COVANTA ENERGY CORP
<DOCUMENT>
<TYPE>EX-10.1N
<SEQUENCE>12
<FILENAME>covex10-1n_718.txt
<TEXT>
                                                                 EXHIBIT 10.1(n)
                                                                 ---------------

                               SUBSIDIARY GUARANTY

         This SUBSIDIARY GUARANTY is entered into as of April 1, 2002 by the
undersigned (each a "Guarantor", and together with any future Subsidiaries of
Company executing this Guaranty, being collectively referred to herein as the
"Guarantors") in favor of and for the benefit of BANK OF AMERICA, N.A., as
Administrative Agent for and representative of (in such capacity herein called
"Guarantied Party") the Lenders from time to time party to the Credit Agreement
referred to below.

                                    RECITALS

         Covanta Energy Corporation, a Delaware corporation ("Company"), and
certain subsidiaries of Company (collectively, Company and such subsidiaries of
Company are "Borrowers " and each a "Borrower"), have entered into that certain
Debtor-in-Possession Credit Agreement dated as of April 1, 2002 with the
financial institutions listed on the signature pages thereof as Lenders,
Guarantied Party, as Administrative Agent for Lenders, and Deutsche Bank AG, New
York Branch, as Documentation Agent (said Debtor-in-Possession Credit Agreement,
as it may heretofore have been and as it may hereafter be amended, supplemented
or otherwise modified from time to time, being the "Credit Agreement";
capitalized terms defined therein and not otherwise defined herein being used
herein as therein defined).

         Guarantied Party and Lenders are sometimes referred to herein as
"Beneficiaries".

         Pursuant to the Credit Agreement, Borrowers and the Lenders have agreed
that the Lenders shall provide, subject to the terms and conditions contained in
the Credit Agreement, debtor-in-possession revolving credit facilities for the
Borrowers to fund working capital and general corporate purposes and to make
certain other payments during the Chapter 11 Cases, and thus the Guarantied
Obligations (as hereinafter defined) are being incurred for and will inure to
the benefit of Guarantors (which benefits are hereby acknowledged).

         Guarantors are willing irrevocably and unconditionally to guaranty such
obligations of Borrowers.

         NOW, THEREFORE based upon the foregoing and other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, and
in order to induce Lenders and Guarantied Party to make Loans and other
extensions of credit under the Credit Agreement, Guarantors hereby agree as
follows:

         Guaranty. (a) In order to induce Lenders to extend credit to Borrowers
pursuant to the Credit Agreement, Guarantors jointly and severally irrevocably
and unconditionally guaranty, as primary obligors and not merely as sureties,
the due and punctual payment in full of all Guarantied Obligations (as
hereinafter defined) when the same shall become due, whether at stated maturity,
by acceleration, demand or otherwise (including amounts that would become due
but for the operation of the automatic stay under Section 362(a) of the
Bankruptcy Code). The term "Guarantied Obligations " is used herein in its most
comprehensive sense and includes, without limitation, any and all Obligations of
Borrowers, including, without limitation, those arising under successive
borrowing transactions under the

         Credit Agreement which shall either continue the Obligations of
Borrowers or from time to time renew them after they have been satisfied.

         Each Guarantor acknowledges that a portion of the Loans may be advanced
to it, that Letters of Credit may be issued for the benefit of its business, and
that the Guarantied Obligations with respect to the Credit Agreement and the
other Loan Documents are being incurred for and will inure to its benefit.

         Any interest, fees, costs, expenses or other charges on any portion of
the Guarantied Obligations that accrue after the commencement of any proceeding,
voluntary or involuntary, involving the bankruptcy, insolvency, receivership,
reorganization, liquidation or arrangement of Borrowers or of Company and/or its
Subsidiaries, as the case may be, including, without limitation, accruals
permitted under Section 506(b) of the Bankruptcy Code (or, if interest, fees,
costs, expenses or other charges on any portion of the Guarantied Obligations
cease to accrue by operation of law by reason of the commencement of said
proceeding, such interest as would have accrued on such portion of the
Guarantied Obligations if said proceeding had not been commenced) shall be
included in the Guarantied Obligations because it is the intention of each
Guarantor and Guarantied Party that the Guarantied Obligations should be
determined without regard to any rule of law or order that may relieve Borrowers
or of Company and/or its Subsidiaries, as the case may be, of any portion of
such Guarantied Obligations.

