Document:

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                                                                    EXHIBIT 4.1

                         REGISTRATION RIGHTS AGREEMENT

         This Registration Rights Agreement, dated as of December 2, 2003, (as
amended, supplemented or otherwise modified from time to time, this
"Agreement"), by and between Danielson Holding Corporation, a Delaware
corporation (the "Company"), and D. E. Shaw Laminar Portfolios, L.L.C., a
Delaware limited liability company ("DES"), SZ Investments, L.L.C., a Delaware
limited liability company ("SZI"), and Third Avenue Trust, on behalf of the
Third Avenue Value Fund Series, a Delaware business trust ("TAT"), severally
(each of DES, SZI and TAT, an "Investor" and collectively, the "Investors").
Capitalized terms used herein and not otherwise defined shall have the meanings
ascribed thereto in the Note Purchase Agreement.

                                  WITNESSETH:

         WHEREAS, the Investors are parties to that certain Note Purchase
Agreement of even date herewith, among the Company and the Investors, severally
(the "Note Purchase Agreement"), and pursuant thereto the Company has agreed to
execute and deliver this Agreement for the benefit of the Investors;

         NOW, THEREFORE, intending to be legally bound, the parties hereto
agree as follows:

                                   ARTICLE I

                              REGISTRATION RIGHTS

         1.1      Definitions. For purposes of this Article I:

         (a)      The term "Common Stock" means the Company's common stock, par
value $.10 per share.

         (b)      The term "Company Voting Securities" shall mean Common Stock
and any other equity securities of the Company entitled to vote generally for
the election of directors

         (c)      The term "Exchange Act" means the Securities Exchange Act of
1934, as amended.

         (d)      The term "Holder" shall mean any Investor who holds
Registrable Securities and any holder of Registrable Securities to whom the
registration rights conferred by this Agreement have been transferred.

         (e)      The term "register," "registered" and "registration" refer to
a registration effected by preparing and filing a registration statement in
compliance with the Securities Act of 1933, as amended (the "Act").

         (f)      The term "Registrable Securities" means shares of Common
Stock acquired by the Investors pursuant to the Note Purchase Agreement. In the
case of SZI, Registrable Securities of SZI shall be governed by the provisions
of this Agreement and not by the

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provisions of the registration rights agreement, dated as of November 8, 2002,
between the Company and SZI.

         (g)      The term "Rule 415 Offering" means an offering on a delayed
or continuous basis pursuant to Rule 415 (or any successor rule to similar
effect) promulgated under the Act.

         (h)      The term "Shelf Registration Statement" means a registration
statement intended to effect a shelf registration in connection with a Rule 415
Offering.

         1.2      Shelf Registrations and Piggy-Back Registrations.

         (a)      Pursuant to Section 5.7 of the Note Purchase Agreement, on
the earlier of June 30, 2004, or ten days after the date of the closing of the
Rights Offering, the Company shall file with the SEC a Shelf Registration
Statement, or such other registration statement as the Company may qualify to
file, and shall use commercially reasonable efforts to cause such registration
statement to be declared effective as promptly as practicable, on behalf of the
Holders with respect to all of the Registrable Securities and shall use its
commercially reasonable efforts to keep such registration statement effective
until such time as all such Registrable Securities covered thereby have been
sold or disposed of thereunder or sold, transferred or otherwise disposed of to
a Person that is not a Holder.

         (b)      Piggyback Registration. If (but without any obligation to do
so) the Company proposes to register any of its Common Stock under the Act in
connection with the public offering of such Common Stock by the Company solely
for cash (other than a registration relating solely to the sale of securities
to participants in a dividend reinvestment plan, stock plan or employee benefit
plan; a registration relating solely to the issuance of securities to the
security holders of an acquired company in connection with an acquisition; or a
registration on any form which does not permit inclusion of selling
stockholders), or the Company proposes to register any of its securities on
behalf of a holder exercising demand registration rights, the Company shall, at
such time, promptly give each Investor written notice of such registration.
Upon the written request any Investor given within 15 days after mailing of
such notice by the Company, the Company shall cause to be registered under the
Act all of the Registrable Securities that such Investor has requested to be
registered. Notwithstanding anything to the contrary in this Section 1.2(b), in
connection with any offering involving an underwriting of shares being issued
by the Company, the Company shall not be required under this Section 1.2(b) to
include any of the Holders' Registrable Securities in such underwriting or the
registration statement relating thereto unless they accept the terms of the
underwriting as agreed upon between the Company and the underwriters selected
by the Company. If the total amount of securities, including Registrable
Securities, requested by Holders and other stockholders to be included in such
offering exceeds the amount of securities offered other than by the Company
that the underwriters reasonably believe can be offered without jeopardizing
the success of the offering, then the Company shall be required to include in
the offering only that number of such securities, including Registrable
Securities, which the underwriters believe will not jeopardize the success of
the offering. To achieve any necessary reduction in the securities to be sold,
the securities to be excluded from the offering shall first be selected (in
each case, pro rata among such class of holders according to the total amount
of securities proposed to be included in the registration statement or in such
other proportions as shall mutually be agreed to by such class of holders) in
the following order:

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(i) first, securities being included on behalf of holders other than either the
Investors or other holders of Registrable Securities shall be excluded; (ii)
next, if additional securities must be excluded, Registrable Securities
included pursuant to Section 1.2(b) shall be excluded; (iii) finally, if
additional securities must be excluded, securities offered by the Company shall
be excluded.

