Document:

exv10w1

    Exhibit 10.1

 

 

    COVANTA
    HOLDING CORPORATION

    EQUITY AWARD PLAN

    FOR EMPLOYEES AND OFFICERS,

    as amended by the

    Board of Directors through

    February 26, 2009

 

 

    TABLE OF
    CONTENTS

 

	 	 	 	 	 	 	 
	
 
	
 
	
 
	
 
	
    Page

	 

	

    Section 1.
    

	
 
	
    Purpose; Definitions
	
 
	 
	
    1
	 

	

    (a)

	
 
	
    “Administrator”
	
 
	 
	
    1
	 

	

    (b)

	
 
	
    “Affiliate”
	
 
	 
	
    1
	 

	

    (c)

	
 
	
    “Applicable Laws”
	
 
	 
	
    1
	 

	

    (d)

	
 
	
    “Award”
	
 
	 
	
    1
	 

	

    (e)

	
 
	
    “Award Agreement”
	
 
	 
	
    1
	 

	

    (f)

	
 
	
    “Board”
	
 
	 
	
    1
	 

	

    (g)

	
 
	
    “Cause”
	
 
	 
	
    1
	 

	

    (h)

	
 
	
    “Code”
	
 
	 
	
    1
	 

	

    (i)

	
 
	
    “Committee”
	
 
	 
	
    1
	 

	

    (j)

	
 
	
    “Common Stock”
	
 
	 
	
    1
	 

	

    (k)

	
 
	
    “Company”
	
 
	 
	
    1
	 

	

    (l)

	
 
	
    “Director”
	
 
	 
	
    1
	 

	

    (m)

	
 
	
    “Disability”
	
 
	 
	
    1
	 

	

    (n)

	
 
	
    “Effective Date”
	
 
	 
	
    2
	 

	

    (o)

	
 
	
    “Employee”
	
 
	 
	
    2
	 

	

    (p)

	
 
	
    “Exchange Act”
	
 
	 
	
    2
	 

	

    (q)

	
 
	
    “Fair Market Value”
	
 
	 
	
    2
	 

	

    (r)

	
 
	
    “Incentive Stock Option”
	
 
	 
	
    2
	 

	

    (s)

	
 
	
    “Mature Shares”
	
 
	 
	
    2
	 

	

    (t)

	
 
	
    “Non-Qualified Stock Option”
	
 
	 
	
    2
	 

	

    (u)

	
 
	
    “Officer”
	
 
	 
	
    2
	 

	

    (v)

	
 
	
    “Option”
	
 
	 
	
    2
	 

	

    (w)

	
 
	
    “Participant”
	
 
	 
	
    2
	 

	

    (x)

	
 
	
    “Performance Award”
	
 
	 
	
    2
	 

	

    (y)

	
 
	
    “Performance Share”
	
 
	 
	
    2
	 

	

    (z)

	
 
	
    “Performance Unit”
	
 
	 
	
    2
	 

	

    (aa)

	
 
	
    “Plan”
	
 
	 
	
    2
	 

	

    (bb)

	
 
	
    “Recipient”
	
 
	 
	
    2
	 

	

    (cc)

	
 
	
    “Restricted Stock”
	
 
	 
	
    3
	 

	

    (dd)

	
 
	
    “Restricted Stock Unit”
	
 
	 
	
    3
	 

	

    (ee)

	
 
	
    “Retirement”
	
 
	 
	
    3
	 

	

    (ff)

	
 
	
    “Service Provider”
	
 
	 
	
    3
	 

	

    (gg)

	
 
	
    “Stock Appreciation Right”
	
 
	 
	
    3
	 

	

    (hh)

	
 
	
    Share
	
 
	 
	
    3
	 

	

    (ii)

	
 
	
    “Subsidiary”
	
 
	 
	
    3
	 

	

    Section 2.
    

	
 
	
    Stock Subject to the Plan
	
 
	 
	
    3
	 

	

    Section 3.
    

	
 
	
    Administration of the Plan
	
 
	 
	
    3
	 

	

    (a)

	
 
	
    Administration
	
 
	 
	
    3
	 

	

    (b)

	
 
	
    Powers of the Committee
	
 
	 
	
    4
	 

	

    Section 4.
    

	
 
	
    Eligibility for Awards
	
 
	 
	
    4
	 

	

    Section 5.
    

	
 
	
    Limitations on Options
	
 
	 
	
    4
	 

	

    Section 6.
    

	
 
	
    Term of Plan
	
 
	 
	
    5
	 

	

    Section 7.
    

	
 
	
    Term of Option
	
 
	 
	
    5
	 

	

    Section 8.
    

	
 
	
    Option Exercise Price and Consideration
	
 
	 
	
    5
	 

	

    (a)

	
 
	
    Exercise Price
	
 
	 
	
    5
	 

	

    (b)

	
 
	
    Waiting Period and Exercise Dates
	
 
	 
	
    5
	 

	

    (c)

	
 
	
    Form of Consideration
	
 
	 
	
    5
	 

    

    i

 

	 	 	 	 	 	 	 
	
 
	
 
	
 
	
 
	
    Page

	 

	

    Section 9.
    

	
 
	
    Exercise of Option
	
 
	 
	
    6
	 

	

    (a)

	
 
	
    Procedure for Exercise; Rights as a Stockholder
	
 
	 
	
    6
	 

	

    (b)

	
 
	
    Termination of Relationship as Employee or Officer
	
 
	 
	
    6
	 

	

    (c)

	
 
	
    Disability of Recipient
	
 
	 
	
    7
	 

	

    (d)

	
 
	
    Death of Recipient
	
 
	 
	
    7
	 

	

    (e)

	
 
	
    Retirement of Recipient
	
 
	 
	
    7
	 

	

    (f)

	
 
	
    Cash out Provisions
	
 
	 
	
    8
	 

	

    Section 10.
    

	
 
	
    Restricted Stock and Restricted Stock Units
	
 
	 
	
    8
	 

	

    (a)

	
 
	
    Awards of Restricted Stock and Restricted Stock Units
	
 
	 
	
    8
	 

	

    (b)

	
 
	
    Awards and Certificates
	
 
	 
	
    8
	 

	

    (c)

	
 
	
    Terms and Conditions
	
 
	 
	
    9
	 

	

    (d)

	
 
	
    Other Provisions
	
 
	 
	
    9
	 

	

    Section 11.
    

	
 
	
    Deferral of Restricted Stock Award
	
 
	 
	
    10
	 

	

    Section 12.
    

	
 
	
    Other Awards
	
 
	 
	
    10
	 

	

    (a)

	
 
	
    Stock Appreciation Right
	
 
	 
	
    10
	 

	

    (b)

	
 
	
    Performance Award
	
 
	 
	
    10
	 

	

    (c)

	
 
	
    Performance Shares
	
 
	 
	
    11
	 

	

    (d)

	
 
	
    Performance Units
	
 
	 
	
    11
	 

	

    (e)

	
 
	
    Other Stock-Based Awards
	
 
	 
	
    11
	 

	

    Section 13.
    

	
 
	
    Non-Transferability of Awards
	
 
	 
	
    11
	 

	

    Section 14.
    

	
 
	
    Adjustments Upon Changes in Capitalization
	
 
	 
	
    11
	 

	

    Section 15.
    

	
 
	
    Date of Grant
	
 
	 
	
    12
	 

	

    Section 16.
    

	
 
	
    Term; Amendment and Termination of the Plan
	
 
	 
	
    12
	 

	

    (a)

	
 
	
    Amendment and Termination
	
 
	 
	
    12
	 

	

    (b)

	
 
	
    Stockholder Approval
	
 
	 
	
    12
	 

	

    (c)

	
 
	
    Effect of Amendment or Termination
	
 
	 
	
    12
	 

	

    Section 17.
    

	
 
	
    Conditions Upon Issuance of Shares
	
 
	 
	
    12
	 

	

    (a)

	
 
	
    Legal Compliance
	
 
	 
	
    12
	 

	

    (b)

	
 
	
    Withholding Obligations
	
 
	 
	
    12
	 

	

    (c)

	
 
	
    Inability to Obtain Authority
	
 
	 
	
    12
	 

	

    (d)

	
 
	
    Grants Exceeding Allotted Shares
	
 
	 
	
    13
	 

	

    Section 18.
    

