sold on such Delivery
Date as the principal amount of Firm Notes set forth in Schedule 1 hereto opposite the name of such
Initial Purchaser bears to the aggregate principal amount of Firm Notes.

          The price of the Firm Notes purchased by the Initial Purchasers shall be equal to 97.25% of
the principal amount thereof. The price of the Option Notes purchased by the Initial Purchasers
shall be 97.25% of the principal amount thereof plus unpaid interest that has accrued with respect
to the Firm Notes from the Initial Delivery Date to, but not including, the applicable Delivery
Date.

          The Company shall not be obligated to deliver any of the Firm Notes or Option Notes to be
delivered on the applicable Delivery Date, except upon payment for all such Notes to be purchased
on such Delivery Date as provided herein.

     4. Offering of Notes by the Initial Purchasers. (a) Each of the Initial Purchasers,
severally and not jointly, hereby represents and warrants to the Company that it will offer
the Notes for sale upon the terms and conditions set forth in this Agreement and in the
Pricing Disclosure Package. Each of the Initial Purchasers hereby represents and warrants
to, and agrees with, the Company, on the basis of the representations, warranties and
agreements of the Company, that such Initial Purchaser: (i) is a QIB with such knowledge and
experience in financial and business matters as are necessary in order to evaluate the
merits and risks of an investment in the Notes; (ii) is purchasing the Notes pursuant to a
private sale exempt from registration under the Securities Act; (iii) in connection with the
Exempt Resales, will solicit offers to buy the Notes only from, and will offer to sell the
Notes only to, the Eligible Purchasers in accordance with this Agreement and on the terms
contemplated by the Pricing Disclosure Package; and (iv) will not offer or sell the Notes,
nor has it offered or sold the Notes by, or otherwise engaged in, any form of general
solicitation or general advertising (within the meaning of Regulation D, including, but not
limited to, advertisements, articles, notices or other communications published in any
newspaper, magazine, or similar medium or broadcast over television or radio, or any seminar
or meeting whose attendees have been invited by any general solicitation or general
advertising). The Initial Purchasers have advised the Company that they will offer the
Notes to Eligible Purchasers at a price initially equal to 100% of the principal amount
thereof, plus accrued interest, if any, from the Initial Delivery Date. Such price may be
changed by the Initial Purchasers at any time without notice.

 

 

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     (b) Each Initial Purchaser has not nor, prior to the later to occur of (A) the Initial
Delivery Date and (B) completion of the distribution of the Notes, will not, use, authorize
use of, refer to or distribute any material in connection with the offering and sale of the
Notes other than (i) the Preliminary Offering Memorandum, the Pricing Disclosure Package,
the Offering Memorandum, (ii) any written communication that contains no “issuer
information” (as defined in Rule 433(h)(2) under the Securities Act) that was not included
(including through incorporation by reference) in the Preliminary Offering Memorandum or any
Free Writing Offering Document listed on Schedule 3 hereto, (iii) the Free Writing
Offering Documents listed on Schedule 3 hereto, (iv) any written communication
prepared by such Initial Purchaser and approved in advance by the Company in writing, or (v)
any written communication that contains the terms of the Notes and/or other information that
was included (including through incorporation by reference) in the Preliminary Offering
Memorandum, the Pricing Disclosure Package or the Offering Memorandum.

          Each of the Initial Purchasers understands that the Company and, for purposes of the opinions
to be delivered to the Initial Purchasers pursuant to Section 8 hereof, counsel to the Company and
counsel to the Initial Purchasers, will rely upon the accuracy and truth of the foregoing
representations, warranties and agreements, and the Initial Purchasers hereby consent to such
reliance.

          5. Delivery of and Payment for the Notes. Delivery of and payment for the Firm Notes shall be
made at 10:00 A.M., New York City time, on the fourth full business day following the date of this
Agreement or at such other date or place as shall be determined by agreement between the
Representatives and the Company. This date and time are sometimes referred to as the “Initial
Delivery Date.” Delivery of the Firm Notes shall be made to the Representatives for the account of
each Initial Purchaser against payment by the several Initial Purchasers through the
Representatives of the respective aggregate purchase prices of the Firm Notes being sold by the
Company to or upon the order of the Company by wire transfer in immediately available funds to the
accounts specified by the Company. Time shall be of the essence, and delivery at the time and place
specified pursuant to this Agreement is a further condition of the obligation of each Initial
Purchaser hereunder. The Company shall deliver the Firm Notes through the facilities of The
Depository Trust Company (“DTC”) unless the Representatives shall otherwise instruct.

          The option granted in Section 2 may be exercised in whole or from time to time in part by
written notice being given to the Company by the Representatives not later than 30 days after the
date of this Agreement. Such notice shall set forth the aggregate principal amount of Option Notes
as to which the option is being exercised, the names in which the principal amount of Option Notes
are to be registered, the denominations in which the principal amount of Option Notes are to be
issued and the date and time, as determined by the Representatives, when the principal amount of
Option Notes are to be delivered; provided, however, that this date and time shall not be earlier
than the Initial Delivery Date nor earlier than the second business day after the date on which the
option shall have been exercised nor later than the tenth business day after the date on which the
option shall have been exercised. Each date and time the principal amount of Option Notes are
delivered is sometimes referred to as an “Option Notes Delivery Date,” and

 

 

17

the Initial Delivery Date and any Option Notes Delivery Date are sometimes each referred to as
a “Delivery Date.”

          Delivery of the Option Notes by the Company and payment for the Option Notes by the several
Initial Purchasers through the Representatives shall be made at 10:00 A.M., New York City time, on
the date specified in the corresponding notice described in the preceding paragraph or at such
other date or place as shall be determined by agreement between the Representatives and the
Company. On the Option Notes Delivery Date, the Company shall deliver or cause to be delivered the
Option Notes to the Representatives for the account of each Initial Purchaser against payment by
the several Initial Purchasers through the Representatives of the respective aggregate purchase
prices of the Option Notes being sold by the Company to or upon the order of the Company of the
purchase price by wire transfer in immediately available funds to the accounts specified by the
Company. Time shall be of the essence, and delivery at the time and place specified pursuant to
this Agreement is a further condition of the obligation of each Initial Purchaser hereunder. The
Company shall deliver the Option Notes through the facilities of DTC unless the Representatives
shall otherwise instruct.

          6. Further Agreements of the Company. The Company agrees:

     (a) To promptly furnish to the Initial Purchasers, without charge, such number of
copies of the Pricing Disclosure Package and the Offering Memorandum, as may then be amended
or supplemented, as they may reasonably request;

     (b) Not to make any amendment or supplement to the Pricing Disclosure Package or to the
Offering Memorandum of which the Initial Purchasers shall not previously have been advised
or to which they shall reasonably object after being so advised;

     (c) To the use of the Pricing Disclosure Package and the Offering Memorandum, in
accordance with state or foreign securities laws of the jurisdictions in which the
Securities are offered, by the Initial Purchasers and by all dealers to whom Notes may be
sold in connection with the offering and sale of the Notes;

     (d) To advise the Initial Purchasers promptly, and confirm such advice in writing, (i)
of the occurrence of any event which makes any statement of a material fact made in any of
the Pricing Disclosure Package or the Offering Memorandum, as then amended or supplemented,
untrue or which requires the making of any additions to or changes in any of the Pricing
Disclosure Package or the Offering Memorandum, as then amended or supplemented, in order to
make the statements therein, in the light of the circumstances under which they were made,
not misleading; (ii) of the issuance by any governmental or regulatory authority of any
order preventing or suspending the use of any of the Pricing Disclosure Package or the
Offering Memorandum or the initiation or, to the best knowledge of the Company, threatening
of any proceeding for that purpose; and (iii) of the receipt by the Company of any notice
with respect to any suspension of the qualification of the Notes for offer and sale in any
jurisdiction or the initiation or threatening of any proceeding for such purpose; and to use
its reasonable best efforts to prevent the issuance of any such order preventing or
suspending the use of any of the

 

 

18

Pricing Disclosure Package or the Offering Memorandum or suspending any such
qualification of the Securities and, if any such order is issued, will obtain as soon as
possible the withdrawal thereof;

     (e) If, at any time prior to completion of the distribution of the Notes by the Initial
Purchasers to Eligible Purchasers, any event occurs or information becomes known that, in
the judgment of the Company or in the opinion of counsel for the Initial Purchasers, should
be set forth in the Pricing Disclosure Package or the Offering Memorandum so that the
Pricing Disclosure Package or the Offering Memorandum, as then amended or supplemented, does
not include any untrue statement of material fact or omit to state a material fact necessary
in order to make the statements therein, in the light of the circumstances under which they
were made, not misleading, or if it is necessary to supplement or amend the Pricing
Disclosure Package or the Offering Memorandum in order to comply with any law, to prepare,
subject to Section 6(b), an appropriate supplement or amendment thereto, and to
expeditiously furnish to the Initial Purchasers and dealers a reasonable number of copies
thereof;

     (f) Not to make any offer to sell or solicitation of an offer to buy the Notes that
would constitute a Free Writing Offering Document without the prior consent of the
Representatives, which consent shall not be unreasonably withheld or delayed; if at any time
following issuance of a Free Writing Offering Document any event occurred or occurs as a
result of which such Free Writing Offering Document conflicts with the information in the
Preliminary Offering Memorandum, the Pricing Disclosure Package or the Offering Memorandum
or, when taken together with the information in the Preliminary Offering Memorandum, the
Pricing Disclosure Package or the Offering Memorandum, includes an untrue statement of a
material fact or omits to state any material fact necessary in order to make the statements
therein, in the light of the circumstances then prevailing, not misleading, as promptly as
practicable after becoming aware thereof, to give notice thereof to the Initial Purchasers
through the Representatives and, if requested by the Representatives, to prepare and furnish
without charge to each Initial Purchaser a Free Writing Offering Document or other document
which will correct such conflict, statement or omission;

     (g) Promptly from time to time to take such action as the Initial Purchasers may
reasonably request to qualify the Notes for offering and sale under state or foreign
securities laws of such jurisdictions as the Initial Purchasers may request and to comply
with such laws so as to permit the continuance of sales and dealings therein in such
jurisdictions for as long as may be necessary to complete the distribution of the Notes;
provided that in connection therewith the Company shall not be required to (i) qualify as a
foreign corporation in any jurisdiction in which it would not otherwise be required to so
qualify, (ii) file a general consent to service of process in any such jurisdiction or (iii)
subject itself to taxation in any jurisdiction in which it would not otherwise be subject;

     (h) To furnish to the holders of the Notes as soon as practicable after the end of each
fiscal year an annual report (including a balance sheet and statements of income,
stockholders’ equity and cash flows of the Company and its consolidated subsidiaries
certified by independent public accountants) and, as soon as practicable after the end of

 

 

19

each of the first three quarters of each fiscal year (beginning with the fiscal quarter
ending after the date of the Offering Memorandum), to make available to the holders of Notes
consolidated summary financial information of the Company and its subsidiaries for such
quarter in reasonable detail; provided that so long as the Company files periodic reports
pursuant to Section 13 or 15(d) of the Exchange Act for the foregoing periods, the Company
shall be deemed to comply with this Section 6(h);

     (i) For a period commencing on the date hereof and ending on the 60th day
after the date of the Offering Memorandum (the “Lock-Up Period”), not to, directly or
indirectly, (1) offer for sale, sell, pledge or otherwise dispose of (or enter into any
transaction or device that is designed to, or could be expected to, result in the
disposition by any person at any time in the future of) any shares of Common Stock or
securities convertible into or exchangeable for Common Stock or into or for cash based on
the market price of the Common Stock (other than the Notes and the warrant transactions
described in each of the Pricing Disclosure Package and the Offering Memorandum under
“Description of Cash Concurrent Convertible Note Hedge Transactions and Warrant
Transactions,” any shares issued upon conversion of the 1.00% Senior Convertible Debentures
due 2027 and shares issued pursuant to employee benefit plans, qualified stock option plans
or other employee compensation plans existing on the date hereof), or sell or grant options,
rights or warrants with respect to any shares of Common Stock or securities convertible into
or exchangeable for Common Stock or into or for cash based on the market price of the Common
Stock (other than the grant of options pursuant to option plans existing on the date
hereof), (2) enter into any swap or other derivatives transaction that transfers to another,
in whole or in part, any of the economic benefits or risks of ownership of such shares of
Common Stock, whether any such transaction described in clause (1) or (2) above is to be
settled by delivery of Common Stock or other securities, in cash or otherwise, (3) file or
cause to be filed a registration statement with respect to the registration of any shares of
Common Stock or securities convertible, exercisable or exchangeable into Common Stock or any
other securities of the Company (other than any registration statement on Form S-8) or (4)
publicly disclose the intention to do any of the foregoing, in each case without the prior
written consent of Barclays Capital Inc. on behalf of the Initial Purchasers, and to cause
each officer, director and stockholder of the Company set forth on Schedule 5 hereto
to furnish to Barclays Capital Inc., prior to the Initial Delivery Date, a letter or
letters, substantially in the form of Exhibit A hereto (the “Lock-Up Agreements”);
notwithstanding the foregoing, if (1) during the last 17 days of the Lock-Up Period, the
Company issues an earnings release or material news or a material event relating to the
Company occurs or (2) prior to the expiration of the Lock-Up Period, the Company announces
that it will release earnings results during the 16-day period beginning on the last day of
the Lock-Up Period, then the restrictions imposed in this paragraph shall continue to apply
until the expiration of the 18-day period beginning on the issuance of the earnings release
or the announcement of the material news or the occurrence of the material event, unless
Barclays Capital Inc., on behalf of the Initial Purchasers, waives such extension in
writing;

 

 

20

     (j) To apply the net proceeds from the sale of the Notes as set forth in each of the
Pricing Disclosure Package and the Offering Memorandum under the caption “Use of Proceeds”;

     (k) Not to resell, directly or indirectly, any of the Notes that have been acquired by
any of them, except for Notes purchased by the Company or any of its affiliates and resold
in a transaction registered under the Securities Act;

     (l) Not to sell, offer for sale or solicit offers to buy or otherwise negotiate in
respect of any security (as defined in the Securities Act) that would be integrated with the
sale of the Notes in a manner that would require the registration under the Securities Act
of the sale to the Initial Purchasers or the Eligible Purchasers of the Notes;

     (m) To use its best efforts to permit the Notes to be eligible for clearance and
settlement through DTC;

     (n) Between the date hereof and the Initial Delivery Date, not to do or authorize any
act or thing that would result in an adjustment of the conversion price or conversion rate
of the Notes; and

     (o) Without the consent of the Representatives, not to take any action prior to the
Initial Delivery Date which would require the Pricing Disclosure Package or the Offering
Memorandum to be amended or supplemented pursuant to Section 6(e).

          7. Expenses. The Company agrees, whether or not the transactions contemplated by this
Agreement are consummated or this Agreement is terminated, to pay all costs, expenses, fees and
taxes incident to and in connection with (a) the authorization, issuance, sale and delivery of the
Notes and any stamp duties or other taxes payable in that connection, and the preparation and
printing of certificates for the Notes; (b) the preparation, printing and distribution of the
Preliminary Offering Memorandum, the Pricing Disclosure Package and the Offering Memorandum and any
amendment or supplement thereto; (c) the production and distribution of this Agreement and any
other related documents in connection with the offering, purchase, sale and delivery of the Notes;
(d) the qualification of the Notes under the securities laws of the several jurisdictions as
provided in Section 6(g) and the preparation, printing and distribution of a Blue Sky Memorandum
(including reasonable and documented related fees and expenses of counsel to the Initial
Purchasers); (e) the preparation, printing and distribution of one or more versions of the Pricing
Disclosure Package and the Offering Memorandum for distribution in Canada (often in the form of a
Canadian “wrapper”) (including reasonable and documented related fees and expenses of Canadian
counsel to the Initial Purchasers); (f) the approval of the Notes by DTC for “book-entry” transfer;
(g) the investor presentations on any “road show” undertaken in connection with the marketing of
the Notes, including, without limitation, expenses associated with any electronic roadshow; and (h)
all other costs and expenses incident to the performance of the obligations of the Company,
including the costs and charges of any transfer agent and any registrar, any fees charged by rating
agencies for rating the Notes, the fees and expenses of the Trustee and any paying agent (including
related fees and expenses of any counsel to such parties).

