Exhibit 10.6


 


EXECUTIVE VERSION


 


 


THIRD AMENDED AND RESTATED


 


UNDERWRITING AND CONTINUING


 


INDEMNITY AGREEMENT


 


dated


 


December 22, 2003


 


among


 


GREAT LAKES DREDGE & DOCK CORPORATION,


 


CERTAIN OF ITS SUBSIDIARIES,


 


TRAVELERS CASUALTY AND SURETY COMPANY


 


and


 


TRAVELERS CASUALTY AND SURETY COMPANY OF AMERICA


 

















 


TABLE OF CONTENTS


 


	
  ARTICLE I

  	
  DEFINITIONS

  	
   

  
	
   

  	
   

  	
   

  
	
  SECTION 1.1

  	
  DEFINED TERMS

  	
   

  
	
  SECTION 1.2

  	
  USE OF DEFINED TERMS

  	
   

  
	
  SECTION 1.3

  	
  ACCOUNTING PRINCIPLES

  	
   

  
	
   

  	
   

  	
   

  
	
  ARTICLE II

  	
  BOND FACILITY

  	
   

  
	
   

  	
   

  	
   

  
	
  SECTION 2.1

  	
  BONDS

  	
   

  
	
  SECTION 2.2

  	
  PREMIUM PAYMENT

  	
   

  
	
   

  	
   

  	
   

  
	
  ARTICLE III

  	
  INDEMNIFICATION

  	
   

  
	
   

  	
   

  	
   

  
	
  SECTION 3.1

  	
  INDEMNITY

  	
   

  
	
  SECTION 3.2

  	
  EXONERATION

  	
   

  
	
  SECTION 3.3

  	
  CASH COLLATERAL

  	
   

  
	
  SECTION 3.4

  	
  WAIVER OF CLAIMS AND HOLD HARMLESS

  	
   

  
	
  SECTION 3.5

  	
  WITHDRAWAL FROM AND TERMINATION OF
  AGREEMENT

  	
   

  
	
  SECTION 3.6

  	
  INDEMNITORS AGREE TO BECOME PARTY
  DEFENDANTS

  	
   

  
	
  SECTION 3.7

  	
  INDEMNITORS’ WAIVER OF NOTICE

  	
   

  
	
  SECTION 3.8

  	
  INDEMNITORS’ KNOWING CONSENT TO
  AGREEMENT

  	
   

  
	
  SECTION 3.9

  	
  INDEMNITORS’ DUTY TO REMAIN INFORMED
  OF PRINCIPAL’S BUSINESS

  	
   

  
	
  SECTION 3.10

  	
  ENFORCEABILITY OF RIGHTS DIRECTLY
  AGAINST INDEMNITORS

  	
   

  
	
   

  	
   

  	
   

  
	
  ARTICLE IV

  	
  CONDITIONS
  PRECEDENT

  	
   

  
	
   

  	
   

  	
   

  
	
  SECTION 4.1

  	
  CONDITION PRECEDENT TO EFFECTIVENESS
  OF THIS AGREEMENT

  	
   

  
	
  SECTION 4.2

  	
  CONDITIONS PRECEDENT TO ALL BONDS

  	
   

  
	
   

  	
   

  	
   

  
	
  ARTICLE V

  	
  REPRESENTATIONS
  AND WARRANTIES

  	
   

  
	
   

  	
   

  	
   

  
	
  SECTION 5.1

  	
  INCORPORATION, GOOD STANDING, AND DUE
  QUALIFICATION

  	
   

  
	
  SECTION 5.2

  	
  CORPORATE POWER AND AUTHORITY

  	
   

  
	
  SECTION 5.3

  	
  LEGALLY ENFORCEABLE AGREEMENT

  	
   

  
	
  SECTION 5.4

  	
  APPROVALS

  	
   

  
	
  SECTION 5.5

  	
  OWNERSHIP AND LIENS

  	
   

  
	
  SECTION 5.6

  	
  TAXES

  	
   

  
	
  SECTION 5.7

  	
  INSURANCE

  	
   

  
	
  SECTION 5.8

  	
  COMPLIANCE

  	
   

  
	
  SECTION 5.9

  	
  LITIGATION

  	
   

  
	
  SECTION 5.10

  	
  SUBSIDIARIES

  	
   

  
	
  SECTION 5.11

  	
  REAL PROPERTY

  	
   

  
	
  SECTION 5.12

  	
  EQUIPMENT

  	
   

  
	
  SECTION 5.13

  	
  VESSELS

  	
   

  



 


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  ARTICLE VI

  	
  COVENANTS

  	
   

  
	
   

  	
   

  	
   

  
	
  SECTION 6.1

  	
  CORPORATE EXISTENCE

  	
   

  
	
  SECTION 6.2

  	
  MAINTENANCE OF RECORDS

  	
   

  
	
  SECTION 6.3

  	
  MAINTENANCE OF PROPERTIES

  	
   

  
	
  SECTION 6.4

  	
  MAINTENANCE OF INSURANCE

  	
   

  
	
  SECTION 6.5

  	
  COMPLIANCE WITH LAWS

  	
   

  
	
  SECTION 6.6

  	
  TAXES

  	
   

  
	
  SECTION 6.7

  	
  BOOKS AND RECORDS

  	
   

  
	
  SECTION 6.8

  	
  FINANCIAL RECORDS AND REPORTS

  	
   

  
	
  SECTION 6.9

  	
  PRINCIPALS’ REPRESENTATION

  	
   

  
	
  SECTION 6.10

  	
  NOTICE OF LITIGATION

  	
   

  
	
  SECTION 6.11

  	
  LIENS

  	
   

  
	
  SECTION 6.12

  	
  DEBT AND CONTINGENT LIABILITIES

  	
   

  
	
  SECTION 6.13

  	
  DISPOSITION OF ASSETS; ISSUANCE OF
  EQUITY.

  	
   

  
	
  SECTION 6.14

  	
  MERGERS

  	
   

  
	
  SECTION 6.15

  	
  INVESTMENTS

  	
   

  
	
  SECTION 6.16

  	
  DIVIDEND RESTRICTIONS

  	
   

  
	
  SECTION 6.17

  	
  RESTRICTIONS UPON CONTRACTS WITH
  AFFILIATES

  	
   

  
	
  SECTION 6.18

  	
  NATURE OF BUSINESS

  	
   

  
	
  SECTION 6.19

  	
  NET WORTH

  	
   

  
	
  SECTION 6.20

  	
  NET CURRENT ASSETS

  	
   

  
	
  SECTION 6.21

  	
  SUBORDINATED DEBT AND PAYMENT
  BLOCKAGE NOTICE.

  	
   

  
	
   

  	
   

  	
   

  
	
  ARTICLE VII

  	
  RIGHTS OF
  TRAVELERS

  	
   

  
	
   

  	
   

  	
   

  
	
  SECTION 7.1

  	
  FURTHER ASSURANCES/TRAVELERS AS
  ATTORNEY-IN-FACT

  	
   

  
	
  SECTION 7.2

  	
  CONTRACT FUNDS HELD IN TRUST

  	
   

  
	
  SECTION 7.3

  	
  RIGHT OF TRAVELERS TO SETTLE CLAIMS

  	
   

  
	
  SECTION 7.4

  	
  AUTHORITY OF TRAVELERS TO MAKE LOANS
  TO PRINCIPAL

  	
   

  
	
  SECTION 7.5

  	
  AUTHORITY OF TRAVELERS TO AMEND BOND

  	
   

  
	
  SECTION 7.6

  	
  RIGHTS OF TRAVELERS TO TAKE POSSESSION
  OF THE WORK

  	
   

  
	
  SECTION 7.7

  	
  DEPOSITORY TRUST ACCOUNTS

  	
   

  
	
  SECTION 7.8

  	
  PRESERVATION OF TRAVELERS’S RIGHTS

  	
   

  
	
  SECTION 7.9

  	
  AUTHORITY OF TRAVELERS TO ELECT
  REMEDIES

  	
   

  
	
   

  	
   

  	
   

  
	
  ARTICLE VIII

  	
  MISCELLANEOUS

  	
   

  
	
   

  	
   

  	
   

  
	
  SECTION 8.1

  	
  BENEFICIAL PARTIES

  	
   

  
	
  SECTION 8.2

  	
  JOINT AND SEVERAL

  	
   

  
	
  SECTION 8.3

  	
  ATTORNEYS FEES

  	
   

  
	
  SECTION 8.4

  	
  APPLICABLE LAW

  	
   

  
	
  SECTION 8.5

  	
  JURISDICTION FOR SUITS UNDER THIS
  AGREEMENT

  	
   

  
	
  SECTION 8.6

  	
  INDEMNITORS WAIVE DEFENSE OF
  SUBSEQUENT EXECUTION

  	
   

  
	
  SECTION 8.7

  	
  VALIDITY OF AGREEMENT

  	
   

  



 


ii

















 


	
  SECTION 8.8

  	
  ORAL MODIFICATIONS INEFFECTIVE

  	
   

  
	
  SECTION 8.9

  	
  NOTICES

  	
   

  
	
  SECTION 8.10

  	
  REAFFIRMATION AND RESTATEMENT

  	
   

  
	
  SECTION 8.11

  	
  CONFIDENTIALITY

  	
   

  
	
  SECTION 8.12

  	
  RELEASE OF LIENS

  	
   

  
	
  SECTION 8.13

  	
  SUCCESSORS AND ASSIGNS

  	
   

  



 


	
  EXHIBIT A

  	
  -

  	
  Form of Supplemental
  Signature Page

  
	
  EXHIBIT B

  	
  -

  	
  Form of Pledge
  Agreement

  
	
  EXHIBIT C

  	
  -

  	
  Form of Security
  Agreement (A/R)

  
	
  EXHIBIT D

  	
  -

  	
  Form of Security
  Agreement (Equipment)

  
	
  EXHIBIT E

  	
  -

  	
  Form of Vessel
  Mortgage (First)

  
	
  EXHIBIT F

  	
  -

  	
  Form of Vessel
  Mortgage (Second)

  
	
   

  	
   

  	
   

  
	
  SCHEDULE 1.1

  	
  -

  	
  Permitted Liens

  
	
  SCHEDULE 5.7

  	
  -

  	
  Insurance

  
	
  SCHEDULE 5.9

  	
  -

  	
  Litigation

  
	
  SCHEDULE 5.10

  	
  -

  	
  Subsidiaries

  
	
  SCHEDULE 5.11

  	
  -

  	
  Real Property

  
	
  SCHEDULE 5.12

  	
  -

  	
  Equipment

  
	
  SCHEDULE 5.13

  	
  -

  	
  Vessels

  
	
  SCHEDULE 6.4

  	
  -

  	
  Insurers

  
	
  SCHEDULE 6.12

  	
  -

  	
  Existing Debt
  and Contingent Liabilities

  
	
  SCHEDULE 6.15

  	
  -

  	
  Investments

  
	
  SCHEDULE 6.17

  	
  -

  	
  Affiliate
  Transactions

  
				



 


iii

















 


THIRD AMENDED AND RESTATED


UNDERWRITING AND CONTINUING


INDEMNITY AGREEMENT


 


THIS THIRD AMENDED
AND RESTATED UNDERWRITING AND CONTINUING INDEMNITY AGREEMENT (the “Agreement”),
made and entered into this 22nd day of December, 2003, is among (i) GREAT LAKES
DREDGE & DOCK CORPORATION, a Delaware corporation (“HOLDINGS”), and
the SUBSIDIARIES of HOLDINGS from time to time signatories hereto (collectively
with HOLDINGS, the “INDEMNITORS”), and (ii) TRAVELERS CASUALTY AND
SURETY COMPANY, a Connecticut corporation (as assignee of Reliance Insurance
Company, a Pennsylvania corporation, United Pacific Insurance Company, a Pennsylvania
corporation, Reliance National Insurance Company, a Delaware corporation, and
Reliance Surety Company, a Delaware corporation) (“TCASC”), and
TRAVELERS CASUALTY AND SURETY COMPANY OF AMERICA, a Connecticut corporation (“TRAVELERS
AMERICA” and together with TCASC, “TRAVELERS”).


 


R E C I T A L S


 


WHEREAS, the
PRINCIPALS are engaged in the business, among other things, of dredging,
dredging reclamation, aggregate mining and supply, and marine construction in
the United States and in other countries, and any PRINCIPAL, individually,
jointly with others or on behalf of any of its SUBSIDIARIES, AFFILIATES or
divisions or their SUBSIDIARIES, AFFILIATES or divisions now in existence or
hereafter formed or acquired, or on behalf of third-party Persons, may desire
or be required from time to time in connection with these businesses to deliver
certain BOND(s) to OBLIGEES; and


 


WHEREAS, certain
of the INDEMNITORS, the PRINCIPALS and TRAVELERS are parties to that certain
Second Amended and Restated Underwriting and Continuing Indemnity Agreement
(the “SECOND AMENDMENT AND RESTATEMENT”) dated as of August 19,
1998, which amended and restated that certain First Amended and Restated
Underwriting and Continuing Indemnity Agreement dated as of September 24,
1997 (“FIRST AMENDMENT AND RESTATEMENT”), which amended and restated
that certain Amended Agreement dated as of October 15, 1991, among certain
of the PRINCIPALS, certain AFFILIATES of the PRINCIPALS and TRAVELERS (as
amended and restated by the FIRST AMENDMENT AND RESTATEMENT and the SECOND
AMENDMENT AND RESTATEMENT, and as otherwise amended or modified, the “EXISTING
AGREEMENT”); and


 


WHEREAS, in
accordance with the terms of the EXISTING AGREEMENT, TRAVELERS has heretofore
executed or procured and, upon the express condition that this Agreement and
the other UNDERWRITING DOCUMENTS be executed, TRAVELERS may continue to execute
or procure the execution of BOND(s), and TRAVELERS may continue previously
executed BOND(s) and may forbear cancellation of such BOND(s); and


 


WHEREAS, each of
the INDEMNITORS recognizes that BONDS are a necessary and desirable adjunct to
the businesses done and to be done by the PRINCIPALS and desires to accommodate
the financial, security, indemnity, exoneration and other requirements of TRAVELERS
as an inducement to TRAVELERS to become surety upon obligations of the 


 

















 


PRINCIPALS and has therefore agreed to be bound by this Agreement and
the other UNDERWRITING DOCUMENTS to which it is a party and has agreed to
exercise its best efforts to permit and require the PRINCIPALS to honor and
perform all of the terms of this Agreement; and


 


WHEREAS, TRAVELERS
has agreed to act as surety or procure surety BONDS for the PRINCIPALS, subject
to the understanding of the parties that TRAVELERS is under no obligation to
act as surety for every bond of the PRINCIPALS, that TRAVELERS shall have the
right to refuse to execute BONDS for any reason, including, without limitation,
with respect to CONTRACTS which in TRAVELERS’ sole judgment present risks not contemplated
by this Agreement and that the PRINCIPALS are under no obligation to obtain
BONDS from TRAVELERS; and


 


WHEREAS, the
INDEMNITORS and the PRINCIPALS now desire to amend and restate the EXISTING
AGREEMENT on the terms and conditions set forth in this Agreement.


