-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, H3XYzwY1REHS4aHgse1WNDRmEIGfgKC+sJeIbh6+Pn0aTPOljOZo36GVkve0hbUc tZabkqz5W8iRfi7Vy9p6lw== 0000950123-03-013752.txt : 20031212 0000950123-03-013752.hdr.sgml : 20031212 20031212171506 ACCESSION NUMBER: 0000950123-03-013752 CONFORMED SUBMISSION TYPE: SC 13D PUBLIC DOCUMENT COUNT: 6 FILED AS OF DATE: 20031212 GROUP MEMBERS: DAVID E SHAW GROUP MEMBERS: DE SHAW & CO LLC GROUP MEMBERS: DE SHAW & CO LP FILED BY: COMPANY DATA: COMPANY CONFORMED NAME: DE SHAW LAMINAR PORTFOLIOS LLC CENTRAL INDEX KEY: 0001263972 IRS NUMBER: 010577802 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: SC 13D MAIL ADDRESS: STREET 1: 120 W 45TH STREET STREET 2: TOWER 45, 39TH FLOOR CITY: NEW YORK STATE: NY ZIP: 10036 SUBJECT COMPANY: COMPANY DATA: COMPANY CONFORMED NAME: DANIELSON HOLDING CORP CENTRAL INDEX KEY: 0000225648 STANDARD INDUSTRIAL CLASSIFICATION: FIRE, MARINE & CASUALTY INSURANCE [6331] IRS NUMBER: 956021257 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: SC 13D SEC ACT: 1934 Act SEC FILE NUMBER: 005-02837 FILM NUMBER: 031052547 BUSINESS ADDRESS: STREET 1: 767 THIRD AVE 5TH FL CITY: NEW YORK STATE: NY ZIP: 10017 BUSINESS PHONE: 2128880347 MAIL ADDRESS: STREET 1: 767 THIRD AVE CITY: NEW YORK STATE: NY ZIP: 10017-2023 FORMER COMPANY: FORMER CONFORMED NAME: MISSION INSURANCE GROUP INC DATE OF NAME CHANGE: 19900826 FORMER COMPANY: FORMER CONFORMED NAME: MISSION EQUITIES CORP DATE OF NAME CHANGE: 19770921 SC 13D 1 y92325sc13d.txt ORIGINAL FILING ON SCHEDULE 13D 1292848.6 OMB APPROVAL OMB Number: 3235-0145 Expires: December 31, 2005 Estimated average burden hours per response...11 UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 SCHEDULE 13D Under the Securities Exchange Act of 1934 Danielson Holding Corporation - -------------------------------------------------------------------------------- (Name of Issuer) Common Stock, par value $0.10 per share - -------------------------------------------------------------------------------- (Title of Class of Securities) 236274106 - -------------------------------------------------------------------------------- (CUSIP Number) D. E. Shaw Laminar Portfolios, L.L.C. Attn: Compliance Department 120 West Forty-Fifth Street Floor 39, Tower 45 New York, NY 10036 212-478-0000 - -------------------------------------------------------------------------------- (Name, Address and Telephone Number of Person Authorized to Receive Notices and Communications) Copies to: Steven Wilamowsky, Esq. Willkie Farr & Gallagher 787 Seventh Avenue New York, New York 10019 (212) 728-8000 December 2, 2003 - -------------------------------------------------------------------------------- (Date of Event which Requires Filing of this Statement) If the filing person has previously filed a statement on Schedule 13G to report the acquisition that is the subject of this Schedule 13D, and is filing this schedule because of Sections 240.13d-1(e), 240.13d-1(f) or 240.13d-1(g), check the following box: [ ] Note: Schedules filed in paper format shall include a signed original and five copies of the schedule, including all exhibits. See Rule 240.13d-7 for other parties to whom copies are to be sent. * The remainder of this cover page shall be filled out for a reporting person's initial filing on this form with respect to the subject class of securities, and for any subsequent amendment containing information which would alter disclosures provided in a prior cover page. The information required on the remainder of this cover page shall not be deemed to be "filed" for the purpose of Section 18 of the Securities Exchange Act of 1934 ("Act") or otherwise subject to the liabilities of that section of the Act but shall be subject to all other provisions of the Act (however, see the Notes). SCHEDULE 13D CUSIP NO. 236274106 PAGE 1 OF 11 PAGES - -------------------------------------------------------------------------------- 1 NAME OF REPORTING PERSON I.R.S. IDENTIFICATION NO. OF ABOVE PERSON D. E. Shaw Laminar Portfolios, L.L.C. FEIN 01-0577802 - -------------------------------------------------------------------------------- 2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (a) [ ] (b) [ ] - -------------------------------------------------------------------------------- 3 SEC USE ONLY - -------------------------------------------------------------------------------- 4 SOURCE OF FUNDS* WC (see Item 3 of this Schedule 13D) - -------------------------------------------------------------------------------- 5 CHECK IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS 2(d) or 2(e) [ ] - -------------------------------------------------------------------------------- 6 CITIZENSHIP OR PLACE OF ORGANIZATION Delaware - -------------------------------------------------------------------------------- 7 SOLE VOTING POWER NUMBER OF -0- SHARES -------------------------------------------------------------- 8 SHARED VOTING POWER BENEFICIALLY 2,788,127 OWNED BY -------------------------------------------------------------- 9 SOLE DISPOSITIVE POWER EACH -0- REPORTING -------------------------------------------------------------- 10 SHARED DISPOSITIVE POWER PERSON WITH 2,788,127 - -------------------------------------------------------------------------------- 11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON 2,788,127 - -------------------------------------------------------------------------------- 12 CHECK IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES (SEE INSTRUCTIONS) [ ] - -------------------------------------------------------------------------------- 13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11) 7.8%(1) - -------------------------------------------------------------------------------- 14 TYPE OF REPORTING PERSON (SEE INSTRUCTIONS) OO - -------------------------------------------------------------------------------- - -------- 1 Based on a total of 35,814,749 outstanding shares of Common Stock derived from (i) 30,693,896 shares of Common Stock outstanding as of November 7, 2003, as set forth in the Issuer's Quarterly Report on Form 10-Q for the period ended September 30, 2003, and (ii) 5,120,853 issued on December 2, 2003 pursuant to the Note Purchase Agreement. CUSIP NO. 236274106 PAGE 2 OF 11 PAGES - -------------------------------------------------------------------------------- 1 NAME OF REPORTING PERSON I.R.S. IDENTIFICATION NO. OF ABOVE PERSON D. E. Shaw & Co., L.P. FEIN 13-3695715 - -------------------------------------------------------------------------------- 2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (a) [ ] (b) [ ] - -------------------------------------------------------------------------------- 3 SEC USE ONLY - -------------------------------------------------------------------------------- 4 SOURCE OF FUNDS* WC (see Item 3 of this Schedule 13D) - -------------------------------------------------------------------------------- 5 CHECK IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS 2(d) or 2(e) [ ] - -------------------------------------------------------------------------------- 6 CITIZENSHIP OR PLACE OF ORGANIZATION Delaware - -------------------------------------------------------------------------------- 7 SOLE VOTING POWER NUMBER OF -0- SHARES -------------------------------------------------------------- 8 SHARED VOTING POWER BENEFICIALLY 2,788,127 OWNED BY -------------------------------------------------------------- 9 SOLE DISPOSITIVE POWER EACH -0- REPORTING -------------------------------------------------------------- 10 SHARED DISPOSITIVE POWER PERSON WITH 2,788,127 - -------------------------------------------------------------------------------- 11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON 2,788,127 - -------------------------------------------------------------------------------- 12 CHECK IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES (SEE INSTRUCTIONS) [ ] - -------------------------------------------------------------------------------- 13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11) 7.8%(1) - -------------------------------------------------------------------------------- 14 TYPE OF REPORTING PERSON (SEE INSTRUCTIONS) IA, PN - -------------------------------------------------------------------------------- - -------- 1 Based on a total of 35,814,749 outstanding shares of Common Stock derived from (i) 30,693,896 shares of Common Stock outstanding as of November 7, 2003, as set forth in the Issuer's Quarterly Report on Form 10-Q for the period ended September 30, 2003, and (ii) 5,120,853 issued on December 2, 2003 pursuant to the Note Purchase Agreement. CUSIP NO. 236274106 PAGE 3 OF 11 PAGES - -------------------------------------------------------------------------------- 1 NAME OF REPORTING PERSON I.R.S. IDENTIFICATION NO. OF ABOVE PERSON D. E. Shaw & Co., L.L.C. FEIN 13-3799946 - -------------------------------------------------------------------------------- 2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (a) [ ] (b) [ ] - -------------------------------------------------------------------------------- 3 SEC USE ONLY - -------------------------------------------------------------------------------- 4 SOURCE OF FUNDS* WC (see Item 3 of this Schedule 13D) - -------------------------------------------------------------------------------- 5 CHECK IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS 2(d) or 2(e) [ ] - -------------------------------------------------------------------------------- 6 CITIZENSHIP OR PLACE OF ORGANIZATION Delaware - -------------------------------------------------------------------------------- 7 SOLE VOTING POWER NUMBER OF -0- SHARES -------------------------------------------------------------- 8 SHARED VOTING POWER BENEFICIALLY 2,788,127 OWNED BY -------------------------------------------------------------- 9 SOLE DISPOSITIVE POWER EACH -0- REPORTING -------------------------------------------------------------- 10 SHARED DISPOSITIVE POWER PERSON WITH 2,788,127 - -------------------------------------------------------------------------------- 11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON 2,788,127 - -------------------------------------------------------------------------------- 12 CHECK IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES (SEE INSTRUCTIONS) [ ] - -------------------------------------------------------------------------------- 13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11) 7.8%(1) - -------------------------------------------------------------------------------- 14 TYPE OF REPORTING PERSON (SEE INSTRUCTIONS) OO - -------------------------------------------------------------------------------- - -------- 1 Based on a total of 35,814,749 outstanding shares of Common Stock derived from (i) 30,693,896 shares of Common Stock outstanding as of November 7, 2003, as set forth in the Issuer's Quarterly Report on Form 10-Q for the period ended September 30, 2003, and (ii) 5,120,853 issued on December 2, 2003 pursuant to the Note Purchase Agreement. CUSIP NO. 236274106 PAGE 4 OF 11 PAGES - -------------------------------------------------------------------------------- 1 NAME OF REPORTING PERSON I.R.S. IDENTIFICATION NO. OF ABOVE PERSON David E. Shaw - -------------------------------------------------------------------------------- 2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (a) [ ] (b) [ ] - -------------------------------------------------------------------------------- 3 SEC USE ONLY - -------------------------------------------------------------------------------- 4 SOURCE OF FUNDS* WC (see Item 3 of this Schedule 13D) - -------------------------------------------------------------------------------- 5 CHECK IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS 2(d) or 2(e) [ ] - -------------------------------------------------------------------------------- 6 CITIZENSHIP OR PLACE OF ORGANIZATION United States - -------------------------------------------------------------------------------- 7 SOLE VOTING POWER NUMBER OF -0- SHARES -------------------------------------------------------------- 8 SHARED VOTING POWER BENEFICIALLY 2,788,127 OWNED BY -------------------------------------------------------------- 9 SOLE DISPOSITIVE POWER EACH -0- REPORTING -------------------------------------------------------------- 10 SHARED DISPOSITIVE POWER PERSON WITH 2,788,127 - -------------------------------------------------------------------------------- 11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON 2,788,127 - -------------------------------------------------------------------------------- 12 CHECK IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES (SEE INSTRUCTIONS) [ ] - -------------------------------------------------------------------------------- 13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11) 7.8%(1) - -------------------------------------------------------------------------------- 14 TYPE OF REPORTING PERSON (SEE INSTRUCTIONS) IN - -------------------------------------------------------------------------------- - -------- 1 Based on a total of 35,814,749 outstanding shares of Common Stock derived from (i) 30,693,896 shares of Common Stock outstanding as of November 7, 2003, as set forth in the Issuer's Quarterly Report on Form 10-Q for the period ended September 30, 2003, and (ii) 5,120,853 issued on December 2, 2003 pursuant to the Note Purchase Agreement. ITEM 1. SECURITY AND THE ISSUER This statement on Schedule 13D relates to the common stock, par value $0.10 per share ("Common Stock"), of Danielson Holding Corporation, a Delaware corporation ("Issuer"), and is being filed pursuant to Rule 13d-1 under the Securities Exchange Act of 1933, as amended (the "Exchange Act"). The principal executive offices of the Issuer are located at Two North Riverside Plaza, Suite 600, Chicago, IL 60606. ITEM 2. IDENTITY AND BACKGROUND (a),(f) This statement is filed on behalf of D. E. Shaw Laminar Portfolios, L.L.C., a Delaware limited liability company ("Laminar"), D. E. Shaw & Co., L.P., a Delaware limited partnership ("DESCO LP"), D. E. Shaw & Co., L.L.C., a Delaware limited liability company ("DESCO LLC"), and David E. Shaw, a citizen of the United States of America (David E. Shaw, together with Laminar, DESCO LP and DESCO LLC, collectively, the "Reporting Persons"). The Reporting Persons are filing jointly and the agreement among the Reporting Persons to file jointly is attached hereto as Exhibit 2 and incorporated herein by reference. (b) The business address and principal office, as applicable, of all Reporting Persons is 120 West Forty-Fifth Street, Floor 39, Tower 45, New York, NY 10036. (c) The principal business of Laminar is that of a limited liability company focusing primarily on distressed-securities related investment strategies. Laminar has no executive officers or directors. The principal business of DESCO LP is to act as an investment adviser to certain funds, including without limitation Laminar. The principal business of DESCO LLC is to act as managing member to certain funds, including without limitation Laminar. D. E. Shaw & Co., Inc. ("DESCO Inc."), a Delaware corporation, is the general partner of DESCO LP. D. E. Shaw & Co. II, Inc. ("DESCO II, Inc."), a Delaware corporation, is the managing member of DESCO LLC. David E. Shaw is the president and sole shareholder of DESCO Inc. and DESCO II, Inc. (d),(e) During the last five years, neither any Reporting Person nor, to the best knowledge of any Reporting Person, any person named in Item 2, has been (i) convicted in a criminal proceeding (excluding traffic violations or similar misdemeanors) or (ii) a party to a civil proceeding of a judicial or administrative body of competent jurisdiction and as a result of such proceeding was or is subject to a judgment, decree or final order enjoining future violations of, or prohibiting or mandating activities subject to, federal or state securities laws or finding any violations with respect to such laws. ITEM 3. SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATION. In acquiring 227,700 shares of the Issuer's Common Stock owned prior to December 2, 2003, Laminar expended approximately $312,564 of working capital (net of brokerage commissions). On December 2, 2003, Laminar executed a Note Purchase Agreement (the "Note Purchase Agreement") among the Issuer, Laminar, SZ Investments, L.L.C. ("SZI") and Third Avenue Trust, on behalf of the Third Avenue Value Fund Series ("Third Avenue"), pursuant to which each of Laminar, SZI and Third Avenue agreed, severally, to provide the Issuer with a bridge loan in the aggregate principal amount of $40,000,000 (the "Bridge Loan"). In connection with such transaction, the Issuer issued (i) an aggregate of 5,120,853 shares of its Common Stock which represent consideration for Laminar, SZI and Third Avenue agreeing to provide the Bridge Loan, to Laminar, SZI and Third Avenue (the "Allocation Shares"), of which 2,560,427 were issued to Laminar (the "Laminar Allocation Shares"), and (ii) convertible notes, which are convertible for the Issuer's Common Stock in certain specified and limited circumstances, in an aggregate principal amount of $40,000,000 to Laminar, SZI and Third Avenue, including $20,000,000 to Laminar (the "Laminar Note"), which were issued in consideration for the Bridge Loan. Pursuant to the Note Purchase Agreement, the Issuer has agreed to use the proceeds of the Bridge Loan (a) to purchase the equity of Covanta Energy Corporation ("Covanta") pursuant to a reorganization plan under Chapter 11 proceedings in the United States Bankruptcy Court for the Southern District of New York (the "Bankruptcy Court"), (b) to pay fees and expenses related to the acquisition of Covanta, and (c) for general corporate purposes. In the event the purchase of Covanta does not occur for any reason other than any default of the Issuer, the Laminar Note would remain outstanding and would be required to be repaid pursuant to its terms, and the Issuer has the right to redeem all of the Allocation Shares issued to Laminar, SZI, and Third Avenue pursuant to the Note Purchase Agreement for aggregate consideration of $4.00. A copy of the Note Purchase Agreement is referenced herein as Exhibit 3 and incorporated herein by reference. All funds used in providing Laminar's portion of the Bridge Loan were obtained from the working capital of Laminar. ITEM 4. PURPOSE OF TRANSACTION. The acquisition of the Laminar Allocation Shares and the Laminar Note were effected for the purpose of investing in the Issuer. Pursuant to the Note Purchase Agreement, the Issuer intends to use such funds to purchase the equity of Covanta, pay fees and expenses related thereto, and for the Issuer's general corporate purposes. Upon the Bankruptcy Court's approval of the reorganization plan and after closing of the acquisition of Covanta, the Issuer has agreed to use all commercially reasonable efforts to initiate a rights offering (the "Possible Rights Offering"). In connection with the Possible Rights Offering, each of Laminar, SZI and Third Avenue would have the right to acquire additional shares of the Issuer's Common Stock and each has agreed to exercise such right in the same proportion as the public as set forth in the Note Purchase Agreement. The Issuer has agreed to use the proceeds of the Possible Rights Offering to prepay the convertible notes. To the extent the proceeds of the Possible Rights Offering are insufficient to prepay the entire principal amount of the convertible notes outstanding, the convertible notes will automatically convert into shares of the Issuer's Common Stock at a conversion price of $1.53 per share. In addition to Common Stock that may be acquired by each of Laminar, SZI, and Third Avenue in the Possible Rights Offering, Laminar has agreed to acquire, if the Possible Rights Offering is consummated, additional shares of Common Stock and to convert a portion of the Laminar Note into such Common Stock. Pursuant to the Note Purchase Agreement, the convertible notes will remain outstanding to the extent any conversion would result in an "ownership change" of the Issuer under the Internal Revenue Code. Laminar's ability to acquire additional Common Stock of the Issuer pursuant to the Note Purchase Agreement, as set forth above, is conditional upon several factors, including in certain circumstances, the closing of the acquisition of Covanta and the consummation of the Possible Rights Offering by the Issuer. The total number of shares Laminar would be able to acquire pursuant to the Note Purchase Agreement is based on facts to be determined in the future. Pursuant to the Note Purchase Agreement, after the closing of the acquisition of Covanta and the completion of the Possible Rights Offering by the Issuer, Laminar believes it would own a maximum of between 14,305,435 and 16,203,624 shares of Common Stock of the Issuer (including the Subject Shares (as defined in Item 5 below)). In connection with the Note Purchase Agreement, the Issuer has granted Laminar, SZI, and Third Avenue certain registration rights, as set forth in a Registration Rights Agreement dated as of December 2, 2003, by and among the Issuer, Laminar, SZI, and Third Avenue (the "Registration Rights Agreement"). A copy of the Registration Rights Agreement is referenced herein as Exhibit 4 and incorporated herein by reference. The Note Purchase Agreement contains certain restrictive covenants pursuant to which the Issuer has agreed not to, without the consent of holders of 66 2/3% of the principal amount of the convertible notes issued to Laminar, SZI and Third Avenue, among other things, pay dividends on any of its securities until the convertible notes are converted or repaid in full. As is applicable to all holders of 5% or more of the Issuer's Common Stock, Laminar will be subject to restrictions contained in the Issuer's Certificate of Incorporation, which limit stock transfers by 5% or greater shareholders and prohibits parties from acquiring 5% or more of the Issuer's Common Stock without the Issuer's consent. In connection with the Note Purchase Agreement, Laminar and the Issuer have entered into a letter agreement (the "Letter Agreement") dated December 2, 2003, which pre-approves under the Issuer's Certificate of Incorporation the future disposition of certain shares of the Common Stock acquired by Laminar pursuant to the Note Purchase Agreement, including the Laminar Allocation Shares and the Common Stock issuable to Laminar upon conversion of the Laminar Note, in such amounts and in such circumstances as set forth in the Letter Agreement. A copy of the Letter Agreement is attached hereto as Exhibit 5 and incorporated herein by reference. The summaries contained in this Schedule 13D of certain provisions of each of the Note Purchase Agreement, the Registration Rights Agreement, the Letter Agreement, and all other documents attached hereto as exhibits are not intended to be complete and are qualified in their entirety by each respective agreement attached or referenced as Exhibits to this Schedule 13D and incorporated herein by reference. The summary contained in this Schedule 13D of certain provisions of the Issuer's Certificate of Incorporation is not intended to be complete and is qualified in its entirety by the Certificate of Incorporation, as amended, filed by the Issuer as Exhibit 3.1 to the Issuer's Annual Report on Form 10K for the period ended December 31, 1999. Subject to the Issuer's Certificate of Incorporation and the Letter Agreement, Laminar intends to continue to review its investment in the Common Stock and, from time to time depending upon certain factors, including without limitation the financial performance of the Issuer, the availability and price of shares of Common Stock, other general market and investment conditions, and any restrictions under applicable law may determine to acquire through open market purchases or otherwise additional shares of Common Stock, or may determine to sell through the open market or otherwise, in each case, subject to the limitations