Document:

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                                                                   EXHIBIT 10.28

                                 ORGANIC, INC.

                       1999 LONG-TERM STOCK INCENTIVE PLAN

                       NONQUALIFIED STOCK OPTION AGREEMENT

      THIS AGREEMENT, entered into as of the Grant Date (as defined in paragraph
1), by and between the Participant and Organic, Inc. (the "Company"),

                                   WITNESSETH:

      WHEREAS, the Company maintains the Organic, Inc. 1999 Long-Term Stock
Incentive Plan (the "Plan"), which is incorporated into and forms a part of this
Agreement; and

      WHEREAS, the Company and the Participant have previously entered into a
Nonqualified Stock Option Agreement with a grant date of February 7, 2001 (the
"Former Option Agreement"), pursuant to which the Participant was issued
2,250,000 shares of Stock; and

      WHEREAS, the Company and the Participant have entered into an amended
Employment Agreement, pursuant to which the shares covered by the Former Option
Agreement shall be canceled, the Former Option Agreement terminated and new
nonqualified stock options issued hereunder; and

      WHEREAS, the amended Employment Agreement and the grant of options
hereunder were approved by the Board of Directors as of June 20, 2001:

      NOW, THEREFORE, IT IS AGREED, by and between the Company and the
Participant, as follows:

      1.  Terms of Award. The following terms used in this Agreement shall have
the meanings set forth in this paragraph 1:

          (a) The "Participant" is Mark Kingdon.

          (b) The "Grant Date" is June 20, 2001.

          (c) The number of "Covered Shares" shall be 2,500,000 shares of Stock.

          (d) The "Exercise Price" is $0.26 per share.

Other terms used in this Agreement are defined pursuant to paragraph 10 or
elsewhere in this Agreement.

      2.  Award and Exercise Price. This Agreement specifies the terms of the
option (the "Option") granted to the Participant to purchase the number of
Covered Shares of Stock at the

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Exercise Price per share as set forth in paragraph 1. The Option is not intended
to constitute an "incentive stock option" as that term is used in Code section
422.

      3.  Vesting and Exercise.

          (a) Subject to the limitations of this Agreement, and unless the
Participant chooses to exercise the Option prior to vesting pursuant to
paragraph 4, the Option shall become exercisable with respect to one-fourth
(1/4) of the Covered Shares on January 15, 2002 (but only if the Date of
Termination has not occurred before such date) and with respect to
one--forty-eighth (1/48) of the Covered Shares on the 15th day of each month
thereafter, continuing until such time as the option is fully exercisable (but
only if the Date of Termination has not occurred before the respective vesting
dates).

          (b) Covered Shares as to which the Option is exercisable in accordance
with this paragraph 3 (regardless of whether the Option has been exercised with
respect to those shares) are sometimes referred to as "vested shares," and
Covered Shares as to which the Option is not exercisable in accordance with this
paragraph 3, until such time as the Option would have become exercisable with
respect to those shares (regardless of whether the Option has been exercised
with respect to those shares in accordance with paragraph 4) are sometimes
referred to as "unvested shares."

          (c) If the Participant is employed by the Company or an Affiliate at
the time of a Change in Control and the Participant is offered a position with
comparable responsibilities and compensation, the Participant shall become
vested in all unvested options held by the Participant at the date of the Change
in Control. If the Participant is employed by the Company or an Affiliate at the
time of a Change in Control and the Participant is not offered a position with
comparable responsibilities and compensation, the Participant shall become
vested in all unvested options held by the Participant at the date of the Change
in Control. The acceleration of vesting as provided in this paragraph shall
similarly apply to the vesting of unvested shares purchased by the Participant
under the Option.

          (d) If the Participant is terminated by the Company at any time after
the Grant Date for reasons other than Cause (as defined in his employment letter
agreement), the Participant shall be credited with 6 months of additional
vesting service for purposes of (i) the vesting of Options, and (ii) the vesting
of unvested shares purchased by the Participant under an Option.

          (e) Notwithstanding the foregoing provisions of this paragraph 3, the
Option shall become fully vested and exercisable immediately prior to the Date
of Termination, if the Date of Termination occurs by reason of the Participant's
death or Disability. The Option may be exercised on or after the Date of
Termination only as to that portion of the Covered Shares for which it was
exercisable (or became exercisable) immediately prior to the Date of
Termination.

