Exhibit 10.2
SEVERANCE PLAN FOR
COVANTA ENERGY CORPORATION SENIOR OFFICERS
1. Purpose of the Plan. The purpose of the Severance Plan for Covanta Energy
Corporation Senior Officers (the “Plan”) is to provide for severance benefits to
certain specified senior officers whose employment with the Company Group is
involuntarily terminated. This Plan is intended to be the exclusive means by
which the Company provides eligible employees with severance benefits except to
the extent different benefits are provided in written agreements signed by
authorized representatives of the Company. Except where specifically stated
otherwise, the provisions of this Plan in effect as of the Termination Date of
an eligible Employee shall be deemed to be effective for the eligible Employee
whose Eligible Termination of Employment occurred on or after the Plan’s
Effective Date.
2. Definitions. The following terms and phrases when used in the Plan shall have
the following meanings:
(a) “Administrator” shall mean the Administrative Committee of Covanta Energy
Corporation. With respect to any period during which there is no such committee,
the Compensation Committee of the Board shall serve as Administrator.
(b) “Beneficiary” shall mean, with respect to an Employee, such Employee’s
estate.
(c) “Board” shall mean the Board of Directors of Covanta Holding.
(d) “Cause” shall mean, with respect to the termination of an Employee’s
employment with the Company Group, such Employee’s (i) failure or refusal to
perform the duties of his or her employment with the Company Group in a
reasonably satisfactory manner, (ii) fraud or other act of dishonesty,
(iii) serious misconduct in connection with the performance of his or her duties
for the Company Group, (iv) material violation of any policy or procedure of the
Company Group, (v) conviction of, or plea of nolo contendere to, a felony or
other crime or (vi) other conduct that has or reasonably is expected to result
in material injury to the business or reputation of any member of the Company
Group, in any such case, as determined by the Plan Administrator in his/her sole
discretion.
(e) “Change in Control” shall mean the occurrence of any of the following
events, each of which shall be determined independently of the others:
(i) any “Person” (as hereinafter defined), other than a holder of at least 10%
of the outstanding voting power of Covanta Holding as of the date of this Plan,
becomes a “beneficial owner” (as such term is used in Rule 13d-3 promulgated
under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) of a
majority of the stock of Covanta Holding entitled to vote in the election of
directors of Covanta Holding;
(ii) individuals who are Continuing Directors (as hereinafter defined) of
Covanta Holding cease to constitute a majority of the members of the Board;

 

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(iii) stockholders of Covanta Holding adopt and consummate a plan of complete or
substantial liquidation or an agreement providing for the distribution of all or
substantially all of the assets of Covanta Holding;
(iv) Covanta Holding is a party to a merger, consolidation, other form of
business combination or a sale of all or substantially all of its assets, with
an unaffiliated third party, unless the business of Covanta Holding following
consummation of such merger, consolidation or other business combination is
continued following any such transaction by a resulting entity (which may be,
but need not be, Covanta Holding) and the stockholders of Covanta Holding
immediately prior to such transaction hold, directly or indirectly, at least a
majority of the voting power of the resulting entity; provided, however, that a
merger or consolidation effected to implement a recapitalization of Covanta
Holding (or similar transaction) shall not constitute a Change in Control;
(v) there is a Change in Control of Covanta Holding of a nature that is reported
in response to item 5.01 of Current Report on Form 8-K or any similar item,
schedule or form under the Exchange Act, as in effect at the time of the change,
whether or not Covanta Holding is then subject to such reporting requirements;
provided, however, that for purposes of this Plan a Change in Control shall not
be deemed to occur if the Person or Persons deemed to have acquired control is a
holder of at least 10% of the outstanding voting power of Covanta Holding as of
the date of this Plan; or
(vi) Covanta Holding consummates a transaction which constitutes a “Rule 13e-3
transaction” (as such term is defined in Rule 13e-3 of the Exchange Act) prior
to the termination of this Plan.
(f) “Code” shall mean the Internal Revenue Code of 1986, as amended.
(g) “Company Group” shall mean, collectively or individually, as the context
requires, Covanta and each of its Subsidiaries. When referring to the employment
of an Employee with the Company Group (or the termination of such employment),
references to Company Group shall be deemed to refer to the member thereof that
employs such Employee, as appropriate in the context.
(h) “Continuing Directors” shall mean the members of the Board on the date of
execution of this Plan, provided that any person becoming a member of the Board
subsequent to such date whose election or nomination for election was supported
by at least a majority of the directors who then comprised the Continuing
Directors shall be considered to be a Continuing Director; and the term “Person”
is used as such term is used in Sections 13(d) and 14(d) of the Exchange Act.
(i) “Covanta” shall mean Covanta Energy Corporation, a corporation duly
organized under the laws of the state of Delaware, or any successor thereto.
(j) “Covanta Holding” shall mean Covanta Holding Corporation, a corporation duly
organized under the laws of Delaware or any successor thereto and the sole
stockholder of Covanta.