	
 
	
    General Provisions
	
 
	 
	
    13
	 

	

    (a)

	
 
	
    Term of Plan
	
 
	 
	
    13
	 

	

    (b)

	
 
	
    No Contract of Employment
	
 
	 
	
    13
	 

	

    (c)

	
 
	
    Severability
	
 
	 
	
    13
	 

	

    (d)

	
 
	
    Governing Law
	
 
	 
	
    13
	 

	

    (e)

	
 
	
    Dividends
	
 
	 
	
    13
	 

	

    (f)

	
 
	
    Prohibition on Loans to Participants
	
 
	 
	
    13
	 

	

    (g)

	
 
	
    Performance-Based Compensation
	
 
	 
	
    13
	 

	

    (h)

	
 
	
    Unfunded Status of Plan
	
 
	 
	
    14
	 

	

    (i)

	
 
	
    Liability of Committee Members
	
 
	 
	
    14
	 

    ii

 

    COVANTA
    HOLDING CORPORATION EQUITY AWARD PLAN FOR

    EMPLOYEES AND OFFICERS

 

    Section 1.  Purpose;
    Definitions.

 

    The purposes of this Plan are to promote the interests of the
    Company (including any Subsidiaries and Affiliates) and its
    stockholders by using equity interests in the Company to
    attract, retain and motivate its management and other eligible
    persons and to encourage and reward their contributions to the
    Company’s performance and profitability.

 

    The following capitalized terms shall have the following
    respective meanings when used in this Plan:

 

    (a) “Administrator” means the Board or any
    one of its Committees as shall be administering the Plan, in
    accordance with Section 3 of the Plan.

 

    (b) “Affiliate” means any corporation or
    other entity controlled by the Company and designated by the
    Committee as such.

 

    (c) “Applicable Laws” means the legal
    requirements relating to the administration of plans providing
    one or more of the types of Awards described in the Plan and the
    issuance of Shares thereunder pursuant to U.S. state
    corporate laws, U.S. federal and state securities laws, the
    Code and the applicable laws of any foreign country or
    jurisdiction where Awards are, or will be, granted under the
    Plan.

 

    (d) “Award” means a grant of an Option,
    Restricted Stock, Stock Appreciation Right, Restricted Stock
    Unit, Performance Share, Performance Unit or other stock-based
    Award under the Plan, all on a stand alone, combination or
    tandem basis, as described in or granted under the Plan.

 

    (e) “Award Agreement” means a written
    agreement between the Company and a Participant evidencing the
    terms and conditions of an individual Award. The Award Agreement
    is subject to the terms and conditions of the Plan.

 

    (f) “Board” means the Board of Directors
    of the Company.

 

    (g) “Cause” shall mean, unless otherwise
    determined by the Committee, (i) the conviction of the
    Recipient for committing, or entering a plea of nolo contendere
    by the Recipient with respect to, a felony under federal or
    state law or a crime involving moral turpitude; (ii) the
    commission of an act of personal dishonesty or fraud involving
    personal profit in connection with the Recipient’s
    employment by the Company; (iii) the willful misconduct,
    gross negligence or deliberate failure on the part of the
    Recipient to perform his or her employment duties with the
    Company in any material respect; or (iv) the failure to
    comply with Company policies or agreements with the Company, in
    any material respect.

 

    (h) “Code” means the Internal Revenue Code
    of 1986, as amended or replaced from time to time.

 

    (i) “Committee” means the Compensation
    Committee of the Board, or another committee appointed by the
    Board to administer the Plan, in accordance with Section 3
    of the Plan.

 

    (j) “Common Stock” means the common stock,
    par value $.10, of the Company.

 

    (k) “Company” means Covanta Holding
    Corporation, a Delaware corporation.

 

    (l) “Director” means a director serving on
    the Board of the Company who is not also an employee of the
    Company or any Subsidiary or Affiliate thereof; who has not been
    an employee of the Company during the taxable year or an officer
    of the Company at any time; and who has been duly elected to the
    Board by the stockholders of the Company or by the Board under
    applicable corporate law. Neither service as a Director nor
    payment of a director’s fee by the Company shall, without
    more, constitute “employment” by the Company.

 

    (m) “Disability” means permanent and total
    disability as determined under procedures established by the
    Committee for the purposes of the Plan; provided, however,
    that (i) with respect to an Incentive Stock Option,
    such Disability must also fall within the meaning of
    “permanent and total disability” as defined in
    Section 22(e)(3) of the Code, and (ii) with respect to
    all Awards, to the extent required by Section 409A of the
    Code, such Disability must also fall within the meaning of
    “disability” as defined in Section 409A of the
    Code.

    

    1

 

    (n) “Effective Date” means the date
    described in Section 18(a) of the Plan.

 

    (o) “Employee” means any common-law
    employee of the Company or a Subsidiary or Affiliate of the
    Company, including Officers employed by the Company or any
    Subsidiary or Affiliate of the Company. Neither service as a
    Director nor payment of a director’s fee by the Company
    shall, without more, constitute “employment” by the
    Company.

 

    (p) “Exchange Act” means the Securities
    Exchange Act of 1934, as amended from time to time, and any
    successor thereto, or the rules and regulations promulgated
    thereunder.

 

    (q) “Fair Market Value” means, as of any
    date, the value of Common Stock determined as follows:

 

    (i) If the Common Stock is listed on the American Stock
    Exchange Composite Tape, its Fair Market Value shall be either
    the mean of the highest and lowest reported sale prices of the
    stock (or, if no sales were reported, the average of the closing
    bid and asked price) or the last reported sales price of the
    stock, as determined by the Committee in its discretion, on the
    American Stock Exchange for any given day or, if not listed on
    such exchange, on any other national securities exchange on
    which the Common Stock is listed or on the NASDAQ Stock Market
    as reported in The Wall Street Journal or such other source as
    the Committee deems reliable;

 

    (ii) If the Common Stock is regularly quoted by a
    recognized securities dealer but selling prices are not
    reported, the Fair Market Value of a Share of Common Stock shall
    be either the mean between the high bid and low asked prices or
    the last asked price, as determined by the Committee for the
    Common Stock on any given day, as reported in The Wall Street
    Journal or such other source as the Committee deems reliable;

 

    (iii) In the absence of an established regular public
    market for the Common Stock, the Fair Market Value shall be
    determined in good faith by the Committee pursuant to a
    reasonable application of a reasonable valuation method in
    accordance with the provisions of Section 409A of the Code
    and the regulations thereunder and, with respect to an Incentive
    Stock Option, in accordance with such regulations as may be
    issued under the Code; provided that with respect to an
    individual described in Section 8(a)(i)(A) hereof, this
    Section 1(q)(iii) shall not be available if the resulting
    price fails to represent the Fair Market Value of the stock on
    the date of grant as determined in accordance with
    Sections 1(q)(i) or (ii) above.

 

    (r) “Incentive Stock Option” means an
    Option intended to qualify as an incentive stock option within
    the meaning of Section 422 of the Code and the regulations
    promulgated thereunder.

 

    (s) “Mature Shares” means any shares held
    by the Recipient for a minimum period of 6 months.

 

    (t) “Non-Qualified Stock Option” means any
    Option that is not an Incentive Stock Option.

 

    (u) “Officer” unless otherwise noted
    herein, means a person who is an officer of the Company or a
    Subsidiary or Affiliate.

 

    (v) “Option” means a stock option granted
    pursuant to the Plan.

 

    (w) “Participant” means an Employee or
    Officer who holds an outstanding Award.

 

    (x) “Performance Award” means an Award
    granted pursuant to Section 11(b) of the Plan.

 

    (y) “Performance Share” means an
    Award granted pursuant to Section 13(c) of the Plan.

 

    (z) “Performance Unit” means an
    Award granted pursuant to Section 13(d) of the Plan.

 

    (aa) “Plan” means this Equity Award Plan.

 

    (bb) “Recipient” means an Employee or
    Officer who holds an outstanding Award.

 

    (cc) “Restricted Stock” means shares of
    Common Stock acquired pursuant to an Award granted pursuant to
    Section 10 of the Plan.

    

    2

 

    (dd) “Restricted Stock Unit” means a
    notional account established pursuant to an Award granted
    pursuant to Section 10 of the Plan that is (i) valued
    solely by reference to shares of Common Stock, (ii) subject
    to restrictions specified in the Award Agreement, and
    (iii) payable in Common Stock, cash or a combination
    thereof. The Restricted Stock Unit awarded to the Participant
    will vest according to time-based or performance-based criteria
    specified in the Award Agreement.