of the Note Purchase Agreement and the Letter Agreement. Pursuant to the Note Purchase Agreement, Laminar has agreed with the Issuer not to acquire, or permit any of its controlled affiliates to acquire, any shares of Common Stock of the Issuer before the closing of the Possible Rights Offering. Except as stated above, no Reporting Person nor, to the best knowledge of any Reporting Person, any of the persons listed in Item 2, has any plans or proposals of the types referred to in clauses (a) through (j) of Item 4 of Schedule 13D. ITEM 5. INTEREST IN SECURITIES OF THE ISSUER. (a) To the knowledge of the Reporting Persons, based upon the Issuer's Quarterly Report on Form 10-Q for the period ended September 30, 2003, there were 30,693,896 shares of Common Stock outstanding as of November 7, 2003. Based upon the foregoing, the 2,788,127 shares of Common Stock beneficially owned by Laminar (the "Subject Shares") represent approximately 7.8% of the issued and outstanding Common Stock, after giving effect to the 5,120,853 Allocation Shares issued pursuant to the Note Purchase Agreement. Laminar has beneficial ownership of the Subject Shares pursuant to the Note Purchase Agreement; provided, however, that it is not able to transfer such shares prior to the earlier of July 15, 2004 and the closing of the Possible Rights Offering. (b) Laminar currently has the power to vote or to direct the vote of the Subject Shares owned by Laminar. DESCO LP as Laminar's investment adviser and DESCO LLC as Laminar's managing member also may be deemed to have the power to vote or direct the vote of the Subject Shares. As general partner of DESCO LP, DESCO Inc. may be deemed to have the power to vote or to direct the vote of the Subject Shares. As managing member of DESCO LLC, DESCO II, Inc. has the power to vote or to direct the vote of the Subject Shares. None of DESCO LP, DESCO LLC, DESCO Inc. or DESCO II, Inc. owns any shares of the Issuer directly and each such entity disclaims beneficial ownership of the Subject Shares. David E. Shaw does not own any shares of the Issuer directly. By virtue of David E. Shaw's position as president and sole shareholder of DESCO Inc., which is the general partner of DESCO LP, and by virtue of David E. Shaw's position as president and sole shareholder of DESCO II, Inc., which is the managing member of DESCO LLC, David E. Shaw may be deemed to have the power to vote or direct the vote of, and the power to dispose or direct the disposition of, the Subject Shares owned by Laminar, constituting 7.8% of the outstanding shares and, therefore, David E. Shaw may be deemed to be the beneficial owner of such shares. David E. Shaw disclaims beneficial ownership of the Subject Shares. Each of the Reporting Persons, DESCO Inc. and DESCO II, Inc. disclaims beneficial ownership of any of the Issuer's Common Stock issuable to Laminar upon conversion of the Laminar Note or otherwise pursuant to the Note Purchase Agreement other than the Laminar Allocation Shares. Each of the Reporting Persons, DESCO Inc., and DESCO II, Inc. disclaims beneficial ownership of any securities of the Issuer beneficially owned by SZI or Third Avenue. As of the date hereof, neither any Reporting Person, nor to the best knowledge of any Reporting Person, any of the persons set forth in Item 2, owns any shares of Common Stock other than the shares owned by Laminar. (c) Except as set forth above, during the last 60 days, no transactions in the Common Stock were effected by any Reporting Person, or to the best knowledge of any Reporting Person, any of the persons set forth in Item 2. (d) No person other than the Reporting Persons has the right to receive or the power to direct the receipt of dividends from, or the proceeds from the sale of shares of Common Stock owned by Laminar. Clause (e) of Item 5 of Schedule 13D is not applicable. ITEM 6. CONTRACTS, ARRANGEMENTS, UNDERSTANDINGS OR RELATIONSHIPS WITH RESPECT TO SECURITIES OF THE ISSUER. Pursuant to the Note Purchase Agreement, Laminar and Third Avenue, severally and not jointly, have agreed with the Issuer that upon acquisition by each of Laminar and Third Avenue respectively of 10% or more of the Common Stock, such entity shall not vote or direct the vote with respect to issues directly affecting the Issuer's insurance company subsidiaries, including the management, policies and operations of the Issuer's insurance subsidiaries. Each of Laminar and Third Avenue has filed, severally and not jointly, a Disclaimer of Affiliation and Control with each of the insurance regulators in the States of California and Montana. Copies of the Disclaimer of Affiliation and Control, as amended, filed by Laminar in the States of California and Montana are attached hereto as Exhibits 6 and 7 respectively and are incorporated by reference herein. Except for the matters described herein, neither the Reporting Persons nor, to the best knowledge of any Reporting Person, any of the persons listed in Item 2 has any contract, arrangement, understanding or relationship with any person with respect to any securities of the Issuer. ITEM 7. MATERIAL TO BE FILED AS EXHIBITS. Exhibit 1 Power of Attorney, granted by David E. Shaw in favor of Stuart Steckler, dated February 5, 2001. Exhibit 2 Joint Filing Agreement, by and among the Reporting Persons, dated December 12, 2003. Exhibit 3 Note Purchase Agreement, by and among Danielson Holding Corporation, D. E. Shaw Laminar Portfolios, L.L.C., SZ Investments, L.L.C., and Third Avenue Trust on behalf of the Third Avenue Value Fund Series, dated as of December 2, 2003 (Incorporated by reference to Exhibit 2.2 of the Current Report on Form 8-K filed by Danielson Holding Corporation on December 5, 2003). Exhibit 4 Registration Rights Agreement, by and among Danielson Holding Corporation, D. E. Shaw Laminar Portfolios, L.L.C., SZ Investments, L.L.C., and Third Avenue Trust on behalf of the Third Avenue Value Fund Series, dated as of December 2, 2003 (Incorporated by reference to Exhibit 4.1 of the Current Report on Form 8-K filed by Danielson Holding Corporation on December 5, 2003). Exhibit 5 Letter Agreement between Danielson Holding Corporation and D. E. Shaw Laminar Portfolios, L.L.C., dated as of December 2, 2003. Exhibit 6 Disclaimer of Affiliation and Control, submitted by D. E. Shaw Laminar Portfolios, L.L.C. to the Insurance Commissioner of the State of California, dated December 2, 2003, as amended by the Amendment and Supplement to Disclaimer of Affiliation and Control, dated December 12, 2003. Exhibit 7 Disclaimer of Affiliation and Control, submitted by D. E. Shaw Laminar Portfolios, L.L.C. to the Insurance Commissioner of the State of Montana, dated December 2, 2003, as amended by the Amendment and Supplement to Disclaimer of Affiliation and Control, dated December 12, 2003. SIGNATURES After reasonable inquiry and to the best of each of the undersigned's knowledge and belief, each of the undersigned, severally and not jointly, certifies that the information set forth in this statement is true, complete and correct. A Power of Attorney, dated February 5, 2001 granted by David E. Shaw in favor of Stuart Steckler is attached hereto as Exhibit 1 and incorporated herein by reference. Dated: December 12, 2003 D. E. SHAW LAMINAR PORTFOLIOS, L.L.C. BY: D. E. SHAW & CO., L.L.C., as managing member By: /s/ Stuart Steckler ------------------- Name: Stuart Steckler Title: Managing Director D. E. SHAW & CO., L.P. By: /s/ Stuart Steckler ------------------- Name: Stuart Steckler Title: Managing Director D. E. SHAW & CO., L.L.C. By: /s/ Stuart Steckler ------------------- Name: Stuart Steckler Title: Managing Director DAVID E. SHAW By: /s/ Stuart Steckler ------------------- Name: Stuart Steckler Title: Attorney-in-Fact for David E. Shaw EX-99.1 3 y92325exv99w1.txt POWER OF ATTORNEY Exhibit 1 POWER OF ATTORNEY FOR CERTAIN FILINGS UNDER THE SECURITIES EXCHANGE ACT OF 1934 I, David E. Shaw, hereby make, constitute and appoint each of: Lou Salkind and Stu Steckler, acting individually, as my agent and attorney-in-fact, with full power of substitution, for the purpose of, from time to time, executing in my name and/or my capacity as President of D. E. Shaw & Co., Inc. (acting for itself or as the general partner or managing member of D. E. Shaw & Co., L. P., D. E. Shaw Development, L.P., D. E. Shaw & Co., L.L.C., D. E. Shaw Development, L.L.C., or Attenuon, L.L.C.) all documents, certificates, instruments, statement, other filings and amendments to the forgoing (collectively, "documents") determined by such person to be necessary or appropriate to comply with ownership or control-person reporting requirements imposed by any United States or non-United States governmental or regulatory authority, including without limitation Forms 3, 4, 5, 13D, 13F and 13G required to be filed with the Securities and Exchange Commission; and delivering, furnishing or filing any such documents with the appropriate governmental or regulatory authority. Any such determination shall be conclusively evidenced by such person's execution and delivery, furnishing or filing of the applicable document. This power of attorney shall be valid from the date hereof and replaces the power granted on January 14, 1997, which is hereby cancelled. IN WITNESS HEREOF, I have executed this instrument as of the date set forth below. Date: February 5, 2001 DAVID E. SHAW /s/David E. Shaw New York, New York EX-99.2 4 y92325exv99w2.txt JOINT FILING AGREEMENT Exhibit 2 JOINT FILING AGREEMENT In accordance with Rule 13d-1(k)(1) under the Securities Exchange Act of 1934, as amended, each of the undersigned Reporting Persons hereby agrees to the joint filing, along with all other such Reporting Persons, on behalf of each of them of a statement on Schedule 13D (including amendments thereto) with respect to the common stock, par value $.10 per share of Danielson Holding Corporation, and that this Agreement be included as an Exhibit to such joint filing. This Agreement may be executed in any number of counterparts, all of which taken together shall constitute one and the same instrument. IN WITNESS WHEREOF, each of the undersigned hereby executes this Agreement as of this 12th day of December, 2003. D. E. SHAW LAMINAR PORTFOLIOS, L.L.C. BY: D. E. SHAW & CO., L.L.C., as managing member By: /s/ Stuart Steckler ------------------- Name: Stuart Steckler Title: Managing Director D. E. SHAW & CO., L.P. By: /s/ Stuart Steckler ------------------- Name: Stuart Steckler Title: Managing Director D. E. SHAW & CO., L.L.C. By: /s/ Stuart Steckler ------------------- Name: Stuart Steckler Title: Managing Director DAVID E. SHAW By: /s/ Stuart Steckler ------------------- Name: Stuart Steckler Title: Attorney-in-Fact for David E. Shaw EX-99.5 5 y92325exv99w5.txt LETTER AGREEMENT Exhibit 5 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 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- 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- 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- 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: Agreed: DANIELSON HOLDING CORPORATION By: /s/ Philip Tinkler ---------------------------------- Name: Title: Date: EX-99.6 6 y92325exv99w6.txt DISCLAIMER OF AFFILIATION Exhibit 6 To the Insurance Commissioner of the State of California: AMENDMENT AND SUPPLEMENT TO THE DISCLAIMER (INSURANCE CODE SECTION 1215.4(l)), DATED DECEMBER 2, 2003 by D. E. SHAW LAMINAR PORTFOLIOS, L.L.C. ("Laminar"), and its Affiliates of affiliation with NATIONAL AMERICAN INSURANCE COMPANY OF CALIFORNIA DANIELSON INSURANCE COMPANY; DANIELSON NATIONAL INSURANCE COMPANY all of 19100 Susana Road Rancho Dominguez, California 90221 Dated as of December 12, 2003 at New York, New York. Reference is made to that certain disclaimer filed pursuant to California Insurance Code Section 1215.4(l) made in connection with the purchase and sale of securities convertible into voting common stock of Danielson Holding Corporation ("DHC"), filed by D. E. Shaw Laminar Portfolios L.L.C. on December 2, 2003 (the "Disclaimer"). This filing supplements and amends the Disclaimer as provided herein. All capitalized terms used but not defined herein shall have the meanings assigned to them in the Disclaimer. 