Document:

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                                                                   EXHIBIT 10.20

                                                     July 28, 2003

Samuel Zell
President and Chief Executive Officer
Danielson Holding Corporation
Two North Riverside Plaza
Suite 600
Chicago, Illinois 60606

Dear Mr. Zell:

This letter agreement confirms our understanding that Danielson Holding
Corporation (the "Company" or "you") has engaged Credit Suisse First Boston LLC
and its affiliates, successors and assigns, as appropriate ("CSFB", "we" or
"us"), to act as its exclusive financial advisor with respect to the Company's
proposed Acquisition (as defined below) of the domestic waste-to-energy,
independent power production and water and wastewater operations of Covanta
Energy Corporation (the "Target").

As part of our engagement, we will, as requested:

(a)   assist the Company in evaluating the Acquisition, including as necessary
      business and financial due diligence and analysis of the Target;

(b)   assist the Company in developing a strategy to effectuate the Acquisition,
      including evaluating financing and structuring alternatives;

(c)   advise the Company on the structuring and terms of any potential equity or
      equity-linked financing at the Company undertaken in connection with the
      Acquisition; and

(d)   render a written opinion, upon further request, as to the fairness from a
      financial point of view to the Company of the consideration to be paid by
      the Company in the Acquisition (an "Opinion").

In connection with CSFB's engagement, the Company will furnish CSFB with all
information concerning the Company and, to the extent available to the Company,
the Target, which CSFB reasonably deems appropriate and will provide CSFB with
access to the officers, directors, employees, accountants, counsel and other
representatives (collectively, the "Representatives") of the Company and, as
practicable, the Target, it being understood that CSFB will rely solely upon
such information supplied by the Company, the Target and their respective
Representatives without assuming any responsibility for independent
investigation or verification thereof. In addition, the Company agrees to
promptly advise CSFB of any material event or change in the business, affairs,
condition (financial or otherwise) or prospects of the Company or, to the
knowledge of the Company, the Target that occurs during the term of CSFB's
engagement hereunder. All non-public information concerning the Company or the
Target, which is given to CSFB in connection with this engagement, will be used
solely in the course of the performance of our services hereunder and will be
treated confidentially by us for so long as it remains non-public. Except as
otherwise required by applicable law or judicial or regulatory process, CSFB
will not disclose this information to a third party without the Company's
consent.

As compensation for our financial advisory services hereunder, the Company
agrees to pay CSFB as follows (subject to setoff as set forth below):
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                                                                          Page 2

(1)   if, and only if, (a) a definitive acquisition agreement and other
      necessary transaction documents pertaining to the Acquisition (the
      "Acquisition Documents") are mutually executed and delivered, and (b) to
      the extent necessary, the United States Bankruptcy Court approves the
      terms and conditions of the Acquisition Documents, then upon such
      occurrence of (a) and (b), the Company shall be obligated to pay CSFB $1
      million in immediately available funds (the "Approval Payment"), which
      payment will be made within 2 business days after the reimbursement of any
      portion of the Company's expenses by the Target;

(2)   if, and only if, the Acquisition closes, the Company shall pay CSFB an
      additional $3 million in immediately available funds (the "Closing
      Payment") within 1 business day after the closing of the Acquisition; and

(3)   if, and only if, neither the Approval Payment nor the Closing Payment have
      been paid in accordance with this agreement on or before December 24,
      2003, or the Company terminates this agreement (other than for CSFB's
      gross negligence or bad faith), the Company shall pay CSFB $750,000 in
      immediately available funds (the "Guaranteed Payment"), within 5 business
      days thereafter; it being understood that the entire Guaranteed Payment
      (to the extent paid) shall be credited against the Approval Payment or the
      Closing Payment (but shall not be credited against both the Approval
      Payment and the Closing Payment) if and when such Approval Payment or
      Closing Payment, as the case may be, is paid.

As compensation for our rendering of an Opinion, the Company agrees to pay CSFB
an opinion fee equal to $500,000 (the "Opinion Fee"), payable upon the rendering
of an Opinion to the Company's Board of Directors. The Opinion Fee will be fully
creditable (to the extent paid) against the Approval Payment; provided, however,
that if the Approval Payment has already been paid at the time the Opinion Fee
becomes payable, the Opinion Fee will not be creditable against the Approval
Payment and will instead be fully creditable (to the extent paid) against the
Closing Payment.

In addition, the Company agrees to periodically reimburse CSFB for all customary
and reasonable out-of-pocket expenses, including the customary and reasonable
fees and expenses of its outside legal counsel, if any, and any other advisor
retained by CSFB (it being understood that the retention of any such advisor,
other than outside legal counsel, will be made only with the prior approval of
the Company, which shall not be unreasonably withheld or delayed), resulting
from or arising out of this engagement.

All fees and expenses payable hereunder are net of all applicable withholding
and similar taxes.

In consideration of the mutual promises made herein, notwithstanding anything to
the contrary in the letter agreement between CSFB, the Company and the Special
Committee of the Board of Directors of the Company, dated December 20, 2002 (the
"ACL Engagement Letter"), CSFB shall not be entitled to any payment of the
Restructuring Fee (as such term is defined in the ACL Engagement Letter);
provided, however, that, the parties shall allocate a portion (as agreed upon)
of the Approval Payment, Closing Payment or Guaranteed Payment, as applicable,
in respect of the services provided by CSFB pursuant to the ACL Engagement
Letter. Notwithstanding anything to the contrary herein, CSFB shall continue to
be entitled to reimbursement of out-of-pocket expenses pursuant to Section 3(c)
of the ACL Engagement Letter without duplication hereunder. The ACL Engagement
Letter shall continue in full force and effect as modified hereby.

