EXHIBIT 10.5

EQUITY COMMITMENT
FOR RIGHTS OFFERING

DANIELSON HOLDING CORPORATION

     
Parties:
  Danielson Holding Corporation, a Delaware corporation (“DHC”), and D. E. Shaw
Laminar Portfolios, L.L.C., a Delaware limited liability company (the
“Shareholder”).
 
   
Acquisition
  DHC expects to acquire (the “Acquisition”) all of the capital stock of
American Ref-Fuel Holdings Corp. (“Ref-Fuel”), as well as refinance certain
existing indebtedness of Covanta Energy Corporation (“Covanta”), a wholly-owned
subsidiary of DHC.
 
   
Use of Proceeds
  To fund the Acquisition, refinance certain indebtedness of Ref-Fuel, Covanta
and their subsidiaries, pay transaction fees and expenses, and for general
corporate purposes.
 
   
Rights Offering
  In connection with the Acquisition, DHC expects to conduct a rights offering
(“Rights Offering”) of warrants or other rights (the “Rights”) to purchase an
aggregate of approximately $400 million of newly-issued shares of DHC common
stock, par value $0.10 per share (“Common Stock”).
 
   

  The purchase price for the Common Stock in the Rights Offering will be not
greater than $6.00 per share (“Subscription Price”), and the total number of
Common Stock shares to be offered will be approximately 67 million.
 
   

  The Rights shall be issued to each stockholder (including, without limitation,
to the Shareholder) on a pro rata basis (“basic subscription right”) and shall
be non-transferable. Stockholders, including, without limitation, the
Shareholder, who fully exercise their basic subscription right shall also be
entitled, but shall not be obliged, to subscribe for any Common Stock shares
offered in the Rights Offering and not purchased by other stockholders, subject
to proration (in proportion to the number of Common Stock shares a stockholder
has subscribed for pursuant to the basic subscription right) if the
oversubscribed shares exceed the number of Common Stock shares available
(“oversubscription right”). Exercise of the basic subscription right (including
by the Shareholder pursuant to the Equity Commitment hereunder) and the
oversubscription right shall

 

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  be subject, in each instance, to the restrictions contained in Article Fifth
of DHC’s Certificate of Incorporation and such other transfer restrictions
and/or stock certificate escrow protection mechanisms as may be imposed by DHC
in accordance with past practice to ensure compliance with Article Fifth.
 
   
Equity Commitment of Shareholder
  Provided that the condition precedents specified under the heading “Conditions
to the Obligations of the Shareholder” below have been satisfied, or waived by
the Shareholder in writing, then the Shareholder agrees to exercise in full (the
“Equity Commitment”) all of its basic subscription rights issued to the
Shareholder in the Rights Offering and pay for and acquire the applicable Common
Stock. Issuance of any Common Stock pursuant to any exercise of the Equity
Commitment shall be subject in each instance, to the restrictions contained in
Article Fifth of DHC’s Certificate of Incorporation and such other transfer
restrictions and/or stock certificate escrow protection mechanisms as may be
imposed by DHC in accordance with past practice to ensure compliance with
Article Fifth. Further, the Shareholder agrees that it will not sell, pledge or
otherwise transfer any shares of Common Stock prior to the closing of the Rights
Offering or the termination of its commitment hereunder. The Shareholder’s
decision to participate in the Rights Offering contemplated hereby is an
independent decision based upon its own independent analysis and is not based
upon the investment decision of any other person or entity.
 
   
Amount Payable to
  In consideration of the Shareholder’s Equity Commitment:
the Shareholder
   
 
   

  - Upon DHC and the Shareholder signing this “Equity Commitment for Rights
Offering,” the Shareholder shall earn an amount equal to 1.5% of its Equity
Commitment to provide its Equity Commitment through 5/31/05;
 
   

  - On or prior to 5/15/05, for an additional earned amount of .25% of the
Shareholder’s Equity Commitment, DHC shall have the option to extend the
Shareholder’s obligations hereunder through 6/30/05;
 
   

  - On or prior to 6/15/05, for an additional earned amount of .25% of the
Shareholder’s Equity Commitment, DHC shall have the option to extend the
Shareholder’s obligations hereunder through 7/31/05;
 
   

  - On or prior to 7/15/05, for an additional earned amount of .25% of the
Shareholder’s Equity Commitment, DHC shall have the option to extend the
Shareholder’s obligations

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  hereunder through 8/31/05.
 