 

    (ee) “Retirement” means a Service
    Provider’s retirement from active employment with the
    Company or any Subsidiary or Affiliate as determined under a
    pension plan of the Company or any Subsidiary or Affiliate
    applicable to the Service Provider; or the Service
    Provider’s termination of employment at or after
    age 55 under circumstances that the Committee, in its sole
    discretion, deems equivalent to retirement.

 

    (ff) “Service Provider” means an Employee
    or Officer. A Service Provider who is an Employee shall not
    cease to be a Service Provider (i) during any leave of
    absence approved by the Company; provided that, for
    purposes of Incentive Stock Options, no such leave may exceed
    ninety (90) days, unless reemployment upon expiration of
    such leave is guaranteed by statute or contract; or (ii) as
    a result of transfers between locations of the Company or
    between the Company and any Subsidiary or Affiliate. If
    reemployment upon expiration of a leave of absence approved by
    the Company is not guaranteed by statute or contract, then on
    the 91st day of such leave any Incentive Stock Option held
    by the Recipient shall cease to be treated as an Incentive Stock
    Option and shall be treated for tax purposes as a Non-Qualified
    Stock Option.

 

    (gg) “Stock Appreciation Right” means an
    Award granted pursuant to Section 11(a) of the Plan.

 

    (hh) “Share” means a share of the Common
    Stock, as adjusted in accordance with Section 14 of the
    Plan.

 

    (ii) “Subsidiary” means a “subsidiary
    corporation,” whether now or hereafter existing, as defined
    in Section 424(f) of the Code.

 

    Section 2.  Stock
    Subject to the Plan.

 

    Subject to the provisions of Section 14 of the Plan, the
    maximum aggregate number of Shares available for grants of
    Awards under the Plan is 12,000,000 Shares. The maximum
    aggregate number of Incentive Stock Options that may be issued
    under the Plan is 12,000,000. The Shares subject to an Award
    under the Plan may be authorized but unissued, or reacquired
    Common Stock or treasury shares. Except as otherwise provided in
    Section 14 of the Plan, no Recipient may be granted Awards
    in any calendar year with respect to more than
    250,000 Shares of Restricted Stock or Restricted Stock
    Units and Options to purchase 650,000 Shares, 250,000
    Performance Shares or $5.0 million of Performance Units. In
    determining the number of Shares with respect to which a
    Recipient may be granted an Award in any calendar year, any
    Award which is cancelled shall count against the maximum number
    of Shares for which an Award may be granted to a Recipient.

 

    If an Award expires or becomes unexercisable without having been
    exercised in full, the unpurchased Shares which were subject
    thereto shall become available for future grant or sale under
    the Plan (unless the Plan has terminated); provided,
    however, that Shares that have actually been issued under
    the Plan, whether upon exercise of an Option or other Award,
    shall not be returned to the Plan and shall not become available
    for future distribution under the Plan, except that if Shares of
    Restricted Stock are repurchased by the Company at their
    original purchase price, and the original Recipient of such
    Shares did not receive any benefits of ownership of such Shares,
    such Shares shall become available for future grant under the
    Plan. For purposes of the preceding sentence, voting rights
    shall not be considered a benefit of Share ownership.

 

    Section 3.  Administration
    of the Plan.

 

    (a) Administration.  The Plan shall be
    administered by the Compensation Committee of the Board, or
    another Committee that may be appointed by the Board for this
    purpose in accordance with Applicable Laws. Such Committee shall
    consist of two or more members of the Board each of whom is a
    “disinterested person” as defined in
    Rule 16b-3(c)(2)(i)
    of the General Rules and Regulations promulgated under the
    Exchange Act; and all of whom, in addition, shall constitute
    “outside directors” for purposes of granting
    “performance-based compensation” awards under Treas.
    Reg. Sec. 1.162-27(e)(3) and Section 162(m)(4)(C) of the
    Code. (Such “outside directors” shall be appointed by,
    and may be removed by, such Board.) Committee members shall
    serve for such term(s) as the Board may determine, subject to
    removal by the Board at any time. The Committee shall act by a
    majority of its members,

    

    3

 

    or if there are only two members of such Committee, by unanimous
    consent of both members. If at any time there is no Committee in
    office, the functions of the Committee specified in the Plan
    shall be carried out by the Board.

 

    (b) Powers of the Committee.  Except for
    the terms and conditions explicitly set forth in the Plan, the
    Committee shall have exclusive authority, in its discretion, to
    determine the Fair Market Value of the Common Stock in
    accordance with Section 1(q) of the Plan and to determine
    all matters relating to Awards under the Plan, including the
    selection of individuals to be granted an Award, the type of
    Award, the number of shares of Common Stock subject to an Award,
    all terms, conditions, restrictions and limitations, if any,
    including, without limitation, vesting, acceleration of vesting,
    exercisability, termination, substitution, cancellation,
    forfeiture, or repurchase of an Award and the terms of any
    instrument that evidences the Award. The Committee shall also
    have exclusive authority to interpret the Plan and its rules and
    regulations, and to make all other determinations deemed
    necessary or advisable under or for administering the Plan,
    subject to Section 16 of the Plan. All actions taken and
    determinations made by the Committee pursuant to the Plan shall
    be conclusive and binding on all parties involved or affected.
    The Committee may, by a majority of its members then in office,
    authorize any one or more of its members or any Officer of the
    Company to execute and deliver documents on behalf of the
    Committee, or delegate to an Officer of the Company the
    authority to make decisions pursuant to Section 8 of the
    Plan, provided that the Committee may not delegate its
    authority with regard to the selection for participation of or
    the granting of Awards to persons subject to Section 16 of
    the Exchange Act.

 

    (c) Compliance with Section 409A of the
    Code.  Awards granted under this Plan shall be
    designed and administered in such a manner that they are either
    exempt from the application of, or comply with, the requirements
    of Section 409A of the Code and the regulations thereunder.
    To the extent that the Committee determines that any Award
    granted under the Plan is subject to Section 409A of the
    Code, the Award Agreement shall incorporate the terms and
    conditions necessary to avoid the imposition of an additional
    tax under Section 409A of the Code upon a Participant.
    Notwithstanding any other provision of the Plan or any Award
    Agreement (unless the Award Agreement provides otherwise with
    respect to this Section): (i) an Award shall not be
    granted, deferred, accelerated, extended, paid out, settled,
    substituted or modified under this Plan in a manner that would
    result in the imposition of an additional tax under
    Section 409A of the Code upon a Participant; and
    (ii) if an Award constitutes “deferred
    compensation” within the meaning of Section 409A of
    the Code, and if the Participant holding the Award is a
    “specified employee” (as defined in Section 409A
    of the Code, with such classification to be determined in
    accordance with the methodology established by the Company), no
    distribution or payment of any amount shall be made before a
    date that is six months following the date of such
    Participant’s “separation from service” (as
    defined in Section 409A of the Code) or, if earlier, the
    date of the Participant’s death. Although the Company
    intends to administer the Plan so that Awards will be exempt
    from, or will comply with, the requirements of Section 409A
    of the Code, the Company does not warrant that any Award under
    the Plan will qualify for favorable tax treatment under
    Section 409A of the Code or any other provision of federal,
    state, local or
    non-United
    States law. Neither the Company, its Subsidiaries and
    Affiliates, nor their respective directors, officer, employees
    or advisers shall be liable to any Participant (or any other
    individual claiming a benefit through the Participant) for any
    tax, interest, or penalties the Participant might owe as a
    result of the grant, holding, vesting, exercise, or payment of
    any Award under the Plan.

 

    Section 4.  Eligibility
    for Awards.

 

    Non-Qualified Stock Options and other Awards may be granted to
    Employees and Officers who are Employees. In addition, an Award
    may be granted to a person who is offered employment by the
    Company, a Subsidiary or an Affiliate, provided that such
    Award shall be immediately forfeited if such person does not
    accept such offer of employment within such time period as the
    Company, Subsidiary or Affiliate may establish. If otherwise
    eligible, an Employee or Officer who has been granted an Option
    or other Award may be granted additional Options or other Awards.

 

    Section 5.  Limitations
    on Options.