 

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(k) “Disability” shall mean an Employee’s absence, for a consecutive period of
6 months, from the duties of his or her employment with the Company Group due to
an illness or injury of such Employee.
(l) “Effective Date” shall mean February 25, 2010.
(m) “Eligible Termination of Employment” shall mean the involuntary termination
other than for Cause of an Employee’s employment with the Company Group after
the Effective Date.
(n) “Employee” shall mean only an individual directly employed by the Company
Group on a regular, full-time basis, and who is either a Senior Vice President,
a Regional President, an Executive Vice President or the President of Covanta or
Covanta Holding .
(o) “ERISA” shall mean the Employee Retirement Income Security Act of 1974, as
amended.
(p) “Plan” shall mean this Severance Plan for Covanta Energy Corporation Senior
Officers, as the same may be amended and in effect from time to time.
(q) “Salary” shall mean the Employee’s annual base salary rate in effect on his
or her Termination Date.
(r) “Severance Period” shall mean, with respect to an Employee who satisfies the
severance benefit conditions described in Section 6, the number of months or
years such Employee is entitled to receive continued payments of his or her
Salary or other benefits pursuant to Section 7 or Section 8.
(s) “Subsidiary” shall mean each entity in which Covanta owns, directly or
indirectly, capital stock or other ownership interests representing fifty
percent (50%) or more of the combined voting power of the outstanding voting
stock or other ownership interests of such entity.
(t) “Termination Date” shall mean the effective date of an Employee’s
termination of employment with the Company Group.
3. Administration.
(a) Appointment of Plan Administrator. The Administrator shall appoint a Plan
Administrator, who initially shall be the Senior Vice President-Human Resources
of the Company Group, to manage the day-to-day operation of this Plan. The Plan
Administrator may be removed by action of the Administrator at any time, with or
without cause, upon written notice. The Plan Administrator may resign upon
30 days’ written notice to the Administrator. Upon such removal or resignation
of the Plan Administrator, the Administrator shall appoint a successor thereto.
In the event the Administrator fails to appoint a Plan Administrator under this
Section, the Administrator shall be the Plan Administrator.

 

