exv10w3



 





Exhibit 10.3




DANIELSON HOLDING CORPORATION




STOCK OPTION AGREEMENT

FOR EMPLOYEES AND OFFICERS




     THIS STOCK OPTION AGREEMENT, is made as of this 5th day of October, 2004
(the “Grant Date”) between Danielson Holding Corporation, a Delaware
corporation (the “Company”), and                                   (the
“Optionee”). Capitalized terms used herein that are not otherwise defined
shall have the meaning ascribed to them in the Danielson Holding Corporation
Equity Award Plan for Employees and Officers (the “Plan”).



W I T N E S S E T H:




     WHEREAS, the Company desires to provide the Optionee 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 Optionee 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 Optionee the option
to purchase all or part of an aggregate of                              shares of Common
Stock, on the terms and conditions set forth in the Plan, subject to the
vesting, exercise and other requirements set forth in this Agreement, to the
extent not inconsistent with the Plan (the “Option”). Of the shares subject to
this Option,                are intended to qualify as Incentive Stock Options, as
defined in and subject to Section 422 of the Internal Revenue Code (“Code”), to
the extent these Options, when aggregated with other incentive stock options
granted to the Optionee, do not exceed the $100,000 per year limitation of
Section 422(d) of the Code. The remainder shall be Non-Qualified Stock
Options, which are not intended to qualify as Incentive Stock Options.



     2. Purchase Price. The per share purchase price of the shares of Common
Stock issuable upon exercise of the Option shall be $                  , which
shall be not less than 100% of the Fair Market Value (as defined in the Plan)
on the effective date of this 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, for both Incentive Stock Options and Non-Qualified
Stock Options;



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	 	(b)	 	the date the Optionee’s employment with the
Company, or any Subsidiary or Affiliate, is terminated for
Cause, as defined in the Plan;
	 
	 	(c)	 	to the extent the Option is vested on the date of
such termination, (i) for Incentive Stock Options, the date
that is three (3) months after the Optionee’s employment with
the Company, or any Subsidiary or Affiliate, is terminated
other than (i) for Cause or (ii) upon the Optionee’s death,
Disability or Retirement, as defined in the Plan (provided
that if the Optionee dies within such three (3)-month period,
any such unexercised Option shall continue to be exercisable
for twelve (12) months from the date of such death or the
exercise period that applies for purposes of Section 422 of
the Code); or (ii) for Non-Qualified Stock Options, the date
that is twelve (12) months after the Optionee’s employment
with the Company, or any Subsidiary or Affiliate, is
terminated other than (i) for Cause or (ii) upon the
Optionee’s death, Disability or Retirement;
	 
	 	(d)	 	to the extent the Option is vested on the date of
such termination, the date that is twelve (12) months after
the Optionee’s employment with the Company, or any Subsidiary
or Affiliate, is terminated as a result of the Optionee’s
Disability, as defined in the Plan;
	 
	 	(e)	 	to the extent the Option is vested on the date of
such death, the date that is twelve (12) months after the
Optionee dies while employed by the Company, or any Subsidiary
or Affiliate (or, for Incentive Stock Options, the exercise
period that applies for purposes of Section 422 of the Code);
	 
	 	(f)	 	to the extent the Option is vested on the date of
such Retirement, (i) for Incentive Stock Options, the date
that is three (3) months after the date the Optionee’s
employment with the Company, or any Subsidiary or Affiliate,
is terminated as a result of the Optionee’s Retirement, as
defined in the Plan (provided that if the Optionee dies within
such three (3)-month period, any such unexercised Option shall
continue to be exercisable for twelve (12) months from the
date of such death or the exercise period that applies for
purposes of Section 422 of the Code); or (ii) for
Non-Qualified Stock Options, the date that is three (3) years
after the Optionee’s employment with the Company, or any
Subsidiary or Affiliate, is terminated as a result of the
Optionee’s Retirement, as defined in the Plan (provided that
if the Optionee dies within such three (3)-year period, any
such unexercised Option shall continue to be exercisable for
twelve (12) months from the date of such death); or



In the event of termination of the Optionee’s employment for Cause, the
Optionee shall forfeit all rights hereunder with respect to any vested or
nonvested Options as of the date of such



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termination. Subject to the foregoing
terms of this Section 3, if the Optionee terminates employment without Cause,
the Optionee shall forfeit all rights hereunder with respect to any nonvested
Options as of the date of such termination, including the right to purchase
shares of Common Stock under the Option.



     4. Vesting.




	 	(a)	 	Subject to any forfeiture provisions in this Agreement or in the Plan,
the Optionee shall become vested in the Options granted hereunder as follows:




	 	 	 
	Percentage Vested

	 	Vesting Date
	
 

	 	
 
	33%

	 	February 28, 2006
	33%

	 	February 28, 2007
	34%

	 	February 28, 2008








	 	(b)	 	Notwithstanding the vesting schedule contained in Section 4(a) hereof,
in the event of a “Change in Control”, then the Optionee shall become 100%
vested in the Option following such “Change in Control” of the Company. For
purposes of this Agreement, a “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 the Company as of the date of
this Agreement, 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 the Company entitled to vote in
the election of directors of the Company; (ii) individuals who are Continuing
Directors of the Company (as hereinafter defined) cease to constitute a
majority of the members of the Board; (iii) stockholders of the Company 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 the
Company; (iv) the Company 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 the Company 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, the Company) and the stockholders of the Company 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 the Company (or
similar transaction) shall not constitute a Change in Control; (v) there is a
Change in Control of the Company 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
the Company is then subject to such reporting requirements; provided, however,
that for purposes of this Agreement 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 the Company as of the date of
this Agreement; or (vi) the Company



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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 or expiration of this Agreement.