 

    Each Option shall be designated in the written Award Agreement
    as either an Incentive Stock Option or a Non-Qualified Stock
    Option. However, notwithstanding such designation, to the extent
    that the Options are amended; the aggregate Fair Market Value of
    the Shares with respect to which Incentive Stock Options are
    exercisable for the first time by the Recipient during any
    calendar year (under all plans of the Company and any Subsidiary
    or Affiliate)

    

    4

 

    exceeds $100,000; or other circumstances exist that would cause
    the Options to lose their status as Incentive Stock Options,
    such Options shall be treated as Non-Qualified Stock Options.
    For purposes of this Section 5, Incentive Stock Options
    shall be taken into account in the order in which they were
    granted. The Fair Market Value of the Shares shall be determined
    as of the time the Option with respect to such Shares is
    granted. If an Option is granted hereunder that is
    part Incentive Stock Option and
    part Non-Qualified
    Stock Option due to becoming first exercisable in any calendar
    year in excess of $100,000, the Incentive Stock Option portion
    of such Option shall become exercisable first in such calendar
    year, and the Non-Qualified Stock Option portion shall commence
    becoming exercisable once the $100,000 limit has been reached.

 

    Section 6.  Term
    of Plan.

 

    The Plan shall become effective upon the approval by the
    stockholders of the Company as described in Section 16 of
    the Plan. It shall continue in effect for a term of ten
    (10) years unless terminated earlier under Section 16
    of the Plan.

 

    Section 7.  Term
    of Option.

 

    The term of each Option shall be stated in the Award Agreement
    but shall be no longer than ten (10) years from the date of
    grant or such shorter term as may be provided in the Award
    Agreement. Moreover, in the case of an Incentive Stock Option
    granted to a Recipient who, at the time the Incentive Stock
    Option is granted, owns stock representing more than ten percent
    (10%) of the voting power of all classes of stock of the Company
    or any Subsidiary (taking into account the attribution rules
    under Section 424(d) of the Code), the term of the
    Incentive Stock Option shall be five (5) years from the
    date of grant or such shorter term as may be provided in the
    Award Agreement.

 

    Section 8.  Option
    Exercise Price and Consideration.

 

    (a) Exercise Price.  The per share
    exercise price for the Shares to be issued pursuant to exercise
    of an Option shall be determined by the Committee, subject to
    the following:

 

    (i) In the case of an Incentive Stock Option

 

    (A) granted to an Employee who, at the time the Incentive
    Stock Option is granted, owns stock representing more than ten
    percent (10%) of the voting power of all classes of stock of the
    Company or any Subsidiary (taking into account the attribution
    rules under Section 424(d) of the Code), the per Share
    exercise price shall be not less than 110% of the Fair Market
    Value per Share on the date of grant, or

 

    (B) granted to any Employee other than an Employee
    described in paragraph (A) immediately above, the per Share
    exercise price shall be not less than 100% of the Fair Market
    Value per Share on the date of grant.

 

    (ii) In the case of a Non-Qualified Stock Option, the per
    Share exercise price shall be not less than 100% of the Fair
    Market Value per Share on the date of grant.

 

    (b) Waiting Period and Exercise
    Dates.  The Committee shall have the authority,
    subject to the terms of the Plan, to determine any vesting
    restriction or limitation or waiting period with respect to any
    Option granted to a Recipient or the Shares acquired pursuant to
    the exercise of such Option.

 

    (c) Form of Consideration.  The Committee
    shall determine the acceptable form of consideration for
    exercising an Option, including the method of payment. In the
    case of an Incentive Stock Option, the Committee shall determine
    the acceptable form of consideration at the time of grant. Such
    consideration may consist entirely of:

 

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

 

    (ii) other Mature Shares owned on the date of exercise of
    the Option by the Recipient (and, in the case of the exercise of
    a Non-Qualified Stock Option, Restricted Stock subject to an
    Award hereunder) based on the Fair Market Value of the Common
    Stock on the date the Option is exercised; provided,
    however, that in the case of an Incentive Stock Option, the
    right to make a payment in the form of already owned Shares may
    be authorized only at the time the Option is granted; and
    provided that if payment is made in the form of
    Restricted Stock, the number of equivalent shares of Common
    Stock to be received shall be subject to the same

    

    5

 

    forfeiture restrictions to which such Restricted Stock was
    subject, unless otherwise determined by the Committee;

 

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

 

    (iv) at the discretion of the Committee, 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 sale or loan proceeds
    required to pay the exercise price, subject, however, to
    Section 18(f) of the Plan; or

 

    (v) such other consideration and method of payment for the
    issuance of Shares to the extent permitted by the Committee and
    Applicable Laws.

 

    Section 9.  Exercise
    of Option.

 

    (a) Procedure for Exercise; Rights as a
    Stockholder.  Except as otherwise authorized by
    the Committee, any Option granted hereunder shall be exercisable
    according to the terms of the Plan and at such times and under
    such conditions as determined by the Committee and set forth in
    the Award Agreement. If the Committee provides that any Option
    is exercisable only in installments, the Committee may at any
    time waive such installment exercise provisions, in whole or in
    part, based on such factors as the Committee may determine. The
    Committee may at any time, in whole or in part, accelerate the
    exercisability of any Option.

 

    An Option shall be deemed exercised when the Company receives:
    (i) written notice of exercise (in accordance with the
    Award Agreement) from the person entitled to exercise the
    Option, and (ii) full payment for the Shares with respect
    to which the Option is exercised. Full payment may consist of
    any consideration and method of payment authorized by the
    Committee in accordance with Section 8(c) of the Plan and
    permitted by the Award Agreement and the Plan. Shares issued
    upon exercise of an Option shall be issued in the name of the
    Recipient. Until the stock certificate evidencing such Shares is
    issued (as evidenced by the appropriate entry on the books of
    the Company or of a duly authorized transfer agent of the
    Company), no right to vote or receive dividends or any other
    rights as a stockholder shall exist with respect to such Shares,
    notwithstanding the exercise of the Option. The Company shall
    issue (or cause to be issued) such stock certificate promptly
    after the Option is exercised. No adjustment will be made for a
    dividend or other right for which the record date is prior to
    the date the stock certificate is issued, except as provided in
    Section 14 of the Plan.

 

    Exercising an Option in any manner shall decrease the number of
    Shares thereafter available, both for purposes of the Plan and
    for sale under the Option, by the number of Shares as to which
    the Option is exercised.

 

    (b) Termination of Relationship as Employee or
    Officer.  If a Recipient ceases to be a Service
    Provider, other than for Cause or upon the Recipient’s
    death, Disability or Retirement, the Recipient, subject to the
    restrictions of this Section 9(b), may exercise his or her
    Option within the time specified in this Section 9(b) to
    the extent that the Option is vested on the date of termination,
    including any acceleration of vesting granted by the Committee,
    and has not yet expired as set forth in the Award Agreement.
    Unless otherwise set forth in the Award Agreement, such Option
    may be exercised as follows: (i) if the Option is a
    Non-Qualified Stock Option, it shall remain exercisable for the
    lesser of the remaining term of the Option or twelve
    (12) months from the date of such termination of the
    relationship as a Service Provider; or (ii) if the Option
    is an Incentive Stock Option, it shall remain exercisable for
    the lesser of the term of the Option or three (3) months
    following the Recipient’s termination of his relationship
    as a Service Provider; provided, however, that if the
    Recipient dies within such three-month period, any unexercised
    Option held by such Recipient shall notwithstanding the
    expiration of such three-month period continue to be exercisable
    (to the extent to which it was exercisable at the time of death)
    for the lesser of a period of twelve (12) months from the
    date of such death; the expiration of the stated term of such
    Option; or the exercise period that applies for purposes of
    Section 422 of the Code. If, on the date of termination,
    the Recipient is not vested as to his or her entire Option and
    the Committee has not granted any acceleration of vesting, the
    Shares covered by the unvested portion of the Option shall
    revert to the Plan. If a Recipient ceases to be a Service
    Provider for Cause, the Option shall immediately terminate, and
    the Shares covered by such Option shall revert to the Plan. If,
    after termination, the Recipient does not exercise his or her
    Option within the time specified herein, the Option shall
    terminate, and the Shares covered by such Option shall revert to
    the Plan.

    

    6

 

    Notwithstanding the above, in the event of a Recipient’s
    change in status from Employee to non-Employee Officer or
    Director, the Recipient shall not automatically be treated as if
    the Recipient terminated his relationship as a Service Provider,
    nor shall the Recipient be treated as ceasing to provide
    services to the Company solely as a result of such change in
    status. In the event a Recipient’s status changes from
    Employee to non-Employee Officer or Director, an Incentive Stock
    Option held by the Recipient shall cease to be treated as an
    Incentive Stock Option and shall be treated for tax purposes as
    a Non-Qualified Stock Option three months and one day following
    such change of status.

