Exhibit 10.2


 


CREDIT AGREEMENT


 


 


Dated as of December 17, 2003


 


 


Between


 


 


GENERAL ELECTRIC CAPITAL CORPORATION


 


 


And


 


 


GREAT LAKES DREDGE & DOCK COMPANY


 

















 


TABLE OF CONTENTS


 


	
  ARTICLE
  1       DEFINITIONS AND ACCOUNTING TERMS

  	
   

  
	
  Section 1.1.

  	
  Certain Defined Terms.

  	
   

  
	
  Section 1.2.

  	
  Computation of Time Periods.

  	
   

  
	
  Section 1.3.

  	
  Accounting Terms.

  	
   

  
	
  ARTICLE
  2       CREDIT FACILITIES; DRAWDOWN
  PROCEDURES AND REPAYMENT PROVISIONS

  	
   

  
	
  Section 2.1.

  	
  The Loan.

  	
   

  
	
  Section 2.2.

  	
  General Provisions.

  	
   

  
	
  Section 2.3.

  	
  Changes in Law, Funding Losses, etc.

  	
   

  
	
  Section 2.4.

  	
  Payments and Computations.

  	
   

  
	
  Section 2.5.

  	
  Setoff.

  	
   

  
	
  ARTICLE
  3       SECURITY

  	
   

  
	
  Section 3.1.

  	
  Security Documents.

  	
   

  
	
  Section 3.2.

  	
  Release of Security.

  	
   

  
	
  Section 3.3.

  	
  Exercise of Powers of Attorney.

  	
   

  
	
  ARTICLE
  4       CONDITIONS TO FUNDING

  	
   

  
	
  Section 4.1.

  	
  Conditions Precedent to Initial Funding.

  	
   

  
	
  ARTICLE
  5       REPRESENTATIONS, WARRANTIES AND
  COVENANTS

  	
   

  
	
  Section 5.1.

  	
  Representations and Warranties.

  	
   

  
	
  Section 5.2.

  	
  Affirmative Covenants.

  	
   

  
	
  Section 5.3.

  	
  Negative Covenants.

  	
   

  
	
  ARTICLE
  6       EVENTS OF DEFAULT; REMEDIES

  	
   

  
	
  Section 6.1.

  	
  Events of Default, Acceleration.

  	
   

  
	
  Section 6.2.

  	
  Additional Rights.

  	
   

  
	
  ARTICLE
  7       MISCELLANEOUS

  	
   

  
	
  Section 7.1.

  	
  Amendments, etc.

  	
   

  
	
  Section 7.2.

  	
  Notices, etc.

  	
   

  
	
  Section 7.3.

  	
  Governing Law.

  	
   

  
	
  Section 7.4.

  	
  Service of Process and Consent to
  Jurisdiction; Waiver of Venue.

  	
   

  
	
  Section 7.5.

  	
  No Remedy Exclusive.

  	
   

  



 


i

















 


	
  Section 7.6.

  	
  Payment of Costs.

  	
   

  
	
  Section 7.7.

  	
  Further Assurances.

  	
   

  
	
  Section 7.8.

  	
  Counterparts.

  	
   

  
	
  Section 7.9.

  	
  Headings.

  	
   

  
	
  Section 7.10.

  	
  Severability.

  	
   

  
	
  Section 7.11.

  	
  Survival.

  	
   

  
	
  Section 7.12.

  	
  WAIVER OF TRIAL BY JURY.

  	
   

  
	
  Section 7.13.

  	
  Assignment by The Lender.

  	
   

  
	
  Section 7.14.

  	
  Confidentiality.

  	
   

  



 


 


	
  EXHIBIT A

  	
  –

  	
  Description
  of Vessels

  
	
  EXHIBIT B

  	
  –

  	
  Form of Secured Promissory Note

  
	
  EXHIBIT C

  	
  –

  	
  Form of First Preferred Fleet Mortgage

  
	
  EXHIBIT D

  	
  –

  	
  Form of Assignment of Earnings and Charterparties

  
	
  EXHIBIT E

  	
  –

  	
  Form of Assignment of Insurances

  
	
   

  	
   

  	
   

  
	
  Schedule 5.2(l)

  	
  –

  	
  Insurance

  
	
   

  	
   

  	
   

  
	
  APPENDIX A

  	
  –

  	
  Form of Notice of Drawing

  



 


ii

















 


CREDIT AGREEMENT


 


THIS CREDIT AGREEMENT (this “Agreement”),
dated as of December 17, 2003, is made by and between GENERAL ELECTRIC
CAPITAL CORPORATION, a corporation duly organized and validly existing under
the laws of the State of Delaware, and GREAT LAKES DREDGE & DOCK COMPANY, a
corporation duly organized and validly existing under the laws of the State of
New Jersey.


 


RECITALS


 


WHEREAS, the Borrower has requested that the
Lender make available to the Borrower a term loan in the principal amount of
$23,400,000, the proceeds of which will be used by the Borrower to finance
and/or refinance a portion of its cost to acquire the Vessels from BCC
Equipment Leasing Corporation, a Delaware corporation (“Seller”), to pay
certain costs incident hereto and thereto and to provide additional working capital;
and


 


WHEREAS, as security for the Loan, the
Borrower has offered to grant the Lender, among other things, a first preferred
fleet mortgage over the Vessels, and collaterally assign to the Lender (i) all
insurances and requisition compensation of the Vessels and (ii) all charters
(other than charters entered into in connection with work being performed on a
bonded project) entered into with respect to the Vessels having a duration of
nine months or more and the right to receive payments of all sums from time to
time payable thereunder; and


 


WHEREAS, the Lender is willing to make the
Loan to the Borrower, subject to the terms and conditions of this Agreement.


 


NOW, THEREFORE, in consideration of the
premises and mutual covenants herein contained, and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged,
and intending to be legally bound hereby, the parties do hereby agree as
follows:


 


ARTICLE 1


 


DEFINITIONS
AND ACCOUNTING TERMS


 


Section 1.1.      Certain Defined Terms. As used in
this Agreement, unless the context requires otherwise, the following terms
shall have the following meanings (such to be equally applicable to the
singular and plural forms of the terms defined):


 


“Acquisition
Agreement” means the Merger Agreement dated November 12, 2003 between GLDD
Acquisition Corp., GLDD Merger Sub, Inc., and Great Lakes Dredge & Dock
Corporation.


 


“Adjusted
Consolidated EBITDA” means EBITDA plus adjustments, without duplication (i)
required or permitted by Regulation S-X of the 1933 Act, and (ii) for the four
Fiscal Quarters ending September 30, 2003, December 31, 2003, March 31, 2004,
June 30, 2004, and September 30, 2004 consisting of up to $3,200,000 of
adjustments with respect to the pro  forma savings 


 

















 


resulting from the equipment financing transactions, subject to
confirmation by the Lender that the Guarantor’s calculation of such savings is
reasonable.


 


 


“Affiliate”
means, as to any Person, any other Person that, directly or indirectly,
controls, is controlled by or is under common control with such Person
(excluding any trustee under, or any committee with responsibility for
administering any Plan).  For purposes
of this definition, the term “control” (including the terms “controlling,”
“controlled by” and “under common control with”) of a Person means the
possession, direct or indirect, of the power to vote 10% or more of the
securities having ordinary voting power for the election of directors of such
Person or to direct or cause the direction of the management and policies of
such Person, whether through the ownership of voting securities, by contract or
otherwise.


 


“Agreement” has the meaning set forth
in the Preamble.


 


“Applicable Percentage” means for the
FLORIDA 72.29%; for the KEY WEST 23.53%; and for the GL 184 4.18%.


 


“Assignment of Earnings” means the
Assignment of Earnings and Charterparties, substantially in the form attached
hereto as Exhibit D, as the same may be amended, restated, supplemented
or otherwise modified from time to time.


 


“Assignment of Insurances” means the
Assignment of Insurances, substantially in the form attached hereto as Exhibit E
as the same may be amended, restated, supplemented or otherwise modified from
time to time.


 


“Bonding Agreement” means the Second
Amended and Restated Underwriting and Continuing Indemnity Agreement dated as
of August 19, 1998 by and among the Guarantor, certain of its Subsidiaries and
Travelers Casualty and Surety Company and Travelers Casualty and Surety Company
of America, including any related notes, guaranties, collateral documents,
instruments and agreements executed in connection therewith, as amended,
restated, modified, renewed, refunded, replaced or refinanced in whole or in
part from time to time.


 


“Borrower” means Great Lakes Dredge
& Dock Company, a New Jersey corporation, and its successors and permitted
assigns.


 


“Breakage Fees” has the meaning set
forth in Section 2.3(c).


 


“Business Day” means (i) for all
purposes other than as covered by clause (ii) below, any day of the year
excluding Saturday, Sunday and any day which shall be in the cities of New
York, New York and Chicago, Illinois a legal holiday or a day on which banking
institutions are authorized or required by law or other government actions to
close, and (ii) with respect to all notices and determinations in connection
with any payments of principal, interest and any other amounts due hereunder or
under the other Loan Documents, any day which is a Business Day described in
clause (i) and which is also a day on which dealings in Dollars are carried out
in the London interbank Eurodollar market.