 

 

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          8. Conditions of Initial Purchasers’ Obligations. The respective obligations of the Initial
Purchasers hereunder are subject to the accuracy, when made and on each Delivery Date, of the
representations and warranties of the Company contained herein, to the performance by the Company
of its obligations hereunder, and to each of the following additional terms and conditions:

     (a) No Initial Purchaser shall have discovered and disclosed to the Company on or prior
to such Delivery Date that the Pricing Disclosure Package or the Offering Memorandum, or any
amendment or supplement thereto, contains an untrue statement of a fact which, in the
opinion of Simpson Thacher & Bartlett LLP, counsel for the Initial Purchasers, is material
or omits to state a fact which, in the opinion of such counsel, is material and is required
to be stated therein or is necessary to make the statements therein not misleading.

     (b) All corporate proceedings and other legal matters incident to the authorization,
form and validity of this Agreement, the Notes, the Indenture, the Pricing Disclosure
Package and the Offering Memorandum, and all other legal matters relating to this Agreement
and the transactions contemplated hereby shall be reasonably satisfactory in all material
respects to counsel for the Initial Purchasers, and the Company shall have furnished to such
counsel all documents and information that they may reasonably request to enable them to
pass upon such matters.

     (c) Neal, Gerber & Eisenberg LLP shall have furnished to the Representatives its
written opinion and statement, as counsel to the Company, addressed to the Initial
Purchasers and dated such Delivery Date, in form and substance reasonably satisfactory to
the Representatives, substantially in the form attached hereto as Exhibit B-1.

     (d) Latham & Watkins LLP shall have furnished to the Representatives its written
opinions, as special counsel to the Company, addressed to the Initial Purchasers and dated
such Delivery Date, in form and substance reasonably satisfactory to the Representatives,
substantially in the form attached hereto as Exhibit B-2.

     (e) The General Counsel of the Company shall have furnished to the Representatives its
written opinion, addressed to the Initial Purchasers and dated such Delivery Date, in form
and substance reasonably satisfactory to the Representatives, substantially in the form
attached hereto as Exhibit B-3.

     (f) Dewey & LeBoeuf LLP shall have furnished to the Representatives its written
opinion, as regulatory counsel to the Company, addressed to the Initial Purchasers and dated
such Delivery Date, in form and substance reasonably satisfactory to the Representatives,
substantially in the form of attached hereto as Exhibit B-4.

     (g) The Representatives shall have received from Simpson Thacher & Bartlett LLP,
counsel for the Initial Purchasers, such opinion and statement, dated such Delivery Date,
with respect to the issuance and sale of the Notes, the Pricing Disclosure Package, the
Offering Memorandum and other related matters as the Representatives may reasonably require,
and the Company shall have furnished to such counsel such

 

 

22

documents as they reasonably request for the purpose of enabling them to pass upon such
matters.

     (h) At the time of execution of this Agreement, the Representatives shall have received
from Ernst & Young LLP a letter, in form and substance satisfactory to the Representatives,
addressed to the Initial Purchasers and dated the date hereof (i) confirming that they are
independent public accountants within the meaning of the Securities Act and are in
compliance with the applicable requirements relating to the qualification of accountants
under Rule 2-01 of Regulation S-X of the Commission, and (ii) stating, as of the date hereof
(or, with respect to matters involving changes or developments since the respective dates as
of which specified financial information is given in the Pricing Disclosure Package, as of a
date not more than three days prior to the date hereof), the conclusions and findings of
such firm with respect to the financial information and other matters ordinarily covered by
accountants’ “comfort letters” to initial purchasers in connection with registered public
offerings.

     (i) With respect to the letter of Ernst & Young LLP referred to in the preceding
paragraph and delivered to the Representatives concurrently with the execution of this
Agreement (the “initial letter”), the Company shall have furnished to the Representatives a
letter (the “bring-down letter”) of such accountants, addressed to the Initial Purchasers
and dated such Delivery Date (i) confirming that they are independent public accountants
within the meaning of the Securities Act and are in compliance with the applicable
requirements relating to the qualification of accountants under Rule 2-01 of Regulation S-X
of the Commission, (ii) stating, as of the date of the bring-down letter (or, with respect
to matters involving changes or developments since the respective dates as of which
specified financial information is given in each of the Pricing Disclosure Package and the
Offering Memorandum, as of a date not more than three days prior to the date of the
bring-down letter), the conclusions and findings of such firm with respect to the financial
information and other matters covered by the initial letter and (iii) confirming in all
material respects the conclusions and findings set forth in the initial letter.

     (j) The Company shall have furnished to the Representatives a certificate, dated such
Delivery Date, of its Chief Executive Officer and its Chief Financial Officer stating that:

     (i) The representations, warranties and agreements of the Company in Section 2
are true and correct on and as of such Delivery Date, and the Company has complied
with all its agreements contained herein and satisfied all the conditions on its
part to be performed or satisfied hereunder at or prior to such Delivery Date; and

     (ii) They have carefully examined the Pricing Disclosure Package and the
Offering Memorandum, and, in their opinion, (A) the Pricing Disclosure Package, as
of the Applicable Time and as of the applicable Delivery Date, and the Offering
Memorandum, as of its date and as of the applicable Delivery Date, did not and do
not contain any untrue statement of a material fact and did not and

 

 

23

do not omit to state a material fact necessary to make the statements therein,
in the light of the circumstances under which they were made, not misleading, and
(B) since the date of Pricing Disclosure Package, no event has occurred that should
have been set forth in a supplement or amendment to the Pricing Disclosure Package
or the Offering Memorandum.

     (k) Except as described in each of the Pricing Disclosure Package or the Offering
Memorandum, (i) neither the Company nor any of its subsidiaries shall have sustained, since
the date of the latest audited financial statements included or incorporated by reference in
the Pricing Disclosure Package, any loss or interference with its business from fire,
explosion, flood or other calamity, whether or not covered by insurance, or from any labor
dispute or court or governmental action, order or decree or (ii) since such date there shall
not have been any change in the capital stock of the Company or the long-term debt of the
Company or any of its subsidiaries or any change, or any development involving a prospective
change, in or affecting the financial condition, results of operations, stockholders’
equity, properties, management or business of the Company and its subsidiaries taken as a
whole, the effect of which, in any such case described in clause (i) or (ii), is, in the
judgment of the Representatives, so material and adverse as to make it impracticable or
inadvisable to proceed with the public offering or the delivery of the Notes being delivered
on such Delivery Date on the terms and in the manner contemplated in the Offering
Memorandum.

     (l) Subsequent to the execution and delivery of this Agreement (i) no downgrading shall
have occurred in the rating accorded the debt securities of the Company or any of its
subsidiaries by any “nationally recognized statistical rating organization” (as that term is
defined by the Commission for purposes of Rule 436(g)(2) under the Securities Act), and (ii)
no such organization shall have publicly announced that it has under surveillance or review,
with possible negative implications, its rating of any of the debt securities of the Company
or any of its subsidiaries.

     (m) Subsequent to the execution and delivery of this Agreement there shall not have
occurred any of the following: (i) trading in securities generally on the New York Stock
Exchange or the American Stock Exchange or in the over-the-counter market, or trading in any
securities of the Company on any exchange or in the over-the-counter market, shall have been
suspended or materially limited or the settlement of such trading generally shall have been
materially disrupted or minimum prices shall have been established on any such exchange or
such market by the Commission, by such exchange or by any other regulatory body or
governmental authority having jurisdiction, (ii) a banking moratorium shall have been
declared by federal or state authorities, (iii) the United States shall have become engaged
in hostilities, there shall have been an escalation in hostilities involving the United
States or there shall have been a declaration of a national emergency or war by the United
States or (iv) there shall have occurred such a material adverse change in general economic,
political or financial conditions, including, without limitation, as a result of terrorist
activities after the date hereof (or the effect of international conditions on the financial
markets in the United States shall be such), as to make it, in the judgment of the
Representatives, impracticable or inadvisable to proceed with the public offering or
delivery of the Notes being delivered on such

 

 

24

Delivery Date on the terms and in the manner contemplated in the Offering Memorandum.

     (n) The Lock-Up Agreements between the Representatives and the officers, directors and
certain stockholders of the Company set forth on Schedule 5, delivered to the
Representatives on or before the date of this Agreement, shall be in full force and effect
on such Delivery Date.

     (o) The Notes shall have been made eligible for clearance on DTC.

     (p) The conditions to the effectiveness of the cash convertible note hedge transactions
and warrant transactions in connection with the issuance of the Notes shall have been
satisfied.

          All opinions, letters, evidence and certificates mentioned above or elsewhere in this
Agreement shall be deemed to be in compliance with the provisions hereof only if they are in form
and substance reasonably satisfactory to counsel for the Initial Purchasers.

          9. Indemnification and Contribution.

     (a) The Company shall indemnify and hold harmless each Initial Purchaser, its
directors, officers and employees and each person, if any, who controls any Initial
Purchaser within the meaning of Section 15 of the Securities Act, from and against any loss,
claim, damage or liability, joint or several, or any action in respect thereof (including,
but not limited to, any loss, claim, damage, liability or action relating to purchases and
sales of Notes), to which that Initial Purchaser, director, officer, employee or controlling
person may become subject, under the Securities Act or otherwise, insofar as such loss,
claim, damage, liability or action arises out of, or is based upon, (i) any untrue statement
or alleged untrue statement of a material fact contained in (A) any Free Writing Offering
Document, the Preliminary Offering Memorandum, the Pricing Disclosure Package, the Offering
Memorandum or any amendment or supplement thereto, (B) any Blue Sky application or other
document prepared or executed by the Company (or based upon any written information
furnished by the Company for use therein) specifically for the purpose of qualifying any or
all of the Notes under the securities laws of any state or other jurisdiction (any such
application, document or information being hereinafter called a “Blue Sky Application”) or
(C) in any materials or information provided to investors by, or with the prior written
approval of, the Company in connection with the marketing of the offering of the Notes
(“Marketing Materials”), including any roadshow or investor presentations made to investors
by the Company (whether in person or electronically) (provided that no prior written
approval shall be required for any materials or information that are Free Writing Offering
Documents listed on Schedule 3 hereto or which contain only “issuer information” (as
defined in Rule 433(h)(2) under the Securities Act) and/or the terms of the Notes in each
case that was included (including through incorporation by reference) in the Preliminary
Offering Memorandum, the Pricing Disclosure Package or the Offering Memorandum), or (ii) the
omission or alleged omission to state in any Free Writing Offering Document, the Preliminary
Offering Memorandum, the Pricing Disclosure Package, the Offering

 

 

25

Memorandum or any amendment or supplement thereto, or in any Blue Sky Application or
any Marketing Materials, any material fact necessary to make the statements therein not
misleading, and shall reimburse each Initial Purchaser and each such director, officer,
employee or controlling person promptly upon demand for any legal or other expenses
reasonably incurred by that Initial Purchaser, director, officer, employee or controlling
person in connection with investigating or defending or preparing to defend against any such
loss, claim, damage, liability or action as such expenses are incurred; provided, however,
that the Company shall not be liable in any such case to the extent that any such loss,
claim, damage, liability or action arises out of, or is based upon, any untrue statement or
alleged untrue statement or omission or alleged omission made in any Preliminary Offering
Memorandum, the Pricing Disclosure Package or Offering Memorandum, or in any such amendment
or supplement thereto, or in any Blue Sky Application or any Marketing Materials, in
reliance upon and in conformity with written information concerning such Initial Purchaser
furnished to the Company through the Representatives by or on behalf of any Initial
Purchaser specifically for inclusion therein, which information consists solely of the
information specified in Section 9(e). The foregoing indemnity agreement is in addition to
any liability which the Company may otherwise have to any Initial Purchaser or to any
director, officer, employee or controlling person of that Initial Purchaser.

     (b) Each Initial Purchaser, severally and not jointly, shall indemnify and hold
harmless the Company, its directors, officers and employees, and each person, if any, who
controls the Company within the meaning of Section 15 of the Securities Act, from and
against any loss, claim, damage or liability, joint or several, or any action in respect
thereof, to which the Company or any such director, officer, employee or controlling person
may become subject, under the Securities Act or otherwise, insofar as such loss, claim,
damage, liability or action arises out of, or is based upon, (i) any untrue statement or
alleged untrue statement of a material fact contained in any Free Writing Offering Document,
the Preliminary Offering Memorandum, the Pricing Disclosure Package, the Offering Memorandum
or any amendment or supplement thereto, or in any Blue Sky Application or any Marketing
Material, or (ii) the omission or alleged omission to state in any Free Writing Offering
Document, the Preliminary Offering Memorandum, the Pricing Disclosure Package, the Offering
Memorandum or any amendment or supplement thereto, or in any Blue Sky Application or any
Marketing Material, any material fact necessary to make the statements therein not
misleading, but in each case only to the extent that the untrue statement or alleged untrue
statement or omission or alleged omission was made in reliance upon and in conformity with
written information concerning such Initial Purchaser furnished to the Company through the
Representatives by or on behalf of that Initial Purchaser specifically for inclusion
therein, which information is limited to the information set forth in Section 9(e). The
foregoing indemnity agreement is in addition to any liability that any Initial Purchaser may
otherwise have to the Company or any such director, officer, employee or controlling person.

     (c) Promptly after receipt by an indemnified party under this Section 9 of notice of
any claim or the commencement of any action, the indemnified party shall, if a claim in
respect thereof is to be made against the indemnifying party under this Section 9,

 

 

26

notify the indemnifying party in writing of the claim or the commencement of that
action; provided, however, that the failure to notify the indemnifying party shall not
relieve it from any liability which it may have under this Section 9 except to the extent it
has been materially prejudiced by such failure and, provided, further, that the failure to
notify the indemnifying party shall not relieve it from any liability which it may have to
an indemnified party otherwise than under this Section 9. If any such claim or action shall
be brought against an indemnified party, and it shall notify the indemnifying party thereof,
the indemnifying party shall be entitled to participate therein and, to the extent that it
wishes, jointly with any other similarly notified indemnifying party, to assume the defense
thereof with counsel reasonably satisfactory to the indemnified party. After notice from the
indemnifying party to the indemnified party of its election to assume the defense of such
claim or action, the indemnifying party shall not be liable to the indemnified party under
this Section 9 for any legal or other expenses subsequently incurred by the indemnified
party in connection with the defense thereof other than reasonable costs of investigation;
provided, however, that the indemnified party shall have the right to employ counsel to
represent jointly the indemnified party and those other indemnified parties and their
respective directors, officers, employees and controlling persons who may be subject to
liability arising out of any claim in respect of which indemnity may be sought under this
Section 9 if (i) the indemnified party and the indemnifying party shall have so mutually
agreed; (ii) the indemnifying party has failed within a reasonable time to retain counsel
reasonably satisfactory to the indemnified party; (iii) the indemnified party and its
directors, officers, employees and controlling persons shall have reasonably concluded that
there may be legal defenses available to them that are different from or in addition to
those available to the indemnifying party; or (iv) the named parties in any such proceeding
(including any impleaded parties) include both the indemnified parties or their respective
directors, officers, employees or controlling persons, on the one hand, and the indemnifying
party, on the other hand, and representation of both sets of parties by the same counsel
would be inappropriate due to actual or potential differing interests between them, and in
any such event the fees and expenses of such separate counsel shall be paid by the
indemnifying party. No indemnifying party shall (i) without the prior written consent of the
indemnified parties (which consent shall not be unreasonably withheld), settle or compromise
or consent to the entry of any judgment with respect to any pending or threatened claim,
action, suit or proceeding in respect of which indemnification or contribution may be sought
hereunder (whether or not the indemnified parties are actual or potential parties to such
claim or action) unless such settlement, compromise or consent includes an unconditional
release of each indemnified party from all liability arising out of such claim, action, suit
or proceeding and does not include any findings of fact or admissions of fault or
culpability as to the indemnified party, or (ii) be liable for any settlement of any such
action effected without its written consent (which consent shall not be unreasonably
withheld), but if settled with the consent of the indemnifying party or if there be a final
judgment for the plaintiff in any such action, the indemnifying party agrees to indemnify
and hold harmless any indemnified party from and against any loss or liability by reason of
such settlement or judgment.

