<PAGE>

                                                           Exhibit 10 (ii) (35)

                       American International Companies

AIG Insurance Company
American Fidelity Company
American Home Assurance Company                          Principal Bond Office
Granite State Insurance Company                             70 Pine Street
Illinois National Insurance Company                       New York, NY  10270
The Insurance Company of the State of Pennsylvania
National Union Fire Insurance Company of Pittsburgh, PA
New Hampshire Insurance Company
Commerce and Industry Insurance Company of Canada


                          GENERAL INDEMNITY AGREEMENT
                          ---------------------------

     THIS AGREEMENT of indemnity, made and entered into this
13/th/ day of September, 1999, by The IT Group, Inc.: IT Corproration (herein
                                  -----------------------------------
after called the Contractor) and The IT Group, Inc.; IT Corporation (hereinafter
                                 ----------------------------------
called the Indemnitors, if any) and the member companies of the AMERICAN
INTERNATIONAL GROUP OF COMPANIES (AIG Insurance Company, American Fidelity
Company, American Home Assurance Company, Granite State Insurance Company,
Illinois National Insurance Company, The Insurance Company of the State of
Pennsylvania, National Union Fire Insurance Company of Pittsburgh, Pa., New
Hampshire Insurance Company, Commerce and Industry Insurance Company of Canada),
hereinafter individually and collectively referred to as "SURETY".

                                  WITNESSETH:
                                  -----------

     WHEREAS, IT Corporation ("IT") is the owner of four (4) sites formerly
used for the disposal of hazardous waste in Northern California, three (3) of
which have been closed, and the fourth site(the Panoche site) is presently in
the process of closure construction. IT is required by regulations of the
California Environmental Protection Agency, Department of Toxic Substances
Control ("DTSC") to maintain certain trust funds to assure completion of such
closure and post closure care of the sites; and

     WHEREAS, the DTSC is prepared to release the trust funds in consideration
of the issuance of a bond issued by the Surety on behalf of the
Contractor/Indemnitor.

     WHEREAS, the Contractor, in the performance of contracts and the
fulfillment of obligations generally, whether in its own name solely, or any
one, combination of, or all of the indemnitors, or any present or future
subsidiary, or a subsidiary of a subsidiary of the Contractor, whether alone or
in joint venture with others not named herein and any corporation, partnership
or person who may desire, or be required to give or procure certain surety
bonds, undertakings or instruments of guarantee, and to renew, or continue or
substitute the same from time to time; or new bonds, undertakings or instruments
of guarantee with the same or different penalties, and/or conditions, may be
desired or required, in renewal, continuation, extension or substitutions
thereof; any one or more of which are hereinafter called Bonds; or the
Contractor or Indemnitors may request the Surety to refrain from canceling said
Bonds; and

     WHEREAS, at the request of the Contractor and the Indemnitors and upon the
express understanding that this Agreement of Indemnity should be given, the
Surety has executed or procured to be executed, and may from time to time
hereafter execute or procure to be executed, said Bonds on behalf of the
Contractor; and

     WHEREAS, the Indemnitors have a substantial, material and beneficial
interest in the obtaining of the Bonds or in the Surety's refraining from
canceling said Bonds.

     NOW, THEREFORE, in consideration of the premises the Contractor and
Indemnitors for themselves, their heirs, executors, administrators, successors
and assigns, jointly and severally, hereby covenant and agree with the Surety,
its successors and assigns, as follows:

                                   PREMIUMS
                                   --------

     FIRST: The Contractor and Indemnitors will pay to the Surety in such
manner as may be agreed upon all premiums and charges of the Surety for Bonds in
accordance with its rate filings, its manual of rates, or as otherwise agreed
upon, until the Contractor or Indemnitors shall serve evidence satisfactory to
the Surety of its discharge or release from the Bonds and all liability by
reason thereof.