         In the event that all or any portion of the Guarantied Obligations is
paid by Borrowers or of Company and/or its Subsidiaries, as the case may be, the
obligations of each Guarantor hereunder shall continue and remain in full force
and effect or be reinstated, as the case may be, in the event that all or any
part of such payment(s) is rescinded or recovered directly or indirectly from
Guarantied Party or any other Beneficiary as a preference, fraudulent transfer
or otherwise, and any such payments that are so rescinded or recovered shall
constitute Guarantied Obligations.

         Subject to the other provisions of this Section 1, upon the failure of
Borrowers or of Company and/or its Subsidiaries, as the case may be, to pay any
of the Guarantied Obligations when and as the same shall become due, each
Guarantor will upon demand pay, or cause to be paid, in cash, to Guarantied
Party for the ratable benefit of Beneficiaries, an amount equal to the aggregate
of the unpaid Guarantied Obligations.

         (b) Anything contained in this Guaranty to the contrary
notwithstanding, the obligations of each Guarantor under this Guaranty shall be
limited to a maximum aggregate amount equal to the largest amount that would not
render its obligations hereunder subject to avoidance as a fraudulent transfer
or conveyance under Section 548 of the Bankruptcy Code or any applicable
provisions of comparable state law (collectively, the " Fraudulent Transfer Laws
"), in each case after giving effect to all other liabilities of such Guarantor,
contingent or otherwise, that are relevant under the Fraudulent Transfer Laws
(specifically excluding, however, any liabilities of such Guarantor (x) in
respect of intercompany indebtedness to Borrowers or other affiliates of
Borrowers to the extent that such indebtedness would be discharged in an amount
equal to the amount paid by such Guarantor hereunder and (y) under any guaranty
of Subordinated Indebtedness which guaranty contains a limitation as to maximum
amount similar to that set forth in this Section 1(b), pursuant to which the
liability of such Guarantor hereunder is included in the liabilities taken into
account in determining such maximum amount) and after giving effect as assets to
the value (as determined under the applicable provisions of the Fraudulent
Transfer Laws) of any rights to subrogation, reimbursement, indemnification or
contribution of such Guarantor pursuant to applicable law or pursuant to the
terms of any agreement.

         (c) Each Guarantor under this Guaranty, and each guarantor under other
guaranties, if any, relating to the Credit Agreement (the "Related Guaranties")
that contain a contribution provision similar to that set forth in this Section
1(c), together desire to allocate among themselves (collectively, the
"Contributing Guarantors "), in a fair and equitable manner, their obligations
arising under this Guaranty and the Related Guaranties. Accordingly, in the
event any payment or distribution is made on any date by a Guarantor under this
Guaranty or a guarantor under a Related Guaranty, each such Guarantor or such
other guarantor shall be entitled to a contribution from each of the other
Contributing Guarantors in the maximum amount permitted by law so as to maximize
the aggregate amount of the Guarantied Obligations paid to Beneficiaries.

