Document:

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                                                             Exhibit 10.4(a)

                   EMPLOYMENT STATUS AND CONSULTING AGREEMENT

          This EMPLOYMENT STATUS AND CONSULTING AGREEMENT (the "Agreement") is
entered into as of this 5th day of November, 2003 by and between Covanta Energy
Corporation, a Delaware corporation (together with all its subsidiaries, the
"Company"), and Scott Mackin (the "Executive").

                                   WITNESSETH:

          WHEREAS, the Company filed on September 8, 2003 a draft Plan of
Reorganization and related documents, stating its intention to: (i) separate the
international component of the Company's independent power production businesses
into a separate business, Covanta Power International Holdings, Inc. ("CPIH")
for financial purposes; (ii) sell its geothermal assets in order to provide
liquidity for the Company's exit from bankruptcy; and (iii) further streamline
its domestic operations, primarily to be comprised of the waste-to-energy
business, thereby reducing costs wherever not directly applicable to the
on-going operations of the Company following emergence from bankruptcy; and

          WHEREAS, Executive, having been employed by the Company in excess of
seventeen years, has acquired an extensive background in the waste-to-energy
business through, among other things, the negotiation of the numerous contracts
underlying the Company's waste-to-energy business, the development of extensive
relationships with the Company's client communities and in the waste-to-energy
business generally and the assembly of the Company's current management team
which is responsible for managing the Company's core waste-to-energy business;
and

          WHEREAS, the Company has determined that the Executive's role and
position should be changed such that (a) Executive will resign as President and
Chief Executive Officer ("CEO") of the Company, (b) Executive will remain a
member of the Board of Directors of the Company ("Board Member") until the
effective date (the "Effective Date") of the Company's Plan of Reorganization
(the "Plan," which term shall include any amendments and any subsequent Plan of
Reorganization filed with and approved by the Bankruptcy Court in connection
with the Company's ongoing bankruptcy proceedings), (c) the Executive will be
retained as a consultant to the Company for a period ending on the second
anniversary of his resignation so that the Company may be strengthened through
continued exposure to the critical knowledge and insight of the waste-to-energy
business that the Executive possesses, and (d) Executive will further agree to
the extensive non-competition and non-solicitation restrictions outlined herein,
and the Executive desires to serve in such capacities, and agree to such
restrictions, on the terms and conditions set forth herein; and

          NOW, THEREFORE, in consideration of the premises and the mutual
covenants and promises contained herein and for other good and valuable
consideration, the Company and the Executive hereby agree as follows:

          1. Term, Position and Responsibilities.

          (a) Term of Services. Upon the date that each of (i) approval of this
Agreement by the court of competent jurisdiction, (ii) execution hereof by both
parties hereto, and (iii) payment of all amounts to Executive set forth in
paragraphs 2(a) and 4(c) below (such date, the "Resignation Date"), Executive
shall resign as CEO of the Company, and the Company shall thereafter immediately
be deemed to have accepted such resignation and shall engage the Executive as a
consultant to the Company for a term ending on the second anniversary of the
Resignation Date (the "Expiration Date" such consulting service period being
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referred to herein as the "Services Period"), on the terms and subject to the
conditions of this Agreement. The Executive shall remain a member of the Board
of Directors of the Company until the Effective Date. In the event that the
Company terminates the Executive's engagement as a Consultant prior to the
Expiration Date for any reason "Without Cause" (as defined in the Covanta Energy
Corporation Key Employee Severance Plan, which defined term is incorporated
herein, except that a termination due to the Executive's death or disability
shall be considered "Without Cause") or if the Company removes Executive as a
member of the Board of Directors prior to the Effective Date for any reason
Without Cause, Executive will be entitled to receive as of the date of
termination all of the unpaid compensation (set forth in Section 2 below), the
employee benefits and perquisites (set forth in Section 3 below) and the
benefits from the other agreements (set forth in Section 4 below), in the
amounts and to the same extent as if such termination had not occurred. It is
hereby agreed that the Executive's resignation pursuant to this agreement shall
be an "Eligible Termination of Employment" as defined in the Covanta Energy
Corporation Key Employee Severance Plan and a "resignation for Mutual Benefit"
within the meaning of the Covanta Energy Corporation Long-Term Incentive Plan,
but that his continued service as Board Member shall continue his qualification
under the Covanta Energy Corporation Key Employee Retention Bonus Plan. It is
also agreed that neither Executive's role as Board Member nor the Executive's
engagement as consultant, nor both taken together, constitutes a reemployment of
the Executive triggering the "Clawback" Requirement contained in Section 7(b) of
the Long-Term Incentive Plan. Notwithstanding anything herein to the contrary,
on and after the Effective Date, Executive's sole relationship with the Company
shall be as consultant, subject to the terms and conditions hereof.