          (f) The Participant acknowledges that the option to purchase shares
granted to the Participant pursuant to the Former Option Agreement will be
canceled by the Company upon the execution of this Agreement. Any attempt by the
Participant to exercise the right to purchase

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shares under the Former Option Agreement shall immediately terminate this
Agreement and the option to purchase Covered Shares hereunder.

      4.  Exercise Prior to Vesting. Subject to the provisions of the Option,
the Participant may elect, at any time prior to his Termination Date, to
exercise the Option as to any part or all of the Covered Shares subject to this
Option at any time prior to the Expiration Date, including, without limitation,
a time prior to the date on which the Option would otherwise be exercisable in
accordance with paragraph 3; provided, however, that:

          (a) A partial exercise of the Option shall be deemed to cover first
vested shares and then the earliest vesting installment of unvested shares.

          (b) Subject to Section 3, any shares so purchased from installments
which have not vested as of the date of exercise shall be subject to the
purchase option in favor of the Company as described in the Early Exercise Stock
Purchase Agreement.

          (c) The Participant shall be required to enter into an Early Exercise
Stock Purchase Agreement in the form provided by the Company with a vesting
schedule that will result in the same vesting as if no early exercise had
occurred.

      The election provided in this paragraph 4 to purchase shares upon the
exercise of the Option prior to the Vesting Date shall cease upon the
Participant's Termination Date.

      5.  Expiration. The Option shall not be exercisable after the Company's
close of business on the last business day that occurs prior to the Expiration
Date. The "Expiration Date" shall be earliest to occur of:

          (a) the ten-year anniversary of the Grant Date;

          (b) if the Date of Termination occurs by reason of death, Disability
or Retirement, the one-year anniversary of such Date of Termination; or

          (c) if the Date of Termination occurs for reasons other than death,
Disability, or Retirement, the 180-day anniversary of such Date of Termination.

      6.  Method of Option Exercise. Subject to the terms of this Agreement and
the Plan, the Option may be exercised in whole or in part by filing a written
notice with the Secretary of the Company at its corporate headquarters prior to
the Company's close of business on the last business day that occurs prior to
the Expiration Date or by such other means as the Secretary shall from time to
time establish. Such notice shall specify the number of shares of Stock which
the Participant elects to purchase, and shall be accompanied by payment of the
Exercise Price for such shares of Stock indicated by the Participant's election.
The Option shall not be exercisable if and to the extent the Company determines
that such exercise would violate applicable state or Federal securities laws or
the rules and regulations of any securities exchange on which the Stock is
traded. If the Company makes such a determination, it shall use all reasonable
efforts to obtain compliance with such laws, rules and regulations. In making
any determination hereunder, the Company may rely on the opinion of counsel for
the Company.

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      7.  Payment of Exercise Price. Payment of the Exercise Price may be made
by any of the following methods or any combination thereof,

          (a) By cash or by check payable to the Company or other such party as
the Company may from time to time specify;

          (b) Except as otherwise provided by the Committee before the Option is
exercised and provided that the Company's common stock is publicly traded and
quoted regularly in the Wall Street Journal, by delivery of shares of Stock
owned by the Participant and acceptable to the Committee having an aggregate
Fair Market Value (valued as of the date of exercise) that is equal to the
amount of cash that would otherwise be required; or

          (c) By authorizing a third party to sell shares of Stock (or a
sufficient portion of the shares) acquired upon exercise of the Option and remit
to the Company a sufficient portion of the sale proceeds to pay the entire
Exercise Price and any tax withholding resulting from such exercise.

      8.  Withholding. All deliveries and distributions under this Agreement are
subject to withholding of all applicable taxes. At the election of the
Participant, and subject to such rules and limitations as may be established by
the Committee from time to time, such withholding obligations may be satisfied
through the surrender of shares of Stock which the Participant already owns, or
to which the Participant is otherwise entitled under the Plan.

      9.  Transferability. The Option is not transferable other than as
designated by the Participant by will or by the laws of descent and
distribution, and during the Participant's life, may be exercised only by the
Participant.

      10. Definitions. For purposes of this Agreement, the terms used in this
Agreement shall be subject to the following:

          (a) Change in Control. The term "Change in Control" shall be defined
as that term is defined in the Plan.

