Document:

exv10w1

 

EXHIBIT 10.1

DANIELSON HOLDING CORPORATION

EQUITY AWARD PLAN FOR EMPLOYEES AND OFFICERS

 

 

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”	 	 	2	 
	(i)
	 	“Committee”	 	 	2	 
	(j)
	 	“Common Stock”	 	 	2	 
	(k)
	 	“Company”	 	 	2	 
	(l)
	 	“Director”	 	 	2	 
	(m)
	 	“Disability”	 	 	2	 
	(n)
	 	“Effective Date”	 	 	2	 
	(o)
	 	“Employee”	 	 	2	 
	(p)
	 	“Exchange Act”	 	 	2	 
	(q)
	 	“Fair Market Value”	 	 	2	 
	(r)
	 	“Incentive Stock Option”	 	 	3	 
	(s)
	 	“Mature Shares”	 	 	3	 
	(t)
	 	“Non-Qualified Stock Option”	 	 	3	 
	(u)
	 	“Officer”	 	 	3	 
	(v)
	 	“Option”	 	 	3	 
	(w)
	 	“Participant”	 	 	3	 
	(x)
	 	“Performance Award”	 	 	3	 
	(y)
	 	“Plan”	 	 	3	 
	(z)
	 	“Recipient”	 	 	3	 
	(aa)
	 	“Restricted Stock”	 	 	3	 
	(bb)
	 	“Retirement”	 	 	3	 
	(cc)
	 	“Service Provider”	 	 	4	 
	(dd)
	 	“Stock Appreciation Right”	 	 	4	 
	(ee)
	 	Share	 	 	4	 
	(ff)
	 	“Subsidiary”	 	 	4	 
	SECTION 2.
	 	Stock Subject to the Plan	 	 	4	 
	SECTION 3.
	 	Administration of the Plan	 	 	5	 

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TABLE OF CONTENTS

(Continued)

	 	 	 	 	 	 	 
	 	 	 	 	Page
	(a)
	 	Administration	 	 	5	 
	(b)
	 	Powers of the Committee	 	 	5	 
	SECTION 4.
	 	Eligibility for Awards	 	 	5	 
	SECTION 5.
	 	Limitations on Options	 	 	6	 
	SECTION 6.
	 	Term of Plan	 	 	6	 
	SECTION 7.
	 	Term of Option	 	 	6	 
	SECTION 8.
	 	Option Exercise Price and Consideration	 	 	6	 
	(a)
	 	Exercise Price	 	 	6	 
	(b)
	 	Waiting Period and Exercise Dates	 	 	7	 
	(c)
	 	Form of Consideration	 	 	7	 
	SECTION 9.
	 	Exercise of Option	 	 	8	 
	(a)
	 	Procedure for Exercise; Rights as a Stockholder	 	 	8	 
	(b)
	 	Termination of Relationship as Employee or Officer	 	 	8	 
	(c)
	 	Disability of Recipient	 	 	9	 
	(d)
	 	Death of Recipient	 	 	9	 
	(e)
	 	Retirement of Recipient	 	 	10	 
	(f)
	 	Cash out Provisions	 	 	10	 
	SECTION 10.
	 	Restricted Stock	 	 	11	 
	(a)
	 	Awards of Restricted Stock	 	 	11	 
	(b)
	 	Awards and Certificates	 	 	11	 
	(c)
	 	Terms and Conditions	 	 	12	 
	(d)
	 	Other Provisions	 	 	13	 
	SECTION 11.
	 	Deferral of Stock Award	 	 	13	 
	SECTION 12.
	 	Other Awards	 	 	13	 
	(a)
	 	Stock Appreciation Right	 	 	13	 
	(b)
	 	Performance Award	 	 	14	 
	(c)
	 	Other Stock-Based Awards	 	 	14	 
	SECTION 13.
	 	Non-Transferability of Awards	 	 	14	 
	SECTION 14.
	 	Adjustments Upon Changes in Capitalization	 	 	15	 
	SECTION 15.
	 	Date of Grant	 	 	15	 
	SECTION 16.
	 	Term; Amendment and Termination of the Plan	 	 	15	 
	(a)
	 	Amendment and Termination	 	 	15	 
	(b)
	 	Stockholder Approval	 	 	16	 
	(c)
	 	Effect of Amendment or Termination	 	 	16	 
	SECTION 17.
	 	Conditions Upon Issuance of Shares	 	 	16	 