 


2

















 


“Capital Expenditures” means, for any
period, the aggregate amount of all expenditures of the Guarantor and its
Subsidiaries for fixed or capital assets made or incurred during such period
(whether or not paid in cash and including that portion of Capital Leases which
is capitalized on the consolidated balance sheet of the Guarantor and its
Subsidiaries) which, in accordance with GAAP, would be classified as capital
expenditures; provided, however, that, for any such period, such
aggregate amount shall be reduced by the sum of (in each case to the extent the
following would otherwise be required to be capitalized on the consolidated balance
sheet of the Guarantor and its subsidiaries) (a) proceeds received from the
sale of fixed or capital assets which have been applied, within one year of
receipt thereof, to the purchase or cost of design, installation, construction,
repair or improvement of fixed or capital assets used or useful in the business
of the Guarantor and its Subsidiaries; (b) insurance or requisition proceeds or
condemnation awards received in connection with the damage, destruction,
requisition or condemnation of fixed or capital assets which have been applied,
within one year of receipt thereof, to the purchase or cost of design,
installation, construction, repair or improvement of fixed or capital assets
used or useful in the business of the Guarantor and its Subsidiaries; (c)
proceeds of indemnity claims made by the Guarantor (or the parent corporation
that owns the Guarantor) pursuant to the Acquisition Agreement to the extent
used in connection with the purchase or cost of design, installation,
construction, repair or improvement of fixed or capital assets used or useful
in the business of the Guarantor and its Subsidiaries in connection with such
indemnity claim; (d) with regard to equipment purchased simultaneously with the
trade-in of existing equipment of the Guarantor or its Subsidiaries, the amount
of the credit extended for such trade-in; (e) expenditures for vessels
identified to be sold by the Guarantor or any of its Subsidiaries and then
leased-back (on an operating lease basis) by the Guarantor or any of its Subsidiaries
to the extent that such sale occurs within 180 days of the completion of the
construction of such vessel and the Borrower has notified the Lender in writing
in reasonable detail of the timing, facts and circumstances of such sale and
lease-back to the extent that the aggregate amount of such expenditures does
not exceed $15,000,000 at any time (provided that if any vessel so identified
is not sold, the amount of the expenditures made that relate to such vessel
shall be added back to the amount of Capital Expenditures for the Fiscal Year
in which such expenditure was made); and (f) the repurchase of any Designated
Vessels that are utilized by the Guarantor or any Subsidiary under an operating
lease.


 


“Capital Lease” means, with respect to
any Person, any lease of any property by that Person as lessee, the obligation
for Rentals with respect to which is required to be accounted for as a capital
lease on the balance sheet of such Person in accordance with GAAP.


 


“Capitalized Rentals” means, as of the
date of any determination, the amount at which the aggregate Rentals due and to
become due under all Capital Leases under which the Guarantor or any of its
Subsidiaries is a lessee would be reflected as a liability on a consolidated
balance sheet of the Guarantor and its Subsidiaries.


 


“Capital Stock” means any and all
shares, interests, participations or other equivalents (however designated) of
capital stock of a corporation, any and all equivalent ownership interests in a
Person (other than a corporation) and any and all warrants, rights or options
to purchase any of the foregoing.


 


“CERCLA” has the meaning specified in
the definition of “Environmental Laws”.


 


3

















 


“Change of Control” means
(i) the failure of one or more Principals to have or to exercise
the power to elect at least a majority of the Board of Directors of the
Guarantor, or (ii) the failure
of the Guarantor to own (directly or indirectly) 100% of the then outstanding
shares of Capital Stock of the Borrower, or to have the power (directly or
indirectly) to direct or cause the direction of the management or policies of
the Borrower.


 


“Charter” means any time charter,
space charter, voyage charter or contract of affreightment entered into by the
Borrower, as owner, with any third party charterer, for any Vessel.


 


“Closing Date” means December 17,
2003.


 


“Code” means the Internal Revenue Code
of 1986, as amended.


 


“Collateral” means collectively the
Vessels and all other collateral now or hereafter serving as security for any
or all of the Obligations pursuant to the Loan Documents.


 


“Collection Account” has the meaning
set forth in Section 5.2(h).


 


“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
Capitalized Rentals under any Capitalized Lease, (vii) all obligations of such
Person to redeem, repurchase, exchange, defease in cash or otherwise make
payments in cash in respect of its capital stock prior to December 17, 2013,
(viii) reimbursement obligations with respect to letters of credit, and (ix)
obligations under direct or indirect guaranties in respect of, and obligations
(contingent or otherwise) to purchase or otherwise acquire, or otherwise to
assure a creditor against loss in respect of, indebtedness or obligations of
others of the kinds referred to in clauses (i) through (viii)
above.  For avoidance of doubt,
notwithstanding FAS 150, the Capital Stock of the Guarantor or any direct
parent of the Guarantor shall not constitute Debt so long as such Capital Stock
does not require any cash payments or dividends thereon or require any
mandatory redemption or repurchase prior to the date one year after the
maturity of the Obligations.


 


“Default” means any Event of Default
or any event which with the giving of notice or lapse of time, or both, would
constitute an Event of Default.


 


“Default Rate” has the meaning set
forth in Section 2.2(b).


 


4

















 


“Designated Vessels” means the dredge
“New York,” the dredge “Victoria Island,” the “BTS-401 and BTS-402 Scows,” the
Bottom-Dump Barges G.L.61, G.L. 62 and G.L. 65,” the dredge “Texas” and the
dredge “Pontchartrain” and ancillary equipment related thereto.


 


“Dollars” and “$” means the
lawful money of the United States of America.


 


“EBITDA” means, with respect to any
period, as determined in accordance with GAAP, the sum of the amounts for such
period of (a) Net Income, plus, without duplication and to the extent
reflected as a charge in the consolidated statement of such Net Income for such
period: (i) depreciation, depletion and amortization expense, (ii) federal,
state, local and foreign income taxes, (iii) Interest Expense, (iv) transaction
fees and expenses incurred in connection with the Transactions to the extent
not exceeding in the aggregate $17,000,000, (v) non-cash charges and losses,
(vi) any amounts included in the calculation of the Net Income for amortization
or non-cash charges for the write-off or impairment of goodwill, intangibles or
other purchase accounting adjustments related to the accounting for this
transaction, the transactions contemplated by the Senior Credit Facility or
other acquisitions under GAAP (including Financial Accounting Standards No. 141
and 142), (vii) fees and expenses incurred in connection with the Bonding
Agreement and this Agreement and any future amendments thereto, (viii)
management fees paid pursuant to any management agreement to the extent
permitted to be paid under the Senior Credit Facility, and (ix) Net Income
attributable to the minority equity interests in North American Site
Developers, Inc. to the extent the Net Income in respect of such minority
equity interest is received by the Guarantor, and (b) minus, without
duplication, (i) non-cash gains. 
“EBITDA” for the Guarantor and its Subsidiaries for the fiscal quarters
ended December 31, 2002 through and including December 31, 2003 will be
calculated on a pro-forma basis, adding to EBITDA, all scheduled basic hire
payments previously paid by the Borrower to BCC Equipment Leasing Corporation
for the Vessels and the vessel named Carolina during the twelve-month period
prior to the date of calculation.


 


“Environmental Law” 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 (“CERCLA”),
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 Substances Control Act, and 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.


 


“ERISA Affiliate” means any (i)
corporation which is a member of the same controlled group of corporations
(within the meaning of Section 414(b) of the Code) as the Borrower, (ii)
partnership or other trade or business (whether or not incorporated) under
common control (within the meaning of Section 414(c) of the Code) with the
Borrower, and (iii) member of the same affiliated service group (within the
meaning of Section 414(m) of the Code) as the Borrower, any corporation
described in clause (i) above or any partnership or trade or business


 


5

















 


described in clause (ii) above.


 


“Eurocurrency Liabilities” has the
meaning specified in Regulation D of the Board of Governors of the Federal
Reserve System, as in effect from time to time.


 


“Eurodollar Rate Reserve Percentage”
means, for any Interest Period, the reserve percentage (expressed as a decimal
and rounded upwards, if necessary, to the next higher 1/100th of 1%)
applicable two (2) Business Days before the first day of such Interest Period
under regulations issued from time to time by the Board of Governors of the
Federal Reserve System (or any successor) for determining the maximum reserve
requirement (including, without limitation, any emergency, supplemental or
other marginal reserve requirement) for a member bank of the Federal Reserve
System in New York City with respect to liabilities or assets consisting of or
including Eurocurrency Liabilities (or with respect to any other category of
liabilities that includes deposits by reference to which the interest rate on
the Loan is determined) having a term equal to such Interest Period.


 


“Event of Default” means any one of
the events listed in Section 6.1.


 


“Excluded Taxes” has the meaning set
forth in Section 2.4(d).


 


“Fiscal Quarter” means any quarter of
any Fiscal Year.


 


“Fiscal Year” means the fiscal year of
the Guarantor consisting of a period of twelve consecutive months ending
December 31.


 


“Fleet Mortgage” means the First
Preferred Fleet Mortgage, substantially in the form attached hereto as Exhibit C,
executed by the Borrower in favor of the Lender, as amended, restated,
supplemented or otherwise modified from time to time.


 


“GAAP” means generally accepted
accounting principles set forth in the rules, regulations, statements, opinions
and pronouncements of the American Institute of Certified Public Accountants
and of the Financial Accounting Standards Board (or agencies with similar
functions of comparable stature and authority within the accounting profession)
as in effect from time to time, except as provided in the definitions of “Debt”
and “Interest Expense” in respect of the treatment of Capital Stock of the
Guarantor (or any direct parent of the Guarantor) pursuant to Statement of
Financial Accounting Standards No. 150 (“FAS 150”).


 


“GE Charters” has the meaning set
forth in Section 5.2(q).


 


“Governmental Authority” means any
nation or government, any state or other political subdivision thereof and any
entity exercising executive, legislative, judicial, regulatory or
administrative functions of or pertaining to government.


 


“Guarantor” means Great Lakes Dredge
& Dock Corporation, a Delaware corporation, and its successors and
permitted assigns.


 


6

















 


“Guaranty” means the Guaranty
Agreement dated as of the date hereof, executed by the Guarantor in favor of
the Lender, as the same may be amended, restated, supplemented or otherwise
modified from time to time.