         Guaranty Absolute; Continuing Guaranty. The obligations of each
Guarantor hereunder are irrevocable, absolute, independent and unconditional and
shall not be affected by any circumstance which constitutes a legal or equitable
discharge of a guarantor or surety other than payment in full of the Guarantied
Obligations. In furtherance of the foregoing and without limiting the generality
thereof, each Guarantor agrees that: (a) this Guaranty is a guaranty of payment
when due and not of collectibility; (b) Guarantied Party may enforce this
Guaranty upon the occurrence of an Event of Default under the Credit Agreement
or the occurrence of an early termination date notwithstanding the existence of
any dispute between Borrowers and any Beneficiary with respect to the existence
of such event; (c) the obligations of each Guarantor hereunder are independent
of the obligations of Borrowers under the Loan Documents, and the obligations of
any other Guarantor and a separate action or actions may be brought and
prosecuted against each Guarantor whether or not any action is brought against
Borrowers or any of such other Guarantors and whether or not Borrowers are
joined in any such action or actions; and (d) a payment of a portion, but not
all, of the Guarantied Obligations by one or more Guarantors shall in no way
limit, affect, modify or abridge the liability of such or any other Guarantor
for any portion of the Guarantied Obligations that has not been paid. This
Guaranty is a continuing guaranty and shall be binding upon each Guarantor and
its successors and assigns, and each Guarantor irrevocably waives any right to
revoke this Guaranty as to future transactions giving rise to any Guarantied
Obligations.

         Actions by Beneficiaries. Any Beneficiary may from time to time,
subject to the terms and conditions in the Credit Agreement, without notice or
demand and without affecting the validity or enforceability of this Guaranty or
giving rise to any limitation, impairment or discharge of any Guarantor's
liability hereunder, (a) renew, extend, accelerate or otherwise change the time,
place, manner or terms of payment of the Guarantied Obligations, (b) settle,
compromise, release or discharge, or accept or refuse any offer of performance
with respect to, or substitutions for, the Guarantied Obligations or any
agreement relating thereto and/or subordinate the payment of the same to the
payment of any other obligations, (c) request and accept other guaranties of the
Guarantied Obligations and take and hold security for the payment of this
Guaranty or the Guarantied Obligations, (d) release, exchange, compromise,
subordinate or modify, with or without consideration, any security for payment
of the Guarantied Obligations, any other guaranties of the Guarantied
Obligations, or any other obligation of any Person with respect to the
Guarantied Obligations, (e) enforce and apply any security now or hereafter held
by or for the benefit of any Beneficiary in respect of this Guaranty or the
Guarantied Obligations and direct the order or manner of sale thereof, or
exercise any other right or remedy that Guarantied Party or the other
Beneficiaries, or any of them, may have against any such security, as Guarantied
Party in its discretion may determine consistent with the Credit Agreement and
any applicable Loan Documents, including foreclosure on any such security
pursuant to one or more judicial or nonjudicial sales, whether or not every
aspect of any such sale is commercially reasonable, and (f) exercise any other
rights available to Guarantied Party or the other Beneficiaries, or any of them,
under the Loan Documents.

         No Discharge. This Guaranty and the obligations of Guarantors hereunder
shall be valid and enforceable and shall not be subject to any limitation,
impairment or discharge for any reason (other than payment in full in cash of
the Guarantied Obligations), including without limitation the occurrence of any
of the following, whether or not any Guarantor shall have had notice or
knowledge of any of them: (a) any failure to assert or enforce or agreement not
to assert or enforce, or the stay or enjoining, by order of court, by operation
of law or otherwise, of the exercise or enforcement of, any claim or demand or
any right, power or remedy with respect to the Guarantied Obligations or any
agreement relating thereto, or with respect to any other guaranty of or security
for the payment of the Guarantied Obligations, (b) any waiver or modification
of, or any consent to departure from, any of the terms or provisions of the
Credit Agreement, any of the other Loan Documents or any agreement or instrument
executed pursuant thereto, or of any other guaranty or security for the
Guarantied Obligations, (c) the Guarantied Obligations, or any agreement rela
ting thereto, at any time being found to be illegal, invalid, unenforceable or
disallowed in any respect (including, without limitation, pursuant to Section
502 of the Bankruptcy Code), (d) the application of payments received from any
source to the payment of indebtedness other than the Guarantied Obligations,
even though Guarantied Party or the other Beneficiaries, or any of them, might
have elected to apply such payment to any part or all of the Guarantied
Obligations, (e) any failure to perfect or continue perfection of a security
interest in any collateral which secures any of the Guarantied Obligations, (f)
any defenses, set-offs or counterclaims which Borrowers may assert against
Guarantied Party or any Beneficiary in respect of the Guarantied Obligations,
including but not limited to failure of consideration, breach of warranty,
payment, statute of frauds, statute of limitations, accord and satisfaction and
usury, and (g) any other act or thing or omission, or delay to do any other act
or thing, which may or might in any manner or to any extent vary the risk of a
Guarantor as an obligor in respect of the Guarantied Obligations.