         1.3      Additional Obligations of the Company. Whenever the Company
has filed a registration statement under this Article I, the Company shall, as
expeditiously as reasonably possible:

         (a)      Prepare and file with the SEC such amendments and supplements
to such registration statement and the prospectus used in connection therewith
as may be necessary to comply with the provisions of the Act with respect to
the disposition of all securities covered thereby.

         (b)      Furnish to the holders of Registrable Securities such numbers
of copies of a prospectus, including a preliminary prospectus, in conformity
with the requirements of the Act, and such other documents as they may
reasonably request in order to facilitate the disposition of Registrable
Securities covered by such registration statement owned by them.

         (c)      Use its best efforts to register and qualify the securities
covered by such registration statement under such other securities or Blue Sky
laws of such states or other jurisdictions as shall be reasonably requested by
the holders of Registrable Securities, provided that the Company shall not be
required to qualify to do business or to file a general consent to service of
process in any such states or jurisdictions where it is not so subject.

         (d)      Notify each holder of Registrable Securities covered by such
registration statement at any time when a prospectus relating thereto is
required to be delivered under the Act of the happening of any event as a
result of which the prospectus included in such registration statement, as then
in effect, includes an untrue statement of a material fact or omits to state a
material fact required to be stated therein or necessary to make the statements
therein not misleading in the light of the circumstances then existing, and
then use its best efforts to promptly correct such statement or omission.
Notwithstanding the foregoing and anything to the contrary set forth in this
Section 1.3, each holder of Registrable Securities acknowledges that the
Company shall have the right to suspend the use of the prospectus forming a
part of a registration statement if such offering would interfere with a
pending corporate transaction or for other reasons involving material
non-public information, until such time as an amendment to the registration
statement has been filed by the Company and declared effective by the SEC, or
until such time as the Company has filed an appropriate report with the SEC
pursuant to the Exchange Act. Each holder of Registrable Securities hereby
covenants that it will (a) keep any such notice strictly confidential, and (b)
not sell any shares of Common Stock pursuant to such prospectus during the
period commencing at the time at which the Company gives the holder of
Registrable Securities notice of the suspension of the use of such prospectus
and ending at the time the Company gives the holder of Registrable Securities
notice that it may thereafter effect sales pursuant to such prospectus. The
Company shall only be able to suspend the use of such prospectus for not more
than two periods of not more than 90 days each in respect of any registration
in any 12 month period.

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         (e)      Use its best efforts to cause all Registrable Securities to
be listed on all securities exchanges on which similar securities issued by the
Company are then listed.

         1.4      Furnish Information. It shall be a condition precedent to the
obligations of the Company to take any action pursuant to this Article I with
respect to the Registrable Securities of any selling holder of Registrable
Securities that such holder of Registrable Securities shall furnish to the
Company such information regarding itself, the Registrable Securities held by
it, and the intended method of disposition of such securities as shall be
required to effect the registration of such holder's Registrable Securities and
as may be required from time to time to keep such registration current.

         1.5      Expenses of Registration. All expenses incurred by or on
behalf of the Company in connection with registrations, filings or
qualifications pursuant to Section 1.2, including, without limitation, all
registration, filing and qualification fees, printers' and accounting fees, and
fees and disbursements of counsel for the Company, shall be borne by the
Company. In no event shall the Company be obligated to bear any underwriting
discounts or commissions or brokerage fees or commissions relating to
Registrable Securities or the actual fees and expenses of more than one counsel
for each selling Investor; provided that such fees and expenses in the
aggregate shall not exceed $60,000.

         1.6      Indemnification. In the event any Registrable Securities are
included in a registration statement under this Article I:

         (a)      To the extent permitted by law, the Company will indemnify
and hold harmless each holder and the affiliates of such holder, and their
respective directors, officers, general and limited partners, agents and
representatives (and the directors, officers, affiliates and controlling
persons thereof), and each other person, if any, who controls such holder
within the meaning of the Act, against any losses, claims, damages, or
liabilities (joint or several) to which they may become subject under the Act,
the Exchange Act or other federal or state law, insofar as such losses, claims,
damages or liabilities (or actions in respect thereof) arise out of or are
based upon any of the following statements, omissions or violations
(collectively a "Violation"): (i) any untrue statement or alleged untrue
statement of a material fact contained in such registration statement,
including any preliminary prospectus (but only if such statement is not
corrected in the final prospectus) contained therein or any amendments or
supplements thereto, (ii) the omission or alleged omission to state therein a
material fact required to be stated therein, or necessary to make the
statements therein not misleading (but only if such omission is not corrected
in the final prospectus), or (iii) any violation or alleged violation by the
Company in connection with the registration of Registrable Securities under the
Act, the Exchange Act, any state securities law or any rule or regulation
promulgated under the Act, the Exchange Act or any state securities law; and
the Company will pay to each such Holder, affiliate or controlling person, as
incurred, any legal or other expenses reasonably incurred by them in connection
with investigating or defending any such loss, claim, damage, liability or
action; provided, however, that the indemnity agreement contained in this
Section 1.6(a) shall not apply to amounts paid in settlement of any such loss,
claim, damage, liability or action if such settlement is effected without the
consent of the Company (which consent shall not be unreasonably withheld), nor
shall the Company be liable in any such case for any such loss, claim, damage,
liability or action to the extent that it arises out of or is based upon a
Violation which occurs in reliance upon and

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in conformity with written information furnished expressly for use in
connection with such registration by any such holder or controlling person.
Each indemnified party shall furnish such information regarding itself or the
claim in question as an indemnifying party may reasonably request in writing
and as shall be reasonably required in connection with defense of such claim
and litigation resulting therefrom.

         (b)      To the extent permitted by law, each selling holder of
Registrable Securities will indemnify and hold harmless the Company, each of
its directors, each of its officers who has signed the registration statement,
each person, if any, who controls the Company within the meaning of the Act,
any underwriter, any other holder selling securities in such registration
statement and any controlling person of any such underwriter or other holder,
against any losses, claims, damages or liabilities Joint or several) to which
any of the foregoing persons may become subject, under the Act, the Exchange
Act or other federal or state law, insofar as such losses, claims, damages or
liabilities (or actions in respect thereto) arise out of or are based upon any
Violation, in each case to the extent (and only to the extent) that such
Violation occurs in reliance upon and in conformity with written information
furnished by such holder expressly for use in connection with such
registration; and each such holder will pay, as incurred, any legal or other
expenses reasonably incurred by any person intended to be indemnified pursuant
to this Section 1.6(b) in connection with investigating or defending any such
loss, claim, damage, liability or action; provided, however, that the indemnity
agreement contained in this Section 1.6(b) shall not apply to amounts paid in
settlement of any such loss, claim, damage, liability or action if such
settlement is effected without the consent of such holder, which consent shall
not be unreasonably withheld; provided, that, in no event shall any indemnity
under this Section 1.6(b) exceed the net proceeds from the offering received by
such holder. Each indemnified party shall furnish such information regarding
itself or the claim in question as an indemnifying party may reasonably request
in writing and as shall be reasonably required in connection with defense of
such claim and litigation resulting therefrom.

         (c)      Promptly after receipt by an indemnified party under this
Section 1.6 of notice of the commencement of any action (including any
governmental action), such indemnified party will, if a claim in respect
thereof is to be made against any indemnifying party under this Section 1.6,
deliver to the indemnifying party a written notice of the commencement thereof
and the indemnifying party shall have the right to participate in, and, to the
extent the indemnifying party so desires, jointly with any other indemnifying
party similarly noticed, to assume the defense thereof with counsel mutually
satisfactory to the parties. The failure to deliver written notice to the
indemnifying party within a reasonable time after the commencement of any such
action, if materially prejudicial to its ability to defend such action, shall
relieve such indemnifying party of any liability to the indemnified party under
this Section 1.6 to the extent of such prejudice, but the omission so to
deliver written notice to the indemnifying party will not relieve it of any
liability that it may have to any indemnified party otherwise than under this
Section 1.6. The indemnified party shall have the right, but not the
obligation, to participate in the defense of any action referred to above
through counsel of its own choosing and shall have the right, but not the
obligation, to assert any and all separate defenses, cross claims or
counterclaims which it may have, and the fees and expenses of such counsel
shall be at the expense of such indemnified party unless (i) the employment of
such counsel has been specifically authorized in advance by the indemnifying
party , (ii) there is a conflict of interest that prevents counsel for the
indemnifying party from adequately representing the interests of the
indemnified party or there are defenses available to the indemnified party that
are different from, or additional to, the defenses that are

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available to the indemnifying party, (iii) the indemnifying party does not
employ counsel that is reasonably satisfactory to the indemnified party within
a reasonable period of time, or (iv) the indemnifying party fails to assume the
defense or does not reasonably contest such action in good faith, in which
case, if the indemnified party notifies the indemnifying party that it elects
to employ separate counsel, the indemnifying party shall not have the right to
assume the defense of such action on behalf of the indemnified party and the
reasonable fees and expenses of such separate counsel shall be borne by the
indemnifying party; provided, however, that, the indemnifying party shall not,
in connection with any proceeding or related proceedings in the same
jurisdiction, be liable for the reasonable fees and expenses of more than one
separate firm (in addition to one firm acting as local counsel) for all
indemnified parties.