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(b) Plan Administrator’s Responsibilities. The Plan Administrator shall have and
exercise all discretion and other authority to control and manage the day-to-day
operation and administration of the Plan, except such authority as is
specifically allocated otherwise by or under the terms of the Plan or that is
retained or otherwise allocated by the Administrator. Within such delegated
authority, the Plan Administrator may take such actions or make such decisions
as he or she deems appropriate in his or her sole discretion. Without limiting
the foregoing, the Plan Administrator shall have authority, power, and
discretion with respect to the Plan:
(i) to construe, interpret, and apply the provisions of the Plan, and, in
connection therewith, to decide all questions of eligibility for, and the
amount, manner, and time of payment of, any benefits in accordance with the
terms and conditions of the Plan;
(ii) to establish the policies, interpretations, practices, and procedures of
this Plan;
(iii) to prescribe and require the use of appropriate forms;
(iv) to prepare all reports, notices, and any other documents relating to the
Plan which may be required by law;
(v) to hire all persons providing services to the Plan;
(vi) to delegate to one or more individuals such duties and functions relating
to the daily operation and administration of the Plan as he or she, in his or
her discretion, sees fit;
(vii) to receive all disclosures required of fiduciaries and other service
providers under ERISA or any other federal or state law;
(viii) to act as this Plan’s agent for the service of legal process;
(ix) to perform all other responsibilities allocated to the Plan Administrator
in the instrument appointing the Plan Administrator.
All findings of fact, determinations, constructions, interpretations, and
decisions of the Plan Administrator shall be final, conclusive, and binding on
all parties affected thereby, unless arbitrary and capricious.
(c) Action by the Company. Any authority or responsibility allocated or reserved
to the Plan Administrator under this Plan may be exercised by the Senior Vice
President — Human Resources.
(d) Compensation. The Plan Administrator shall not receive compensation (other
than regular compensation from the Company Group for services to the Plan), but
shall be reimbursed by the Company Group for expenses incurred in the
performance of such duties.

 

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(e) Limitation of Liability; Indemnification. The Administrator and the Plan
Administrator shall each be entitled to rely upon any report or other
information furnished to it by any officer or other employee of the Company
Group and by any independent certified public accountant, compensation
consultant, legal counsel or other professional retained by any member of the
Company Group to assist in the administration of the Plan. To the maximum extent
permitted by law, neither the Administrator nor the Plan Administrator shall be
liable to any person for, and Covanta shall indemnify and hold the Administrator
and the Plan Administrator harmless from and against any liability in respect
of, any action taken or omitted in good faith in connection with the
administration of the Plan.
4. Eligibility. Each Employee shall be eligible to participate in the Plan
beginning on the later of the Effective Date and the date such Employee
commences regular, full-time employment with the Company Group, provided an
Eligible Termination of Employment occurs. No other individual shall be eligible
to participate in the Plan.
5. Ineligibility For Severance Benefits. An Employee will be ineligible for
severance pay or other benefits under this Plan if any of the following apply,
unless otherwise determined by the Plan Administrator:
(a) the Employee retires, resigns or dies before the effective date of the
Eligible Termination of Employment;
(b) the Employee’s employment is terminated for Cause as determined by the
Company in its sole discretion before the effective date of the Eligible
Termination of Employment;
(c) the Employee’s employment is terminated or he or she is deemed to have
resigned from employment for failing to return from an approved leave of absence
by the expiration date of the approved leave before the effective date of the
Eligible Termination of Employment;
(d) the Employee’s employment is terminated because the Employee is physically
or otherwise unable to perform the essential duties and functions of his
position with or without reasonable accommodation before the effective date of
the Eligible Termination of Employment;
(e) the Employee is terminated while receiving or seeking payments or benefits
under a program, policy, plan or a law that provides payments or benefits to an
Employee unable to work because of illness, injury or disability;
(f) the Employee is not directly employed by any member of the Company Group; or
(g) the Employee is terminated in connection with a sale of all or part of the
Company Group and has been offered employment with the purchaser.
6. Severance Benefit Conditions. An Employee’s eligibility for severance
benefits under the Plan shall be subject to all of the following limitations and
conditions precedent:
(a) the termination of such Employee’s employment must constitute an Eligible
Termination of Employment;

 