 

    (c) Disability of Recipient.  If, as a
    result of the Recipient’s Disability, a Recipient ceases to
    be a Service Provider, the Recipient may exercise his or her
    Option subject to the restrictions of this Section 9(c) and
    within the period of time specified herein to the extent the
    Option is vested on the date of termination, including any
    acceleration of vesting granted by the Committee, and has not
    yet expired as set forth in the Award Agreement. Unless
    otherwise set forth in the Award Agreement, such Option shall be
    exercisable for the lesser of the remaining period of time
    specified in the Award Agreement or twelve (12) months from
    the date of such termination. If, on the date of termination,
    the Recipient is not vested as to his or her entire Option and
    the Committee has not granted any acceleration of vesting, the
    Shares covered by the unvested portion of the Option shall
    revert to the Plan. If, after termination, the Recipient does
    not exercise his or her Option within the time specified herein,
    the Option shall terminate, and the Shares covered by such
    Option shall revert to the Plan. In the event of termination of
    employment by reason of Disability, if an Incentive Stock Option
    is exercised after the expiration of the exercise periods
    applicable under Section 422 of the Code, such Option will
    thereafter be treated as a Non-Qualified Stock Option.

 

    (d) Death of Recipient.  If a Recipient
    dies while an Employee, the Option may be exercised subject to
    the restrictions of this Section 9(d) and within such
    period of time as is specified in the Award Agreement (but in no
    event later than the earlier of twelve (12) months from the
    date of such death or the expiration of the term of such Option
    as set forth in the Award Agreement), but only to the extent
    that the Option is vested on the date of death, including any
    acceleration of vesting granted by the Committee, and has not
    yet expired as set forth in the Award Agreement. If, at the time
    of death, the Recipient is not vested as to his or her entire
    Option and the Committee has not granted any acceleration of
    vesting, the Shares covered by the unvested portion of the
    Option shall immediately revert to the Plan. The Option may be
    exercised by the executor or administrator of the
    Recipient’s estate or, if none, by the person(s) entitled
    to exercise the Option under the Recipient’s will or the
    applicable laws of descent or distribution. If the Option is not
    so exercised within the time specified herein, the Option shall
    terminate, and the Shares covered by such Option shall revert to
    the Plan. In the event of termination of employment by reason of
    death, if an Incentive Stock Option is exercised after the
    expiration of the exercise periods that apply for purposes of
    Section 422 of the Code, such Option will thereafter be
    treated as a Non-Qualified Stock Option.

 

    (e) Retirement of Recipient.

 

    (i) Non-Qualified Stock Options.  If, as a
    result of the Recipient’s Retirement, a Recipient ceases to
    be a Service Provider, the Recipient may, subject to the
    restrictions of this Section 9(e), exercise his or her
    Non-Qualified Stock Option within the time specified herein to
    the extent the Option is vested on the date of termination,
    including any acceleration of vesting granted by the Committee,
    and has not yet expired as set forth in the Award Agreement.
    Unless otherwise set forth in the Award Agreement, such Option
    may be exercised for the lesser of the remaining period of time
    specified in the Award Agreement or three (3) years
    following the Recipient’s Retirement. Notwithstanding the
    foregoing, if the Recipient dies within such three (3)-year (or
    shorter) period, any unexercised Non-Qualified Stock Option held
    by such Recipient shall, notwithstanding the expiration of such
    period, continue to be exercisable to the extent to which it was
    exercisable at the time of death for a period of twelve
    (12) months from the date of death or the expiration of the
    stated term of such Option, whichever period is shorter.

 

    (ii) Incentive Stock Options.  If the
    Recipient holds an Incentive Stock Option and ceases to be a
    Service Provider by reason of his or her Retirement, such
    Incentive Stock Option may continue to be exercisable by the
    Recipient to the extent to which it was exercisable at the time
    of Retirement for a period of three (3) months from the
    date of Retirement or the expiration of the stated term of such
    Option, whichever period is the shorter. Notwithstanding the
    foregoing, if the Recipient dies within such three-month period,
    any unexercised Incentive Stock Option held by such Recipient
    shall, notwithstanding the expiration of such period, continue

    

    7

 

    to be exercisable to the extent to which it was exercisable at
    the time of death for a period of twelve (12) months from
    the date of such death; the expiration of the stated term of
    such Option; or the exercise period that applies for purposes of
    Section 422 of the Code, whichever period is the shorter.

 

    If, on the date of termination due to Retirement, the Recipient
    is not vested as to his or her entire Option and the Committee
    has not granted any acceleration of vesting, the Shares covered
    by the unvested portion of the Option shall revert to the Plan.
    If, after termination due to Retirement, the Option is not
    exercised within the time specified herein, the Option shall
    terminate, and the Shares covered by such Option shall revert to
    the Plan.

 

    (f) Cash out Provisions.  On receipt of
    written notice of exercise, to the extent permitted by
    Section 409A of the Code and the regulations thereunder,
    the Committee may elect, but shall not be required to, to cash
    out all or any part of the shares of Common Stock for which an
    Option is being exercised by paying the Recipient an amount, in
    cash, equal to the excess of the Fair Market Value of the Common
    Stock over the option price times the number of shares of Common
    Stock for which an Option is being exercised on the effective
    date of such cash out. Cash outs pursuant to this
    Section 9(f) relating to Options held by Recipients who are
    actually or potentially subject to Section 16(b) of the
    Exchange Act shall comply with the provisions of Section 16
    of the Exchange Act and the rules promulgated thereunder, to the
    extent applicable.

 

    Section 10.  Restricted
    Stock and Restricted Stock Units.

 

    (a) Awards of Restricted Stock and Restricted Stock
    Units.  Shares of Restricted Stock or Restricted
    Stock Units may be issued either alone, in addition to, or in
    tandem with other Awards granted under the Plan
    and/or cash
    awards made outside of the Plan. The Committee shall determine
    the individuals to whom it will award Restricted Stock or
    Restricted Stock Units under the Plan, and it shall advise the
    Recipient in writing, by means of an Award Agreement, of the
    terms, conditions and restrictions related to the Award,
    including the number of Shares or Restricted Stock Units to be
    awarded to the Recipient, the time or times within which such
    Awards may be subject to forfeiture and any other terms and
    conditions of the Awards, in addition to those contained in this
    Section 10. The Committee may condition the grant or
    vesting of Restricted Stock or Restricted Stock Units upon the
    attainment of specified performance goals of the Recipient or of
    the Company, Subsidiary or Affiliate for or within which the
    Recipient is primarily employed, or upon such other factors as
    the Committee shall determine. The provisions of an Award need
    not be the same with respect to each Recipient. The terms of the
    Award of Restricted Stock or Restricted Stock Units shall comply
    in all respects with Applicable Law and the terms of the Plan.

 

    (b) Awards and Certificates.  Each Award
    shall be confirmed by, and subject to the terms of, an Award
    Agreement. Shares of Restricted Stock shall be evidenced in such
    manner as the Committee may deem appropriate, including
    book-entry registration or issuance of one or more stock
    certificates. The Committee may require that the certificates
    evidencing such Shares be held in custody by the Company until
    the restrictions thereon shall have lapsed and that, as a
    condition of any Award of Restricted Stock, the Recipient shall
    have delivered to the Company a stock power, endorsed in blank,
    relating to the Common Stock covered by such Award. Any
    certificate issued with respect to Shares of Restricted Stock
    shall be registered in the name of such Recipient and shall bear
    an appropriate legend referring to the terms, conditions and
    restrictions applicable to such Award, substantially in the
    following form:

 

    “The transferability of this certificate and the shares of
    Stock represented hereby are subject to the terms and conditions
    (including forfeiture) of the Covanta Holding Corporation Equity
    Award Plan for Employees and Officers and an Award Agreement.
    Copies of such Plan and Award Agreement are on file at the
    office of the Secretary of Covanta Holding Corporation.”

 

    If and when the Restriction Period (hereinafter defined) expires
    without a prior forfeiture of the Restricted Stock subject to
    such Restriction Period, the Recipient may request that
    unlegended certificates for such Shares be delivered to the
    Recipient.