 


NOW, THEREFORE, in
consideration of the mutual agreements set forth herein, the execution or
procurement of any BOND(s) by TRAVELERS or the forbearance or cancellation of
any existing BOND(s) by TRAVELERS and as an inducement to such execution,
procurement or forbearance, we, the undersigned PRINCIPALS and INDEMNITORS,
agree and bind ourselves, our successors and assigns, jointly and severally, as
follows:


 


ARTICLE I



DEFINITIONS


 


SECTION 1.1   DEFINED TERMS.  For the purposes of this Agreement, the
following terms shall have the meanings listed below:


 


“AFFILIATE” means,
with respect to any PERSON, any other PERSON or group acting in concert with
such PERSON that, directly or indirectly, through one or more intermediaries,
controls, or is controlled by, or is under the common control with such
PERSON.  For purposes of this
definition, “control” (including, with correlative meanings, the terms
“controlled by” and “under common control with”), as used with respect to any
PERSON or group of PERSONS, shall mean the possession, directly or indirectly,
of the power to direct or cause the direction of management and policies of
such PERSON, whether through the ownership of voting securities or by contract
or otherwise.


 


“AUTHORIZED
OFFICER” means, with respect to any PERSON, the chief executive officer,
president, chief financial officer, treasurer, assistant treasurer, controller
or any vice president of such PERSON.


 


“BANK LOAN
FACILITY” means that certain Credit Agreement dated as of December 22, 2003,
by and among GLDD Acquisitions Corp., HOLDINGS, certain corporate affiliates
thereof, the financial institutions from time to time parties thereto and Bank
of America, N.A., as administrative agent to such financial institutions, and
the documents, instruments and agreements executed and delivered in connection
therewith, as all of the same may be amended, restated, supplemented or
otherwise modified from time to time, and any credit agreement or 


 


2

















 


other agreement or agreements relating to any refinancing, extension,
renewal or replacement, in whole or in part, thereof.


 


“BOND(s)” means
any surety agreements, undertakings, or instruments of guarantee signed by
TRAVELERS on behalf of any PRINCIPAL, whether executed before or after the
execution of this Agreement.


 


“CONTINGENT
LIABILITY” means any agreement, undertaking or arrangement by which any Person
guarantees, endorses or otherwise becomes or is contingently liable upon (by
agreement, contingent, or otherwise, to provide funds for payment, to supply
funds to, or otherwise to invest in, a debtor, or otherwise to assure a
creditor against loss) the indebtedness, obligation or any other liability of
any other Person (other than by endorsements of instruments in the course of
collection), or guarantees the payment of dividends or other distributions upon
the shares of any other PERSON.


 


“CONTRACT(s)”
means any contract referred to or described in any BOND(s) issued on behalf of
any PRINCIPAL.


 


“DEBT” means and
includes, with respect to any PERSON, (i) indebtedness for borrowed money, (ii)
obligations evidenced by bonds (including, without limitation, license, bid,
performance, lien or payment bonds), debentures, notes or other similar
instruments, (iii) obligations which have been incurred in connection with the
acquisition of property or services (including, without limitation, obligations
to pay the deferred purchase price of property or services), excluding trade
payables and accrued expenses incurred in the ordinary course of business, (iv)
obligations secured by any LIEN or other charge upon property or assets owned
by such PERSON, even though such PERSON has not assumed or become liable for
the payment of such obligations, (v) obligations created or arising under any
conditional sale or other title retention agreement with respect to property
acquired by such PERSON, notwithstanding the fact that the rights and remedies
of the seller, lender or lessor under such agreement in the event of default
are limited to repossession or sale of property, (vi) the principal amount of
any capital lease and (vii) reimbursement obligations with respect to letters
of credit.


 


“DEBT INDENTURE”
means that certain Indenture dated as of December 22, 2003, by and among
HOLDINGS, certain of the SUBSIDIARIES of HOLDINGS, and The Bank of New York, as
Trustee, governing the issuance by HOLDINGS of $175,000,000 in original
principal amount of its 7 3/4% Senior Subordinated Notes due 2013, as amended,
restated, supplemented, modified, refunded, refinanced or replaced, in whole or
in part, from time to time in accordance with Section 6.21.


 


“ENVIRONMENTAL
LAWS” means all international, foreign, federal, state or local laws, statutes,
common law duties, rules, regulations, ordinances and codes, together with all
administrative or judicial orders, licenses, authorizations and permits of, and
agreements with, any governmental authorities, in each case relating to
environmental, health, safety and land use and natural resource matters now or
hereafter in effect; including, without limitation, the Comprehensive
Environmental Response, Compensation and Liability Act of 1980, the Clean Air
Act, the Federal Water Pollution Control Act of 1972, the Solid Waste Disposal
Act, as amended, the Resource Conservation and Recovery Act, the Toxic
Substance Control Act, and 


 


3

















 


the Emergency Planning and Community Right-to-Know Act, and the
Occupational Safety and Health Act, and any analogous state or local laws.


 


“ERISA” means the
Employee Retirement Income Security Act of 1974, as amended from time to time,
and the regulations and published interpretations thereof.


 


“EVENT OF DEFAULT”
means any one or more of the following:


 


(a)                                  Failure
by the INDEMNITORS, or any of them, to pay on the date when due (and after
giving effect to any applicable payment period) any obligation owing to
TRAVELERS hereunder; provided, however, that any BOND premium may
be disputed by any PRINCIPAL in good faith in the ordinary course of business
without causing an EVENT OF DEFAULT under this clause (a); provided further,
that the foregoing shall not prevent TRAVELERS from filing suit to recover any
such disputed premium;


or


(b)                                 Failure
by the INDEMNITORS, or any of them, to comply with or to perform their
respective obligations under Sections 3.3,  6.7, 6.14, 6.16,
6.19, 6.20 or 6.21 of this Agreement, and, in the case of Section 6.16,
such failure shall continue for ten (10) days;


or


(c)                                  Failure
by the INDEMNITORS, or any of them, to comply with or perform their respective
obligations under any provision of this Agreement (and not constituting an
Event of Default under any of the other clauses of this definition) and (1)
continuance of such failure for thirty (30) days after notice thereof to the
INDEMNITOR by TRAVELERS specifying such failure if such failure can be cured
with diligence within such thirty-day period by the INDEMNITORS, or can be
cured by the payment of money, or (2) continuance of such failure for sixty
(60) days by TRAVELERS specifying such failure if such failure cannot with
diligence be cured within such thirty-day period and cannot be cured by the
payment of money;


or


(d)                                 Any
representation or warranty made or deemed made by any INDEMNITOR in this
Agreement or any other UNDERWRITING DOCUMENT, shall prove to have been
incorrect in any material respect on or as of the date made or deemed made;


or


(e)                                  an
OBLIGEE has declared by delivery of written notice to any PRINCIPAL that such
PRINCIPAL is in default of any provision under the respective CONTRACT(s)
between such PRINCIPAL and such OBLIGEE and such PRINCIPAL has failed to cure
such default within that period of time provided to cure said default within
such CONTRACT(s) in which such PRINCIPAL is alleged to be in default and such
default results in any OBLIGEE making demand for payment or performance under
any BOND provided in connection with such CONTRACT; provided, that
TRAVELERS shall, upon investigation, reasonably determine in good faith that
PRINCIPAL is in default under the CONTRACT(s) or such PRINCIPAL has
acknowledged its default under the CONTRACT(s), 


 


4

















 


irrespective
of whether or not such PRINCIPAL is actually in default of the CONTRACT(s)
(such a determination by TRAVELERS shall not be binding upon such PRINCIPAL in
any dispute such PRINCIPAL may have with such OBLIGEE or a claimant under the
related BOND(s); except as provided above, it shall be no defense to the
enforcement of this Agreement by TRAVELERS, and co-sureties, if any, that
PRINCIPAL asserts that it is not in default under the CONTRACT(s));


or


(f)                                    TRAVELERS
has received notice or knowledge of facts giving rise to a reasonable good
faith belief that it has incurred or may incur a LOSS and a PRINCIPAL has
failed to cure such LOSS or to take reasonable steps to avoid the incurrence by
TRAVELERS of such LOSS within thirty (30) days after receipt of written notice
sent by TRAVELERS to such PRINCIPAL; provided, that no EVENT OF DEFAULT
under this clause (f) shall occur if prior to the expiration of such
thirty-day period such PRINCIPAL causes (1) a letter of credit with a face
amount equal to such LOSS and otherwise in form and substance reasonably
acceptable to TRAVELERS to be issued and delivered to TRAVELERS or (2) cash
collateral in an amount equal to such LOSS to be pledged to TRAVELERS pursuant
to documentation reasonably acceptable to TRAVELERS; provided  further,
that the providing of such letter of credit or cash collateral shall not
obligate TRAVELERS to deny any claim related to such LOSS unless TRAVELERS has
determined that a meritorious defense exists to such claim;


or


(g)                                 Any
PRINCIPAL within fifteen (15) days after receipt of notice sent by TRAVELERS to
such PRINCIPAL has failed, refused or delayed to pay or is unable to pay any
claims, bills or other indebtedness incurred in, or in connection with, the
performance of the CONTRACT(s) which claims, bills or other indebtedness
TRAVELERS, upon investigation, shall have reasonably determined in good faith
to be valid;


or


(h)                                 Any
INDEMNITOR shall (i) fail to pay any DEBT or CONTINGENT OBLIGATION of such
INDEMNITOR in an aggregate principal amount in excess of $5,000,000, or any
interest or premium thereon, when due whether by scheduled maturity, required
prepayment, acceleration, demand, or otherwise (subject to any applicable grace
periods), or (ii) fail to perform or observe any term, covenant, or condition
on its part to be performed or observed under any agreement or instrument
relating to any DEBT or CONTINGENT OBLIGATION of such INDEMNITOR in an
aggregate principal amount in excess of $5,000,000 (subject to any applicable
grace periods), if the result of such failure to perform or observe is (A) in
the case of the BANK LOAN FACILITY, either to accelerate the maturity of such
DEBT or to cause a PAYMENT BLOCKAGE NOTICE to be delivered to the Trustee under
the DEBT INDENTURE, (B) in the case of the DEBT INDENTURE, to accelerate or
permit the acceleration of the maturity of such DEBT or (C) in the case of any
other DEBT or CONTINGENT OBLIGATION, to accelerate the maturity of such DEBT or
CONTINGENT OBLIGATION;


 


5

















 


or


(i)                                     Any
INDEMNITOR becomes insolvent or generally fails to pay, or admits in writing
its inability to pay, debts as they become due; or any INDEMNITOR applies for,
consents to, or acquiesces in the appointment of, a trustee, receiver or other
custodian for such INDEMNITOR or for a substantial portion of its property, or
makes a general assignment for the benefit of creditors; or, in the absence of
such application, consent or acquiescence, a trustee, receiver or other
custodian is appointed for any INDEMNITOR or for a substantial part of the
property of any thereof and is not dismissed or discharged within sixty (60)
days; or any bankruptcy, reorganization, debt arrangement, or other case or
proceeding under any bankruptcy or insolvency law, or any dissolution or
liquidation proceeding, is commenced in respect of any INDEMNITOR and if such case
or proceeding is not commenced by such INDEMNITOR, it is consented to or
acquiesced in by such INDEMNITOR or is not released, dismissed, vacated or
fully bonded within sixty (60) days undismissed; or any INDEMNITOR takes any
corporate action to authorize, or in furtherance of, any of the foregoing;


or


(j)                                     A
final judgment or judgments (after the expiration of all times to appeal
therefrom) for the payment of money in excess of $5,000,000 in the aggregate
shall be rendered against any INDEMNITOR and the same shall not be (i) fully
covered by insurance or (ii) vacated, stayed, bonded, paid or discharged for a
period of thirty (30) days.


 


“EXISTING
AGREEMENT” has the meaning set forth in the recitals to this Agreement.


 


“FINANCIAL
STATEMENTS” means all those balance sheets, income statements and other
financial statements of any INDEMNITOR or any AFFILIATE thereof which have been
furnished to TRAVELERS for the purpose of or in connection with this Agreement
and the transactions contemplated hereby.


 


“GAAP” is defined
as generally accepted accounting principles set forth in the opinions and
pronouncements of the Accounting Principles Board and the American Institute of
Certified Public Accountants and statements and pronouncements of the Financial
Accounting Standards Board.


 


“GLDDC” means
Great Lakes Dredge & Dock Company, a New Jersey corporation.


 


“HOLDINGS” has the
meaning set forth in the recitals to this Agreement.


 


“INDEMNITOR” means
any of HOLDINGS or any SUBSIDIARY of HOLDINGS which is a party to this
Agreement as of the date hereof or which becomes a party to this Agreement
after the date hereof by hereafter executing and delivering to TRAVELERS a
SUPPLEMENTAL SIGNATURE PAGE and INDEMNITORS means, collectively, all of
HOLDINGS and all such SUBSIDIARIES of HOLDINGS.


 


“INTERCREDITOR
AGREEMENT” means that certain Intercreditor Agreement dated as of
December 22, 2003, by and among GLDD Acquisitions Corp., HOLDINGS, certain



 


6

















 


SUBSIDIARIES of HOLDINGS,
Bank of America, N.A., as administrative agent, and TRAVELERS, and the
documents, instruments and agreements executed and delivered pursuant thereto,
as all of the same may be amended, restated, supplemented or otherwise modified
from time to time, and any other intercreditor agreement in replacement thereof
which is in form and substance acceptable to TRAVELERS.


 


“LIEN” means any
mortgage, deed of trust, pledge, security interest, hypothecation, assignment,
deposit arrangement to assure payment of DEBT, encumbrance, lien (statutory or
other), charge, or encumbrance of any kind or nature whatsoever (including,
without limitation, any conditional sale or other title retention agreement,
any financing lease having substantially the same economic effect as any of the
foregoing).


 


“LIMITED
SUBSIDIARY” means (a) any SUBSIDIARY which is not an INDEMNITOR and (b) any
INDEMNITOR which is not a wholly-owned SUBSIDIARY of HOLDINGS; provided,
that North American Site Developers, Inc. shall not be deemed to be a LIMITED
SUBSIDIARY for purposes of this Agreement.