          (b) Position and Responsibilities. The Executive shall continue to
serve as Board Member of the Company and its affiliates (collectively, the
"Company Group") until the Effective Date and as consultant to the Company with
respect to the waste-to-energy business during the Services Period. During the
Services Period, the Executive shall have the duties and responsibilities that
are customarily assigned to individuals serving in such position or positions as
he may then hold and such other duties and responsibilities directly relating to
his consulting service as the Board specifies from time to time including,
without limitation, prior to the Effective Date, taking all steps necessary and
desirable to achieve the most expeditious and beneficial recovery for creditors,
with respect to the entire Services Period, providing, as the Company may from
time to time reasonably request, consulting services to the Company regarding
its waste-to-energy business with respect to all relevant matters within his
knowledge and interacting on behalf of the Company with client communities in
order to maintain and further develop positive relations with such client
communities. During the Services Period, the Executive shall comply with all
policies and procedures of the Company.

          2. Compensation.

          (a) Board Member and Consulting Fee. For the services to be performed
by the Executive during the Services Period and expressly in consideration of
the covenants contained in Section 6, (i) Executive shall continue to qualify as
a Tier I Employee under the Covanta Energy Group Key Employee Retention Bonus
Plan and (ii) the Company shall pay to the Executive, in cash, a sum of
$1,750,000 (the "Consulting Fee"), of which amount $1,000,000 shall be payable
no later than the Resignation Date and the remaining amount of the Consulting
Fee (i.e. $750,000) shall be payable pursuant to section 4(e) hereof.

          3. Benefits.

          (a) Participation in Employee Benefit Plans. During the Services
Period, other than as explicitly provided in this Agreement, the Executive shall
not be eligible to participate in any of the employee benefit plans and programs
maintained by the Company Group.

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          (b) SERP Benefit. On the Expiration Date, the Company shall pay to the
Executive, in a lump sum, his vested benefits under the Supplementary Benefit
Plan of Ogden Projects, Inc., in an amount determined as of October 31, 2003.

          (c) Medical, Dental and Life Insurance Benefits. For the period
commencing on the Resignation Date and ending on the fourth anniversary thereof,
the Executive (as well as his eligible dependents) shall continue to be eligible
to receive family coverage pursuant to the medical, dental and life insurance
benefit programs maintained by the Company Group from time to time for the
Company's executives, in accordance with the terms and conditions thereof as in
effect from time to time; provided that the Executive will be considered an
executive of the Company for purposes of determining eligibility under such
programs.

          (d) Business Expenses. During the Services Period, the Company shall
reimburse the Executive for all reasonable, ordinary and necessary expenses
incurred by the Executive in the performance of the Executive's duties
hereunder, provided that the Executive accounts to the Company for such expenses
in a manner reasonably prescribed by the Company.

          (e) Outplacement Services. At the Executive's request, the Company
shall provide the Executive outplacement services selected by the Executive in
an amount reasonable and customary for executives of a rank and status similar
to the Executive.

          (f) Director and Officer Insurance. The Company jointly and severally
agree to continue to maintain at no expense to Executive directors' and
officers' liability and fiduciary insurance covering the Executive, to the
extent commercially available on the same basis and terms as the Company
provides for its active executives and directors (including so called "Side A:
Executive Liability Coverage"), until such time as suits against the Executive
with respect to his employment with, or services as a director to, the Company
are no longer permitted by law, with such period not to exceed more than six
years from the Effective Date. Such policy shall provide notice from the insurer
to Executive if insurer intends to cancel or not renew said policy.

          4. Other Agreements.

          (a) 2003 Annual Bonus. With respect to calendar year 2003, the Company
shall pay to the Executive the incentive bonus for which Executive was entitled
as if the Executive served as CEO for the full year 2003, based upon the
Company's Annual Incentive Program, at a 100% target, on the date on which the
Company pays annual bonuses to its other executives.

          (b) Retention Bonus. So long as Executive continues ready and willing
to serve as Board Member until the Effective Date, the Company shall pay to the
Executive a cash retention payment equal to $156,646, payable on the Effective
Date under the terms and conditions of the Company's Key Employee Retention
Bonus Plan.

          (c) Severance Payment. The Company shall pay to the Executive on the
Resignation Date severance of $1,287,500.00 in full settlement and satisfaction
of the Executive and the Company's rights and obligations with respect to
severance under the Company's Key Employee Severance Plan.

          (d) LTIP Award. The Company shall pay to the Executive on the
Effective Date the amount of $2,055,000.00, calculated as of the date hereof as
an Alternative Transaction, in full settlement and satisfaction of the
Executive's and the Company's rights and obligations with respect to payments
under the Company's Long-Term Incentive Plan.

          (e) Remaining Consulting Fee. For the services to be performed by the
Executive during the Services Period and expressly in consideration of the

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covenants contained in Section 6, the Company shall pay to the Executive on the
Effective Date the balance of the Consulting Fee (i.e. $750,000).