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TABLE OF CONTENTS

(Continued)

	 	 	 	 	 	 	 
	 	 	 	 	Page
	(a)
	 	Legal Compliance	 	 	16	 
	(b)
	 	Withholding Obligations	 	 	16	 
	(c)
	 	Inability to Obtain Authority	 	 	16	 
	(d)
	 	Grants Exceeding Allotted Shares	 	 	17	 
	SECTION 18.
	 	General Provisions	 	 	17	 
	(a)
	 	Term of Plan	 	 	17	 
	(b)
	 	No Contract of Employment	 	 	17	 
	(c)
	 	Severability	 	 	17	 
	(d)
	 	Governing Law	 	 	17	 
	(e)
	 	Dividends	 	 	17	 
	(f)
	 	Prohibition on Loans to Participants	 	 	17	 
	(g)
	 	Performance-Based Compensation	 	 	17	 
	(h)
	 	Unfunded Status of Plan	 	 	18	 
	(i)
	 	Liability of Committee Members	 	 	18	 

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DANIELSON 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 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 Danielson 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.

     (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:

	(A)	 	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;
	 
	(B)	 	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;
	 
	(C)	 	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 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) “Plan” means this Equity Award Plan.

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

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

     (bb) “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.

     (cc) “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.

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

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

     (ff) “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 4,000,000
Shares. The maximum aggregate number of Incentive Stock Options that may be
issued under the Plan is 4,000,000. 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 300,000
Shares. 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,

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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.

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)
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

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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:

	(A)	 	In the case of an Incentive Stock Option

	(i)	 	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
	 
	(ii)	 	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.

	(B)	 	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:

	(A)	 	cash (in the form of a certified or bank check or such other
instrument as the Company may accept);
	 
	(B)	 	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 forfeiture restrictions
to which such Restricted Stock was subject, unless otherwise
determined by the Committee;
	 
	(C)	 	any combination of (i) and (ii) above;
	 
	(D)	 	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
	 
	(E)	 	such other consideration and method of payment for the
issuance of Shares to the extent permitted by the Committee and
Applicable Laws.

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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. Except as
otherwise authorized by the Committee, 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 determined by the
Committee, 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.

     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. Except as otherwise authorized by the
Committee, 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

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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 determined by the Committee or specified 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. Except as otherwise authorized by the Committee,
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.

	(A)	 	Non-Qualified Stock Options. Except as otherwise authorized
by the Committee, 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 determined by the Committee, 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.
	 
	(B)	 	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 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.

-7-

 

     (f) Cash out Provisions. On receipt of written notice of exercise, 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.

     (a) Awards of Restricted Stock. Shares of Restricted Stock 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 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 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 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 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 Danielson 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 Danielson 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 shall be subject to
the following terms and conditions:

	(A)	 	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 Recipient shall not be permitted to sell, assign,
transfer, pledge or otherwise encumber Shares of Restricted Stock
(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 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

-8-

 

	 	 	number of Shares that a Recipient may receive in any twelve
(12)-month period in an Award of Restricted Stock.
	 
	(B)	 	Rights. 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.
	 
	(C)	 	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 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 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.

   (b) An election to defer pursuant to (a) above with respect to Shares of
Restricted Stock issuable in a calendar year must be made on or prior to
December 31st of the year that precedes the year in which such Restricted Stock
would otherwise be issued. Notwithstanding the foregoing, an Employee or
Officer may make an election to defer pursuant to this Section 11 no later than
30 days after the Effective Date, for the year in which the Employees Plan is
first effective, or, if later, within 30 days after the date the Employee or
Officer first becomes eligible to participate.

   (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.

-9-

 

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”). The Spread with
respect to a stock appreciation right may 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) 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

-10-

 

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.

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,
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,

-11-

 

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 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.
Any Awards designated as “performance-based compensation” shall be conditioned
on the achievement of one or more performance measures, and the measurement may
be stated in absolute terms or relative to comparable companies.