 


“Hazardous Materials” means all those
substances, materials or wastes, which are regulated by, or which may form the
basis of liability under, any Environmental Law, including all substances,
materials or wastes identified under any Environmental Law as a hazardous
waste, hazardous constituent, special waste, hazardous substance, hazardous
material, or toxic substance, pollutant, contaminant or words of similar
meaning, asbestos, or petroleum, including crude oil or any fraction thereof,
and all substances identified under CERCLA and/or OPA  as hazardous.


 


“Indenture” means that certain
Indenture dated as of August 19, 1998 between The Bank of New York, as trustee,
the Guarantor and certain subsidiaries of the Guarantor, pursuant to which the
Guarantor has consummated the issuance of its 11.25% Senior Subordinated Notes
due 2008, as the same may be amended, restated, supplemented or otherwise
modified from time to time.


 


“Initial Appraisal Report” means that
certain Appraisal Report dated July 7, 2003 issued by Merrill Marine Services,
Inc., covering the Vessels.


 


“Interest Expense” means, for any
Fiscal Quarter, the aggregate consolidated interest expense (net of interest
income) of the Guarantor and its consolidated Subsidiaries for such Fiscal
Quarter, as determined in accordance with GAAP, including (i) commitment fees
paid or payable during such Fiscal Quarter, (ii) all other fees paid or payable
with respect to the issuance or maintenance of any guaranty or contingent Debt
(including letters of credit but excluding fees paid under the Bonding
Agreement), which, in accordance with GAAP, would be included as interest
expense, (iii) net costs or benefits under any interest rate hedging
transaction and (iv) the portion of any payments made in respect of Capitalized
Rentals of the Guarantor and its consolidated Subsidiaries allocable to
interest expense, but excluding any amortization of costs and expenses incurred
in connection with, and relating to, this Agreement or other financings
permitted by this Agreement.  For the
avoidance of doubt, Interest Expense shall not include any non-cash dividends
or other non-cash payments in respect of any Capital Stock of the Guarantor or
any direct parent of the Guarantor.


 


“Interest Period” means the period
commencing either on the (i) Closing Date, or (ii) expiration of the
immediately preceding period relating thereto, and ending three (3) months
thereafter.


 


“Lender” means General Electric
Capital Corporation, a corporation organized and existing under the laws of the
State of Delaware (and includes its successors and assigns).


 


“LIBOR Rate” means, for any Interest
Period for any LIBOR Rate Loan, the rate of interest equal to (i) the rate
determined by the Lender at which Dollar deposits for such Interest Period are
offered based on information presented on Page 3750 of the Dow Jones Market
Service (formerly known as the Telerate Service) as of 11:00 a.m. London time
on the second Business Day prior to the first day of such Interest Period,
divided by (ii) a number equal to 1.00 


 


7

















 


minus the Eurodollar Rate Reserve Percentage
for such Interest Period.  If the rate
described above does not appear on the Dow Jones Market Service on any
applicable interest determination date, the LIBOR Rate shall be the rate
(rounded upwards, if necessary, to the next higher 1/100th of 1%)
appearing on Reuters Screen FRBD as of 11:00 a.m. (London time) two (2)
Business Days prior to the first day of such Interest Period and having a
maturity equal to such Interest Period, as adjusted for reserves, and if that
rate does not appear on Reuters Screen FRBD on any applicable interest
determination date, the LIBOR Rate shall be the rate (rounded upwards, if
necessary, to the next higher 1/100th of 1%), determined on the
basis of the offered rates for deposits in U.S. Dollars for a period of time
comparable to such LIBOR Rate Loan which are offered by four major banks in the
London interbank market at approximately 11:00 a.m. London time, on the second
Business Day prior to the first day of such Interest Period as selected by the
Lender.  The principal London office of
each of the four major London banks will be requested to provide a quotation of
its U.S. Dollar deposit offered rate. 
If at least two such quotations are provided, the rate for that date
will be the arithmetic mean of quotations. 
If fewer than two quotations are provided as requested, the rate for
that date will be determined on the basis of the rates quoted for loans in U.S.
Dollars to leading European banks for a period of time comparable to such
Interest Period offered by major banks in New York City at approximately 11:00
a.m. (New York time), on the second Business Day prior to the first day of such
Interest Period.  In the event that the
Lender is unable to obtain any such quotation as provided above, it will be
considered that LIBOR Rate cannot be determined.


 


“LIBOR Rate Loan” means the Loan while
bearing interest at the LIBOR Rate.


 


“Lien” means, with respect to any
asset, any mortgage, lien, pledge, charge, security interest or encumbrance of
any kind in respect of such asset.  For
the purposes of this Agreement, a Person shall be deemed to own subject to a
Lien any asset which it has acquired or holds subject to the interest of a
vendor or lessor under any conditional sale agreement, Capital Lease or other
title retention agreement relating to such asset.


 


“Loan” has the meaning set forth in Section
2.1(a).


 


“Loan Documents” mean this Agreement,
the Note, the Fleet Mortgage, the Assignment of Insurances, the Assignment of
Earnings, the Guaranty, and any other agreements, documents and instruments
executed and/or delivered pursuant to this Agreement or otherwise evidencing,
securing and/or guaranteeing the Loan or other Obligations.


 


“Material Adverse Effect” means (a) a
material adverse effect upon (i)  the
financial condition, operating results, assets, liabilities, business or
operations of the Guarantor and the Borrower taken as a whole, or (ii) the
ability of the Borrower to perform in any material respect the Loan Documents,
or (b) the occurrence of an event which could reasonably be expected to have a
material adverse effect on the legality, validity or enforceability against the
Borrower of this Agreement or any other Loan Document or any of its Obligations
hereunder or thereunder.


 


“Maturity Date” has the meaning set
forth in Section 2.1(b).


 


“Multiemployer Plan” means a Plan
which is defined in § 4001(a)(3) of ERISA.


 


8

















 


“Net Proceeds” means the cash proceeds
received by the Borrower in connection with the consummation of any transaction
or event of the type resulting in a mandatory prepayment under Section
2.1(e), net of all fees, expenses, charges, taxes, commissions and costs
incurred by the Borrower in connection with the consummation of such
transaction or the prosecution or settlement of such event.


 


“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) which, in accordance with GAAP,
would be included as net income on a consolidated statement of income of the
Guarantor and its Subsidiaries for such period.


 


“Note” means the secured promissory
note of even date herewith, substantially in the form attached hereto as Exhibit
B, in the original principal amount of $23,400,000, executed by the
Borrower and payable to the order of the Lender to evidence the Loan, as the
same may be amended, restated, supplemented, or otherwise modified from time to
time.


 


“Notice of Drawing” has the meaning
set forth in Section 2.1(a).


 


“Obligations” means any obligations of
the Borrower to the Lender of any kind, including, without limitation, any
obligation to make any payment for any reason, whether or not such obligation
is reduced to judgment, liquidated, unliquidated, fixed, contingent, matured,
disputed, undisputed, legal, equitable, secured or unsecured, and whether or
not such obligation is discharged, stayed or otherwise affected by any proceeding
referred to in Section 6.1(g) or 6.1(h), in each case
arising under this Agreement or under any other Loan Document.  For the purposes hereof, the Borrower’s
Obligations under the Loan Documents include, without limitation, the timely
payment of (i) all principal, interest, prepayment premiums, late charges, fees
and expenses (including reasonable attorney’s fees and expenses),
disbursements, indemnities and any other amounts payable by the Borrower under
or pursuant to the Note or any of the other Loan Documents, and (ii) any amount
which the Lender, in its sole discretion, may elect to pay or advance on the
Borrower’s behalf pursuant to and in accordance with the terms of the Loan
Documents.


 


“OPA” means the Oil Pollution Act of
1990, as amended, together with all rules and regulations promulgated pursuant
thereto.


 


“Permitted Business Acquisition” means
any acquisition by the Guarantor or any of its Subsidiaries of all or any part
of the assets, shares or other equity interests in a corporation or other
Person engaged in the same business or activities reasonably related,
complementary or incidental to the business of the Guarantor or any of its
Subsidiaries but only if no Default or Event of Default shall have occurred and
be continuing immediately prior to such acquisition or after giving effect
thereto.


 


“Permitted Liens” means, in the case
of the Vessels:


 


(i)          charters and subcharters (excluding
bareboat charters) of the Vessels, provided that such charters and subcharters
do not interfere in any material respects with the business of the Guarantor
and its Subsidiaries;


 


9

















 


(ii)         Liens arising by operation of law or by
contract on insurance policies and proceeds thereto to secure the financing of
premiums payable under such policies;


 


(iii)        Liens (other than those arising with
respect to any non-compliance with ERISA or Environmental Laws) for taxes,
assessments or governmental charges, but only to the extent that such taxes,
assessments or charges are either not delinquent or are being contested in good
faith by appropriate proceedings, and with respect to which adequate reserves
or other appropriate provisions are being maintained in accordance with GAAP;


 


(iv)       Liens of carriers, warehousemen, mechanics,
materialmen, suppliers and other Liens imposed by law (including maritime law)
created in the ordinary course of business of the Guarantor and its
Subsidiaries, but only to the extent that the amounts secured or to be secured
by such Liens are either not overdue or are being contested in good faith and
adequate reserves or other appropriate provisions for the payment thereof are
being maintained in accordance with GAAP, and failure to satisfy the same will
not result in loss, sale or forfeiture of any of the Vessels;


 


(v)        Liens (other than any Lien imposed by
ERISA or Environmental Laws) incurred in the ordinary course of the Guarantor’s
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 adequate reserves or other appropriate provisions
are being maintained in accordance with GAAP, and failure to satisfy the same
will not result in loss, sale or forfeiture of any of the Vessels; and


 


(vi)       Liens of or resulting from any judgment
or award, other than any judgment or award that gives rise to an Event of
Default, the time for appeal or petition for rehearing of which shall not have
expired, or in respect of which the Guarantor or any of its Subsidiaries shall
at any time in good faith be prosecuting an appeal or proceeding for a review
and in respect of which a stay of execution pending such appeal or proceeding
for review shall have been secured.