          (f) Corporate Indemnities. The Company jointly and severally agree
to provide the Executive indemnification rights to the greatest extent permitted
by applicable law and at a level at least as favorable to that which the
Executive is currently entitled including, without limitation, the
indemnification rights to which the Executive is currently entitled under
Section 20 of the Company's Certificate of Incorporation and the indemnification
rights to which he is entitled by reason of his service as a fiduciary, at the
Company's request, to or with respect to any current or contemplated employee
benefit plan of the Company.

          (g) No Other Benefits. Except as specifically set forth in this
Section 4, the Executive shall not be entitled to receive any payments or
benefits under any such plan, policy, program or practice providing any bonus or
incentive compensation or severance compensation or benefits (and the provisions
of this Section 4 shall supersede the provisions of any such plan, policy,
program or practice), except that Executive shall remain fully entitled to any
vested benefits under any tax-qualified plans maintained or contributed to by
the Company Group or Section 4980B of the Code, the Covanta Energy Pension Plan
and the Covanta Energy Savings Plan and shall receive on the Resignation Date
his vested benefits under the Covanta Energy Select Plan.

          5. Confidential Information/Intellectual
             Property/Cooperation/NonDisparagement.

          (a) Confidential Information. Executive agrees that, except otherwise
permitted or directed by the Company, he will not appropriate for his own use,
disclose, divulge, furnish or make available to any person any confidential or
proprietary information concerning the Company Group, including without
limitation any confidential or proprietary information concerning the
operations, plans or methods of doing business of the Company Group (the
"Information"); provided, that the term "Information" shall not include such
information which is or becomes generally available to the public other than as
a result of unauthorized or improper disclosure by the Executive.
Notwithstanding the foregoing, the Executive may disclose Information to the
extent he is compelled to do so by lawful service of process, subpoena, court
order, or as he is otherwise compelled to do by law or the rules or regulations
of any regulatory body to which he is subject, including full and complete
disclosure in response thereto, in which event he agrees to provide the Company
with a copy of the documents seeking disclosure of such information promptly
upon receipt of such documents and prior to their disclosure of any such
information, so that the Company may, upon notice to the Executive, take such
action as the Company deems appropriate in relation to such subpoena or request
and the Executive may not disclose any such information until the Company has
had the opportunity to take such action.

          (b) Intellectual Property. Executive agrees that all right, title and
interest to all works of whatever nature generated in the course of his
employment with the Company Group resides with the Company Group. The Executive
agrees that he will return to the Company, not later than the Expiration Date,
all property, in whatever form (including computer files and other electronic
data), of the Company Group in his possession, including without limitation, all
copies (in whatever form) of all files or other information pertaining to the
Company Group, its officers, directors, shareholders or customers, and any
business or business opportunity of the Company Group.

          (c) Cooperation. The Executive agrees to reasonably cooperate
(including attending meetings) with respect to any claim, arbitral hearing,
lawsuit, action or governmental or internal investigation relating to the
business of the Company Group prior to the Expiration Date. The Executive agrees
to provide full and complete disclosure in response to any inquiry in connection

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with any such matters. The Company agrees to reimburse the Executive for his
reasonable expenses incurred in connection with such cooperation.

          (d) Non-Disparagement. The Executive shall not intentionally make any
public statements, encourage others to make statements or release information
intended to disparage or defame the Company Group or any of its directors or
officers. The Company shall cause its senior executives not to intentionally
make, or cause or encourage others to make, any public statements or release
information intended to disparage or defame the Executive's reputation.
Notwithstanding the foregoing, nothing in this Section 5(e) shall prohibit any
person from making truthful statements when required by order of a court or
other body having jurisdiction or as required by law.

          6. Covenant Not to Compete/Non-Solicitation.

          (a) So long as the Company is not in default of a material obligation
hereunder, the Executive agrees not to engage in any aspect of the Company
Business (as hereinafter defined) other than as a consultant to the Company
prior to the third anniversary of the Resignation Date (the "Restricted
Period").

          (b) The Executive shall be deemed to be engaging in Company Business
if he:

          (i)  directly or indirectly, whether or not for compensation,
               participates in the ownership, management, operation or control
               of any Competitor (as hereinafter defined) or is employed by or
               performs consulting services for any Competitor;

          (ii) directly or indirectly, whether or not for compensation, is
               employed by or performs consulting services for any client
               communities of a Company Business other than as contemplated
               herein;

         (iii) offers employment to any employee of the Company Group or
               attempts to solicit or hire or assist any other person or entity
               in soliciting or hiring any such employee to leave or cease their
               employment relationship with the Company Group for any reason
               whatsoever.

          (c) For purposes of this Section 6:

          (i)  "Company Business" shall mean the development, design,
               construction, ownership and/or operation of waste-to-energy
               facilities and the operation of existing water facilities
               (including, without limitation, treatment, purification,
               collection, and/or distribution of water and wastewater) in the
               domestic United States.

          (ii) A "Competitor" is any corporation, firm, partnership,
               proprietorship or other entity that engages in any Company
               Business.