     (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

-12-

 

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.

-13-exv10w2

 

Exhibit 10.2

DANIELSON HOLDING CORPORATION

RESTRICTED STOCK AWARD AGREEMENT

     THIS AGREEMENT is made and entered into as of this 5th day of October,
2004 (the “Grant Date”) by and between Danielson Holding Corporation, a
Delaware corporation (the “Company”), and                 (the
“Employee”), pursuant to the Danielson Holding Corporation 2005 Equity Award
Plan for Employees and Officer (the “Plan”). This Agreement and the award
contained herein is subject to the terms and conditions set forth in the Plan,
which are incorporated by reference herein, and the following terms and
conditions:

     1. Award of Restricted Stock. In consideration for the prior and
continued service of Employee to Covanta Energy Corporation (“Covanta”), a
wholly-owned subsidiary of the Company, and as part of the Long-Term Incentive
Program of Covanta, as adopted by the Company, the Company hereby awards to the
Employee, subject to the further terms and conditions set forth in this
Agreement,           shares (the “Restricted Stock”) of its common stock,
$0.10 par value per share (the “Common Stock”), as of the Grant Date.

     2. Rights of Stockholder. Employee shall have all of the rights of a
stockholder with respect to the shares of Restricted Stock (including the right
to vote the shares of Restricted Stock and the right to receive dividends with
respect to the shares of Restricted Stock), except as provided in Section 3 and
Section 6 hereof.

     3. Restrictions on Transfer. Except as otherwise provided in this
Agreement, Employee may not sell, transfer, assign, pledge, encumber or
otherwise dispose of any of the shares of Restricted Stock or the rights
granted hereunder (any such disposition or encumbrance being referred to herein
as a “Transfer”). Any Transfer or purported Transfer by Employee of any of the
shares of Restricted Stock shall be null and void and the Company shall not
recognize or give effect to such Transfer on its books and records or recognize
the person to whom such purported Transfer has been made as the legal or
beneficial holder of such shares. The shares of Restricted Stock shall not be
subject to sale, execution, pledge, attachment, encumbrance or other process
and no person shall be entitled to exercise any rights of Employee as the
holder of such Restricted Stock by virtue of any attempted execution,
attachment or other process until the restrictions imposed herein on the
Transfer of the shares of Restricted Stock shall lapse as provided in Section 4
hereof. All certificates representing the shares of Restricted Stock shall
have endorsed thereon the following legend (in addition to any other legends
that are customary or required on certificates representing shares of the
Company’s Common Stock):

     “THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO
RESTRICTIONS ON TRANSFER AND OTHER TERMS AND CONDITIONS (INCLUDING
FORFEITURE) SET FORTH IN A RESTRICTED STOCK AWARD AGREEMENT DATED
AS OF OCTOBER 5, 2004, BETWEEN THE COMPANY AND THE REGISTERED
HOLDER, A COPY OF WHICH IS ON FILE AT THE PRINCIPAL OFFICE OF THE

 

 

COMPANY. ANY TRANSFER OR PURPORTED TRANSFER OF THE SHARES
REPRESENTED BY THIS CERTIFICATE IN VIOLATION OF SUCH RESTRICTED
STOCK AWARD AGREEMENT SHALL BE NULL AND VOID.”

     If and when the restrictions imposed herein on the transfer of shares of
Restricted Stock shall have lapsed as provided in Section 4 hereof,
certificates for such shares without the restricted stock legend set forth in
this section shall be delivered to the Employee. Until such restrictions have
lapsed, any certificates representing any shares of Restricted Stock shall be
held in custody by the Company, and the Employee shall, as a condition of any
award of Restricted Stock, have delivered a stock power, endorsed in blank,
relating to the Common Stock covered by such award. Employee may request the
removal of such restricted stock legend from certificates representing any
shares of Restricted Stock as to which the restrictions imposed herein on the
transfer thereof shall have lapsed as provided in Section 4 hereof. Such
request shall be in writing to the General Counsel of the Company.