 

    (c) Terms and Conditions.  Shares of
    Restricted Stock and Restricted Stock Units shall be subject to
    the following terms and conditions:

 

    (i) Restriction Period.  Subject to the
    provisions of the Plan and the terms of the Award Agreement,
    during a period set by the Committee, commencing with the date
    of such Award (the “Restriction Period”), the

    

    8

 

    Recipient shall not be permitted to sell, assign, transfer,
    pledge or otherwise encumber Shares of Restricted Stock or
    Restricted Stock Units (the “Restrictions”). The
    Committee may provide for the lapse of such Restrictions in
    installments or otherwise and may accelerate or waive such
    Restrictions, in whole or in part, in each case based on period
    of service, performance of the Recipient or of the Company,
    Subsidiary or Affiliate, division or department for which the
    Recipient is employed or such other factors or criteria as the
    Committee may determine. Notwithstanding the foregoing, if the
    Recipient of a Restricted Stock Award or Restricted Stock Unit
    is subject to the provisions of Section 16 of the Exchange
    Act, shares of Common Stock subject to the grant may not,
    without the written consent of the Committee, be sold or
    otherwise disposed of within six (6) months following the
    date of grant. The Committee may, in its discretion, impose a
    limit on the number of Shares that a Recipient may receive in
    any twelve (12)-month period in an Award of Restricted Stock or
    Restricted Stock Units.

 

    (ii) Rights of Restricted Stock
    Recipients.  Except as provided in
    Section 10(c) of the Plan, the applicable Award Agreement
    and Applicable Law, the Recipient shall have, with respect to
    the Shares of Restricted Stock, all of the rights of a
    stockholder of the Company holding the class or series of Common
    Stock that is the subject of the Award Agreement, including, if
    so provided in the Award Agreement, the right to vote the Shares
    and the right to receive any cash dividends. Unless otherwise
    determined by the Committee in the applicable Award Agreement
    and subject to Section 18(e) of the Plan, for the Restriction
    Period, (A) cash dividends on the Shares of Common Stock
    that are the subject of the Award Agreement shall be
    automatically deferred and reinvested in additional Restricted
    Stock and (B) dividends payable in Common Stock shall be
    paid in the form of Restricted Stock. If there is a pro rata
    distribution of warrants or other rights to acquire shares of
    Common Stock, then the Recipient shall have the right to
    participate in or receive such warrants or other rights,
    provided, however, that any shares of Common Stock
    acquired pursuant to the exercise of such warrants or other
    rights shall be subject to the same vesting requirements and
    restrictions as the underlying Common Stock.

 

    (iii) Rights of Restricted Stock Unit
    Recipients.  The recipient of Restricted Stock
    Units shall not have any of the rights of a stockholder of the
    Company and has no right to vote any shares of Common Stock or
    to receive any cash dividend. The Committee shall be entitled to
    specify in a Restricted Stock Unit Award Agreement that a
    Recipient is entitled to receive dividend equivalents in the
    form of rights to receive additional Restricted Stock Units
    based on the value of any cash dividends the Company pays.

 

    (iv) Termination of Service Provider
    Relationship.  Except to the extent otherwise
    provided in the applicable Award Agreement or the Plan, if a
    Recipient ceases to be a Service Provider for any reason during
    the Restriction Period, all Shares or Restricted Stock Units
    still subject to restriction shall be forfeited by the
    Recipient. Without limiting the foregoing, an Award Agreement
    may, at the Committee’s discretion, allow for vesting to
    continue after termination of employment with the Company,
    provided the Recipient remains an Employee of any Subsidiary or
    Affiliate of the Company.

 

    (d) Other Provisions.  The Award Agreement
    shall contain such other terms, provisions and conditions not
    inconsistent with the Plan as may be determined by the Committee
    in its sole discretion, including, without limitation,
    provisions relating to tax matters including wage withholding
    requirements; prohibitions on elections by the Recipient under
    Section 83(b) of the Code; and
    “gross-up”
    payments to Recipients to satisfy tax liabilities. In addition,
    the terms of the Award Agreements for Restricted Stock need not
    be the same with respect to each Recipient.

 

    Section 11.  Deferral
    of Restricted Stock Award.

 

    (a) The Committee may, in its sole discretion, authorize an
    Employee or Officer to elect to defer the ownership of the
    Shares of Common Stock otherwise issuable pursuant to
    Section 10. Any such election shall be made in writing in
    the form prescribed by the Committee, and shall be subject to
    such rules and procedures as shall be determined by the
    Committee in its sole discretion. In no event, however, shall
    any deferral be permitted to the extent prohibited by Applicable
    Laws or to the extent the deferral would impose additional taxes
    or penalties under Section 409A of the Code and the
    regulations thereunder.

    

    9

 

    (b) An election to defer pursuant to (a) above with
    respect to Shares of Restricted Stock must be made
    (i) within 30 days of the grant of the Restricted
    Stock Award, and (ii) at least 12 months in advance of
    the date of vesting of any of the Shares of Common Stock covered
    by the Restricted Stock Award.

 

    (c) At the time of the deferral election described in this
    Section 11, the Employee or Officer may select the date for
    the issuance or receipt of the deferred Shares. If the Employee
    or Officer does not select a date for the issuance of deferred
    Shares, the deferred Shares will be issued upon termination of
    his or her service as an Employee or Officer.

 

    Section 12.  Other
    Awards.

 

    The Committee, in its sole discretion, but subject to the terms
    of the Plan, may grant the following types of Awards (in
    addition to or in combination with the Awards of Options and
    Restricted Stock described above) under this Plan on a stand
    alone, combination or tandem basis:

 

    (a) Stock Appreciation Right.  The
    Committee may grant a right to receive the excess of the Fair
    Market Value of a Share on the date the Stock Appreciation Right
    is exercised over the Fair Market Value of a Share on the date
    the Stock Appreciation Right was granted (the
    “Spread”). Upon exercise of a Stock Appreciation
    Right, the Spread with respect to a Stock Appreciation Right
    will be payable in cash, Shares with a total Fair Market Value
    equal to the Spread or a combination of these two. With respect
    to Stock Appreciation rights that are subject to Section 16
    of the Exchange Act, however, the Committee shall retain sole
    discretion (i) to determine the form in which payment of
    the Stock Appreciation Right will be made (cash, Shares, or any
    combination thereof) or (ii) to approve an election by a
    Recipient to receive cash in full or partial settlement of Stock
    Appreciation Rights. Each Award Agreement for Stock Appreciation
    Rights shall provide that Stock Appreciation Rights under the
    Plan may not be exercised earlier than six (6) months from
    the date of grant. The terms of the Award Agreements granting
    Stock Appreciation Rights need not be the same with respect to
    each Recipient. A Stock Appreciation Right shall be subject to
    adjustment as provided in Section 14 of the Plan.

 

    (b) Performance Award.  The Committee may
    grant a Performance Award based on the performance of the
    Recipient over a specified performance period. A Performance
    Award may be awarded to an Employee contingent upon future
    performance of the Company or any Affiliate, Subsidiary,
    division or department thereof in which such Employee is
    employed, if applicable, during the performance period. The
    Committee shall establish the performance measures applicable to
    such performance prior to the beginning of the performance
    period, but subject to such later revisions as the Committee may
    deem appropriate to reflect significant, unforeseen events or
    changes. The Performance Award may consist of a right to receive
    Shares (or cash in an amount equal to the Fair Market Value
    thereof) or the right to receive an amount equal to the
    appreciation, if any, in the Fair Market Value of Shares over a
    specified period. Each Performance Award shall have a maximum
    value established by the Committee at the time such Award is
    made. In determining the value of Performance Awards, the
    Committee shall take into account the Recipient’s
    responsibility level, performance, potential, other Awards and
    such other considerations as it deems appropriate. Payment of a
    Performance Award may be made following the end of the
    performance period in cash, Shares (based on the Fair Market
    Value on the payment date) or a combination thereof, as
    determined by the Committee, and in a lump sum or installments
    as determined by the Committee. Except as otherwise provided in
    an Award Agreement or as determined by the Committee, a
    Performance Award shall terminate if the Recipient does not
    remain continuously in the employ of the Company at all times
    during the applicable performance period. The terms of the Award
    Agreements granting a Performance Award need not be the same
    with respect to each Recipient.