     (d) If the indemnification provided for in this Section 9 shall for any reason be
unavailable to or insufficient to hold harmless an indemnified party under Section 9(a), or

 

 

27

9(b) in respect of any loss, claim, damage or liability, or any action in respect
thereof, referred to therein, then each indemnifying party shall, in lieu of indemnifying
such indemnified party, contribute to the amount paid or payable by such indemnified party
as a result of such loss, claim, damage or liability, or action in respect thereof, (i) in
such proportion as shall be appropriate to reflect the relative benefits received by the
Company, on the one hand, and the Initial Purchasers, on the other, from the offering of the
Notes or (ii) if the allocation provided by clause (i) above is not permitted by applicable
law, in such proportion as is appropriate to reflect not only the relative benefits referred
to in clause (i) above but also the relative fault of the Company, on the one hand, and the
Initial Purchasers, on the other, with respect to the statements or omissions that resulted
in such loss, claim, damage or liability, or action in respect thereof, as well as any other
relevant equitable considerations. The relative benefits received by the Company, on the one
hand, and the Initial Purchasers, on the other, with respect to such offering shall be
deemed to be in the same proportion as the total net proceeds from the offering of the Notes
purchased under this Agreement (before deducting expenses) received by the Company, on the
one hand, and the total underwriting discounts and commissions received by the Initial
Purchasers with respect to the Notes purchased under this Agreement, on the other hand. The
relative fault shall be determined by reference to whether the untrue or alleged untrue
statement of a material fact or omission or alleged omission to state a material fact
relates to information supplied by the Company or the Initial Purchasers, the intent of the
parties and their relative knowledge, access to information and opportunity to correct or
prevent such statement or omission. The Company and the Initial Purchasers agree that it
would not be just and equitable if contributions pursuant to this Section 9(d) were to be
determined by pro rata allocation (even if the Initial Purchasers were treated as one entity
for such purpose) or by any other method of allocation that does not take into account the
equitable considerations referred to herein. The amount paid or payable by an indemnified
party as a result of the loss, claim, damage or liability, or action in respect thereof,
referred to above in this Section 9(d) shall be deemed to include, for purposes of this
Section 9(d), any legal or other expenses reasonably incurred by such indemnified party in
connection with investigating or defending any such action or claim. Notwithstanding the
provisions of this Section 9(d), no Initial Purchaser shall be required to contribute any
amount in excess of the amount by which the net proceeds from the sale of the Notes
underwritten by it exceeds the amount of any damages that such Initial Purchaser has
otherwise paid or become liable to pay by reason of any untrue or alleged untrue statement
or omission or alleged omission. No person guilty of fraudulent misrepresentation (within
the meaning of Section 11(f) of the Securities Act) shall be entitled to contribution from
any person who was not guilty of such fraudulent misrepresentation. The Initial Purchasers’
obligations to contribute as provided in this Section 9(d) are several in proportion to
their respective underwriting obligations and not joint.

     (e) Each of the Initial Purchasers severally confirms that (i) the names of such
Initial Purchaser set forth in the cover pages and in the table after the first paragraph
under the caption “Plan of Distribution,” (ii) the last paragraph on the cover page, (iii)
the third paragraph under the caption “Plan of Distribution,” (iv) the second sentence of
the seventh paragraph under the caption “Plan of Distribution,” (v) the fourth and fifth
sentences of the ninth paragraph under the caption “Plan of Distribution,” (vi) the tenth

 

 

28

paragraph under the caption “Plan of Distribution,” and (vii) the fourth paragraph and
the first sentence of the sixth paragraph under the caption “Description of the Concurrent
Cash Convertible Note Hedge Transactions and Warrants,” the fourth paragraph and the first
sentence of the sixth paragraph under the caption “Offering Memorandum Summary—The
Offering—Concurrent Cash Convertible Note Hedge Transactions and Warrants” and the third
paragraph and the first sentence of the fifth paragraph under the caption “Risk
Factors—Risks Relating to This Offering—The concurrent cash convertible note hedge
transactions and warrant transactions may affect the value of the Notes and our common
stock,” in each case in the Pricing Disclosure Package and the Offering Memorandum are
correct, and each of the Initial Purchasers severally confirms and the Company acknowledges
and agrees that such statements constitute the only information concerning such Initial
Purchaser furnished in writing to the Company by or on behalf of the Initial Purchasers
specifically for inclusion in the Preliminary Offering Memorandum, the Pricing Disclosure
Package and the Offering Memorandum or any amendment or supplement thereto, or in any Blue
Sky Application or any Marketing Material.

          10. Defaulting Initial Purchasers. If, on any Delivery Date, any Initial Purchaser defaults
in the performance of its obligations under this Agreement, the remaining non-defaulting Initial
Purchasers shall be obligated to purchase the Notes that the defaulting Initial Purchaser agreed
but failed to purchase on such Delivery Date in the respective proportions which the principal
amount of the Firm Notes set forth opposite the name of each remaining non-defaulting Initial
Purchaser in Schedule 1 hereto bears to the total principal amount of the Firm Notes set
forth opposite the names of all the remaining non-defaulting Initial Purchasers in Schedule
1 hereto; provided, however, that the remaining non-defaulting Initial Purchasers shall not be
obligated to purchase any of the Notes on such Delivery Date if the total principal amount of the
Notes that the defaulting Initial Purchaser or Initial Purchasers agreed but failed to purchase on
such date exceeds 9.09% of the total principal amount of the Notes to be purchased on such Delivery
Date, and any remaining non-defaulting Initial Purchaser shall not be obligated to purchase more
than 110% of the principal amount of the Notes that it agreed to purchase on such Delivery Date
pursuant to the terms of Section 2. If the foregoing maximums are exceeded, the remaining
non-defaulting Initial Purchasers, or those other initial purchasers satisfactory to the
Representatives who so agree, shall have the right, but shall not be obligated, to purchase, in
such proportion as may be agreed upon among them, all the Notes to be purchased on such Delivery
Date. If the remaining Initial Purchasers or other initial purchasers satisfactory to the
Representatives do not elect to purchase the Notes that the defaulting Initial Purchaser or Initial
Purchasers agreed but failed to purchase on such Delivery Date, this Agreement (or, with respect to
any Option Notes Delivery Date, the obligation of the Initial Purchasers to purchase, and of the
Company to sell, the Option Notes) shall terminate without liability on the part of any
non-defaulting Initial Purchaser or the Company, except that the Company will continue to be liable
for the payment of expenses to the extent set forth in Sections 7 and 12. As used in this
Agreement, the term “Initial Purchaser” includes, for all purposes of this Agreement unless the
context requires otherwise, any party not listed in Schedule 1 hereto that, pursuant to
this Section 9, purchases Notes that a defaulting Initial Purchaser agreed but failed to purchase.

 

 

29

          Nothing contained herein shall relieve a defaulting Initial Purchaser of any liability it may
have to the Company for damages caused by its default. If other Initial Purchasers are obligated or
agree to purchase the Notes of a defaulting or withdrawing Initial Purchaser, either the
Representatives or the Company may postpone the Delivery Date for up to seven full business days in
order to effect any changes that in the opinion of counsel for the Company or counsel for the
Initial Purchasers may be necessary in the Pricing Disclosure Package, the Offering Memorandum or
in any other document or arrangement.

          11. Termination. The obligations of the Initial Purchasers hereunder may be terminated by the
Representatives by notice given to and received by the Company prior to delivery of and payment for
the Firm Notes if, prior to that time, any of the events described in Sections 8(k), 8(l) and 8(m)
shall have occurred or if the Initial Purchasers shall decline to purchase the Notes for any reason
permitted under this Agreement.

          12. Reimbursement of Initial Purchasers’ Expenses. If (a) the Company shall fail to tender
the Notes for delivery to the Initial Purchasers for any reason or (b) the Initial Purchasers shall
decline to purchase the Notes for any reason permitted under this Agreement, the Company will
reimburse the Initial Purchasers for all reasonable out-of-pocket expenses (including fees and
disbursements of counsel) incurred by the Initial Purchasers in connection with this Agreement and
the proposed purchase of the Notes, and upon demand the Company shall pay the full amount thereof
to the Representatives. If this Agreement is terminated pursuant to Section 11 by reason of the
default of one or more Initial Purchasers, the Company shall not be obligated to reimburse any
defaulting Initial Purchaser on account of those expenses.

          13. Research Analyst Independence. The Company acknowledges that the Initial Purchasers’
research analysts and research departments are required to be independent from their respective
investment banking divisions and are subject to certain regulations and internal policies, and that
such Initial Purchasers’ research analysts may hold views and make statements or investment
recommendations and/or publish research reports with respect to the Company and/or the offering
that differ from the views of their respective investment banking divisions. The Company hereby
waives and releases, to the fullest extent permitted by law, any claims that the Company may have
against the Initial Purchasers with respect to any conflict of interest that may arise from the
fact that the views expressed by their independent research analysts and research departments may
be different from or inconsistent with the views or advice communicated to the Company by such
Initial Purchasers’ investment banking divisions. The Company acknowledges that each of the Initial
Purchasers is a full service securities firm and as such from time to time, subject to applicable
securities laws, may effect transactions for its own account or the account of its customers and
hold long or short positions in debt or equity securities of the companies that may be the subject
of the transactions contemplated by this Agreement.

          14. No Fiduciary Duty. The Company acknowledges and agrees that in connection with this
offering, sale of the Notes or any other services the Initial Purchasers may be deemed to be
providing hereunder, notwithstanding any preexisting relationship, advisory or otherwise, between
the parties or any oral representations or assurances previously or subsequently made by the
Initial Purchasers: (i) no fiduciary or agency relationship between the Company and any other
person, on the one hand, and the Initial Purchasers, on the other, exists;

 

 

30

(ii) the Initial Purchasers are not acting as advisors, expert or otherwise, to the Company,
including, without limitation, with respect to the determination of the public offering price of
the Notes, and such relationship between the Company, on the one hand, and the Initial Purchasers,
on the other, is entirely and solely commercial, based on arms-length negotiations; (iii) any
duties and obligations that the Initial Purchasers may have to the Company shall be limited to
those duties and obligations specifically stated herein; and (iv) the Initial Purchasers and their
respective affiliates may have interests that differ from those of the Company. The Company hereby
waives any claims that the Company may have against the Initial Purchasers with respect to any
breach of fiduciary duty in connection with this offering.

          15. Notices, Etc. All statements, requests, notices and agreements hereunder shall be in
writing, and:

     (a) if to the Initial Purchasers, shall be delivered or sent by mail or facsimile
transmission to (i) Barclays Capital Inc., 745 Seventh Avenue, New York, New York 10019,
Attention: Syndication Registration (Fax: 646-834-8133), with a copy, in the case of any
notice pursuant to Section 8(c), to the Office of the General Counsel, Barclays Capital
Inc., 745 Seventh Avenue, New York, New York 10019 (Fax: 212-520-0121), (ii) Citigroup
Global Markets Inc., 388 Greenwich Street, New York, NY 10013, Attention: Office of the
General Counsel (Fax: 212-816-7912) and (iii) J.P. Morgan Securities Inc., 383 Madison
Avenue, New York, New York 10179, Attention: Equity Syndicate Desk (Fax: 212-622-8358); and

     (b) if to the Company, shall be delivered or sent by mail or facsimile transmission to
Covanta Holding Corporation, 40 Lane Road, Fairfield, New Jersey, Attention: General
Counsel (Fax: 973-882-7357).

Any such statements, requests, notices or agreements shall take effect at the time of receipt
thereof. The Company shall be entitled to act and rely upon any request, consent, notice or
agreement given or made by the Representatives on behalf of the Initial Purchasers.

          16. Persons Entitled to Benefit of Agreement. This Agreement shall inure to the benefit of
and be binding upon the Initial Purchasers, the Company, and their respective successors. This
Agreement and the terms and provisions hereof are for the sole benefit of only those persons,
except that (A) the representations, warranties, indemnities and agreements of the Company
contained in this Agreement shall also be deemed to be for the benefit of the directors, officers
and employees of the Initial Purchasers and each person or persons, if any, who control any Initial
Purchaser within the meaning of Section 15 of the Securities Act and (B) the indemnity agreement of
the Initial Purchasers contained in Section 9(b) of this Agreement shall be deemed to be for the
benefit of the directors of the Company, the officers and employees of the Company and any person
controlling the Company within the meaning of Section 15 of the Securities Act. Nothing in this
Agreement is intended or shall be construed to give any person, other than the persons referred to
in this Section 15, any legal or equitable right, remedy or claim under or in respect of this
Agreement or any provision contained herein.

 

 

31

          17. Survival. The respective indemnities, representations, warranties and agreements of the
Company and the Initial Purchasers contained in this Agreement or made by or on behalf of them,
respectively, pursuant to this Agreement, shall survive the delivery of and payment for the Notes
and shall remain in full force and effect, regardless of any investigation made by or on behalf of
any of them or any person controlling any of them.

          18. Definition of the Terms “Business Day” and “Subsidiary”.
For purposes of this Agreement,
(a) “business day” means each Monday,
Tuesday, Wednesday, Thursday or Friday that is not a day on
which banking institutions in New York are generally authorized or obligated by law or executive
order to close and (b) “subsidiary” means any subsidiary of the Company required to be identified
pursuant to Item 601(b)(21) of Regulation S-K.

          19. Governing Law. This Agreement shall be governed by and construed in accordance with the
laws of the State of New York.

          20. Counterparts. This Agreement may be executed in one or more counterparts and, if executed
in more than one counterpart, the executed counterparts shall each be deemed to be an original but
all such counterparts shall together constitute one and the same instrument.

          21. Headings. The headings herein are inserted for convenience of reference only and are not
intended to be part of, or to affect the meaning or interpretation of, this Agreement.

 

 

32

     If the foregoing correctly sets forth the agreement between the Company and the Initial
Purchasers, please indicate your acceptance in the space provided for that purpose below.

	 	 	 	 	 
	 	Very truly yours,

COVANTA HOLDING CORPORATION

 	 
	 	By:  	             /s/ Mark Pytosh
 	 
	 	 	Name:  	Mark Pytosh 	 
	 	 	Title:  	Executive Vice President and Chief Financial Officer 	 

 

 

33

	 	 	 	 	 

Accepted:

Barclays Capital Inc. 

Citigroup Global Markets Inc.

J.P. Morgan Securities Inc.

For themselves and as Representatives

of the several Initial Purchasers named

in Schedule 1 hereto

By Barclays Capital Inc.

	 	 	 	 	 
	By:
	 	 	 	 
	 

	 	/s/ Robert Stowe 

Authorized Representative
	 	 

By Citigroup Global Markets Inc.

	 	 	 	 	 
	By:

	 	/s/ Jack Paris
	 	 
	 

	 	 	 	 
	 

	 	Authorized Signatory	 	 

By J.P. Morgan Securities Inc.

	 	 	 	 	 
	By:

	 	/s/ Michael O’Donovan
	 	 
	 

	 	 	 	 
	 

	 	Authorized Signatory	 	 

 

 

SCHEDULE 1

	 	 	 	 	 
	 	 	Principal Amount of
	Initial Purchasers	 	Firm Notes
	Barclays
Capital Inc.
	 	 	124,000,000	 
	Citigroup
Global Markets Inc.
	 	 	104,000,000	 
	J.P. Morgan
Securities Inc.
	 	 	104,000,000	 
	Calyon
Securities (USA) Inc.
	 	 	28,000,000	 
	Avondale Partners LLC
	 	 	20,000,000	 
	Deutsche
Bank Securities Inc.
	 	 	20,000,000	 
	Total
	 	$	400,000,000	 

 

 

SCHEDULE 2

Pricing Term Sheet

$400,000,000

COVANTA HOLDING CORPORATION

3.25% Cash Convertible Senior Notes due 2014

Pricing Term Sheet

	 	 	 
	Issuer:

	 	Covanta Holding Corporation, a Delaware corporation
	Underlying (Ticker):

	 	CVA (NYSE)
	Amount:

	 	$400,000,000
	Option to Purchase Additional Notes:

	 	Up to $60,000,000 of additional notes, solely to cover over-allotments, if any
	Issue Price:

	 	100% of principal amount
	Annual Interest Rate:

	 	3.25%, from May 22, 2009
	Share Price at Pricing:

	 	$15.14 per share
	Conversion Premium (approximately):

	 	22.50% of Share Price at Pricing
	Conversion Price (approximately):

	 	$18.55
	Conversion Rate (subject to adjustment):

	 	53.9185 shares per $1,000 principal amount of notes
	Cash Conversion Rights:

	 	Subject to fulfillment of certain conditions and during the periods described in the preliminary offering memorandum relating to the offering
	Maturity:

	 	June 1, 2014, unless repurchased at the holder’s option upon a fundamental change or cash converted earlier
	Interest Payment Dates:

	 	June 1 and December 1, beginning December 1, 2009
	 
	 	 
	Net Proceeds:

	 	Approximately $387.7 million
	 
	 	 
	Use of Proceeds:

	 	Net proceeds from the offering, together with the proceeds from the warrant transactions described in the preliminary offering memorandum, will be used for
working capital and general corporate purposes, which may include funding a portion of the construction cost of a 1,700 metric tpd energy-from-waste
facility in Dublin, Ireland, other capital expenditures, potential permitted investments or acquisitions.
	 