          7. Company Property.

          The Executive hereby agrees to return to the Company and to cease
using any property of the Company Group, including without limitation, security
key cards, corporate credit cards, telephone calling cards or home office
equipment provided by the Company Group and to return such property no later
than the Expiration Date.

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          8. Reasonableness.

          The Executive acknowledges that the restrictions set forth in this
Agreement are necessary to prevent the use and disclosure of Information and to
otherwise protect the legitimate business interests of the Company Group. The
Executive further acknowledges that all of the restrictions in this Agreement
are reasonable in all respects, including without limitation duration, territory
and scope of activity. The Executive agrees that the existence of any claim or
cause of action by him against the Company Group, whether predicated on this
Agreement or otherwise, shall not constitute a defense to the enforcement by the
Company of the covenants and restrictions set forth in this Agreement, except
the covenants and restrictions set forth in Section 6 above, as provided in
Section 6(a). Furthermore, Executive acknowledges the significant sums to be
paid hereunder for agreeing to and complying with such restrictions.

          9. Irreparable Harm; Injunctive Relief.

          The parties hereto hereby declare that it is impossible to measure in
money the damages that will accrue to the Company Group in the event that the
Executive breaches any of the restrictive covenants provided in Sections 5 and 6
of this Agreement. In the event that the Executive breaches any such restrictive
covenant, the Company shall be entitled to an injunction, a restraining order or
such other equitable relief, including, but not limited to, specific performance
(without the requirement to post bond) restraining such Executive from violating
such restrictive covenant. If the Company shall institute any action or
proceeding to enforce the restrictive covenant, such Executive hereby waives the
claim or defense that the Company has an adequate remedy at law and agrees not
to assert in any such action or proceeding the claim or defense that the Company
has an adequate remedy at law. The foregoing shall not prejudice the Company's
right to require such Executive to account for and pay over to the Company, and
such Executive hereby agrees to account for and pay over, the compensation,
earnings, profits, monies, accruals or other benefits derived or received by
such Executive as a result of any transaction constituting a breach of any of
the restrictive covenants provided in Sections 5 and 6 of this Agreement, and
the parties hereby agree that the Company shall be entitled to an equitable
accounting of all such compensation, earnings, profits, monies, accruals and
other benefits. The parties hereby agree that the Restricted Period shall be
extended by any period during which the Employee is found to be in violation of,
or to have violated, Section 6 of this Agreement.

          10. Court's Right to Modify Restrictions.

          The parties acknowledge and agree that (i) each of the restrictive
covenants contained in Sections 5 and 6 of this Agreement shall be construed as
a separate covenant with respect to each geographic area and each activity to
which it applies, (ii) if, in any judicial proceeding, a court shall deem any of
the restrictive covenants invalid, illegal or unenforceable because its scope is
considered excessive, such restrictive covenant shall be modified so that the
scope of the restrictive covenant is reduced only to the minimum extent
necessary to render the modified covenant valid, legal and enforceable, and
(iii) if any restrictive covenant (or portion thereof) is deemed invalid,
illegal or unenforceable in any jurisdiction, as to that jurisdiction such
restrictive covenant (or portion thereof) shall be ineffective to the extent of
such invalidity, illegality or unenforceability, without affecting in any way
the remaining restrictive covenants (or portion thereof) in such jurisdiction or
rendering that or any other restrictive covenant (or portion thereof) invalid,
illegal, or unenforceable in any other jurisdiction.

          11. Mutual Release of Claims.

          Notwithstanding anything in this Agreement to the contrary, upon the
Effective Date, as a condition to the receipt of the payments and benefits
described herein and the provision of consulting services pursuant hereto, the
parties shall each be required to execute a Mutual Release of Claims Agreement
in the form attached hereto as Exhibit A and such Mutual Release of Claims

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Agreement shall have become effective and irrevocable in accordance with its
terms.

          12. Miscellaneous.

          (a) Integration. This Agreement constitutes the entire understanding
of the Company and the Executive with respect to the subject matter hereof and
supersedes all prior understandings, written or oral, including without
limitation the Employment Agreement between the Executive and the Company dated
as of October 1, 1998 and as amended November 26, 2001 (these were employment,
not consulting agreements). A failure of the Company or the Executive to insist
on strict compliance with any provision of this Agreement shall not be deemed a
waiver of such provision or any other provision hereof. In the event that any
provision of this Agreement is determined to be so broad as to be unenforceable,
such provision shall be interpreted to be only so broad as is enforceable.

          (b) Binding Effect; Assignment, This Agreement shall be binding on and
inure to the benefit of the Company and its successors and permitted assigns.
This Agreement shall also be binding on and inure to the benefit of Executive
and his heirs, executors, administrators and legal representatives. This
Agreement shall not be assignable by any party hereto without the prior written
consent of the other parties hereto, except as provided pursuant to this Section
12(b). The Company may effect such an assignment without prior written approval
of the Executive upon the transfer of all or substantially all of its business
and/or assets (by whatever means).