1. The Disclaimer, when filed on December 2, 2003, contained certain references to the contents of the draft Note Purchase Agreement that are no longer accurate in light of the final, executed version of the Note Purchase Agreement agreed upon by the parties. Accordingly, Paragraph 2(D) of the Disclaimer is deleted in its entirety and replaced with the following: D. Laminar's Voluntary Voting Restriction Under the terms of the Note Purchase Agreement, Laminar has agreed, upon the acquisition of common stock resulting in a holding of ten percent (10%) or more of DHC common stock, not to exercise its voting power in DHC stock to direct or cause the direction of the management, policies or operations of DHC's insurance company subsidiaries, including, without limitation, the California Insurers. Specifically, pursuant to Section 7.3(e) of the Note Purchase Agreement, Laminar agrees not to vote on matters: (i) that directly affect the management, policies and operations of the Company's insurance subsidiaries including the election of directors and appointment of officers of the insurance subsidiaries of DHC, including the California Insurers; (ii) that directly affect the policies and business operations of the insurance subsidiaries, including matters involving the business plans or strategies of the insurance subsidiaries, including the California Insurers, underwriting and claims handling standards and procedures, arrangements with insurance agents and brokers, regulatory compliance filings, or reinsurance arrangements of the insurance subsidiaries, including the California Insurers; and (iii) directly regarding the management or operations of the insurance subsidiaries that insurance regulators in the jurisdictions where Laminar has filed a Disclaimer advise would constitute the exercise of control over the management, policies and operations of the insurance subsidiaries under the applicable Insurance Holding Company Act.(1) Laminar has effectively agreed, pursuant to Section 7.3(e) of the Note Purchase Agreement, not to exercise control over the business operations of DHC's insurance subsidiaries, including the California Insurers. 2. The first sentence of the second paragraph of 4(B) of the Disclaimer is deleted in its entirety and replaced with the following: DHC has amended its By-Laws to provide that any holder of 20% or more of the voting power of DHC shall have the right to nominate a candidate for election to the DHC Board of Directors. 3. Additionally, Laminar supplements the Disclaimer with the following documents: A. A copy of the executed Note Purchase Agreement, dated as of December 2, 2003, with attachments (attached hereto as Exhibit A). B. DHC's amended By-Laws providing that any holder of twenty percent (20%) or more of the voting power of DHC shall have the right to nominate a candidate for election the DHC Board of Directors (attached hereto as Exhibit B). - -------- (1) Pursuant to Section 5.2(c) of the Note Purchase Agreement, DHC agrees not to enter into any transaction with a regulated entity that would subject any of the Investor Parties to regulatory approval. This provision is intended to apply to a new acquisition of a regulated entity that may affect the Investor Parties rather than transactions affecting the California Insurers. -2- IN WITNESS WHEREOF, the undersigned has hereunto signed its name at the City of New York in the State of New York this 12th day of December, 2003. D. E. Shaw Laminar Portfolios, L.L.C. By: D. E. Shaw & Co., L.L.C., as its managing member /s/ Stuart Steckler --------------------------------- Name: Stuart Steckler Title: Managing Director State of New York County of New York } ss. Stuart Steckler, first being duly sworn, deposes and says that he is the Managing Director of D. E. Shaw Laminar Portfolios, L.L.C., the person preparing and filing the attached paper(s); that he has read the same and knows the contents thereof and that the contents are true of his own knowledge. D.E. Shaw & Co., L.L.C. By:/s/ Stuart Steckler ----------------------------- Name: Stuart Steckler Title: Managing Director Subscribed and sworn to before me this ____ day of ____, 2003. ________ (Notarial Seal) Notary Public in and for said County and State My commission expires ______________________________________________ -3- To the Insurance Commissioner of the State of California: DISCLAIMER (INSURANCE CODE SECTION 1215.4(l)) by D. E. SHAW LAMINAR PORTFOLIOS, L.L.C. ("Laminar"), and its Affiliates (as defined herein) of affiliation with NATIONAL AMERICAN INSURANCE COMPANY OF CALIFORNIA 19100 Susana Road Rancho Dominguez, California 90221 DANIELSON INSURANCE COMPANY; 19100 Susana Road Rancho Dominguez, California 90221 DANIELSON NATIONAL INSURANCE COMPANY 19100 Susana Road Rancho Dominguez, California 90221 Dated December 2, 2003 at New York, New York This disclaimer filed pursuant to California Insurance Code Section 1215.4(l) (the "Disclaimer") is made in connection with the purchase and sale of securities convertible into voting common stock of Danielson Holding Corporation ("DHC") and related transactions (the "Transaction"). DHC is a Delaware corporation and the indirect parent of National American Insurance Company of California ("NAICC"); Danielson Insurance Company ("DICO"); and Danielson National Insurance Company ("DNIC") (collectively, the "California Insurers"), all of Rancho Dominguez, California. As set forth in greater detail below, pursuant to an agreement (the "Note Purchase Agreement") (attached hereto in substantially final form as Exhibit A)(1) by and among DHC and several purchasers, including Laminar, Laminar will acquire notes issued by DHC convertible into 10% or more of the voting common stock of DHC (the "Notes"). It is possible that pursuant to Section 1215(b) of the California Insurance Code,(2) Laminar's acquisition of such notes could - -------------------- (1) Given the complexity of this transaction, some of the transaction documents are still subject to negotiation. Exhibits that are not in final form will be supplemented with final versions of the applicable documents as soon as final forms are agreed upon by the relevant parties. This Disclaimer is being filed on the same day, but prior to, the execution of the Note Purchase Agreement described herein. (2) Section 1215(b) of the California Insurance Code provides that "control" shall be presumed to exist "if any person, directly or indirectly, owns, controls, holds with the power to vote, or holds proxies representing, more than 10 percent of the voting securities of any other person." The California Insurance Code does not specifically define the term "voting securities." However, Section 1215.2 governing tender offers treats trigger the presumption of control over DHC's wholly owned indirect subsidiaries, the California Insurers. The purpose of this Disclaimer is to disclaim, pursuant to Section 1215.4(l) of the California Insurance Code, affiliation with and control of DHC and the California Insurers by Laminar and its direct and indirect affiliates. Laminar does not now, and will not upon the completion of the Transaction, control directly or indirectly within the meaning of Section 1215(b) of the California Insurance Code, DHC or the California Insurers. Although upon completion of the Transaction, Laminar will control up to 25.88% of the voting shares of DHC, Laminar has agreed to certain restrictions on the exercise of its voting powers. Pursuant to Section 7.3(e) of the Note Purchase Agreement, and as described in this Disclaimer, Laminar will agree not to vote or direct the vote of DHC with respect to issues directly affecting DHC's insurance company subsidiaries, including the management, policies and operations of DHC's insurance subsidiaries, including the California Insurers. Laminar's interest in DHC arises from its economic interests in a business that is wholly unrelated to the insurance business, as discussed in greater detail below. Upon consummation of the proposed Transaction, Laminar would be an arm's length investor in DHC with an economic interest in the Notes and the underlying common stock of DHC into which the Notes would convert. As set forth herein, pursuant to agreed restrictions to its voting rights in DHC, Laminar and its Affiliates would not have the power to direct or cause the direction of the management, policies and operations of the DHC insurance company subsidiaries, including the California Insurers. 1. THE PARTIES A. Laminar Laminar is a limited liability company organized under the laws of Delaware. The Managing Member of Laminar is D. E. Shaw & Co., L.L.C. ("DESCO LLC"), a limited liability company organized under the laws of Delaware. The Managing Member of DESCO LLC is D. E. Shaw & Co. II, Inc. ("DESCO II, Inc.") a corporation organized under the laws of Delaware. D. E. Shaw & Co., L.P. ("DESCO L.P."), a limited partnership organized under the laws of Delaware, is the investment advisor to Laminar. D. E. Shaw & Co., Inc. ("DESCO, Inc."), a corporation organized under the laws of Delaware, is the general partner of DESCO LP. Dr. David E. Shaw is the chairman, president and sole stockholder of DESCO, Inc. and DESCO II, Inc. For purposes of this Disclaimer, DESCO LLC, DESCO L.P., DESCO. Inc., DESCO II, Inc., and Dr. David E. Shaw shall be defined as "Affiliates." - ---------------------------- tender offers of securities convertible to voting securities as offers that may trigger the registration requirements of the holding company act, providing as follows: "[n]o person shall make a tender offer for, or a request or invitation for tenders of, or enter into an agreement to exchange securities for or acquire in the open market, any voting security, or any security convertible into a voting security, of a domestic insurer or of any other person controlling a domestic insurer ... if, as a result of the consummation thereof, such person would, directly or indirectly, acquire control of such insurer ... unless, at the time copies of the offer or purchase or request or invitation are first published or sent or given to security holders or the agreement or transaction is entered into, [approval of the proposed acquisition has been sought from the Calfornia Insurance Commissioner]." This Disclaimer is therefore filed on the basis of Laminar's acquisition of the Notes. -2- The address and principal office of Laminar and the Affiliates is: 120 W. 45th Street 39th Floor New York, New York, 10036 Attention: General Counsel B. The California Insurers DICO, DNIC and NAICC are California domestic insurers. DICO and DNIC are wholly owned subsidiaries of NAICC. DICO has 3,125 issued and outstanding voting shares of common stock. NAICC owns 3,125 shares, constituting all of DICO's issued and outstanding voting common stock. DNIC has 20,000 issued and outstanding voting shares of common stock. NAICC owns 20,000 shares, constituting all of DNIC's voting common stock. NAICC has 13,000 issued and outstanding shares of voting common stock, all of which are owned by Danielson Indemnity Company ("DIND"). DIND has 170,000 issued and outstanding voting shares of common stock. DHC owns 170,000, constituting all of DIND's issued and outstanding voting shares of common stock. DICO, DNIC, NAICC, and DIND are directly or indirectly the wholly owned subsidiaries of DHC. Through its control of DIND, DHC controls with the power to direct the vote of one hundred percent (100%) of the shares of the California Insurers. Accordingly, DHC is a controlling person of the California Insurers within the meaning of Section 1215(b) of the California Insurance Code. DHC is a public company whose current stock ownership is as follows: SZ Investments, L.L.C. ("SZ") is the beneficial owner of 5,460,612 shares of DHC's common stock, representing 17.81% of the voting power of DHC. SZ was permitted to take this position in DHC by approval of the California Insurance Department dated July 19, 1999. Third Avenue Trust on behalf of Third Avenue Fund Series ("Third Avenue") is the beneficial owner of 4.27% of DHC's voting power. The remaining outstanding shares of DHC are publicly held by over 1,300 stockholders, with no stockholders other than the Commissioner of Insurance of the State of California, on behalf of the Mission Insurance Companies' Trusts, owning more than 5% of the voting power. Laminar and its Affiliates are not directly or indirectly controlled by or under common control with NAICC, DNIC, DICO or DHC. The only relationship between Laminar, its Affiliates, and the California Insurers results from the Transaction described below. 