	 	 
	 

	 	Concurrently with the offering, Covanta intends to use available cash to pay the total cost of the cash convertible note hedge transactions. The net cost
to Covanta of the cash convertible note hedge transactions and the warrant transactions is $50.8 million.
	 
	 	 
	Offering Status:

	 	Rule 144A
	144A CUSIP:

	 	22282E AB8
	ISIN:

	 	US22282EAB83
	 
	 	 
	Pricing Date:

	 	May 18, 2009
	Settlement Date:

	 	May 22, 2009
	 
	 	 
	Adjustment to Conversion Rate Upon Non-Stock Change of Control:

	 	The following table sets forth the number of additional shares (subject to adjustment) by which the conversion rate shall be increased based on the share
price and effective date upon a non-stock change of control, as described in the preliminary offering memorandum relating to the offering:

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	Share Price
	Effective Date	 	$15.14	 	$17.50	 	$20.00	 	$22.50	 	$25.00	 	$27.50	 	$30.00	 	$35.00	 	$40.00	 	$45.00	 	$50.00	 	$60.00
	 
	May 22, 2009
	 	 	12.1316	 	 	 	10.1729	 	 	 	7.5920	 	 	 	5.8094	 	 	 	4.5340	 	 	 	3.5940	 	 	 	2.8837	 	 	 	1.9045	 	 	 	1.2824	 	 	 	0.8676	 	 	 	0.5810	 	 	 	0.2353	 
	 
	June 1, 2010
	 	 	12.1316	 	 	 	9.4909	 	 	 	6.9084	 	 	 	5.1691	 	 	 	3.9550	 	 	 	3.0808	 	 	 	2.4343	 	 	 	1.5661	 	 	 	1.0308	 	 	 	0.6813	 	 	 	0.4444	 	 	 	0.1643	 
	 
	June 1, 2011
	 	 	12.1316	 	 	 	8.7999	 	 	 	6.1713	 	 	 	4.4640	 	 	 	3.3155	 	 	 	2.5176	 	 	 	1.9465	 	 	 	1.2098	 	 	 	0.7745	 	 	 	0.4981	 	 	 	0.3140	 	 	 	0.1003	 
	 
	June 1, 2012
	 	 	12.1316	 	 	 	8.0277	 	 	 	5.2784	 	 	 	3.5956	 	 	 	2.5347	 	 	 	1.8440	 	 	 	1.3787	 	 	 	0.8198	 	 	 	0.5111	 	 	 	0.3213	 	 	 	0.1959	 	 	 	0.0493	 
	 
	June 1, 2013
	 	 	12.1316	 	 	 	6.8033	 	 	 	3.8474	 	 	 	2.2603	 	 	 	1.4056	 	 	 	0.9339	 	 	 	0.6616	 	 	 	0.3827	 	 	 	0.2422	 	 	 	0.1531	 	 	 	0.0897	 	 	 	0.0083	 
	 
	June 1, 2014
	 	 	12.1316	 	 	 	3.2244	 	 	 	0.0000	 	 	 	0.0000	 	 	 	0.0000	 	 	 	0.0000	 	 	 	0.0000	 	 	 	0.0000	 	 	 	0.0000	 	 	 	0.0000	 	 	 	0.0000	 	 	 	0.0000	 

	 	 	 	 	 
	 	 	If the share price is:
	 
	 

	 	•
	 	in excess of $60.00 per share (subject to adjustment), the conversion rate will not be increased

 

 

	 	 	 	 	 
	 

	 	•
	 	less than $15.14 per share (subject to adjustment), the conversion rate will not be increased
	 
	 	 	Notwithstanding the foregoing, in no event will the conversion rate including such additional shares exceed 66.0501 per $1,000 principal amount of notes
(subject to adjustment).
	 
	Joint Book-Running Managers:	 	Barclays Capital Inc., Citigroup Global Markets Inc. and J.P. Morgan Securities Inc.
	Co-Managers:	 	Calyon Securities (USA) Inc., Avondale Partners LLC and Deutsche Bank Securities Inc.
	 
	 	 	 	 
	Cash Convertible Note Hedge Transactions and Warrant Transactions:	 	The cash convertible note hedge transactions will initially cover in the aggregate 21,567,400 shares (24,802,510 shares if the over-allotment option is
exercised in full) of the Issuer’s common stock. The warrant transactions will also initially cover in the aggregate 21,567,400 shares (24,802,510 shares
if the over-allotment option is exercised in full) of the Issuer’s common stock. The strike price of the warrant transactions will initially be $25.738 per
share, which is 170% of the closing price of the Issuer’s common stock on May 18, 2009.
	 
	 	 	 	 
	As Adjusted Ratio of Earnings to Fixed Charges:	 	For three months ended March 31, 2009, as adjusted earnings were insufficient to cover as adjusted fixed charges by $15.7 million

For the year ended December 31, 2008: 2.03x

 

 

Capitalization table:

	 	 	 	 	 
	 	 	As of March	 
	 	 	31, 2009	 
	 	 	As	 
	 	 	Adjusted(1)	 
	 	 	(In thousands)	 
	Cash and cash equivalents and restricted funds held in trust:
	 	 	 	 
	Cash and cash equivalents
	 	$	496,353	 
	Restricted funds held in trust
	 	 	328,805	 
	 
	 	 	 
	Total cash and cash equivalents and restricted funds held in trust
	 	$	825,158	 
	 
	 	 	 
	Debt:
	 	 	 	 
	Project debt (non-recourse)
	 	$	1,012,329	 
	Unamortized premium on project debt
	 	 	18,164	 
	Other long-term debt
	 	 	462	 
	Covanta Energy’s first lien term loan facility (due 2014)
	 	 	637,000	 
	Debentures(2)
	 	 	314,084	 
	Notes offered hereby(3)
	 	 	322,180	 
	 
	 	 	 
	Total debt
	 	$	2,304,219	 
	 
	 	 	 
	Equity:
	 	 	 	 
	Covanta Holding Corporation Stockholders’ equity:
	 	 	 	 
	Preferred stock ($0.10 par value; authorized 10,000 shares; none issued on an actual or as adjusted
basis)
	 	$	—	 
	Common stock ($0.10 par value; authorized 250,000 shares; issued 155,506 shares and outstanding 154,841 shares
on an actual and as adjusted basis)(4)
	 	 	15,551	 
	Additional paid-in capital(5)
	 	 	881,588	 
	Accumulated other compensation loss
	 	 	(10,332	)
	Accumulated earnings
	 	 	348,568	 
	Treasury stock, at par
	 	 	(67	)
	 
	 	 	 
	Covanta Holding Corporation stockholders’ equity
	 	 	1,235,308	 
	 
	 	 	 
	Noncontrolling interests in subsidiaries
	 	 	31,187	 
	 
	 	 	 
	Total equity
	 	$	1,266,495	 
	 
	 	 	 
	Total capitalization
	 	$	3,570,714	 
	 
	 	 	 

 

			
	(1)	 	The cash convertible note hedge transactions that we expect to enter into concurrently
with this offering will be included on our balance sheet as an asset which we estimate will
be approximately $97.7 million, but are not shown in the capitalization table above. The
liability associated with the cash conversion option that is part of the Notes and the
asset associated with the cash convertible note hedge transactions will be periodically
marked to market each period. See the section titled “Risk Factors— Risks Relating to This
Offering— The accounting method for the Notes will result in our having to recognize a gain
or loss in our consolidated statements of income to the extent a change in the valuation of
the conversion option that is part of the Notes from the previous period is not offset by a
change in the valuation of the cash convertible note hedge transactions from the prior
period, which may increase the volatility of our earnings. In addition, we will be required
to recognize interest expense that is larger than the stated interest rate on the Notes.
These consequences could have a material adverse effect on our reported financial results”
in the preliminary offering memorandum.
	 
	(2)	 	Consists of face value of the Debentures of $373.8 million, net of debt discount of $59.7
million.
	 
	(3)	 	Consists of face value of the Notes offered hereby of $400.0 million, net of debt
discount of $77.8 million. In addition, the cash conversion option part of the Notes
offered hereby will be recorded separately as a long-term liability on our balance sheet,
but is not shown in the capitalization table above. This long-term liability will be $77.8
million on an as adjusted basis.
	 
	(4)	 	The number of issued shares in the table above as of March 31, 2009 on an as adjusted
basis does not include (a) approximately 2.9 million shares of our common stock issuable
upon exercise of outstanding stock options; (b) up to approximately 15.9 million shares of
our common stock issuable upon conversion of our Debentures; and (c) up to 25.9 million
shares of our common stock that may be issued under the warrant transactions described in
the preliminary offering memorandum.
	 
	(5)	 	Includes the proceeds from the warrant transactions on an as adjusted basis.

The offering is being made to qualified institutional buyers pursuant to Rule 144A under the
Securities Act. These securities have not been registered under the Securities Act of 1933, as
amended, or under any state securities laws and, unless so registered, may not be offered or sold
in the United Stales or to U.S. persons except pursuant to an exemption from, or in a transaction
not subject to the registration requirements of the Securities Act and applicable state securities
laws.

This pricing term sheet supplements the preliminary offering memorandum issued by Covanta Holding
Company dated May 18, 2009.

 

 

SCHEDULE 3

Free Writing Offering Documents

1. Electronic Road Show dated May 18, 2009

2. Pricing Term Sheet containing the terms of the Notes, in the form of Schedule 2

 

 

SCHEDULE 4-A

List of Subsidiaries

8309 Tujunga Avenue Corp.

AC LINES LLC

American Commercial Lines Holdings LLC

Burney Mountain Power

Capital Compost & Waste Reduction Services, LLC

Central Valley Biomass Holdings, LLC

Central Valley Fuels Management Inc.

Covanta Alexandria / Arlington, Inc.

Covanta ARC Company

Covanta ARC Holdings, LLC

Covanta ARC LLC

Covanta B-3, LLC

Covanta Babylon, Inc.

Covanta Berkshire Holdings, Inc.

Covanta Berkshire Operations, Inc.

Covanta Bessemer, Inc.

Covanta Biofuels, Inc.

Covanta Bristol, Inc.

Covanta Capital District II LLC

Covanta Capital District LLC

Covanta Capital District, L.P

Covanta Company of SEMASS, L.P.

 

 

Covanta Connecticut (S.E.), LLC

Covanta Delano, Inc.

Covanta Delaware Valley II, LLC

Covanta Delaware Valley LLC

Covanta Delaware Valley, L.P.

Covanta Development Company LLC

Covanta Energy Americas, Inc.

Covanta Energy Asia, Inc.

Covanta Energy Corporation

Covanta Energy Europe, Inc

Covanta Energy Group, Inc.

Covanta Energy Resource Corp.

Covanta Energy Services, Inc.

Covanta Engineering Services, Inc.

Covanta Essex Company

Covanta Essex II, LLC

Covanta Essex LLC

Covanta Fairfax, Inc.

Covanta Frederick/Carroll, Inc.

Covanta Funds Administration, Inc.

Covanta Hampton Roads LLC

Covanta Harford, Inc.

Covanta Harrisburg, Inc.

Covanta Haverhill Associates

 

 

Covanta Haverhill Properties, Inc.

Covanta Haverhill, Inc.

Covanta Hawaii Energy LLC

Covanta Hempstead Company

Covanta Hempstead II, LLC

Covanta Hempstead LLC

Covanta Hennepin Energy Resource Co., Limited Partnership

Covanta Hillsborough, Inc.

Covanta Holding Corporation

Covanta Honolulu Resource Recovery Venture

Covanta Huntington Limited Partnershiip

Covanta Huntington Resource Recovery One Corp.

Covanta Huntington Resource Recovery Seven Corp.

Covanta Huntsville, Inc.

Covanta Hydro Operations West, Inc.

Covanta Indianapolis, Inc.

Covanta Insurance Holdings Corporation

Covanta Kent, Inc.

Covanta Lake Holding Corp.

Covanta Lake II, Inc.

Covanta Lancaster, Inc.

Covanta Lee, Inc.

Covanta Long Island, Inc.

Covanta Maine, LLC

 

 

Covanta Marion Land Corp.

Covanta Marion, Inc.

Covanta Mendota Holdings, Inc.

Covanta Mendota, L.P.

Covanta Mid-Conn, Inc.

Covanta Montgomery, Inc.

Covanta Niagara II, LLC

Covanta Niagara LLC

Covanta Niagara, L.P.

Covanta Oahu Waste Energy Recovery, Inc.

Covanta Omega Lease, Inc.

Covanta Onondaga Five Corp.

Covanta Onondaga Four Corp.

Covanta Onondaga Limited Partnership

Covanta Onondaga Operations, Inc.

Covanta Onondaga Three Corp.

Covanta Onondaga Two Corp.

Covanta Onondaga, Inc.

Covanta Operations of SEMASS II, LLC

Covanta Operations of SEMASS LLC

Covanta Operations of Union LLC

Covanta OPW Associates, Inc.

Covanta OPWH, Inc.

Covanta Otay 3 Company

 

 

Covanta Pasco, Inc.

Covanta Pinellas, Inc.

Covanta Pittsfield, LLC

Covanta Power Development of Mauritius, Inc.

Covanta Power Development, Inc.

Covanta Power International Holdings, Inc.

Covanta Power Pacific, Inc.

Covanta Power Plant Operations

Covanta Projects of Hawaii, Inc.

Covanta Projects of Wallingford, L.P.

Covanta Projects, Inc.

Covanta Ref-Fuel Finance LLC

Covanta Ref-Fuel Holdings LLC

Covanta Ref-Fuel II LLC

Covanta Ref-Fuel LLC

Covanta Ref-Fuel Management II, LLC

Covanta Ref-Fuel Management LLC

Covanta Renewable Fuels LLC

Covanta Research & Technology, LLC

Covanta RRS Holdings, Inc.

Covanta SBR Associates

Covanta SECONN LLC

Covanta Secure Services, LLC

Covanta SEMASS II, LLC

 

 

Covanta SEMASS LLC

Covanta SEMASS, L.P.

Covanta Southeastern Connecticut Company

Covanta Southeastern Connecticut, L.P.

Covanta Springfield, LLC

Covanta Stanislaus, Inc.

Covanta Systems, LLC

Covanta Union, Inc.

Covanta Wallingford Associates, Inc.

Covanta Warren Energy Resource Co., Limited Partnership

Covanta Warren Holdings I, Inc.

Covanta Warren Holdings II, Inc.

Covanta Waste to Energy of Italy, Inc.

Covanta Waste to Energy, LLC

Covanta Water Holdings, Inc.

Covanta Water Systems, Inc.

Covanta WBH, LLC

Danielson Indemnity Company

Danielson Insurance Company

Danielson National Insurance Company

Danielson Reinsurance Corporation

DSS Environmental, Inc.

Generating Resource Recovery Partners L.P.

Haverhill Power, LLC

 

 

Koma Kulshan Associates L.P.

Kramer Capital Consultants, Inc.

LMI, Inc.

Michigan Waste Energy, Inc.

Mount Kisco Transfer Station, Inc.

MSW Energy Erie LLC

MSW Energy Finance Co. II, Inc.

MSW Energy Finance Co., Inc.

MSW Energy Holdings II LLC

MSW Energy Holdings LLC

MSW Energy Hudson LLC

MSW I Sub, LLC

Mt. Lassen Power

NAICC Insurance Services

National American Insurance Company of California

New Covanta Lake Holding LLC

OPI Quezon, LLC

Pacific Energy Operating Group, L.P.

Pacific Energy Resources Incorporated

Pacific Hydropower Company

Pacific Oroville Power, Inc.

Pacific Recovery Corporation

Pacific Wood Fuels Company

Pacific-Ultrapower Chinese Station

 

 

Peabody Monofill Associates, Inc.

Penstock Power Company

Recycling Industries Transfer Station, LLC

SEMASS Partnership

South Fork II Associates Limited Partnership

Thermendota, Inc.

TransRiver II, LLC

TransRiver LLC

TransRiver Canada Incorporated

TransRiver Marketing Company, L.P.

TransRiver Philadelphia LLC

TransRiver Portsmouth LLC

TransRiver Transfer Systems LLC

TransRiver Waste LLC

UAH Groveville Hydro Associates

UAH Management Corp

Valor Insurance Company, Incorporated

Ambiente 2000 S.R.L.

Bal-Sam India Holdings Limited

Chengdu Jiuniang Environmental Energy Co. Ltd.

Chongqing Sanfeng Covanta Environmental Industry Co., Ltd.