         Waivers. Each Guarantor waives, for the benefit of Beneficiaries: (a)
any right to require Guarantied Party or the other Beneficiaries, as a condition
of payment or performance by such Guarantor, to (i) proceed against Borrowers,
any other guarantor (including any other Guarantor) of the Guarantied
Obligations or any other Person, (ii) proceed against or exhaust any security
held from Borrowers, any other guarantor of the Guarantied Obligations or any
other Person, (iii) proceed against or have resort to any balance of any deposit
account or credit on the books of any Beneficiary in favor of Borrowers or any
other Person, or (iv) pursue any other remedy in the power of any Beneficiary;
(b) any defense arising by reason of the incapacity, lack of authority or any
disability or other defense of Borrowers including, without limitation, any
defense based on or arising out of the lack of validity or the unenforceability
of the Guarantied Obligations or any agreement or instrument relating thereto or
by reason of the cessation of the liability of Borrowers from any cause other
than payment in full of the Guarantied Obligations; (c) any defense based upon
any statute or rule of law which provides that the obligation of a surety must
be neither larger in amount nor in other respects more burdensome than that of
the principal; (d) any defense based upon Guarantied Party's or any other
Beneficiary's errors or omissions in the administration of the Guarantied
Obligations, except behavior that amounts to bad faith; (e) (i) any principles
or provisions of law, statutory or otherwise, that are or might be in conflict
with the terms of this Guaranty and any legal or equitable discharge of such
Guarantor's obligations hereunder, (ii) the benefit of any statute of
limitations affecting such Guarantor's liability hereunder or the enforcement
hereof, (iii) any rights to set-offs, recoupments and counterclaims, and (iv)
promptness, diligence and any requirement that any Beneficiary protect, secure,
perfect or insure any Lien or any property subject thereto; (f) notices,
demands, presentments, protests, notices of protest, notices of dishonor and
notices of any action or inaction, including acceptance of this Guaranty,
notices of default under the Credit Agreement, notices of any renewal, extension
or modification of the Guarantied Obligations or any agreement related thereto,
notices of any extension of credit to Borrowers and notices of any of the
matters referred to in Section 3 and 4 hereof and any right to consent to any
thereof; and (g) to the fullest extent permitted by law, any defenses or
benefits that may be derived from or afforded by law which limit the liability
of or exonerate guarantors or sureties, or which may conflict with the terms of
this Guaranty.

         Guarantors' Rights of Subrogation, Contribution, Etc.; Subordination of
Other Obligations. Each Guarantor waives any claim, right or remedy, direct or
indirect, that such Guarantor now has or may hereafter have against Borrowers or
any of its assets in connection with this Guaranty or the performance by such
Guarantor of its obligations hereunder, in each case whether such claim, right
or remedy arises in equity, under contract, by statute under common law or
otherwise and including without limitation (a) any right of subrogation,
reimbursement or indemnification that such Guarantor now has or may hereafter
have against Borrowers, (b) any right to enforce, or to participate in, any
claim, right or remedy that any Beneficiary now has or may hereafter have
against Borrowers, and (c) any benefit of, and any right to participate in, any
collateral or security now or hereafter held by any Beneficiary. In addition,
until the Guarantied Obligations shall have been paid in full in cash and the
Commitments shall have terminated and all Letters of Credit shall have expired
or been cancelled, each Guarantor shall withhold exercise of any right of
contribution such Guarantor may have against any other guarantor of any of the
Guarantied Obligations. Each Guarantor further agrees that, to the extent the
waiver or agreement to withhold the exercise of its rights of subrogation,
reimbursement, indemnification and contribution as set forth herein is found by
a court of competent jurisdiction to be void or voidable for any reason, any
rights of subrogation, reimbursement or indemnification such Guarantor may have
against Borrowers or against any collateral or security, and any rights of
contribution such Guarantor may have against any such other guarantor, shall be
junior and subordinate to any rights Guarantied Party or the other Beneficiaries
may have against Borrowers, to all right, title and interest Guarantied Party or
the other Beneficiaries may have in any such collateral or security, and to any
right Guarantied Party or the other Beneficiaries may have against such other
guarantor.