2. THE TRANSACTION A. Background: The Covanta Acquisition DHC is negotiating to acquire Covanta Energy Corporation's ("Covanta") equity pursuant to a reorganization plan (the "Plan") under chapter 11 proceedings pending in the United States Bankruptcy Court for the Southern District of New York (the "Bankruptcy Court") -3- (the "Covanta Acquisition").(3) B. Laminar's Acquisition of Notes Pursuant to the terms of (and subject to certain conditions set forth in) the Note Purchase Agreement, Laminar, Third Avenue, and SZ, severally (the "Investor Parties"), will provide a portion of the funding necessary for DHC to consummate the Covanta Acquisition through various financing arrangements to DHC and Covanta in connection with the Covanta Acquisition. Pursuant to the Note Purchase Agreement, the Investor Parties have the following percentage participations in the investment: Laminar 50%, Third Avenue 25%, and SZ 25%, except that Laminar will have 100% of the responsibility for providing an international revolver to CPIH as described in footnote 3. Pursuant to the terms of the Note Purchase Agreement, to be entered into between DHC and the Investor Parties, the Investor Parties will provide DHC with a loan in the form of a convertible bridge loan in the amount of $40 million (the "Convertible Bridge Loan"), the proceeds of which DHC shall use to pay the full consideration for the Covanta Acquisition, to pay expenses in connection with the transaction and for general corporate purposes. The Investor Parties will receive the Notes, convertible into common stock of DHC. In consideration for their agreement to provide the Convertible Bridge Loan and the other financing arrangements, including an $118 million letter of credit facility and a $10 million revolving credit facility, the Investor Parties will receive from DHC, in accordance with their percentage participation, 5.12 million shares of DHC common stock. (the "Allocation Shares").(4) For the avoidance of doubt, the description set forth in this Section 2.B of this Disclaimer focuses on the issue of control under the California Insurance Code but is a summary description of the Transaction and does not document the full scope of the proposed Transaction contemplated by the Note Purchase Agreement, or the DHC acquisition agreement with Covanta. C. Rights Offering--Laminar's Acquisition of DHC Common Stock Upon the Bankruptcy Court's approval of the Plan and after the closing of the Covanta Acquisition, DHC will initiate a pro rata rights offering to all of its stockholders. The Investor Parties will convert the Notes for shares of DHC equal to up to a maximum number of shares as agreed among the parties. During the rights offering, Laminar shall acquire additional DHC shares of increasing amounts in accordance with the schedule annexed hereto as Exhibit B, based upon the levels of public participation in the rights offering (excluding the Investor Parties - -------------------- (3) Under DHC's agreement with Covanta, in order to acquire the Covanta stock, DHC is required to make deposits totalling $30 million, and in addition, the Investor Parties shall provide Covanta a letter of credit facility with a mixed use revolver of $118 million on a second prior lien basis (the "Second Lien LOC") and Laminar will provide Covanta's subsidiary Covanta Power International Holdings, Inc. ("CPIH") a revolving credit facility for international operations of $10 million (the "Revolving Note"). (4) In addition, the Investor Parties will receive up front cash fees of 2% (and other fees) from Covanta for the Second Lien LOC and Laminar shall receive up front cash fees of 2% (and other fees) from Covanta for the Revolving Note. -4- and the Commissioner of Insurance for the State of California).(5) On a fully diluted basis, the amount of DHC common stock acquired by Laminar as a result of the Allocation Shares, rights offering and conversion of the Notes would range between 19.24% (assuming 100% public participation) and 25.88% (assuming 0% public participation) of all of DHC's outstanding common stock. DHC intends to repay the Notes out of the proceeds of the rights offering. In the event that the proceeds are insufficient to pay off the Notes, then the terms of the loan will change with respect to unpaid amounts, as set forth in the Note Purchase Agreement. D. Laminar's Voluntary Voting Restriction Under the terms of the Note Purchase Agreement, Laminar has agreed not to exercise its voting power in DHC stock to direct or cause the direction of the management, policies or operations of DHC's insurance company subsidiaries, including, without limitation, the California Insurers. Specifically, Section 7.3(e) of the Note Purchase Agreement restricts Laminar's ability to vote on matters that directly affect: (i) the management, policies and operations of the Company's insurance Subsidiaries including the election of directors and appointment of officers of the California Insurers; (ii) the policies and business operations of the insurance subsidiaries, including matters involving the business plans or strategies of the California Insurers, underwriting and claims handling standards and procedures, arrangements with insurance agents and brokers, regulatory compliance filings, or reinsurance arrangements of the California Insurers; and (iii) the management or operations of the insurance subsidiaries that insurance regulators in the jurisdictions where Laminar has filed a Disclaimer advise would constitute the exercise of control over the management, policies and operations of the insurance subsidiaries under the applicable Insurance Holding Company Act.(6) By the terms of the Note Purchase Agreement, Laminar will generally exercise its voting power in DHC to protect its investment in DHC with respect to issues such as the transferability of the Notes or common stock, approval of DHC's issuance of common stock, pari passu ranking equity, changes to DHC's organizational and constituent documents, and tax treatment of Laminar and DHC. Pursuant to Section 7.3(e) of the Note Purchase Agreement, Laminar will not direct the business operations of DHC's insurance subsidiaries, including the California Insurers. 3. VOTING POWER OF LAMINAR A. Shares Controlled by Laminar Currently, Laminar directly or indirectly owns 227,700 shares of DHC and - -------------------- (5) If, after using all proceeds of the rights offering to repay the Notes, notes are still outstanding, the remaining notes shall be converted into common stock of DHC on a pro rata basis, provided, however, that the Notes will remain outstanding to the extent conversion for stock would result in an "ownership change" of DHC (e.g., if the percentage of such conversion exceeds 47.5% of the DHC common stock). (6) Pursuant to Section 5.2(c) of the Note Purchase Agreement, DHC agrees not to enter into any transaction with a regulated entity that would subject any of the Investor Parties to regulatory approval. This provision is intended to apply to a new acquisition of a regulated entity that may affect the Investor Parties rather than transactions affecting the California Insurers. -5- directly owns no shares in any of the California Insurers. Upon completion of the conversion, Laminar would own common stock of DHC, which is a controlling person of the California Insurers. B. Issued and Outstanding Shares of DHC As of the date of the Note Purchase Agreement, on a fully diluted basis, DHC had 30,673,831 outstanding shares of common stock and 1,952,253 options to purchase common stock are outstanding. On a fully diluted basis, there will be 74,355,657 shares of common stock issued and outstanding after the rights offering, assuming 100% public participation. C. Acquisition of Shares by Laminar in the Transaction Assuming full conversion, after the rights offering depending upon the extent of public participation, Laminar will own between approximately 14,300,000 (assuming 100% public participation) and approximately 16,000,000 (assuming 0% public participation) shares of common stock of DHC which constitutes between 19.24% and 25.88% of the voting power of the issued and outstanding common stock of DHC. 4. LAMINAR WILL NOT EXERCISE CONTROL OF DHC AND THE CALIFORNIA INSURERS After the Transaction closes, although Laminar will hold, with the power to vote, ten percent (10%) or more of the voting shares of DHC, pursuant to the restrictions set forth in the Note Purchase Agreement, Laminar will not have the power to direct or cause the direction of the management, policies and operations of DHC or the California Insurers as contemplated by Section 1215(b) of the California Insurance Code. For the reasons set forth below, Laminar disclaims affiliation with and control of DHC and the California Insurers as contemplated by Section 1215.4(l) of the California Insurance Code. A. Influence of Other DHC Shareholders Over DHC and the California Insurers The corporate structure and interests of DHC's major shareholders result in significantly restricting Laminar's ability to direct or cause the direction of the management and policies of DHC even after full conversion of the notes to voting common stock. SZ is the registered insurance holding company of the California Insurers pursuant to California Insurance Department letter dated July 19, 1999. SZ will own between 16.32% (assuming 100% public participation) and 21.48% (assuming 0% public participation) of the post - conversion vote of DHC. Third Avenue will control between 6.55% (assuming 100% public participation) and 14.85% (assuming 0% public participation) of the post - - conversion vote of DHC. B. Board Representation The DHC Board of Directors currently consists of eight (8) directors (the "Directors"). A ninth Board seat remains vacant with the intention that if the California Commissioner of Insurance seeks to have board representation, the other members of the Board will have the ability to appoint a suitable candidate proposed by the Commissioner for that role. -6- Of the eight current Directors, two (2) are affiliated with SZ and two (2) are affiliated with Third Avenue: Martin J. Whitman is a Director of DHC and is the Chairman of the Board and a Trustee of Third Avenue; David Barse is a Director of DHC and is the President and Chief Executive Officer of Third Avenue; William Pate is a Director of DHC and is the Managing Director of Equity Group Investments, L.L.C., ("EGI"), an entity under common control with SZ because the ownership of SZ and EGI are substantially similar; Samuel Zell, Chairman of the Board of Directors and Chief Executive Officer of DHC, is also the Chairman of the Board of EGI and the President of SZ, which is owned by various Zell family trusts. DHC has agreed to amend its By-Laws to provide that any holder of 20% or more of the voting power of DHC shall have the right to nominate a candidate for election to the DHC Board of Directors. Accordingly, to the extent that Laminar owns 20% or more of the outstanding common stock of DHC, Laminar will have the ability, but not the obligation, to nominate one director to the DHC Board of Directors subject to stockholder approval of such nominee. Laminar will supplement this Disclaimer with the updated by-laws as soon as they are adopted