         (d)      The obligations of the Company and the holders under this
Section 1.6 shall survive the completion of any offering of Registrable
Securities in a registration statement under this Article I.

         1.7      Reports Under the Exchange Act. With a view to making
available to the holders of Registrable Securities the benefits of Rule 144
promulgated under the Exchange Act and any other rule or regulation of the SEC
that may at any time permit a holder to sell securities of the Company to the
public without registration or pursuant to a registration on Form S-3, the
Company agrees to:

         (a)      use its best efforts to make and keep public information
available, as those terms are understood and defined in Rule 144;

         (b)      use its best efforts to file with the SEC in a timely manner
all reports and other documents required under the Act and the Exchange Act;
and

         (c)      furnish to any Holder forthwith upon request (i) a written
statement by the Company as to its compliance with the reporting requirements
of Rule 144, or as to whether it qualifies as a registrant whose securities may
be resold pursuant to Form S-3, (ii) a copy of the most recent annual or
quarterly report of the Company and such other reports and documents so filed
by the Company, and (iii) such other information (and the Company shall take
such action) as may be reasonably requested in availing any holder of
Registrable Securities of any rule or regulation of the SEC which permits the
selling of any such securities without registration or pursuant to such form.

         1.8      No Assignment of Registration Rights. The rights to cause the
Company to register Registrable Securities pursuant to this Article I may only
be assigned by a holder of Registrable Securities to a transferee or assignee
of any Registrable Securities if immediately following such transfer the
further disposition of such securities by the transferee or assignee is
restricted under the Act.

         1.9      Waiver Procedures. The observance by the Company of any
provision of this Article I may be waived (either generally or in a particular
instance and either retroactively or prospectively) with the written consent of
the holders of at least 66 2/3% of the Registrable

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Securities, and any waiver effected in accordance with this paragraph shall be
binding upon each holder of Registrable Securities.

         1.10     "Market Stand-off" Agreement. Any holder of Registrable
Securities, if requested by an underwriter of any registered public offering of
Company securities being sold in a firm commitment underwriting, agrees not to
sell or otherwise transfer or dispose of any Common Stock (or other Company
Voting Securities) held by such holder other than shares of Registrable
Securities included in the registration during the seven days prior to, and
during a period of up to 180 days following, the effective date of the
registration statement. Such agreement shall be in writing in a form reasonably
satisfactory to the Company and such underwriter. The Company may impose
stop-transfer instructions with respect to the securities subject to the
foregoing restriction until the end of the required stand-off period.

                                  ARTICLE II

                                 MISCELLANEOUS

         2.1      Remedies. Each of the Investors and the Company acknowledge
and agree that (i) the provisions of this Agreement are reasonable and
necessary to protect the proper and legitimate interests of the parties hereto,
and (ii) the parties would be irreparably damaged in the event any of the
provisions of this Agreement were not performed in accordance with their
specific terms or were otherwise breached. It is accordingly agreed that any
party shall be entitled to seek preliminary and permanent injunctive relief to
prevent breaches of the provisions of this Agreement by any other party (or its
Affiliates) without the necessity of proving actual damages or of posting any
bond, and to enforce specifically the terms and provisions hereof and thereof
in any court of the United States or any state thereof having jurisdiction,
which rights shall be cumulative and in addition to any other remedy to which
the parties may be entitled hereunder or at law or equity.

         2.2      Notices. All notices, and other communications hereunder
shall be in writing and shall be deemed given if delivered personally, sent by
documented overnight delivery service or, to the extent receipt is confirmed,
facsimile, to the appropriate address or facsimile number set forth below (or
at such other address or facsimile number for a party as shall be specified by
like notice): (i) if to the Company, to Danielson Holding Corporation, 2 North
Riverside Plaza, Suite 600, Chicago, IL 60606, Attention: Philip Tinkler,
Facsimile: (312) 454-9678 and (ii) if to any Investor, to such Investor at the
address set forth in EXHIBIT A.

         2.3      Severability. If any term, provision, covenant or restriction
of this Agreement is held by a court of competent jurisdiction to be invalid,
void or unenforceable, the remainder of the terms, provisions, covenants and
restrictions shall remain in full force and effect and shall in no way be
affected, impaired or invalidated. The parties hereto agree that they will use
their best efforts at all times to support and defend this Agreement.

         2.4      Amendments. This Agreement may be amended only by an
agreement in writing signed by each of the parties hereto.

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         2.5      Governing Law. This Agreement shall be governed and
controlled as to validity, enforcement, interpretation, construction, effect
and in all other respects by the internal laws of the State of Delaware
applicable to contracts made in that State.