                                       1
<PAGE>

                                   INDEMNITY
                                   ---------

     SECOND: The Contractor and Indemnitors shall exonerate, indemnify, and keep
indemnified the Surety from and against any and all liability for losses and/or
expense of whatsoever kind or nature (including, but not limited to, interest,
court costs and reasonable counsel fees) and from and against any and all such
losses and/or expenses which the Surety may sustain and incur: (1) By reason of
having executed or procured the execution of the Bonds, (2) By reason of the
failure of the Contractor or Indemnitors to perform or comply with the covenants
and conditions of this Agreement or (3) in enforcing any of the covenants and
conditions of this Agreement; provided, however, and notwithstanding anything in
this Agreement to the contrary, neither Contractor nor any of the Indemnitors
shall be liable for any amount or in any other manner by reason of any
negligence, willful misconduct or violation of law of Surety or any substitute
contractor that Surety may hire to complete the work at any of the sites.
Payment by reason of the aforesaid causes shall be made to the Surety by the
Contractor and Indemnitors as soon as liability exists or is asserted against
the Surety, whether or not the Surety shall have made any payment therefor. Such
payment shall be equal to the amount of the reserve set by the Surety. In the
event of any payment by the Surety the Contractor and Indemnitors further agree
that in any accounting between the Surety and the Contractor, or between the
Surety and the Indemnitors, or either or both of them, the Surety shall be
entitled to charge for any and all disbursements made by it in good faith in and
about the matters herein contemplated by this Agreement under the belief that it
is or was liable for the sums and amounts so disbursed, or that it was necessary
or expedient to make such disbursements, whether or not such liability,
necessity or expediency existed; and that the vouchers or other evidence of any
such payments made by the Surety shall be prima facie evidence of the fact and
amount of the liability to the Surety.

                                  ASSIGNMENT
                                  ----------

     THIRD: The Contractor, the Indemnitors hereby consenting, will assign,
transfer and set over, and does hereby assign, transfer and set over to the
Surety, as collateral, to secure the obligations in any and all of the
paragraphs of this Agreement and any other indebtedness and liabilities of the
Contractor to the Surety, whether heretofore or hereafter incurred, the
assignment in the case of each contract to become effective as of the date of
the bond covering such contract, but only in the event of (1) any abandonment,
forfeiture or breach of any contracts referred to in the Bonds or of any breach
of any said Bonds; or (2) of any breach of the provisions of any of the
paragraphs of this Agreement; or (3) of a default in discharging such other
indebtedness or liabilities when due; or (4) of any assignment by the Contractor
for the benefit of creditors, or of the appointment, or of any application for
the appointment, of a receiver or trustee for the Contractor whether insolvent
or not; or (5) of any proceeding which deprives the Contractor of the use of any
of the machinery, equipment, plant, tools, or material referred to in section
(b) of this paragraph; or (6) of the Contractor's, absconding, disappearing,
lack of legal capacity, being convicted of a felony solely applicable to the
site in question: (a) All the rights of the Contractor in, and growing in any
manner out of, all contracts referred to in the Bonds, or in, or growing in any
manner out of the Bonds; (b) All the rights, title and interest of the
Contractor in and to all machinery, equipment, plant, tools and materials which
are now, or may hereafter be, about or upon the site or sites of any and all of
the contractual work referred to in the Bonds or elsewhere, including materials
purchased for or chargeable to any and all contracts referred to in the bonds,
materials which may be in process of construction, in storage elsewhere, or in
transportation to any and all of said sites; (c) All the rights, title and
interest of the Contractor in and to all subcontracts let or to be let in
connection with any and all contracts referred to in the Bonds, and in and to
all surety bonds supporting such subcontracts; (d) All actions, causes of
actions, claims and demands whatsoever which the Contractor may have or acquire
against any subcontractor, laborer or materialman, or any person furnishing or
agreeing to furnish or supply labor, material, supplies, machinery, tools or
other equipment in connection with or on account of any and all contracts
referred to in the Bonds; and against any surety or sureties of any
subcontractor, laborer, or materialman; (e) Any and all percentages retained and
any and all sums that may be due or hereafter become due on account of any and
all contracts referred to in the Bonds and all other contracts whether bonded or
not in which the Contractor has an interest, in all cases subject to any prior
encumbrances thereon.

                                   TRUST FUND
                                   ----------

     FOURTH: If any of the Bonds are executed in connection with a contract
which by its terms or by law prohibits the assignment of the contract monies, or
any part thereof, the Contractor and Indemnitors covenant and agree that all
payments received for or on account of said contract shall be held as a trust
fund in which the Surety has an interest, for the payment of obligations
incurred in the performance of the contract and for labor, materials, and
services furnished in the prosecution of the work provided in said contract or
any authorized extension or modification thereof; and, further, it is expressly
understood and declared that all monies due and to become due under any contract
or contracts covered by the Bonds are trust funds, whether in the possession of
the Contractor or

                                       2
<PAGE>

Indemnitors or otherwise, for the benefit of and for payment of all such
obligations in connection with any such contract or contracts for which the
Surety would be liable under any of said Bonds, which said trust also inures to
the benefit of the Surety for any liability or loss it may have or sustain under
any said Bonds, and this Agreement and declaration shall also constitute notice
of such trust.