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(b) to the extent requested by Covanta or the member of the Company Group that
employs such Employee, such Employee must remain in the active employment of the
Company Group until the Termination Date specified by Covanta or such member,
provided that (i) such Termination Date may not be more than one hundred eighty
(180) days following the date notice of termination is given and (ii) if Covanta
or such member thereafter (but prior to the indicated Termination Date)
terminates such Employee’s employment without Cause (and such termination is not
due to such Employee’s death or Disability), such Employee shall be eligible to
receive severance benefits under the Plan provided he or she satisfies all of
the other conditions specified in this Section 6; and
(c) promptly following such Employee’s Termination Date, but in no event later
than sixty (60) days following such Employee’s Termination Date, such Employee
must (i) execute and deliver a termination agreement which contains an effective
release of all claims against the Company Group, substantially in the form
attached hereto as Appendix A, and (ii) refrain from revoking the release
contained in such termination agreement as permitted therein; provided, however,
that such termination agreement may contain additional terms and conditions
relating to non-disparagement and confidentiality. Failure to execute such
termination agreement in substantially the form attached hereto as Exhibit A or
any revocation of such termination agreement prior to the sixtieth (60th) day
following such Employee’s Termination Date will result in forfeiture of any
payments or benefits hereunder.
(d) Notwithstanding any of the foregoing terms, in the event, and at the moment,
that Employee violates any of his or her duties or obligations set forth in the
restrictive covenants contained in any restricted stock award agreement,
restricted stock unit agreement or any other equity award agreement of Covanta
Holding that continue after the termination of his or her employment, the terms
of Sections 7 and 8 will be of no force or effect and the Company Group’s
obligations under those subsections to make severance payments or provide
continued employee benefits will immediately cease.
(e) No Employee shall be entitled to any severance payments or benefits under
the Plan unless and except as specifically determined by the Plan Administrator
in his or her discretion. The Plan Administrator, in his or her discretion, may
also waive any provision of this Plan in a particular case or cases; provided,
however, that the Plan Administrator may not waive any provisions of this Plan
as they relate to any of the Employees covered by this Plan without the
approval, in their sole discretion, of the Covanta Holding Corporation
Compensation Committee of the Board of Directors.
7. Severance Benefits.
(a) Cash Payments. Except as provided in Section 8, each Employee who satisfies
the severance benefit conditions described in Section 6 shall receive (or, in
the event of his or her death after the effective date of the Eligible
Termination of Employment, such Employee’s Beneficiary shall thereafter receive)
continued payments of his or her Salary in accordance with the applicable
payroll policies of the member of the Company Group employing such Employee as
follows:

 

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(i) Executive Vice Presidents, Regional Presidents and Senior Vice Presidents:
eighteen (18) months; and
(ii) Chief Executive Officer: twenty four (24) months.
Salary continuation payments shall commence ninety (90) days following such
Employee’s Termination Date in accordance with the Company Group’s normal
payroll cycle, provided that, unless otherwise determined by the Plan
Administrator, the period during which severance benefits are being paid to any
Employee shall not exceed the maximum period allowed under Department of Labor
Regulation §2510.3-2(b) to avoid classification as an “employee pension benefit
plan” under ERISA.
(b) Additional Discretionary Payments. No additional payments may be made to any
of the Employees covered by Plan without the approval, in their sole discretion,
of the Covanta Holding Corporation Compensation Committee of the Board of
Directors.
(c) Continued Medical and Dental Benefits. Each Employee who satisfies the
severance benefit conditions described in Section 6 shall be entitled to
continue during such Employee’s Severance Period his or her participation and
the participation of such Employee’s eligible dependents in the medical and
dental benefit plans in which such Employee (and eligible dependents)
participated immediately prior to his or her Termination Date, in accordance
with the generally applicable terms of such plans as in effect from time to
time, subject to timely payment by such Employee (and eligible dependents) of
all contributions, premiums, co-payments and deductibles required to be paid by
participants in such plans; provided that an Employee’s right to continue his or
her participation and the participation of such Employee’s eligible dependents
in any such medical or dental plan shall cease immediately if such Employee is
offered or becomes eligible for coverage under a medical or dental plan, as
applicable, of any subsequent employer.
8. Change in Control. Notwithstanding anything to the contrary in this Plan, in
the event of an Eligible Termination of Employment within one (1) year following
a Change in Control of an eligible Employee who satisfies the severance benefit
conditions described in Section 6, the following provisions shall apply and
supersede any contrary provisions in Section 7 hereof; provided, however, that
if the Change in Control does not fall within the scope of a “change in the
ownership of a corporation”, a “change in the effective control of a
corporation” or a “change in the ownership of a substantial portion of a
corporation’s assets” as described in Treas. Reg. §1.409A-3(i)(5), then the sum
of the amounts payable described in Section 8(b)(i) and Section 8(b)(ii) shall
be payable in accordance with the schedule set forth in Section 7(a):
(a) Eligible Termination of Employment following Change in Control — Base
Payments. Employee shall be entitled to receive a cash payment equal to the sum
of the following:
(i) accrued but unpaid portion of the annual base salary, if any, accrued up to
and including the Termination Date,
(ii) any annual cash bonus, if any, earned but unpaid for any year preceding the
then current employment year,