     4. Lapse of Restrictions and Forfeiture. Subject to Section 4(c) hereof,
the restrictions on transfer imposed on the shares of Restricted Stock by this
Section 4 shall lapse with respect to the shares of Restricted Stock and the
Employee will vest, or gain actual “ownership” of the shares of Restricted
Stock in accordance with the terms of Section 4(a) hereof.

	 	(a)	 	Restricted Stock Time Vesting. One-half of the shares of Restricted
Stock awarded hereunder, consisting of           shares (“Time Vesting
Restricted Stock”), shall vest as of the dates and in the amounts set forth
below provided that Employee is employed on such date by the Company or its
Affiliates or Subsidiaries:

	 	A.	 	          shares and representing one-third of the Time
Vesting Restricted Stock, shall vest on February 28, 2005;
	 
	 	B.	 	          shares and representing one-third of the Time
Vesting Restricted Stock, shall vest on February 28, 2006; and
	 
	 	C.	 	          shares and representing one-third of the Time
Vesting Restricted Stock, shall vest on February 28, 2007.

	 	(b)	 	Restricted Stock Performance Vesting. One-half of the shares of
Restricted Stock awarded hereunder, consisting of           shares
(“Performance Vesting Restricted Stock”), shall vest as of the dates and in the
amounts set forth below:

	 	A.	 	First Tranche Amount. The “First Tranche Amount” consisting of
          shares and representing one-third of the Performance
Vesting Restricted Stock, shall vest on February 28, 2005 pursuant to the
satisfaction of the applicable performance based metric of operating
cashflow of the Covanta as set forth in the Covanta 2004 Cash Bonus Plan.

 

 

	 	B.	 	Second Tranche Amount. The “Second Tranche Amount” consisting of
          shares and representing one-third of the Performance
Vesting Restricted Stock, shall vest on February 28, 2006 pursuant to the
satisfaction of the applicable performance criteria and schedule
determined by the Board of Directors of the Company (the “Board”) or the
Compensation Committee of the Company’s Board of Directors (“Compensation
Committee”); provided, however, that if the Board or Compensation
Committee does not establish new criteria, then the performance criteria
and schedule for awarding bonuses under the Covanta 2005 Cash Bonus Plan
shall apply; and
	 
	 	C.	 	Third Tranche Amount. The “Third Tranche Amount” consisting of
          shares and representing one-third of the Performance
Vesting Restricted Stock, shall vest on February 28, 2007 pursuant to the
satisfaction of the applicable performance criteria and schedule
determined by the Board or Compensation Committee; provided, however,
that if the Board or Compensation Committee does not establish new
criteria, then the performance criteria and schedule for awarding bonuses
under the Covanta 2006 Cash Bonus Plan shall apply.
	 
	 	D.	 	Forfeiture of Unearned Restricted Stock. In the event that any
shares of Performance Vesting Restricted Stock do not vest pursuant to
any of Subsection A, B or C of this Section 4(b), then such Performance
Vesting Restricted Stock shall be forfeited and cancelled as of such
date.

	 	(c)	 	Notwithstanding anything to the contrary in Section 4(a), in the event
that prior to the lapse of restrictions on transfer pursuant to Section 4(a),
Employee’s employment with all of the Company, its Affiliates and Subsidiaries
is terminated for any reason other than death or Disability, Employee shall
forfeit, on the date on which his employment is terminated, all of the shares
of Restricted Stock as to which the restrictions on transfer imposed thereon by
Section 3 hereof shall not have lapsed prior to such date.
	 
	 	(d)	 	Notwithstanding anything to the contrary in Sections 4(a) or (b)
hereof, in the event of a Change in Control, the restrictions on transfer
imposed by Section 3 on the shares of Restricted Stock shall lapse. For
purposes of this Agreement, a “Change in Control” shall mean the occurrence of
any of the following events, each of which shall be determined independently of
the others: (i) any “Person” (as hereinafter defined), other than a holder of
at least 10% of the outstanding voting power of the Company as of the date of
this Agreement, becomes a “beneficial owner” (as such term is used in Rule
13d-3 promulgated under the Securities Exchange Act of 1934, as amended (the
“Exchange Act”)) of a majority of the stock of the Company entitled to vote in
the election of directors of the Company; (ii) individuals who are Continuing
Directors of the Company (as hereinafter defined) cease to constitute a
majority of the members of the Board; (iii) stockholders of the Company adopt
and consummate a plan of complete or substantial liquidation or an agreement
providing for the distribution of all or substantially all of the assets of the
Company; (iv) the Company is a party to a merger, consolidation, other form of
business combination or a sale of all or substantially all of its assets, with
an unaffiliated third party, unless the business of the Company following
consummation of such merger, consolidation or other business combination is
continued following any such transaction by a resulting entity (which may be,
but need not be, the Company) and the