Covanta Bangladesh Operating Limited

Covanta Cayman (Rojana) Limited

Covanta Cayman (Sahacogen) Limited

 

 

Covanta Energy (Ireland) Limited

Covanta Energy (Thailand) Limited

Covanta Energy (UK) Limited

Covanta Energy Asia Holdings Limited

Covanta Energy Asia Pacific Limited

Covanta Energy China (Delta) Limited

Covanta Energy China (Gamma) Limited

Covanta Energy India (Balaji) Limited

Covanta Energy India (CBM) Limited

Covanta Energy India (Samalpatti) Limited

Covanta Energy India Private Limited

Covanta Energy International Investments Limited

Covanta Energy Limited

Covanta Energy Philippine Holdings, Inc.

Covanta Europe Engineering Limited

Covanta Europe Holdings S.a.r.l.

Covanta Europe Operations Limited

Covanta Five Limited

Covanta Four Limited

Covanta Holding Limited

Covanta India Operating Private Limited

Covanta Italy Holding, S.r.l.

Covanta Italy I S.r.l.

Covanta Italy II S.r.l.

 

 

Covanta Madurai Operating Private Limited

Covanta Mauritius O&M Ltd.

Covanta One Limited

Covanta Philippines Operating, Inc.

Covanta Samalpatti Operating Private Limited

Covanta Three Limited

Covanta Two Limited

Covanta Waste to Energy Asia Investments

Covanta Waste to Energy Asia Limited

Covanta Waste to Energy Asia Ltd

Dublin Waste to Energy (Holdings) Limited

Dublin Waste to Energy Limited

Edison (Bataan) Cogeneration Corporation

Enereruope Holdings III, B.V.

GOA Holdings Limited

Guangzhou Development Covanta Environmental Industry Co., Ltd.

Hidro Operaciones Don Pedro S.A.

Madurai Power Corporation Pvt. Ltd.

NEPC Consortium Power Ltd.

Ogden Energy (Gulf) Limited

Ogden Energy India (Bakreshwar) Limited

Ogden Power Development — Cayman, Inc.

Ogden Taiwan Investments Limited

OLMEC Insurance Ltd.

 

 

P.H. Don Pedro

P.H. Rio Volcan

Power Operations and Maintenance Limited

Prima S.r.l.

Quezon Power (Philippines) Limited

Quezon Power, Inc.

Samalpatti Power Company Private Limited

Taixing Covanta Yanjiang Cogeneration Company Limited

 

 

SCHEDULE 4-B

List of Significant Subsidiaries

Covanta ARC Holdings, LLC

Covanta ARC LLC

Covanta Energy Corporation

Covanta Essex Company

Covanta Essex LLC

Covanta Hempstead Company

Covanta Hempstead LLC

Covanta RRS Holdings, Inc.

Covanta SEMASS, L.P.

MSW Energy Hudson LLC

Quezon Power, Inc.

Covanta Power International Holdings, Inc.

 

 

SCHEDULE 5

Persons Delivering Lock-Up Agreements

Directors

David M. Barse

Ronald J. Broglio

Peter C.B. Bynoe

Linda J. Fisher

Joseph M. Holsten

Richard L. Huber

Anthony J. Orlando

William C. Pate

Robert S. Silberman

Jean Smith

Clayton Yeutter

Samuel Zell

Officers

Anthony J. Orlando

Mark A. Pytosh

John M. Klett

Seth Myones

Timothy J. Simpson

Thomas E. Bucks

Stockholders

SZ Investments, L.L.C.

EGI-Fund (05-07) Investors, L.L.C.

Third Avenue Management LLC

 

 

Exhibit A

LOCK-UP LETTER AGREEMENT

Barclays Capital inc.

Citigroup Global Markets Inc.

J.P. Morgan Inc.

As Representatives of the several

     Initial Purchasers named in Schedule 1,

c/o Barclays Capital Inc.

745 Seventh Avenue

New York, New York 10019

Ladies and Gentlemen:

          The undersigned understands that you and certain other firms (the “Initial Purchasers”)
propose to enter into a Purchase Agreement (the “Purchase Agreement”) providing for the purchase by
the Initial Purchasers of cash convertible senior notes due 2014 (the “Notes”) of Covanta Holding
Corporation, a Delaware corporation (the “Company”), and that the Initial Purchasers propose to
reoffer the Notes to the public (the “Offering”).

          In consideration of the execution of the Purchase Agreement by the Initial Purchasers, and for
other good and valuable consideration, the undersigned hereby irrevocably agrees that, without the
prior written consent of Barclays Capital Inc. on behalf of the Initial Purchasers, the undersigned
will not, directly or indirectly, (1) offer for sale, sell, pledge, or otherwise dispose of (or
enter into any transaction or device that is designed to, or could be expected to, result in the
disposition by any person at any time in the future of) any shares of Common Stock (including,
without limitation, shares of Common Stock that may be deemed to be beneficially owned by the
undersigned in accordance with the rules and regulations of the Securities and Exchange Commission
and shares of Common Stock that may be issued upon exercise of any options or warrants) or
securities convertible into or exercisable or exchangeable for Common Stock or into or for cash
based on the market price of the Common Stock (other than pledges of Common Stock to secure loans
with broker-dealers and other financial institutions that existed prior to the date hereof where
such broker-dealers and other financial institutions are entitled to foreclose on such pledges in
accordance with the terms thereof), (2) enter into any swap or other derivatives transaction that
transfers to another, in whole or in part, any of the economic benefits or risks of ownership of
shares of Common Stock, whether any such transaction described in clause (1) or (2) above is to be
settled by delivery of Common Stock or other securities, in cash or otherwise, (3) make any demand
for or exercise any right or cause to be filed a registration statement, including any amendments
thereto, with respect to the registration of any shares of Common Stock or securities convertible
into or exercisable or exchangeable for Common Stock or into or for cash based on the market price
of the Common Stock or any other securities of the Company or (4) publicly disclose the intention
to do any of the foregoing, for a period commencing on the date hereof and ending on the
60th day after the date of the Offering

 

 

Memorandum relating to the Offering (such 60-day period, the “Lock-Up Period”). For the
avoidance of doubt, the restrictions in the preceding sentence of this Lock-Up Letter Agreement do
not apply to the exercise of rights by pledgees under pledge or other security agreements executed
by the undersigned to the extent such agreements are in effect on the date hereof.

          Notwithstanding the foregoing, and subject to the conditions below, the undersigned may
transfer any shares of Common Stock held of record or that may be deemed to be beneficially owned
by the undersigned in accordance with the rules and regulations of the Securities and Exchange
Commission without the prior written consent of Barclays Capital Inc.:

	 	(i)	 	as a bona fide gift or gifts;
	 
	 	(ii)	 	to any trust for the direct or indirect benefit of the
undersigned or the immediate family of the undersigned;
	 
	 	(iii)	 	as a distribution to limited partners, members or
stockholders of the undersigned, to the undersigned’s affiliates or to any
investment fund or other entity controlled or managed by the undersigned;
	 
	 	(iv)	 	to any beneficiary of the undersigned pursuant to a will or
other testamentary document or applicable laws of descent; or
	 
	 	(v)	 	to any corporation, partnership, limited liability company or
other entity all of the beneficial ownership interests of which are held by
the undersigned or immediate family of the undersigned;

provided, that (a) Barclays Capital Inc. shall have received a signed copy of this lock-up
agreement from each donee, trustee, distributee, or transferee, as the case may be, (b) any such
transfer shall not involve a disposition for value, and (c) the undersigned does not otherwise
voluntarily effect any such public filing or report regarding such transfers.

          Notwithstanding the foregoing, if (1) during the last 17 days of the Lock-Up Period, the
Company issues an earnings release or material news or a material event relating to the Company
occurs or (2) prior to the expiration of the Lock-Up Period, the Company announces that it will
release earnings results during the 16-day period beginning on the last day of the Lock-Up Period,
then the restrictions imposed by this Lock-Up Letter Agreement shall continue to apply until the
expiration of the 18-day period beginning on the issuance of the earnings release or the
announcement of the material news or the occurrence of the material event, unless Barclays Capital
Inc. waives such extension in writing. The undersigned hereby further agrees that, prior to
engaging in any transaction or taking any other action that is subject to the terms of this Lock-Up
Letter Agreement during the period from the date of this Lock-Up Letter Agreement to and including
the 34th day following the expiration of the Lock-Up Period, it will give

2

 

notice thereof to the Company and will not consummate such transaction or take any such action
unless it has received written confirmation from the Company that the Lock-Up Period (as such may
have been extended pursuant to this paragraph) has expired.

          In furtherance of the foregoing, the Company and its transfer agent are hereby authorized to
decline to make any transfer of securities if such transfer would constitute a violation or breach
of this Lock-Up Letter Agreement.

          It is understood that, if the Company notifies the Initial Purchasers that it does not intend
to proceed with the Offering, if the Purchase Agreement does not become effective, or if the
Purchase Agreement (other than the provisions thereof which survive termination) shall terminate or
be terminated prior to payment for and delivery of the Notes, the undersigned will be released from
its obligations under this Lock-Up Letter Agreement.

          The undersigned understands that the Company and the Initial Purchasers will proceed with the
Offering in reliance on this Lock-Up Letter Agreement.

          Whether or not the Offering actually occurs depends on a number of factors, including market
conditions. Any Offering will only be made pursuant to a Purchase Agreement, the terms of which are
subject to negotiation between the Company and the Initial Purchasers.

[Signature page follows]

3

 

          The undersigned hereby represents and warrants that the undersigned has full power and
authority to enter into this Lock-Up Letter Agreement and that, upon request, the undersigned will
execute any additional documents necessary in connection with the enforcement hereof. Any
obligations of the undersigned shall be binding upon the heirs, personal representatives,
successors and assigns of the undersigned.

	 	 	 	 	 
	 	Very truly yours,

 	 
	 	By:  	 	 
	 	 	Name:  	 	 
	 	 	Title:  	 	 
	 

Dated: May __, 2009

4

 

EXHIBIT B-1

FORM OF OPINION OF NEAL, GERBER & EISENBERG LLP

     1. To the best of our knowledge, except as described in each of the Pricing Disclosure Package
and the Offering Memorandum, there are no legal or governmental proceedings pending to which the
Company or any of its Significant Subsidiaries is a party or of which any property or assets of the
Company or any of its Significant Subsidiaries is the subject, the adverse determination of which
would reasonably be expected to result in a Material Adverse Effect or would reasonably be expected
to result in a material adverse effect on the performance of the Purchase Agreement or the
consummation of the transactions contemplated thereby; and, to the best of our knowledge, no such
proceedings are threatened or contemplated by governmental authorities or other persons or
entities.

     2. We have acted as special securities counsel to the Company on a regular basis, including in
connection with the preparation of the Pricing Disclosure Package and the Offering Memorandum and,
based on the foregoing, no information has been disclosed to us that gives us reason to believe
that and, on the basis of the foregoing, no facts have come to our attention which causes us to
believe that:

     (a) the Pricing Disclosure Package, as of the Applicable Time, contained any untrue
statement of a material fact or omitted to state any material fact required to be stated
therein or necessary in order to make the statements therein, in light of the circumstances
under which they were made, not misleading; or

     (b) the Offering Memorandum, as of its date and as of the date hereof, contained or
contains any untrue statement of a material fact or omitted or omits to state any material
fact required to be stated therein or necessary in order to make the statements therein, in
light of the circumstances under which they were made, not misleading,

except that, in each case, we express no opinion or belief with respect to the financial statements
or other financial or statistical data contained in or incorporated by reference in or omitted from
the Pricing Disclosure Package or the Offering Memorandum. The foregoing statement is qualified to
the effect that we do not assume any responsibility for the accuracy, completeness or fairness of
the statements contained in the Pricing Disclosure Package or the Offering Memorandum.

 

 

EXHIBIT B-2

FORM OF OPINION OF LATHAM & WATKINS LLP

1. The Company is a corporation under the DGCL with corporate power and authority to own its
properties and to conduct its business as described in the Offering Memorandum. With your
consent, based solely on certificates from public officials, we confirm that the Company is
validly existing and in good standing under the laws of the State of Delaware.

2. The Purchase Agreement has been duly authorized by all necessary corporate action of the
Company and has been duly executed and delivered by the Company.

3. The Indenture has been duly authorized by all necessary corporate action of
the Company, has been duly executed and delivered by the Company, and is the legally valid
and binding agreement of the Company, enforceable against the Company in accordance with its
terms.

4. The Notes have been duly authorized by all necessary corporate action of the Company and,
when executed, issued and authenticated in accordance with the terms of the Indenture and
delivered to and paid for by you in accordance with the terms of the Purchase Agreement,
will be the legally valid and binding obligations of the Company, enforceable against the
Company in accordance with their terms.

5. No registration of the Notes under the Securities Act of 1933, as amended, and no
qualification of the Indenture under the Trust Indenture Act of 1939, as amended, is
required for the purchase of the Notes by you or the initial resale of the Notes by you to
Eligible Purchasers (as defined in the Purchase Agreement), in each case, in the manner
contemplated by the Purchase Agreement and the Offering Memorandum. We express no opinion,
however, as to when or under what circumstances any Notes initially sold by you may be
reoffered or resold.

6. The execution and delivery of the Purchase Agreement and the Indenture, and the issuance
and sale of the Notes by the Company to you and the other Initial Purchasers pursuant to the
Purchase Agreement, do not on the date hereof:

     (i) violate the Company’s Governing Documents; or

     (ii) result in the breach of or a default under any of the Specified
Agreements; or

     (iii) violate any federal or New York statute, rule or regulation applicable to
the Company or the DGCL; or

 

 

     (iv) require any consents, approvals, or authorizations to be obtained by the
Company from, or any registrations, declarations or filings to be made by the
Company with, any governmental authority under any federal or New York statute, rule
or regulation applicable to the Company or the DGCL on or prior to the date hereof
that have not been obtained or made.

7. The statements in each of the Pricing Disclosure Package and the Offering Memorandum
under the caption “Description of the Notes,” insofar as they purport to describe or
summarize certain provisions of the Notes or the Indenture, are accurate summaries or
descriptions in all material respects.

8. The Company is not, and immediately after giving effect to the sale of the Notes in
accordance with the Purchase Agreement and the application of the proceeds as described in
the Offering Memorandum under the caption “Use of Proceeds,” will not be required to be,
registered as an “investment company” within the meaning of the Investment Company Act of
1940, as amended.

9. The statements in each of the Preliminary Offering Memorandum and the Offering Memorandum
under the caption “Certain United States Federal Income Tax Considerations,” insofar as such
statements purport to constitute summaries of United States federal income and estate tax
law and regulations or legal conclusions with respect thereto, constitute accurate summaries
of the matters described therein in all material respects.

2

 

EXHIBIT B-3

FORM OF OPINION OF GENERAL COUNSEL

          The Company and each of its Significant Subsidiaries (other than Quezon Power, Inc.) has been
duly organized and is validly existing and in good standing as a corporation or other business
entity under the laws of its jurisdiction of organization. The Company and each of its Significant
Subsidiaries (other than Quezon Power, Inc.) is qualified to do business and in good standing as a
foreign corporation or other business entity in each jurisdiction in which its ownership or lease
of property or the conduct of its businesses requires such qualification, except where the failure
to be so qualified or in good standing, in the aggregate, would not reasonably be expected to
result in a Material Adverse Effect. Each of the Significant Subsidiaries has all power and
authority necessary to own or hold its properties and conduct the businesses in which it is
engaged.

1

 

EXHIBIT B-4

FORM OF OPINION OF DEWEY & LEBOEUF LLP

          We are of the opinion that neither the Company nor any of its subsidiaries is subject to any
state or federal law or regulation relating to the ownership or operation of electric generation
facilities, including without limitation the Federal Energy Regulatory Laws, which would require
any notice or other filing or consent or approval for the execution, delivery or performance of the
Purchase Agreement or the issuance and sale of the Notes in the manner contemplated in the Purchase
Agreement.

2EX-10.2

Exhibit 10.2

[Bank Name and Address]

	 	 	 
	DATE:

	 	May 18, 2009
	 
	 	 
	TO:

	 	Covanta Holding Corporation
	 

	 	40 Lane Road
	 

	 	Fairfield, New Jersey
	ATTENTION:

	 	Treasurer
	TELEPHONE:

	 	973-882-4193
	FACSIMILE:

	 	973-882-7234
	 
	 	 
	FROM:

	 	[Bank Agent], acting as Agent for [Bank Name]
	TELEPHONE:

	 	[             ]
	 
	 	 
	SUBJECT:

	 	[Form of Cash Convertible Note Hedge Transaction]

The purpose of this letter agreement (this “Confirmation”) is to confirm the terms and conditions
of the Transaction entered into between [Bank Name] (“Bank”), through its agent [Bank Agent] (the
“Agent”), and Covanta Holding Corporation (“Counterparty”) on the Trade Date specified below (the
“Transaction”). This Confirmation constitutes a “Confirmation” as referred to in the Master
Agreement specified below. [Barclays Bank PLC is regulated by the
Financial Services Authority. Barclays Bank PLC is not a
member of the Securities Investor Protection Corporation
(“SIPC”).]