          (b) Date of Termination. The "Date of Termination" shall be the first
day occurring on or after the Grant Date on which the Participant is not
employed by the Company or any Subsidiary, regardless of the reason for the
termination of employment; provided that a termination of employment shall not
be deemed to occur by reason of a transfer of the Participant between the
Company and a Subsidiary or between two Subsidiaries; and further provided that
the Participant's employment shall not be considered terminated while the
Participant is on a leave of absence from the Company or a Subsidiary approved
by the Participant's employer. If, as a result of a sale or other transaction,
the Participant's employer ceases to be a Subsidiary (and the Participant's
employer is or becomes an entity that is separate from the Company), and the
Participant is not, at the end of the 30-day period following the transaction,
employed by the Company or an entity that is then a Subsidiary, then the
occurrence of such transaction shall be treated as the Participant's Date of
Termination caused by the Participant being discharged by the employer.

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          (c) Disability. Except as otherwise provided by the Committee, the
Participant shall be considered to have a "Disability" during the period in
which the Participant, after reasonable accommodation, is unable, by reason of a
medically determinable physical or mental impairment, to engage in any
substantial gainful activity, which condition, in the opinion of a physician
selected by the Committee, is expected to have a duration of not less than 120
days.

          (d) Retirement. "Retirement" of the Participant shall mean, with the
approval of the Committee, the occurrence of the Participant's Date of
Termination on or after the date the Participant attains age 55.

          (e) Plan Definitions. Except where the context clearly implies or
indicates the contrary, a word, term, or phrase used in the Plan is similarly
used in this Agreement.

      11. Whole Shares. This Option may only be exercised for whole shares. In
lieu of issuing a fraction of a share upon any exercise of the Option, resulting
from an adjustment of the Option pursuant to paragraph 4.2(f) of the Plan or
otherwise, the Company will be entitled to pay to the Participant an amount
equal to the Fair Market Value of such fractional share.

      12. Heirs and Successors. This Agreement shall be binding upon, and inure
to the benefit of, the Company and its successors and assigns, and upon any
person acquiring, whether by merger, consolidation, purchase of assets or
otherwise, all or substantially all of the Company's assets and business. If any
rights exercisable by the Participant or benefits deliverable to the Participant
under this Agreement have not been exercised or delivered, respectively, at the
time of the Participant's death, such rights shall be exercisable by the
Designated Beneficiary, and such benefits shall be delivered to the Designated
Beneficiary, in accordance with the provisions of this Agreement and the Plan.
The "Designated Beneficiary" shall be the beneficiary or beneficiaries
designated by the Participant in a writing filed with the Committee in such form
and at such time as the Committee shall require. If a deceased Participant fails
to designate a beneficiary, or if the Designated Beneficiary does not survive
the Participant, any rights that would have been exercisable by the Participant
and any benefits distributable to the Participant shall be exercised by or
distributed to the legal representative of the estate of the Participant. If a
deceased Participant designates a beneficiary and the Designated Beneficiary
survives the Participant but dies before the Designated Beneficiary's exercise
of all rights under this Agreement or before the complete distribution of
benefits to the Designated Beneficiary under this Agreement, then any rights
that would have been exercisable by the Designated Beneficiary shall be
exercised by the legal representative of the estate of the Designated
Beneficiary, and any benefits distributable to the Designated Beneficiary shall
be distributed to the legal representative of the estate of the Designated
Beneficiary.

      13. Administration. The authority to manage and control the operation and
administration of this Agreement shall be vested in the Committee, and the
Committee shall have all powers with respect to this Agreement as it has with
respect to the Plan. Any interpretation of the Agreement by the Committee and
any decision made by it with respect to the Agreement is final and binding on
all persons.

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      14. Plan Governs. Notwithstanding anything in this Agreement to the
contrary, the terms of this Agreement shall be subject to the terms of the Plan,
a copy of which may be obtained by the Participant from the office of the
Secretary of the Company; and this Agreement is subject to all interpretations,
amendments, rules and regulations promulgated by the Committee from time to time
pursuant to the Plan.

      15. Not An Employment Contract. The Option will not confer on the
Participant any right with respect to continuance of employment or other service
with the Company or any Subsidiary, nor will it interfere in any way with any
right the Company or any Subsidiary would otherwise have to terminate or modify
the terms of such Participant's employment or other service at any time.

      16. Notices. Any written notices provided for in this Agreement or the
Plan shall be in writing and shall be deemed sufficiently given if either hand
delivered or if sent by fax or overnight courier, or by postage paid first class
mail. Notices sent by mail shall be deemed received three business days after
mailing but in no event later than the date of actual receipt. Notices shall be
directed, if to the Participant, at the Participant's address indicated by the
Company's records, or if to the Company, at the Company's principal executive
office.