          (c) Choice of Law. This Agreement shall be construed, enforced and
interpreted in accordance with and governed by the laws of the State of New
Jersey, without regard to its choice of law provisions.

          (d) Successor. The rights and obligations of the Company under this
Agreement shall be binding on and inure to the benefit of the Company, its
successors and assigns.

          (e) Taxes. The Company may withhold from any payments made under this
Agreement all applicable taxes, including but not limited to income, employment
and social insurance taxes, as shall be required by law.

          (f) Modification. This Agreement may only be modified, amended or
revised by a writing signed by both parties and approved by the bankruptcy court
so long as such court has jurisdiction over this Agreement and the matters
herein.

          (g) Severability. It is the intent of the parties that the provisions
of this Agreement be enforced to the fullest extent permissible under applicable
law. If any provision of this Agreement shall be adjudged by any court of
competent jurisdiction to be invalid or unenforceable, such judgment shall not
invalidate any other provision of this Agreement. The parties agree that if a
court of competent jurisdiction adjudges any provision of this Agreement to be
invalid or unenforceable, such court shall modify such provision so that it is
enforceable to the extent permitted by applicable law and consistent with the
parties' intent.

          (h) Notices. Any notice or other communication required or permitted
to be delivered under this Agreement shall be (i) in writing, (ii) delivered
personally, by courier service or by certified or registered mail, first-class
postage prepaid and return receipt requested, (iii) deemed to have been received
on the date of delivery or, if so mailed, on the third business day after the
mailing thereof, and (iv) addressed as follows (or to such other address as the
party entitled to notice shall hereafter designate in accordance with the terms
hereof):

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          (i) If to the Company, to it at:

              General Counsel
              Covanta Energy Corporation
              40 Lane Road
              Fairfield, NJ 07007

         (ii) if to Executive, to him at his residential address as currently
              on file with the Company.

          Copies of any notices or other communications given under this
Agreement shall also be given to:

              Cleary, Gottlieb, Steen & Hamilton
              One Liberty Plaza
              New York, New York 10006
              Attention:   A. Richard Susko, Esq.

          (i) Counterparts. This Agreement may be executed in any number of
counterparts and by different parties on separate counterparts, each of which
counterpart, when so executed and delivered, shall be deemed to be an original
and all of which counterparts, taken together, shall constitute but one and the
same Agreement.

          (j) Headings. The headings in this Agreement are included for
convenience only and shall not constitute a part of this Agreement nor shall
they affect its meaning, construction or effect.

          (k) Opportunity for Review. The Executive agrees and acknowledges that
his execution of this Agreement is completely voluntary and that he has been
advised to consult with an attorney prior to executing this Agreement to ensure
that he fully and thoroughly understands its legal significance.

          IN WITNESS WHEREOF, the Company has duly executed this Agreement by
its authorized representatives and Executive has hereunto set his hand, in each
case effective as of the date first above written.

                                       COVANTA ENERGY CORPORATION

                                       By: /s/ Jeff Horowitz
                                           -------------------------------------
                                           Name: Scott Mackin

                                       EXECUTIVE:

                                           /s/ Scott Mackin
                                           -------------------------------------
                                           Name:  Scott Mackin

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January 6, 2004

Bruce W. Stone
10 Old Jackson Avenue, #41
Hastings on Hudson, NY 10706

Dear Bruce:

This will confirm your Separation from COVANTA ENERGY CORPORATION (herein the
"Company") effective as of January 31, 2004 (hereafter the "Separation Date").
This letter agreement (the "Agreement and Release") describes your existing
rights and obligations relating to your departure from the Company and offers
you certain additional benefits.

1.   Although you will no longer be employed by the Company after the Separation
     Date, certain of your obligations to the Company will continue. Those
     obligations are in addition to and not a limitation upon your
     confidentiality obligations under your Employee Confidential Disclosure
     Agreement dated May 22, 1987. To ensure that you are aware of your
     important obligations under the Employee Confidential Agreement, a copy is
     attached. If you receive a subpoena or other request for information, you
     agree to immediately notify COVANTA Energy Corporation's General Counsel.

2.   Prior to the Separation Date, you must turn over to the Company, all
     documents, records and property including but not limited to computers,
     computer equipment, credit cards, keys, manuals, notebooks and all other
     data relating to the Company or any of its direct or indirect subsidiaries
     (each, a "COVANTA Company" and collectively, the "COVANTA Companies") in
     your possession or custody or under your control belonging to or in any way
     relating to the business of the Company, or any of the other COVANTA
     Companies or any of their respective customers.