 

 

stockholders of the Company immediately
prior to such transaction hold, directly or indirectly, at least a majority of
the voting power of the resulting entity; provided, however, that a merger or
consolidation effected to implement a recapitalization of the Company (or
similar transaction) shall not constitute a Change in Control; (v) there is a
Change in Control of the Company of a nature that is reported in response to
item 5.01 of Current Report on Form 8-K or any similar item, schedule or form
under the Exchange Act, as in effect at the time of the change, whether or not
the Company is then subject to such reporting requirements; provided, however,
that for purposes of this Agreement a Change in Control shall not be deemed to
occur if the Person or Persons deemed to have acquired control is a holder of
at least 10% of the outstanding Voting Power of the Company as of the date of
this Agreement; or (vi) the Company consummates a transaction which constitutes
a “Rule 13e-3 transaction” (as such term is defined in Rule 13e-3 of the
Exchange Act) prior to the termination or expiration of this Agreement.

	 	(e)	 	In the event of a Rule 13e-3 transaction, then effective coincident
with the consummation of such Rule 13e-3 transaction, the restrictions on
transfer imposed by Section 3 on the shares of Restricted Stock shall lapse;
provided, however, that notwithstanding the foregoing, in connection with the
consummation of such Change in Control or Rule 13e-3 transaction, all such
unvested shares of Restricted Stock then held by Employee shall be deemed to
vest and become exercisable at such time in order to permit Employee to
participate in such transaction.
	 
	 	(f)	 	In the event that Employee is an employee of Covanta, then the
references to the Company in Section 4(d)(i), (iii), (iv), (v) and (vi) above
shall also include, in the alternative, Covanta.
	 
	 	(g)	 	For purposes of this Section 4, “Continuing Directors” shall mean the
members of the Board on the date of execution of this Agreement, provided that
any person becoming a member of the Board subsequent to such date whose
election or nomination for election was supported by at least a majority of the
directors who then comprised the Continuing Directors shall be considered to be
a Continuing Director; and the term “Person” is used as such term is used
Sections 13(d) and 14(d) of the Exchange Act.

     5. Transferability. Notwithstanding anything contained in this Agreement
to the contrary, shares of Restricted Stock are not transferable or assignable
by the Employee until the restrictions thereon have lapsed.

     6. Adjustment Provisions. If, during the term of this Agreement, there
shall be any merger, reorganization, consolidation, recapitalization, stock
dividend, stock split, rights offering or extraordinary distribution with
respect to the Common Stock, or other change in corporate structure affecting
the Common Stock, the Committee shall make or cause to be made an appropriate
and equitable substitution, adjustment or treatment with respect to the
Restricted Stock, including a substitution or adjustment in the aggregate
number or kind of shares subject to this Agreement, notwithstanding that the
Restricted Stock are subject to the restrictions on transfer imposed by Section
3 above. Any securities, awards or rights issued pursuant to this Section 6
shall be subject to the same restrictions as the underlying Restricted Stock to
which they relate.

 

 

     7. Tax Withholding. As a condition precedent to the receipt of any shares
of Restricted Stock hereunder, Employee agrees to pay to the Company, at such
times as the Company shall determine, such amounts as the Company shall deem
necessary to satisfy any withholding taxes due on income that Employee
recognizes as a result of (i) the lapse of the restrictions imposed by Section
3 hereof on the shares of Restricted Stock or (ii) Employee’s filing of an
election pursuant to Section 83(b) of the Internal Revenue Code of 1986 (the
“Code”), as amended, with respect to the shares of Restricted Stock. The
obligations of the Company under this Agreement and the Plan shall be
conditional on such payment or arrangements, and the Company, its Affiliates
and Subsidiaries shall, to the extent permitted by law, have the right to
deduct any such taxes from any payment otherwise due to the Employee.