      17. No Rights As Shareholder. The Participant shall not have any rights of
a shareholder with respect to the shares subject to the Option, until a stock
certificate has been duly issued following exercise of the Option as provided
herein.

      18. Amendment. This Agreement may be amended by written agreement of the
Participant and the Company, without the consent of any other person.

                                    * * * * *

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      IN WITNESS WHEREOF, the Participant has executed this Agreement, and the
Company has caused these presents to be executed in its name and on its behalf,
all as of the Grant Date.

                                            Participant

                                            /s/ MARK KINGDON
                                            ------------------------------------

                                            Organic, Inc.

                                            By: /s/ MICHAEL HUDES
                                                --------------------------------
                                                   Duly authorized on behalf
                                                   of the Board of Directors

                                       7<PAGE>   1
                           PHILIP SERVICES CORPORATION
                           PERFORMANCE UNIT BONUS PLAN

     1. PURPOSE. PHILIP SERVICES CORPORATION, a Delaware corporation, hereby
adopts the Philip Services Corporation Performance Unit Bonus Plan. The purpose
of the Plan is to attract and retain outstanding individuals to serve as key
Employees of the Company and to strengthening the mutuality of interest between
such persons and the Company's shareholders, by providing them with incentive
compensation based upon the performance of the Company. Certain capitalized
terms are defined in Section 12 of the Plan.

     2. PARTICIPATION. Participation in this Plan is limited to officers and key
Employees of the Company and its subsidiaries who are designated by the
Committee in its sole discretion. Persons who participate in the Plan are
sometimes herein referred to as "Participants."

     3. EFFECTIVE DATE AND TERM. This Plan has been approved by the Board on May
9, 2001 (the "Effective Date"). The term of the Plan shall continue until the
tenth anniversary of the Effective Date, unless sooner terminated by the Board.
No new Awards may be made after the termination of the Plan, but termination
shall not affect the vesting of outstanding Awards.

     4. AWARDS. The Committee shall have the authority, in it sole discretion,
to determine which eligible persons shall be Participants, and to grant such
Awards to each Participant as it may, in its sole discretion, determine. Each
Award shall be evidenced by a written instrument or agreement between the
Company and the Participant in the form determined by the Committee. The terms
of each Award shall be as provided below:

     (a) Units. Each Award shall be based on a specified number of Units, as
determined by the Committee. Each Unit shall have an initial value, determined
by the Committee, at the time it is granted, and the value of each Unit shall be
determined at the end of the performance period as described below. At the end
of the performance period, if the Participant is still employed and has
otherwise satisfied the requirements of the Award, he or she shall receive a
cash payment equal to the value of the Units.

     (b) Performance Periods. Awards will normally be made at the beginning of
each fiscal year of the Company, and the performance period for each Award shall
be the three fiscal years commencing with the year for which the Award is
granted. In special cases, the Committee may establish a Performance Period of
more or fewer than three fiscal years, and may grant Awards during a fiscal year
and provide for an appropriate proration of the value adjustment. A Participant
may receive an Award during the Performance Period for a previously granted
Award, and the provisions of this Plan shall apply separately to each Award.

     (c) Unit Value. The initial value of each Unit granted for the Company's
2001 fiscal year shall be $10 per Unit. The Committee shall establish the
initial value of subsequently granted Units. At the end of the Performance
Period, or at the time an award is vested, the initial value of each Unit in an
Award shall be increased or decreased by a multiplier determined under the
formula established for the Award by the Committee at the time the Award is
granted. The Committee may establish different valuation formulae for Awards
granted to different Participants at the same time, taking into account the
factors that are most appropriate for each Participant, as determined by the
Committee in its sole discretion. The settlement value

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established by the Committee for each Unit at the end of the Performance Period
shall be the basis on which payments shall be made to Participants.