by DHC. In light of the following facts, Laminar's right to propose the nomination of one Director will not enable Laminar to direct or cause the direction of the management of DHC or the California Insurers. i. a single director will have no more influence or control over a board which will comprise eight or more other members than any of those other members. The nominated director will have no special voting, quorum or veto rights at board meetings of DHC and will therefore be no more able to influence the outcome of board decisions than any other director. The same will apply if he or she sits on any board committee. ii. Under applicable law, Laminar's appointee will be subject to the same fiduciary duties as other directors, to act in the interests of DHC's shareholders generally. iii. Shareholders of DHC in a general meeting have the right to vote on the appointment and removal of directors, including the nominee of Laminar. Laminar can not, therefore, ensure that its nominee will be appointed to the DHC's board or prevent his or her removal against the wishes of a majority of the DHC's shareholders. iv. Laminar will have no special voting, quorum or veto rights attaching to its common shares. C. Management Control Laminar will not be entitled to appoint the management of DHC or the California Insurers as a result of its stock ownership. Samuel Zell is the President and Chief Executive Officer of DHC and in that position oversees the management and operations of DHC. Through his influence as the President of SZ (the registered holding company of the California Insurers) over the DHC board members affiliated with SZ and his influence as the Chairman of EGI over the board members affiliated with EGI, the entity that provides administrative services to DHC -7- (as described below), and his positions as Chairman of the Board of Directors, President, and Chief Executive Officer of DHC, Mr. Zell's influence over the management, policies and operations of DHC will be greater than the influence Laminar would have to direct the management of DHC. D. Contractual Arrangements. Laminar will have no contractual arrangements with DHC to provide goods or services. Pursuant to a corporate services agreement (the "Services Agreement") dated as of September 2, 2003 between DHC and EGI, EGI has agreed to provide certain administrative services to DHC, including, among others, shareholder relations, insurance procurement and management, payroll services, cash management and treasury functions, technology services, listing exchange compliance and financial and corporate record keeping. As noted above, EGI and SZ are affiliated entities with substantially similar ownership, and both are affiliated with Mr. Zell. Although the Notes owned by Laminar trigger the presumption of control under Section 1215(b) of the California Insurance Code, given the existing board composition, the identities of the current officers, and the affiliated status of many board members and the executive officers with other significant shareholders, as a practical matter, Laminar's voting power will not enable it to direct the management, policies, or operations of DHC or the California Insurers. On a combined basis, SZ and Third Avenue will hold up to 36.33% of the common stock of DHC, significantly more than the maximum amount that could be held by Laminar (giving effect to the Transactions). Additionally, representatives of SZ and Third Avenue together hold half of the seats on DHC's Board. Even with Board representation and affiliated persons serving as officers, Laminar will not be able to exercise functional control over DHC. E. Laminar's Voluntary Voting Restriction Pursuant to Section 7.3(e) of the Note Purchase Agreement, Laminar has agreed not to exercise its voting power in DHC stock in votes relating to the management, policies and operations of the DHC insurance subsidiaries. Consequently, as a practical matter, Laminar's voting power in DHC will not enable it to appoint management or vote on board members of the California Insurers, and Laminar will be unable to influence management decisions of the California Insurers involving insurance operations, business strategies, underwriting and claims handling, reinsurance programs, or regulatory compliance. Laminar's equity position in DHC will be passive with respect to the management, policies and operations of the California Insurers. 5. The proposed Transaction by Laminar relating to the California Insurers will not result in affiliation, within the meaning of California Insurance Code Section 1215, of Laminar with the California Insurers, or vice versa, because: A. Even after the completion of the contemplated Transactions, DHC will be unable to assert functional control over DHC because the interests of other major shareholders, including share ownership and service as directors and executive -8- officers by individuals affiliated with other shareholders will aggregate to greater influence over the management, polices, and operations of DHC than Laminar could assert. B. Management and control of the daily operations of the DHC insurance subsidiaries, including the California Insurers is vested in the officers of such insurance companies and will not be within the control of Laminar. C. Laminar will exercise only passive ownership of DHC's shares on all issues affecting the management, policies and operations of the California Insurers, and will not vote its shares in DHC or cause such shares to be voted on issues that directly affect the management or operations of the California Insurers. For the reasons set forth above, Laminar on its own behalf and on behalf of its Affiliates respectfully requests your acceptance of this disclaimer of affiliation and control. -9- IN WITNESS WHEREOF, the undersigned has hereunto signed its name and affixed its corporate seal at City of New York in the State of New York this 2nd day of December, 2003. D. E. Shaw Laminar Portfolios, L.L.C. By: D. E. Shaw & Co., L.L.C., as its managing member /s/ Stuart Steckler ------------------------ Name: Stuart Steckler Title: Managing Director -10- (1) DISCLAIMER ALLOWED this ____ day of _____, 20___, on the basis of the evidence presented herein. _________________ INSURANCE COMMISSIONER OF THE STATE OF CALIFORNIA BY ____________________________________________________ DEPUTY (2) NOTICE OF HEARING -- RE DISALLOWANCE You are hereby notified that there will be a public hearing in my offices, Room __at __ on, 20__, commencing at __ o'clock __M for the purpose of determining whether the within disclaimer should be disallowed. At such hearing all parties in interest may appear and present relevant evidence and argument to that end. Dated __, 20__ . _____________________________________________ Insurance Commissioner of the State of California By _____________________________________ Deputy -11- EX-99.7 7 y92325exv99w7.txt DISCLAIMER OF AFFILIATION Exhibit 7 To the Insurance Commissioner of the State of Montana AMENDMENT AND SUPPLEMENT TO THE DISCLAIMER (INSURANCE CODE SECTION 33-2-1112) DATED DECEMBER 2, 2003 by D. E. SHAW LAMINAR PORTFOLIOS, L.L.C. ("Laminar") and its Affiliates (as defined herein) of affiliation with VALOR INSURANCE COMPANY, INCORPORATED 2727 Central Avenue Billings, Montana 59102 Dated as of December 12, 2003 at New York, New York Reference is made to that certain disclaimer filed pursuant to Montana Insurance Code Section 33-2-1112 made in connection with the purchase and sale of securities convertible into voting common stock of Danielson Holding Corporation ("DHC"), filed by D. E. Shaw Laminar Portfolios L.L.C. on December 2, 2003 (the "Disclaimer"). This filing supplements and amends the Disclaimer as provided herein. All capitalized terms used but not defined herein shall have the meanings assigned to them in the Disclaimer. 1. The Disclaimer, when filed on December 2, 2003, contained certain references to the contents of the draft Note Purchase Agreement that are no longer accurate in light of the final, executed version of the Note Purchase Agreement agreed upon by the parties. Accordingly, Paragraph 2(D) of the Disclaimer is deleted in its entirety and replaced with the following: D. Laminar's Voluntary Voting Restriction Under the terms of the Note Purchase Agreement, Laminar has agreed, upon the acquisition of common stock resulting in a holding of ten percent (10%) or more of DHC common stock, not to exercise its voting power in DHC stock to direct or cause the direction of the management, policies or operations of DHC's insurance company subsidiaries, including, without limitation, Valor. Specifically, pursuant to Section 7.3(e) of the Note Purchase Agreement, Laminar agrees not to vote on matters: (i) that directly affect the management, policies and operations of the Company's insurance subsidiaries including the election of directors and appointment of officers of the insurance subsidiaries of DHC, including Valor; (ii) that directly affect the policies and business operations of the insurance subsidiaries, including matters involving the business plans or strategies of the insurance subsidiaries, including Valor, underwriting and claims handling standards and procedures, arrangements with insurance agents and brokers, regulatory compliance filings, or reinsurance arrangements of the insurance subsidiaries, including Valor; and (iii) directly regarding the management or operations of the insurance subsidiaries that insurance regulators in the jurisdictions where Laminar has filed a Disclaimer advise would constitute the exercise of control over the management, policies and operations of the insurance subsidiaries under the applicable Insurance Holding Company Act.(1) Laminar has effectively agreed, pursuant to Section 7.3(e) of the Note Purchase Agreement, not to exercise control over the business operations of DHC's insurance subsidiaries, including Valor. 2. The first sentence of the second paragraph of 4(B) of the Disclaimer is deleted in its entirety and replaced with the following: DHC has amended its By-Laws to provide that any holder of 20% or more of the voting power of DHC shall have the right to nominate a candidate for election to the DHC Board of Directors. 3. Additionally, Laminar supplements the Disclaimer with the following documents: A. A copy of the executed Note Purchase Agreement, dated as of December 2, 2003, with attachments (attached hereto as Exhibit A). B. DHC's amended By-Laws providing that any holder of twenty percent (20%) or more of the voting power of DHC shall have the right to nominate a candidate for election the DHC Board of Directors (attached hereto as Exhibit B). - -------- (1) Pursuant to Section 5.2(c) of the Note Purchase Agreement, DHC agrees not to enter into any transaction with a regulated entity that would subject any of the Investor Parties to regulatory approval. This provision is intended to apply to a new acquisition of a regulated entity that may affect the Investor Parties rather than transactions affecting Valor. -2- IN WITNESS WHEREOF, the undersigned has hereunto signed its name at the City of New York in the State of New York this 12th day of December, 2003. D. E. Shaw Laminar Portfolios, L.L.C. By: D. E. Shaw & Co., L.L.C., as its managing member /s/ Stuart Steckler ----------------------------- Name: Stuart Steckler Title: Managing Director State of New York County of New York } ss. Stuart Steckler, first being duly sworn, deposes and says that he is the Managing Director of D. E. Shaw Laminar Portfolios, L.L.C., the person preparing and filing the attached paper(s); that he has read the same and knows the contents thereof and that the contents are true of his own knowledge. D.E. Shaw & Co., L.L.C. By:/s/ Stuart Steckler ------------------------ Name: Stuart Steckler Title: Managing Director Subscribed and sworn to before me this ____ day of ____, 2003. ________ (Notarial Seal) Notary Public in and for said County and State My commission expires ______________________________________________ -3- To