For purposes of this agreement, "Acquisition" shall include, without limitation,
any investment in or acquisition (whether in one or a series of transactions) of
all or a majority of the capital stock, assets or other interests of the Target
or any entity comprising the Target by the Company or its affiliates, regardless
of the form any such investment or acquisition takes. Without limiting the
generality of the foregoing, it is understood that any transaction resulting in
the Company's ownership of more than 50% of Target's voting stock will be deemed
a consummated Acquisition for purposes of determining if and when the full
Approval Payment and Closing Payment are payable.
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                                                                          Page 3

If we are requested to render an Opinion to the Company with respect to the
fairness from a financial point of view of the consideration paid by the Company
pursuant to the Acquisition, the nature and scope of our analysis as well as the
form and substance of our Opinion shall be such as we reasonably deem
appropriate. If requested by you, our Opinion shall be delivered in writing.

No advice or Opinion rendered by CSFB, whether formal or informal, may be
disclosed, in whole or in part, or summarized, excerpted from or otherwise
referred to without our prior written consent, which shall not be unreasonably
withheld or delayed. In addition, neither CSFB, the Company, nor the terms of
this engagement may be otherwise referred to without CSFB's or the Company's
prior written consent, as the case may be (provided, that such restrictions on
references to the Company only apply to references to the Company by the
investment banking division of CSFB in connection with this engagement and
furthermore, without limiting the generality of the foregoing, do not restrict,
amend or alter any of CSFB's rights pursuant to the following paragraph and
CSFB's policies and procedures related to its research analysts), which consent
shall not be unreasonably withheld or delayed. The Company (and each employee,
representative or other agent of the Company) may disclose to any and all
persons, without limitation of any kind, the tax treatment and tax structure of
the Acquisition and all materials of any kind (including opinions or other tax
analyses) that are provided to the Company relating to such tax treatment and
structure. The obligations of the Company and CSFB pursuant to this paragraph
shall survive any expiration or termination of this agreement or CSFB's
engagement hereunder.

The Company acknowledges that CSFB may, at its option and expense and after
announcement of the Acquisition, place announcements and advertisements or
otherwise publicize the Acquisition and CSFB's role in it (which may include the
reproduction of the Company's logo) on CSFB's Internet Website and in such
financial and other newspapers and journals as it may choose, stating that CSFB
has acted as financial advisor to the Company in connection with the
Acquisition.

Since CSFB will be acting on behalf of the Company in connection with its
engagement hereunder, the Company and CSFB agree to the indemnity provisions and
other matters set forth in Annex A which is incorporated by reference into this
agreement.

In addition, if the Target undertakes a public offering or private placement of
debt securities, or the Company or one of its subsidiaries undertakes a public
offering or private placement of debt securities for the benefit of the Target
(in each case, a "Debt Financing"), CSFB shall have the right of first refusal
to serve in the role of lead arranger, lead managing underwriter or exclusive
placement agent or principal counterparty, as applicable, so long as the
proposed terms, conditions and fees related to such transaction are at least as
favorable to the Company as any other bona fide written offer to serve in such
role made to the Company by an internationally recognized bulge bracket
investment bank, in connection with any Debt Financing through December 31,
2005. As compensation for any such services in connection with a Debt Financing,
the Company agrees to pay CSFB its customary fees to be mutually agreed upon at
the appropriate time. The terms of any such additional engagements will be set
forth in separate letter agreements containing terms and conditions to be
mutually agreed upon, including without limitation appropriate indemnification
provisions. The obligations of the Company pursuant to this paragraph shall
survive any expiration or termination of this agreement or CSFB's engagement
hereunder.

The Company further understands that if CSFB is asked to act for the Company in
any other formal additional capacity relating to this engagement but not
specifically addressed in this letter, such as acting as an underwriter in
connection with the issuance of securities by the Company and/or the Target,
then such activities shall constitute separate engagements and the terms and
conditions of any such additional engagements will be embodied in one or more
separate written agreements, containing provisions and terms to be mutually
agreed upon, including without limitation appropriate indemnification
provisions. The indemnity provisions in Annex A shall apply to any such
additional engagements, unless superseded by an indemnity provision set forth in
a separate agreement applicable to any such additional engagements, and shall
remain in full force and effect regardless of any completion, modification or
termination of CSFB's engagement(s).
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                                                                          Page 4

CSFB's engagement hereunder may be terminated at any time by either CSFB or the
Company upon ten days' prior written notice thereof to the other party;
provided, however, that in the event of any termination of CSFB's engagement
hereunder by the Company (other than for CSFB's gross negligence or bad faith)
CSFB will continue to be entitled to the full Approval Payment and Closing
Payment provided for herein, as applicable, if CSFB would be entitled to such
payment or payments but for such termination of CSFB's engagement hereunder,
less the amount of the Guaranteed Payment, if paid, in the event that at any
time prior to the expiration of twelve months after any such termination the
Company consummates, or enters into a definitive agreement providing for, an
Acquisition; and provided, further, that no termination of CSFB's engagement
hereunder shall affect the Company's obligation to reimburse CSFB for its
out-of-pocket expenses as provided for herein and to indemnify CSFB and certain
related persons and entities as provided in Annex A.

CSFB is a full service securities firm engaged in securities trading and
brokerage activities as well as investment banking and financial advisory
services. In the ordinary course of our trading and brokerage activities, CSFB
or its affiliates may hold positions, for its own account or the accounts of
customers, in equity, debt or other securities of the Company or any other
company that may be involved in the matters contemplated by this agreement.
Additionally, the Company acknowledges that CSFB is a contingent creditor to
Covanta Energy Corporation pursuant to an existing letter of credit facility,
and in such other capacity, may acquire information about the Target, Covanta
Energy Corporation, and other prospective purchasers, CSFB shall have no
obligation to disclose such information, or the fact that CSFB is in possession
of such information, to the Company or to use such information on the Company's
behalf. CSFB has adopted policies and procedures designed to preserve the
independence of its research analysts whose views may differ from those of
CSFB's investment banking division.