     (d) Adjustment Formulae. The Committee shall establish the Performance
Criteria, Performance Targets and Performance Multipliers used to determine
Awards. The Performance Criteria shall be after-tax income, or other objective
criteria related to the performance of the Company, or a division or subsidiary
of the Company, as selected by the Committee, with such adjustments as the
Committee may determine. For each Performance Criteria the Committee shall
establish Performance Targets representing the level of actual performance that
must be achieved during the Performance Period for Participants to qualify for
Awards. Each Performance Target shall have a corresponding Performance
Multiplier that shall determine the settlement value of the Performance Units.
At the end of the Performance Period, or sooner at the Committee's discretion,
the Company's actual results for each Performance Criteria shall be compared to
the Performance Target. If the Company's actual results meet or exceed the
Performance Target, the Units shall be multiplied by the corresponding
Performance Multiplier to determine the settlement value of the Units. If the
Company's actual performance exceeds the minimum Performance Target but falls
between two Performance Targets for which Performance Multipliers have been set,
the Performance Multiplier used to determine the Unit value shall be determined
by interpolation. The Committee may also reserve the right to increase or
decrease the Performance Multipliers based upon its subjective evaluation either
of the Participant's performance in general, or performance based upon factors
specified in the Award.

     (e) Example. The following example will illustrate the application of the
formula. Assume that for a given Award, the base value of the Units is $10 per
Unit, the Performance Criteria is the Company's after tax income and the
Performance Period is 3 years. Now assume that the Performance Targets are
various levels of after tax income achieved at the end of the Performance Period
and each Performance Target has been assigned a corresponding Performance
Multipliers ranging in value from 1 to 3. At the end of the Performance Period
the Performance Units would have a value based on the level of after tax income
achieved. The application of the valuation formula would be as follows:

<TABLE>
<CAPTION>
(a) Base Value of Performance                (c) Performance        (d) Performance        (e) Performance
Unit @ time of grant equals $10               Target @ year 3          Multiplier         Unit Value @ year 3

(b) Performance Criteria                                                                       (a) x (d)
-------------------------------              ----------------       ---------------       -------------------
<S>                                          <C>                         <C>                   <C>
After Tax Income                             Less Than $ 50mm            0                       0
                                                       $ 50mm            1                     $10
                                                       $ 75mm            2                     $20
                                                       $100mm            3                     $30
</TABLE>

     Accordingly, the value of each Unit would range from $0 to $30.

     (f) Application of Formula. To the extent the valuation formula for any
Award is based upon accounting concepts that have a clearly defined meaning, the
determination by the Company's regularly employed certified public accountants
shall be final and conclusive.

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However, the Committee may provide for adjustments to performance criteria,
performance target or performance multipliers, including adjustments to reflect
extraordinary or nonrecurring events, which adjustments need not be based on
terms with clearly defined accounting meanings. The determination by the
Committee in good faith of the proper adjustments to the performance percentages
in such cases shall be final and conclusive on all parties.

     (g) Payment of Awards. The amount of each Award shall be equal to the
settlement value of the Units upon which such Award is based multiplied by the
number of Units, as determined after the close of the final fiscal year in the
Performance Period. Subject to the vesting provisions of Section 5 below, such
amount shall be paid, in a single lump sum cash payment, to the Participant as
soon as practical after the adjustment formula for the final fiscal year is
determined. The Committee may adopt procedures to permit a Participant to make
an irrevocable election to defer payment of an Award pursuant to the terms of
any nonqualified deferred compensation award adopted by the Company.

     5. VESTING OF AWARDS. Except as otherwise provided by the Committee, all
Awards granted pursuant to this Plan shall be subject to vesting as hereinafter
provided. Except as otherwise provided below, if a Participant terminates
his/her Employment, all Awards that have not vested prior to such termination
shall be forfeited and shall revert to the Company without further action by the
Company or payment of consideration to the Participant.

     (a) Normal Vesting. Except as otherwise provided herein or determined by
the Committee, each Award shall vest at the end of the Performance Period for
such Award, provided that the Participant is still an Employee on such date. The
vesting schedule provided in this Section 5(a) shall be applied separately to
each Award. If a Participant's Employment is terminated prior to the end of a
Performance Period for any reason other than one of the reasons specified in
paragraphs (b), (c) or (d) below, the Award shall be shall be forfeited and
shall revert to the Company without further action by the Company or payment of
consideration to the Participant.

     (b) Accelerated Vesting. In the case of a Participant who dies or retires
after attaining the age of 65 or by reason of a mental or physical disability
which prevents him/her from performing his/her duties as an Employee (as
determined by the Committee), while still an Employee, or is terminated by the
Company for reasons other than cause, the Committee in its sole discretion may
accelerate the vesting of each Award granted to such Participant on a prorated
basis for the performance period corresponding to the Award. Such Participant's
Units shall be paid to him or her to his or her Beneficiary at the end of the
performance period specified in the participant's Award or sooner as determined
by the Committee.