   

  In the event the Rights Offering is not commenced before August 15, 2005 or is
terminated, DHC will be entitled, at its option, to pay any amount earned by the
Shareholder by delivering to the Shareholder a number of shares of Common Stock,
valued based on the 10-day average closing price on the American Stock Exchange
of the Common Stock following failure to commence the Rights Offering by
August 15, 2005 or the announcement of the termination of the Rights Offering;
provided, however, that such delivery of shares of Common Stock shall only be
made to the extent it would not result in an unreasonable risk of an ownership
change within the meaning of Section 382 of the Internal Revenue Code. For the
avoidance of doubt, in the event that delivery of such shares would result in an
unreasonable risk of an ownership change within the meaning of Section 382 of
the Internal Revenue Code, DHC shall pay the amounts earned by the Shareholder
in cash. Amounts earned by the Shareholder shall be payable and paid within five
(5) business days of the earliest of (i) the failure to commence the Rights
Offering by August 15, 2005, (ii) final termination of the Rights Offering and
(iii) the closing of the Rights Offering.
 
   

  In addition, DHC shall reimburse the Shareholder for all reasonable
out-of-pocket fees and expenses of outside legal counsel incurred in connection
with the execution and delivery of this agreement.
 
   
Registration Rights
  The Shareholder will be granted registration rights with respect to all shares
of common stock of DHC held by it, consistent with that certain registration
rights agreement, dated as of December 2, 2003, by and between DHC and the
Shareholder, SZ Investments, L.L.C., a Delaware limited liability company, and
Third Avenue Trust, on behalf of The Third Avenue Value Fund Series, a Delaware
business trust, (the “Existing Registration Rights Agreement”), including
immediate shelf registration rights; provided however, that in addition to the
immediate shelf registration rights, the Shareholder shall be granted demand
registration rights with respect to all shares of common stock of DHC held by
the Shareholder as described below, and with respect to any primary underwritten
equity offering initiated by DHC prior to June 30, 2006, the Shareholder
(together with any other shareholders executing an equity commitment similar to
the

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  equity commitment hereunder) and DHC will be subject to a pro rata “cut back”
in the amount of Common Stock to be included therein in the case any primary
underwritten equity offering is scaled back. Whether or not the Rights Offering
is consummated, the Shareholder (together with any other shareholders executing
an equity commitment similar to the equity commitment hereunder) will be
entitled to one secondary underwritten offering under the registration rights
agreement with the participation by DHC in a typical “road show” process which
shall have the full support of DHC and its management, subject to certain
customary limitations (it being understood that if such offering is suspended by
DHC, then such offering shall not count as such underwritten equity offering).
The reasonable fees and expenses (other than underwriting discounts and
commissions) of any such offering will be paid by DHC. Nothing in the
registration rights agreement or otherwise will limit the applicability of the
transfer restrictions contained in DHC’s Restated Certificate of Incorporation,
as amended.
 
   

  DHC and the Shareholder agree to negotiate, execute and deliver an amendment
to the Existing Registration Rights Agreement at or prior to closing of the
Rights Offering, in order to incorporate the terms and conditions described
above, including customary covenants related to an underwritten offering.
 
   
Representations and Warranties
  DHC makes the representations and warranties set forth on Exhibit A hereto to
the Shareholder. The Shareholder makes to DHC the representations and warranties
set forth on Exhibit B hereto.
 