In connection with this engagement, CSFB is acting as an independent contractor
and not in any other capacity, with duties owing solely to the Company. All
aspects of the relationship created by this agreement shall be governed by and
construed in accordance with the laws of the State of New York, applicable to
contracts made and to be performed therein. All actions and proceedings arising
out of or relating to this letter agreement shall be heard and determined
exclusively in any New York state or federal court sitting in the Borough of
Manhattan of the City of New York, to whose jurisdiction the Company hereby
irrevocably submits. The Company hereby irrevocably waives any defense or
objection to the New York forum designated above. Each of CSFB and the Company
waives all right to trial by jury in any action, suit, proceeding or
counterclaim (whether based upon contract, tort or otherwise) related to or
arising out of the engagement of CSFB pursuant to, or the performance by CSFB of
the services contemplated by, this agreement.
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                                                                          Page 5

We are delighted to accept this engagement and look forward to working with you
on this assignment. Please confirm that the foregoing is in accordance with your
understanding by signing and returning to us the enclosed duplicate of this
letter.

                                    Very truly yours,

                                    CREDIT SUISSE FIRST BOSTON LLC

                                    By:
                                        ---------------------------------------
                                        Name: Niron Stabinsky
                                        Title: Director

Accepted and agreed to as of the date first written above:

DANIELSON HOLDING CORPORATION

By:
    ---------------------------------------------
    Name:  Samuel Zell
    Title: President and Chief Executive Officer
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                                                                          Page 6

                                     ANNEX A

                                                                   July 28, 2003

In further consideration of the agreements contained in our engagement letter
dated the date hereof (the "engagement"), in the event that Credit Suisse First
Boston LLC ("CSFB") or any of its affiliates, the respective directors,
officers, partners, agents or employees of CSFB or any of its affiliates, or any
other person controlling CSFB or any of its affiliates (collectively,
"Indemnified Persons") becomes involved in any capacity in any action, claim,
suit, investigation or proceeding, actual or threatened, brought by or against
any person, including stockholders of Danielson Holding Corporation (the
"Company"), in connection with or as a result of the engagement or any matter
referred to in the engagement, the Company will reimburse such Indemnified
Person for its reasonable and customary out-of-pocket legal and other expenses
(including without limitation the out-of-pocket costs and expenses incurred in
connection with investigating, preparing for and responding to third party
subpoenas or enforcing the engagement) incurred in connection therewith as such
out-of-pocket expenses are incurred, except to the extent that indemnification
would be unavailable for such claims as provided below. The Company will also
indemnify and hold harmless any Indemnified Person from and against, and the
Company agrees that no Indemnified Person shall have any liability to the
Company or its owners, parents, affiliates, security holders or creditors for,
any losses, claims, damages or liabilities (including actions or proceedings in
respect thereof) (collectively, "Losses") (A) related to or arising out of (i)
the Company's actions or failures to act (including statements or omissions made
or information provided by the Company or its agents) or (ii) actions or
failures to act by an Indemnified Person with the Company's consent or in
reasonable reliance on the Company's actions or failures to act (provided, that
CSFB's unreasonable reliance on the Company's actions or failures to act shall
be deemed to be included within clause (B))or (B) otherwise related to or
arising out of the engagement or CSFB's performance thereof, except that this
clause (B) shall not apply to any Losses that are finally determined by a court
or arbitral tribunal to have resulted primarily from the bad faith or gross
negligence of any Indemnified Person. If such indemnification is for any reason
not available or insufficient to hold an Indemnified Person harmless, the
Company agrees to contribute to the Losses involved in such proportion as is
appropriate to reflect the relative benefits received (or anticipated to be
received) by the Company, on the one hand, and by CSFB, on the other hand, with
respect to the engagement or, if such allocation is determined by a court or
arbitral tribunal to be unavailable, in such proportion as is appropriate to
reflect other equitable considerations such as the relative fault of the Company
on the one hand and of CSFB on the other hand; provided, however, that, to the
extent permitted by applicable law, the Indemnified Persons shall not be
responsible for amounts which in the aggregate are in excess of the amount of
all fees actually received by CSFB from the Company in connection with the
engagement. Relative benefits to the Company, on the one hand, and CSFB, on the
other hand, with respect to the engagement shall be deemed to be in the same
proportion as (i) the total value paid or proposed to be paid or received or
proposed to be received by the Company or its security holders, as the case may
be, pursuant to the transaction(s), whether or not consummated, contemplated by
the engagement, bears to (ii) all fees actually received by CSFB in connection
with the engagement.

The Company will not, without CSFB's prior written consent, which shall not be
unreasonably withheld or delayed, settle, compromise, consent to the entry of
any judgment in or otherwise seek to terminate any action, claim, suit,
investigation or proceeding in respect of which indemnification may be sought
hereunder (whether or not any Indemnified Person is a party thereto) unless such
settlement, compromise, consent or termination includes a release of each
Indemnified Person from any liabilities arising out of such action, claim, suit,
investigation or proceeding. The Company will not permit any such settlement,
compromise, consent or termination to include a statement as to, or an admission
of, fault, culpability or a failure to act by or on behalf of an Indemnified
Person, without such Indemnified Person's prior written consent, which shall not
be unreasonably withheld or delayed. No Indemnified Person seeking
indemnification, reimbursement or contribution under this agreement will,
without the Company's prior written consent, which shall not be unreasonably
withheld or delayed, settle, compromise, consent to the entry of any judgment in
or otherwise seek to terminate any action, claim, suit, investigation or
proceeding referred to herein.
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                                                                          Page 7

Prior to entering into any agreement or arrangement with respect to, or
effecting, any merger, statutory exchange or other business combination or
proposed sale or exchange, dividend or other distribution or liquidation of all
or a significant portion of its assets in one or a series of transactions or any
significant recapitalization or reclassification of its outstanding securities
that does not directly or indirectly provide for the assumption of the
obligations of the Company set forth herein, the Company will notify CSFB in
writing thereof (if not previously so notified) and, if requested by CSFB, shall
arrange in connection therewith alternative means of providing for the
obligations of the Company set forth herein, including the assumption of such
obligations by another party, insurance, surety bonds or the creation of an
escrow, in each case in an amount and upon terms and conditions satisfactory to
CSFB.