     (c) Change of Control. Upon the occurrence of a Change of Control, all
outstanding Awards previously granted to all Participants who are employed on
the effective date of the Change of Control [or whose Employment was terminated
in anticipation of the Change of Control] shall be fully vested. The Committee
shall determine the settlement value of outstanding Units as of the date of the
Change of Control, taking into account appropriate adjustments to the valuation
formula. However, in no event shall the Committee establish a settlement value
of less than $10 per unit. All awards shall be paid as soon as practical
following the Change of Control.

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     (d) Termination for Cause. If a Participant's Employment is terminated by
the Company for Cause, all Awards, including those that were previously vested
and those for which the Performance Period ended prior to the termination but
which have not yet been paid, shall be forfeited in full.

     (e) Variations in Vesting. The Committee, in its sole discretion, may alter
any of the requirements for vesting set forth in this Section 5 (but may not
delay vesting with respect to awards therefore granted), including without
limitation providing any requirements for vesting that are based upon the
attainment of performance targets by the Participant, by the Company, or by any
division or subsidiary of the Company. Any deviation from the vesting provisions
in this Section 5 shall be set forth in the written instrument or agreement
evidencing the Award.

     6. PAYMENT AFTER TERMINATION.

     (a) Upon termination of Employment (other than for Cause), any Award that
was vested at the time of termination (including any acceleration of vesting
that occurs by reason of the termination) shall be payable to the Participant or
his/her Beneficiary as soon as practicable after the amount of the Award is
determined, and to the extent not vested shall be forfeited.

     (b) The Committee may permit Participants to designate Beneficiaries to
receive the benefit of an Award of a Participant who dies prior to receipt of
such Award, in accordance with procedures established by the Committee, but if
the Committee does not adopt such procedures, or if the Participant has not
designated a Beneficiary or the Committee is unable to determine who the
Participant's Beneficiary was, the payment shall be made to the Participant's
estate.

     (c) In the case of a Participant who is unable, by reason of physical or
mental disability, to receive the benefits of an Award, the Committee shall
treat such Participant's legal guardian, if any, or any person who has a power
of attorney over the Participant's affairs, as his/her Beneficiary. If no legal
guardian has been appointed and no person has the Participant's power of
attorney, the Committee may, in its sole discretion, treat any person who
demonstrates that he/she will apply the Award for the Participant's benefit and
support as the Participant's Beneficiary. The determination in good faith of the
person to be treated as a Participant's Beneficiary shall be final, conclusive
and binding on all other persons.

     7. NONTRANSFERABILITY. Except as otherwise provided in Section 6 with
respect to Beneficiaries, Awards shall not be transferable, and any purported
transfer, whether voluntary or involuntary, by a Participant shall be null and
void and confer no rights upon the purported transferee. Notwithstanding the
foregoing, the Committee may, in its sole discretion, permit Participants to
transfer the right to receive Awards to members of their family, trusts, family
partnerships or other entities established for members of their family, or
charitable organizations, subject to such terms, conditions and limitations as
the Committee may require. Any Awards so transferred shall remain subject to
forfeiture in the hands of the transferee.

     8. EQUITABLE ADJUSTMENTS. Notwithstanding any other provision of the Plan,
in the event of a reorganization, recapitalization, merger, consolidation,
split-up, split-off, spin-off, share exchange or any similar change in the
corporate structure of the Company, the Committee shall make such adjustments as
it deems appropriate (such determination to be conclusive) to

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<PAGE>   5

reflect such event (to prevent the dilution or enlargement of rights under the
Plan and outstanding Awards) for all purposes of the Plan, including, without
limitation, making adjustments to the valuation formulae for all outstanding
Awards, providing for any successor to the Company to assume the obligations of
the Company under the Plan and outstanding Awards, or settling all or part of
any outstanding Award for a payment equal to the value of the Award taking into
account any effect of such event on Fair Value, and/or the acceleration of
vesting if such event constitutes a Change of Control.

     9. AMENDMENT OR DISCONTINUATION OF PLAN. The Board may amend or discontinue
the Plan at any time or suspend or discontinue the Plan at any time, except that
no amendment to the Plan shall adversely affect any Award made prior to the date
of such amendment without the express written consent of the Participant
affected.

     10. MISCELLANEOUS.

     (a) Nothing contained herein shall be construed to give any person the
contractual right to remain in the Employ of the Company.

     (b) This Plan shall be governed and construed in accordance with the laws
of the State of Delaware (regardless of the law that might otherwise govern
under applicable Delaware principles of conflicts of laws).