   
Conditions to the Obligations of the Shareholder
  The obligations of the Shareholder described herein shall be subject to the
following conditions (which may be waived on behalf of the Shareholder by the
Shareholder in its sole and absolute discretion);
 
   

  (i) The receipt of all government approvals and consents to consummate the
Acquisition and related transactions as required by law;
 
   

  (ii) The Rights Offering closing no later than May 31, 2005, as such date may
be extended as provided for herein until August 31, 2005;

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  (iii) The concurrent consummation of the debt financing (or alternative debt
financing on terms and conditions no less favorable to DHC in the aggregate) on
substantially the same terms and conditions as described in the commitment
letters, as set forth on Exhibit C;
 
   

  (iv) The representations and warranties set forth on Exhibit A hereto being
true and correct in all material respects as of the date hereof; and
 
   

  (v) The concurrent consummation of the Acquisition and the Rights Offering.
 
   
Termination Rights of the Shareholder
  The Shareholder shall have no further obligations hereunder in the event that
the Rights Offering is not closed on or prior to May 31, 2005, as such date may
be extended as provided for herein until August 31, 2005.
 
   
DHC’s Termination Rights
  DHC shall be entitled to terminate its obligations hereunder at any time for
any or no reason by delivery of written notice to the Shareholder; provided,
however, that such termination shall not effect DHC’s obligation, if any, to pay
any and all amounts earned by the Shareholder pursuant to this “Equity
Commitment for Rights Offering”.
 
   
Public Announcements
  DHC and the Shareholder shall both agree (such consent not to be reasonably
withheld) as to the content and timing of any press release or other document
disclosing the existence of the Rights Offering, the Equity Commitment, and any
related transactions.
 
   
Miscellaneous
  This “Equity Commitment for Rights Offering” is made solely for the benefit of
the Shareholder, the affiliates of the Shareholder, and DHC and its affiliates,
and no other person, partnership, association or corporation shall acquire or
have any right under or by virtue of this “Equity Commitment for Rights
Offering”.
 
   

  Neither DHC nor the Shareholder may assign any of its rights (nor delegate any
of its obligations) under this “Equity Commitment for Rights Offering” without
the prior written consent of DHC (if such assignment or delegation is to be made
by the Shareholder) or the Shareholder (if the assignment or delegation is to be
made by DHC).
 
   

  In case any one or more of the provisions contained in this

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  “Equity Commitment for Rights Offering,” or the application thereof in any
circumstance, is held invalid, illegal or unenforceable in any respect under the
laws of any jurisdiction, the validity, legality and enforceability of any such
provision in every other respect and of the remaining provisions contained
herein shall not be in any way affected or impaired thereby or under the laws of
any other jurisdiction.  

  This “Equity Commitment for Rights Offering” may not be amended, modified or
changed, in whole or in part, except by an instrument in writing signed by DHC
and the Shareholder.
 
   
Binding Commitment
  This “Equity Commitment for Rights Offering” made by the Shareholder
represents the binding commitment by, on the one hand, DHC and, on the other
hand, the Shareholder, with respect to the subject matter hereof. Each party
executing this Agreement intends to be legally bound hereby.

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Exhibit A

DHC Representations and Warranties

     DHC represents and warrants to the Shareholder, as of the date hereof, as
follows:

               DHC has all necessary corporate power and authority to execute
and deliver this “Equity Commitment for Rights Offering,” and perform its
obligations hereunder. The Rights Offering has been duly and validly authorized
by DHC, and all determinations and consents necessary for the issuance of Common
Stock in connection therewith required under Article Fifth of the Certificate of
Incorporation have been obtained. This “Equity Commitment for Rights Offering”
is the valid and binding obligation of DHC and is enforceable against DHC by the
Shareholder in accordance with its terms, except as enforceability may be
limited by bankruptcy, insolvency, reorganization, moratorium and other similar
laws relating to or affecting creditors’ rights generally or by general
equitable principles (regardless of whether such enforceability is considered in
a proceeding in equity or at law) and except as rights to indemnity may be
limited by federal or state law or principles of public policy.