The Company's obligations hereunder shall be in addition to any rights that any
Indemnified Person may have at common law or otherwise. The Company acknowledges
that in connection with the engagement CSFB is acting as an independent
contractor and not in any other capacity with duties owing solely to the
Company. This agreement and any other agreements relating to the engagement
shall be governed by and construed in accordance with the laws of the State of
New York, applicable to contracts made and to be performed therein and, in
connection therewith, the parties hereto consent to the exclusive jurisdiction
of the Supreme Court of the State of New York sitting in New York County or the
United States District Court for the Southern District of New York and the
respective appellate courts thereof. Notwithstanding the foregoing, solely for
purposes of enforcing the Company's obligations hereunder, the Company consents
to personal jurisdiction, service and venue in any court proceeding in which any
claim subject to this agreement is brought by or against any Indemnified Person.
CSFB HEREBY AGREES, AND THE COMPANY HEREBY AGREES ON ITS OWN BEHALF AND, TO THE
EXTENT PERMITTED BY APPLICABLE LAW, ON BEHALF OF ITS SECURITY HOLDERS, TO WAIVE
ANY RIGHT TO TRIAL BY JURY WITH RESPECT TO ANY CLAIM, COUNTER-CLAIM OR ACTION
ARISING OUT OF THE ENGAGEMENT OR CSFB'S PERFORMANCE THEREOF.

The provisions of this agreement shall apply to the engagement (including
related activities prior to the date hereof) and any modification thereof and
shall remain in full force and effect regardless of the completion or
termination of the engagement. If any term, provision, covenant or restriction
herein is held by a court of competent jurisdiction to be invalid, void or
unenforceable or against public policy, the remainder of the terms, provisions
and restrictions contained herein shall remain in full force and effect and
shall in no way be affected, impaired or invalidated.

DANIELSON HOLDING CORPORATION

By:
    --------------------------------
    Name:  Samuel Zell
    Title: President and Chief Executive Officer

Accepted and agreed to as of the date hereof:
CREDIT SUISSE FIRST BOSTON LLC

By:
    --------------------------------
    Name:  Niron Stabinsky
    Title: Director<PAGE>

                                                                   EXHIBIT 10.25

                              TAX SHARING AGREEMENT

                  THIS TAX SHARING AGREEMENT (this "AGREEMENT") is dated as of
March 10, 2004 by and between Danielson Holding Corporation, a Delaware
corporation (hereinafter referred to as "PARENT"), Covanta Energy Corp.
("COVANTA"), a Delaware corporation and, solely for purposes of Section 6 of
this Agreement, Covanta Power International Holdings, Inc., a Delaware
Corporation ("COVANTA INTERNATIONAL").

                                   WITNESSETH

                  WHEREAS, Parent is the common parent corporation of an
"affiliated group" of corporations (as it may be constituted from time to time,
the "AFFILIATED GROUP"), as defined in Section 1504 of the Internal Revenue Code
of 1986, as amended (the "CODE"); and

                  WHEREAS, Parent will file a U.S. consolidated federal income
tax return on behalf of the Affiliated Group for the taxable year ending
December 31, 2004, and generally will be required to file consolidated federal
income tax returns for subsequent years, which will, beginning on March 11,
2004, include Covanta and all of its current and future subsidiaries that would
be treated as members of an affiliated group of corporations, as defined in
Section 1504(a) of the Code, for which Covanta would be the common parent
corporation if Covanta and such subsidiaries were not members of the Affiliated
Group (each of such subsidiary and Covanta, a "SUBGROUP MEMBER," such affiliated
group of Subgroup Members, "COVANTA SUBGROUP" as listed in Appendix A attached
hereto);

                  WHEREAS, Covanta International will not be a member of the
Affiliated Group; and

                  WHEREAS, it is the intent and desire of Parent and Covanta to
enter into this Agreement, to provide, with respect to federal, state and local
income taxes, for the amount and time of payments by Covanta to Parent and for
the amount and time of payments by Parent to Covanta.

                  NOW, THEREFORE, Parent and Covanta, intending to be legally
bound hereby, and in consideration of the mutual covenants herein contained,
agree as follows:

         1.       Consolidated Federal Return.

                  A U.S. consolidated federal income tax return and estimated
tax returns shall be prepared and filed by Parent for the taxable year ending
December 31, 2004 (THE "2004 TAXABLE YEAR"), and for each subsequent taxable
period in respect of which the Affiliated Group is required or permitted to file
a consolidated federal income tax return. With respect to such tax return
preparation, Parent shall act in good faith with regard to any and all Subgroup
Members. All Subgroup Members shall cooperate with Parent in the preparation and
filing of such tax return and shall provide such assistance and documents,
without charge, as may be requested by Parent for that purpose. Parent shall
have the right with respect to any consolidated federal income tax returns to
determine (a) the manner in which such returns, documents or statements

<PAGE>

shall be prepared and filed, including, without limitation, the manner in which
any item of income, gain, loss, deduction or credit shall be reported, (b)
whether any extensions should be requested, and (c) the elections that will be
made by any Subgroup Member. In addition, Parent shall have the sole right to
(x) contest, compromise, or settle any adjustments or deficiency proposed,
asserted or assessed as a result of any audit of any consolidated tax return,
(y) file, prosecute, compromise or settle any claim for refund, and (z)
determine whether any refunds shall be received by way of refund or credited
against tax liabilities. Each Subgroup Member and their respective counsel shall
cooperate, to the extent reasonably practicable, in the contest or compromise
of, or defense against any such suit, action or proceeding described above.
Parent may, and shall cause Subgroup Members to, execute and file such consents,
elections, and other documents as Parent determines are required or appropriate
for the proper filing of such returns.