The definitions and provisions contained in the 2002 ISDA Equity Derivatives Definitions (the
“Equity Definitions”), as published by the International Swaps and Derivatives Association, Inc.,
are incorporated into this Confirmation. In the event of any inconsistency between the Equity
Definitions and this Confirmation, this Confirmation shall govern. Certain defined terms used
herein have the meanings assigned to them in the Indenture to be dated on or about May 22, 2009
between Counterparty and Wells Fargo Bank, National Association, as trustee (the “Indenture”)
relating to USD400 million aggregate principal amount of 3.25% Cash Convertible Senior Notes due
2014 (the “Cash Convertible Notes”) issued by Counterparty. In the event of any inconsistency
between the Indenture and this Confirmation, this Confirmation shall govern. For the avoidance of
doubt, references herein to sections of the Indenture are based on the draft of the Indenture most
recently reviewed by the parties at the time of the execution of this Confirmation. If any
relevant sections of the Indenture are changed, added, or renumbered following execution of this
Confirmation, the parties will amend this Confirmation in good faith to preserve the economic
intent of the parties. The parties further acknowledge that references to the Indenture herein are
references to the Indenture as in effect on the date of its execution and if the Indenture is
amended following its execution (other than such changes or additions as contemplated in the
immediately preceding sentence), any such amendment will be disregarded for purposes of this
Confirmation unless the parties agree otherwise in writing.

Each party is hereby advised, and each such party acknowledges, that the other party has engaged
in, or refrained from engaging in, substantial financial transactions and has taken other material
actions in reliance upon the parties’ entry into the Transaction to which this Confirmation relates
on the terms and conditions set forth below.

1. This Confirmation evidences a complete and binding agreement between Bank and Counterparty as to
the terms of the Transaction to which this Confirmation relates. This Confirmation shall
supplement, form a part of, and be subject to, an agreement in the form of the ISDA 1992 Master
Agreement (Multicurrency — Cross Border) (the “Agreement”) as if Bank and Counterparty had
executed an agreement in such form (without any Schedule except for (i) the election of US Dollars
(“USD”) as the Termination Currency, (ii) the replacement of the word “third” in the last line of
Section 5(a)(i) of the Agreement with the word “first”, (iii) the election that the “Cross Default”
provisions of Section 5(a)(vi) of the Agreement (except that the phrase “, or becoming capable at
such time of being

1

 

declared,” shall have been deleted from Section 5(a)(vi)) shall apply to Bank with a “Threshold
Amount” equal to 3% of [Bank Parent Company] shareholders’ funds, and (iv) “Specified
Indebtedness” shall have the meaning specified in Section 14 of the Agreement, except that
indebtedness or obligations in respect of deposits received in the ordinary course of the banking
business of such party shall not constitute Specified Indebtedness) on the Trade Date. In the
event of any inconsistency between provisions of the Agreement and this Confirmation, this
Confirmation will prevail for the purpose of the Transaction. The parties hereby agree that no
Transaction other than the Transaction to which this Confirmation relates shall be governed by the
Agreement.

2. The terms of the particular Transaction to which this Confirmation relates are as follows:

	 	 	 
	General Terms:
	 	 
	 
	Trade Date:

	 	May 18, 2009.
	 
	 	 
	Option Style:

	 	Modified American, as described below under “Procedures
for Exercise”.
	 
	 	 
	Option Type:

	 	Call.
	 
	 	 
	Buyer:

	 	Counterparty.
	 
	 	 
	Seller:

	 	Bank.
	 
	 	 
	Shares:

	 	The common stock, par value USD0.10 per share, of
Counterparty (Ticker symbol “CVA”).
	 
	 	 
	Number of Options:

	 	400,000; provided that if the initial purchasers named in
the Purchase Agreement (as defined in Section 4(a) below)
exercised the option to purchase additional Cash
Convertible Notes (“Additional Cash Convertible Notes”)
pursuant to Section 3 of the Purchase Agreement, the
Number of Options shall be automatically increased,
effective upon payment by Counterparty of the Additional
Premium on the Additional Premium Payment Date, by a
number of Options equal to the number of Additional Cash
Convertible Notes in denominations of USD1,000 principal
amount issued pursuant to such exercise, and Calculation
Agent will promptly notify Counterparty of the increased
Number of Options.
	 
	 	 
	Option Entitlement:

	 	As of any date, a number of Shares per Option equal to
the “Conversion Rate” (as defined in the Indenture) as of
such date, but without regard to any adjustments to the
“Conversion Rate” pursuant to Section 10.03 or to Section
10.04(g) or (h) of the Indenture).
	 
	 	 
	Strike Price:

	 	As provided in Schedule A to this Confirmation.
	 
	 	 
	Applicable Percentage:

	 	[Barclays Bank PLC - 50%;
Citibank, N.A. - 25%; JPMorgan Chase Bank, National
Association - 25%].
	 
	 	 
	Number of Shares:

	 	The product of (i) the Number of Options, (ii) the Option
Entitlement and (iii) the Applicable Percentage.
	 
	 	 
	Premium:

	 	As provided in Schedule A to this Confirmation; provided
that if the Number of Options is increased pursuant to
the proviso to the definition of “Number of Options”
above, Counterparty shall pay on the Additional Premium
Payment Date an additional Premium (the “Additional
Premium”) equal to the product of the number of Options
by which the aggregate Number of Options is so increased
and USD [Barclays Bank PLC - 122.15; Citibank, N.A. - 61.075;
JPMorgan Chase Bank, National Association - 61.075].
	 
	 	 
	Premium Payment Date:

	 	The closing date for the initial issuance of the Cash
Convertible Notes.

2

 

	 	 	 
	Additional Premium Payment Date:

	 	The closing date for the purchase and sale of the
Additional Cash Convertible Notes.
	 
	 	 
	Exchange:

	 	The New York Stock Exchange.
	 
	 	 
	Related Exchange(s):

	 	All Exchanges.
	 
	 	 
	Calculation Agent:

	 	Bank.
	 
	 	 
	Procedures for Exercise:
	 	 
	 
	 	 
	Exercise Dates:

	 	Each Conversion Date.
	 
	 	 
	Conversion Dates:

	 	Each “Conversion Date” (as defined in the Indenture).
	 
	 	 
	Exercisable Options:

	 	In respect of each Conversion Date, a number of Options
equal to the number of Cash Convertible Notes in
denominations of USD1,000 principal amount satisfying all
of the requirements for conversion on such Conversion
Date in accordance with the terms of the Indenture,
subject to “Notice of Exercise” below, but no greater
than the Number of Options.
	 
	 	 
	Expiration Date:

	 	The earlier of (x) the last day on which any Cash
Convertible Notes remain outstanding and (y) the maturity
date of the Cash Convertible Notes.
	 
	 	 
	Multiple Exercise:

	 	Applicable, as provided under “Exercisable Options” above.
	 
	 	 
	Automatic Exercise:

	 	Applicable, subject to “Notice of Exercise” below.

3

 

	 	 	 
	Notice of Exercise:

	 	Notwithstanding anything to the contrary in the Equity
Definitions, in order to exercise any Exercisable
Options, Counterparty must notify, or cause the Trustee
to notify, Bank in writing prior to 5:00 p.m., New York
City time, on the day that is at least one Scheduled
Trading Day prior to the first day of the applicable
“Conversion Period” (as defined in the Indenture) in
respect of the Cash Convertible Notes being converted on
the Conversion Date relating to the relevant Exercise
Date (the “Notice Deadline”) of (i) the number of Options
being exercised on such Exercise Date; (ii) the Exercise
Date; (iii) the scheduled commencement date of the
“Conversion Period”; and (iv) the scheduled settlement
date under the Indenture for the relevant Cash
Convertible Notes converted on the Conversion Date
corresponding to such Exercise Date; provided that,
notwithstanding the foregoing, such notice (and the
related automatic exercise of such Options) shall be
effective if given after the relevant Notice Deadline but
prior to 5:00 PM New York City time, on the fifth
Scheduled Trading Day of such “Conversion Period”, in
which case the Calculation Agent shall have the right to
adjust the Delivery Obligation as appropriate to reflect
the additional costs (including, but not limited to,
hedging mismatches and market losses) and reasonable
expenses incurred by Bank in connection with its hedging
activities (including the unwinding of any hedge
position) as a result of its not having received such
notice prior to the Notice Deadline; provided further
that in respect of Cash Convertible Notes converted
during the period beginning on, and including the
55th “Scheduled Trading Day” (as defined in
the Indenture) prior to the “Maturity Date” (as defined
in the Indenture) for such Cash Convertible Notes and
ending on the first “Scheduled Trading Day” immediately
preceding the “Maturity Date”, the Notice Deadline shall
be the first “Scheduled Trading Day” immediately
preceding the “Maturity Date”.

4

 

	 	 	 
	Settlement Terms:
	 	 
	 
	 	 
	Delivery Obligation:

	 	In respect of an Exercise Date occurring on a Conversion
Date, in lieu of the obligations set forth in Sections
8.1 and 9.1 of the Equity Definitions, and subject to
“Notice of Exercise” above, Bank shall pay to
Counterparty on the related Settlement Date, with respect
to a number of Options exercised on such Exercise Date,
an amount in cash equal to the product of (i) the
Applicable Percentage and (ii) the excess, if any, of (x)
the aggregate “Cash Conversion Settlement Amount” (as
defined in the Indenture) that Counterparty is obligated
to pay to the holder(s) of the related Cash Convertible
Notes converted on such Conversion Date pursuant to
Section 10.02(b) of the Indenture over (y) the aggregate
principal amount of such Cash Convertible Notes (such
product, the “Net Cash Settlement Amount”); provided that
such obligation shall be determined excluding (a) any
cash that Counterparty is obligated to pay to holder(s)
of the Cash Convertible Notes as a result of any
adjustments to the Conversion Rate as set forth in
Section 10.03 or in Section 10.04(g) or (h) of the
Indenture and, (b) for the avoidance of doubt, any
interest payment or distribution that Counterparty is
obligated to deliver in respect of Cash Convertible Notes
converted on such Conversion Date.
	 
	 	 
	Notice of Delivery Obligation:

	 	No later than the Scheduled Trading Day immediately
following the last day of the “Conversion Period” (as
defined in the Indenture), Counterparty shall, or shall
cause Trustee to, give Bank notice of the final amount of
cash comprising the Net Cash Settlement Amount; it being
understood, for the avoidance of doubt, that the
requirement of Counterparty to deliver such notice shall
neither (i) limit Counterparty’s obligations with
respect to “Notice of Exercise” above nor (ii) affect
Bank’s delivery obligations hereunder in any way.
	 
	 	 
	Settlement Date:

	 	In respect of an Exercise Date occurring on a Conversion
Date, the settlement date for the cash to be paid in
connection with the related Cash Convertible Notes under
the terms of the Indenture; provided that the Settlement
Date shall not be prior to the Currency Business Day
immediately following the date on which Counterparty
gives notice to Bank of such Settlement Date.
	 
	 	 
	Settlement Currency:

	 	USD.
	 
	 	 
	Share Adjustments:
	 	 
	 
	 	 
	Method of Adjustment:

	 	Notwithstanding Section 11.2 of the Equity Definitions,
upon any adjustment to the “Conversion Rate” (as defined
in the Indenture) and/or the nature of the Shares
underlying the Cash Convertible Notes pursuant to the
Indenture (other than an increase in the “Conversion
Rate” pursuant to Section 10.03 or to Section 10.04(g) or
(h) of the Indenture), the Calculation Agent will make a
corresponding adjustment to any one or more of the Strike
Price, Number of Options, the Option Entitlement and any
other variable relevant to the exercise, settlement,
payment or other terms of the Transaction to the same
extent as the adjustment under the Indenture.
Counterparty agrees that it will notify Bank upon the
effectiveness of any such adjustment.
	 
	 	 
	Extraordinary Events:
	 	 

5

 

	 	 	 
	Merger Events:

	 	Notwithstanding Section 12.1(b) of the Equity
Definitions, a “Merger Event” means the occurrence of any
event or condition set forth in Section 10.05 of the
Indenture.
	 
	 	 
	Notice of Merger Consideration:

	 	Upon the occurrence of a Merger Event that causes the
Shares to be converted into or exchanged for more than a
single type of consideration (determined based in part
upon the form of election of the holders of the Shares),
Counterparty shall promptly notify the Calculation Agent
in writing of the types and amounts of consideration that
holders of Shares have affirmatively elected to receive
upon consummation of such Merger Event; provided that in
no event shall the date of such notification be later
than the date on which such Merger Event is consummated.
	 
	 	 
	Consequences of Merger Events:

	 	Notwithstanding Section 12.2 of the Equity Definitions,
upon the occurrence of a Merger Event, the Calculation
Agent shall make a corresponding adjustment in respect of
any adjustment under the Indenture to any one or more of
the nature of the Shares, the Strike Price, the Number of
Options, the Option Entitlement and any other variable
relevant to the exercise, settlement, payment or other
terms of the Transaction; provided, however, that such
adjustment shall be made without regard to any adjustment
to the “Conversion Rate” (as defined in the Indenture)
pursuant to Section 10.03 or to Section 10.04(g) or (h)
of the Indenture.
	 
	 	 
	Nationalization, Insolvency or Delisting:

	 	Cancellation and Payment (Calculation Agent
Determination); provided that, in addition to the
provisions of Section 12.6(a)(iii) of the Equity
Definitions, it will also constitute a Delisting if the
Exchange is located in the United States and the Shares
are not immediately re-listed, re-traded or re-quoted on
any of the New York Stock Exchange, the American Stock
Exchange, the NASDAQ Global Select Market or the NASDAQ
Global Market (or their respective successors); if the
Shares are immediately re-listed, re-traded or re-quoted
on any such exchange or quotation system, such exchange
or quotation system shall thereafter be deemed to be the
Exchange.
	 
	 	 
	Additional Disruption Events: 
	 	 
	 
	 	 
	Change in Law:

	 	Applicable; provided that Section 12.9(a)(ii)(Y) of the
Equity Definitions is hereby deleted.
	 
	 	 
	Failure to Deliver:

	 	Applicable.
	 
	 	 
	Insolvency Filing:

	 	Applicable.
	 
	 	 
	Hedging Disruption:

	 	Applicable.
	 
	 	 
	Increased Cost of Hedging:

	 	Applicable.
	 
	 	 
	Hedging Party:

	 	Bank for all applicable Additional Disruption Events.
	 
	 	 
	Determining Party:

	 	Bank for all applicable Extraordinary Events.
	 
	 	 
	Acknowledgments:
	 	 
	 
	 	 
	Non-Reliance:

	 	Applicable.
	 
	 	 
	Agreements and Acknowledgments

Regarding Hedging Activities:

	 	Applicable.
	 
	 	 
	Additional Acknowledgments:

	 	Applicable.

6

 

3. Mutual Representations, Warranties and Agreements.

Each of Bank and Counterparty represents and warrants to, and agrees with, the other party that:

	 	(a)	 	Commodity Exchange Act. It is an “eligible contract participant” within the
meaning of Section 1a(12) of the U.S. Commodity Exchange Act, as amended (the “CEA”).
The Transaction has been subject to individual negotiation by the parties. The
Transaction has not been executed or traded on a “trading facility” as defined in
Section 1a(33) of the CEA; and
	 
	 	(b)	 	Securities Act. It is a “qualified institutional buyer” as defined in Rule
144A under the U.S. Securities Act of 1933, as amended (the “Securities Act”), or an
“accredited investor” as defined in Section 2(a)(15)(ii) of the Securities Act.