 


“LOSS” means:


 


(a)                                  All
damages, costs, expenses (including all reasonable attorney fees, expert fees
and consulting fees and other liabilities) which TRAVELERS, or any of them, may
sustain or incur by reason of executing or procuring the execution of the
BOND(s), or any other BOND(s) which may be already or hereafter executed on
behalf of any PRINCIPAL, or any renewal or continuation thereof; or which may
be sustained or incurred by reason of making any investigation on account
thereof, prosecuting or defending any action in connection therewith, obtaining
a release, recovering or attempting to recover any salvage in connection
therewith or enforcing by litigation or otherwise any of the provisions of this
Agreement, including, but not limited to:


 


(1)                                  money
judgments, amounts paid in settlement or compromise, the full amount of
reasonable attorney and other professional fees incurred or paid by TRAVELERS,
or any of them, court costs and fees, and interest at the prime rate or
reference rate announced from time to time by Bank of America, N.A. on all sums
due it from the fifteenth day following TRAVELERS’s, or any of their, demand
for said sums, whether or not interest has been awarded by a court, provided,
that such LOSS is not due to the gross negligence, bad faith or willful
misconduct of TRAVELERS, or any of them; and


 


(2)                                  any
LOSS which TRAVELERS, or any of them, may sustain or incur in connection with
the CONTRACT(s) or BOND(s), whether that LOSS results from the activity of any
PRINCIPAL individually or as part of a joint venture, partnership or other
entity which has been or may be formed in connection with the performance of
the CONTRACT(s) and in which any PRINCIPAL has an ownership interest, provided,
that such LOSS is


 


7

















 


not due to the gross negligence, bad faith or willful misconduct of
TRAVELERS, or any of them; and


 


(3)                                  any
LOSS which TRAVELERS, or any of them, may sustain or incur as a result of any
actions taken by TRAVELERS, or any of them, upon information provided by any
INDEMNITOR, provided that such LOSS is not due to the gross negligence,
bad faith or willful misconduct of TRAVELERS, or any of them;


 


(b)                                 All
reasonable legal and consulting fees and related expenses incurred in
connection with any application or submission by any PRINCIPAL for a proposal,
bid or other BOND, whether or not TRAVELERS, or any of them, decides to issue
said BOND; and


 


(c)                                  All
premiums, fees, interest and other charges due TRAVELERS, or any of them, in
connection with this Agreement or the BOND(s).


 


“LYDON” means
Lydon Dredging & Construction Company, Ltd., a Canadian corporation.


 


“MATERIAL ADVERSE
CHANGE” means a material adverse change in the condition (financial or otherwise),
business, operations or prospects of HOLDINGS and its SUBSIDIARIES, taken as a
whole.


 


“MERGER AGREEMENT”
means that certain Amended and Restated Agreement and Plan of Merger, dated as
of December 22, 2003, among GLDD Acquisitions Corp., a Delaware corporation
(“Parent “), GLDD Merger Sub, Inc., a Delaware corporation and a direct
wholly-owned subsidiary of Parent, HOLDINGS and, solely in its capacity as
Stockholder Representative thereunder and for purposes of Sections 2.8, 2.9,
Article VIII and Article IX thereof, Vectura Holding Company LLC.


 


“NET INCOME”
means, for any period, the aggregate of all amounts (exclusive of all amounts
in respect of any extraordinary or non-recurring gain or loss (including,
without limitation, any write-off of the Chicago Flood litigation insurance
receivable)) which, in accordance with GAAP, would be included as net income on
a consolidated statement of income of HOLDINGS and its SUBSIDIARIES for such
period.


 


“OBLIGEE” means
any named party or parties appearing on the BOND(s) in whose favor the BOND(s)
are issued.


 


“PAYMENT BLOCKAGE
NOTICE” has the meaning assigned thereto in the DEBT INDENTURE.


 


“PERMITTED LIENS”
means:


 


(a)                                  any
LIEN in favor of TRAVELERS;


 


8

















 


(b)                                 LIENS
securing the BANK LOAN FACILITY and the obligations arising thereunder (provided,
that such LIENS are granted in compliance with and remain subject to the
INTERCREDITOR AGREEMENT);


 


(c)                                  LIENS
for taxes, assessments or other governmental charges or levies that are either
not yet past due or that are being contested in good faith by appropriate
proceedings and for which adequate reserves have been established in accordance
with GAAP;


 


(d)                                 Carriers’,
warehousemen’s, landlord’s, mechanics’, workmen’s and repairmen’s LIENS or
other like LIENS arising by operation of law (including maritime law) in the
ordinary course of business and securing sums which are not past due, or that
are being contested in good faith by appropriate proceedings and for which
adequate reserves have been established in accordance with GAAP;


 


(e)                                  any
LIEN on assets existing on the effective date of this Agreement and listed on Schedule 1.1
to this Agreement and the continuation of any such LIEN upon a refinancing,
renewal or extension of the DEBT secured by such existing LIEN (provided,
that the property subject to such LIEN is limited to the property to which such
LIEN is attached prior to the effective date of this Agreement and the
principal amount of such DEBT as of the effective date of this Agreement is not
increased);


 


(f)                                    any
LIEN on capital equipment granted to secure the purchase price thereof;


 


(g)                                 any
LIEN on capital equipment granted in connection with capitalized leases of such
equipment in the ordinary course of business;


 


(h)                                 LIENS
(other than any LIEN imposed by ERISA or ENVIRONMENTAL LAWS) incurred or
deposits (including, without limitation, security deposits) made in the
ordinary course of HOLDINGS’ business or any of its SUBSIDIARIES’ businesses
(including, without limitation, surety bonds and appeal bonds) in connection
with workers’ compensation, unemployment insurance and other types of social
security benefits or to secure the performance of tenders, bids, contracts
(other than for the repayment of borrowed money or to stay a judgment pending
an appeal thereof), statutory obligations and other similar obligations or
arising as a result of progress payments under government contracts, but only
to the extent that the amounts secured or to be secured by such LIENS are either
not delinquent or are being contested in good faith and with respect to which
adequate reserves or other appropriate provisions are being maintained in
accordance with GAAP;


 


(i)                                     survey
exceptions, encumbrances, easements or reservations of, or rights of others
for, rights-of-way, sewers, electric lines, telegraph or telephone lines and
other similar purposes, or zoning or other restrictions as to the use of real
property or liens incidental to the conduct of such PRINCIPAL or to the
ownership of its properties;


 


9

















 


(j)                                     judgment
LIENS not giving rise to an Event of Default so long as such LIEN is adequately
bonded within 15 days after the entry of such judgment;


 


(k)                                  LIENS
arising from filing UCC financing statements for precautionary purposes in
connection with true leases of personal property under which HOLDINGS or any
SUBSIDIARY is lessee;


 


(l)                                     any
LIENS on any property or assets acquired by HOLDINGS or any of its SUBSIDIARIES
which LIEN existed prior to the acquisition thereof and was not created in
contemplation of such acquisition, provided, that such LIENS attach only
to the property or assets so acquired;


 


(m)                               LIENS
securing reimbursement obligations in respect of commercial letters of credit
and covering the goods (or the documents of title in respect of such goods)
financed by such letters of credit, which have been issued in the ordinary
course of business;


 


(n)                                 any
LIEN on any asset of any PERSON existing at the time such PERSON is merged or
consolidated with or into HOLDINGS or any SUBSIDIARY of HOLDINGS (to the extent
such merger or consolidation is permitted hereunder) and which LIEN was not
created in contemplation of such event, provided, that such LIEN
attaches only to the assets acquired pursuant to such merger or consolidation;


 


(o)                                 LIENS
securing any interest rate, swap, hedging, currency, commodity, foreign country
risk or other similar agreement;


 


(p)                                 leases
or subleases (including bareboat charters) granted and entered into with others
not interfering in any material respect with the businesses of HOLDINGS and its
SUBSIDIARIES;


 


(q)                                 LIENS
securing payment of DEBT permitted and described in clause (m) of Section 6.12,
and LIENS securing payment of DEBT permitted and described in clause (d) of Section 6.12
to the extent limited to the accounts receivable financed with such DEBT;


 


(r)                                    LIENS
on the VESSEL FINANCING COLLATERAL granted to secure the VESSEL FINANCING
AGREEMENT;


 


(s)                                  renewals
or replacements of any of the foregoing, provided that such renewed or replaced
LIEN does not extend to property other than that which was encumbered by the
originally permitted LIEN hereunder;


 


(t)                                    LIENS
arising by operation of law or by contract encumbering insurance policies and
proceeds thereof to secure the financing of premiums payable under such
policies;


 


10

















 


(u)                                 customary
rights of set-off, revocation, refund, or charge back under deposit agreements
or under the Uniform Commercial Code of banks or other financial institutions
(but not in respect of DEBT generally);


 


(v)                                 LIENS
pursuant to a purchase agreement or sale agreement securing the obligations
under such purchase agreement or sale agreement and encumbering solely the
assets that are to be sold in any asset disposition permitted by this
Agreement; and


 


(w)                               other
LIENS securing obligations that do not exceed an aggregate amount of $5,000,000
at any time outstanding.


 


“PERSON” means any
entity, whether an individual, trustee, corporation, partnership, joint stock
company, limited liability company, unincorporated organization, business
association or firm, joint venture, a government or any agent or
instrumentality or political subdivision thereof.


 


“PLAN” means any
employee benefit plan (as defined in Section 3(3) of ERISA) established,
maintained or to which contributions have been made by any PRINCIPAL.


 


“PLEDGE AGREEMENT”
means a Note Pledge Agreement substantially in the form of Exhibit B
hereto, executed by certain of the INDEMNITORS in favor of TRAVELERS, as the
same may be amended, restated, supplemented or otherwise modified from time to
time.


 


“PRINCIPAL” means
any of HOLDINGS, GLDDC, LYDON, and any other INDEMNITOR for whom TRAVELERS has
executed a BOND; and PRINCIPALS means collectively all of the foregoing
PERSONS.


 


“TRAVELERS” has
the meaning set forth in the recitals to this Agreement.


 


“RESTRICTED
AMOUNTS” means, as of any date, each of the following: (a) all DEBT and
CONTINGENT LIABILITIES of the type described in clause (j) of Section 6.12
outstanding on such date, (b) the fair market value of all assets sold from the
date hereof through such date pursuant to the terms of clause (a)(iv)(B)
of Section 6.13, and (c) investments of the type described in clause
(e) of Section 6.15 outstanding on such date.


 


“SECURITY
AGREEMENTS” means, collectively, the SECURITY AGREEMENT (A/R) and each SECURITY
AGREEMENT (EQUIPMENT).


 


“SECURITY
AGREEMENT (A/R) “ means a Security Agreement (A/R) substantially in the form of
Exhibit C hereto, executed by the PRINCIPALS (other than LYDON) in favor
of TRAVELERS, as the same may be amended, restated, supplemented or otherwise
modified from time to time.


 


“SECURITY
AGREEMENT (EQUIPMENT)” means each of the Security Agreement (Equipment)
substantially in the form of Exhibit D hereto, executed and delivered by
each of GLDDC and HOLDINGS (or any other INDEMNITOR which executes a VESSEL 


 


11

















 


MORTGAGE after the date
hereof) in favor of TRAVELERS, as the same may be amended, restated,
supplemented or otherwise modified from time to time.


 


“SUBORDINATED
DEBT” means all DEBT of HOLDINGS issued pursuant to the DEBT INDENTURE.


 


“SUBSIDIARY” of a
PERSON means any corporation, association, partnership, limited liability
company, joint venture or other business entity of which more than 50% of the
voting stock or other equity interests, is owned or controlled directly or
indirectly by such PERSON, or one or more of the SUBSIDIARIES of such PERSON,
or a combination thereof.  Unless the context
otherwise clearly requires, references herein to a “SUBSIDIARY” refer to a
SUBSIDIARY of HOLDINGS.


 


“SUPPLEMENTAL
SIGNATURE PAGE” means a supplemental signature page to this Agreement in the
form of Exhibit A hereto.


 


“UNDERWRITING
DOCUMENTS” means this Agreement, each of the SECURITY AGREEMENTS, the PLEDGE
AGREEMENT, the VESSEL MORTGAGES, each BOND and any other instrument, document
or agreement delivered by any INDEMNITOR in connection herewith.


 


“VESSEL FINANCING
AGREEMENT” means that certain Credit Agreement, dated as of December 17,
2003, by and between GLDDC and General Electric Capital Corporation, and the
documents, instruments and agreements executed and delivered pursuant thereto,
as all of the same may be amended, restated, supplemented or otherwise modified
from time to time, and any credit agreement or other agreement or agreements
relating to any refinancing, extension, renewal or replacement, in whole or in
part, from time to time thereof.


 


“VESSEL FINANCING
COLLATERAL” means, collectively, (i) the Vessels Florida (Official No. 506446),
Key West (Official No. 684596) and GL 184 (Official No. 652202), (ii) all
insurance and requisition compensation relating to such vessels and any
proceeds thereof, and (iii) all charters (other than charters entered into in
connection with work being performed on a bonded project) entered into with
respect to such vessels having a duration of nine months or more, and the right
to receive payments of all sums thereunder.


 


“VESSEL MORTGAGES”
means, collectively, (i) the First Preferred Fleet Mortgage substantially in
the form of Exhibit E hereto, executed by GLDDC in favor of TRAVELERS,
(ii) the Second Preferred Fleet Mortgage substantially in the form of Exhibit
F hereto, executed by GLDDC in favor of TRAVELERS, (iii) the First
Preferred Fleet Mortgage substantially in the form of Exhibit E  hereto, executed by HOLDINGS in favor of
TRAVELERS, (iv) the Second Preferred Fleet Mortgage substantially in the form
of Exhibit F hereto, executed by HOLDINGS in favor of TRAVELERS, and (v)
any other fleet mortgages or vessel mortgages at any time hereafter executed
and delivered by any INDEMNITOR in connection with this Agreement and the other
UNDERWRITING DOCUMENTS; in each case as any of the foregoing documents may be amended,
restated, supplemented or otherwise modified from time to time.


 


SECTION 1.2   USE OF DEFINED TERMS.  Any collective defined term and any defined
term used in the plural shall be taken to encompass all members of the relevant
class.  