         2.       Allocation of Federal Tax Liability

                  (a)      Covanta agrees to pay to Parent, for each taxable
year or portion thereof during the term of this Agreement, as the Covanta
Subgroup's share of the tax liability of the Affiliated Group, an amount equal
to the apportioned tax liability of the Covanta Subgroup determined under
Regulation Section 1.1552 1(a)(1) with the modifications provided in Section 3
of this Agreement. For purposes of this Agreement, Covanta will be treated as
the common parent corporation of the Covanta Subgroup. Accordingly, the Covanta
Subgroup's proportionate share of the tax liability of the Affiliated Group
shall be determined by multiplying the Affiliated Group's tax liability by a
fraction, the numerator of which equals Covanta's Taxable Income (as defined
below in Section 3), and the denominator of which equals the Affiliated Group's
consolidated taxable income computed pursuant to Section 1552(a)(1) of the Code
and Treasury Regulations Section 1.1552-1(a)(1). For purposes of this Agreement,
tax liability shall include any liability for alternative minimum tax ("AMT").
The Covanta Subgroup shall compute its separate adjusted AMT in accordance with
the principles of Proposed Treasury Regulations Sections 1.1552-1(g) and
1.1502-55(h)(6)(iv) as the excess (if any) of the AMT of the Affiliated Group
over the AMT of the Affiliated Group as determined by excluding the Covanta
Subgroup's income, gains, deductions and losses (with the modifications provided
in Section 3 of this Agreement and assuming an AMT net operating loss as of the
Closing Date of $556,399,000) and credits, and Covanta Subgroup's proportionate
share of the AMT of the Affiliated Group shall be determined by multiplying the
AMT of the Affiliated Group by a fraction, the numerator of which equals Covanta
Subgroup's separate adjusted AMT and the denominator of which equals the sum of
the separate adjusted AMT's of all members of the Affiliated Group (determined
with the modifications provided in Section 3 of this Agreement and assuming an
AMT net operating loss as of the Closing Date of $556,399,000); provided,
however, Covanta shall pay Parent for any AMT liability actually incurred by
Parent if such AMT liability would not have been incurred if in an earlier
taxable year the Covanta Subgroup had computed its AMT liability under Section
55 et seq. of the Code (with the modifications provided in Section 3 of this
Agreement and assuming an AMT net operating loss as of the Closing Date of
$556,399,000) as if it had filed its own separate return as the common parent
corporation of the Covanta Subgroup and had not been included in the U.S.
consolidated federal income tax return filed by Parent on behalf of the
Affiliated Group, provided further however, that the amount of such payment
shall not exceed the excess of the cumulative Covanta Subgroup separate adjusted
AMT (as defined in Proposed Treasury Regulations Section 1.1502-

                                       2
<PAGE>

55(h)(6)(iv) with the modifications provided in Section 3 of this Agreement and
assuming an AMT net operating loss as of the Closing Date of $556,399,000) over
the sum of (A) the cumulative AMT amount the Covanta Subgroup has paid under
this Section 2(a) of this Agreement and (B) any reduction in Parent's AMT
liability resulting from the inclusion of the Covanta Subgroup in Parent's
Affiliated Group.

                  (b)      The Covanta Subgroup's allocable share of the U.S.
consolidated federal income tax liability of Parent for each year beginning with
the 2004 Taxable Year, determined as provided in Section 2(a) above, shall be
further apportioned among the Subgroup Members, other than Covanta Warren Energy
Resources Co., LP ("WARREN"), Covanta Equity of Stanislaus, Inc. ("STANISLAUS"),
Covanta Equity of Alexandria/Arlington, Inc. ("ALEXANDRIA"), Covanta Tampa
Construction, Inc. ("TAMPA CONSTRUCTION"), and Covanta Tampa Bay, Inc. ("TAMPA
BAY") (together, the "REMAINING DEBTORS") in a manner consistent with the
allocation method provided in Section 2(a) above. The Tax Sharing Agreement
between Covanta, Warren, Stanislaus and Alexandria dated as of March 10, 2004,
the Tax Sharing Agreement between Covanta and Tampa Construction dated as of
March 10, 2004 and the Tax Sharing Agreement between Covanta and Tampa Bay
provide, with respect to federal, state and local income taxes, for the amount
of payments by Covanta to the Remaining Debtors and for the amount of payments
by the Remaining Debtors to Covanta.

                  (c)      Covanta's payment of such apportioned tax liability
shall constitute a complete settlement of the federal income tax liability of
all Subgroup Members for such taxable year, except as otherwise provided in
Section 9 of this Agreement. Parent shall indemnify and hold harmless Covanta
against any liability for federal income tax (including alternative minimum tax
and additional amounts) relating to taxable years during the term of this
Agreement (including any liability for taxes attributable to other corporations
for which a Subgroup Member is liable under Regulation Section 1.1502-6) other
than such apportioned tax liability. All computations under this Agreement shall
be made on the basis that each Subgroup Member is a member of the Affiliated
Group and that such group files a consolidated return.