         Any indebtedness of Borrowers now or hereafter held by any Guarantor is
subordinated in right of payment to the Guarantied Obligations, and any such
indebtedness of Borrowers to a Guarantor collected or received by such Guarantor
after an Event of Default has occurred and is continuing, and any amount paid to
a Guarantor on account of any subrogation, reimbursement, indemnification or
contribution rights referred to in the preceding paragraph when all Guarantied
Obligations have not been paid in full in cash, shall be held in trust for
Guarantied Party on behalf of Beneficiaries and shall forthwith be paid over to
Guarantied Party for the benefit of Beneficiaries to be credited and applied
against the Guarantied Obligations.

         Expenses. Guarantors jointly and severally agree to pay, or cause to be
paid, on demand, and to save Guarantied Party and the other Beneficiaries
harmless against liability for, (i) any and all costs and expenses (including
fees and disbursements of counsel and allocated costs of internal counsel)
incurred or expended by Guarantied Party or any other Beneficiary in connection
with the enforcement of or preservation of any rights under this Guaranty and
(ii) any and all costs and expenses (including those arising from rights
indemnification) required to be paid by Guarantors under the provisions of any
other Loan Document, together with any and all interest (at the default rate set
forth in subsection 2.2E of the Credit Agreement) that shall accrue on unpaid
costs and expenses referred to in clause (i) and (ii) hereof (to the extent
permitted by applicable law).

         Financial Condition of Borrowers. No Beneficiary shall have any
obligation, and each Guarantor waives any duty on the part of any Beneficiary,
to disclose or discuss with such Guarantor its assessment, or such Guarantor's
assessment, of the financial condition of Borrowers or any matter or fact
relating to the business, operations or condition of Borrowers. Each Guarantor
has adequate means to obtain information from Borrowers on a continuing basis
concerning the financial condition of Borrowers and their ability to perform
their obligations under the Loan Documents, and each Guarantor assumes the
responsibility for being and keeping informed of the financial condition of
Borrowers and of all circumstances bearing upon the risk of nonpayment of the
Guarantied Obligations.

         Representations and Warranties. Each Guarantor makes, for the benefit
of Beneficiaries, each of the representations and warranties made in the Credit
Agreement by Borrowers as to such Guarantor, its assets, financial condition,
operations, organization, legal status, business and the Loan Documents to which
it is a party.

         Covenants. Each Guarantor agrees that, so long as any part of the
Guaranteed Obligations shall remain unpaid, any Letter of Credit shall be
outstanding, or any Lender shall have any Commitment, such Guarantor will,
unless Requisite Lenders shall otherwise consent in writing, perform or observe,
and cause its Subsidiaries to perform or observe, all of the terms, covenants
and agreements that the Loan Documents state that Borrowers are to cause a
Guarantor and such Subsidiaries to perform or observe.

         Set Off. In addition to any other rights any Beneficiary may have under
law or in equity, if any amount shall at any time be due and owing by a
Guarantor to any Beneficiary under this Guaranty, such Beneficiary is authorized
at any time or from time to time, without notice (any such notice being
expressly waived), to set off and to appropriate and to apply any and all
deposits (general or special, including but not limited to indebtedness evidence
by certificates of deposit, whether matured or unmatured) and any other
indebtedness of such Beneficiary owing to a Guarantor and any other property of
such Guarantor held by a Beneficiary to or for the credit or the account of such
Guarantor against and on account of the Guarantied Obligations and liabilities
of such Guarantor to any Beneficiary under this Guaranty.