         2.6      Descriptive Headings. Descriptive headings are for
convenience only and shall not control or affect the meaning or construction of
any provision of this Agreement

         2.7      Counterparts; Facsimile Signatures. This Agreement shall
become binding when one or more counterparts hereof, individually or taken
together, bears the signatures of each of the parties hereto. This Agreement
may be executed in any number of counterparts, each of which shall be an
original as against the party whose signature appears thereon, or on whose
behalf such counterpart is executed, but all of which taken together shall be
one and the same agreement. A facsimile copy of a signature of a party to this
Agreement or any such counterpart shall be fully effective as if an original
signature.

         2.8      Successors and Assigns. This Agreement shall be binding upon
and inure to the benefit of and be enforceable by the successors and assigns of
the parties hereto.

         2.9      Assignments. This Agreement may not be assigned without the
prior written consent of each party hereto, and any attempt to effect an
assignment hereof without such consent shall be void.

         2.10     Jurisdiction and Service of Process. THE COMPANY AND EACH OF
THE INVESTORS, HEREBY CONSENT TO THE JURISDICTION OF ANY STATE OR FEDERAL COURT
LOCATED WITHIN THE STATE OF DELAWARE AND IRREVOCABLY AGREE THAT, SUBJECT TO THE
OTHER PROVISIONS OF THIS AGREEMENT, ALL ACTIONS OR PROCEEDINGS ARISING OUT OF
OR RELATING TO THIS AGREEMENT WHICH MAY BE LITIGATED SHALL BE LITIGATED IN SUCH
COURTS. THE COMPANY AND EACH OF THE INVESTORS ACCEPT FOR SUCH PARTY AND IN
CONNECTION WITH SUCH PARTY'S PROPERTIES, GENERALLY AND UNCONDITIONALLY, THE
NONEXCLUSIVE JURISDICTION OF THE AFORESAID COURTS AND WAIVES ANY DEFENSE OF
FORUM NON CONVENIENS, AND IRREVOCABLY AGREES TO BE BOUND BY ANY JUDGMENT
RENDERED THEREBY IN CONNECTION WITH THIS AGREEMENT. THE COMPANY AND EACH OF THE
INVESTORS AGREE TO ACCEPT SERVICE OF ALL PROCESS, BY REGISTERED OR CERTIFIED
MAIL, RETURN RECEIPT REQUESTED, IN ANY SUCH PROCEEDINGS IN ANY SUCH COURT, SUCH
SERVICE BEING HEREBY ACKNOWLEDGED BY EACH SUCH PARTY TO BE EFFECTIVE AND
BINDING SERVICE IN EVERY RESPECT. IF ANY AGENT APPOINTED BY THE COMPANY OR ANY
OF THE INVESTORS REFUSES TO ACCEPT SERVICE, SUCH PARTY HEREBY AGREES THAT
SERVICE UPON SUCH PARTY BY MAIL SHALL CONSTITUTE SUFFICIENT NOTICE. NOTHING
HEREIN SHALL AFFECT THE RIGHT TO SERVE PROCESS IN ANY OTHER MANNER PERMITTED BY
LAW OR SHALL LIMIT THE RIGHT OF THE COMPANY OR ANY INVESTOR TO BRING
PROCEEDINGS AGAINST THE COMPANY OR ANY INVESTOR IN THE COURTS OF ANY OTHER
JURISDICTION.

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         2.11     Trial. THE COMPANY AND EACH OF THE INVESTORS HEREBY WAIVE
SUCH PARTY'S RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED UPON
OR ARISING OUT OF THIS AGREEMENT OR ANY DEALINGS BETWEEN THE PARTIES HERETO
RELATING TO THE SUBJECT MATTER HEREOF. THE COMPANY AND EACH OF THE INVESTORS
ALSO WAIVE ANY BOND OR SURETY OR SECURITY UPON SUCH BOND WHICH MIGHT, BUT FOR
THIS WAIVER, BE REQUIRED OF ANY PARTY TO THIS AGREEMENT WITH RESPECT TO ANY
ACTION COMMENCED BY ONE OF THEM AGAINST THE OTHER OF THEM. THE SCOPE OF THIS
WAIVER IS INTENDED TO BE ALL-ENCOMPASSING OF ANY AND ALL DISPUTES THAT MAY BE
FILED IN ANY COURT AND THAT RELATE TO THE SUBJECT MATTER OF THIS TRANSACTION,
INCLUDING WITHOUT LIMITATION, CONTRACT CLAIMS, TORT CLAIMS, BREACH OF DUTY
CLAIMS, AND ALL OTHER COMMON LAW AND STATUTORY CLAIMS. THE COMPANY AND EACH OF
THE INVESTORS ACKNOWLEDGE THAT THIS WAIVER IS A MATERIAL INDUCEMENT TO ENTER
INTO A BUSINESS RELATIONSHIP, THAT EACH HAS ALREADY RELIED ON THE WAIVER IN
ENTERING INTO THIS AGREEMENT AND THAT EACH WILL CONTINUE TO RELY ON THE WAIVER
IN THEIR RELATED FUTURE DEALINGS. EACH OF THE COMPANY AND EACH OF THE INVESTORS
FURTHER WARRANTS AND REPRESENTS THAT SUCH PARTY HAS REVIEWED THIS WAIVER WITH
SUCH PARTY'S LEGAL COUNSEL, AND THAT SUCH PARTY KNOWINGLY AND VOLUNTARILY
WAIVES SUCH PARTY'S JURY TRIAL RIGHTS FOLLOWING CONSULTATION WITH LEGAL
COUNSEL. THIS WAIVER IS IRREVOCABLE, MEANING THAT IT MAY NOT BE MODIFIED EITHER
ORALLY OR IN WRITING, AND THE WAIVER SHALL APPLY TO ANY SUBSEQUENT AMENDMENTS,
RENEWALS, SUPPLEMENTS OR MODIFICATIONS TO THIS AGREEMENT. IN THE EVENT OF
LITIGATION, THIS AGREEMENT MAY BE FILED AS A WRITTEN CONSENT TO A TRIAL BY THE
COURT.