                            UNIFORM COMMERCIAL CODE
                            -----------------------

     FIFTH: That this Agreement shall constitute a Security Agreement to the
Surety and also a Financing Statement, both in accordance with the provisions of
the Uniform Commercial Code of every jurisdiction wherein such Code is in effect
and may be so used by the Surety without in any way abrogating, restricting or
limiting the rights of the Surety under this Agreement or under law, or in
equity.

                                   TAKEOVER
                                   --------

     SIXTH: In the event of any breach, delay or default asserted by the
obligee in any said Bonds, or the Contractor has suspended or ceased work on any
contract or contracts covered by any said Bonds, or failed to pay obligations
incurred in connection therewith, Contractor's conviction of a felony solely
applicable to the site in question, imprisonment, incompetencylack of legal
capacity, insolvency, or bankruptcy of the Contractor, or the appointment of a
receiver or trustee for the Contractor solely applicable to the site in
question, or the property of the Contractor, or in the event of a assignment for
the benefit of creditors of the Contractor, or if any action is taken by or
against the Contractor under or by virtue of the National Bankruptcy Code, or
should reorganization or arrangement proceedings be filed by or against the
Contractor under said Act, or if any action is taken by or against the
Contractor under the insolvency  laws of any state, possession, or territory of
the United States the Surety shall have the right, at its option and in its sole
discretion and is hereby authorized, subject to consultation with principal as
described in clause Thirteen of this document, with or without exercising any
other right or option conferred upon it by law or in the terms of this
Agreement, to take possession of any part or all of the work under any contract
or contracts covered by any said Bonds, and at the expense of the Contractor and
Indemnitors to complete or arrange for the completion of the same, and the
Contractor and Indemnitors shall promptly upon demand pay to the Surety all
reasonable losses, and expenses so incurred.

                                    CHANGES
                                    -------

     SEVENTH: The Surety is authorized and empowered, upon the sending of
notice, via certified mail, return receipt requested, to  the Indemnitors to
assent to any change whatsoever in the Bonds, and/or any contracts referred to
in the Bonds, and/or in the general conditions, plans and/or specifications
accompanying said contracts, including, but not limited to, any change in the
time for the completion of said contracts and to payments or advances thereunder
before the same may be due, and to assent to or take any assignment or
assignments, to execute or consent to the execution of any continuations,
extensions or renewals of the Bonds and to execute any substitute or substitutes
therefore, with the same or different conditions, provisions and obligees and
with the same or larger or smaller penalties, it being expressly understood and
agreed that the Indemnitors shall remain bound under the terms of this Agreement
even though any such assent by the Surety does or might substantially increase
the liability of said Indemnitors; provided however, and notwithstanding
anything in this Agreement to the contrary, Surety shall make no changes without
Contractor's and Indemnitors' written consent in any contract, plan or
specification, which would, or is reasonably likely to lead to either, 1)a
change in any closure or post closure plan approved for a site, or 2) an
increase in the closure or post closure costs with respect to a site.

                                   ADVANCES
                                   --------

     EIGHTH: The Surety is authorized and empowered to guarantee loans, to
advance or lend to the Contractor any money, which the Surety may see fit, for
the purpose of any contracts referred to in, or guaranteed by the Bonds; and all
money expended in the completion of any such contracts by the Surety, or lent or
advanced from time to time to the Contractor, or guaranteed by the Surety for
the purposes of any such contracts, and all costs, and expenses incurred by the
Surety in relation thereto, unless repaid with legal interest by the Contractor
to the Surety when due, shall be presumed to be a loss by the Surety for which
the Contractor and the Indemnitors shall be responsible, notwithstanding that
said money or any part thereof should not be so used by the Contractor.

                               BOOKS AND RECORDS
                               -----------------

     NINTH: At any time, and until such time as the liability of the Surety
under any and all said Bonds is terminated, the Surety shall have the right to
reasonable access to the books, records, and accounts of the Contractor and
Indemnitors; and any bank depository, materialman, supply house, or other
person, firm, or corporation when

                                       3
<PAGE>

requested by the Surety is hereby authorized to furnish the Surety any
information requested including, but not limited to, the status of the work
under contracts being performed by the Contractor, the condition of the
performance of such contracts and payments of accounts.