 


12

















 


Any defined term used in
the singular preceded by “any” shall be taken to indicate any number of the
members of the relevant class.  A
reference to any PERSON shall include all predecessors in interest of such
PERSON and any successors or assigns of such PERSON, including successors by
way of merger, acquisition or similar event. 
Any defined term used in the singular and preceded by the word “each”
shall indicate all members of the relevant class, individually.  A Section or an Exhibit or a
Schedule is, unless otherwise stated, a reference to a section hereof
or an exhibit or a schedule hereto, as the case may be.  The words “hereof,” “herein,” “hereto” and “hereunder”
and words of similar import when used in this Agreement shall refer to this
Agreement as a whole and not to any particular provision of this Agreement.


 


SECTION 1.3   ACCOUNTING PRINCIPLES.  Unless the context otherwise clearly
requires, all accounting terms not expressly defined herein shall be construed,
and all financial computations required under this Agreement shall be made, in
accordance with GAAP, consistently applied.


 


ARTICLE II



BOND FACILITY


 


SECTION 2.1   BONDS.  Subject to the terms of this Agreement, TRAVELERS agrees to
provide or procure surety bonds for or on behalf of the PRINCIPALS; provided,
that TRAVELERS reserves the right to decline to execute any BOND(s) and if
TRAVELERS executes any proposal or bid bond and if any PRINCIPAL is awarded the
CONTRACT(s), TRAVELERS shall not be obligated to execute any BOND(s) required
to perform the awarded contract.  No
claim shall be made, nor any cause of action asserted against TRAVELERS as a
consequence of its failure to execute any BOND(s).


 


SECTION 2.2   PREMIUM PAYMENT.  Each PRINCIPAL agrees to pay all premiums on
the BOND(s) issued for such PRINCIPAL, computed in accordance with the regular
manual of rates in effect on the date such BOND(s) are executed; such payments
to be made within 45 days of receipt by INDEMNITORS of a statement therefor from
TRAVELERS pursuant to the payment directions stated therein or as otherwise
agreed to between INDEMNITORS and TRAVELERS. 
The failure of any PRINCIPAL to pay the bond premiums or the failure of
TRAVELERS to receive premiums shall not provide INDEMNITORS with any defense to
an action under this Agreement.


 


ARTICLE III



INDEMNIFICATION


 


SECTION 3.1   INDEMNITY.  INDEMNITORS agree to indemnify, and keep indemnified, and hold
and save harmless TRAVELERS against all LOSS; provided, that in no event
shall any INDEMNITOR indemnify or hold harmless TRAVELERS against any LOSS
arising out of the gross negligence, bad faith or willful misconduct of
TRAVELERS.  The duty of INDEMNITORS to
indemnify TRAVELERS is a continuing duty, separate from the duty to exonerate,
and survives any payments made in exoneration of TRAVELERS.  Amounts due TRAVELERS pursuant to this
Section shall be payable within fifteen (15) days of receipt by 


 


13

















 


INDEMNITORS of written
demand therefor.  Notwithstanding
anything to the contrary herein, any INDEMNITOR which is not a wholly-owned
SUBSIDIARY of HOLDINGS (other than North American Site Developers, Inc.) shall
indemnify and hold and save TRAVELERS harmless only as to any LOSS incurred by
or on behalf of such INDEMNITOR.


 


SECTION 3.2   EXONERATION.  INDEMNITORS recognize and acknowledge the
common law right of TRAVELERS to be exonerated by PRINCIPAL for any LOSS
arising out of any surety obligation undertaken by TRAVELERS in connection with
any BOND, provided, that in no event shall any INDEMNITOR exonerate
TRAVELERS for any LOSS arising out of the gross negligence, bad faith or
willful misconduct of TRAVELERS.  In the
event any PRINCIPAL fails or refuses to exonerate TRAVELERS for any LOSS upon
written demand therefor, all INDEMNITORS other than such PRINCIPAL agree, upon
such demand by TRAVELERS, to exonerate TRAVELERS from LOSS to the same extent
such INDEMNITORS agree to indemnify TRAVELERS as provided in Section 3.1,
by satisfying such PRINCIPAL’s obligations under the CONTRACT(s) and obtaining
either a withdrawal of all claims against TRAVELERS under the BOND(s) or a
general release.  Notwithstanding
anything to the contrary contained herein, any INDEMNITOR which is not a
wholly-owned SUBSIDIARY of HOLDINGS (other than North American Site Developers,
Inc.) shall exonerate TRAVELERS only as to BONDS issued for or on behalf of
such INDEMNITOR.


 


SECTION 3.3   CASH COLLATERAL.  Upon refusal or failure of any PRINCIPAL to
exonerate TRAVELERS in accordance with the terms hereof, INDEMNITORS agree
within ten (10) days of demand therefor to deposit with TRAVELERS an amount of
money or other collateral of value adequate in the reasonable judgment of
TRAVELERS to exonerate TRAVELERS, such funds to be held by TRAVELERS as
collateral pursuant to documentation reasonably acceptable to TRAVELERS, with
the right to use such funds or any part thereof at any time in payment or
compromise of such LOSS, and in which funds INDEMNITORS do hereby grant to
TRAVELERS a security interest to secure such LOSS.  Unexpended funds by TRAVELERS pursuant to a request for
exoneration hereunder shall be repaid to HOLDINGS and its SUBSIDIARIES when the
liability of TRAVELERS arising out of the event for which exoneration was requested
has been resolved to the reasonable satisfaction of TRAVELERS and TRAVELERS
shall have been furnished with full releases of all liability under a surety
obligation and have been reimbursed in full for all LOSS.  Interest earned (if any) upon funds held by
TRAVELERS pursuant to a request for exoneration under this Section which
is not otherwise expended in accordance with this Section shall be paid to
HOLDINGS and its SUBSIDIARIES.


 


SECTION 3.4   WAIVER OF CLAIMS AND HOLD HARMLESS.  Each INDEMNITOR specifically agrees to
protect, indemnify and hold harmless TRAVELERS, each of its officers,
directors, employees, agents and its attorneys-in-fact against any and all LOSS
that may in any way arise in connection with this Agreement and the other
UNDERWRITING DOCUMENTS and the powers herein granted, specifically waiving any
claim which any INDEMNITOR has or might hereafter have against TRAVELERS or its
attorneys-in-fact on account of anything done in enforcing the terms of this
Agreement, the BOND(s) or any other UNDERWRITING DOCUMENT except for any LOSS
due to the gross negligence, bad faith, or willful misconduct of
TRAVELERS.  Until all obligations owing
to TRAVELERS hereunder have been paid in full, each INDEMNITOR hereby waives
and relinquishes in favor of 


 


14

















 


TRAVELERS any claim or
right to payment that such INDEMNITOR may have or hereafter have or acquire
against any PRINCIPAL or other INDEMNITOR by subrogation, indemnification,
contribution or otherwise.


 


SECTION 3.5   WITHDRAWAL FROM AND TERMINATION OF
AGREEMENT.  (a)Each INDEMNITOR
expressly recognizes and covenants this Agreement as its continuing obligation
to protect TRAVELERS from all LOSS.  Any
INDEMNITOR may notify TRAVELERS in writing of such INDEMNITOR’s withdrawal from
this Agreement; and such notice shall state when, not less than fifteen (15)
days after receipt of such notice by TRAVELERS, such withdrawal shall be
effective.  Such INDEMNITOR will not be
liable under this Agreement as to any BOND(s) executed by TRAVELERS after the
effective date of such notice; provided, that as to any and all such
BOND(s) executed or authorized by TRAVELERS prior to the effective date of such
notice and as to any and all renewals, continuations, extensions, or
substitutions (and, if a proposal or bid bond has been executed or authorized
prior to such effective date, as to any contract bond executed pursuant
thereto) regardless of when the same are executed, such INDEMNITOR shall be and
remain fully liable hereunder, as if notice had not been served.  Withdrawal by any INDEMNITOR shall in no way
affect the obligation of any other INDEMNITOR who has given no notice of
termination to TRAVELERS.


 


(b)                                 HOLDINGS
may notify TRAVELERS of the termination of this Agreement by delivering written
notice of such termination to TRAVELERS, such termination to be effective on a
date specified in such notice which date shall not be less than fifteen (15)
days from receipt of such notice; provided, that no such termination
shall be effective at any time when any BONDS shall remain outstanding or any
obligations under this Agreement shall remain unpaid.


 


SECTION 3.6   INDEMNITORS AGREE TO BECOME PARTY
DEFENDANTS.  In the event of legal
proceedings against TRAVELERS arising out of this Agreement or the BONDS,
TRAVELERS may apply for a court order making any or all of the INDEMNITORS
party defendants, and each INDEMNITOR consents to the granting of such
application, including consent to the jurisdiction of the court in which the
application is made, and agrees to become such a party defendant or third-party
defendant and to allow judgment, in the event of judgment against TRAVELERS, to
be rendered also against each INDEMNITOR, jointly and severally, in like amount
and in favor of TRAVELERS unless such judgment is due to the gross negligence,
bad faith or willful misconduct of TRAVELERS.


 


SECTION 3.7   INDEMNITORS’ WAIVER OF NOTICE.  INDEMNITORS waive notice of the execution,
continuation, modification, renewal, enlargement or amendment of any BOND and
of any fact, act or information concerning or affecting the rights or
liabilities of TRAVELERS or INDEMNITORS including, but not limited to, any acts
giving rise to any LOSS under the BOND(s).


 


SECTION 3.8   INDEMNITORS’ KNOWING CONSENT TO AGREEMENT.  Each INDEMNITOR warrants that it is
specifically and beneficially interested in obtaining the BOND(s) or the
forbearance of cancellation of any existing BOND(s).  INDEMNITORS acknowledge that the execution of this Agreement and
the undertaking of indemnity was not made in reliance upon any representation
concerning the responsibility of any INDEMNITOR or concerning the competence of
PRINCIPAL to perform.  INDEMNITORS agree
to make no 


 


15

















 


claim against TRAVELERS
for any oral representations, promises or statements made to any of them by
TRAVELERS or any of its agents or brokers, or for the failure of TRAVELERS to
disclose facts or information to INDEMNITORS.


 


SECTION 3.9   INDEMNITORS’ DUTY TO REMAIN INFORMED OF
PRINCIPAL’S BUSINESS.  INDEMNITORS
possess the duty to remain informed of all aspects of each PRINCIPAL’s business
and the business activities and financial affairs of each PRINCIPAL.  INDEMNITORS acknowledge that they are
presently informed of the state of business activities and financial affairs of
each PRINCIPAL and all INDEMNITORS. 
TRAVELERS possesses no obligation to inform any INDEMNITOR of any aspect
of any PRINCIPAL’s business or the business activities and financial affairs of
the INDEMNITORS or of the request for, or issuance of, any BOND(s).


 


SECTION 3.10   ENFORCEABILITY OF RIGHTS DIRECTLY
AGAINST INDEMNITORS.  TRAVELERS
shall be entitled to enforce the obligations of this AGREEMENT directly against
any INDEMNITOR without the necessity of first proceeding against the
PRINCIPAL.  The failure of any
INDEMNITOR to perform any of the terms of this Agreement or the release of any
INDEMNITOR by TRAVELERS shall not excuse or release the remaining INDEMNITORS
from their obligations under this Agreement.


 


SECTION 3.11   ADDITIONAL INDEMNITORS.  INDEMNITORS acknowledge that this Agreement
can be amended by the execution and delivery of a SUPPLEMENTAL SIGNATURE PAGE
to add another PERSON as an INDEMNITOR to this Agreement and INDEMNITORS waive
any and all notice in connection with the addition of additional INDEMNITORS,
and further acknowledge the rights and obligations provided herein shall apply
to all INDEMNITORS whenever made a party to this Agreement.


 


ARTICLE IV



CONDITIONS PRECEDENT


 


SECTION 4.1   CONDITION PRECEDENT TO EFFECTIVENESS OF
THIS AGREEMENT.  The effectiveness
of this Agreement is subject to the condition precedent that TRAVELERS shall
have received on or before the day hereof each of the following, in form and
substance satisfactory to TRAVELERS and its counsel:


 


(a)                                  A
SECURITY AGREEMENT (A/R) duly executed by each PRINCIPAL (other than LYDON)
and, unless already filed, executed Financing Statements (UCC-1) to be filed in
all jurisdictions in the opinion of TRAVELERS desirable to perfect the security
interest created by such SECURITY AGREEMENT (A/R);


 


(b)                                 The
VESSEL MORTGAGES duly executed by the mortgagee party thereto, together with
(i) any supplements thereto as applicable, and (ii) proper documentation
releasing all other LIENS, if any, on the related vessels;


 


(c)                                  A
SECURITY AGREEMENT (EQUIPMENT) duly executed by each INDEMNITOR party to a
VESSEL MORTGAGE and, unless already filed, executed Financing Statements
(UCC-1) to be filed in all jurisdictions in the 


 


16

















 


opinion
of TRAVELERS desirable to perfect the security interest created by such
SECURITY AGREEMENT (EQUIPMENT);


 


(d)                                 The
PLEDGE AGREEMENT duly executed by the INDEMNITORS referenced on the signature
pages thereto together with a photocopy of the Master Intercompany Demand Note,
evidence that Bank of America, N.A., as administrative agent under the BANK
LOAN FACILITY is in receipt of the original of such Note and executed Financing
Statements (UCC-1) to be filed in all jurisdictions in the opinion of TRAVELERS
desirable to perfect the security interest created by such PLEDGE AGREEMENT;


 


(e)                                  The
INTERCREDITOR AGREEMENT and the Proceeds Agent Agreement contemplated thereby,
duly executed by the PRINCIPALS, TRAVELERS and the other parties thereto;


 


(f)                                    A
favorable opinion of Winston & Strawn LLP, counsel to the PRINCIPALS and
INDEMNlTORS, addressing such legal matters as TRAVELERS may require;


 


(g)                                 An
officer’s certificate of HOLDINGS certifying that the BANK LOAN FACILITY, the
MERGER AGREEMENT and the DEBT INDENTURE are in full force and effect, and
attaching true and correct copies of the principal documents thereof;


 


(h)                                 A
secretary’s certificate of each INDEMNITOR certifying copies of such party’s
organizational documents, appropriate resolutions authorizing the execution,
delivery and performance of this Agreement and the other UNDERWRITING DOCUMENTS
to which such party is a party and certifying incumbencies and true signatures
of its officers so authorized;


 


(i)                                     Evidence
of the good standing of each INDEMNITOR in the jurisdiction in which such party
is organized;


 


(j)                                     Evidence
of the existence of insurance on the property of each PRINCIPAL, together with
evidence establishing TRAVELERS as a loss payee and/or additional insured on
all insurance policies relating to any tangible property on which TRAVELERS has
a first LIEN under the VESSEL MORTGAGES and each SECURITY AGREEMENT
(EQUIPMENT);


 


(k)                                  Such
other information and documents as may reasonably be required by TRAVELERS.