 


“Person” means a natural person,
partnership, corporation (including a business trust), limited liability
company, joint stock company, partnership (whether general or limited), trust,
unincorporated association, joint venture or other entity, or a government or
any political subdivision or agency thereof, or any other entity, whether acting
in an individual, fiduciary or other capacity.


 


“Plan” means an employee benefit plan
defined in Section 3(3) of ERISA in respect of which the Borrower or any ERISA
Affiliate is, or within the immediately preceding six (6) years was, an
“employer” as defined in Section 3(5) of ERISA.


 


“Prepayment Premium” means an amount
equal to (i) 3% of any principal amount prepaid on or before December 17, 2004,
(ii) 2% of any principal amount prepaid after 


 


10

















 


December 17, 2004 and prior to December 17, 2005, (iii) 1% of any
principal amount prepaid after December 17, 2005 and prior to December 17,
2008, and (iv) 0% thereafter.


 


“Prime-Based Rate” means a floating
and fluctuating per annum rate of interest at all times equal to the prime rate
of interest published from time to time in the “Money Rates” Section of The
Wall Street Journal.


 


“Principals” means the collective
reference to the Persons that are stockholders of the Guarantor as of the
Closing Date; provided, however, that upon consummation of the
Sale in accordance with the terms and conditions set forth in Section 5.3(g),
the term “Principals” shall thereafter mean the collective reference to the
Persons that are stockholders of the newly created entity that owns (directly
or indirectly) 100% of the outstanding shares of Capital Stock of the Guarantor
as of the closing date of the Sale.


 


“Rentals” means, with respect to any
Person, as of the date of any determination thereof all fixed rents (including
as such all payments which the lessee is obligated to make to the lessor on
termination of the lease or surrender of the property and including all
payments on Capital Leases) payable by such Person, as lessee or sublessee
under a lease of real or personal property, but shall be exclusive of any
amounts required to be paid by such Person (whether designated as rents or
additional rents) on account of maintenance, repairs, insurance, taxes and
similar charges.


 


“Sale” has the meaning set forth in Section
5.3(g).


 


“Seller” has the meaning set forth in
the Recitals to this Agreement.


 


“Senior Credit Facility” means the
Credit Agreement, dated as of August 19, 1998, among the Guarantor, certain
subsidiaries of the Guarantor (including, without limitation, the Borrower),
the financial institutions from time to time party thereto, and Bank of
America, N.A., as administrative agent, as 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.


 


“Senior Debt” means Total Funded Debt
consisting of (i) the aggregate principal amount of all Debt of such Person as
shown on such Person’s balance sheet, other than Subordinated Debt, and (ii)
Capitalized Rentals, all determined on a consolidated basis in accordance with
GAAP.  “Senior Debt” shall be calculated
net of cash and cash equivalents held by the Guarantor and its Subsidiaries in
the United States.


 


“Senior Lenders” means the lenders
from time to time under the Senior Credit Facility.


 


“Subordinated Debt” means any Debt of
the Guarantor, the Borrower or any Subsidiary subordinated in right and time of
payment to the Obligations on terms and pursuant to documentation reasonably
satisfactory to the Lender in all respects. 
The subordination provisions set forth in the Indenture are acknowledged
by the Lender to be satisfactory to the Lender.


 


11

















 


“Subsidiary” of any Person means any
corporation of which more than 50% of the issued and outstanding capital stock
having ordinary voting power to elect a majority of the Board of Directors of
such corporation (irrespective of whether at the time capital stock of any
other class or classes of such corporation shall or might have voting power
upon the occurrence of any contingency) is at the time directly or indirectly
owned or controlled by such Person, by such Person and one or more of its other
Subsidiaries or by one or more of such Person’s other Subsidiaries.


 


“Total Funded Debt” of any Person
means, as of any date of determination, all Debt of the Guarantor and its
consolidated Subsidiaries which, in accordance with GAAP, should be included as
liabilities in the consolidated balance sheet of the Guarantor and its
Subsidiaries at such time (excluding, however, the undrawn face amount of all
letters of credit and all Capitalized Rentals due within one year from the date
of determination hereunder).  “Total
Funded Debt,” when used with respect to the Guarantor, shall mean the aggregate
amount of all such Total Funded Debt of the Guarantor and its Subsidiaries
determined on a consolidated basis in accordance with GAAP (eliminating
intercompany items).  “Total Funded
Debt” shall be calculated net of cash and cash equivalents held by the
Guarantor and its Subsidiaries in the United States.


 


“Total Loss” has the meaning set forth
in Section 5.2(l).


 


“Transactions” means, collectively,
the merger and the other transactions contemplated by the Acquisition
Agreement.


 


“UCC” means the Uniform Commercial
Code as in effect from time to time in the State of New York.


 


“U.S. Person” has the meaning
specified in Code Section 7701(a)(30).


 


“Vessels” means collectively the
Vessels identified on Exhibit A attached hereto; and “Vessel”
means each such Vessel individually; provided, however, that
any Vessel released from the security interest created under this Agreement or
the other Loan Documents pursuant to the terms hereof or thereof shall, from
and after such release, no longer constitute a “Vessel”.


 


Section 1.2.            Computation of Time Periods.  For the purposes of this Agreement, in the
computation of periods of time from a specified date to a later specified date,
the word “from” means “from and including” and each of the words “to” and
“until” means “to but excluding”.


 


Section 1.3.            Accounting Terms.  All accounting terms not specifically
defined herein shall be construed in accordance with GAAP.  Except as otherwise provided herein, if any
changes in accounting principles from those used in the preparation of the most
recent financial statements referred to in Section 5.2(a) are hereafter
required or permitted by the rules, regulations, pronouncements and opinions of
the Financial Accounting Standards Board of the American Institute of Certified
Public Accountants (or successors thereto or agencies with similar functions)
and are adopted by the Guarantor or the Borrower with the agreement of its
independent certified public accountants and such changes result in a change in
the method of calculation of any of the financial covenants, standards or terms
found in Section 5.2(r)  or
in the related definitions of terms used therein, the parties hereto agree to
enter into negotiations in 


 


12

















 


order to amend such provisions so as to
reflect equitably such changes with the desired result that the criteria for
evaluating the Borrower’s or the Guarantor’s financial condition shall be the
same after such changes as if such changes had not been made, provided  that
no change in GAAP that would affect the method of calculation of any of the
financial covenants, standards or terms shall be given effect in such
calculations until such provisions are amended, in a manner reasonably
satisfactory to the Lender, so as to reflect such change in accounting
principles.  Notwithstanding anything to
the contrary herein, the application of GAAP shall not include FAS 150.


 


 


ARTICLE 2


 


CREDIT FACILITIES;

DRAWDOWN PROCEDURES AND REPAYMENT PROVISIONS


 


Section 2.1.            The
Loan.


 


(a)           Advance of Loan.  Subject to the terms and conditions of this
Agreement, and in reliance upon the representations and warranties set forth
herein, the Lender agrees to lend to the Borrower Twenty-Three Million Four
Hundred Thousand United States Dollars ($23,400,000) (the “Loan”).  The proceeds of the Loan shall be used by
the Borrower solely to finance and/or refinance a portion of its costs to
acquire the Vessels, to fund certain costs and expenses associated with the
Loan and the purchase of the Vessels and to provide additional working
capital.  The Borrower may request the
Lender to advance the proceeds of the Loan by delivering to the Lender a duly
completed Notice of Drawing substantially in the form annexed hereto as Appendix
A, which notice shall be irrevocable and be received by the L ender not
later than 11:00 a.m. E.S.T. one (1) Business Day prior to the Closing Date (“Notice
of Drawing”).  The Lender’s
obligation to make the Loan available hereunder shall expire on December 31,
2003, provided, however, that such obligation shall terminate
automatically upon the occurrence of a Default or an Event of Default.  The Borrower unconditionally and irrevocably
authorizes the Lender to make the payments specified in the Notice of Drawing.


 


(b)           Principal Payment
of the Loan.  The Borrower shall
repay the principal amount of the Loan over a period of ten (10) years in forty
(40) consecutive quarterly installments, commencing on March 17, 2004 and
continuing thereafter on the same day of each third month thereafter until paid
in full.  The first thirty-nine (39)
such principal installments shall be in the amount of $487,500 each, and the
final principal installment, due on December 17, 2013, shall be in an amount
equal to the then unpaid principal balance of the Loan.  Unless sooner paid, all sums due under the
Loan shall be due and payable in full on December 17, 2013 (the “Maturity
Date”).


 


(c)           Interest.  Except for any period during which an Event
of Default under Section 6.1(a) has occurred and is continuing
hereunder (and irrespective of whether or not the maturity of the Loan has been
accelerated pursuant hereto), the Borrower shall pay interest on the unpaid
principal balance of the Loan from the date the Loan is made until the date the
Loan has been indefeasibly repaid in full, calculated with respect to each
Interest Period at a rate per annum equal to the LIBOR Rate applicable to such
Interest Period plus 440 basis points. 
Interest 


 


13

















 


accrued on the
Loan shall be paid by the Borrower to the Lender on a quarterly basis
commencing on March 17, 2004, and continuing on the same day of each third
month thereafter until maturity of the Loan (whether by acceleration, extension
or otherwise) at which time the Borrower shall pay to the Lender all accrued
but unpaid interest on the Loan.