                               DECLINE EXECUTION
                               -----------------

     TENTH: Unless otherwise specifically agreed in writing, the Surety may
decline to execute any Bond and the Contractor and Indemnitors agree to make no
claim to the contrary in consideration of the Surety's receiving this Agreement;
and if the Surety shall execute a Bid or Proposal Bond, it shall have the right
to decline to execute any and all of the bonds that may be required in
connection with any award that may be made under the proposal for which the Bid
or Proposal Bond is given and such declination shall not diminish or alter the
liability that may arise by reason of having executed the Bid or Proposal Bond.

                              NOTICE OF EXECUTION
                              -------------------

     ELEVENTH: The Indemnitors hereby waive notice of the execution of said
Bonds and of the acceptance of this Agreement, and the Contractor and the
Indemnitors hereby waive all notice of any default, or any other act or acts
giving rise to any claim under said Bonds, as well as notice of any and all
liability of the Surety under said Bonds, and any and all liability on their
part hereunder, to the end and effect that, the Contractor and the Indemnitors
shall be and continue liable hereunder, notwithstanding any notice of any kind
to which they might have been or be entitled, and notwithstanding any defenses
they might have been entitled to make.

[Reserved.]

                                   HOMESTEAD
                                   ---------

     TWELFTH:  The Contractor and the Indemnitors hereby waive, so far as their
respective obligations under this Agreement are concerned, all rights to claim
any of their property, including their respective homesteads, as exempt from
levy, execution, sale or other legal process under the laws of any State,
Territory, or Possession.

                                  SETTLEMENTS
                                  -----------

     THIRTEENTH:  The Surety shall have the right to adjust, settle or
compromise any claim, demand, suit or judgment upon the Bonds, unless the
Contractor and the Indemnitors shall request the Surety to litigate such claim
or demand, or to defend such suit, or to appeal from such judgment, and shall
deposit with the Surety, at the time of such request, cash or collateral
satisfactory to the Surety in kind and amount, to be used in paying any judgment
or judgments rendered or that may be rendered, with interest, costs, expenses
and attorney's fees, including those of the Surety. However, Surety agrees that
it will first review Contractor's and Indemnitors' financial condition and in
its' reasonable discretion, decide whether it will require cash or other
collateral.

                                   SURETIES
                                   --------

     FOURTEENTH: In the event the Surety procures the execution of the Bonds by
other sureties, or executes the Bonds with co-sureties, or reinsures any portion
of said Bonds with reinsuring sureties, then all the terms and conditions of
this Agreement shall inure to the benefit of such other sureties, co-sureties
and reinsuring sureties, as their interest may appear.

                                     SUITS
                                     -----

     FIFTEENTH: Separate suits may be brought hereunder as causes of action
accrue, and the bringing of suit or the recovery of judgment upon any cause of
action shall not prejudice or bar the bringing of other suits upon other causes
of action, whether theretofore or thereafter arising.

                                OTHER INDEMNITY
                                ---------------

     SIXTEENTH: That the Contractor and the Indemnitors shall continue to
remain bound under the terms of this Agreement even though the Surety may have
from time to time heretofore or hereafter, upon notice to the Contractor and the
Indemnitors, accepted or released other agreements of indemnity or collateral in
connection with the execution or procurement of the aforementioned Bonds, from
the Contractor or Indemnitors or others, it being expressly understood and
agreed by the Contractor and the Indemnitors that any and all other rights which
the Surety may have or acquire against the Contractor and the Indemnitors and/or
others under any such other or additional agreements of indemnity or collateral
shall be in addition to, and not in lieu of, the rights afforded the Surety
under this Agreement.

                                  INVALIDITY
                                  ----------

     SEVENTEENTH:  In case any of the parties mentioned in this Agreement fail
to execute the same, or in case the execution hereof by any of the parties be
defective or invalid for any reason, such failure, defect or

                                       4
<PAGE>

invalidity shall not in any manner affect the validity of this Agreement or the
liability hereunder of any of the parties executing the same, but each and every
party so executing shall be and remain fully bound and liable hereunder to the
same extent as if such failure, defect or invalidity had not existed. It is
understood and agreed by the Contractor and Indemnitors that the rights, powers,
and remedies given the Surety under this Agreement shall be and are in addition
to, and not in lieu of, any and all other rights, powers, and remedies which the
Surety may have or acquire against the Contractor and Indemnitors or others
whether by the terms of any other agreement or by operation of law or otherwise.