 


SECTION 4.2   CONDITIONS PRECEDENT TO ALL BONDS.  The obligation of TRAVELERS to issue any
BOND shall be subject to the further conditions precedent that on the date of
such issuance:


 


(a)                                  The
following statements shall be true and, by its request for the issuance of such
BOND, the applicable PRINCIPAL shall be deemed to have certified to TRAVELERS
that as of the date of such issuance:


 


17

















 


(i)                                     the
representations and warranties contained in Article V of this
Agreement, in Section 4 of the SECURITY AGREEMENT (A/R), in Section 4
of each SECURITY AGREEMENT (EQUIPMENT), in Section 4 of the PLEDGE
AGREEMENT and in Article I of each of the VESSEL MORTGAGES are
correct in all material respects on and as of the date of such issuance as
though made on and as of such date except to the extent stated to relate to an
earlier date, in which case such representation and warranty shall be correct
as of such earlier date;


 


(ii)                                  no
authorizations, approvals or consents of, and no filings or registrations with
(other than those previously made or obtained) any governmental or regulatory
authority or agency are necessary for the continued performance by each
PRINCIPAL and each INDEMNITOR of the UNDERWRITING DOCUMENTS to which each is a
party, or for the continued validity and enforceability thereof with respect to
each PRINCIPAL and each INDEMNITOR which is a party thereto; and


 


(iii)                               no EVENT OF DEFAULT has
occurred and is continuing, or would result from the issuance of such BOND;


 


(b)                                 TRAVELERS
shall have received each of the following:


 


(i)                                     a
SECURITY AGREEMENT (A/R) duly executed by the PRINCIPAL (other than LYDON) for
whom such BOND is issued unless such PRINCIPAL previously delivered a SECURITY
AGREEMENT (A/R) pursuant to SECTION 4.1(a), together with
acknowledgment copies of the Financing Statements (UCC-1) required to be filed
pursuant to SECTION 4.1(a); and


 


(ii)                                  such
other approvals and documents as TRAVELERS may reasonably request.


 


ARTICLE V



REPRESENTATIONS AND WARRANTIES


 


The PRINCIPALS
represent and warrant to TRAVELERS that


 


SECTION 5.1   INCORPORATION, GOOD STANDING, AND DUE
QUALIFICATION.  HOLDINGS and each
SUBSIDIARY:  (a) is a corporation
or other legal entity duly organized, validly existing and in good standing
under the laws of the jurisdiction of its organization; (b) has the
organizational power and authority, and has all material governmental licenses,
authorizations, consents and approvals, necessary to own its assets and to
transact the business in which it is now engaged or proposed to be engaged,
except to the extent the failure thereof could not reasonably be expected to
have a MATERIAL ADVERSE CHANGE; and (c) is duly qualified as a foreign
organization and in good standing under the laws of each other jurisdiction in
which such qualification is required except to the extent the 


 


18

















 


failure to so qualify
could not reasonably be expected to name a MATERIAL ADVERSE CHANGE.


 


SECTION 5.2   CORPORATE POWER AND AUTHORITY.  The execution, delivery, and performance by
each PRINCIPAL and each INDEMNITOR of the UNDERWRITING DOCUMENTS to which each
is a party have been duly authorized by all necessary organizational and
stockholder action and do not and will not (a) contravene such party’s
organizational documents; (b) violate any provision of any material law, rule,
regulation, order, writ, judgment, injunction, decree, determination, or award
presently in effect having applicability to such party; (c) result in a breach
of or constitute a default under any material indenture or loan or credit
agreement or any other material agreement, lease, or instrument to which such
party is a party or by which it or its properties may be bound or affected
(except where the appropriate consents have been obtained); (d) result in, or
require, the creation or imposition of any Lien (except LIENS in favor of
TRAVELERS and LIENS arising under the BANK CREDIT FACILITY), upon or with
respect to any of the properties now owned or hereafter acquired by such party;
or (e) cause such party to be in default under any such law, rule, regulation,
order, writ, judgment, injunction, decree, determination, or award or any such
indenture, agreement, lease, or instrument (except where the appropriate
consents have been obtained).


 


SECTION 5.3   LEGALLY ENFORCEABLE AGREEMENT.  This Agreement is, and each of the other
UNDERWRITING DOCUMENTS when delivered under this Agreement will be, legal,
valid, and binding obligations of each PRINCIPAL and each INDEMNITOR party
thereto, enforceable against such PRINCIPAL or INDEMNITOR, as the case may be,
in accordance with their respective terms, except to the extent that such
enforcement may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium and other similar laws affecting creditors’ rights
generally and by equitable principles (regardless of whether enforcement is
sought at law or in equity).


 


SECTION 5.4   APPROVALS.  Except for filings and recordings of Liens created pursuant to
the SECURITY AGREEMENTS and the VESSEL MORTGAGES, as of the date of this
Agreement, no authorizations, approvals or consents of, and no filings or
registrations with, any governmental or regulatory authority or agency are
necessary for the execution, delivery or performance by each PRINCIPAL and each
INDEMNITOR of the UNDERWRITING DOCUMENTS to which each is a party or for the
validity or enforceability thereof, other than those which have been heretofore
made or obtained.


 


SECTION 5.5   OWNERSHIP AND LIENS.  Each of HOLDINGS and each SUBSIDIARY has
title to, or valid leasehold interests in, all of its properties and assets,
real and personal, that are necessary for conduct of such Person’s business and
none of the material properties and assets owned by HOLDINGS or any SUBSIDIARY
and none of their respective material leasehold interests is subject to any
LIEN, except such as may be permitted pursuant to Section 6.11 of
this Agreement.


 


SECTION 5.6   TAXES.  Each of HOLDINGS and each SUBSIDIARY has filed all material tax
returns (federal, state, and local) required to be filed and has paid all
taxes, assessments, and governmental charges and levies thereon to be due,
including interest and 


 


19

















 


penalties, except to the
extent the validity thereof is being contested in good faith by appropriate
proceedings and for which adequate reserves have been set aside on its books in
accordance with GAAP.


 


SECTION 5.7   INSURANCE.  As of the date of this Agreement, each PRINCIPAL has insurance in
force as disclosed in Schedule 5.7 attached hereto and made a part
hereof.


 


SECTION 5.8   COMPLIANCE.  Each of HOLDINGS and each SUBSIDIARY is in
material compliance with all statutes and governmental rules and regulations
applicable to it, including without limitation, ERISA insofar as ERISA applies
to it, except to the extent the failure to be in compliance therewith could not
reasonably be expected to have a MATERIAL ADVERSE CHANGE.  No condition exists or event or transaction
has occurred in connection with any PLAN which could result in any liability,
fine or penalty being asserted against HOLDINGS or any SUBSIDIARY, in an
aggregate amount in excess of $5,000,000.


 


SECTION 5.9   LITIGATION.  There is no action, suit or proceeding pending
against, or to the knowledge of HOLDINGS threatened against or affecting,
HOLDINGS or any SUBSIDIARY before any court or arbitrator or any government
body, agency or official in which there is a reasonable likelihood of an
adverse decision which could reasonably be expected to have a MATERIAL ADVERSE
CHANGE or which in any manner draws into question the validity of this
Agreement except those referred to in Schedule 5.9 attached hereto
and made a part hereof.


 


SECTION 5.10   SUBSIDIARIES.  Schedule 5.10 attached hereto
and made a part hereof sets forth a complete and accurate list, as of the date
of this Agreement, of each SUBSIDIARY of HOLDINGS and each SUBSIDIARY set forth
on Schedule 5.10 and designated with an asterisk (“*”) is a
wholly-owned SUBSIDIARY of HOLDINGS.


 


SECTION 5.11   REAL PROPERTY.  Schedule 5.11 contains a
complete and accurate list, as of the date of this Agreement, of the address of
any real property owned or leased by each PRINCIPAL with a net book value in
excess of $750,000.


 


SECTION 5.12   EQUIPMENT.  Schedule 5.12 attached hereto and made a part hereof
sets forth a complete and accurate list, as of the date of this Agreement, of
each item of equipment with a net book value in excess of $750,000 owned or
leased by each PRINCIPAL.


 


SECTION 5.13   VESSELS.  Schedule 5.13 attached hereto and made a part hereof
sets forth a complete and accurate list, as of the date of this Agreement, of
all vessels owned of record by any PRINCIPAL with a net book value in excess of
$750,000 and, except as set forth on Schedule 5.13, each such
vessel has all certificates required under applicable law (except where the
failure could not reasonably be expected to have a MATERIAL ADVERSE CHANGE),
including, without limitation, certificates of documentation, and, except as
set forth on Schedule 5.13, each such vessel has been certified by
the U.S. Coast Guard.  Each such
certificate is in full force and effect and each such vessel is in seaworthy
and operational condition.  TRAVELERS
has (or will have upon proper filing of the VESSEL MORTGAGES with the U.S.
Coast Guard) a perfected security interest, arising pursuant to the VESSEL
MORTGAGES, in each vessel set forth on Schedule 5.13 and designated
with an asterisk (“*”).


 


20

















 


ARTICLE VI



COVENANTS


 


So long as any
BONDS shall remain outstanding, HOLDINGS hereby covenants and agrees with
TRAVELERS as follows:


 


SECTION 6.1   CORPORATE EXISTENCE.  HOLDINGS will, and will cause each
SUBSIDIARY to, maintain its legal existence (in good standing where appropriate
under local law) and remain or become duly qualified or licensed (and in good
standing where appropriate under local law) as a foreign organization in each
jurisdiction in which the conduct of its businesses or location of its assets
requires such qualification or license, except where the failure to take any
such action could not in the aggregate reasonably be expected to have a
MATERIAL ADVERSE CHANGE.


 


SECTION 6.2   MAINTENANCE OF RECORDS.  HOLDINGS will, and will cause each
SUBSIDIARY to, keep adequate records and books of account, in which complete
entries will be made in accordance with GAAP consistently applied.


 


SECTION 6.3   MAINTENANCE OF PROPERTIES.  HOLDINGS will, and will cause each
SUBSIDIARY to, maintain, keep and preserve all of its properties (tangible and
intangible) necessary or useful in its business in good working order and
condition, ordinary wear and tear and damage caused by casualty excepted.


 


SECTION 6.4   MAINTENANCE OF INSURANCE.  HOLDINGS will, and will cause each
SUBSIDIARY to, maintain insurance with financially sound and reputable
insurance companies or associations (i) listed on Schedule 6.4,
(ii) that have an A.M. Best policy-holders rating of not less than A, or if no
such rating is applicable, that have a quality comparable to those rated A or
better, or (iii) as TRAVELERS may reasonably approve, in such amounts and
covering such risks as are usually carried by companies engaged in the same or
a similar business and similarly situated, which insurance may provide for
reasonable deductibility from coverage thereof.  HOLDINGS further agrees to furnish TRAVELERS upon written request
with an annual report on the insurance in force and with copies of the policies
of said insurance evidencing the existence of the coverage called for by this
Agreement.


 


SECTION 6.5   COMPLIANCE WITH LAWS.  HOLDINGS will, and will cause each
SUBSIDIARY to, comply in all respects with all applicable laws, rules,
regulations, and orders the failure to comply with which could reasonably be
expected to have a MATERIAL ADVERSE CHANGE, such compliance to include, without
limitation, paying before the same become delinquent all material taxes,
assessments, and governmental charges imposed upon it or upon its property,
except taxes, assessments and governmental charges being contested in good
faith by appropriate proceedings and for which adequate reserves have been set
aside on its books in accordance with GAAP.


 


SECTION 6.6   TAXES.  HOLDINGS will, and will cause each SUBSIDIARY to, promptly pay
all of its material taxes, assessments and other governmental charges prior to
the date on which all penalties are attached thereto; provided, that
nothing herein contained shall be 


 


21

















 


interpreted to require
the payment of any tax, assessment or charge so long as its validity is being
contested in good faith by appropriate proceedings and for which adequate
reserves have been set aside on its books in accordance with GAAP.


 


SECTION 6.7   BOOKS AND RECORDS.  Until TRAVELERS shall have been furnished
with evidence satisfactory to it that it has been discharged from its
obligations under all BONDS without LOSS, upon reasonable prior notice
TRAVELERS shall have the right at reasonable times during normal business hours
to free access to the books and records of each of HOLDINGS and its
SUBSIDIARIES, including, without limitation, its books, records, accounts,
computer software and other computer-stored information, for the purpose of
examining, copying, or reproducing the same. 
Following the occurrence and during the continuance of an EVENT OF
DEFAULT, each PRINCIPAL authorizes and requests any and all depositories in
which funds of such PRINCIPAL may be deposited to furnish to TRAVELERS upon
TRAVELERS’s written request statements of its account and any other documents
reflecting its receipts and disbursements, and any PERSON doing business with
such PRINCIPAL is authorized to furnish any information requested by TRAVELERS
concerning any transaction.  Subject to Section 8.11,
TRAVELERS may furnish copies of any and all statements, agreements and
FINANCIAL STATEMENTS and any information which it now has or may obtain
concerning each of HOLDINGS and its SUBSIDIARIES to other PERSONS for the
purpose of procuring co-suretyship or reinsurance.


 


SECTION 6.8   FINANCIAL RECORDS AND REPORTS.  HOLDINGS will provide TRAVELERS with copies
of yearly audited FINANCIAL STATEMENTS of HOLDINGS and its SUBSIDIARIES on a
consolidated basis as soon as possible upon completion and in no event later
than ninety (90) days after the end of the period under audit.  In addition, HOLDINGS will furnish TRAVELERS
with true copies of quarterly unaudited FINANCIAL STATEMENTS of HOLDINGS and
its SUBSIDIARIES on a consolidated basis, and such other financial information
in a form as TRAVELERS may reasonably request, upon completion and in no event
later than forty-five (45) days after the end of each of the first three fiscal
quarters of each fiscal year.  The
FINANCIAL STATEMENTS to be provided by HOLDINGS will be prepared in conformity
with GAAP (except, with respect to unaudited FINANCIAL STATEMENTS, for the
absence of footnotes and subject to year-end audit adjustments) applied on a
basis consistent with that of the preceding fiscal year and in each instance
will present fairly and accurately the financial condition of HOLDINGS and its
SUBSIDIARIES on a consolidated basis as at the dates of the statements and the
results of their operations for the periods then ended.  HOLDINGS agrees to promptly notify TRAVELERS
of the occurrence of any MATERIAL ADVERSE CHANGE.