     (c) Any notice required or permitted to be given by the Company or any
Participant hereunder may be given by personal delivery, sent by facsimile or
reputable overnight courier service, or sent by registered or certified United
States mail, with proper postage prepaid, and addressed to the Company at its
principal corporate headquarters, to the attention of the Secretary, and to a
Participant at his/her most recent address listed on the records of the Company.
Notices shall be given when delivered by hand and deemed given on the next
business day following transmission by facsimile or overnight courier, or on the
fifth business day after being mailed.

         (d) In interpreting this Plan, all singular words include the plural
form and vice versa, and nouns and pronouns of one gender include all genders.
Captions and section headings are for convenience of reference and have no
substantive meaning.

     11. COMMITTEE.

     (a) This Plan shall be administered by the Committee. The Committee shall
have the authority, in its sole discretion, and subject to and not inconsistent
with the express provisions of the Plan, to administer the Plan and to exercise
all the powers and authority either specifically granted to it under the Plan or
necessary or desirable in connection with the administration of the Plan,
including, without limitation, the authority to interpret and construe all terms
of the Plan and to prescribe, amend and rescind rules, regulations and
procedures relating to the Plan, and to make all other determinations deemed
necessary or advisable for the administration of the Plan. Any determination,
interpretation, construction or other action made or taken pursuant to the
provisions of the Plan by or on behalf of the Committee shall be final, binding
and conclusive for all purposes and upon all persons, including without
limitation the Company, the Company's

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<PAGE>   6

shareholders, the Participants and their respective successors in interest.
Notwithstanding the foregoing provisions of this Section 11(a), all powers,
authority and duties given the Committee by an provision of this Plan may be
exercisable by the Board or delegated by the Board to any other person or
committee in its sole discretion.

     (b) The authority to administer and interpret the Plan on a daily basis,
subject to the authority of the Committee as provided in Section 11(a),
including the authority to prescribe procedures and take all other action that
is ministerial or technical in nature, shall be exercised by the Benefits
Steering Committee of the Company, or persons acting under its supervision and
control, or such other officer of the Company as may be designated by the Board
or the Chief Executive Officer of the Company.

     (c) No member of the Committee, or officer or Employee of the Company,
shall be personally liable by reason of any action taken, or omitted, by such
person, which such person believed in good faith to be proper under the Plan, or
for any mistake of judgment made in good faith, and the Company shall indemnify
and hold harmless each member of the Committee, and each other officer or
Employee of the Company to whom any duty or power relating to the administration
or interpretation of the Plan has been delegated, against any cost or expense
(including reasonable fees and disbursements of legal counsel) or liability
(including any sum paid in settlement of a claim) arising out of any act or
omission in connection with the Plan unless arising out of such person's own
fraud or bad faith.

     12. CERTAIN DEFINITIONS. As used herein, the following terms shall have the
following meanings:

     (a) "Award" means the right granted to a Participant pursuant to Section 4
to receive a cash payment based on the value of the Units, subject to all terms
and conditions of the Plan. As the context requires, the term "Award" may also
refer to the written instrument or agreement setting forth the terms of an
Award.

     (b) "Beneficiary" means the person who shall have the right to receive an
Award following the death or disability of a Participant, as determined under
Section 6.

     (c) "Board" means the Board of Directors of the Company.

     (d) "Cause" means the termination of a Participant's Employment by reason
of the fact that the Participant has committed fraud on the Company, that the
Participant has committed a felony, or a criminal offense involving the Company,
whether or not the Participant is indicted or convicted, or that the Participant
has committed a willful or intentional breach of his/her obligations as an
Employee, including a willful or intentional breach of any employment agreement
or persistent failure to carry out the responsibilities or his/her position or
to comply with the rules and procedures of the Company. A Participant's
Employment shall be treated as having been terminated for Cause if the
Participant is terminated for other reasons, or resigns, at a time when Cause
existed (whether or not the Company was aware of the Cause) at the time of
termination, or if the Employee engages in a willful or intention breach of any
noncompete or confidentiality agreement after termination. The existence of
Cause shall be determined by the Committee, and its determination, if made in
good faith, shall be final and conclusive. The

                                     - 6 -

<PAGE>   7

payment of any Award shall be suspended for the period of time during which the
determination of Cause is being made.

     (e) "Change of Control" means the occurrence after the Effective Date of
any of the events described in (i), (ii), or (iii) below. Certain capitalized
terms used to determine whether a Change of Control has occurred are defined in
(iv).