3.   Contingent upon the continued and faithful performance of your obligations
     as described herein and in consideration for the waiver/release described
     in this Agreement and Release, we agree to pay you the gross amount of
     $487,500 (such gross amount, hereafter the "Cash Separation Payment" and,
     together with the subsidized continuation of your group medical and dental
     insurance coverage described under Section 6 hereinafter the "Separation
     Payments") minus normal payroll taxes and normal deductions relating to
     benefits paid in the next payroll cycle after the expiration of the
     Revocation Period referred to in the Agreement. The Cash Separation Payment
     represents 78 weeks of base pay and will be paid pursuant to the terms and
     conditions of the COVANTA Energy Corporation Key Employee Severance Pay
     Plan (the "Plan").

     In addition, as a participant in the COVANTA Energy Corporation Special
     Retention Bonus Plan (the "Retention Plan"), you will be entitled to a pro
     rata portion of your third installment

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     (the "Retention Bonus Award), payable at the time of the Company's
     emergence from bankruptcy, minus normal payroll taxes, in accordance with
     the terms of the Retention Plan.

     Finally, as a participant in the COVANTA Energy Corporation Long-Term
     Incentive Plan (the "LTIP"), on and subject to the terms and conditions of
     the LTIP, you will be entitled to an LTIP Award (as defined in the LTIP)
     as, to the extent, in the amount and at the time provided under the terms
     and conditions of the LTIP.

     In the event of your death before all the payments provided for in any of
     the preceding paragraphs of this Section 3 have been made to you, any
     amounts still due you will be paid to your estate.

     You hereby acknowledge and agree that, pursuant to the terms and conditions
     of the Plan, your right to receive any Separation Payments and the
     Company's obligation to pay or provide any Separation Payments to you is
     conditioned upon your execution and delivery of this Agreement and Release
     on or after your Separation Date, including, without limitation, the
     release of claims contained in Section 12 (the "Release"), and your
     refraining from revoking the Release as permitted in Section 18 herein. If
     you execute this Agreement and Release prior to your Separation Date, this
     Agreement and Release shall not be binding upon the Company and shall have
     no legal effect.

4.   You agree that, during the period you are providing consulting services to
     any Covanta Company pursuant to the Consulting Agreement between you and
     the Company, dated as of March __, 2004, you shall not, directly or
     indirectly, for your own account or for the account of any individual,
     person, firm or other entity, (i) solicit for employment, employ or
     otherwise interfere with the employment relationship of any COVANTA Company
     with any natural person who is or was (at any time within the six month
     period immediately preceding any such solicitation, employment or other
     interference) employed by or otherwise engaged to perform services for any
     COVANTA Company, or (ii) solicit or otherwise attempt to establish any
     business relationship of a nature that is competitive with the business or
     relationship of any COVANTA Company with any individual, person, firm or
     other entity which is or was (at any time within the 12 month period
     immediately preceding such solicitation or other attempt) a customer,
     client or distributor of any Covanta Company. You further agree that you
     will be available to consult with us at reasonable times upon reasonable
     notice so long as such consultation does not unreasonably interfere with
     any other employment in which you may then be engaged.

5.   While you may not be precluded from applying for and receiving state
     unemployment compensation benefits, if you do receive any such benefits for
     any of the 78 weeks immediately following your Separation Date (e.g., the
     weeks for which you are receiving Cash Separation Payments), you must
     promptly pay to the Company the aggregate amount of state unemployment
     compensation benefits received by you for any such weeks.

6.   Any group accident insurance, short-term disability insurance, life
     insurance or long-term disability insurance coverage you have with the
     Company will terminate on the Separation Date.

     If enrolled, you may continue, decrease or stop contributions to your
     Health Care Account. Dependent Care Account contributions must be
     discontinued due to IRS regulations. Contact Sue Ryan at (973) 882-7140 for
     more information.

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     Under the Consolidated Omnibus Budget Reconciliation Act of 1985 ("COBRA"),
     you may continue your group medical and dental insurance provided you
     timely elect continuation of such coverage. For the eighteen month period
     following your Separation Date or until the end of the month after the
     month in which you are offered or become eligible for such insurance
     coverage from a subsequent employer, whichever occurs first, the Company
     will pay the same portion of the cost of the medical and dental insurance
     elected under COBRA as it would if you remained an active employee of the
     Company, subject to your timely payment to the Company of all
     contributions, premiums, co-payments and deductibles required to be paid by
     active employees who participate in any such insurance plan. If you are
     still eligible for medical and dental insurance coverage under COBRA when
     the Company's obligation under this Section 6 to subsidize the cost of
     group medical and dental insurance you elected ends, you may continue such
     coverage in accordance with COBRA by paying the full COBRA premium.
     Coverage during the subsidized period under this Section 6 does not extend
     the period of coverage under COBRA. The Separation Date is the date of the
     "qualifying event" for COBRA purposes.

     CobraServ will send you information as it relates to the status of your
     benefits. If you have any have questions, you can contact Customer Service
     at (800) 877-7994.

7.   If your rights under the Covanta Energy Pension Plan have vested, you will
     receive a letter containing an estimate of benefits payable and a
     description of the steps necessary to collect these benefits. If you are a
     participant in the Resource Recovery Pension Plan, you will receive an
     information package describing your distribution options in accordance with
     the Plan. If you are a participant in the Resource Recovery Senior
     Management Pension Plan, you will automatically receive a distribution
     (shortly after your Separation Date) in accordance with the election on
     file.

