Exhibit 10.5
COVANTA HOLDING CORPORATION
STOCK OPTION AWARD AGREEMENT
FOR DIRECTORS
THIS STOCK OPTION AWARD AGREEMENT, is made as of this _____ day of ________,
20__ (the “Date of Grant”) between Covanta Holding Corporation, a Delaware
corporation (the “Company”), and _____________________ (the “Recipient”).
Capitalized terms used herein that are not otherwise defined shall have the
meaning ascribed to them in the Covanta Holding Corporation 2014 Equity Award
Plan (the “Plan”).
W I T N E S S E T H:

WHEREAS, the Company desires to provide the Recipient with the opportunity to
purchase shares of its common stock, par value $0.10 per share (“Common Stock”),
in accordance with the terms of the Plan; and
WHEREAS, the Recipient wishes to acquire the right to purchase shares of Common
Stock granted hereby.
NOW, THEREFORE, in consideration of the premises and of the mutual covenants and
agreements hereinafter contained, the parties hereto mutually covenant and agree
as follows:
1.Grant of Option. The Company hereby grants to the Recipient the option to
purchase all or part of an aggregate of ______________ (_______) shares of
Common Stock (the “Shares”), on the terms and conditions set forth in the Plan,
subject to the requirements set forth in this Agreement, to the extent not
inconsistent with the Plan (the “Option”). The Option is a Non-Qualified Stock
Option and is not intended to qualify as an “incentive stock option” as that
term is used in Section 422 of the Code.

2.Exercise Price. The per share purchase price of the Shares issuable upon
exercise of the Option shall be $_____ (the “Exercise Price”), which shall be
not less than 100% of the Fair Market Value on the Date of Grant.

3.Term. The term of the Option shall expire as of the earliest of the following:

(a)the date that is ten (10) years from the Date of Grant;

(b)to the extent the Option is vested on the date of termination of the
Recipient’s service as a Director (including by reason of the Recipient’s
death), the date that is three (3) years after the date of such termination
other than if the termination is for Cause; or

(c)the date the Recipient’s service as a Director is terminated for Cause.

To the extent that a portion of the Option has not vested prior to the
termination of the Recipient’s service as a Director (including by reason of the
Recipient’s death), the Recipient shall forfeit all rights hereunder with
respect to that unvested portion of the Option as of the date of such
termination. In the event

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of termination of the Recipient’s service as a Director for Cause, the Recipient
shall forfeit all rights hereunder with respect to the entire Option (i.e., both
vested and unvested portions) as of the date of such termination.
4.Vesting and Exercise. Subject to any forfeiture provisions in this Agreement
or in the Plan, the Recipient shall vest in the Option: (i) with respect to
_____% of the Shares on __________; and (ii) with respect to _____% of the
Shares on _____________, provided that the Recipient’s service as a Director
continues through such date. The Recipient may only exercise the Option to the
extent it is vested; provided, however, that the Recipient may not exercise any
portion of the Option prior to the earlier occurrence of (A) the date that is
six (6) months after the Date of Grant or (B) a Change in Control.

5.Method of Exercising Option.

(a)Subject to the terms and conditions of this Agreement, the Option may be
exercised by written notice delivered to the Company or its designated
representative in the manner and at the address for notices set forth in Section
9 hereof. Such notice shall state that the Option is being exercised thereby and
shall specify the number of Shares for which the Option is being exercised. The
notice shall be signed by the person or persons exercising the Option and shall
be accompanied by payment in full of the Exercise Price for such Shares being
acquired upon the exercise of the Option. Payment of such Exercise Price may be
made by one of the following methods:

(i)in cash (in the form of a certified or bank check or such other instrument as
the Committee may accept);

(ii)in other shares of Common Stock owned on the date of exercise of the Option
by the Recipient as will have a Fair Market Value equal to the Exercise Price of
the Shares being acquired upon the exercise of the Option;

(iii)in any combination of (i) and (ii) above;

(iv)by delivery of a properly executed exercise notice together with such other
documentation as the Committee and a qualified broker, if applicable, shall
require to effect an exercise of the Option, and delivery to the Company of the
proceeds required to pay the Exercise Price; or

(v)by requesting that the Company withhold such number of Shares then issuable
upon exercise of the Option as will have a Fair Market Value equal to the
Exercise Price of the Shares being acquired upon the exercise of the Option.

If the tender of shares of Common Stock as payment of the Exercise Price would
result in the issuance of fractional shares of Common Stock, the Company shall
instead return the balance in cash or by check to the Recipient. If the Option
is exercised by any person or persons other than the Recipient, the notice
described in this Section 5(a) shall be accompanied by appropriate proof (as
determined by the Committee) of the right of such person or persons to exercise
the Option under the terms of the Plan and this Agreement. The Company shall
issue and deliver, in the name of the person or persons exercising the Option, a
certificate or certificates representing such Shares as soon as practicable
after notice and payment are received and the exercise is approved.
(b)The Option may be exercised in accordance with the terms of the Plan and this
Agreement with respect to any whole number of Shares, but in no event may an
Option be exercised as to

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fewer than one hundred (100) Shares at any one time, or the remaining Shares
covered by the Option if less than two hundred (200).

(c)The Recipient shall have no rights of a stockholder with respect to Shares to
be acquired by the exercise of the Option until the date of issuance of a
certificate or certificates representing such Shares. Except as otherwise
expressly provided in the Plan, no adjustment shall be made for dividends or
other rights for which the record date is prior to the date such stock
certificate is issued. All Shares purchased upon the exercise of the Option as
provided herein shall be fully paid and non-assessable.

