exv10w5



 




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






 









 






	 	 	 
	

	 	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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