the Insurance Commissioner of the State of Montana: DISCLAIMER (INSURANCE CODE SECTION 33-2-1112) by D. E. SHAW LAMINAR PORTFOLIOS, L.L.C. ("Laminar") and its Affiliates (as defined herein) of affiliation with VALOR INSURANCE COMPANY, INCORPORATED 2727 Central Avenue Billings, Montana 59102 Dated December 2, 2003 at New York, New York This disclaimer filed pursuant to Montana Insurance Code Section 33-2-1112 (the "Disclaimer") is made in connection with the purchase and sale of securities convertible into voting common stock of Danielson Holding Corporation ("DHC") and related transactions (the "Transaction"). DHC is a Delaware corporation and the indirect parent of Valor Insurance Company, Incorporated ("Valor"), of Billings, Montana. As set forth in greater detail below, pursuant to an agreement (the "Note Purchase Agreement") (attached hereto in substantially final form as Exhibit A)(1) by and among DHC and several purchasers, including Laminar, Laminar will acquire notes issued by DHC convertible into 10% or more of the voting common stock of DHC (the "Notes"). It is possible that pursuant to Section 33-2-1101(2) of the Montana Insurance Code,(2) Laminar's acquisition of such notes could trigger the presumption of control over DHC's wholly owned subsidiary, Valor. The purpose of this Disclaimer is to disclaim, pursuant to Section 33-2-1112 of the Montana Insurance Code, affiliation with and control of DHC and Valor by Laminar and its direct and indirect affiliates. Laminar does not now, and will not upon the completion of the Transaction, control directly or indirectly within the meaning of Section 33-2-1101(2) of the Montana Insurance Code, DHC or Valor. Although upon completion of the Transaction, Laminar will control up to 25.88% - -------------------- (1) Given the complexity of this transaction, some of the transaction documents are still subject to negotiation. Exhibits that are not in final form will be supplemented with final versions of the applicable documents as soon as final forms are agreed upon by the relevant parties. This Disclaimer is being filed on the same day, but prior to, the execution of the Note Purchase Agreement described herein. (2) Section 33-2-1101(2) of the Montana Insurance Code provides that "control" shall be presumed to exist "if any person, directly or indirectly, owns, controls, holds with the power to vote, or holds proxies representing, more than 10 percent of the voting securities of any other person." Section 33-2-1101(6) of the Montana Insurance Code defines "securityholder" as "one who owns any security . . . including common stock, preferred stock, debt obligations, and any other security convertible into or evidencing the right to acquire any of the foregoing." This Disclaimer is therefore filed on the basis of Laminar's acquisition of the Notes. of the voting shares of DHC, Laminar has agreed to certain restrictions on the exercise of its voting powers. Pursuant to Section 7.3(e) of the Note Purchase Agreement, and as described in this Disclaimer, Laminar will agree not to vote or direct the vote of DHC with respect to issues directly affecting DHC's insurance company subsidiaries, including the management, policies and operations of DHC's insurance subsidiaries, including Valor. Laminar's interest in DHC arises from its economic interests in a business that is wholly unrelated to the insurance business, as discussed in greater detail below. Upon consummation of the proposed Transaction, Laminar would be an arm's length investor in DHC with an economic interest in the Notes and the underlying common stock of DHC into which the Notes would convert. As set forth herein, pursuant to agreed restrictions to its voting rights in DHC, Laminar and its Affiliates would not have the power to direct or cause the direction of the management, policies and operations of the DHC insurance company subsidiaries, including Valor. 1 THE PARTIES A. Laminar Laminar is a limited liability company organized under the laws of Delaware. The Managing Member of Laminar is D. E. Shaw & Co., L.L.C. ("DESCO LLC"), a limited liability company organized under the laws of Delaware. The Managing Member of DESCO LLC is D. E. Shaw & Co. II, Inc. ("DESCO II, Inc.") a corporation organized under the laws of Delaware. D. E. Shaw & Co., L.P. ("DESCO L.P."), a limited partnership organized under the laws of Delaware, is the investment advisor to Laminar. D. E. Shaw & Co., Inc. ("DESCO, Inc."), a corporation organized under the laws of Delaware, is the general partner of DESCO LP. Dr. David E. Shaw is the chairman, president and sole stockholder of DESCO, Inc. and DESCO II, Inc. For purposes of this Disclaimer, DESCO LLC, DESCO L.P., DESCO. Inc., DESCO II, Inc., and Dr. David E. Shaw shall be defined as "Affiliates." The address and principal office of Laminar and the Affiliates is: 120 W. 45th Street 39th Floor New York, New York, 10036 Attention: General Counsel B. Valor National American Insurance Company of California ("NAICC") is a California insurer. Valor is a wholly owned subsidiary of NAICC. Valor has 6,050 issued and outstanding voting shares of common stock. NAICC owns 6,050 shares, constituting all of Valor's issued and outstanding voting common stock. NAICC has 13,000 issued and outstanding shares of voting common stock, all of which are owned by Danielson Indemnity Company ("DIND"). DIND has 170,000 issued and outstanding voting shares of common stock. DHC owns 170,000, constituting all of DIND's issued and outstanding voting shares of common stock. Valor, NAICC, and DIND are directly -2- or indirectly the wholly owned subsidiaries of DHC. Through its control of DIND, DHC controls with the power to direct the vote of one hundred percent (100%) of the shares of Valor. Accordingly, DHC is a controlling person of Valor within the meaning of Section 33-2-1101 of the Montana Insurance Code. DHC is a public company whose current stock ownership is as follows: SZ Investments, L.L.C. ("SZ") is the beneficial owner of 5,460,612 shares of DHC's common stock, representing 17.81% of the voting power of DHC. SZ was permitted to take this position in DHC by approval of the Montana Insurance Department dated August 10, 1999. Third Avenue Trust on behalf of Third Avenue Fund Series ("Third Avenue") is the beneficial owner of 4.27% of DHC's voting power. The remaining outstanding shares of DHC are publicly held by over 1,300 stockholders, with no stockholders other than the Commissioner of Insurance of the State of California, on behalf of the Mission Insurance Companies' Trusts, owning more than 5% of the voting power. Laminar and its Affiliates are not directly or indirectly controlled by or under common control with NAICC, DHC or Valor. The only relationship between Laminar, its Affiliates, and Valor results from the Transaction described below. 2. THE TRANSACTION A. Background: The Covanta Acquisition DHC is negotiating to acquire Covanta Energy Corporation's ("Covanta") equity pursuant to a reorganization plan (the "Plan") under chapter 11 proceedings pending in the United States Bankruptcy Court for the Southern District of New York (the "Bankruptcy Court") (the "Covanta Acquisition").(3) B. Laminar's Acquisition of Notes Pursuant to the terms of (and subject to certain conditions set forth in) the Note Purchase Agreement, Laminar, Third Avenue, and SZ, severally (the "Investor Parties"), will provide a portion of the funding necessary for DHC to consummate the Covanta Acquisition through various financing arrangements to DHC and Covanta in connection with the Covanta Acquisition. Pursuant to the Note Purchase Agreement, the Investor Parties have the following percentage participations in the investment: Laminar 50%, Third Avenue 25%, and SZ 25%, except that Laminar will have 100% of the responsibility for providing an international revolver to CPIH as described in footnote 3. - -------------------- (3) Under DHC's agreement with Covanta, in order to acquire the Covanta stock, DHC is required to make deposits totalling $30 million, and in addition, the Investor Parties shall provide Covanta a letter of credit facility with a mixed use revolver of $118 million on a second prior lien basis (the "Second Lien LOC") and Laminar will provide Covanta's subsidiary Covanta Power International Holdings, Inc. ("CPIH") a revolving credit facility for international operations of $10 million (the "Revolving Note"). -3- Pursuant to the terms of the Note Purchase Agreement, to be entered into between DHC and the Investor Parties, the Investor Parties will provide DHC with a loan in the form of a convertible bridge loan in the amount of $40 million (the "Convertible Bridge Loan"), the proceeds of which DHC shall use to pay the full consideration for the Covanta Acquisition, to pay expenses in connection with the transaction and for general corporate purposes. The Investor Parties will receive the Notes, convertible into common stock of DHC. In consideration for their agreement to provide the Convertible Bridge Loan and the other financing arrangements, including an $118 million letter of credit facility and a $10 million revolving credit facility, the Investor Parties will receive from DHC, in accordance with their percentage participation, 5.12 million shares of DHC common stock. (the "Allocation Shares").(4) For the avoidance of doubt, the description set forth in this Section 2.B of this Disclaimer focuses on the issue of control under the Montana Insurance Code but is a summary description of the Transaction and does not document the full scope of the proposed Transaction contemplated by the Note Purchase Agreement, or the DHC acquisition agreement with Covanta. C. Rights Offering--Laminar's Acquisition of DHC Common Stock Upon the Bankruptcy Court's approval of the Plan and after the closing of the Covanta Acquisition, DHC will initiate a pro rata rights offering to all of its stockholders. The Investor Parties will convert the Notes for shares of DHC equal to up to a maximum number of shares as agreed among the parties. During the rights offering, Laminar shall acquire additional DHC shares of increasing amounts in accordance with the schedule annexed hereto as Exhibit B, based upon the levels of public participation in the rights offering (excluding the Investor Parties and the Commissioner of Insurance for the State of California).(5) On a fully diluted basis, the amount of DHC common stock acquired by Laminar as a result of the Allocation Shares, rights offering and conversion of the Notes would range between 19.24% (assuming 100% public participation) and 25.88% (assuming 0% public participation) of all of DHC's outstanding common stock. DHC intends to repay the Notes out of the proceeds of the rights offering. In the event that the proceeds are insufficient to pay off the Notes, then the terms of the loan will change with respect to unpaid amounts, as set forth in the Note Purchase Agreement. D. Laminar's Voluntary Voting Restriction Under the terms of the Note Purchase Agreement, Laminar has agreed not to exercise its voting power in DHC stock to direct or cause the direction of the management, policies or operations of DHC's insurance company subsidiaries, including, without limitation, Valor. Specifically, Section 7.3(e) of the Note Purchase Agreement restricts Laminar's ability to - -------------------- (4) In addition, the Investor Parties will receive up front cash fees of 2% (and other fees) from Covanta for the Second Lien LOC and Laminar shall receive up front cash fees of 2% (and other fees) from Covanta for the Revolving Note. (5) If, after using all proceeds of the rights offering to repay the Notes, notes are still outstanding, the remaining notes shall be converted into common stock of DHC on a pro rata basis, provided, however, that the Notes will remain outstanding to the extent conversion for stock would result in an "ownership change" of DHC (e.g. if the percentage of such conversion exceeds 47.5% of the DHC common stock). -4- vote on matters that directly affect: (i) the management, policies and operations of the Company's insurance Subsidiaries including the election of directors and appointment of officers of Valor; (ii) the policies and business operations of the insurance subsidiaries, including matters involving the business plans or strategies of Valor, underwriting and claims handling standards and procedures, arrangements with insurance agents and brokers, regulatory compliance filings, or reinsurance arrangements of Valor; and (iii) the management or operations of the insurance subsidiaries that insurance regulators in the jurisdictions where Laminar has filed a Disclaimer advise would constitute the exercise of control over the management, policies and operations of the insurance subsidiaries under the applicable Insurance Holding Company Act.