8.   If enrolled in the Covanta Energy Savings Plan or the Power Savings Plan
     you may receive distribution of your account balance following your
     Separation Date by contacting T. Rowe Price at (800) 922-9945. If you are a
     participant in the Ogden Projects Profit Sharing Plan, you will receive an
     information package describing your distribution options. If your account
     balance in any of the Plans listed in this section is less than $5,000,
     your balance will be distributed to you automatically.

9.   Any unused vacation pay accrued up through the Separation Date will be paid
     to you shortly after that date. Any personal advances due the Company or
     outstanding business-related expenses will be deducted from the cash
     amounts otherwise due you hereunder.

10.  All payments being made to you under this Agreement and Release will be
     subject to withholding for federal income taxes and, where applicable, to
     withholding for Social Security, unemployment compensation and State,
     County and City taxes.

11.  You acknowledge and agree that the contents of this Agreement and Release
     and all communications, oral or written, concerning or referred to in this
     Agreement and Release are confidential and that you may not disclose them
     to any third party except your immediate family, your financial advisor and
     attorney, and appropriate governmental agencies which may require this
     information.

12.  By executing this Agreement and Release, you hereby, on your own behalf and
     on behalf of your agents, representatives, assigns, heirs, executors and
     administrators (collectively, the

                                       3
<PAGE>

     "Employee Releasors") hereby fully and unconditionally release, remise,
     acquit and forever discharge each of the COVANTA Companies and each of
     their respective officers, directors, shareholders, members, agents,
     employees, consultants, independent contractors, attorneys, advisors,
     successors and assigns (collectively, the "COVANTA Releasees"), jointly and
     severally, from any and all claims, causes of action, charges, complaints,
     demands, costs, rights, losses, damages and other liability whatsoever,
     known or unknown (collectively, the "Claims"), which you have or may have
     against any COVANTA Releasee arising on or prior to the date you execute
     this Release, including but not limited to, Claims in respect of your
     employment with, or termination of employment from, any and all of the
     COVANTA Companies or your relationship with any of the COVANTA Companies,
     claims under any employment agreement with any Covanta Company, dismissal,
     redundancy, wrongful termination, breach of contract, fraud, deceit,
     negligence, misrepresentation, defamation, Disability, discrimination of
     any type, unlawful deduction from wages, breach of rights or entitlements
     under the United States Age Discrimination in Employment Act, the United
     States Americans with Disabilities Act of 1990, the United States Family
     and Medical Leave Act of 1993, Title VII of the United States Civil Rights
     Act of 1964, 42 U.S.C. Section 1981, the laws of the state of New Jersey,
     the laws of the United States, and any workers' compensation or disability
     claims or any other federal, state, local, common or other law, other than
     the Excluded Claims (as defined below). You further agree that you will not
     file or permit to be filed on your behalf any such Claim. Notwithstanding
     the preceding sentence or any other provision of this Agreement and
     Release, this Agreement and Release is not intended to interfere with your
     right to file a charge with the Equal Employment Opportunity Commission
     (the "EEOC") in connection with any Claim you believe you may have against
     any of the COVANTA Companies. However, by executing this Agreement and
     Release, you hereby waive the right to recover in any proceeding you may
     bring before the EEOC or any state human rights commission or in any
     proceeding brought by the EEOC or any state human rights commission on your
     behalf. Notwithstanding the preceding two sentences or any other provision
     hereof, this Release is for any relief, no matter how denominated,
     including, but not limited to, injunctive relief, wages, back pay, front
     pay, compensatory damages, and punitive damages.

     For purposes of this Agreement and Release, the term "Excluded Claims"
     shall mean claims to enforce any of your rights under or pursuant to this
     Agreement and Release or the LTIP and, with respect to your employment with
     a COVANTA Company prior to the Separation Date, claims for benefits accrued
     by and payable to you under the terms and conditions of any employee
     benefit plan of a COVANTA Company in which you were a participant prior to
     your Separation Date and which remain due and payable in accordance with
     the terms of such plan, as in effect from time to time; and claims for
     indemnification under indemnification agreements, COVANTA's Certificate of
     Incorporation or By-Laws or applicable law for actions taken while an
     employee of any COVANTA Company.

     You hereby acknowledge that the Separation Payments that you are receiving
     in connection with this Release are in addition to anything of value to
     which you are already entitled from the Company or any other COVANTA
     Releasee.

13.  You recognize that the monies and benefits set forth in this Agreement and
     Release constitute consideration for this Release and you agree that you
     will not seek anything further from any COVANTA Releasees. You recognize
     that you are bound by this Agreement and Release and that anyone who
     succeeds to your rights and responsibilities, such as your heirs or the
     executor of your estate, is also bound. This Agreement and Release is made
     for the benefit of the COVANTA Releasees, including the individuals and

                                       4
<PAGE>

     entities collectively described herein, as well as all who succeed to their
     rights and responsibilities, such as the successors and assigns of the
     corporate entities, and the heirs and executors of the estates of the
     individuals collectively referred to herein as Releases.