 


(d)           Optional
Prepayments of the Loan.  The
Borrower shall have the right to prepay the Loan in whole at any time or in
part from time to time; provided  that (i) each partial prepayment
shall be in an amount not less than $1,000,000 or any integral multiple
thereof, (ii) the Borrower shall give the Lender not less than five (5)
Business Days advance written notice of any such prepayment, and (iii)
irrespective of whether any such prepayment is voluntary or by reason of an
Event of Default hereunder, acceleration of maturity of the Loan or for any
other reason whatsoever, the Borrower shall pay to the Lender simultaneously
with each such prepayment (x) accrued and unpaid interest on the amount prepaid
to (but not including) the date of such prepayment, (y) Breakage Fees, if
applicable, and (z) the Prepayment Premium, if any.  Each such prepayment shall be applied first to accrued but
unpaid interest and Breakage Fees and Prepayment Premiums, if applicable, on
the portion of the Loan being repaid and then to the remaining principal
installments on a pro-rata basis.


 


(e)           Mandatory
Prepayments of the Loan.  If at any
time prior to repayment in full of the Loan,


 


(i)            one of the Vessels is sold or
otherwise disposed of, the Borrower shall pay to the Lender, upon its receipt
of the Net Proceeds from such sale or other disposition of said Vessel, an
amount equal to the greater of (x) the Net Proceeds of sale or disposition, up
to but not to exceed the amount then outstanding under the Loan, or (y) an
amount determined by multiplying the remaining unpaid principal balance of the
Loan by the Applicable Percentage for the subject Vessel, plus, in each
case, all applicable Prepayment Premiums or Breakage Fees, if any.  So long as no Event of Default shall have
occurred and be continuing, all such prepayments shall be applied first to
Breakage Fees and Prepayment Premiums, if any, and then to the remaining
principal installments on a pro-rata basis; and


 


(ii)           one of the Vessels sustains a Total
Loss, the Borrower shall pay to the Lender, within ninety (90) days of the date
of such Total Loss, an amount (which after taking into account any insurance
proceeds previously received by the Lender as a result of such Total Loss) is
equal to the greater of (x) the Net Proceeds received by the Borrower as a
result of such Total Loss up to but not to exceed the amount then outstanding
under the Loan, or (y)  an amount
determined by multiplying the remaining unpaid principal balance of the Loan by
the Applicable Percentage for the subject Vessel, plus, in each case,
any applicable Breakage Fees, if any. 
So long as no Event of Default shall have occurred and be continuing,
all such prepayments shall be applied first to Breakage Fees, if any, and then
to the remaining principal installments on a pro-rata basis.


 


(f)            The Note.  The Borrower’s obligation to repay the Loan,
with interest, shall be evidenced by the Note.


 


14

















 


Section 2.2.            General
Provisions.


 


(a)           Payments.  Whenever any payment to be made by the
Borrower under the provisions of this Agreement or the Note is due on a day which
is not a Business Day, the due date thereof shall be extended to the next
succeeding Business Day and, in the case of any payment which bears interest,
such extension of time shall be included in computing interest on such payment.  All payments of principal, interest, fees or
other amounts to be made by the Borrower under the provisions of this Agreement
or the Note shall be paid without set-off or counterclaim to the Lender at the
Lender’s office specified in Section 7.2 hereof in lawful money of
the United States of America in immediately available funds.


 


(b)           Default Rate.  Upon the occurrence and during the
continuance of an Event of Default under Section 6.1(a), the unpaid
principal balance of the Loan shall bear interest at a rate per annum equal to
two percent (2%) in excess of the rate otherwise applicable hereunder (the “Default
Rate”).


 


Section 2.3.            Changes
in Law, Funding Losses, etc.


 


(a)           Basis for Determining LIBOR Rate
Inadequate or Unfair.  If with
respect to any Interest Period:


 


(i)            deposits in Dollars (in the
applicable amounts) are not being offered to the Lender in the relevant market
for such Interest Period, or the Lender otherwise reasonably determines (which
determination shall be binding and conclusive on the Borrower) that by reason
of circumstances affecting the London interbank Eurodollar market adequate and
reasonable means do not exist for ascertaining the applicable LIBOR Rate; or


 


(ii)           the Lender reasonably determines that
the LIBOR Rate will not adequately and fairly reflect the cost to the Lender of
making or maintaining the Loan for such Interest Period;


 


then the Lender shall promptly notify the Borrower in writing thereof
and the Lender and the Borrower shall attempt to agree upon an alternative rate
that would otherwise compensate the Lender for the cost of making or
maintaining the Loan.  In the event the
parties cannot agree on an alternative rate, then, within sixty (60) days
thereafter, the Borrower shall either: 
(a) prepay the Loan, together with all accrued interest thereon,
Breakage Fees and Prepayment Premiums, if any, and all other sums due
hereunder; or (b) request the Lender to convert the interest rate applicable to
the Loan from a rate based on the LIBOR Rate to the Prime-Based Rate (plus 340
basis points instead of 440 basis points) effective on the last day of the
current Interest Period.  The Lender
shall agree to modify the terms of the Note reflecting the change in the
applicable interest rate so long as no Default or Event of Default has then
occurred.


 


(b)           Changes in Law
Rendering Maintenance of the Loan Unlawful, etc.  In the event that any change after the Closing Date in (including
the adoption of any new) applicable laws or regulations, or any change after
the Closing Date in the interpretation of applicable laws or regulations by any
governmental authority, central bank or comparable agency charged with the
administration thereof, should make it unlawful for the Lender to make or
maintain the Loan 


 


15

















 


as a LIBOR
Rate Loan, then the Lender shall promptly notify the Borrower of such change
and the Borrower shall either: 
(a) prepay the Loan, together with all accrued interest thereon,
Breakage Fees and Prepayment Premiums, if any, and all other sums due
hereunder; or (b) request the Lender to convert the interest rate applicable to
the Loan from a rate based on the LIBOR Rate to the Prime-Based Rate (plus 340
basis points instead of 440 basis points) effective on the last day of the
current Interest Period.  The Lender
shall agree to modify the terms of the Note reflecting the change in the
applicable interest rate so long as no Default or Event of Default has then
occurred.


 


(c)           Funding Losses.  The Borrower hereby agrees that upon demand
by the Lender (which demand shall be accompanied by a statement setting forth
in reasonable detail the basis for the calculations of the amount claimed) the
Borrower will indemnify the Lender against any actual net loss or out-of-pocket
expense (collectively, the “Breakage Fees”) which the Lender may sustain
or incur (including, without limitation, any net loss or expense incurred by
reason of the liquidation or re-employment of deposits or other funds acquired
by the Lender to fund or maintain the Loan), as reasonably determined by the
Lender, as a result of any prepayment of any amounts due under the Note other
than at the end of an Interest Period.


 


(d)           Discretion of the
Lender as to Manner of Funding. 
Notwithstanding any provision of this Agreement to the contrary, the
Lender shall be entitled to fund and maintain its funding of all or any part of
the Loan in any manner it sees fit.


 


(e)           Conclusiveness of
Statements; Survival of Provisions. 
Determinations and statements issued by the Lender pursuant to the
provisions hereof shall be conclusive absent manifest error.  The Lender may use reasonable averaging and
attribution methods in determining compensation under this Section 2.3,
and the provisions of such Section shall survive repayment of the Loan,
cancellation of the Note and any termination of this Agreement.


 


Section 2.4.            Payments
and Computations.


 


(a)           Making of
Payments.  The Borrower shall make
all payments of principal of, Prepayment Premiums, if any, and interest on, the
Note to the Lender in Dollars, in immediately available funds, not later than
11:00 A.M. E.S.T. on the day when due, to be applied by the Lender in
accordance with the terms of this Agreement and the Note.  Funds received after 11:00 A.M. E.S.T. shall
be deemed to have been received by the Lender on the next following Business
Day.


 


(b)           Application of
Certain Payments.  Each payment of
principal shall be applied in the manner provided in the Note or in the absence
of such direction, as the Lender shall determine in its sole discretion; provided,
however, that optional prepayments shall be applied as set forth in Section 2.1(d)
and mandatory prepayments shall be applied as set forth in Section 2.1(e)
or Section 5.3(h) (as applicable).


 


(c)           Computations.  All computations of interest shall be made
by the Lender on the basis of a 360-day year, for the actual number of days
(including the first day but excluding the last day) occurring in the Interest
Period; provided, however, that computations of interest based
upon the Prime-Based Rate shall be made on the basis of a 366/365-day year and 


 


16

















 


actual days
elapsed.  Each determination by the
Lender of an interest rate hereunder shall be conclusive and binding for all
purposes, absent demonstrable error.


 


(d)           Payment Net of
Taxes.  All payments made by the
Borrower to the Lender under this Agreement and the Note shall be made without
any setoff or counterclaim, and free and clear of and without withholding or
deduction for or on account of any taxes (except to the extent that such
withholding or deduction is compelled by law), excluding any taxes assessed on
or measured by the net income of the Lender imposed by any jurisdiction (any
such excluded taxes, the “Excluded Taxes”).  If the Borrower is compelled by law to make any such deduction or
withholding, it will:


 


(i)            pay to the relevant authorities the
full amount required to be withheld or deducted;


 


(ii)           except
with respect to Excluded Taxes, pay such additional amounts to the Lender as
may be required for the Lender to receive, after such deduction or withholding
(including any required deduction or withholding on such additional amounts),
the amount it would have received had no such deduction or withholding been
made; and


 


(iii)          promptly forward to the Lender an
official receipt or other documentation satisfactory to the Lender evidencing
such payment to such authorities.