         3.       Taxable Income. For purposes of this Agreement, "Covanta's
Taxable Income" shall be Covanta's taxable income computed in accordance with
Regulation Section 1.1552-1(a)(1)(ii) (and shall not be negative), except that
the following modifications will apply:

                  (i) Covanta's    Taxable Income shall be computed in
         accordance with Regulation Section 1.1552-1(a)(1)(ii), assuming
         Covanta's separate taxable income is the amount that would be shown on
         the consolidated return for the Covanta Subgroup, had Covanta filed
         such return as the common parent corporation of the Covanta Subgroup;

                  (ii) for purposes of applying Regulation
         Section 1.1552-1(a)(1)(ii)(a), for each Taxable Year (beginning the day
         after the Closing Date), (A) the portion of the consolidated net
         operating loss deduction attributable to Covanta shall be deemed to be
         increased by the Adjustment Amount (as defined below) and (B) the net
         operating loss deduction attributable to other members of the
         Affiliated Group shall be accordingly reduced;

                  (iii) the "ADJUSTMENT AMOUNT" shall be the lesser of (A) the
         excess of Covanta's taxable income (computed as if Covanta had filed a
         separate return as the common parent

                                       3
<PAGE>

         of the Covanta Subgroup) over the portion of the consolidated net
         operating loss deduction attributable solely to the Covanta Subgroup
         and actually available to be used by the Affiliated Group and (B) the
         excess of $571,846,000 over: the sum of (i) the cumulative Adjustment
         Amount for all prior periods (beginning after the Closing Date); (ii)
         the cumulative amount of the consolidated net operating loss deduction
         utilized by affiliates of the Parent listed in Appendix B attached
         hereto for all prior periods (beginning after the Closing Date); and
         (iii) the sum of any net operating losses that (x) expired unused for
         such prior periods (except to the extent such expiration resulted from
         a current-year loss of a Parent Affiliate (other than a Subgroup
         Member) being used to offset Covanta's taxable income(computed as if
         Covanta had filed a separate return as the common parent of the Covanta
         Subgroup)) and (y) that would have expired unused for all such prior
         periods had the Covanta Subgroup and the affiliates of Parent listed in
         Appendix B been the only members of the Affiliated Group with Parent.
         For purposes of this clause (iii), the amount of net operating loss and
         time of expiration is as set forth on Appendix C (as adjusted due to a
         change in law).

         4.       Limitations on Attribute Use.

                  Notwithstanding anything in this Agreement to the contrary, if
Covanta realizes an item of income or gain as a result of any disposition of any
of its assets that is subject to Section 384 of the Code, the portion of tax
liability attributable to such item shall be paid in full by Covanta; provided,
however, the amount of such payment shall not exceed the tax liability of Parent
for such taxable year. Any remaining tax liability of the Affiliated Group shall
be allocated pursuant to this Agreement without taking into account such item of
income or gain.

         5.       No Current Payments for Utilization of Net Operating Losses.

                  Neither Covanta nor any other Subgroup Member shall have any
liability to make payments to Parent or to any other member of the Affiliated
Group for the utilization by the Covanta Subgroup of net operating losses deemed
to be attributable to Covanta pursuant to Section 3(ii) of this Agreement.

         6.       Covanta International.

                  If the Affiliated Group or any member of the Affiliated Group
is liable for any federal, state, local or foreign tax liability generated by
Covanta International, or would be liable but for the use of any Affiliated
Group attributes or offsets, then Covanta International will pay to Parent, on
an after-tax basis, the amount of any such liability.

         7.       Payment of Tax.

                  (a)      Each Subgroup Member shall pay to Covanta no later
than 4 business days before the date on which the Affiliated Group's
consolidated federal income tax return is required to be filed (taking account
of any extensions thereof) such Subgroup Member's separate return tax liability
determined as provided under Section 2(b) above plus its "Equitable Share" (as
defined below) of any interest or penalties shown on the Affiliated Group's
consolidated federal income tax return. Any payments made by the Remaining
Debtors under this Agreement

                                       4
<PAGE>

will be counted towards their obligations under the Tax Sharing Agreement
between Covanta, Warren, Stanislaus and Alexandria dated as of March 10, 2004,
the Tax Sharing Agreement between Covanta and Tampa Construction dated as of
March 10, 2004 and the Tax Sharing Agreement between Covanta and Tampa Bay dated
as of March 10, 2004.

                  (b)      Covanta shall pay to Parent no later than 2 business
days before the date on which the Affiliated Group's consolidated federal income
tax return is required to be filed (taking account of any extensions thereof)
Covanta Subgroup's separate return tax liability determined as provided under
Section 2 and 3 above plus its "Equitable Share" (as defined below) of any
interest or penalties shown on the Affiliated Group's consolidated federal
income tax return.

                  (c)      To the extent that the interest and penalties shown
on a return are directly related to items of income, deduction, credit, etc. of
a particular "member" of the Affiliated Group as defined in Section 1504(a) of
the Code (a "MEMBER"), or such Member's delay in providing information to Parent
as provided in Section 1 above, such Member's Equitable Share of such interest
and penalties is 100%. Section 3(ii) shall not apply for purposes of determining
whether a consolidated net operating loss deduction is directly related to
Covanta. Each Member's Equitable Share of any interest and penalties shown on
the return that are not directly related to the items or delay of a particular
Member (and so allocated to that particular Member) will be a ratable share of
any such interest or penalties, determined by multiplying such interest or
penalties by a fraction, the numerator of which equals the portion of the
Affiliated Group's tax liability allocated to such Member determined as provided
under Section 2 above (before interest or penalties) and the denominator of
which equals the Affiliated Group's tax liability (before interest or
penalties).

         8.       Estimated Tax Payments.

                  (a)      If the Affiliated Group is required to make estimated
federal income tax payments (including payments due at the time any extension of
time is sought for the filing of the Affiliated Group's federal income tax
return), Covanta shall, if requested by Parent, pay to Parent, no later than 2
business days before the date each estimated tax payment is to be made by
Parent, that percentage of the estimated tax payment that equals the percentage
which the estimated separate return tax liability of Covanta Subgroup bears to
the sum of the Parties' estimated separate return tax liabilities for the
taxable year computed as provided under Sections 2 and 3 above. Parent shall
reasonably determine such estimates. If Covanta is required to make a payment to
Parent for estimated taxes as provided in the preceding sentence, each Subgroup
Member shall, if requested by Covanta, pay to Covanta, no later than 2 business
days before the date Covanta is required to make a payment to Parent, that
percentage of such payment that equals the percentage which the estimated
separate return tax liability of such Subgroup Member bears to the Covanta
Subgroup's estimated separate return tax liability for the taxable year computed
as provided under Sections 2 and 3 above.