 


SECTION 6.9   PRINCIPALS’ REPRESENTATION.  HOLDINGS will provide TRAVELERS on a
quarterly basis with a letter in which an AUTHORIZED OFFICER of HOLDINGS represents
that to his or her knowledge, as of the date of such quarter end, no condition,
event or act exists which constitutes, or which with notice or the lapse of
time, or both, would constitute an EVENT OF DEFAULT.  This letter shall accompany each delivery of FINANCIAL STATEMENTS
required by Section 6.8 hereof.


 


SECTION 6.10   NOTICE OF LITIGATION.  HOLDINGS shall promptly give notice in
writing to TRAVELERS of (a) any litigation filed or threatened against HOLDINGS
or any of 


 


22

















 


its SUBSIDIARIES
involving an amount in excess of $6,000,000 which claim is not covered by
insurance and (b) all litigation filed against any INDEMNITOR associated with
any CONTRACT with respect to which five or more separate litigation matters are
then pending.


 


SECTION 6.11   LIENS.  HOLDINGS will not, and will not permit any SUBSIDIARY to create,
incur, assume, or suffer to exist any LIEN upon any of its properties or assets
now owned or hereafter acquired, except for PERMITTED LIENS.


 


SECTION 6.12   DEBT AND CONTINGENT LIABILITIES.  HOLDINGS will not, and will not permit any
SUBSIDIARY to, incur, assume, or suffer to exist any DEBT or CONTINGENT
LIABILITY, except for:


 


(a)                                  DEBT
and CONTINGENT LIABILITY existing at the effective date of this Agreement and
disclosed on Schedule 6.12 attached hereto and any renewals,
extensions, refinancings or replacements thereof, provided, that the
terms thereof are not materially more burdensome on the INDEMNITORS than the
existing terms;


 


(b)                                 endorsement
of instruments for deposit or collection in the ordinary course of business;


 


(c)                                  CONTINGENT
LIABILITIES in connection with third-party leases, repurchase agreements or
sales in the ordinary course of business;


 


(d)                                 DEBT
and CONTINGENT LIABILITIES in respect of factoring or financing of accounts
receivable with respect to any contract or series of contracts under which the
amounts payable to HOLDINGS or any SUBSIDIARY are payable in whole or in part
in the currency of any country other than the United States of America, sold or
pledged on a non-recourse basis in an aggregate amount not to exceed
$10,000,000;


 


(e)                                  DEBT
of the PRINCIPALS and INDEMNITORS arising under this Agreement and under the
other UNDERWRITING DOCUMENTS;


 


(f)                                    DEBT
and CONTINGENT LIABILITIES arising under (i) the BANK LOAN FACILITY; provided,
that the aggregate principal amount of all loans plus the undrawn face amount
of all letters of credit outstanding under the BANK LOAN FACILITY shall at no
time exceed $130,000,000; (ii) the DEBT INDENTURE; provided, that the
aggregate principal amount outstanding under the DEBT INDENTURE shall at no
time exceed $175,000,000; and (iii) the 1998 DEBT INDENTURE (as defined in the
EXISTING AGREEMENT) in the aggregate principal amount outstanding of
approximately $26,940,000; provided, that HOLDINGS will redeem such DEBT
promptly following the date hereof and in any event by February 15, 2004,
and that the amount necessary to redeem such DEBT shall have been irrevocably
committed or set aside in a manner reasonably acceptable to TRAVELERS until
application thereof to redeem such DEBT;


 


(g)                                 DEBT
and CONTINGENT LIABILITIES under or in respect of capital leases;


 


23

















 


(h)                                 DEBT
of HOLDINGS to any SUBSIDIARY and DEBT of any SUBSIDIARY to HOLDINGS or any
other SUBSIDIARY to the extent permitted by Section 6.15;


 


(i)                                     DEBT
consisting of deferred payment obligations of a PRINCIPAL for insurance
premiums or of funds borrowed for the payment of such premiums;


 


(j)                                     CONTINGENT
LIABILITIES consisting of guaranties by HOLDINGS or any SUBSIDIARY of
obligations of HOLDINGS or any SUBSIDIARY, as the case may be, under any DEBT
otherwise permitted hereunder or under any lease or other agreement (not
representing DEBT) entered into in the ordinary course of business; provided,
that the aggregate amount of such CONTINGENT LIABILITIES of INDEMNITORS
relating to DEBT of LIMITED SUBSIDIARIES, when added to the other RESTRICTED
AMOUNTS then outstanding, shall not exceed at any time $30,000,000;


 


(k)                                  DEBT
incurred in the ordinary course of business in the nature of open accounts
(extended by suppliers on normal trade terms in connection with purchasers of
goods or services) accrued liabilities and deferred income, taxes and judgments
or orders for the payment of money to the extent such judgments or orders do
not result in any EVENT OF DEFAULT;


 


(l)                                     DEBT
and CONTINGENT LIABILITIES incurred to finance the acquisition, construction,
repair or improvement of assets in the ordinary course of business so long as
the amount of such DEBT does not exceed the purchase price, construction cost,
repair cost or improvement cost of the assets acquired, constructed, repaired
or improved with the proceeds thereof;


 


(m)                               DEBT
arising from the issuance of license, bid, performance and lien bonds, and
other undertakings or instruments of guaranty, whether issued by TRAVELERS or
any other surety for the benefit of HOLDINGS or any SUBSIDIARY;


 


(n)                                 DEBT
incurred in connection with any interest rate hedging transaction, foreign
currency or commodity hedging transactions, foreign exchange contract or other
similar arrangement entered into by HOLDINGS or any SUBSIDIARY;


 


(o)                                 CONTINGENT
LIABILITIES consisting of guaranties by HOLDINGS or any SUBSIDIARY of obligations
of Amboy Aggregates, a New Jersey joint venture, and its SUBSIDIARIES; provided,
that the aggregate amount of such CONTINGENT LIABILITIES of INDEMNITORS, shall
not exceed at any time $17,000,000;


 


(p)                                 DEBT
OF SUBSIDIARIES which represents the assumption by such SUBSIDIARIES of DEBT of
another SUBSIDIARY in connection with the merger of such other SUBSIDIARY with
and into the assuming SUBSIDIARY or the purchase of all or substantially all of
the assets of such other SUBSIDIARY;


 


(q)                                 all
premiums, interest, fees, expenses, indemnities, charges and additional or
contingent interest on obligations described in this Section 6.12;


 


24

















 


(r)                                    DEBT
and CONTINGENT LIABILITIES in respect of taxes, assessments, governmental
charges, to the extent that payment thereof is not required pursuant to Section 6.6;


 


(s)                                  DEBT
and CONTINGENT LIABILITIES arising under the VESSEL FINANCING AGREEMENT, provided
that the aggregate principal amount thereunder does not exceed $23,400,000 at
any time outstanding;


 


(t)                                    unsecured
DEBT used to repurchase capital stock of GLDD Acquisitions Corp. from former
employees, at any time outstanding not to exceed in the aggregate $5,000,000;


 


(u)                                 CONTINGENT
LIABILITIES otherwise permitted by this Agreement; and


 


(v)                                 other
DEBT of HOLDINGS and its SUBSIDIARIES in an aggregate amount, determined on a
consolidated basis with respect to HOLDINGS and its SUBSIDIARIES, at any time
outstanding not to exceed $10,000,000.


 


SECTION 6.13   DISPOSITION OF ASSETS; ISSUANCE OF
EQUITY.


 


(a)                                  Except
for PERMITTED LIENS, HOLDINGS will not, and will not permit its SUBSIDIARIES
to, sell, lease, transfer, or otherwise dispose of its assets whether now owned
or hereafter acquired except for


 


(i)                                     sales
of inventory in the ordinary course of business,


 


(ii)                                  the
sale or other disposition of any investment of the type described in clauses
(a) through (e), (h) and (j) of Section 6.15,


 


(iii)                               a disposition made in
connection with a sale and leaseback transaction involving the sale or
disposition of capital assets, provided (A) such sale or disposition is for an
amount not less than the fair market value thereof and (B) any DEBT arising in
connection therewith is permitted by Section 6.12,


 


(iv)                              a
sale, lease or other disposition that either (A) is made in the ordinary course
of business for fair market value, (B) is a sale, lease or transfer from
HOLDINGS to any SUBSIDIARY or from a SUBSIDIARY to HOLDINGS or any other
SUBSIDIARY; provided, that, in the case of a sale, lease or other
disposition by HOLDINGS or any SUBSIDIARY which is not a LIMITED SUBSIDIARY to
a LIMITED SUBSIDIARY, the fair market value of such assets, when added to the
other RESTRICTED AMOUNTS then outstanding, shall not exceed at any time
$30,000,000 or (C) is a lease (on a short-term or long-term basis) to another
Person of assets no longer useful or necessary in the operations of businesses
of HOLDINGS and its SUBSIDIARIES,


 


(v)                                 a
sale or other disposition of assets no longer useful or necessary in the operations
or businesses of HOLDINGS and its SUBSIDIARIES and the purchase price is not
less than the fair market value of the asset sold or disposed of,


 


25

















 


(vi)                              a
sale or other disposition of accounts receivable arising in the ordinary course
of business which are overdue and which HOLDINGS or any SUBSIDIARY have
determined are not economical to collect, and


 


(vii)                           other dispositions, provided,
that such dispositions do not exceed in the aggregate in any fiscal year ten
percent (10%) of the book value of all assets.


 


(b)                                 HOLDINGS
further agrees that it shall not permit its SUBSIDIARIES to authorize or issue
additional shares of their capital stock or similar equity interest except (i)
shares or similar equity interests issued to HOLDINGS or a wholly-owned
SUBSIDIARY of HOLDINGS, (ii) shares of capital stock or equity interests issued
by (1) any non-wholly owned SUBSIDIARY to its holders of capital stock or
equity interests on a proportionate basis and (2) a newly created SUBSIDIARY to
another PERSON in connection with any joint venture, provided that such
newly created SUBSIDIARY’s business and activities shall be limited to the
conduct of such joint venture, (iii) for directors’ qualifying shares and
similar issuances pursuant to local law requirements, and (iv) shares of
capital stock or equity interests issued by North American Site Developers,
Inc. to Persons other than HOLDINGS or a wholly-owned SUBSIDIARY of HOLDINGS, provided,
that the aggregate amount of such shares of capital stock or equity interests
issued to such Persons shall not exceed twenty-five percent (25%) of the
aggregate number of shares of capital stock or equity interests issued by North
American Site Developers, Inc.


 


SECTION 6.14   MERGERS.  HOLDINGS will not, and will not permit its SUBSIDIARIES to, merge
or consolidate with or into or purchase or otherwise acquire all or
substantially all of the assets of, or stock or other equity interest in, any
PERSON unless (a) after giving effect to such transaction HOLDINGS shall be in
compliance with the provisions of Section 6.19, and 6.20 and
(b) if such transaction involves an INDEMNITOR, the surviving entity shall
have executed and delivered to TRAVELERS a SUPPLEMENTAL SIGNATURE PAGE; provided,
that (x) any wholly-owned SUBSIDIARY which is an INDEMNITOR may merge or
consolidate into HOLDINGS or into or with any other wholly-owned SUBSIDIARY
which is an INDEMNITOR, (y) any wholly-owned SUBSIDIARY which is not an
INDEMNITOR may merge or consolidate into HOLDINGS or into or with any other
wholly-owned SUBSIDIARY, provided, that in the event an INDEMNITOR is a
party to such merger or consolidation, an INDEMNITOR must survive the
transaction and (z) any wholly-owned SUBSIDIARY may sell, transfer, convey, lease
or assign its assets or a substantial part thereof to HOLDINGS or any other
wholly-owned SUBSIDIARY, provided, that in the case of a sale, transfer,
conveyance, lease or assignment by such a SUBSIDIARY which is an INDEMNITOR,
the other party to such transaction must also be an INDEMNITOR.  Notwithstanding the foregoing, HOLDINGS and
its SUBSIDIARIES may consummate the transactions contemplated by the MERGER
AGREEMENT.


 


SECTION 6.15   INVESTMENTS.  HOLDINGS will not, and will not permit its
SUBSIDIARIES to, make or suffer to exist any investment in any PERSON whether
in the form of equity, DEBT or CONTINGENT LIABILITY, except:


 


(a)                                  Cash
Equivalent Investments;


 


26

















 


(b)                                 investments
permitted as DEBT or CONTINGENT LIABILITIES under Section 6.12 and
investments permitted under Section 6.14;


 


(c)                                  investments
existing on the effective date of this Agreement and disclosed in Schedule 6.15;


 


(d)                                 accounts
receivable arising from, and credit extended in connection with, the sale of
goods or rendering of services in the ordinary course of business and
promissory notes or other instruments evidencing such credit or partial
satisfaction thereof;


 


(e)                                  investments,
DEBT and CONTINGENT LIABILITIES in HOLDINGS or its SUBSIDIARIES; provided,
that the aggregate amount of investments in LIMITED SUBSIDIARIES, when added to
the other RESTRICTED AMOUNTS then outstanding, shall not exceed at any time
$30,000,000;


 


(f)                                    loans
or advances to employees of HOLDINGS and its SUBSIDIARIES made in the ordinary
course of business consistent with past business practices;


 


(g)                                 investments
made in the ordinary course of business in connection with its capacity as a
co-joint venturer in a joint venture, corporation or similar pooling of efforts
in respect of a specific project or series of projects for a limited or fixed
duration to conduct a business of a type in which a PRINCIPAL is presently
engaged consistent with past practices;


 


(h)                                 investments
in Amboy Aggregates, a New Jersey joint venture, existing on the date hereof
and disclosed on Schedule 6.15 and additional investments therein
made after the date hereof; provided, that the amount of such additional
investments (excluding increases solely as a result of increases in the
retained earnings of Amboy Aggregates) shall not exceed at any time
$10,000,000;


 


(i)                                     investments
made in connection with the receipt by HOLDINGS or any of its SUBSIDIARIES of
consideration other than cash for the sale by HOLDINGS or such SUBSIDIARY of
any assets permitted to be sold under Section 6.13;


 


(j)                                     investments
received in connection with the bankruptcy or reorganization of, or settlement
of delinquent accounts and disputes with customers and suppliers, in each case
in the ordinary course of business;


 


(k)                                  investments
constituting loans to employees of HOLDINGS and its SUBSIDIARIES to purchase
capital stock of HOLDINGS; and


 


(l)                                     other
investments in an aggregate amount at any one time not to exceed $15,000,000.