 


If any taxes (other than Excluded Taxes) are
directly assessed against the Lender, the Lender shall promptly notify the
Borrower of such assessment.  Unless the
Borrower promptly provides evidence satisfactory to the Lender that such taxes
have been paid, the Lender may pay such taxes. 
Thereafter, the Borrower shall pay such additional amount (including,
without limitation, any penalties, interest or expenses, but excluding any such
items resulting from (A) the failure of the Lender promptly to notify the
Borrower of the assessment of such taxes against the Lender or (B) the gross
negligence, bad faith or willful misconduct of the Lender) as may be necessary
for the Lender to receive, after the payment of such taxes (including any taxes
on such additional amount), the amount the Lender would have received had no
such taxes been assessed.  The
Borrower’s obligations arising from this Section 2.4(d) shall
survive repayment of the Loan, cancellation of the Note and the termination of
this Agreement.


 


Notwithstanding any provision contained in
this Agreement to the contrary, in the event that the Lender should assign all
or any portion of the Loan or of its rights under this Agreement to another
Person, the Borrower’s obligations under this Section 2.4 shall not
be greater than what its obligations would have been if the Lender had retained
a 100% interest in the Loan and in this Agreement.


 


If the Lender determines that it has received
a refund or direct credit with any taxes as to which the Borrower has made
additional payments, it shall promptly notify Borrower of such refund or direct
credit and shall within thirty (30) days of its receipt of the amount of such
refund or direct credit pay such amount to the Borrower (plus any interest paid
or credited by the relevant taxing authority with respect to such amount).   The Lender shall cooperate with the
Borrower to obtain any refunds or direct credits that would give rise to
payments hereunder 


 


17

















 


provided (i) the Borrower pays all reasonable out of pocket expenses
incurred by the Lender to obtain such refunds or direct credits and (ii) the
Lender determines, in its reasonable discretion, that it would not be
materially disadvantaged (other than costs and expenses that the Borrower has
agreed to pay) in obtaining the refund or direct credit.  To the extent a refund or direct credit is
required to be repaid with respect to which the payments have been made under
this provision, the Borrower shall indemnify and promptly reimburse the Lender
for the amounts repaid.


 


Section 2.5.            Setoff.  In addition to and not in limitation of any
rights of the Lender under applicable law, the Lender shall, upon the
occurrence and during the continuance of an Event of Default under Section
6.1(a), have the right to appropriate and apply to the payment of the
Obligations then due and unpaid, any and all monies, securities, deposits and
other property of the Borrower, now or hereafter held or received by, or in
transit to, the Lender.  The Lender
agrees promptly to notify the Borrower after any such setoff and application made
by the Lender; provided  that the failure to give such notice
shall not affect the validity of such setoff and application.  The rights of the Lender under this Section
2.5 are in addition to other interests, rights and remedies (including
other rights of setoff) which the Lender may have.


 


 


ARTICLE 3


 


SECURITY


 


Section 3.1.            Security Documents.  In order to secure the prompt payment and
performance of its Obligations in connection with the Loan, the Borrower shall
execute and deliver to the Lender the following:


 


(i)            the Fleet Mortgage;


 


(ii)           the Assignment of Earnings; and


 


(iii)          the Assignment of Insurances.


 


In addition to the foregoing, the Borrower
shall promptly deliver or cause to be delivered to the Lender the following
documents and instruments:  (i) a copy
of the Certificate of Documentation for each Vessel; (ii) the Letter to the
Master and form of Notice of Mortgage and the Borrower’s certification that
such Notice of Mortgage is posted on each Vessel; (iii) certificates of
insurance issued by the Borrower’s insurance broker evidencing the insurances
covering the Vessels; and (iv) an appropriate Uniform Commercial Code financing
statement with respect to the security interests created pursuant to the Loan
Documents.


 


Section 3.2.            Release of Security.  Upon the sale or other disposition of any
Vessel and the payment by the Borrower to the Lender of all sums payable
pursuant to Section 2.1(e), the Lender, at the Borrower’s sole cost
and expense, shall release and discharge such Vessel (and any other Collateral
used on or forming part of said Vessel) from the security interest created
under this Agreement or any other Loan Document.  Upon payment in full of all sums due hereunder and under the Note
and performance of all of the Borrower’s Obligations with respect thereto, the
Lender, at the Borrower’s sole cost and expense, shall release and discharge
any and all 


 


18

















 


security delivered pursuant to this Agreement
or any of the other Loan Documents.  The
Lender agrees to execute and deliver to the Borrower any instrument, agreement
or release document necessary to effect such release of Liens, and to take such
other actions as shall be reasonably necessary to release the Liens required to
be released under this Section 3.2 promptly upon the reasonable
request of the Borrower and payment by the Borrower of all reasonable out of
pocket costs related thereto.


 


Section 3.3.            Exercise of Powers of Attorney.  The Lender shall not exercise any rights or
powers pursuant to any power of attorney granted to the Lender pursuant to the
Fleet Mortgage or the other Loan Documents except upon the occurrence and
during the continuance of an Event of Default.


 


ARTICLE 4


 


CONDITIONS TO
FUNDING


 


Section 4.1.            Conditions Precedent to Initial
Funding.  The Lender’s agreement to
enter into this Agreement and to make the Loan available to the Borrower is
subject to the condition precedent that the Lender shall have received on or
before the date hereof the following, each in form and substance reasonably
satisfactory to the Lender:


 


(a)           certified copies of
the organizational documents of the Borrower and the Guarantor, the resolutions
of the Board of Directors of the Borrower and of the Guarantor approving the
execution, delivery and performance of each of the Loan Documents to which each
is a party, a certificate of incumbency for each person signing any of the Loan
Documents on behalf of the Borrower and the Guarantor and evidence of the due
incorporation and good standing of the Borrower and the Guarantor;


 


(b)           this Agreement;


 


(c)           the Note;


 


(d)           the Fleet Mortgage;


 


(e)           the Assignment of
Earnings;


 


(f)            the Assignment of
Insurances;


 


(g)           the Guaranty;


 


(h)           the favorable
opinions of counsel for the Borrower and the Guarantor;


 


(i)            a copy of the
Certificate of Documentation for each Vessel; and


 


(j)                                     an
appropriate UCC-1 financing statement with respect to the security interest
created pursuant to the Loan Documents.


 


The Lender shall also have received:


 


19

















 


(i)            evidence reasonably satisfactory to
the Lender and its counsel that the Vessels are duly registered in the name of
the Borrower under the laws of the United States of America, free of all liens
and encumbrances of record, other than (a) the Fleet Mortgage in favor of the
Lender and (b) Permitted Liens;


 


(ii)           evidence reasonably satisfactory to
the Lender and its counsel that all filings and recordings to the extent
permitted or required by applicable law shall have been duly made by the
Borrower and all other action shall have been taken as may be required by the
Lender to perfect the security interests granted by the Borrower under any of
the Loan Documents, all proceedings taken in connection with the Loan and the
execution of the Loan Documents shall be reasonably satisfactory to the Lender,
and the Lender shall have received copies of such documents as the Lender
reasonably may request in connection therewith all in form and substance
reasonably satisfactory to the Lender;


 


(iii)          certificates of insurance naming the
Lender as loss payee as required by the terms hereof and, to the extent
practicable but without subjecting the Lender to any liability for premiums or
calls, as an additional insured, with such responsible and reputable insurance
companies or associations, and in such amounts and covering such risks, as is
required pursuant to this Agreement and the Fleet Mortgage;


 


(iv)          payment of the remainder of the
Lender’s loan fee which originally amounted to $234,000; and


 


(v)           payment to the Lender and its counsel
of all fees and expenses due pursuant to Section 7.6 hereof.


 


ARTICLE 5


 


REPRESENTATIONS,
WARRANTIES AND COVENANTS


 


Section 5.1.            Representations and Warranties.  The Borrower hereby represents and warrants
as follows:


 


(a)           Organization and
Powers.  It is a corporation duly
organized, validly existing and in good standing under the laws of the State of
New Jersey, with organizational identification number 4224001000, and is duly
qualified and authorized to transact business as a foreign corporation and in
good standing under the laws of each jurisdiction in which qualification and
good standing are necessary in order to carry on its present business and
operations (except such jurisdictions where failure to so qualify would not
reasonably be expected to have a Material Adverse Effect).  It has all requisite corporate power and
authority to enter into and to perform its obligations under this Agreement and
the other Loan Documents to which it is a party and to own, operate, and
mortgage the Vessels, except as would not reasonably be expected to have a
Material Adverse Effect.


 


(b)           Authorization.  It has duly authorized by all requisite
corporate action the execution, delivery and performance of each of the Loan
Documents to which it is a party, and the execution, delivery and performance
by it of such Loan Documents will not violate any provision of law, any order
of any court or other agency of government, its articles of 


 


20

















 


incorporation
or bylaws, or any material indenture, agreement or other instrument to which it
is a party, or by which it or any of its property or assets is bound, or be in
conflict with, result in a breach of, or constitute (with due notice or lapse
of time, or both) a default under any such material indenture, agreement or
other instrument, or result in the creation or imposition of any lien, charge
or encumbrance of any nature whatsoever upon any of its property or assets
except as otherwise permitted, required or contemplated by the Loan Documents.  The Loan Documents constitute the legal,
valid and binding obligations of the Borrower, enforceable against it, in
accordance with the terms thereof, subject to bankruptcy, insolvency,
reorganization, moratorium or other similar laws affecting creditors’ rights
generally and to general principles of equity, regardless of whether
enforcement is sought in a proceeding at law or in equity.


 


(c)           Litigation.  As of the Closing Date, there are no
actions, suits or proceedings pending or, to the knowledge of the Borrower,
threatened against or affecting it or its property at law, in equity or in
admiralty, or before or by any governmental authority, department, commission,
bureau, board, agency or instrumentality, domestic or foreign, (i) which could
reasonably be expected to have a Material Adverse Effect or (ii) which purports
to affect the legality, validity or enforceability of any Loan Document.  As of the Closing Date, it is not in default
under or violation of with respect to any order, writ, injunction, decree or
demand of any court or governmental authority, department, commission, board,
bureau, agency or instrumentality, domestic or foreign where such default or
violation could reasonably be expected to have a Material Adverse Effect.