                               ATTORNEY IN FACT
                               ----------------

     EIGHTEENTH: The Contractor and Indemnitors hereby irrevocably nominate,
constitute, appoint and designate the Surety as their attorney-in-fact with the
right, but not the obligation, to exercise all of the rights of the Contractor
and Indemnitors assigned, transferred and set over to the Surety in this
Agreement, including, but not limited to, the power to endorse in the name of
the Contractor and Indemnitors and thereby to collect any check, draft, warrant
or other instrument made or issued in payment of any moneys due on this
agreement in which the Contractor has an interest and to disburse the proceeds
thereof, and in the name of the Contractor and Indemnitors to make, execute, and
deliver any and all additional or other assignments, documents or papers deemed
necessary and proper by the Surety in order to give full effect not only to the
intent and meaning of the within assignments but also to the full protection
intended to be herein given to the Surety under all other provisions of the
Agreement. The Contractor and Indemnitors hereby ratify and confirm all acts and
actions taken and done by the Surety as such attorney-in-fact.

                                  TERMINATION
                                  -----------

     NINETEENTH: This Agreement may be terminated by the Contractor or
Indemnitors upon twenty day's written notice sent by registered mail to the
Surety at its home office at 70 Pine Street, New York, New York, 10270, but any
such notice of termination shall not operate to modify, bar, or discharge the
Contractor or the Indemnitors as to the Bonds that may have been theretofore
executed.

     TWENTIETH: This Agreement may not be changed or modified orally.  No
change or modification shall be effective unless made by written endorsement
executed to form a part hereof.

     IN WITNESS WHEREOF, we have hereunto set our hands and seals the day and
year first above written.

                                  THE IT GROUP, INC.


Attest:  James M. Redwine         By: /s/ Richard R. Conte
--------------------------------- ----------------------------------------------
                                                                (Corporate Seal)
                                  Richard R. Conte, Vice President


                                  IT CORPORATION


Attest:  James M. Redwine         By: /s/ Richard R. Conte
--------------------------------- ----------------------------------------------
                                                                (Corporate Seal)
                                  Richard R. Conte, Vice President

                                       5
<PAGE>

                          PARTNERSHIP ACKNOWLEDGMENT
                          --------------------------

STATE OF
-------------------------------------------------------
COUNTY OF
-------------------------------------------------------

On this ___ day of ___________199__, before me personally appeared
__________________________________, to me known and known to me to be a member
of the firm of
described in and who executed the foregoing instrument, and he thereupon
acknowledged to me that he executed the same as and for the act and deed of the
said firm.

________________________________________________________________________________
Notary Public
Commission Expires ____________________


STATE OF
-------------------------------------------------------
COUNTY OF
-------------------------------------------------------

On this ___ day of ________199__, before me personally appeared
__________________________________, to me known and known to me to be a member
of the firm of
described in and who executed the foregoing instrument, and he thereupon
acknowledged to me that he executed the same as and for the act and deed of the
said firm.

________________________________________________________________________________
Notary Public
Commission Expires ____________________


                           CORPORATE ACKNOWLEDGMENT
                           ------------------------


STATE OF PENNSYLVANIA
-------------------------------------------------------
COUNTY OF ALLEGHENY
-------------------------------------------------------

On this 13/th/ day of September 1999, before me personally appeared Richard R.
Conte, to me known to be the Vice President of The IT Group, Inc., the
corporation executing the above instrument, and acknowledged said instruments to
be the free and voluntary act and deed of said corporation, for the uses and
purposes therein mentioned and on oath stated that the seal affixed is the seal
of said corporation and that said instrument was executed by order of the Board
of Directors of said corporation.

/s/
________________________________________________________________________________
Notary Public
Commission Expires   July 5, 2001
                   ----------------


STATE OF PENNSYLVANIA
-------------------------------------------------------
COUNTY OF ALLEGHENY
-------------------------------------------------------

On this 13/th/ day of September 1999, before me personally appeared Richard R.
Conte, to me known to be the Vice President of IT Corporation, the corporation
executing the above instrument, and acknowledged said instruments to be the free
and voluntary act and deed of said corporation, for the uses and purposes
therein mentioned and on oath stated that the seal affixed is the seal of said
corporation and that said instrument was executed by order of the Board of
Directors of said corporation.

/s/
________________________________________________________________________________
Notary Public
Commission Expires   July 5, 2001
                   ----------------


                                       6