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         IN WITNESS WHEREOF, the parties hereto have executed this Agreement
under seal as of the day and year first above written.

                                DANIELSON HOLDING CORPORATION

                                By: /s/ Philip G. Tinkler
                                   --------------------------------------------
                                Name:   Philip G. Tinkler
                                Title:  Chief Financial Officer

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

                                By: /s/ Max Holmes
                                   --------------------------------------------
                                Name:   Max Holmes
                                Title:  Authorized Signatory

                                SZ INVESTMENTS, L.L.C.

                                By: /s/ William Pate
                                   --------------------------------------------
                                Name:   William Pate
                                Title:  Vice President

                                THIRD AVENUE TRUST, ON BEHALF OF THE
                                THIRD AVENUE VALUE FUND SERIES

                                By: /s/ David M. Barse
                                   --------------------------------------------
                                Name:   David M. Barse
                                Title:  Chief Executive Officer

<PAGE>
                                   EXHIBIT A

                                   PURCHASERS

             Purchaser
          Name and Address

D. E. SHAW LAMINAR PORTFOLIOS, L.L.C.
120 West Forty-Fifth Street
Floor 39, Tower 45                          with a copy to:
New York, NY 10036
Attention:  Max Holmes                      Willkie Farr & Gallagher
Facsimile:  (212) 478-0100                  787 Seventh Avenue
                                            New York, NY 10019
                                            Attention:  Steven Wilamowsky, Esq.
                                            Facsimile:  (212) 728-8111
SZ INVESTMENTS, L.L.C.
2 N. Riverside Plaza, Suite 600
Chicago, IL 60606                           with a copy to:
Attention:  Joseph Paolucci, Esq.
Facsimile:  (312) 559-1280                  Sidley Austin Brown & Wood LLP
                                            Bank One Plaza
                                            10 South Dearborn Street
                                            Chicago, IL 60603

                                            Attention: Imad I. Qasim, Esq.
                                            Jeffrey S. Rothstein, Esq.
                                            Facsimile: (312) 853-7036
THIRD AVENUE TRUST, ON BEHALF OF THE
THIRD AVENUE VALUE FUND SERIES
622 Third Avenue, 32nd Floor                with a copy to:
New York, NY 10017
Attention: Willard J. Hall                  Pillsbury Winthrop LLP
Facsimile: (212) 735-0003                   One Battery Park Plaza
                                            New York, NY 10004
                                            Attention: Richard L. Epling, Esq.
                                            Facsimile: (212) 858-1500<PAGE>
                                                                   EXHIBIT 10.1

                     D. E. Shaw Laminar Portfolios, L.L.C.
                          120 West Forty-Fifth Street
                               Floor 39, Tower 45
                               New York, NY 10036

December 2, 2003

Danielson Holding Corporation
Two North Riverside Plaza, Suite 600
Chicago, IL 60606

Ladies and Gentlemen:

Reference is hereby made to that certain Note Purchase Agreement, dated the
date hereof (the "Note Purchase Agreement"), among Danielson Holding
Corporation (the "Company"), and SZ Investments, L.L.C., Third Avenue Trust, on
behalf of the Third Avenue Value Fund Series, and D. E. Shaw Laminar
Portfolios, L.L.C. ("DES"). As a condition to entering into the Note Purchase
Agreement, DES has requested that the Company enter into this Letter Agreement
(this "Letter Agreement"). Capitalized terms used herein and not otherwise
defined shall have the meanings ascribed thereto in the Note Purchase
Agreement.