 


(d)           Financial
Condition, etc.  As of the Closing Date, there has
been (i) since the last audited financial statements of the Guarantor, no
material adverse change, individually or in the aggregate, in the business,
financial or other condition of the Borrower and the Guarantor taken as a
whole, the industry in which Borrower operates, or the collateral which will be
subject to the security interest granted to the Lender or in the prospects or
projections of Borrower and the Guarantor taken as a whole,
(ii) no litigation commenced which, if successful, would have a material
adverse impact on Borrower and the Guarantor taken as a whole, its or
their business, or its or their ability to repay the Loan, or which would
challenge the transactions under consideration, and (iii) since the last
audited financial statements of the Guarantor, no material increase in the
liabilities, liquidated or contingent, of the Borrower and
Guarantor, taken as a whole, or a material decrease in the assets of the
Borrower
and the Guarantor taken as a whole.


 


(e)           Tax Returns.  It has filed or has caused to have been
filed all material tax returns which, to its knowledge, are required by law to
be filed, and has paid or caused to have been paid all material taxes as shown
on such returns or on any assessment received by it, to the extent that such
taxes have become due and payable as of the Closing Date, after giving effect
to any extensions therefor, unless (i) such taxes, assessments and governmental
charges, if any, are currently contested in good faith and by appropriate
proceedings and adequate reserves therefor have been established as required
under GAAP and (ii) such taxes, assessments or governmental charges the
nonfiling or nonpayment of which could not be reasonably expected to have a Material
Adverse Effect.


 


(f)            Compliance with
Law; Licenses and Permits.  To the
best of its knowledge after due inquiry, it is not in violation of any law,
ordinance, governmental rule or regulation to which it is subject, except where
the failure to be in compliance could not 


 


21

















 


reasonably be
expected to have a Material Adverse Effect, and it has obtained all licenses,
permits, franchises or other governmental authorizations necessary for the
ownership of its properties and the conduct of its business, except where the
failure to obtain such license, permit, franchise or governmental authorization
could not reasonably be expected to have a Material Adverse Effect.


 


(g)           Government
Consents.  Neither the execution and
delivery by it of this Agreement, the Note and any of the other Loan Documents,
nor the consummation by it of any of the transactions contemplated hereby or
thereby, requires the consent or approval of, the giving of notice to, the
registration with, or the taking of any other action in respect of, any
governmental authority or agency, domestic or foreign, other than (i) the
filing and recording of the Fleet Mortgage with the United States Coast Guard,
National Vessel Documentation Center and the UCC-1 financing statement with the
Secretary of the State of New Jersey, and (ii) those obtained or made on or
prior to the Closing Date.


 


(h)           Ownership of
Vessels.  As of the Closing Date,
the Borrower has good and marketable title to the Vessels, free and clear of
all Liens except for Liens in favor of the Lender and Permitted Liens, and upon
execution, filing and recording of the Fleet Mortgage, the Lender will hold a
duly recorded first preferred mortgage lien over the whole of the Vessels.


 


(i)            Principal Place
of Business.  The address stated in Section 7.2
hereof is the principal place of business and chief executive office of the
Borrower.


 


(j)            Margin
Regulations.  Neither the Guarantor
nor the Borrower is engaged, principally or as one of its important activities,
in the business of extending credit for the purpose of “purchasing” or
“carrying” any “margin stock” (as each of the quoted terms is defined or used
in Regulation T, U or X of the Board of Governors of the Federal Reserve
System).  No part of the proceeds of the
Loan has been used for so purchasing or carrying margin stock or for any
purpose which violates, or which would be inconsistent with, the provisions of
Regulation T, U or X.


 


(k)           ERISA.  With respect to any Plan which is a “pension
plan” as defined in § 3(2) of ERISA (other than a Multiemployer Plan) which is
now or within the immediately preceding six years has been maintained or
contributed to by the Borrower and/or by ERISA Affiliate: (i) no “accumulated
funding deficiency” as defined in Code § 412 or ERISA § 302 has occurred,
whether or not that accumulated funding deficiency has been waived; (ii) no
“reportable event” as defined in ERISA § 4043, other than an event with respect
to which the notice requirements have been waived by regulation, has occurred;
and (iii) no distress termination described in § 404(c) of ERISA of any such
Plan which is subject to Title IV of ERISA has occurred and the Pension Benefit
Guaranty Corporation has not instituted proceedings to terminate any such Plan,
and no event or condition which constitute grounds under ERISA § 4041 for the
termination of, or the appointment of a trustee to administer, any such
Plan.  With respect to any Plan which is
a Multiemployer Plan and which is now, or previously has been, contributed to
by the Borrower and/or by ERISA Affiliate: (i) neither the Borrower nor any
ERISA Affiliate has incurred a “complete withdrawal” within the meaning of
ERISA § 4203; and (ii) neither the Borrower nor any ERISA Affiliate has
incurred a “partial withdrawal” within the meaning of ERISA § 4205.


 


22

















 


(l)            Charters.  The Vessels are not currently subject to any
Charters.


 


(m)          Citizenship.  Each of the Borrower and the Guarantor is a
citizen of the United States within the meaning of Section 2 of the Shipping
Act of 1916, as amended (46 U.S.C. § 802), qualified to engage in the coastwise
trade of the United States of America.


 


(n)           Matters Related
to Subordinated Debt.  As of the
Closing Date, the Borrower has delivered to Lender a complete and correct copy
of the Indenture (including all schedules, exhibits, amendments, supplements
and modifications thereto).  The
Obligations constitute “Senior Debt” as defined in the Indenture.  The execution, delivery and/or performance
by the Borrower and the Guarantor of each of the Loan Documents to which it is
a party do not and will not, by the lapse of time, the giving of notice or
otherwise, (i) constitute a violation of the Indenture or (ii) result in or
require the creation or imposition of any Lien whatsoever upon any of the
properties or assets of the Borrower or the Guarantor (other than Liens granted
pursuant to the Loan Documents).  The
Borrower acknowledges that the Lender is entering into this Agreement in
reliance upon the subordination provisions of the Indenture and the related
documents and this Section 5.1(n).


 


(o)           Patriot Act, etc.  The Borrower is and will remain in full
compliance in all material respects with all laws and regulations applicable to
it including, without limitation, (i) ensuring that no person who owns a
controlling interest in or otherwise controls the Borrower is or shall be (A)
listed on the Specially Designated Nationals and Blocked Person List maintained
by the Office of Foreign Assets Control (“OFAC”), Department of the Treasury,
and/or any other similar lists maintained by OFAC pursuant to any authorizing
statute, Executive Order or regulation, or (B) a person designated under
Sections 1(b), (c) or (d) of Executive Order No. 13224 (September 23, 2001),
any related enabling legislation or any other similar Executive Orders, and
(ii) compliance with all applicable Bank Secrecy Act (“BSA”) laws, regulations
and government guidance on BSA compliance and on the prevention and detection
of money laundering violations.


 


Section 5.2.            Affirmative
Covenants.  The Borrower covenants
and agrees that so long as any of the Obligations (other than contingent
obligations hereunder for which no claim has been or is reasonably expected to
be made) remain outstanding, the Borrower hereby agrees that:


 


(a)           Financial
Statements.  The Borrower shall
furnish to the Lender (i) within three (3) days after the Guarantor is required
to file annual financial statements with the SEC, or, if the Guarantor is no
longer required to file with the SEC, then within one hundred twenty (120) days
after the close of its fiscal year, copies of the audited consolidated
financial statements of the Guarantor and its consolidated Subsidiaries
certified as of the end of such period, including a balance sheet and related
statements of earnings and cash flow; (ii) for the first three fiscal quarters
of the Guarantor within three (3) days after the Guarantor is required to file
quarterly financial statements with the SEC, or, if the Guarantor is no longer
required to file with the SEC, then within sixty (60) days after the close of
each of the first three fiscal quarters, copies of its internally prepared
quarterly condensed consolidated financial statements for the Guarantor and its
consolidated Subsidiaries, certified by the Guarantor’s chief financial
officer; (iii) concurrently with the delivery of the financial statements
described in (i) and (ii) above, a compliance certificate signed by the chief
financial officer of the Guarantor, confirming (A) that 


 


23

















 


neither the
Borrower nor the Guarantor is in default of any of its obligations under the
Loan Documents, and (B) that there exists no event of default under the
Borrower’s Senior Credit Facility, or, if any such event of default exists,
what action, if any, the Senior Lenders have taken with respect thereto, and
what action, if any, the Borrower is taking to cure such event of default; and
(iv) such other financial or other information as the Lender may from time to
time reasonably request.  Such financial
statements shall be prepared in accordance with GAAP.


 


(b)           Corporate
Existence.  The Borrower shall
continue to maintain its corporate existence, good standing and qualifications
to do business in all jurisdictions in which such qualification and good
standing are necessary in order for it to conduct its business and own its
property as presently conducted and owned in such jurisdictions (except in such
jurisdictions where the failure to remain so qualified and in good standing
could not reasonably be expected to have a Material Adverse Effect).


 


(c)           Notice of Default.  The Borrower shall notify the Lender
promptly in writing of the occurrence of an event described in Article VI
hereof which with notice or lapse of time, or both, would constitute an Event
of Default described in Article VI hereof and the action which the
Borrower is taking or proposes to take with respect thereto.


 


(d)           Notice of
Mortgage.  The Borrower shall cause
a certified copy of the Fleet Mortgage, together with notice thereof, to be
placed on board each of the Vessels and, reasonably promptly following the date
hereof (and in any event within thirty (30) days of the date hereof), shall
furnish the Lender with copies of the Masters’ signed receipts therefor, in
form and substance reasonably satisfactory to the Lender.