 

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(iii) unreimbursed business expenses, and
(iv) the cash equivalent of any vested benefits as of the date of such
termination under any benefit plans maintained, or contributed to, by Covanta,
or any disability benefits program sponsored by Covanta, to the extent permitted
by, and in accordance with, the terms and conditions of each such plan or
program, and any benefit required by COBRA.
(b) Eligible Termination of Employment following Change in Control — Additional
Payments. In addition to the provisions of Section 8(a), above, Employee shall
be entitled to the following:
(i) an amount equal to the product of (x) Employee’s then current Salary plus
Employee’s average annual cash bonus received by Employee during the two prior
full employment years, and (y) the number of years set forth with respect to
Employee in Section 8(c) hereof, to be paid to Employee as provided in Section
8(d) hereof;
(ii) an amount equal to the pro rata portion of the annual cash bonus, to be
paid to Employee at the time that cash bonuses are paid to other senior-level
executives of Covanta for such employment year; and
(iii) the continuation of medical, dental and life insurance coverage (at the
rates and on the coverage terms available to other senior-level executives) for
the duration of the applicable period set forth in Section 8(c) hereof.
(c) Post-Termination Continuing Payment Amounts.
(i) Executive Vice Presidents, Regional Presidents and Senior Vice Presidents:
one and one-half (1.5) years; and
(ii) Chief Executive Officer: two (2) years.
(d) Terms of Payments. The amounts due to Employee pursuant to Section 8 hereof
shall be paid by Covanta as follows:
(i) fifty percent (50%) of the aggregate amount due to Employee shall be paid to
Employee on the ninetieth (90th) day following the date of Employee’s
Termination Date from the Company Group; and
(ii) fifty percent (50%) of the aggregate amount due to Employee shall be paid
on a monthly basis to Employee over the duration of the applicable period set
forth in Section 8(c) hereof, beginning on the ninetieth (90th) day following
the date of Employee’s Termination Date from the Company Group.
9. Tax Treatment of Benefits. All payments of severance benefits shall be
subject to any applicable income or employment tax withholding and other
appropriate deductions.

 