 


For purposes of
this Section 6.15, “Cash Equivalent Investments” means, at
any item:


 


27

















 


(a)                                  any
obligation, maturing not more than one year after such time, issued or
guaranteed by the United States government or issued by an agency thereof and
backed by the full faith and credit of the United States of America;


 


(b)                                 marketable
general obligations, maturing not more than six months after such time, issued
by any state of the United States of America or any political subdivision of
any such state or any public instrumentality thereof and rated A-2 or higher by
Standard & Poor’s Rating Group, a division of McGraw Hill, Inc., or P-2 or
higher by Moody’s Investors Service, Inc.;


 


(c)                                  commercial
paper, maturing not more than nine months from the date of issue, which is
issued by (i) a corporation organized under the laws of any state of the United
States or of the District of Columbia and rated A-2 or higher by Standard &
Poor’s Rating Group, a division of McGraw Hill, Inc., or P-2 or higher by
Moody’s Investors Service, Inc., or (ii) any lender under the BANK LOAN
FACILITY (or its holding company);


 


(d)                                 any
certificate of deposit, time (including eurodollar time deposits) or demand
deposit or bankers acceptance, maturing not more than one year after such time,
which is issued by either (i) a commercial banking institution organized under
the laws of the United States of America or any State thereof or the District
of Columbia that has a combined capital, surplus and undivided profits of not
less than $500,000,000, (ii) any lender under the BANK LOAN FACILITY, or (iii)
any branch of any lender under the BANK LOAN FACILITY or any commercial banking
institution organized under the laws of the United Kingdom, Canada or Japan
having combined capital, surplus and undivided profits of not less than
$500,000,000;


 


(e)                                  fully
collateralized repurchase agreements with a term of not more than 30 days for
underlying securities of the type described in clauses (a) and (b)
above, entered into with any institution meeting the qualifications specified
in clause (d) above;


 


(f)                                    participations
in loans made to a borrower with a debt rating of A-2 or higher from Standard
& Poor’s Rating Group, a division of McGraw Hill, Inc., or P-2 or higher
from Moody’s Investor Service, Inc.; provided, that such loans must
mature within six months from the date such participation is purchased;


 


(g)                                 short-term
asset management accounts for the purpose of investing in notes issued by a
corporation organized under the laws of any state of the United States or of
the District of Columbia and rated A-2 or higher by Standard & Poor’s
Rating Group, a division of McGraw Hill, Inc., or P-2 or higher by Moody’s
Investors Service, Inc.;


 


(h)                                 bonds
issued by a municipality or governmental agency and rated not lower than BBB by
Standard & Poor’s Rating Group, a division of McGraw Hill, Inc., or Baa2 by
Moody’s Investors Service, Inc. and purchased by HOLDINGS or any of 


 


28

















 


its SUBSIDIARIES in the ordinary course of its business in connection
with retainage under contracts with its customers;


 


(i)                                     United
States dollars or money in other currencies received in the ordinary course of
business;


 


(j)                                     money
market funds at least 95% of the assets of which constitute Cash Equivalent
Investments of the kinds described in clauses (a) through (e), (i)
and (j) of this definition;


 


(k)                                  securities
with maturities of one year or less from the date of acquisition issued or
fully and unconditionally guaranteed by any state, commonwealth or territory of
the United States of America or the federal government of Canada, or by any
political subdivision or taxing authority thereof, and having one of the two
highest ratings obtainable from Standard & Poor’s Rating Group, a division
of McGraw Hill, Inc., or Moody’s Investors Service, Inc.; or


 


(l)                                     in
the case of any SUBSIDIARY of HOLDINGS that is not domiciled in the United
States, investments comparable to the foregoing that have been approved by the
Administrative Agent under the BANK LOAN FACILITY.


 


SECTION 6.16   DIVIDEND RESTRICTIONS.  HOLDINGS will not pay any dividend or make
any other distribution to any PERSON, except:


 


(a)                                  dividends
or distributions payable in common stock or warrants to purchase common stock
or splitups or reclassification of its stock into additional or other shares of
its common stock; and


 


(b)                                 cash
dividends or other distributions payable by HOLDINGS not to exceed in aggregate
during the term of this Agreement the sum of (i) $5,000,000 plus (ii)
fifty percent (50%) of the sum of the positive NET INCOME (if any) for the
fiscal quarter of HOLDINGS ending on or about December 31, 1998 plus
(iii) fifty percent (50%) of the sum of positive NET INCOME (if any) for each
fiscal year of HOLDINGS ending on or after December 31, 1999; provided,
that both before and after giving effect to such dividends or distributions
HOLDINGS shall be in compliance with the provisions of Section 6.19
and 6.20.


 


Notwithstanding
the foregoing, HOLDINGS may consummate the transactions contemplated by the
MERGER AGREEMENT.


 


SECTION 6.17   RESTRICTIONS UPON CONTRACTS WITH
AFFILIATES.  Other than amongst
themselves, HOLDINGS and its SUBSIDIARIES will not without the prior written
consent of TRAVELERS enter into contracts, equipment leases or other agreements
with any AFFILIATE except on an arms’ length basis or except (a) pursuant to
written agreements with third-party PERSONS from which HOLDINGS and its
SUBSIDIARIES have been or are being benefited, including but not limited to
pension plans and other joint employee benefit programs, insurance programs and
other similar joint programs or services, (b) the payment by HOLDINGS and its
SUBSIDIARIES to Madison Dearborn Partners IV, L.P., or any of its AFFILIATES of



 


29

















 


out of pocket costs and
expenses owed to PERSONS who are not AFFILIATES, (c) transactions contemplated
by the MERGER AGREEMENT, (d) any tax sharing agreement entered into by HOLDINGS
or any of its SUBSIDIARIES from time to time, (e) any customary management
agreement entered into by HOLDINGS or its SUBSIDIARIES with Madison Dearborn
Partners IV, L.P. or any of its AFFILIATES from time to time and (f) the
transactions described on Schedule 6.17.


 


SECTION 6.18   NATURE OF BUSINESS.  HOLDINGS and its SUBSIDIARIES shall not
engage in any business activities or operations substantially different from or
unrelated to its present business activities and operations; provided,
that HOLDINGS and its SUBSIDIARIES may engage in activities that are reasonably
related, complimentary or ancillary to its business activities or operations,
including, without limitation, the provision of commercial and industrial
demolition services.


 


SECTION 6.19   NET WORTH.  HOLDINGS and its consolidated SUBSIDIARIES shall not permit NET
WORTH as of the last day of any fiscal quarter of HOLDINGS ending after the
date hereof, to be less than the sum of (i) $90,000,000 plus (ii) fifty
percent (50%) of the sum of the positive NET INCOME (if any) for the fiscal
quarter of HOLDINGS ending on or about December 31, 2003, plus
(iii) fifty percent (50%) of the sum of the positive NET INCOME (if any) for
each fiscal year of HOLDINGS ending on or after December 31, 2004 and
prior to the date of determination hereunder.


 


SECTION 6.20   NET CURRENT ASSETS.  HOLDINGS will not permit the ratio of its
consolidated current assets to its consolidated current liabilities as of the
last day of each fiscal quarter of HOLDINGS to be less than 1.2 to 1 and will
not permit its net current assets as of the last day of each fiscal quarter of
HOLDINGS to be less than $17,000,000; provided, that in the event
HOLDINGS fails to maintain either of these levels it shall immediately notify
TRAVELERS and shall have thirty (30) days in which to restore its position.  In the determination of current assets, pipe
inventory shall be classified as a current asset; and provided further,
that for purposes of calculating consolidated current liabilities, current
maturities of DEBT will be excluded from the calculation thereof to the extent
HOLDINGS or any of its SUBSIDIARIES is able to repay such current maturities
through the incurrence of other non-current DEBT (including, without
limitation, through borrowings under the BANK LOAN FACILITY).


 


SECTION 6.21   SUBORDINATED DEBT AND PAYMENT BLOCKAGE
NOTICE.


 


(a)                                  HOLDINGS
shall not, and shall not suffer or permit any of its SUBSIDIARIES to, (i) make
any payment (other than any payment utilizing proceeds from the issuance of any
equity securities by HOLDINGS or any parent entity) of interest on any
SUBORDINATED DEBT on any day other than the stated, scheduled date (subject to
any applicable grace period) for such payment set forth in the document or
agreement evidencing or governing such SUBORDINATED DEBT, (ii) make any voluntary
or mandatory prepayment (other than any payment utilizing proceeds from the
issuance of any equity securities by HOLDINGS or any parent entity) of
principal of, or redeem, purchase or defease, any SUBORDINATED DEBT, or (iii)
consent to any amendment, supplement or other modification of any of the terms
or provisions contained in, or applicable to, any document or agreement
evidencing or governing 


 


30

















 


SUBORDINATED DEBT, except
to the extent that such amendment, supplement or other modification would
extend the date or reduce the amount of any required repayment or redemption or
would amend, supplement or modify any term or provision in a manner not adverse
to the rights or interests of TRAVELERS. 
Notwithstanding the foregoing, (i) TRAVELERS hereby consents to HOLDINGS
making a voluntary prepayment of, redeeming or repurchasing all of the
principal and accrued and unpaid interest, together with any premium and fees
in connection with such prepayment, redemption or repurchase, on the senior
subordinated notes issued pursuant to the 1998 DEBT INDENTURE (as defined in
the EXISTING AGREEMENT) and (ii) HOLDINGS and its SUBSIDIARIES shall be
permitted to refinance the SUBORDINATED DEBT from time to time pursuant to a
note indenture or other agreement containing covenants, events of default and
other terms not materially more restrictive than those set forth in the DEBT
INDENTURE.


 


(b)                                 HOLDINGS
shall promptly give notice in writing to TRAVELERS of the receipt by the
Trustee under the DEBT INDENTURE of any PAYMENT BLOCKAGE NOTICE.


 


SECTION 6.22   CHANGE OF
LOCATION OR NAME.  None of the
INDEMNITORS shall change (i) the location of its principal place of business or
chief executive office, or (ii) its name or the name under which it conducts
business or its jurisdiction of organization, in each case without giving
TRAVELERS written notice thereof promptly upon the effectiveness of such change
(and in any event no later than 30 days after the effectiveness of such change)
and taking all actions reasonably requested by TRAVELERS to maintain and
preserve all LIENS in favor of TRAVELERS granted pursuant to the UNDERWRITING
DOCUMENTS.


 


ARTICLE VII



RIGHTS OF TRAVELERS


 


SECTION 7.1   FURTHER ASSURANCES/TRAVELERS AS
ATTORNEY-IN-FACT.  PRINCIPALS agree
to sign, execute, file and/or deliver to TRAVELERS all documents, reports,
papers, pleadings and/or instruments reasonably requested by TRAVELERS to
obtain, and/or perfect any of TRAVELERS’s rights under this Agreement.  The INDEMNITORS irrevocably nominate and
appoint TRAVELERS or any other PERSON(s) designated by TRAVELERS, effective
upon the occurrence and during the continuance of an EVENT OF DEFAULT, true and
lawful attorney-in-fact of the INDEMNITORS, with full right and authority, upon
the occurrence and during the continuance of an EVENT OF DEFAULT to execute on
behalf of, and sign the names of each INDEMNITOR to any voucher, release,
satisfaction, check, application for payment, bill of sale of any or all
property assigned by this Agreement or any other UNDERWRITING DOCUMENT to
TRAVELERS or any other paper or contract necessary or desired to carry into
effect the purposes of this Agreement or any other UNDERWRITING DOCUMENT, with
full right and authority, to satisfy the performance of the CONTRACT(s); and
each INDEMNITOR ratifies and confirms all that such attorney-in-fact or
TRAVELERS may lawfully do in the premises and further authorizes and empowers
TRAVELERS and such attorney-in-fact and each of them to enter upon and take
possession of the tools, plant, equipment, materials and subcontracts and all
other collateral security mentioned in this Agreement and enforce, use, employ
and dispose thereof for the purposes set forth in this 


 


31

















 


Agreement, INDEMNITORS
recognize that the appointment of such attorney-in-fact constitutes a power
coupled with an interest.


 


SECTION 7.2   CONTRACT FUNDS HELD IN TRUST.  INDEMNITORS and PRINCIPALS agree and
expressly declare that upon the occurrence and during the continuance of an
EVENT OF DEFAULT all funds due or to become due under the CONTRACT(s) will
immediately become trust funds, whether in possession of INDEMNITORS,
PRINCIPALS or another, for the benefit and the payment of all PERSONS to whom a
PRINCIPAL incurs obligations in the performance of the CONTRACT(s), for which
TRAVELERS would be liable under the BOND(s). 
If TRAVELERS discharges any such obligations, with or without a claim
asserted against TRAVELERS under the BOND(s), it shall be entitled to assert
the right of such PERSON to the trust fund.


 


SECTION 7.3   RIGHT OF TRAVELERS TO SETTLE CLAIMS.  TRAVELERS shall have the exclusive right for
itself and for INDEMNITORS and PRINCIPALS to decide and determine whether any
claim, demand, suit or judgment on the BOND(s) shall be paid, settled, defended
or appealed.  Any payment or
determination made by TRAVELERS under a good faith belief that either TRAVELERS
was or might be liable therefor or such payments were necessary or advisable to
protect any of TRAVELERS’s rights or to avoid or lessen TRAVELERS’s liability
or alleged liability, shall be final, conclusive and binding upon INDEMNITORS
and the PRINCIPALS; and any LOSS which may be sustained or incurred shall be
paid by the respective PRINCIPAL or by INDEMNITORS within fifteen (15) days of
receipt of written demand by TRAVELERS. 
In the event of any payment, settlement, compromise, or investigation,
an itemized statement of LOSS sworn to by an officer or authorized
representative of TRAVELERS or voucher(s) or other evidence of such LOSS shall
be prima facie evidence of the fact and extent of the liability of INDEMNITORS
and the PRINCIPALS to TRAVELERS in any claim or suit and in any and all matters
arising between INDEMNITORS, the PRINCIPALS and TRAVELERS.


 


SECTION 7.4   AUTHORITY OF TRAVELERS TO MAKE LOANS TO
PRINCIPAL.  In addition to the other
remedies provided herein, TRAVELERS is authorized and empowered, but is not
obligated, to advance or loan money or guarantee loans to any PRINCIPAL as
TRAVELERS may see fit for the purpose of any of the CONTRACT(s), or for the
purpose of meeting operational expenses or paying other obligations, bonded or
unbonded.  Such funds may be advanced or
guaranteed at anytime, whether before or after default of such PRINCIPAL under
the CONTRACT(s).  Upon demand by
TRAVELERS, each INDEMNITOR shall be responsible to reimburse TRAVELERS for all
funds so loaned, advanced, or guaranteed and all LOSS incurred by TRAVELERS in
relation thereto, notwithstanding the failure of any PRINCIPAL to so use those
funds.  INDEMNITORS waive all notice of
such advance, loan, or guarantee.