In consideration of the foregoing and the representations, warranties,
covenants and agreements set forth herein and in the Note Purchase Agreement,
the Company and DES hereby agree as follows:

I.       Transfer of Common Stock by DES and the Transferees. Subject to
Paragraph III below, DES and each Transferee may Transfer the shares of Common
Stock acquired by DES pursuant to the Note Purchase Agreement, including the
Escrowed Stock and the Common Stock to be received upon conversion of the Notes
(collectively, the "Subject Shares"), pursuant to the following terms and
conditions:

         A.       DES shall be permitted to Transfer, in one or multiple
         transactions and without obtaining any additional consent from the
         Company pursuant to Article FIFTH of the Restated Certificate of
         Incorporation, an aggregate number of Subject Shares under this
         Paragraph A up to but not exceeding an amount equal to (i) 10% of the
         outstanding Common Stock of the Company (calculated at the time of
         such Transfer) during the period beginning on the date of the closing
         of the Acquisition (the "Closing Date") through the first anniversary
         of the Closing Date; (ii) 15% of the outstanding Common Stock of the
         Company (calculated at the time of such Transfer) less the percentage
         of shares sold pursuant to clause I.A.(i) during the period beginning
         on the first anniversary of the Closing Date and ending on the second
         anniversary of the Closing Date; and (iii) 20% of the outstanding
         Common Stock of the Company (calculated at the time of such Transfer)
         less the percentage of shares sold pursuant to clauses I.A.(i) and
         (ii) during

<PAGE>
         the period beginning on the second anniversary of the Closing Date and
         ending on the third anniversary of the Closing Date;

         B.       anytime after the third anniversary of the Closing Date, DES
         shall be permitted to Transfer any such remaining Subject Shares then
         owned by it free and clear of any limitations on Transfer and without
         obtaining any additional consent from the Company;

         C.       anytime after the Closing Date, if DES becomes subject to any
         filings or other requirements of any federal, state, municipal or
         foreign governmental, regulatory or other public body, agency or
         authority (including self-regulatory organizations), including without
         limitation any insurance or banking authority (collectively,
         "Regulations"), (other than the Disclaimer(s) filed by DES with the
         State Insurance Departments and any filing required under any federal
         or state securities laws (including without limitation Form 3, Form 4,
         Schedule 13d or 13g, and registration statements)) that requires any
         disclosures of the identity of, or other confidential information
         related to DES's direct or indirect investors or any other identifying
         facts or features or would otherwise limit DES's ability to make
         future investments as a result of being made subject to new
         Regulations, DES shall be permitted to Transfer all Subject Shares
         free and clear of any limitations on Transfer and without obtaining
         any additional consent from the Company; and

         D.       each Transferee from a prior Authorized Transfer shall be
         permitted to Transfer any Subject Shares free and clear of any
         limitations on Transfer and without obtaining any additional consent
         from the Company;

provided, that, in each case, such Transfer constitutes an Authorized Transfer.
As used herein, "Transfer" shall mean any sale, assignment, transfer,
disposition, exchange, mortgage, pledge, grant, hypothecation or other
transfer, absolute or as a security or encumbrance, in any manner whatsoever,
from any transaction or transactions, including without limitation, via
secondary market or over-the-counter transactions; "Transferee" shall mean any
Person that receives Subject Shares in an Authorized Transfer; "Authorized
Transfer" shall mean a Transfer by (i) DES pursuant to Paragraphs A, B or C
above or (ii) any Transferee pursuant to Paragraph D above, in each case that
satisfies the procedures described in Paragraph III below; provided further,
that any Transfer must comply with applicable federal and state securities laws
and insider trading policies.

II.      Representations and Warranties of Company. The Company hereby
represents and warrants to DES that:

         A.       The Special Committee of the Board of Directors of the
         Company, on behalf of the Board of Directors, has authorized the
         agreements set forth in this Letter Agreement in resolutions of the
         Special Committee of the Board of Directors adopted at a Special
         Meeting held on November 24, 2003 and determined that: (i) it is in
         the best interest of the Company to pre-approve the Authorized
         Transfers and (ii) subject to the requirements in Paragraph III below,
         all obligations of the Board of Directors and the Company pursuant to
         Article FIFTH of the Restated Certificate of Incorporation have been
         satisfied

                                      -2-
<PAGE>
         in full with regard to the Authorized Transfers, subject to receipt of
         a Bring-Down Opinion (defined below);

         B.       the Company has received the Nixon Peabody Letter
         substantially in the form of Exhibit A hereto;

         C.       based on current law and circumstances, the Bring-Down
         Opinion (as described below) would be available for the Transfers
         described in Paragraph I, unless (i) the Transferee owns other Common
         Stock that the Transferee acquired within the testing period that
         includes the date of the Proposed Transfer, (ii) the Transferee
         becomes a "5-percent shareholder" as a result of the Transfer and
         (iii) DES or the Transferee receives a Blocking Opinion;

         D.       each of the Transfers described in Paragraph I shall be
         treated by the Company as "previously approved subsequent
         transactions" for purposes of Article FIFTH of the Restated
         Certificate of Incorporation.