4. Representations, Warranties and Agreements of Counterparty.

In addition to the representations and warranties in the Agreement and those contained elsewhere
herein, Counterparty further represents, warrants and agrees that:

	 	(a)	 	the representations and warranties of Counterparty set forth in Section 2 of
the Purchase Agreement dated as of the Trade Date between Counterparty and Barclays
Capital Inc., Citigroup Global Markets Inc. and J.P. Morgan Securities Inc., as
representatives of the initial purchasers party thereto (the “Purchase Agreement”), are
true and correct and are hereby deemed to be repeated to Bank as if set forth herein;
	 
	 	(b)	 	Counterparty is not as of the Trade Date, and shall not be after giving effect
to the transactions contemplated hereby, “insolvent” (as such term is defined in
Section 101(32) of the U.S. Bankruptcy Code (Title 11 of the United States Code) (the
“Bankruptcy Code”));
	 
	 	(c)	 	Counterparty shall immediately provide written notice to Bank upon obtaining
knowledge of the occurrence of any event that would constitute an Event of Default      ,
adjustments specified under “Method of Adjustment”, a Merger Event or any other
Extraordinary Event; provided, however, that should Counterparty be in possession of
material non-public information regarding Counterparty, Counterparty shall not
communicate such information to Bank;
	 
	 	(d)	 	Counterparty’s investments in and liabilities in respect of the Transaction,
which it understands are not readily marketable, are not disproportionate to its net
worth, and Counterparty is able to bear any loss in connection with the Transaction,
including the loss of its entire investment in the Transaction;
	 
	 	(e)	 	Counterparty understands, agrees and acknowledges that Bank has no obligation
or intention to register the Transaction under the Securities Act, any state securities
law or other applicable federal securities law;
	 
	 	(f)	 	each of Counterparty’s filings under the Securities Act, the Securities
Exchange Act of 1934, as amended (the “Exchange Act”), or other applicable securities
laws that are required to be filed have been filed and that, as of the respective dates
thereof and as of the date of this representation, there is no misstatement of material
fact contained therein or omission of a material fact required to be stated therein or
necessary to make the statements made therein, in the light of the circumstances under
which they were made, not misleading;
	 
	 	(g)	 	Counterparty is not, and after giving effect to the transactions contemplated
hereby will not be, required to register as an “investment company” as such term is
defined in the Investment Company Act of 1940, as amended;

7

 

	 	(h)	 	Counterparty understands, agrees and acknowledges that no obligations of Bank
to it hereunder shall be entitled to the benefit of deposit insurance and that such
obligations shall not be guaranteed by any affiliate of Bank or any governmental
agency;
	 
	 	(i)	 	(A) Counterparty is acting for its own account, and it has made its own
independent decisions to enter into the Transaction and as to whether the Transaction
is appropriate or proper for it based upon its own judgment and upon advice from such
advisers as it has deemed necessary, (B) Counterparty is not relying on any
communication (written or oral) of Bank or any of its affiliates as investment advice
or as a recommendation to enter into the Transaction (it being understood that
information and explanations related to the terms and conditions of the Transaction
shall not be considered investment advice or a recommendation to enter into the
Transaction) and (C) no communication (written or oral) received from Bank or any of
its affiliates shall be deemed to be an assurance or guarantee as to the expected
results of the Transaction;
	 
	 	(j)	 	without limiting the generality of Section 13.1 of the Equity Definitions,
Counterparty acknowledges that Bank is not making any representations or warranties
with respect to the treatment of the Transaction under FASB Statements 128, 133, as
amended, 149 or 150, EITF Issue No. 00-19, 01-6, 03-6 or 07-5 (or any successor issue
statements), under FASB’s Liabilities & Equity Project or under FASB Staff Position or
any other accounting guidance;
	 
	 	(k)	 	Counterparty is not entering into the Transaction for the purpose of (i)
creating actual or apparent trading activity in the Shares (or any security convertible
into or exchangeable for the Shares) or (ii) raising or depressing or otherwise
manipulating the price of the Shares (or any security convertible into or exchangeable
for the Shares) in violation of the Exchange Act;
	 
	 	(l)	 	Counterparty shall deliver to Bank an opinion of counsel, dated as of the Trade
Date in form and substance reasonably satisfactory to Bank, with respect to matters set
forth in Section 3(a) of the Agreement, and paragraph 4(g) of this Confirmation, and a
resolution of Counterparty’s board of directors authorizing the Transaction and such
other certificate or certificates as Bank shall reasonably request; and
	 
	 	(m)	 	COUNTERPARTY UNDERSTANDS THAT THE TRANSACTION IS SUBJECT TO COMPLEX RISKS THAT
MAY ARISE WITHOUT WARNING AND MAY AT TIMES BE VOLATILE AND THAT LOSSES MAY OCCUR
QUICKLY AND IN UNANTICIPATED MAGNITUDE AND IS WILLING TO ACCEPT SUCH TERMS AND
CONDITIONS AND ASSUME (FINANCIALLY AND OTHERWISE) SUCH RISKS.

5. Other Provisions.

	 	(a)	 	Method of Delivery. Whenever delivery of funds or other assets is required
hereunder by or to Counterparty, such delivery shall be effected through the Agent. In
addition, all notices, demands and communications of any kind relating to the
Transaction between Bank and Counterparty shall be transmitted exclusively through the
Agent.
	 
	 	(b)	 	Additional Termination Event. (i) If (A) an Amendment Event occurs or (B) an
“Event of Default” with respect to Counterparty under the terms of the Cash Convertible
Notes as set forth in Section 6.01 of the Indenture occurs and the Cash Convertible
Notes are declared immediately due and payable under the terms of the Indenture, an
Additional Termination Event shall occur in respect of which (I) Counterparty shall be
the sole Affected Party and the Transaction shall be the sole Affected Transaction and
(II) Bank shall be the party entitled to designate an Early Termination Date pursuant
to Section 6(b) of the Agreement. Upon a written request by Counterparty following the
public announcement of an event that would otherwise constitute an Amendment Event (as
defined below), but prior to the occurrence of such event, Bank shall use good faith
efforts to propose an adjustment to the terms of the Transaction to account for the
expected economic effect on the Transaction of such event. If Counterparty accepts
Bank’s proposed adjustment prior to the occurrence of such event, Bank shall so adjust
the Transaction

8

 

	 	 	 	and such event shall not constitute an Amendment Event. However, (x) if Counterparty
does not accept such proposed adjustment or (y) Bank determines, in its sole
discretion, that no adjustment that it could make would produce a commercially
reasonable result, then the occurrence of such event shall constitute an Amendment
Event.
	 
	 	 	 	“Amendment Event” means that Counterparty amends, modifies, supplements or obtains a
waiver with respect to (i) any term of the Indenture or the Cash Convertible Notes
governing the principal amount, coupon, maturity, repurchase obligation of
Counterparty, redemption right of Counterparty, any term relating to conversion of
the Cash Convertible Notes (including changes to the conversion rate, conversion
settlement dates or conversion conditions), or (ii) any term of the Indenture or the
Cash Convertible Notes that would require consent of the holders of not less than
100% of the principal amount of the Cash Convertible Notes to amend, in each case
without the prior written consent of Bank, such consent not to be unreasonably
withheld.

	 	(ii)	 	Notwithstanding anything to the contrary in this Confirmation,
if any of the following events described in clauses (1) through (4) occurs, (A)
Counterparty shall immediately notify Bank of such event (such notice, a “Bond
Repurchase Notice”), (B) if Counterparty represents to Bank in writing in such
Bond Repurchase Notice that, at the time of delivery of such notice, none of
Counterparty and its affiliates is in possession of any material non-public
information regarding Counterparty or the Shares, then the delivery of such
notice shall constitute an Additional Termination Event in respect of which (I)
Counterparty shall be the sole Affected Party and the portion of the
Transaction relating to a number of Options equal to the number of Cash
Convertible Notes in denominations of USD1,000 principal amount so repurchased,
exchanged or repaid in connection with any of the events set forth below (the
“Affected Portion”) shall be deemed the sole Affected Transaction (II) Bank
shall designate an Exchange Business Day as an Early Termination Date pursuant
to Section 6(b) of the Agreement (such day to occur as close as practicable, in
Bank’s commercially reasonable judgment, to the settlement date of the
repurchase, exchange or repayment with respect to the Affected Portion) and
(III) for the avoidance of doubt, for purposes of determining any amount
payable pursuant to Section 6 of the Agreement in connection with such
Additional Termination Event, Bank (i) shall take into account the time value
of the Transaction with respect to the maturity date of the Cash Convertible
Notes, (ii) shall give effect to the use of the term “the Applicable
Percentage” under the definitions of “Number of Shares” and “Delivery
Obligation” above and (iii) may use a volume-weighted average price determined
over a time period reasonably determined by Bank:

(1) any Cash Convertible Notes are repurchased (whether in
connection with or as a result of a change of control, howsoever
defined, or for any other reason) by Counterparty or any of its
subsidiaries;

(2) any Cash Convertible Notes are delivered to Counterparty in
exchange for delivery of any property or assets of Counterparty or
any of its subsidiaries (howsoever described);

(3) any principal of any of the Cash Convertible Notes is repaid
prior to the final maturity date of the Cash Convertible Notes
(whether following acceleration of the Cash Convertible Notes or
otherwise); or

(4) any Cash Convertible Notes are exchanged by or for the benefit
of the holders thereof for any other securities of Counterparty or
any of its affiliates (or any other property, or any combination
thereof) pursuant to any exchange offer or similar transaction;

provided that, in the case of each of clauses (1) through (4), conversions of
the Cash Convertible Notes pursuant to the terms of the Indenture shall not be
an Additional Termination Event for purposes of this clause (ii).

9

 

	 	(iii)	 	Notwithstanding anything to the contrary in this Confirmation,
the giving of any Notice of Exercise shall constitute an Additional Termination
Event hereunder with respect to the number, if any, of Exercisable Options
specified in such Notice of Exercise as corresponding to a conversion of Cash
Convertible Notes in compliance with Section 10.03 of the Indenture. Upon
receipt of any such notice, Bank shall designate an Exchange Business Day as an
Early Termination Date (such day to occur as close as practicable, in Bank’s
commercially reasonable judgment, to the settlement date of the related Cash
Convertible Notes under the terms of the Indenture), with respect to the
portion of the Transaction corresponding to number of such Exercisable Options
so specified. In lieu of the provisions of “Delivery Obligation”, any payment
and/or delivery hereunder with respect to such conversion shall be calculated
pursuant to Section 6 of the Agreement; where, for the purposes of such
calculation, (A) Counterparty shall be the sole Affected Party with respect to
such Additional Termination Event and (B) for the avoidance of doubt, in
determining the amount payable pursuant to Section 6 of the Agreement, Bank (I)
shall take into account the time value of the Transaction with respect to the
maturity date of the Cash Convertible Notes (II) shall give effect to the use
of the term “the Applicable Percentage” under the definitions of “Number of
Shares” and “Delivery Obligation” above and (III) shall not take into account
any adjustments to the Option Entitlement that result from corresponding
adjustments to the Conversion Rate pursuant to Section 10.03 of the Indenture;
provided further that (A) in case of a partial termination, an Early
Termination Date shall be designated in respect of a Transaction having terms
identical to the Transaction and a Number of Options equal to the terminated
portion and such Transaction shall be the only Terminated Transaction; and (B)
the amount of cash payable in respect of such early termination by Bank to
Counterparty shall not be greater than the product of (x) the Applicable
Percentage and (y) the excess of (a) the total Cash Conversion Settlement
Amount (calculated by giving effect to any adjustment to the “Conversion Rate”
(as defined in the Indenture) in connection with the conversion of the relevant
Cash Convertible Notes pursuant to Section 10.03 of the Indenture)
over (b) the aggregate principal amount of such Cash Convertible Notes, as
determined by the Calculation Agent in its sole reasonable discretion.

	 	(c)	 	Repurchase Notices. Counterparty shall, on any day on which Counterparty
effects any repurchase of Shares, promptly give Bank a written notice of such
repurchase (a “Repurchase Notice”) on such day if following such repurchase, the
Options Equity Percentage as determined on such day is (i) equal to or greater than
[Barclays Bank PLC - 7.5%; Citibank, N.A. - 4.0%; JPMorgan
Chase Bank, National Association - 4.0%] or (ii) greater by 0.5% than the Options Equity Percentage included in the
immediately preceding Repurchase Notice (or, in the case of the first such Repurchase
Notice, greater than the Options Equity Percentage as of the Trade Date). The “Options
Equity Percentage” as of any day is the fraction (A) the numerator of which is the
Number of Shares and (B) the denominator of which is the number of Shares outstanding
on such day. Counterparty agrees to indemnify and hold harmless Bank and its
affiliates and their respective officers, directors, employees, affiliates, advisors,
agents and controlling persons (each, an “Indemnified Person”) from and against any and
all losses (including losses relating to Bank’s hedging activities as a consequence of
becoming, or of the risk of becoming, a Section 16 “insider”, including without
limitation, any forbearance from hedging activities or cessation of hedging activities
and any losses in connection therewith with respect to the Transaction), claims,
damages, judgments, liabilities and expenses (including reasonable attorney’s fees),
joint or several, which an Indemnified Person may become subject to, as a result of
Counterparty’s failure to provide Bank with a Repurchase Notice on the day specified in
this paragraph. If any suit, action, proceeding (including any governmental or
regulatory investigation), claim or demand shall be brought or asserted against the
Indemnified Person in respect of the foregoing, such Indemnified Person shall promptly
notify Counterparty in writing, and Counterparty, upon request of the Indemnified
Person, shall retain counsel reasonably satisfactory to the Indemnified Person to
represent the Indemnified Person and any others Counterparty may designate in such
proceeding and shall pay the fees and expenses of such counsel related to such
proceeding. Counterparty shall not be liable for any settlement of any proceeding
contemplated by this paragraph that is effected without its written consent, but if
settled with such consent or if there be a final judgment for the plaintiff,
Counterparty agrees to indemnify any Indemnified Person from

10

 

	 	 	 	and against any loss or liability by reason of such settlement or judgment.
Counterparty shall not, without the prior written consent of the Indemnified Person,
effect any settlement of any pending or threatened proceeding contemplated by this
paragraph that is in respect of which any Indemnified Person is or could have been a
party and indemnity could have been sought hereunder by such Indemnified Person,
unless such settlement includes an unconditional release of such Indemnified Person
from all liability on claims that are the subject matter of such proceeding on terms
reasonably satisfactory to such Indemnified Person. If the indemnification provided
for in this paragraph is unavailable to an Indemnified Person or insufficient in
respect of any losses, claims, damages or liabilities referred to therein, then
Counterparty hereunder, in lieu of indemnifying such Indemnified Person thereunder,
shall contribute to the amount paid or payable by such Indemnified Person as a
result of such losses, claims, damages or liabilities. The remedies provided for in
this paragraph (c) are not exclusive and shall not limit any rights or remedies
which may otherwise be available to any Indemnified Person at law or in equity. The
indemnity and contribution agreements contained in this paragraph shall remain
operative and in full force and effect regardless of the termination of the
Transaction.

	 	(d)	 	Rule 10b-18. Except as disclosed to Bank in writing prior to the Trade Date,
Counterparty represents and warrants to Bank that it has not made any purchases of
blocks by or for itself or any of its Affiliated Purchasers pursuant to the one block
purchase per week exception in Rule 10b-18(b)(4) under the Exchange Act during each of
the four calendar weeks preceding such date (“Rule 10b-18 purchase,” “blocks” and
“Affiliated Purchaser” each as defined in Rule 10b-18 under the Exchange Act).
Counterparty agrees and acknowledges that it shall not, and shall cause its Affiliated
Purchasers not to, directly or indirectly (including by means of a derivative
instrument) enter into any transaction to purchase any Shares during the period
beginning on the Trade Date and ending on the day on which Bank has informed
Counterparty in writing that it has completed all purchases of Shares to hedge
initially its exposure to the Transaction; provided, that this Section shall not apply
to the following: (A) purchases of Shares pursuant to exercises of stock options
granted to former or current employees, officers, directors, or other affiliates of
Counterparty, including the withholding and/or purchase of Shares from holders of such
options to satisfy payment of the option exercise price and/or satisfy tax withholding
requirements in connection with the exercise of such options; (B) purchases of Shares
from holders of performance shares or units or restricted shares or units to satisfy
tax withholding requirements in connection with vesting; (C) the conversion or exchange
by holders of any convertible or exchangeable securities of the Counterparty previously
issued; or (D) purchases of Shares effected by or for a plan by an agent independent of
the Counterparty that satisfy the requirements of Rule 10b-18(a)(13)(ii).
	 
	 	(e)	 	Regulation M. Counterparty (A) was not on the Trade Date, has not since such
date, and is not on the date hereof, engaged in a distribution, as such term is used in
Regulation M under the Exchange Act, of any securities of Counterparty, and (B) shall
not engage in any “distribution,” as such term is defined in Regulation M, other than a
distribution meeting the requirements of the exceptions set forth in sections
101(b)(10) and 102(b)(7) of Regulation M, until the second Exchange Business Day
immediately following the Trade Date.
	 
