Amendment and Limited Waiver to Intercreditor Agreement

Exhibit 10.3

Execution Copy

AMENDMENT AND
LIMITED WAIVER
TO INTERCREDITOR AGREEMENT

     This AMENDMENT AND LIMITED WAIVER TO INTERCREDITOR AGREEMENT, dated as of May 26, 2006 (this “Limited Waiver”) is entered into by and among COVANTA ENERGY CORPORATION, a Delaware corporation (“Company”), GOLDMAN SACHS CREDIT PARTNERS L.P. (“GSCP”), in its capacity as collateral agent under the First Lien Credit Agreement (as defined below), including its successors in such capacity from time to time (the “First Lien Collateral Agent”), CREDIT SUISSE, Cayman Islands Branch (“Credit Suisse”), in its capacity as administrative agent for the Second Lien Credit Agreement (as defined below), including its successors in such capacity from time to time (the “Second Lien Administrative Agent”), and Credit Suisse, in its capacity as collateral agent for the Parity Lien Claimholders, including its successors in such capacity from time to time (the “Parity Lien Collateral Agent”).

     WHEREAS, Company has entered into (i) that certain INTERCREDITOR AGREEMENT, dated as of June 24, 2005 (as it may be amended, supplemented or otherwise modified, the “Intercreditor Agreement”), by and among the Company, the First Lien Collateral Agent, the Second Lien Administrative Agent and the Parity Lien Collateral Agent, (ii) that certain AMENDED AND RESTATED CREDIT AND GUARANTY AGREEMENT, dated as of May 26, 2006 (as it may be amended, supplemented or otherwise modified, the “First Lien Credit Agreement”), by and among the Company, Covanta Holding Corporation (“Holding”), GSCP, as Sole Lead Arranger, Sole Book Runner, Administrative Agent and Collateral Agent, certain Subsidiaries of the Company as Guarantors, the Lenders party thereto from time to time, JPMC, Calyon and UBS, as Co-Documentation Agents, and (iii) that certain SECOND LIEN CREDIT AND GUARANTY AGREEMENT, dated as of June 24, 2005, as amended by the First Amendment thereto, dated as of May 26, 2006 (as it may be further amended, supplemented or otherwise modified, the “Second Lien Credit Agreement”) by and among the Company, Holding, certain Subsidiaries of the Company as Guarantors, the Lenders party thereto from time to time, GSCP and CREDIT SUISSE, as Joint Book Runners and Co-Syndication Agents, and CREDIT SUISSE, as Administrative Agent, Paying Agent and Collateral Agent;

     WHEREAS, the terms used herein, including in the preamble and recitals hereto, not otherwise defined herein or otherwise amended hereby shall have the meanings ascribed thereto in the Intercreditor Agreement;

     WHEREAS, the First Lien Credit Agreement has been amended on the date hereof to allow for, among other things, Delayed Draw Term Loans (as defined in the First Lien Credit Agreement), the proceeds of which will be applied by Company to prepay up to $140,000,000 of Second Lien Debt and any premium related thereto;

     WHEREAS, subject to certain conditions and limitations, Company and the First Lien Collateral Agent, Second Lien Administrative Agent and Parity Lien Collateral Agent desire to waive the effects of non-compliance with Section 4.1 of the Intercreditor Agreement caused by such prepayment;

     NOW, THEREFORE, in consideration of the premises and the agreements, provisions and covenants herein contained, Company, the First Lien Collateral Agent, the Second Lien Administrative Agent and the Parity Lien Collateral Agent agree as follows:

SECTION 1. AMENDMENT AND WAIVER

          1.1 The First Lien Collateral Agent, Second Lien Administrative Agent and Parity Lien Collateral Agent hereby waive any non-compliance with Section 4.1 of the Intercreditor Agreement to the

extent that such provision would prohibit the prepayment of the Second Lien Debt with the proceeds of the Delayed Draw Term Loans.

          1.2 The definition of “First Lien Obligations” in Section 1.1 of the Credit Agreement is hereby amended by deleting the existing reference to “$786,500,000” in its entirety and replacing it with “$789,312,500”.

2

3