(6) By the terms of the Note Purchase Agreement, Laminar will generally exercise its voting power in DHC to protect its investment in DHC with respect to issues such as the transferability of the Notes or common stock, approval of DHC's issuance of common stock, pari passu ranking equity, changes to DHC's organizational and constituent documents, and tax treatment of Laminar and DHC. Pursuant to Section 7.3(e) of the Note Purchase Agreement, Laminar will not direct the business operations of DHC's insurance subsidiaries, including Valor. - -------------------- (6) Pursuant to Section 5.2(c) of the Note Purchase Agreement, DHC agrees not to enter into any transaction with a regulated entity that would subject any of the Investor Parties to regulatory approval. This provision is intended to apply to a new acquisition of a regulated entity that may affect the Investor Parties rather than transactions affecting Valor. -5- 3. VOTING POWER OF LAMINAR A. Shares Controlled by Laminar Currently, Laminar directly or indirectly owns 227,700 shares of DHC and directly owns no shares in Valor. Upon completion of the conversion, Laminar would own common stock of DHC, which is a controlling person of Valor. B. Issued and Outstanding Shares of DHC As of the date of the Note Purchase Agreement, on a fully diluted basis, DHC had 30,673,831 outstanding shares of common stock and 1,952,253 options to purchase common stock are outstanding. On a fully diluted basis, there will be 74,355,657 shares of common stock issued and outstanding after the rights offering, assuming 100% public participation. C. Acquisition of Shares by Laminar in the Transaction Assuming full conversion, after the rights offering depending upon the extent of public participation, Laminar will own between approximately 14,300,000 (assuming 100% public participation) and approximately 16,000,000 (assuming 0% public participation) shares of common stock of DHC which constitutes between 19.24% and 25.88% of the voting power of the issued and outstanding common stock of DHC. 4. LAMINAR WILL NOT EXERCISE CONTROL OF DHC AND VALOR After the Transaction closes, although Laminar will hold, with the power to vote, ten percent (10%) or more of the voting shares of DHC, pursuant to the restrictions set forth in the Note Purchase Agreement, Laminar will not have the power to direct or cause the direction of the management, policies and operations of DHC or Valor as contemplated by Section 33-2-1101 of the Montana Insurance Code. For the reasons set forth below, Laminar disclaims affiliation with and control of DHC and Valor as contemplated by Section 33-2-1112 of the Montana Insurance Code. A. Influence of Other DHC Shareholders Over DHC and Valor The corporate structure and interests of DHC's major shareholders result in significantly restricting Laminar's ability to direct or cause the direction of the management, policies and operations of DHC even after full conversion of the notes to voting common stock. SZ is the registered insurance holding company of NAICC, Valor's parent, pursuant to a ruling of the California Insurance Department dated July 19, 1999. SZ will own between 16.32% (assuming 100% public participation) and 21.48% (assuming 0% public participation) of the post - conversion vote of DHC. Third Avenue will control between 6.55% (assuming 100% public participation) and 14.85% (assuming 0% public participation) of the post - conversion vote of DHC. -6- B. Board Representation The DHC Board of Directors currently consists of eight (8) directors (the "Directors"). (A ninth board seat remains vacant with the intention that if the California Commissioner of Insurance seeks to have board representation, the other members of the Board will have the ability to appoint a suitable candidate proposed by the Commissioner for that role.) Of the eight current Directors, two (2) are affiliated with SZ and two (2) are affiliated with Third Avenue: Martin J. Whitman is a Director of DHC and is the Chairman of the Board and a Trustee of Third Avenue; David Barse is a Director of DHC and is the President and Chief Executive Officer of Third Avenue; William Pate is a Director of DHC and is the Managing Director of Equity Group Investments, L.L.C., ("EGI"), an entity under common control with SZ because the ownership of SZ and EGI are substantially similar; Samuel Zell, Chairman of the Board of Directors and Chief Executive Officer of DHC, is also the Chairman of the Board of EGI and the President of SZ, which is owned by various Zell family trusts. DHC has agreed to amend its By-Laws to provide that any holder of 20% or more of the voting power of DHC shall have the right to nominate a candidate for election to the DHC Board of Directors. Accordingly, to the extent that Laminar owns 20% or more of the outstanding common stock of DHC, Laminar will have the ability, but not the obligation, to nominate one director to the DHC Board of Directors subject to stockholder approval of such nominee. Laminar will supplement this Disclaimer with the updated By-Laws as soon as they are adopted by DHC. In light of the following facts, Laminar's right to propose the nomination of one Director will not enable Laminar to direct or cause the direction of the management of DHC or Valor. i. a single director will have no more influence or control over a board which will comprise eight or more other members than any of those other members. The nominated director will have no special voting, quorum or veto rights at board meetings of DHC and will therefore be no more able to influence the outcome of board decisions than any other director. The same will apply if he or she sits on any board committee. ii. Under applicable law, Laminar's appointee will be subject to the same fiduciary duties as other directors, to act in the interests of DHC's shareholders generally. iii. Shareholders of DHC in a general meeting have the right to vote on the appointment and removal of directors, including the nominee of Laminar. Laminar can not, therefore, ensure that its nominee will be appointed to the DHC's board or prevent his or her removal against the wishes of a majority of the DHC's shareholders. iv. Laminar will have no special voting, quorum or veto rights attaching to its common shares. -7- C. Management Control Laminar will not be entitled to appoint the management of DHC or Valor as a result of its stock ownership. Samuel Zell is the President and Chief Executive Officer of DHC and in that position oversees the management and operations of DHC. Through his influence as the President of SZ over the DHC board members affiliated with SZ and his influence as the Chairman of EGI over the board members affiliated with EGI, the entity that provides administrative services to DHC (as described below), and his positions as Chairman of the Board of Directors, President, and Chief Executive Officer of DHC, Mr. Zell's influence over the management, policies and operations of DHC will be greater than the influence Laminar would have to direct the management of DHC. D. Contractual Arrangements. Laminar will have no contractual arrangements with DHC to provide goods or services. Pursuant to a corporate services agreement (the "Services Agreement") dated as of September 2, 2003 between DHC and EGI, EGI has agreed to provide certain administrative services to DHC, including, among others, shareholder relations, insurance procurement and management, payroll services, cash management and treasury functions, technology services, listing exchange compliance and financial and corporate record keeping. As noted above, EGI and SZ are affiliated entities with substantially similar ownership, and both are affiliated with Mr. Zell. Although the Notes owned by Laminar trigger the presumption of control under Section 33-2-1101(2) of the Montana Insurance Code, given the existing board composition, the identities of the current officers, and the affiliated status of many board members and the executive officers with other significant shareholders, as a practical matter, Laminar's voting power will not enable it to direct the management, policies, or operations of DHC or Valor. On a combined basis, SZ and Third Avenue will hold up to 36.33% of the common stock of DHC, significantly more than the maximum amount that could be held by Laminar (giving effect to the Transactions). Additionally, representatives of SZ and Third Avenue together hold half of the seats on DHC's Board. Even with Board representation and affiliated persons serving as officers, Laminar will not be able to exercise functional control over DHC. E. Laminar's Voluntary Voting Restriction Pursuant to Section 7.3(e) of the Note Purchase Agreement, Laminar has agreed not to exercise its voting power in DHC stock in votes relating to the management, policies and operations of the DHC insurance subsidiaries. Consequently, as a practical matter, Laminar's voting power in DHC will not enable it to appoint management or vote on board members of Valor, and Laminar will be unable to influence management decisions of Valor involving insurance operations, business strategies, underwriting and claims handling, reinsurance programs, or regulatory compliance. Laminar's equity position in DHC will be passive with respect to the management, policies and operations of Valor. 5. The proposed Transaction by Laminar relating to Valor will not result in -8- affiliation, within the meaning of Montana Insurance Code Section 33-2-1101, of Laminar with Valor, or vice versa, because: A. Even after the completion of the contemplated Transactions, DHC will be unable to assert functional control over DHC because the interests of other major shareholders, including share ownership and service as directors and executive officers by individuals affiliated with other shareholders will aggregate to greater influence over the management, polices, and operations of DHC than Laminar could assert. B. Management and control of the daily operations of the DHC insurance subsidiaries, including Valor, is vested in the officers of such insurance companies and will not be within the control of Laminar. C. Laminar will exercise only passive ownership of DHC's shares on all issues affecting the management, policies and operations of Valor, and will not vote its shares in DHC or cause such shares to be voted on issues that directly affect the management or operations of Valor. For the reasons set forth above, Laminar on its own behalf and on behalf of its Affiliates respectfully requests your acceptance of this disclaimer of affiliation and control. -9- IN WITNESS WHEREOF, the undersigned has hereunto signed its name and affixed its corporate seal at the City of New York in the State of New York this 2nd day of December, 2003. D. E. Shaw Laminar Portfolios, L.L.C. By: D. E. Shaw & Co., L.L.C., as its managing member /s/ Stuart Steckler ------------------------ Name: Stuart Steckler Title: Managing Director -10- (1) DISCLAIMER ALLOWED this ____ day of _____, 20___, on the basis of the evidence presented herein. __________________ INSURANCE COMMISSIONER OF THE STATE OF MONTANA BY _________________________________________________________ DEPUTY -11- -----END PRIVACY-ENHANCED MESSAGE-----