               The Rights and the Common Stock shares issuable upon exercise of
the Rights have been duly authorized by DHC. The Common Stock, when issued and
delivered by DHC against payment therefor as provided for in the Rights
Offering, will be validly issued, fully paid and nonassessable. No vote of the
holders of any class or series of capital stock or other securities of DHC or
any subsidiary of DHC is required to approve or effect this “Equity Commitment
for Rights Offering” or any transaction contemplated hereby, including, without
limitation, under applicable law, applicable stock exchange rules or
regulations, the certificate or articles of incorporation (including, without
limitation, Article Fifth of DHC’s Certificate of Incorporation) or by-laws of
DHC or any subsidiary of DHC, or any agreement of any kind applicable to DHC,
any subsidiary of DHC, or their assets.

               The execution, delivery and performance of this “Equity
Commitment for Rights Offering” will not (i) conflict with, result in the
creation or imposition of any lien, charge or encumbrance upon any of the assets
of DHC or any of its subsidiaries pursuant to the terms of, or constitute a
default under, any material agreement, indenture or instrument to which DHC or
any of its subsidiaries is a party, or (ii) result in a violation of the
Restated Certificate of Incorporation or By-laws of DHC or any of its
subsidiaries or any order, rule or regulation of any court or governmental
agency having jurisdiction over DHC or any of its subsidiaries or any of their
respective properties. Except as required by the Securities Act, the Exchange
Act and applicable state securities law, or other applicable law, no consent,
authorization or order of, or filing or registration with, any court or
governmental agency is required for the execution, delivery and performance of
this “Equity Commitment for Rights Offering.”

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Exhibit B

Representations and Warranties of the Shareholder

     The Shareholder hereby represents and warrants to DHC, as of the date
hereof, as follows:

               (a) The Shareholder has all necessary corporate power and
authority to execute and deliver this “Equity Commitment for Rights Offering,”
and perform its obligations hereunder. The execution, delivery and performance
by the Shareholder of this “Equity Commitment for Rights Offering” and the
transactions contemplated hereby have been duly and validly authorized and
approved, and no other corporate proceedings on the part of the Shareholder are
necessary to authorize such execution, delivery and performance by the
Shareholder. This “Equity Commitment for Rights Offering” is the valid and
binding obligation of the Shareholder and is enforceable against the Shareholder
by DHC in accordance with its terms, except as enforceability may be limited by
bankruptcy, insolvency, reorganization, moratorium and other similar laws
relating to or affecting creditors’ rights generally or by general equitable
principles (regardless of whether such enforceability is considered in a
proceeding in equity or at law) and except as rights to indemnity may be limited
by federal or state law or principles of public policy.

               (b) The execution, delivery and performance of this “Equity
Commitment for Rights Offering” will not (i) conflict with, result in the
creation or imposition of any lien, charge or encumbrance upon any of its assets
or any of its subsidiaries pursuant to the terms of, or constitute a default
under, any material agreement, indenture or instrument to which it or any of its
subsidiaries is a party, or (ii) result in a violation of its Certificate of
Formation or Operating Agreement or similar document or any order, rule or
regulation of any court or governmental agency having jurisdiction over it.
Except as required by the Securities Act, the Exchange Act and applicable state
securities law, no consent, authorization or order of, or filing or registration
with, any court or governmental agency is required for the execution, delivery
and performance of this “Equity Commitment for Rights Offering.”

               (c) The Shareholder’s decision to participate in the Rights
Offering contemplated hereby is an independent decision based upon its own
independent analysis and is not based upon the investment decision of any other
person or entity.

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  Agreed and Acknowledged this 1st day of February, 2005.
DANIELSON HOLDING CORPORATION
 
     

  By: /s/ Anthony J. Orlando

            Anthony J. Orlando       President and CEO        
 
     

  D. E. SHAW LAMINAR PORTFOLIOS, L.L.C.
 
     

  By: /s/ Brandon Baer  

     

    Name: Brandon Baer  

     

    Title: Authorized Signatory  

     

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