                  (b)      Any estimated tax payments made by Covanta to Parent
and by any Subgroup Member to Covanta under this Section 8 with respect to any
taxable year shall be applied to reduce the amount, if any, owed by Covanta and
the Subgroup Member, as applicable, under Section 7 hereof with respect to such
year. Any excess of such estimated payments by

                                       5
<PAGE>

Covanta and the Subgroup Member, as applicable, over the amount described in
Section 7 for such year shall be repaid by Parent to Covanta and by Covanta to
the Subgroup Member, as applicable, no later than 10 business days after the
date of filing of the consolidated federal tax return for such taxable year or,
to the extent such excess represents all or a part of a tax refund to be
received by the Affiliated Group, no later than 10 business days after the
receipt of the refund.

         9.       Adjustments to Tax Liability.

                  (a)      If the consolidated federal tax liability is adjusted
for any taxable period, whether pursuant to an amended return, a claim for
refund, a tax audit by the Internal Revenue Service or some other reason, the
liability of the Parties and each Subgroup Member shall be recomputed to give
effect to such adjustments. In the case of a refund, Parent shall make payment
to Covanta, and Covanta shall make a payment to each Subgroup Member, for its
share of the refund determined in the same manner as in Section 2 above, within
10 business days after the refund is received by Parent or Covanta, as
applicable. In the case of an increase in tax liability, (i) each Subgroup
Member shall pay to Covanta its allocable share of such increased tax liability
(including its Equitable Share of any interest and penalties) within 5 business
days after receiving notice of such liability from Covanta, and (ii) Covanta
shall pay to Parent the Covanta Subgroup's share of such increase (including
Covanta Subgroup's Equitable Share of any interest and penalties) within 10
business days after receiving notice of such liability from Parent. The Members
recognize that a recomputation of the consolidated tax liability for any taxable
year under this Section 9 is not necessarily the final liability for such year,
and such liability may be recomputed more than once.

                  (b)      Each Subgroup Member or any Covanta Tax Affiliate (as
defined in the Investment and Purchase Agreement) shall be responsible for its
tax liability relating to periods prior to (and including) the Closing Date.
Thus, if the Affiliated Group pays any such tax resulting from any final
determination or settlement with the IRS, or any other taxing authority, or any
court decision relating to a tax period prior to the Closing Date, then such
Subgroup Member shall reimburse Parent the amount of any tax, interest,
penalties or other costs resulting from such final determination, settlement, or
court decision.

         10.      Parent's Obligations. Parent shall:

                  (a)      timely file returns and other documents and take such
other action as may be necessary and appropriate to carry out the purpose of
this Agreement; and

                  (b)      subject to receipt by Parent of the payments required
to be made pursuant to Section 7 of this Agreement, timely pay to the Internal
Revenue Service the federal income taxes of the Affiliated Group, including
deficiencies.

         11.      New Members of Affiliated Group.

                  For all taxable periods or portions thereof during which this
Agreement remains in effect, if Covanta acquires (directly or indirectly) or
organizes another entity treated as a corporation for federal, state or local
tax purposes that is required to be included in the Affiliated Group's
consolidated federal income tax return, then such corporation shall join in and
be bound by this Agreement.

                                       6
<PAGE>

         12.      Amendment and Termination of Agreement.

                  (a)      This Agreement may be amended or terminated in whole
or in part only by a written instrument signed by all the parties hereto.

                  (b)      This Agreement shall not be automatically terminated
because Covanta ceases to be included in the Affiliated Group. In such case,
Covanta shall be liable to Parent for an amount determined by multiplying the
Affiliated Group's tax liability (calculated assuming Covanta was still a member
of the Affiliated Group) by a fraction, the numerator of which equals Covanta's
Taxable Income, and the denominator of which equals the Affiliated Group's
consolidated taxable income so computed pursuant to Section 1552(a)(1) of the
Code and Treasury Regulations Section 1.1552-1(a)(1) and assuming Covanta was
still a member of the Affiliated Group. Such payment by Covanta shall constitute
a complete settlement of the federal income tax liability of all Subgroup
Members for such taxable year, except as otherwise provided in Section 9 of this
Agreement. Parent shall indemnify and hold harmless Covanta against any
liability for federal income tax (including alternative minimum tax and
additional amounts) relating to taxable years during the term of this Agreement
other than such apportioned tax liability.

         13.      Audits and Refund Claims.

                  Parent and a former Member shall also consult and furnish each
other with information concerning the status of any tax audit or tax refund
claim relating to a taxable year in which the former Member was included in the
Affiliated Group and a consolidated federal income tax was filed. Parent shall
have the right to make the final determination as to the response of the
Affiliated Group to any audit and shall have the sole right to control any
contest of any change proposed and any proposed disallowance of a refund claim
by the Internal Revenue Service through the Appeals Office of the Internal
Revenue Service and the courts in connection with any taxable year for which
this Agreement is in effect. Each Member shall bear an equitable share of the
cost of any such contest (including fees and expenses of outside accountants,
lawyers or other experts)

         14.      State and Local Income Taxes.

                  The principles underlying the rights and obligations hereunder
of the Members in respect of federal income taxes shall be applied in respect of
any state or local tax (it being understood that the principles provided in
Section 3(ii) of this Agreement shall apply only to the extent Parent has net
operating losses for such applicable state and local taxes on the Closing Date)
based on or measured by all or any part of the net income or loss of the
Affiliated Group or several of its members (a "COMBINED TAX"). All of the
procedural and timing requirements of this Agreement applicable to federal
income taxes shall be equally applicable to any Combined Tax, with appropriate
adjustments thereto to reflect the differences, if any, in corresponding
provisions of the applicable income tax code, law or statute governing any such
Combined Tax and any administrative provisions relating thereto.

         15.      Entire Agreement. This Agreement contains the entire
understanding of the parties hereto with respect to the subject matter contained
herein.