         Taxes and Set-off by Guarantors. All payments to be made by the
Guarantors hereunder will be made without set-off or counterclaim and without
deduction for any taxes, levies, duties, fees, deductions, withholdings,
restrictions or conditions of any nature whatsoever. If at any time any
applicable law, regulation or international agreement requires any Guarantor to
make any such deduction or withholding from any such payment, the sum due from
such Guarantor with respect to such payment will be increased to the extent
necessary to ensure that, after the making of such deduction or withholding,
each Lender receives a net sum equal to the sum which it would have received had
no deduction or withholding been required.

         Discharge of Guaranty Upon Sale of Guarantor. If all of the stock of a
Guarantor or any of its successors in interest under this Guaranty shall be sold
or otherwise disposed of (including by merger or consolidation) in a sale not
prohibited by the Credit Agreement or otherwise consented to by Lenders, the
obligations of such Guarantor or such successor in interest, as the case may be,
hereunder shall automatically be discharged and released without any further
action by any Beneficiary or any other Person effective as of the time of such
sale; provided that, if the sale of such stock constitutes an Asset Sale as a
condition precedent to such discharge and release, Guarantied Party shall have
received evidence satisfactory to it that arrangements satisfactory to it have
been made for delivery to Guarantied Party of the Net Asset Sale Proceeds of
such Asset Sale as required by the Credit Agreement.

         Amendments and Waivers. No amendment, modification, termination or
waiver of any provision of this Guaranty, and no consent to any departure by any
Guarantor therefrom, shall in any event be effective without the written
concurrence of Guarantied Party and, in the case of any such amendment or
modification, Guarantors. Any such waiver or consent shall be effective only in
the specific instance and for the specific purpose for which it was given.

         Miscellaneous. It is not necessary for Beneficiaries to inquire into
the capacity or powers of any Guarantor or Borrowers or the officers, directors
or any agents acting or purporting to act on behalf of any of them.

         The rights, powers and remedies given to Beneficiaries by this Guaranty
are cumulative and shall be in addition to and independent of all rights, powers
and remedies given to Beneficiaries by virtue of any statute or rule of law or
in any of the Loan Documents or any agreement between one or more Guarantors and
one or more Beneficiaries or between Borrowers and one or more Beneficiaries.
Any forbearance or failure to exercise, and any delay by any Beneficiary in
exercising, any right, power or remedy hereunder shall not impair any such
right, power or remedy or be construed to be a waiver thereof, nor shall it
preclude the further exercise of any such right, power or remedy.

         In case any provision in or obligation under this Guaranty shall be
invalid, illegal or unenforceable in any jurisdiction, the validity, legality
and enforceability of the remaining provisions or obligations, or of such
provision or obligation in any other jurisdiction, shall not in any way be
affected or impaired thereby.

         THIS GUARANTY AND THE RIGHTS AND OBLIGATIONS OF GUARANTORS, GUARANTIED
PARTY AND THE OTHER BENEFICIARIES HEREUNDER SHALL BE GOVERNED BY, AND SHALL BE
CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE INTERNAL LAWS OF THE STATE OF NEW
YORK (INCLUDING WITHOUT LIMITATION SECTION 5-1401 OF THE GENERAL OBLIGATIONS LAW
OF THE STATE OF NEW YORK), WITHOUT REGARD TO CONFLICTS OF LAWS PRINCIPLES.

         This Guaranty shall inure to the benefit of Beneficiaries and their
respective successors and assigns.