     (i)  Any person (as defined in the Exchange Act), directly or indirectly,
          becomes the beneficial owner (as defined in Rule 13d-3 under the
          Exchange Act) or has the right to exercise control or direction over
          Voting Securities of the Company carrying in excess of 40 percent of
          the votes attached to all Voting Securities of the Company then
          outstanding; provided, however, that if such a person is an Insider
          (as defined below), such percentage shall be 50 percent.

     (ii) The individuals who constitute the Board on the Effective Date
          together with those who first become directors subsequent to such date
          and whose election to the Board was approved by a vote of at least a
          majority of the directors then still in office who were either
          directors as of such date or whose recommendation, election or
          nomination for election was previously so approved (other than any
          directors whose initial election was a result of a proxy contest or a
          threatened proxy contest), cease for any reason to constitute a
          majority of the members of the Board.

     (iii) Either

          (A)  the shareholders of the Company approve any business combination
               having the effect that the existing shareholders of the Company
               do not own or control at least 75% of the Voting Securities of
               the resulting entity in approximately the same proportion as they
               owned such securities of the Company immediately prior to the
               business combination; or

          (B)  the shareholders of the Company approve either (1) a liquidation
               or dissolution of the Company or (2) a sale of all or
               substantially all of the assets of the Company and, in the case
               of either (1) or (2), the existing shareholders of the Company do
               not own or control at least 75% of the Voting Securities of the
               acquiring or resulting entity in approximately the same
               proportion as they owned the Voting Securities of the Company
               immediately prior to any such transaction.

     (iv) For purposes of the definition of "Change of Control":

          (A)  "Exchange Act" means the Securities Exchange Act of 1934, as
               amended from time to time.

          (B)  "Insider" means a person (as defined in the Exchange Act) that as
               of the Effective Date beneficially owns or exercises control or
               discretion over,

                                     - 7 -

<PAGE>   8

               directly or indirectly, more than 20 percent of the Voting
               Securities of the Company.

          (C)  "Voting Securities" of any corporation means any securities of
               such corporation ordinarily carrying the right to vote in respect
               of election of directors of such corporation provided that if any
               such securities shall at any time carry the right to cast more
               than one vote in respect of the election of directors, such
               securities shall, when and so long as they carry such right, be
               considered for the purposes of this Plan to constitute such
               number of the securities as is equal to the number of votes in
               respect of the election of directors as may be cast by the
               holder.

     (f) "Committee" means such the Compensation Committee of the Board, or such
other committee as the Board may designate to administer the Plan.

     (g) "Company" means Philip Services Corporation, a Delaware corporation,
its successors and assigns.

     (h) "Employee" means a person who is a common law employee of the Company
or of any subsidiary of the Company designated by the Committee, and
"Employment" means the status of being an Employee. The Committee may also
provide for persons who render services to the Company as a consultant or
independent contractor to be treated as an Employee and be eligible to
participate in the Plan, in which event all references to termination of such
person's "Employment" shall be deemed to refer to the termination of the
relationship between such person and the Company upon which his or her
participation in the Plan is based. Except as otherwise provided in the terms of
an Award, a Participant who ceases to be an officer, or whose status with the
Company otherwise changes, but who continues to be an Employee shall not be
considered to have incurred a termination of Employment.

     (i) "Participant" means a person who receives an Award under the Plan, for
so long as such Award is outstanding.

     (j) "Performance Period" means a period of one or more fiscal years or
portions of fiscal years of the Company, determined separately for each Award,
over which the value of the Units shall be determined.

     (k) "Performance Multiplier" means the factor assigned by the Committee to
each Performance Target that determines the Unit value at the end of the
Performance Period.

     (l) "Plan" means this Performance Unit Bonus Plan, including any amendments
hereof and rules and regulations hereunder.

     (m) "SEC" means the Securities and Exchange Commission.

     (n) "Unit" means an arbitrary measure of the amount of payment that a
Participant is entitled to receive pursuant to an Award, as set forth in more
detail in Sections 4 and 5. The use of "Units" as the measure of an Award is a
matter of accounting convenience only, and Units

                                     - 8 -

<PAGE>   9

shall not be considered as securities or as separate property of any kind. A
Participant's rights to an Award shall be solely the right to receive a cash
payment measured by the terms of the Plan and the Award, as a general unsecured
creditor of the Company.

                                     - 9 -

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