 

    (c) Performance Shares.  The Committee may
    grant performance shares under the Equity Award Plan that will
    result in a payment to a Participant. Performance Shares may be
    awarded to an Employee contingent upon future performance of the
    Company or any Affiliate, Subsidiary, division or department
    thereof in which such Employee is employed, if applicable,
    during the performance period. The Committee will set the
    performance periods and performance objectives that, depending
    on the extent to which they are met, will determine the number
    of Performance Shares payable in cash, shares or a combination
    of cash and shares, as applicable. Each Performance Share must
    have an initial value equal to the Fair Market Value of a share
    of Common Stock on the date of grant. Unless otherwise provided
    in an Award or by the Committee, Performance

    

    10

 

    Share Awards terminate if the Recipient does not remain an
    Employee of the Company, or its Affiliates or Subsidiaries at
    all times during the applicable performance period. The terms of
    the Award Agreements granting Performance Shares need not be the
    same with respect to each Participant.

 

    (d) Performance Units.  A Performance Unit
    is designated in a dollar amount of cash. The Committee may
    grant Performance Units that will result in a payment to a
    Participant only if performance goals established by the
    Committee are achieved. The Committee will set the performance
    periods and performance objectives that, depending on the extent
    to which they are met, will determine the amount of Performance
    Units payable in cash, Shares or a combination of cash and
    Shares, as applicable. Performance Units will have an initial
    dollar value established by the Committee prior to the grant
    date. Unless otherwise provided in an Award or by the Committee,
    Performance Unit awards terminate if the Recipient does not
    remain an Employee of the Company, or its Affiliates or
    Subsidiaries at all times during the applicable performance
    period. The terms of the Award Agreements granting Performance
    Units need not be the same with respect to each Recipient.

 

    (e) Other Stock-Based Awards.  The
    Committee may, in its discretion, grant other Share-based Awards
    which are related to or serve a similar function to those Awards
    set forth in this Section 12.

 

    Section 13.  Non-Transferability
    of Awards.

 

    Unless otherwise specified by the Committee in the Award
    Agreement, an Award may not be sold, pledged, assigned,
    hypothecated, transferred, or disposed of in any manner other
    than by (i) will or by 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). Options and other Awards may be exercised, during
    the lifetime of the Participant, only by the Participant or by
    the guardian or legal representative of the Participant or by an
    alternate payee pursuant to a qualified domestic relations
    order. If the Committee makes an Award transferable, such Award
    shall contain such additional terms and conditions as the
    Committee deems appropriate. Any attempt to assign, pledge or
    otherwise transfer any Award or of any right or privileges
    conferred thereby, contrary to the Plan, or the sale or levy or
    similar process upon the rights and privileges conferred hereby,
    shall be void.

 

    Section 14.  Adjustments
    Upon Changes in Capitalization.

 

    Subject to any required action by the stockholders of the
    Company, the number of shares of Common Stock covered by each
    outstanding Award, and the number of shares of Common Stock
    which have been authorized for issuance under the Plan but as to
    which no Awards have yet been granted or which have been
    returned to the Plan upon cancellation or expiration of an
    Award, as well as the price per share of Common Stock covered by
    each such outstanding Award, shall be proportionately adjusted
    for 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; provided, however, that
    (a) conversion of any convertible securities of the Company
    shall not be deemed to have been “effected without receipt
    of consideration;” and (b) no adjustment shall be made
    below par value and no fractional shares of Common Stock shall
    be issued. Such adjustment shall be made by the Board in its
    sole discretion, whose determination in that respect shall be
    final, binding and conclusive. In the event of an extraordinary
    cash dividend, the Committee may, in its sole discretion,
    equitably adjust the aggregate number of Shares available under
    the Plan, as well as the exercise price, number of Shares and
    other appropriate terms of any outstanding Award in order to
    preserve the intended benefits of the Plan. Except as expressly
    provided herein, no issuance by the Company of shares of stock
    of any class, or securities convertible into shares of stock of
    any class, shall affect, and no adjustment by reason thereof
    shall be made with respect to, the number or price of shares of
    Common Stock subject to an Award.

 

    Section 15.  Date
    of Grant.

 

    The date of grant of an Award shall be, for all purposes, the
    date on which the Committee makes the determination granting
    such Award, or such other later date as is determined by the
    Committee. Notice of the determination shall be provided to each
    Participant within a reasonable time after the date of such
    grant.

    

    11

 

    Section 16.  Term;
    Amendment and Termination of the Plan.

 

    (a) Amendment and Termination.  Subject to
    this Section 16 and Section 18(f), the Board may at
    any time amend, alter, suspend or terminate the Plan, including
    without limitation to provide for the transferability of any or
    all Options to comply with or take advantage of rules governing
    registration of shares. Subject to Section 18(f) and the
    other terms of the Plan, the Committee may amend the terms of
    any Option theretofore granted, prospectively or retroactively,
    but no such amendment shall impair the rights of any Recipient
    without the Recipient’s consent.

 

    (b) Stockholder Approval.  The Company
    shall obtain stockholder approval of any material Plan amendment
    and any amendment to the extent necessary and desirable to
    comply with Section 422 of the Code (or any successor rule
    or statute or other applicable law, rule or regulation,
    including the requirements of any exchange or quotation system
    on which the Common Stock is listed or quoted). Such stockholder
    approval, if required, shall be obtained in such a manner and to
    such a degree as is required by the Applicable Law, rule or
    regulation.

 

    (c) Effect of Amendment or
    Termination.  No amendment, alteration, suspension
    or termination of the Plan shall impair the rights of any
    Recipient (except such an amendment made to comply with
    applicable law, including without limitation, Section 409A
    of the Code, stock exchange rules or accounting rules), unless
    mutually agreed otherwise between the Recipient and the
    Committee, which agreement must be in writing and signed by the
    Recipient and the Company.

 

    Section 17.  Conditions
    Upon Issuance of Shares.

 

    (a) Legal Compliance.  Shares shall not be
    issued pursuant to the exercise of an Award unless the exercise
    of such Award and the issuance and delivery of such Shares shall
    comply with all relevant provisions of law, including, without
    limitation, the Securities Act of 1933, as amended, the Exchange
    Act, the rules and regulations promulgated thereunder,
    Applicable Laws, and the requirements of any stock exchange or
    quotation system upon which the Shares may then be listed or
    quoted and shall be further subject to the approval of counsel
    for the Company with respect to such compliance. The Committee
    may cause a legend or legends to be placed on any certificates
    for Shares or other securities delivered under the Plan as it
    may deem appropriate to make reference to such legal rules and
    restrictions, or to impose any restrictions on transfer.

 

    (b) Withholding Obligations.  No later
    than the date as of which an amount first becomes includible in
    the gross income of the Recipient for federal income tax
    purposes with respect to any Award under the Plan, 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. Unless otherwise determined by the
    Committee, withholding obligations may be settled with vested
    Common Stock, including vested Common Stock that is part of the
    Award that gives rise to the withholding requirement. The
    obligations of the Company under the Plan shall be conditioned
    on such payment or arrangements, and the Company, its
    Subsidiaries and its Affiliates shall, to the extent permitted
    by law, have the right to deduct any such taxes from any payment
    otherwise due to the Recipient. The Committee may establish such
    procedures as it deems appropriate, including the making of
    irrevocable elections, for the settlement of withholding
    obligations with vested Common Stock.

 

    (c) Inability to Obtain Authority.  The
    inability of the Company to obtain authority from any regulatory
    body having jurisdiction, which authority is deemed by the
    Company’s counsel to be necessary to the lawful issuance
    and sale of any Shares hereunder, shall relieve the Company of
    any liability in respect of the failure to issue or sell such
    Shares as to which such requisite authority shall not have been
    obtained.

 

    (d) Grants Exceeding Allotted Shares.  If
    the Stock covered by an Award exceeds, as of the date of grant,
    the number of Shares which may be issued under the Plan without
    additional stockholder approval, such Award shall be void with
    respect to such excess Shares, unless stockholder approval of an
    amendment sufficiently increasing the number of Shares subject
    to the Plan is timely obtained in accordance with Applicable Law
    and Section 16(b) of the Plan.

 

    Section 18.  General
    Provisions.

 

    (a) Term of Plan.  This Plan shall become
    effective upon its approval by the stockholders of the Company
    (“Effective Date”), subject to the approval of the
    Company’s stockholders on or before the first anniversary
    of the

    

    12

 

    date of its adoption by the Board. Such stockholder approval
    shall be obtained in the manner and to the degree required under
    Applicable Laws and the rules of any stock exchange upon which
    the Common Stock is listed. It shall continue in effect for a
    term of ten (10) years unless terminated earlier under
    Section 16 of the Plan.