                                       7
<PAGE>

         16.      Successors. This Agreement shall be binding upon and inure to
the benefit of any successor, whether by statutory merger, acquisition of
assets, or otherwise, to any of the parties hereto, to the same extent as if the
successor had been an original party to the agreement.

         17.      Choice of Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of New York.

         18.      Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original, and all of which taken
together shall constitute one and the same instrument.

                            [SIGNATURE PAGE FOLLOWS]

                                       8
<PAGE>

         IN WITNESS WHEREOF, the parties hereto have caused this agreement to be
executed by their duly authorized representatives on the first date mentioned
herein.

                                    DANIELSON HOLDING CORPORATION

                                    By: ___________________________________
                                    Name:
                                    Title:

                                    COVANTA ENERGY CORP.

                                    By: ___________________________________
                                    Name:
                                    Title:

                                    COVANTA POWER INTERNATIONAL HOLDINGS, INC.

                                    By: ___________________________________
                                    Name:
                                    Title:

                                       9
<PAGE>

                            APPENDIX A

                         COVANTA SUBGROUP

Greenway Insurance Company of Vermont
DSS Environmental, Inc.
Covanta Cunningham Environmental Support, Inc.
Haverhill Power, Inc.
LMI, Inc.
Michigan Waste Energy, Inc.
Covanta Oahu Waste Energy  Recovery, Inc.
Covanta Energy Group, Inc.
Covanta Energy Resource Corp.
Covanta Energy International, Inc.
Covanta Energy West, Inc.
Covanta Engineering Services, Inc.
Covanta Haverhill Properties, Inc.
Covanta Marion Land Corp.
Covanta Alexandria/Arlington, Inc.
Covanta Babylon, Inc.
Covanta Bristol, Inc.
Covanta Fairfax Inc.
Covanta Haverhill, Inc.
Covanta Hillsborough, Inc.
Covanta Huntington Res. Rec. 1 Corp.
Covanta Huntington Res. Rec. 7 Corp.
Covanta Huntsville, Inc.
Covanta Indianapolis, Inc.
Covanta Kent, Inc.
Covanta Lancaster, Inc.
Covanta Lee, Inc.
Covanta Long Island, Inc.
Covanta Marion, Inc.
Covanta Montgomery Inc.
Covanta Onondaga Five Corp.
Covanta Onondaga Four Corp.
Covanta Onondaga Inc.

                                       10
<PAGE>

Covanta Onondaga Three Corp.
Covanta Onondaga Two Corp.
Covanta Pasco, Inc.
Covanta Stanislaus, Inc.
Covanta Tulsa, Inc.
Covanta Union, Inc.
Covanta Systems, Inc.
Covanta Omega Lease, Inc.
Covanta Plant Services of New Jersey, Inc.
Covanta Projects of Hawaii, Inc.
Covanta Projects, Inc.
Covanta Energy Services, Inc.
Covanta Wallingford Associates, Inc.
Covanta Waste to Energy, Inc.
Covanta Secure Services, Inc.
Covanta Water Holdings, Inc.
Covanta Water Systems, Inc.
Covanta Warren Energy Resources Co, L.P.
Covanta Water Treatment Services, Inc.
Covanta Acquisition, Inc.
Covanta Bessemer, Inc.
Covanta Onondaga Operations, Inc.
Covanta OPW Associates, Inc.
Covanta OPWH, Inc.
Covanta Mid-Conn, Inc.
Covanta RRS Holdings, Inc.
Olmec Insurance, Ltd.
8309 Tujunga Avenue Corp.
Burney Mountain Power, Inc.
Covanta New Martinsville Hydroelectric, Corporation
ERC Energy, Inc.
ERC Energy II, Inc.
Covanta Geothermal Operations Holdings, Inc.
Heber Field Energy II, Inc.
Covanta Imperial Power Services, Inc.
Mammoth Power Co.
Mt. Lassen Power
Covanta New Martinsville Hydro Operations

                                       11
<PAGE>

Corporation
Covanta Geothermal Operations, Inc.
Covanta Heber Field Energy, Inc.
Covanta Hydro Energy, Inc.
Covanta Hydro Operations, Inc.
Covanta Power Equity Corp.
Covanta Power Pacific, Inc.
Covanta Power Plant Operations
Covanta SIGC Geothermal Operations, Inc.
Pacific Energy Resources, Inc.
Pacific Hydropower Co.
Pacific Oroville Power, Inc.
Pacific Recovery Corp.
Pacific Wood Fuels Co.
Pacific Wood Services Co.
Penstock Power Co.
Covanta Energy Construction, Inc.
Three Mountain Operations, Inc.
Covanta Hydro Operations West, Inc.
Covanta Tampa Bay, Inc.
Three Mountain Power LLC
Covanta Tampa Construction
Covanta Equity Stanislaus, Inc.
Covanta Equity of Alexandria/Arlington, Inc.

                                       12
<PAGE>

                                   APPENDIX B

            Danielson Insurance Co. (Mission Insurance Company Trust)
          Danielson Insurance Co. (Enterprise Insurance Company Trust)
 Danielson National Insurance Company (Mission National Insurance Company Trust)
      Danielson Indemnity Company (Holland-America Insurance Company Trust)
    Danielson Reinsurance Corporation (Mission Reinsurance Corporation Trust)

                                       13
<PAGE>

                                   APPENDIX C

                   Schedule of Expiring Net Operating Losses

<TABLE>
<CAPTION>
Year of Expiration                                           Amount Expiring
------------------                                           ---------------
<S>                                                          <C>
       2004                                                  $   69,947,000
       2005                                                     106,225,000
       2006                                                      92,355,000
       2007                                                      89,790,000
       2008                                                      31,688,000
       2009                                                      39,665,000
       2010                                                      23,600,000
       2011                                                      19,755,000
       2012                                                      38,255,000
       2019                                                      33,635,000
       2022                                                      26,931,000
       Total                                                 $  571,846,000
</TABLE>

                                       14

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