	 	(f)	 	Early Unwind. In the event the sale of Cash Convertible Notes is not
consummated with the initial purchasers for any reason by the close of business in New
York on May 22, 2009 (or such later date as agreed upon by the parties) (May 22, 2009
or such later date as agreed upon being the “Early Unwind Date”), the Transaction shall
automatically terminate (the “Early Unwind”), on the Early Unwind Date and (i) the
Transaction and all of the respective rights and obligations of Bank and Counterparty
under the Transaction shall be cancelled and terminated and (ii) each party shall be
released and discharged by the other party from and agrees not to make any claim
against the other party with respect to any obligations or liabilities of the other
party arising out of and to be performed in connection with the Transaction either
prior to or after the Early Unwind Date; provided that Counterparty shall pay to Bank,
other than in cases involving a breach of the Purchase Agreement by the initial
purchaser thereunder, an amount of cash equal to the aggregate amount of reasonable
costs and expenses relating to the unwinding of Bank’s hedging activities in

11

 

	 	 	 	respect of the Transaction in a commercially reasonable manner (including market
losses incurred in reselling in a commercially reasonable manner any Shares
purchased by Bank or its affiliates in connection with such hedging activities,
unless Counterparty agrees to purchase any such Shares at the cost at which Bank
purchased such Shares) but only to the extent that such market costs and expenses
exceed any realized market gains in such Shares. Bank and Counterparty represent
and acknowledge to the other that, subject to the proviso included in this
paragraph, upon an Early Unwind, all obligations with respect to the Transaction
shall be deemed fully and finally discharged.
	 
	 	(g)	 	Transfer or Assignment. Neither party may transfer or assign any of its rights
or obligations under the Transaction without the prior written consent of the other
party, not to be unreasonably withheld; provided that any such assignment or transfer
by Counterparty shall be subject to receipt by Bank of opinions and documents
reasonably satisfactory to Bank and effected on terms reasonably satisfactory to Bank
with respect to any tax, legal and regulatory matters relevant to the Bank; provided
further that Counterparty shall not be released from its notice and indemnification
obligations hereunder, and Counterparty shall be responsible for all reasonable costs
and expenses, including reasonable counsel fees, incurred by Bank in connection with
any such transfer or assignment. Notwithstanding any provision of the Agreement to the
contrary, Bank may, subject to applicable law, freely transfer and assign all of its
rights and obligations under the Transaction without the consent of Counterparty to any
affiliate of Bank the obligations of which are guaranteed by Bank. In addition, in
order to remediate an Excess Ownership Position, as discussed below it shall use its
commercially reasonable efforts to assign the Excess Ownership Position to a third
party reasonably satisfactory to Counterparty with a rating (or whose guarantor has a
rating) for its long term, unsecured and unsubordinated indebtedness of A- or better by
Standard & Poor’s Ratings Services or its successor (“S&P”), or A3 or better by Moody’s
Investors Service, Inc. or its successor (“Moody’s”) or, if either S&P or Moody’s
ceases to rate such debt, at least an equivalent rating or better by a substitute
rating agency mutually agreed by Counterparty and Bank.
	 
	 	 	 	If at any time at which (1) the Equity Percentage
exceeds 9% or (2) Bank, Bank
Group (as defined below) or any person whose ownership position would be aggregated
with that of Bank or Bank Group (Bank, Bank Group or any such person, a “Bank
Person”) under Section 203 of the Delaware General Corporation Law (the “DGCL
Takeover Statute”) or any state or federal bank holding company or banking laws, or
other federal, state or local laws, regulations or regulatory orders applicable to
ownership of Shares (“Applicable Laws”), owns, beneficially owns, constructively
owns, controls, holds the power to vote or otherwise meets a relevant definition of
ownership in excess of a number of Shares equal to (x) the number of Shares that
would give rise to reporting or registration obligations or other requirements
(including obtaining prior approval by a state or federal regulator) of a Bank
Person under Applicable Laws (including, without limitation, “interested
stockholder” or “acquiring person” status under the DGCL Takeover Statute) and with
respect to which such requirements have not been met or the relevant approval has
not been received minus (y) 1% of the number of Shares outstanding on the date
of determination (either such condition described in clause (1) or (2), an “Excess
Ownership Position”) and Bank is unable, after commercially reasonable efforts, to
effect a transfer or assignment on pricing terms and within a time period reasonably
acceptable to it of all or a portion of the Transaction pursuant to the preceding
sentence such that an Excess Ownership Position no longer exists, Bank may designate
any Scheduled Trading Day as an Early Termination Date with respect to a portion
(the “Terminated Portion”) of the Transaction, such that an Excess Ownership
Position no longer exists. In the event that Bank so designates an Early
Termination Date with respect to a portion of the Transaction, a payment shall be
made pursuant to Section 6 of the Agreement as if (x) an Early Termination Date had
been designated in respect of a Transaction having terms identical to the
Transaction and a Number of Options equal to the Terminated Portion, (y)
Counterparty shall be the sole Affected Party with respect to such partial
termination and (z) such Transaction shall be the only Terminated Transaction. The
“Equity Percentage” as of any day is the fraction, expressed as a percentage, (A)
the numerator of which is the number of Shares that Bank and any of its affiliates
subject to aggregation with Bank, for purposes of the

12

 

	 	 	 	“beneficial ownership” test under Section 13 of the Exchange Act, and all persons
who may form a “group” (within the meaning of Rule 13d-5(b)(1) under the Exchange
Act) with Bank (“Bank Group”), beneficially own (within the meaning of Section 13 of
the Exchange Act) on such day plus [ ]% of the Shares outstanding on such day and
(B) the denominator of which is the number of Shares outstanding on such day.
	 
	 	 	 	Notwithstanding any other provision in this Confirmation to the contrary requiring
or allowing Bank to purchase, sell, receive or deliver any Shares or other
securities to or from Counterparty, Bank may designate any of its affiliates to
purchase, sell, receive or deliver such Shares or other securities and otherwise to
perform Bank’s obligations in respect of the Transaction and any such designee may
assume such obligations. Bank shall be discharged of its obligations to
Counterparty to the extent of any such performance.

	 	(h)	 	Role of Agent. Each of Bank and Counterparty acknowledges to and agrees with
the other party hereto and to and with the Agent that (i) the Agent is acting as agent
for Bank under the Transaction pursuant to instructions from such party, (ii) the Agent
is not a principal or party to the Transaction, and may transfer its rights and
obligations with respect to the Transaction, (iii) the Agent shall have no
responsibility, obligation or liability, by way of issuance, guaranty, endorsement or
otherwise in any manner with respect to the performance of either party under the
Transaction, (iv) Bank and the Agent have not given, and Counterparty is not relying
(for purposes of making any investment decision or otherwise) upon, any statements,
opinions or representations (whether written or oral) of Bank or the Agent, other than
the representations expressly set forth in this Confirmation or the Agreement, and (v)
each party agrees to proceed solely against the other party, and not the Agent, to
collect or recover any money or securities owed to it in connection with the
Transaction. Each party hereto acknowledges and agrees that the Agent is an intended
third party beneficiary hereunder. Counterparty acknowledges that the Agent is an
affiliate of Bank. Bank will be acting for its own account in respect of this
Confirmation and the Transaction contemplated hereunder.
	 
	 	(i)	 	Regulatory Provisions. The time of dealing for the Transaction will be
confirmed by Bank upon written request by Counterparty. The Agent will furnish to
Counterparty upon written request a statement as to the source and amount of any
remuneration received or to be received by the Agent in connection with the
Transaction.
	 
	 	(j)	 	Netting and Setoff. Obligations under the Transaction shall not be netted,
recouped or set off (including pursuant to Section 6 of the Agreement) against any
other obligations of the parties, whether arising under the Agreement, this
Confirmation, under any other agreement between the parties hereto, by operation of law
or otherwise, and no other obligations of the parties shall be netted, recouped or set
off (including pursuant to Section 6 of the Agreement) against obligations under the
Transaction, whether arising under the Agreement, this Confirmation, under any other
agreement between the parties hereto, by operation of law or otherwise, and each party
hereby waives any such right of setoff, netting or recoupment; provided that both
parties agree that subparagraph (ii) of Section 2(c) of the Agreement shall
apply to the Transaction.
	 
	 	(k)	 	Registration. Counterparty hereby agrees that if, in the good faith reasonable
judgment of Bank, based on the advice of counsel, the Shares (“Hedge Shares”) acquired
by Bank for the purpose of hedging its obligations pursuant to the Transaction cannot
be sold in the public market by Bank without registration under the Securities Act,
Counterparty shall, at its election, either (i) in order to allow Bank to sell the
Hedge Shares in a registered offering, make available to Bank an effective registration
statement under the Securities Act and (A) enter into an agreement, in form and
substance satisfactory to Bank, substantially in the form of a customary underwriting
agreement for a registered offering, (B) use its reasonable best efforts to provide
accountant’s “comfort” letters customary in form for registered offerings of equity
securities, (C) provide customary disclosure opinions of outside counsel to
Counterparty reasonably acceptable to Bank, (D) provide other customary opinions,
certificates and closing documents customary in form for registered offerings of equity
securities and (E) afford Bank a reasonable opportunity to conduct a

13

 

	 	 	 	due diligence investigation with respect to Counterparty customary in scope for
underwritten offerings of equity securities; provided, however, that if Bank, in its
sole reasonable discretion, is not satisfied with access to due diligence materials,
the results of its due diligence investigation, or the procedures and documentation
for the registered offering referred to above, then clause (ii) or clause (iii) of
this paragraph shall apply at the election of Counterparty, (ii) in order to allow
Bank to sell the Hedge Shares in a private placement, enter into and comply with a
private placement agreement substantially similar to private placement purchase
agreements customary for private placements of equity securities, in form and
substance satisfactory to Bank (in which case, the Calculation Agent shall make any
adjustments to the terms of the Transaction that are necessary, in its reasonable
judgment, to compensate Bank for any discount from the public market price of the
Shares incurred on the sale of Hedge Shares in a private placement), or (iii)
purchase the Hedge Shares from Bank at the closing price on such Exchange Business
Days, and in the amounts, requested by Bank.
	 
	 	(l)	 	Tax Disclosure. Notwithstanding anything to the contrary herein, in the Equity
Definitions or in the Agreement, and notwithstanding any express or implied claims of
exclusivity or proprietary rights, the parties (and each of their employees,
representatives or other agents) are authorized to disclose to any and all persons,
beginning immediately upon commencement of their discussions and without limitation of
any kind, the tax treatment and tax structure of the Transaction, and all materials of
any kind (including opinions or other tax analyses) that are provided by either party
to the other relating to such tax treatment and tax structure.
	 
	 	(m)	 	Securities Contract; Swap Agreement. The parties hereto agree and acknowledge
that Bank is a “financial institution,” “swap participant” and “financial participant”
within the meaning of Sections 101(22), 101(53C) and 101(22A) of the Bankruptcy Code.
The parties hereto further agree and acknowledge (A) that this Confirmation is (i) a
“securities contract,” as such term is defined in Section 741(7) of the Bankruptcy
Code, with respect to which each payment and delivery hereunder or in connection
herewith is a “termination value,” “payment amount” or “other transfer obligation”
within the meaning of Section 362 of the Bankruptcy Code and a “settlement payment” or
a “transfer” within the meaning of Section 546 of the Bankruptcy Code, and (ii) a “swap
agreement,” as such term is defined in Section 101(53B) of the Bankruptcy Code, with
respect to which each payment and delivery hereunder or in connection herewith is a
“termination value,” a “payment amount” or “other transfer obligation” within the
meaning of Section 362 of the Bankruptcy Code and a “transfer” within the meaning of
Section 546 of the Bankruptcy Code, and (B) that Bank is entitled to the protections
afforded by, among other sections, Section 362(b)(6), 362(b)(17), 362(b)(27), 362(o),
546(e), 546(g), 546(j), 548(d)(2), 555, 560 and 561 of the Bankruptcy Code.
	 
	 	(n)	 	No Material Non-Public Information. Counterparty represents and warrants to
Bank as of the Trade Date that it is not aware of any material non-public information
concerning itself or the Shares.
	 
	 	(o)	 	Right to Extend. Bank may postpone any Exercise Date or postpone or extend any
other date of valuation or delivery with respect to some or all of the relevant Options
(in which event the Calculation Agent shall make appropriate adjustments to the Cash
Conversion Settlement Amount for such Options), if Bank determines, in its reasonable
discretion, that such postponement or extension is reasonably necessary or appropriate
to preserve Bank’s hedging or hedge unwind activity hereunder in light of existing
liquidity conditions or to enable Bank to effect purchases of Shares in connection with
its hedging, hedge unwind or settlement activity hereunder in a manner that would, if
Bank were Counterparty or an affiliated purchaser of Counterparty, be in compliance
with applicable legal, regulatory or self-regulatory requirements, or with related
policies and procedures applicable to Bank.
	 
	 	(p)	 	Payments on Early Termination. The parties hereto agree that for the
Transaction, for the purposes of Section 6(e) of the Agreement, Loss and Second Method
will apply.

14

 

	 	(q)	 	Governing Law. The law of the State of New York (without reference to choice
of law doctrine). The parties hereto irrevocably submit to the non-exclusive
jurisdiction of the courts of the State of New York and the United States Court for the
Southern District of New York in connection with all matters relating hereto and waive
any objection to the laying of venue in, and any claim of inconvenient forum with
respect to, these courts.
	 
	 	(r)	 	Waiver of Jury Trial. EACH PARTY WAIVES, TO THE FULLEST EXTENT PERMITTED BY
APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY SUIT, ACTION
OR PROCEEDING RELATING TO THE TRANSACTION. EACH PARTY (I) CERTIFIES THAT NO
REPRESENTATIVE, AGENT OR ATTORNEY OF THE OTHER PARTY HAS REPRESENTED, EXPRESSLY OR
OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF SUCH A SUIT, ACTION OR
PROCEEDING, SEEK TO ENFORCE THE FOREGOING WAIVER AND (II) ACKNOWLEDGES THAT IT AND THE
OTHER PARTY HAVE BEEN INDUCED TO ENTER INTO THE TRANSACTION, AS APPLICABLE, BY, AMONG
OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS PROVIDED HEREIN.

6. Account Details:

	 	(a)	 	Account for payments to Counterparty:
	 
	 	 	 	Wire instructions:
	 
	 	 	 	[                                        ]
	 
	 	 	 	ACH instructions:
	 
	 	 	 	[                                        ]
	 
	 	(b)	 	Account for payments to Bank:
	 
	 	 	 	[                                        ]

7. Offices:

The Office of Counterparty for the Transaction is: Inapplicable, Counterparty is not a Multibranch
Party.

The Office of Bank for the Transaction is: Inapplicable, Bank is not a Multibranch Party.

8. Notices:

For purposes of this Confirmation:

	 	(a)	 	Address for notices or communications to Counterparty:
	 
	 	 	 	Covanta Holding Corporation

40 Lane Road

Fairfield, New Jersey

Attention: General Counsel

Telephone No.: (+1) 973-882-4193

Facsimile No.: (+1) 973-882-7357
	 
	 	(b)	 	Address for notices or communications to Bank:
	 
	 	 	 	[                                        ]

15

 

	 	 	 	with a copy to:
	 
	 	 	 	[                                        ]
	 
	 	 	 	and
	 
	 	 	 	[                                        ]

This Confirmation may be executed in several counterparts, each of which shall be deemed an
original but all of which together shall constitute one and the same instrument.

16

 

Counterparty hereby agrees to check this Confirmation and to confirm that the foregoing correctly
sets forth the terms of the Transaction by signing in the space provided below and returning to
Bank a facsimile of the fully-executed Confirmation to Bank at [            ]. Originals shall be provided
for your execution upon your request.

Very truly yours,

AGENT

acting solely as Agent for Bank in connection with the Transaction

	 	 	 	 	 
	By:
	 	 	 	 
	 

	 	 

Name:
	 	 
	 

	 	Title:	 	 

Accepted and confirmed as of the Trade Date:

COVANTA HOLDING CORPORATION

	 	 	 	 	 
	By:
	 	 	 	 
	 

	 	 

Name:
	 	 
	 

	 	Title:	 	 

[Cash Convertible Note Hedge Transaction Signature Page]

 

 

SCHEDULE A

For purposes of the Transaction, the following terms shall have the following values/meanings:

	 	 	 	 	 
	1.

	 	Strike Price:
	 	USD[                                        ].
	2.

	 	Premium:
	 	USD[                                        ].

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00159-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00159-of-00352.parquet"}]]