 

    (b) No Contract of Employment.  Neither
    the Plan nor any Award hereunder shall confer upon an individual
    any right with respect to continuing such individual’s
    employment relationship with the Company, nor shall they
    interfere in any way with such individual’s right or the
    Company’s right to terminate such employment relationship
    at any time, with or without cause.

 

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

 

    (d) Governing Law.  The Plan and all
    Awards made and actions thereunder shall be governed by and
    construed in accordance with the laws of the state of Delaware.

 

    (e) Dividends.  The reinvestment of
    dividends in additional Restricted Stock at the time of any
    dividend payment shall be permissible only if sufficient shares
    of Common Stock are available under the Plan for such
    reinvestment (taking into account then outstanding Options and
    other Awards).

 

    (f) Prohibition on Loans to
    Participants.  The Company shall not lend funds to
    any Participant for the purpose of paying the exercise or base
    price associated with any Award or for the purpose of paying any
    taxes associated with the exercise or vesting of an Award.

 

    (g) Performance-Based Compensation.  The
    Committee may designate any Award as “performance-based
    compensation” for purposes of Section 162(m) of the
    Code. Accordingly, in the case of such Awards, the Plan shall be
    administered and the provisions of the Plan or any related Award
    Agreement shall be interpreted in a manner consistent with
    Section 162(m) of the Code. Any Awards designated as
    “performance-based compensation” shall be conditioned
    on the achievement of objective tests based on one or more of
    the following performance measures as determined by the
    Committee:

 

    (i) earnings;

 

    (ii) operating profits (including measures of earnings
    before interest, taxes, depreciation and amortization
    (“EBITDA”), or adjusted EBITDA);

 

    (iii) free cash flow or adjusted free cash flow;

 

    (iv) cash from operating activities;

 

    (v) revenues;

 

    (vi) financial return ratios;

 

    (vii) market performance;

 

    (viii) stockholder return
    and/or value;

 

    (ix) net profits;

 

    (x) earnings per share;

 

    (xi) profit returns and margins;

 

    (xii) stock price;

 

    (xiii) working capital;

 

    (xiv) capital investments;

 

    (xv) returns on capital investments;

 

    (xvi) discounted cash flows; and

    

    13

 

    (xvii) changes between years or periods that are determined
    with respect to any of the above-listed performance criteria.

 

    Performance criteria may be measured solely on a Company,
    Subsidiary or business unit basis, on specific capital projects
    or groups of projects or a combination thereof. Further,
    performance criteria may reflect absolute entity performance or
    a relative comparison of entity performance to the performance
    of a peer group of entities or other external measure of the
    selected performance criteria. The measure for any such award
    may include or exclude items to retain the intents and purposes
    of specific objectives, such as losses from discontinued
    operations, extraordinary gains or losses, the cumulative effect
    of accounting changes, acquisitions or divestitures, foreign
    exchange impacts, acceleration of payments, costs of capital
    invested, discount factors, and any unusual or nonrecurring gain
    or loss. In order to qualify as performance-based under
    Section 162(m), the performance criteria will be
    established before 25% of the performance period has elapsed and
    will not be subject to change (although future awards may be
    based on different performance criteria). The performance
    periods may extend over one to five calendar years, and may
    overlap one another, although no two performance periods may
    consist solely of the same calendar years.

 

    (h) Unfunded Status of Plan.  It is
    intended that the Plan constitute an “unfunded” plan
    for incentive and deferred compensation. The Committee may
    authorize the creation of trusts or other arrangements to meet
    the obligations created under the Plan to deliver Common Stock
    or make payment; provided, however, that, unless the
    Committee otherwise determines, the existence of such trusts or
    other arrangements is consistent with the “unfunded”
    status of the Plan.

 

    (i) Liability of Committee
    Members.  Except as provided under Applicable Law,
    no member of the Board or the Committee will be liable for any
    action or determination made in good faith by the Board or the
    Committee with respect to the Plan or any Award under it.
    Neither the Company, the Board of Directors nor the Committee,
    nor any Subsidiary or Affiliate, nor any directors, officers or
    employees thereof, shall be liable to any Participant or other
    person if it is determined for any reason by the Internal
    Revenue Service or any court that an Incentive Stock Option
    granted hereunder does not qualify for tax treatment as an
    “incentive stock option” under Section 422 of the
    Code.

    

    14EX-10.6.2

EXHIBIT 10.6.2

FOURTH AMENDMENT TO

SERVICE AGREEMENT

     This Fourth Amendment (the “Fourth Amendment”) dated as of April 1, 2009 (the “Effective
Date”), by and between VENTIV COMMERCIAL SERVICES, LLC, a New Jersey limited liability company
(“Ventiv”) and CUMBERLAND PHARMACEUTICALS, INC., a Tennessee corporation (“Client”). Ventiv and
Client may each be referred to herein as a “Party” and collectively, the “Parties”.

WITNESSETH:

     WHEREAS, Ventiv, as successor in interest to Cardinal Health PTS, LLC, and Client are
parties to that certain Contract Sales and Service Agreement dated as of May 16, 2006, as
amended, by that First Amendment to Contract Sales and Service Agreement dated as of July 19,
2006, a Second Amendment to Contract Sales and Service Agreement dated as of June 1, 2007, and a
Third Amendment to Contract Sales and Service Agreement dated as of March 26, 2008
(collectively, the “Service Agreement”).

     WHEREAS, Ventiv and Client desire to supplement and amend the Service Agreement as set
forth herein.

     NOW THEREFORE, in consideration of the premises and other good and valuable consideration,
the receipt and adequacy of which is hereby acknowledged, it is agreed as follows:

     1. Except as provided in this Fourth Amendment, the terms and conditions set forth in the
Service Agreement shall remain unaffected by execution of this Fourth Amendment. To the extent any
provisions or terms set forth in this Fourth Amendment conflict with the terms set forth in the
Service Agreement, the terms set forth in this Fourth Amendment shall govern and control. Terms not
otherwise defined herein, shall have the meanings set forth in the Service Agreement.

 

 

     2. Commencing on the Effective Date, the total number of Representatives providing services on
Client’s behalf is reduced from thirty-eight (38) to thirty-two (32). The total number of Managers
shall remain at four (4).

     3. Commencing on the Effective Date, Section I (Fixed Fees) of Schedule 3.1 (Compensation -
Implementation Fees, Fixed Fees and Pass-Through Costs and Billing Terms) is amended to provide for
Client to pay Ventiv a fixed monthly fee as follows:

	 	 	 	 	 
	PERIOD	 	FIXED MONTHLY FEE	 
	 
	 	 	 	 
	The Effective Date through March 31, 2010
	 	$	392,595	 

     4. This Fourth Amendment may be executed simultaneously in multiple counterparts, each of
which shall be deemed an original, but all of which taken together shall constitute one and the
same instrument. Execution and delivery of this Fourth Amendment by exchange of facsimile copies
bearing the facsimile signature of a party hereto shall constitute a valid and binding execution
and delivery of this Fourth Amendment by such party. Such facsimile copies shall constitute
enforceable original documents.

     5. The terms of this Fourth Amendment are intended by the Parties to be the final expression
of their agreement with respect to the subject matter hereof and may not be contradicted by
evidence of any prior or contemporaneous agreement. The Parties further intend that this Fourth
Amendment constitute the complete and exclusive statement of its terms and shall supersede any
prior agreement with respect to the subject matter hereof.

2

 

     WHEREFORE, the Parties hereto have caused this Fourth Amendment to be executed by their duly
authorized representatives.

	 	 	 	 	 
	 	 	VENTIV COMMERCIAL SERVICES, LLC
	 
	 	 	 	 
	 

	 	By:
	 	/s/ Paul Mignon
	 

	 	 	 	 
	 

	 	Name:
	 	Paul Mignon
	 

	 	Title:
	 	President, inVentiv Selling Solutions
	 
	 	 	 	 
	 	 	CUMBERLAND PHARMACEUTICALS, INC.
	 
	 	 	 	 
	 

	 	By:
	 	/s/ A.J. Kazimi
	 

	 	 	 	 
	 

	 	Name:
	 	A.J. Kazimi
	 

	 	Title:
	 	Chief Executive Officer

3

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