	 	(c)	 	In the event of a Rule 13e-3 transaction, then effective coincident
with the consummation of such Rule 13e-3 transaction, all unvested Options
issued hereunder shall immediately vest and be exercisable by Optionee
notwithstanding the vesting schedules set forth in Section 4(a) hereof;
provided, however, that notwithstanding the foregoing, in connection with the
consummation of such Change in Control or Rule 13e-3 transaction, all such
unvested Options then held by Optionee shall be deemed to vest and become
exercisable at such time in order to permit Optionee to participate in such
transaction.
	 
	 	(d)	 	In the event that Employee is an employee of Covanta Energy
Corporation, a wholly-owned subsidiary of the Company (“Covanta”), then the
references to the Company in Section 4(b)(i), (iii), (iv), (v) and (vi) above
shall also include, in the alternative, Covanta.
	 
	 	(e)	 	For purposes of this Section 4, “Continuing Directors” shall mean the
members of the Board on the date of execution of this Agreement, 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
Sections 13(d) and 14(d) of the Exchange Act.




     5. Exercise. The Optionee shall not be entitled to exercise the Option
until it is vested. Subject to the provisions of Section 3, the Option may be
exercised only while the Optionee is employed by the Company or an Affiliate or
Subsidiary of the Company. In no event shall the Option be exercisable after
the expiration date of the Option.



     6. Nontransferability. The Option shall not be transferable or assignable
other than by will or the laws of descent and distribution, or pursuant to a
qualified domestic relations order as described in Section 206(d) of the
Employee Retirement Income Security Act of 1974, as amended, subject to Article
3. Any attempt to assign, transfer, pledge, hypothecate, dispose of or subject
the Option to execution, attachment or similar process shall be null and void
and without effect. The Option may be exercised during the lifetime of the
Optionee only by the Optionee, his guardian or his legal representative, or by
an alternate payee pursuant to a qualified domestic relations order.



     7. Method of Exercising Options.




	 	(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 10 hereof. Such notice shall state that the Option is being exercised
thereby and shall specify the number of shares of Common Stock involved. The
notice shall be signed by the person or persons exercising the Option and shall
be



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accompanied by payment in full of the Option price for such shares of Common
Stock, such payment to be made in (i) cash, as described in Section 8(c) of the
Plan; (ii) subject to Section 8(c) of the Plan, that number of Mature Shares of
unrestricted Common Stock, or vested Restricted Stock, which has an aggregate
Fair Market Value as of the date of exercise equal to the aggregate exercise
price for all of the shares of Common Stock subject to such exercise; (iii) a
combination of methods (i) and (ii); or (iv) other means authorized by the
Committee in accordance with Section 8(c) of the Plan. If the tender of shares
of Common Stock as payment of the Option 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 Optionee. If the Option is exercised by any person
or persons other than the Optionee, the notice described in this Section 7(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 subject to the
Option, but in no event may an Option be exercised as to 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 Optionee shall have no rights of a stockholder with respect to
shares of Common Stock 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 of Common Stock purchased upon
the exercise of the Option as provided herein shall be fully paid and
non-assessable.
	 
	 	(d)	 	The Optionee 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 Optionee 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 Common
Stock, including Common Stock that is 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 Employee.




     8. 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



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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
defined in Section 14 of the Plan), the Committee may, in its sole discretion,
make an appropriate and equitable adjustment in the aggregate number, kind and
option price of shares subject to this Option; provided, however, that in no
event shall the Option 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.



     9. Conditions Upon Issuance of Option. As a condition to the exercise of
the Option, the Company may require the Optionee to (i) represent and warrant
at the time of any such exercise that the Common Stock is 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.



     10. 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 10. Any
such notice or 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 40 Lane Road, Fairfield, New Jersey 07004
(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 Optionee
or other person or persons then entitled to exercise the Option shall be
addressed to the Optionee or such other person or persons at the Optionee’s
address shown on the signature page hereof.



     11. Limitations. Nothing contained in this Agreement shall be construed
as conferring upon the Optionee the right to continue as an Employee or Officer
or shall affect the right of the Company, in its sole discretion, to terminate
the Optionee’s employment at any time, with or without cause.



     12. 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.



     13. 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.



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     14. Severability. Whenever possible, each provision of this Agreement
shall be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Agreement or the application
thereof to any party or circumstance shall be prohibited by or be invalid under
applicable law, then such provision shall be ineffective to the minimal extent
of such provision or the remaining provisions of this Agreement or the
application of such provision to other parties or circumstances.



     15. Enforceability. This Agreement shall be binding upon the Optionee and
such Optionee’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.



* * *




     IN WITNESS WHEREOF, the Company has caused this Agreement to be duly
executed by its officer thereunto duly authorized, and the Optionee has
executed this Agreement all as of the day and year first above written.



      




	 	 	 	 
	 
	 	DANIELSON
HOLDING CORPORATION
	 
	 	
By:	 	 
	 	 	 	

	 	
Its:	 	 
	 	 	 	

	 	


	 
	 	OPTIONEE:
	 
	 	

	 
	 	OPTIONEE’S
ADDRESS:






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