(d)The Recipient agrees that no later than the date as of which an amount first
becomes includible in his gross income for federal income tax purposes with
respect to the Option, the Recipient shall pay to the Company, or make
arrangements satisfactory to the Company regarding the payment of, any federal,
state, local or foreign taxes of any kind required by law to be withheld with
respect to such amount. Withholding obligations may be settled with shares of
Common Stock, including Shares that are acquired upon exercise of the Option.
The obligations of the Company under this Agreement and the Plan shall be
conditional on such payment or arrangements, and the Company, its Affiliates and
Subsidiaries shall, to the extent permitted by law, have the right to deduct any
such taxes from any payment otherwise due to the Recipient.

6.Non-Transferability. The Option may not be sold, pledged, assigned,
hypothecated, transferred or disposed of in any manner other than (i) by will or
the laws of descent or distribution or (ii) pursuant to a qualified domestic
relations order (as defined in the Code or Title I of the Employee Retirement
Income Security Act of 1974, as amended, or the rules thereunder). The Option
may be exercised, during the lifetime of the Recipient, only by the Recipient,
his guardian or his legal representative, or by an alternate payee pursuant to a
qualified domestic relations order. Any attempt to assign, pledge or otherwise
transfer the Option or of any right or privilege conferred thereby, contrary to
the Plan, or the sale or levy or similar process upon the rights and privileges
conferred hereby, shall be void.

7.Adjustment upon Changes in Capitalization. Subject to any required action by
the stockholders of the Company and the terms of the Plan, if, during the terms
of this Agreement, there shall be any increase or decrease in the number of
issued shares of Common Stock resulting from a stock split, reverse stock split,
stock dividend, combination or reclassification of the Common Stock or any other
increase or decrease in the number of issued shares of Common Stock effected
without receipt of consideration by the Company (as described in Section 9 of
the Plan), the Board of Directors of the Company may, in its sole discretion,
make an appropriate and equitable adjustment in the aggregate number, kind and
Exercise Price of Shares subject to this Option; provided, however, that in no
event shall the Exercise Price be adjusted below the par value of a share of
Common Stock, nor shall any fraction of a Share be issued upon the exercise of
the Option.

8.Conditions upon Issuance of Option. As a condition to the exercise of the
Option, the Company may require the Recipient to (i) represent and warrant at
the time of any such exercise that the Shares are being purchased only for
investment and without any present intention to sell or distribute such Shares
if, in the opinion of legal counsel for the Company, such a representation is
required by any relevant provision of law; and (ii) enter into a lock-up or
similar agreement with the Company with respect to such Shares prohibiting, for
up to 90 days, the disposition of such Shares.

9.Notices. Each notice relating to this Agreement shall be in writing and shall
be sufficiently given if delivered by registered or certified mail, or by a
nationally recognized overnight delivery service, with postage or charges
prepaid, to the address hereinafter provided in this Section 9. Any such notice
or

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communication given by first-class mail shall be deemed to have been given two
business days after the date so mailed, and such notice or communication given
by overnight delivery service shall be deemed to have been given one business
day after the date so sent, provided such notice or communication arrives at its
destination. Each notice to the Company shall be addressed to it at its offices
at 445 South Street, Morristown, New Jersey 07960 (attention: Chief Financial
Officer), with a copy to the Secretary of the Company or to such other designee
of the Company. Each notice to the Recipient or other person or persons then
entitled to exercise the Option shall be addressed to the Recipient or such
other person or persons at the address shown below the Recipient’s name on the
signature page hereof. Either party may change the address to which the other
party must give notice under this Agreement by giving the other party written
notice of the change in accordance with the procedures discussed in this Section
9.

10.Limitations. Nothing contained in this Agreement shall be construed as
conferring upon the Recipient the right to continue as a Director.

11.Incorporation of the Plan. Notwithstanding the terms and conditions contained
herein, this Agreement shall be subject to and governed by all the terms and
conditions of the Plan, which is hereby incorporated by reference. In the event
of any discrepancy or inconsistency between the terms and conditions of this
Agreement and of the Plan, the terms and conditions of the Plan shall control.

12.Interpretation. The interpretation and construction of any terms or
conditions of the Plan, or of this Agreement or other matters related to the
Plan by the Committee, shall be final and conclusive.

13.Severability. In the event that any provision of the Agreement shall be held
illegal or invalid for any reason, the illegality or invalidity shall not affect
the remaining parts of the Agreement, and the Agreement shall be construed and
enforced as if the illegal or invalid provision had not been included.

14.Governing Law. The Agreement shall be governed by and construed in accordance
with the laws of the State of Delaware.

15.Enforceability. This Agreement shall be binding upon the Recipient and such
Recipient’s estate, personal representative and beneficiaries.

16.Pronouns, Singular/Plural. Any use of any masculine pronoun shall include the
feminine and vice-versa, and any use of a singular shall include the plural or
vice-versa, as the context and facts may require.

17.Counterpart Execution. This Agreement may be executed in counterparts, each
of which shall constitute an original and all of which, when taken together,
shall constitute the entire document.

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IN WITNESS WHEREOF, the Company has caused this Agreement to be duly executed by
its officer thereunto duly authorized, and the Recipient has executed this
Agreement all as of the day and year first above written.
COVANTA HOLDING CORPORATION
By:_____________________________________________
Its:_____________________________________________
RECIPIENT
__________________________________________________________
[_______________]

Recipient’s Address:
                        
__________________________________________________________    
__________________________________________________________
__________________________________________________________