     8. Registration. This grant is subject to the condition that if at any
time the Board or Compensation Committee shall determine, in its discretion,
that the listing of the shares of Common Stock subject hereto on any securities
exchange, or the registration or qualification of such shares under any federal
or state law, or the consent or approval of any regulatory body, shall be
necessary or desirable as a condition of, or in connection with, the grant,
receipt or delivery of shares hereunder, such grant, receipt or delivery will
not be effected unless and until such listing, registration, qualification,
consent or approval shall have been effected or obtained free of any conditions
not acceptable to the Board or Compensation Committee. The Company agrees to
make every reasonable effort to effect or obtain any such listing,
registration, qualification, consent or approval.

     9. Rights of Employee. In no event shall the granting of the Restricted
Stock or the other provisions hereof or the acceptance of the Restricted Stock
by Employee interfere with or limit in any way the right of the Company, an
Affiliate or Subsidiary to terminate Employee’s employment at any time, nor
confer upon Employee any right to continue in the employ of the Company, an
Affiliate or Subsidiary for any period of time or to continue his or her
present or any other rate of compensation.

     10. Construction.

	 	(a)	 	Successors. This Agreement and all the terms and provisions
hereof shall be binding upon and shall inure to the benefit of the
parties hereto and their respective legal representatives, heirs and
successors, except as expressly herein otherwise provided.
	 
	 	(b)	 	Entire Agreement; Modification. This Agreement contains the
entire understanding between the parties with respect to the matters
referred to herein. Subject to Section 16(c) of the Plan, this Agreement
may be amended by the Board or Compensation Committee at any time.
	 
	 	(c)	 	Capitalized Terms; Headings; Pronouns; Governing Law.
Capitalized terms used and not otherwise defined herein are deemed to
have the same meanings as in the Plan. The descriptive headings of the
respective sections and subsections of this Agreement are inserted for
convenience of reference only and shall not be deemed to modify or
construe the provisions which follow them. Any use of any masculine
pronoun shall include the feminine and vice-versa and any use of a
singular, the plural

 

 

and vice-versa, as the context and facts may
require. The construction and interpretation of this Agreement shall be
governed in all respects by the laws of the State of Delaware.

	 	(d)	 	Notices. Each notice relating to this Agreement shall be in
writing and shall be sufficiently given if delivered by registered or
certified mail, or by a nationally recognized overnight delivery service,
with postage or charges prepaid, to the address hereinafter provided in
this Section 10. Any such notice or communication given by first-class
mail shall be deemed to have been given two business days after the date
so mailed, and such notice or communication given by overnight delivery
service shall be deemed to have been given one business day after the
date so sent, provided such notice or communication arrives at its
destination. Each notice to the Company shall be addressed to it at its
offices at 40 Lane Road, Fairfield, New Jersey 07004 (attention: Chief
Financial Officer), with a copy to the Secretary of the Company or to
such other designee of the Company. Each notice to the Employee shall be
addressed to the Employee at the Employee’s address shown on the
signature page hereof.
	 
	 	(e)	 	Severability. Whenever possible, each provision of this
Agreement shall be interpreted in such manner as to be effective and
valid under applicable law, but if any provision of this Agreement or the
application thereof to any party or circumstance shall be prohibited by
or invalid under applicable law, such provision shall be ineffective to
the minimal extent of such provision or the remaining provisions of this
Agreement or the application of such provision to other parties or
circumstances.
	 
	 	(f)	 	Counterpart Execution. This Agreement may be executed in
counterparts, each of which shall constitute an original and all of
which, when taken together, shall constitute the entire document.
	 
	 	 	 	 

	 	 	 	 	 
	 	DANIELSON HOLDING CORPORATION

 	 
	 
	 	By:  	 	 
	 	 	 	 
	 	Title:  	 	 
	 	 	 	 
	 

 

Accepted this            day of

                              , 2004.

 

 

EMPLOYEE’S ADDRESS:

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