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10. Claims Procedure. An Employee can make a claim for benefits under the Plan
by sending written notification thereof to the Plan Administrator. If an
Employee who has submitted such a claim is denied benefits for any reason, such
Employee will be notified in writing of such denial within ninety (90) days
after the claim is submitted or will receive written notice within that period
of time stating that an additional ninety (90) days is required to rule upon the
claim. In that case, if such Employee’s claim for benefits is denied, such
Employee will receive written notice of such denial within one hundred eighty
(180) days. Such notification will:
(a) indicate the reasons for the denial and cite the specific Plan provisions
upon which the denial is based;
(b) describe any additional information that may be needed for approval of such
Employee’s claim; and
(c) contain an explanation of the review procedure.
An Employee can request a review of the denial within ninety (90) days after the
time he or she receives the denial notice. Within sixty (60) days after
receiving such written notice for review, the Plan Administrator will notify the
Employee, in writing, of the final decision unless the Plan Administrator
notifies the Employee, in writing, that special circumstances require an
extension (for no more than a single, additional sixty (60) day period), in
which case the Plan Administrator will render its written decision within one
hundred twenty (120) days after receiving the written notice for review. If the
Plan Administrator denies the request for review, the Plan Administrator’s final
decision will be in writing and will contain specific reason and references to
the Plan provisions on which the denial is based. The Plan Administrator’s
decision shall be final and binding and not subject to further review.
11. Section 409A Compliance.
(a) With respect to any benefits provided by this Plan that are subject to Code
section 409A, it is intended that the terms of this Plan comply with the terms
and conditions of Code section 409A and the regulations and guidance promulgated
thereunder and all provisions of this Plan shall be construed in a manner
consistent with the requirements for avoiding taxes or penalties under Code
section 409A. Notwithstanding the foregoing, neither Covanta Holding, Covanta
nor any member of the Company Group shall have any liability with regard to any
failure to comply with Code section 409A so long as they have acted in good
faith with regard to compliance therewith.
(b) If under this Plan, an amount is to be paid in two or more installments, for
purposes of Code section 409A, each installment shall be treated as a separate
payment.
(c) A termination of employment shall not be deemed to have occurred for
purposes of any provision of this Plan providing for the payment of amounts or
benefits upon or following a termination of employment unless such termination
is also a “separation from service” within the meaning of Code section 409A and,
for purposes of any such provision of this Agreement, references to a
“termination,” “termination of employment” or like terms shall mean Separation
from Service.

 

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(d) Notwithstanding the foregoing, if Employee is a “specified employee” of a
public corporation (as described in Treas. Reg. § 1.409A-1(i)), then to the
extent a separate payment described in this Section 8(d) does not fall within
the “short-term deferral” exclusion (as described in Treas. Reg. §
1.409A-1(b)(4)) or the exclusion for separation pay due to involuntary
separation from service (as described in Treas. Reg. § 1.409A-1(b)(9)(iii)), and
such separate payment would be paid during the first six months following
Employee’s separation from service, such payment shall instead be paid on the
first business day following the end of the six-month period following
Employee’s separation from service.
(e) Notwithstanding anything in this Plan to the contrary, the severance
payments payable hereunder shall be exempt from Code section 409A to the extent
that:
(i) The severance payments are paid in full no later than December 31 of the
second calendar year following the calendar year in which the Employee’s
Termination Date occurs; and
(ii) The amount of severance payments payable to the Employee does not exceed
two times the lesser of the following:
(A) the Employee’s annual compensation for the calendar year preceding the
calendar year (the “look-back year”) in which the Employee has an Eligible
Termination of Employment. For this purpose, the Employee’s annual compensation
means the Employee’s base pay (plus such other amounts as are permitted to be
included as prescribed in Code section 409A) for the look-back year (determined
on an annualized basis if the Employee was employed for less than the full
calendar year), as adjusted for any increase during the look-back year that was
expected to continue indefinitely but for the Employee’s termination of
employment; or
(B) the maximum amount that may be taken into account under a qualified plan
pursuant to Code section 401(a)(17) for the calendar year in which the
Employee’s Eligible Termination of Employment occurs.
(f) To the extent the severance payments payable under this Plan do not meet the
exemption under subsection (e), then the Plan Administrator will determine, in
his/her sole discretion, and specify in writing at the time of approving the
severance benefits whether:
(i) Such benefits will be paid no later than 21/2 months following the end of
the calendar year in which the Employee’s Eligible Termination of Employment
occurs, so as to meet the requirements for a short-term deferral as described in
Treas. Reg. §1.409A-1(b)(4) that is exempt from Code section 409A; or
(ii) Such benefits shall be paid in a manner that complies with Code section
409A, such as at a specified date or pursuant to a fixed schedule.