         ALL JUDICIAL PROCEEDINGS BROUGHT AGAINST ANY GUARANTOR ARISING OUT OF
OR RELATING TO THIS GUARANTY MAY BE BROUGHT IN ANY STATE OR FEDERAL COURT OF
COMPETENT JURISDICTION IN THE STATE OF NEW YORK, AND BY EXECUTION AND DELIVERY
OF THIS GUARANTY EACH GUARANTOR ACCEPTS FOR ITSELF AND IN CONNECTION WITH ITS
PROPERTIES, GENERALLY AND UNCONDITIONALLY, THE NONEXCLUSIVE JURISDICTION OF THE
AFORESAID COURTS AND WAIVES ANY DEFENSE OF FORUM NON CONVENIENS AND IRREVOCABLY
AGREES TO BE BOUND BY ANY JUDGMENT RENDERED THEREBY IN CONNECTION WITH THIS
GUARANTY. Each Guarantor agrees that service of all process in any such
proceeding in any such court may be made by registered or certified mail, return
receipt requested, to such Guarantor at its address set forth below its
signature hereto, such service being acknowledged by such Guarantor to be
sufficient for personal jurisdiction in any action against such Guarantor in any
such court and to be otherwise effective and binding service in every respect.
Nothing herein shall affect the right to serve process in any other manner
permitted by law or shall limit the right of Guarantied Party or any Beneficiary
to bring proceedings against such Guarantor in the courts of any other
jurisdiction.

         EACH GUARANTOR AND, BY ITS ACCEPTANCE OF THE BENEFITS HEREOF,
GUARANTIED PARTY EACH AGREES TO WAIVE ITS RESPECTIVE RIGHTS TO A JURY TRIAL OF
ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT OF THIS GUARANTY. The
scope of this waiver is intended to be all-encompassing of any and all disputes
that may be filed in any court and that relate to the subject matter of this
transaction, including without limitation contract claims, tort claims, breach
of duty claims and all other common law and statutory claims. Each Guarantor
and, by its acceptance of the benefits hereof, Guarantied Party each (i)
acknowledges that this waiver is a material inducement for such Guarantor and
Guarantied Party to enter into a business relationship, that such Guarantor and
Guarantied Party have already relied on this waiver in entering into this
Guaranty or accepting the benefits thereof, as the case may be, and that each
will continue to rely on this waiver in their related future dealings, and (ii)
further warrants and represents that each has reviewed this waiver with its
legal counsel and that each knowingly and voluntarily waives its jury trial
rights following consultation with legal counsel. THIS WAIVER IS IRREVOCABLE,
MEANING THAT IT MAY NOT BE MODIFIED EITHER ORALLY OR IN WRITING, AND THIS WAIVER
SHALL APPLY TO ANY SUBSEQUENT AMENDMENTS, RENEWALS, SUPPLEMENTS OR MODIFICATIONS
OF THIS GUARANTY. In the event of litigation, this Guaranty may be filed as a
written consent to a trial by the court.

         Additional Guarantors . The initial Guarantor(s) hereunder shall be
such of the Subsidiaries of Borrowers as are signatories hereto on the date
hereof. From time to time subsequent to the date hereof, Subsidiaries of
Borrowers shall become parties hereto, in accordance with and subject to
subsection 6.8A of the Credit Agreement, as additional Guarantors (each an
"Additional Guarantor"), by executing a counterpart of this Guaranty. A form of
such a counterpart is attached as Exhibit A. Upon delivery of any such
counterpart to Guarantied Party, notice of which is hereby waived by Guarantors,
each such Additional Guarantor shall be a Guarantor and shall be as fully a
party hereto as if such Additional Guarantor were an original signatory hereof.
Each Guarantor expressly agrees that its obligations arising hereunder shall not
be affected or diminished by the addition or release of any other Guarantor
hereunder, nor by any election of the Guarantied Party not to cause any
Subsidiary of Borrowers to become an Additional Guarantor hereunder. This
Guaranty shall be fully effective as to any Guarantor that is or becomes a party
hereto regardless of whether any other Person becomes or fails to become or
ceases to be a Guarantor hereunder.