 


SECTION 7.5   AUTHORITY OF TRAVELERS TO AMEND BOND.  TRAVELERS shall have the right, and is
hereby authorized and empowered, but not required: (a) upon the request of any
INDEMNITOR to increase or decrease the penalty or penalties of any BOND(s), to
change the OBLIGEE(s) therein, to execute any continuation, enlargements,
modifications and renewals thereof or substitute therefor with the same or
different conditions, provisions or OBLIGEE(s), and with the same, larger or
smaller penalties, it being agreed that this instrument shall apply to and
cover such new or changed BOND(s) or renewals even though the consent of 


 


32

















 


TRAVELERS may or does
substantially increase the liability of the INDEMNITORS and the PRINCIPALS; or
(b) to take such steps as it may deem necessary or proper to obtain release
from liability under the BOND(s); or (c) to assent to any changes in any
CONTRACT, including but not limited to, any change in the time for completion
of any CONTRACT and to payments or advances thereunder.


 


SECTION 7.6   RIGHTS OF TRAVELERS TO TAKE POSSESSION
OF THE WORK.  Upon the occurrence
and during the continuance of an EVENT OF DEFAULT (for the avoidance of doubt,
after giving effect to all applicable grace periods contained in the definition
of EVENT OF DEFAULT), in addition to other remedies provided herein, TRAVELERS
is authorized and empowered, but is not obligated, to take possession of the
work under any CONTRACT(s) and at the expense of the respective PRINCIPAL and
of INDEMNITORS to complete or to contract for the completion of the same, or to
consent to the reletting of the completion thereof by OBLIGEE, or to take such
other steps as in the discretion of TRAVELERS may be advisable or necessary to
obtain its release or to avoid LOSS.


 


SECTION 7.7   DEPOSITORY TRUST ACCOUNTS.  Upon the occurrence and during the
continuance of an EVENT OF DEFAULT (for the avoidance of doubt, after giving
effect to all applicable grace periods contained in the definition of EVENT OF
DEFAULT), PRINCIPALS shall, upon demand of TRAVELERS, open an account(s) with a
bank or similar depository designated by PRINCIPALS and approved by TRAVELERS,
which account(s) shall be designated as trust account(s) for the deposit of
such trust funds, and shall deposit therein all monies paid or to be paid under
the CONTRACT(s).  Withdrawals from such
account(s) shall be by check or similar instruments signed by a representative
of TRAVELERS and, at TRAVELERS’s option, countersigned by a PRINCIPAL.  Said trust(s) shall terminate on the payment
by INDEMNITORS and PRINCIPALS of all the contractual obligations for the
payment of which the trust(s) are created or upon the expiration of seven (7)
years from the date thereof, whichever shall first occur.


 


SECTION 7.8   PRESERVATION OF TRAVELERS’S RIGHTS.  TRAVELERS shall have every right and remedy
which a personal surety without compensation would have, including the right to
secure its discharge from the suretyship, and nothing in this Agreement shall
waive, abridge or diminish any right which TRAVELERS might have if this
Agreement were not executed.


 


SECTION 7.9   AUTHORITY OF TRAVELERS TO ELECT REMEDIES.  Each right, remedy and power of TRAVELERS
provided in this Agreement or by law, equity, or statute shall be cumulative,
and the exercise by TRAVELERS of any right, remedy or power shall not preclude
TRAVELERS’s simultaneous or subsequent exercise of any or all other rights,
powers or remedies.  The failure or
delay by TRAVELERS to exercise any right, power or remedy shall not waive any
right, power or remedy.  No notice or
demand upon TRAVELERS by any INDEMNITOR or any PRINCIPAL shall limit or impair
TRAVELERS’s right to take any action under this Agreement or to exercise any
right, power or remedy, subject to the provisions of Section 3.5
herein.


 


33

















 


ARTICLE VIII


 


MISCELLANEOUS


 


SECTION 8.1   BENEFICIAL PARTIES.  This Agreement shall, in all its terms and
agreements, be for the benefit of and protect any PERSON joining with TRAVELERS
in executing any BOND or BONDS or executing at the request of TRAVELERS said
BOND or BONDS as well as any PERSON assuming co-suretyship or reinsurance
thereupon.


 


SECTION 8.2   JOINT AND SEVERAL.  The agreements and covenants herein
contained shall be binding upon the undersigned, both jointly and severally,
upon their successors and assigns jointly and severally, provided, that
the PRINCIPALS and the INDEMNITORS may not assign their rights hereunder
without the prior written consent of TRAVELERS.


 


SECTION 8.3   ATTORNEYS FEES.  The INDEMNITORS agree hereby to pay the
reasonable attorneys fees and expenses incurred by TRAVELERS in the preparation
and enforcement of this Agreement and the other UNDERWRITING DOCUMENTS.


 


SECTION 8.4   APPLICABLE LAW.  The terms and conditions of this Agreement
shall be construed under the laws of New York without regard to its conflicts of
laws principles (other than the provisions of 5-1401 and 5-1402 of the New York
General Obligations Law).


 


SECTION 8.5   JURISDICTION FOR SUITS UNDER THIS
AGREEMENT.  Separate suits may be
brought hereunder as causes of action may accrue, and the pendency or
termination of any such suit shall not bar any action, whether previously or
subsequently arising.  PRINCIPALS and
INDEMNITORS consent to the jurisdiction of the state and federal court located
in Hartford, CT to bring any action against them under this Agreement or the
BOND(s).  Each PRINCIPAL and each
INDEMNITOR are the agents for all PRINCIPALS and all INDEMNITORS for the
purpose of accepting service of process.


 


SECTION 8.6   INDEMNITORS WAIVE DEFENSE OF SUBSEQUENT
EXECUTION.  INDEMNITORS waive any
defense that this Agreement was executed subsequent to any BOND, admitting that
such BOND was executed pursuant to each INDEMNITOR’s request and in reliance
upon INDEMNITORS’ promise to execute this Agreement.


 


SECTION 8.7   VALIDITY OF AGREEMENT.  Failure to execute, or defective execution,
by any party shall not affect the validity of this Agreement as to any other
party executing the same, and each other party shall remain fully bound and
liable hereunder.  Invalidity of any
portion or provision of this Agreement by reason of the laws of any state or
for any other reason shall not render the other provisions or portions
invalid.  Executions of any application
or submission for any BOND by any PRINCIPAL, or of any other indemnity
agreement by any INDEMNITOR for the PRINCIPALS shall not abrogate, waive or
diminish any rights of TRAVELERS under this Agreement.  This Agreement may be executed
simultaneously in one or more counterparts, each of which shall be an original,
but all of which together shall constitute one and the same instrument.


 


34

















 


SECTION 8.8   ORAL MODIFICATIONS INEFFECTIVE.  This Agreement may not be changed or
modified orally.  No change or
modification to this Agreement shall be effective unless specifically agreed to
in writing and executed by TRAVELERS and HOLDINGS.


 


SECTION 8.9   NOTICES.  It is mutually agreed that any and all notices or demands herein
provided for must be given in writing and shall be deemed given if and when
delivered in person or duly deposited in the United States mails, postage
prepaid for regular or certified mail, properly addressed to the party to whom
given at the address of such party shown in this Agreement; provided,
that any party may specify any other post office address in the United States
by giving at least ten (10) days written notice thereof to the other party.


 


Notice to TRAVELERS shall
be sent to:


 


Travelers Casualty and
Insurance Company of America


One Tower Square, 5PB


Hartford, CT  06183


 


Attention:  Chief
Underwriting Officer - National Account Unit


 


with a copy to:


 


Travelers Casualty and
Surety Company

215 Shuman Boulevard

Naperville, IL 60563-8458


 


Attention: Construction
Services - Bond


 


Notice to any PRINCIPAL
or to any INDEMNITOR shall be sent to:


 


Great Lakes Dredge &
Dock Corporation 

2122 York Road 

Oak Brook, IL 60523


 


Attention:                                         Deborah A.
Wensel


Chief
Financial Officer


 


With a copy to:


 


Winston & Strawn LLP

35 W. Wacker Drive 

Chicago, Illinois 60601


 


 


Attention: Brian S. Hart,
Esq.


 


SECTION 8.10   REAFFIRMATION AND RESTATEMENT.  This Agreement constitutes an amendment and
restatement of the EXISTING AGREEMENT and the DEBT evidenced by the EXISTING
AGREEMENT is continuing DEBT.  Nothing
herein shall be 


 


35

















 


deemed to constitute a
payment, settlement or novation of the DEBT evidenced by the EXISTING
AGREEMENT, or to release or otherwise adversely affect any LIEN securing such
DEBT or any rights TRAVELERS has against any guarantor, surety or other party
primarily or secondarily liable for such DEBT.


 


SECTION 8.11   CONFIDENTIALITY.  TRAVELERS agrees that they will maintain the
confidentiality of any written or oral information provided to TRAVELERS by or
on behalf of HOLDINGS or any of its SUBSIDIARIES (hereinafter collectively
called “Confidential Information”), subject to TRAVELERS’s (a)
obligation to disclose any such Confidential Information pursuant to a request
or order under applicable laws and regulations or pursuant to a subpoena or
other legal process, (b) right to disclose any such Confidential Information to
its examiners, auditors, counsel and other professional advisors, (c) right to
disclose any such Confidential Information in connection with any litigation or
dispute involving TRAVELERS and HOLDINGS or any of its SUBSIDIARIES, (d) right
to provide such information to other Persons for the purpose of procuring
co-suretyship or reinsurance if such Person agrees in writing to maintain the
confidentiality of such information on terms substantially similar to those of
this Section as if it were a party hereto.  Notwithstanding the foregoing, any such information supplied to
TRAVELERS or another Person under this Agreement shall cease to be Confidential
Information if it is or becomes known to such Person by other than unauthorized
disclosure, or if it becomes a matter of public knowledge.


 


SECTION 8.12   RELEASE OF LIENS.  TRAVELERS agrees to release the LIENS under
the SECURITY AGREEMENTS, the VESSEL MORTGAGES, and any other UNDERWRITING DOCUMENTS,
and to execute and deliver such documents and instruments requested by any
PRINCIPAL to effect such release;


 


(a)                                  on
any property or assets in which the agent under the BANK LOAN FACILITY has a
first priority LIEN and if such first priority LIEN is released by the agent
under the BANK LOAN FACILITY;


 


(b)                                 on
any property or assets for which substitute collateral is provided with an
appraisal value at least equal to the value of the property or assets released;


 


(c)                                  on
all collateral upon termination of this Agreement and payment in full of all
obligations under this Agreement; and


 


(d)                                 on
any property or assets upon the sale, transfer or other disposition of such
property or assets which is otherwise permitted under this Agreement, up to an
aggregate fair market value, as determined in good faith by the applicable
PRINCIPAL selling such property or assets, not to exceed $5,000,000 during the
term of this Agreement; provided, that TRAVELERS is given prior written
notice of the fair market value of such transaction.


 


SECTION 8.13   SUCCESSORS AND ASSIGNS.  This Agreement shall be binding upon and
inure to the benefit of the INDEMNITORS and TRAVELERS and their respective
successors and assigns (including successors by way of merger, acquisition or
similar event).


 


36

















 


IN WITNESS WHEREOF, this
Agreement is executed by the parties on the day and date first set forth above.


 


	
   

  	
  GREAT LAKES
  DREDGE & DOCK 

  CORPORATION

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
    /s/
  Deborah A. Wensel/

  	
   

  
	
   

  	
   

  	
  Name:

  	
  Deborah A. Wensel

  
	
   

  	
   

  	
  Title:

  	
  Senior Vice President, Chief Financial

  
	
   

  	
   

  	
   

  	
  Officer and Treasurer

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  GREAT LAKES
  DREDGE & DOCK COMPANY

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
   /s/ Deborah
  A. Wensel/

  	
   

  
	
   

  	
   

  	
  Name:

  	
  Deborah A. Wensel

  
	
   

  	
   

  	
  Title:

  	
  Senior Vice President, Chief Financial

  
	
   

  	
   

  	
   

  	
  Officer and Treasurer

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  LYDON DREDGING
  & CONSTRUCTION 

  COMPANY, LTD.

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
   /s/ Deborah
  A. Wensel/

  	
   

  
	
   

  	
   

  	
  Name:

  	
  Deborah A. Wensel

  
	
   

  	
   

  	
  Title:

  	
  Vice President

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  FIFTY-THREE
  DREDGING CORPORATION

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
   /s/ Deborah
  A. Wensel/

  	
   

  
	
   

  	
   

  	
  Name:

  	
  Deborah A. Wensel

  
	
   

  	
   

  	
  Title:

  	
  Vice President

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  DAWSON MARINE
  SERVICES COMPANY

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
   /s/ Deborah
  A. Wensel/

  	
   

  
	
   

  	
   

  	
  Name:

  	
  Deborah A. Wensel

  
	
   

  	
   

  	
  Title:

  	
  Senior Vice President, Chief Financial

  
	
   

  	
   

  	
   

  	
  Officer and Treasurer

  
					



 

















 


	
   

  	
  GREAT LAKES
  CARIBBEAN DREDGING, INC.

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
   /s/ Deborah
  A. Wensel/

  	
   

  
	
   

  	
   

  	
  Name:

  	
  Deborah A. Wensel

  
	
   

  	
   

  	
  Title:

  	
  Senior Vice President, Chief Financial

  
	
   

  	
   

  	
   

  	
  Officer and Treasurer

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  NORTH AMERICAN
  SITE DEVELOPERS, INC.

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
   /s/ Deborah
  A. Wensel/

  	
   

  
	
   

  	
   

  	
  Name:

  	
  Deborah A. Wensel

  
	
   

  	
   

  	
  Title:

  	
  Vice President and Treasurer

  
					



 

















 


	
   

  	
  TRAVELERS
  CASUALTY AND SURETY 

  COMPANY

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
   /s/ Michael
  Damewood

  	
   

  
	
   

  	
   

  	
  Name:

  	
   Michael
  Damewood

  	
   

  
	
   

  	
   

  	
  Title:

  	
  Attorney-in-Fact

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  TRAVELERS
  CASUALTY AND SURETY 

  COMPANY

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
   /s/ Michael
  Damewood

  	
   

  
	
   

  	
   

  	
  Name:

  	
   Michael
  Damewood

  	
   

  
	
   

  	
   

  	
  Title:

  	
  Attorney-in-Fact