14.  You agree not to make any derogatory, negative or defamatory statements in
     public or private regarding any COVANTA Company or any or their respective
     officers, directors or other key employees. The Company shall use its
     reasonable best efforts to cause its officers, directors and other key
     employees not to intentionally make any public statements intended to
     disparage or defame your reputation. Notwithstanding the foregoing, nothing
     contained in this paragraph shall prohibit any person from making truthful
     statements to the extent required by order of a court or in connection with
     a bona fide hearing, investigation or inquiry conducted by a court or other
     governmental body having jurisdiction or otherwise required by law.

15.  You are strongly encouraged to consult an attorney regarding this Agreement
     and Release.

16.  You hereby acknowledge that you are entering into this Agreement and
     Release voluntarily and, by your act of signing below, you agree to all of
     the terms and conditions of this Agreement and Release and intend to be
     legally bound thereby.

17.  Acknowledgement of Your Rights to Consider and Revoke this Release;
     Effective Date of Release.

          (a)  You understand, agree and acknowledge that:

                    -    you have been advised and encouraged by the Company to
                         have this Agreement and Release reviewed by legal
                         counsel of your own choosing and you have been given
                         ample time to do so prior to signing this Agreement and
                         Release;

                    -    you have been provided at least forty-five (45) days to
                         consider this Agreement and Release and to decide
                         whether to agree to the terms contained herein and you
                         have been given the information required to be
                         delivered pursuant to 29 USC Section 626(f)(1)(H),
                         including information as to the class, unit or group of
                         individuals whose employment is being terminated on the
                         same terms and pursuant to the same employee reduction
                         program as you, the eligibility terms and time limits
                         applicable under such program and a list of the job
                         titles and ages of all individuals eligible to
                         participate in such program and the ages of all
                         individuals having the same job classification but who
                         are not eligible to participate in such program;

                    -    you have the right to revoke the Release contained in
                         this Agreement and Release during the seven (7) day
                         period following the date you sign this Agreement and
                         Release (such 7 day period, the "Revocation Period") by
                         giving written notice of such revocation to the
                         Administrator, Stephen M. Gansler, Senior Vice
                         President of Human Resources at 40 Lane Road CN-2615,
                         Fairfield, NJ 07004 on or prior to the seventh day
                         after the date you sign this Agreement and Release and
                         if you exercise your right to revoke this Release, you
                         will forfeit your right to receive any of the
                         Separation Payments;

                                       5
<PAGE>

                    -    the Separation Payments provided herein will not be
                         paid to you until at least eight (8) days after you
                         sign this Agreement and Release and will be paid only
                         if you do not revoke the Release contained in this
                         Agreement and Release pursuant to the paragraph above;
                         and

                    -    by signing this Agreement and Release, you represent
                         that you fully understand the terms and conditions of
                         this Agreement and Release and you intend to be legally
                         bound by them.

You agree that this Agreement shall be interpreted and enforced under the laws
of the State of New Jersey and that any controversy arising out of or relating
to this Agreement and Release shall be governed by the Laws of the State of New
Jersey. Any disputes between the parties relating to this Agreement and Release
shall be determined in a court sitting in New Jersey.

This Agreement and Release, together with the LTIP, represent the entire
agreement between you and the Company concerning this matter. This Agreement and
Release can be modified only in writing signed by both you and the Company. Any
promises or representations, either oral or written, that are not contained in
this Agreement and Release or the LTIP are not valid or binding upon the
Releasees.

                                       6
<PAGE>

If any provision of this Agreement and Release, or the application of such
provision to any person or circumstances, shall be held invalid or
unenforceable, the remaining provisions of this Agreement and Release, and the
application of such provision to persons or circumstances other than those to
which it is held invalid or unenforceable, shall not be affected.

You may formally accept the terms of this Agreement and Release by signing below
on or after your Separation Date and then returning it to me. The enclosed
duplicate may be retained by you.

                                  Very truly yours,

                                  COVANTA ENERGY CORPORATION

                                  By:
                                      -------------------------
                                          Stephen M. Gansler
                                          Senior Vice President

     Enclosures

          I acknowledge that I have read, understand and agree to all the terms
          of this Agreement and Release and further acknowledge that I have had
          the opportunity to review it with an attorney and that I have signed
          this Agreement and Release on or after my Separation Date.

          Dated: _____________        By:
                                          --------------------------
                                          Bruce W. Stone

                                      Sworn to and subscribed before me this ___
                                      day of ________, 2004

                                      ____________________________________
                                      [Name of Notary Public]

                                      Notary Public of ___________________

                                      My Commission Expires ______________

                                       7

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