III.     Procedures for Authorized Transfers. DES and each Transferee intending
to effect a Transfer of Subject Shares that, but for this Paragraph III, would
otherwise qualify as an Authorized Transfer, shall provide the Company written
notice in the form of Exhibit B hereto (the "Notice of Transfer") of such
Transfer (a "Proposed Transfer") no less than seven Business Days before the
date of such Proposed Transfer. The Notice of Transfer shall include the number
of Subject Shares to be Transferred pursuant to such Proposed Transfer and the
anticipated date of such Proposed Transfer. In the case of a Transferee or
intended recipient, as the case may be, that either is or would become a
"5-percent shareholder" (within the meaning of Section 382 of the Internal
Revenue Code of 1986, as amended and the applicable Treasury regulations
thereunder (the "Code")) immediately after the Proposed Transfer, the Notice of
Transfer shall also include the name of the Transferee, in the case of a
Proposed Transfer by DES, or the intended recipient of the Subject Shares, in
the case of a Proposed Transfer by a Transferee , the number of shares of
Common Stock owned, directly or constructively, by such Transferee or intended
recipient within the past three years and the number of shares of Common Stock
acquired within such three year period. The Company shall promptly use all
commercially reasonable efforts to obtain an opinion substantially in the form
of Exhibit C hereto (a "Bring-Down Opinion"), and in no event later than five
Business Days after receipt of the Notice of Transfer, give appropriate
instructions to the transfer agent for the Common Stock (the "Transfer Agent"),
in full satisfaction of the provisions of Article FIFTH of the Restated
Certificate of Incorporation, and shall direct the Transfer Agent to effectuate
the Proposed Transfer; provided, however, that if such Bring-Down Opinion
cannot be delivered, the Company shall deliver to DES or the Transferee, as
applicable, within five Business Days after the receipt of the Notice of
Transfer, an opinion of Skadden, Arps, Slate, Meagher & Flom LLP, Nixon Peabody
LLP or other nationally recognized tax counsel reasonably acceptable to DES or
the Transferee, as applicable, that the Proposed Transfer would result in, or
create an unreasonable risk of, (i) an aggregate increase in the percentage
ownership of the stock of the Company by its "5-percent shareholders" and (ii)
that such aggregate increase in ownership of the stock of the Company would
constitute an "ownership change" under Section 382(g) of the Code, determined
by substituting "48.75 percentage points" for "50 percentage points" where such
phrase appears in Section 382(g)(1)(A) of the Code (the "Blocking Opinion"),
and such Proposed Transfer shall

                                      -3-
<PAGE>
not qualify as an Authorized Transfer. For the avoidance of doubt, any Blocking
Opinion issued upon receipt of a Notice of Transfer shall apply solely to the
Proposed Transfer and not to any subsequent Transfer of Subject Shares pursuant
to this Letter Agreement.

IV.      Cooperation Under FPA.

         A.       DES agrees to use commercially reasonable efforts, to the
         extent required by law, to cooperate in providing information required
         to be furnished as part of any required filing under Section 203 of
         the Federal Power Act, as amended, by Covanta, the Company or DES.

         B.       The Company agrees to use commercially reasonable efforts, to
         cooperate with DES in minimizing the information to be furnished by
         DES and to provide to DES information required in any such filing
         required to be made by DES.

V.       Miscellaneous.

         A.       The Company and DES agree that the provisions of this Letter
         Agreement will be amended to equitably reflect the effect of any
         issuance or redemption of stock of the Company, stock split or reverse
         stock split with respect to stock of the Company, recapitalization of
         the Company or any other adjustment to the capital structure of the
         Company.

         B.       All notices or other communications required or authorized to
         be given hereunder shall be made pursuant to Section 12.4 of the Note
         Purchase Agreement.

         C.       This Letter Agreement may not be amended, supplemented,
         modified or revoked unless agreed to in writing by the parties hereto.

         D.       This Letter Agreement shall be governed by, and construed in
         accordance with, the laws of the State of Delaware, without giving
         effect to its conflicts-of-law provisions.

         E.       The Company and DES hereby acknowledge that damages may not
         be an adequate remedy in the event that any of the provisions of this
         Letter Agreement were not performed in accordance with their specific
         terms or were otherwise breached. It is accordingly agreed that DES
         shall be entitled to an injunction or injunctions to prevent breaches
         of this Letter Agreement and to enforce specifically the terms and
         provisions hereof in any court in the United States or any state
         having jurisdiction, this being in addition to any other remedy to
         which DES is entitled at law or in equity.

                                      -4-
<PAGE>
If you are in agreement with the foregoing, please sign in the space provided
below and return a copy of this Letter Agreement to DES.

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

                                        By: /s/ Max Holmes
                                           ------------------------------------
                                        Name:   Max Holmes
                                        Title:  Authorized Signatory

Agreed:

DANIELSON HOLDING CORPORATION

By: /s/ Philip G. Tinkler
   ---------------------------------
Name:   Philip G. Tinkler
Title:  Chief Financial Officer
Date:   December 2, 2003

                                      -5-

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