         Counterparts; Effectiveness. This Guaranty may be executed in any
number of counterparts and by the different parties hereto in separate
counterparts, each of which when so executed and delivered shall be deemed to be
an original for all purposes; but all such counterparts together shall
constitute but one and the same instrument. This Guaranty shall become effective
as to each Guarantor upon the execution of a counterpart hereof by such
Guarantor (whether or not a counterpart hereof shall have been executed by any
other Guarantor) and receipt by the Guaranteed Party of written or telephonic
notification of such execution and authorization of delivery thereof.

                           Guarantied Party as Agent.

         Guarantied Party has been appointed to act as Guarantied Party
hereunder by Lenders. Guarantied Party shall be obligated, and shall have the
right hereunder, to make demands, to give notices, to exercise or refrain from
exercising any rights, and to take or refrain from taking any action, solely in
accordance with this Guaranty and the Credit Agreement.

         Guarantied Party shall at all times be the same Person that is
Administrative Agent under the Credit Agreement. Written notice of resignation
by Administrative Agent pursuant to subsection 9.5 of the Credit Agreement shall
also constitute notice of resignation as Guarantied Party under this Guaranty;
removal of Administrative Agent pursuant to subsection 9.5 of the Credit
Agreement shall also constitute removal as Guarantied Party under this Guaranty;
and appointment of a successor Administrative Agent pursuant to subsection 9.5
of the Credit Agreement shall also constitute appointment of a successor
Guarantied Party under this Guaranty. Upon the acceptance of any appointment as
Administrative Agent under subsection 9.5 of the Credit Agreement by successor
Administrative Agent, that successor Administrative Agent shall thereupon
succeed to become vested with all the rights, powers, privileges and duties of
the retiring or removed Guarantied Party under this Guaranty, and the retiring
or removed Guarantied Party under this Guaranty shall promptly (i) transfer to
such successor Guarantied Party all sums held hereunder, together with all
records and other documents necessary or appropriate in connection with the
performance of the duties of the successor Guarantied Party under this Guaranty,
and (ii) take such other actions as may be necessary or appropriate in
connection with the assignment to such successor Guarantied Party of the rights
created hereunder, whereupon such retiring or removed Guarantied Party shall be
discharged from its duties and obligations under this Guaranty. After any
retiring or removed Guarantied Party's resignation or removal hereunder as
Guarantied Party, the provisions of this Guaranty shall inure to its benefits as
to any actions taken or omitted to be taken by it under this Guaranty while it
was Guarantied Party hereunder.

                  [Remainder of page intentionally left blank.]


<PAGE>


         IN WITNESS WHEREOF, each Guarantor (and Guarantied Party solely for the
purposes of the waiver of the right to jury trial contained in Section 15) has
caused this Guaranty to be duly executed and delivered by its respective officer
thereunto duly authorized as of the date first written above.

                              Each of the entities listed on Schedule A annexed
                              hereto

                              By: /s/ Jeffrey R. Horowitz
                                 -----------------------------------------------
                                  Name:  Jeffrey R. Horowitz
                                  Title: Authorized Officer

                              Each of the entities listed on Schedule B annexed
                              hereto

                              By: /s/ William J. Metzger
                                 -----------------------------------------------
                                  Name:   William J. Metzger
                                  Title:  Authorized Officer

                              Notice Address:

                                  c/o Covanta Energy Group, Inc.
                                  40 Lane Road
                                  Fairfield, New Jersey  07007
                                  Attn:  Jeffrey Horowitz, Esq.


<PAGE>


                              BANK OF AMERICA, N.A.
                                  as Guarantied Party

                              By: /s/ Michael R. Heredia
                                 -----------------------------------------------
                                  Name:   Michael R. Heredia
                                  Title:  Managing Director

                              Notice Address:
                                       Attention:  Barry Flynn
                                       1 Independence Center
                                       101 North Tryon Street
                                       Charlotte, NC  28255


</TEXT>
</DOCUMENT>