 

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(g) With regard to any provision herein that provides for reimbursement of costs
and expenses or in-kind benefits, except as permitted by Code section 409A,
(i) the right to reimbursement or in-kind benefits shall not be subject to
liquidation or exchange for another benefit, (ii) the amount of expenses
eligible for reimbursement, or in-kind benefits, provided during any taxable
year shall not affect the expenses eligible for reimbursement, or in-kind
benefits to be provided, in any other taxable year, provided that the foregoing
clause (ii) shall not be violated with regard to expenses reimbursed under any
arrangement covered by Code section 105(b) solely because such arrangement
provides for a limit on the amount of expenses that may be reimbursed over some
or all of the period the arrangement is in effect and (iii) such payments shall
be made on or before the last day of Employee’s taxable year following the
taxable year in which the expenses was incurred.
12. Amendment and Termination. Covanta may, in its sole discretion, amend,
alter, suspend, discontinue or terminate the Plan at any time and for any or no
reason, with or without notice and without the consent of any Employee,
stockholder or other person; provided, however, that in the event of the
occurrence of a Change in Control, the payments provided in Sections 8(a),
(b) and/or (c) hereof may not be reduced or otherwise amended in a manner
adverse to the Covered Employees without their prior written consent.
13. General Provisions.
(a) No Special Employment Rights. Nothing contained in the Plan shall confer
upon any Employee any right with respect to the continuation of such Employee’s
employment by the Company Group or interfere in any way with the right of the
Company Group at any time to terminate such employment or to increase or
decrease the base salary or hourly wage rate, other compensation or benefits of
such Employee or otherwise modify the terms or conditions of such Employee’s
employment; provided that such actions may trigger severance benefits if they
constitute an Eligible Termination of Employment.
(b) No Assignment by Employees. Each Employee’s rights hereunder are personal
and no Employee may assign or transfer any part of his or her rights or duties
hereunder, or any benefits due to him or her, to any other person, except that,
in the event of the Employee’s death after the effective date of an Eligible
Termination of Employment, any benefits payable to such Employee shall be paid
instead to his or her Beneficiary.
(c) Certain Withholdings. The Company Group shall have the right to deduct from
amounts otherwise payable under the Plan any sums that federal, state, local or
foreign tax law requires to be withheld with respect to such payment.
(d) Governing Law. The validity, construction and effect of the Plan and any
rules and regulations relating to the Plan shall be determined in accordance
with the laws of the State of New Jersey, without giving effect to principles of
conflicts of laws, and any applicable provisions of federal law.
(e) Arbitration. Any dispute or controversy arising under or in connection with
the Plan shall be resolved by binding arbitration after the Employee has
exhausted his or her administrative remedies under Section 9. The arbitration
shall be held in Fairfield, New Jersey and, except to the extent inconsistent
with the Plan, shall be conducted in accordance with the National Employment
Dispute Resolution Rules of the American Arbitration Association then in effect
at the time of the

 

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arbitration, and otherwise in accordance with principles which would be applied
by a court of law or equity. The arbitrator shall be acceptable to both the
Employee and Covanta. If the parties cannot agree on an acceptable arbitrator,
the dispute shall be heard by a panel of three arbitrators, one appointed by the
Employee, one appointed by Covanta, and the third appointed by the other two
arbitrators. All expenses of arbitration shall be borne by Covanta; provided,
however, that each party shall be responsible for any attorneys fees or expenses
borne by such party, or, in the case of joint expenses, by both parties in equal
portions, except that, in the event the Employee prevails on the principal
issues of such dispute or controversy, all such expenses shall be borne by
Covanta.
(f) Funding. The Plan shall be an unfunded plan. Severance benefits under the
Plan shall be paid from the general assets of the Company Group.
(g) Severability. If any term or provision of the Plan or the application
thereof to any person or circumstance is to any extent held invalid or
unenforceable, the remainder of the Plan or the application of such term or
provision to persons or circumstances other than those as to which it is held
invalid or unenforceable will not be affected thereby, and each term and
provision of the Plan will be valid and enforceable to the fullest extent
permitted by law.
(h) Construction. The captions and numbers preceding the sections of the Plan
are included solely as a matter of convenience of reference and are not to be
taken as limiting or extending the meaning of any of the terms and provisions of
the Plan. Whenever appropriate, words used in the singular shall include the
plural or the plural may be read as the singular.

 

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Appendix A
Form of
Termination Agreement and Release

 

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