 


(e)           Use of Proceeds.  The Borrower shall use the proceeds of the
Loan solely for the purposes specified in the Recitals to this Agreement and
for no other purposes.


 


(f)            Payment of Taxes.  The Borrower shall pay and discharge or
cause to be paid and discharged all material taxes, assessments and
governmental charges or levies imposed on it or on its income or profits or on
any of its material property prior to the date on which penalties attach
thereto, except that it will not be required to pay any such tax, assessment,
charge or levy, the payment of which is being contested in good faith and by
appropriate proceedings, so long as none of the Vessels have been attached or
arrested, or, if attached or arrested, 
such attachment or arrest has been fully bonded and fully lifted, provided
that the Borrower shall not be required to pay any such tax, assessment,
charge, claim or account which (i)(1) is being contested in good faith by
appropriate proceedings which will prevent the forfeiture or sale of any
property or any material interference with the use thereof by such Person, and
(2) has been adequately reserved against in accordance with GAAP or (ii) if not
so paid, could not reasonably be expected to have a Material Adverse Effect.


 


(g)           Compliance with
Rules and Regulations.  The Borrower
shall comply in all material respects with the requirements of all applicable
laws, rules, regulations and orders of any court, governmental body or
regulatory agency having jurisdiction over it or its property, except where (i)
the failure to so comply could not reasonably be expected to have a Material
Adverse Effect and (ii) such laws, rules, regulations or orders are being
contested in good faith 


 


24

















 


and by
appropriate proceedings and its failure to comply with the same will not result
in loss, sale or forfeiture of any of the Vessels.


 


(h)           Collection
Account.  Upon the occurrence and
during the continuation of an Event of Default, the Borrower shall, at the
written request of the Lender, either (i) direct all earnings or other payments
under the Assignment of Earnings or the Assignment of Insurances to be made
directly to the Lender, or (ii) maintain with a depository selected by the
Lender a separate account (the “Collection Account”) into which the
Borrower shall deposit, or cause to be deposited, as provided therein all such
earnings and payments.  Such account
shall be assigned to the Lender pursuant to documentation reasonably
satisfactory to the Lender.


 


(i)            Vessels.  The Borrower will at all times and without
cost or expense to the Lender maintain and preserve, or cause to be maintained
and preserved, the Vessels in good running order and repair (ordinary wear and
tear alone excepted), so that the Vessels shall be, in so far as due dili­gence
can make them so, tight, staunch, strong and well and sufficiently tackled,
apparelled, furnished, equipped and in all material respects seaworthy; and if
classed, will keep the Vessels or cause them to be kept, in such condition as
will entitle them to the applicable classification as determined by the
Borrower in its good faith judgment in American Bureau of Shipping or other
classification society of like standing, and, if any vessel is classed,
annually will furnish to the Lender a certificate by such classi­fi­cation
society or societies that such classification is maintained.  The Vessels shall, and the Borrower covenants
that it will, at all times comply in all material respects with all applicable
laws, treaties and conventions of the country of each Vessel’s registry and
rules and regulations issued thereunder, and shall have on board as and when
required thereby valid certificates showing compliance therewith.  The Borrower will cause the Vessels to be
drydocked in accordance with any applicable class requirements.  The Borrower shall endeavor to give the
Lender five (5) Business Days’ prior telefax notice of drydocking of any of the
Vessels so as to afford the Lender the opportunity to be present.  The Borrower shall not make, or permit to be
made, any substantial change in the structure, type and speed of any of the Vessels
or change in any of their rigs, which might result in a decrease or reduction
in the value or utility of the Vessels (a “Vessel Change”) without first
receiving the written approval thereof by the Lender.  The Borrower shall notify the Lender of any such Vessel Change to
be made in the structure, type and speed of the Vessels or in any of their
rigs.


 


(j)            Inspections;
Logs and Records.  At all reasonable
times, the Borrower shall afford the Lender and its authorized representatives
reasonable access to the Vessels for the purpose of inspecting the same and
their papers and, at the reasonable request of the Lender, the Borrower will
deliver for inspection copies of any and all material documents relating to the
Vessels, whether on board or not subject to the Lender’s agreement to the
Confidentiality provisions set forth herein; provided, however,
that prior to an Event of Default, the Lender shall conduct an inspection not
more than twice annually at the expense of the Lender, during normal business
hours with minimal disruption of the Borrower’s business and after giving
reasonable prior written notice.  If
upon such inspection the Lender shall discover that any of the Vessels is in a
condition that violates in any respect the requirements of Section 5.2(i)
above, the Lender shall have the right to call for the drydocking and repair
thereof within ninety (90) days after the completion of the current project for
which such Vessel is employed and at the sole cost and expense of the
Borrower.  The Borrower shall also
permit the Lender and its representatives from 


 


25

















 


time to time,
to visit and inspect its properties; inspect, audit and make extracts from its
books, records and files, including, but not limited to, management letters
prepared by its auditors; and discuss with its principal officers, and its
independent accountants, its business, assets, liabilities, financial condition
and results of operations; provided, however, that prior to an
Event of Default, the Lender shall conduct an inspection or audit, visit or
inspection not more than twice annually at the expense of the Lender, during
normal business hours with minimal disruption of the Borrower’s business and
after giving reasonable prior written notice. 
Notwithstanding the foregoing, upon the occurrence and during the
continuance of an event of default under the Senior Credit Facility, whether or
not an Event of Default shall then be continuing hereunder, the Lender shall
have the additional right to inspect the Vessels at any time and from time to
time during normal business hours with minimal disruption of the Borrower’s
business and after giving reasonable prior written notice, which inspection
rights shall not count against the twice annual inspection rights described
above.


 


(k)           Litigation.  The Borrower shall promptly inform the
Lender of any pending, or threat in writing of, litigation involving it, where
the amount claimed, together with all other claims then pending or threatened,
exceeds $10,000,000, and of any other event, condition or occurrence which, to
the best of its knowledge and belief, could reasonably be expected to have a
Material Adverse Effect.


 


(l)            Insurance.  At all times during the term hereof, the
Borrower shall obtain and keep each Vessel insured against the risks indicated
below:


 


(i)            marine hull
insurance on full conditions as per Institute Time Clauses Hull (1/10/83) or
American Institute Hull Clauses (June 2, 1977) or other conditions approved by
the Lender,  insuring each of the
Vessels against the usual risks, and for all Vessels taken together for an
agreed aggregate value of not less than 110% of the outstanding principal
balance of the Loan and in all events not less, for each Vessel, than the fair
market value of such Vessel as shown in the Initial Appraisal Report;


 


(ii)           full protection and
indemnity cover on terms and conditions as per the rules of a protection and
indemnity club that is a member of the International Group of Protection and
Indemnity Associations, or equivalent cover acceptable to the Lender, providing
for liability cover in an amount at least equal to $50,000,000 for any one
accident or occurrence;


 


(iii)          to the extent not
already included above, insurance against liability for pollution, spillage or
leakage emanating from the Vessels in an amount at least equal to $50,000,000
for any one accident or occurrence or such other amount as the Lender may
agree;


 


(iv)          when located in
areas normally considered by insurance brokers and underwriters to involve
war-like or hostile areas, war risk insurance, which shall be maintained in the
broadest forms generally available in the United States, London, European or
Japanese markets, and shall include coverage for war risk hull and machinery,
war risk protection and indemnity, confiscation, expropriation, and
piracy.  Such insurance shall be in a
total amount for the aggregate of the Vessels of not less than 


 


26

















 


110% of the outstanding principal balance of
the Loan and in all events not less than, for each Vessel, the fair market
value of such Vessel as shown in the Initial Appraisal Report; and


 


(v)           to the extent not
already included above, mortgagee’s interest insurance, with a single limit at
all times of not less than the outstanding principal balance of the Loan plus
accrued but unpaid interest due thereon.


 


All such insurance shall be provided by (i) the insurers listed on Schedule
5.2(l), (ii) insurers that have an A.M. Best policy-holders rating of not
less than A, or if no such rating is applicable, having a quality comparable to
those rated A or better, or (iii) such other insurers as the Lender may
reasonably approve, and shall contain endorsements, in form and substance
reasonably satisfactory to the Lender, naming the Lender as loss payee with
respect to the casualty insurance which insures the Vessels and as an
additional insured but without any liability for premiums, calls or other
assessments with respect to each liability insurance policy.  Notwithstanding the foregoing, unless
otherwise required by the Lender by written notice to the underwriters (which
notice may only be given while an Event of Default is in existence), (i) any
loss under any insurance on the Vessels with respect to protection and
indemnity risks shall be paid directly to the Borrower to reimburse it for any
loss, damage or expense previously paid by it and covered by such insurance or
to the Person to whom any liability covered by such insurance has been
incurred, and (ii) in the case of any loss (other than a Total Loss) under any
insurance with respect to the Vessels involving any loss or damage to the
Vessels, the underwriters may, so long as they have not been notified that an
Event of Default has occurred and is continuing, pay directly for the repair,
replacement, salvage or other charges involved or, if the Borrower shall have
first repaired the damage or paid salvage or other charges, may pay the
Borrower as reimbursement therefor; provided, however, that if
such damage involves a loss in excess of 10% of the value of the affected
Vessel as of the Closing Date as established by the Initial Appraisal Report,
the underwriters shall make such payment directly to the Lender, which amount
shall be distributed by the Lender to the Borrower for application to repair or
replace the Vessel, upon the Lender’s receipt of evidence reasonably
satisfactory to it of the completion of such repairs or replacement.  The Borrower shall furnish to the Lender
annually certificates of insurance evidencing the insurance maintained in respect
of the Vessels.  Each insurer shall
agree, by endorsement upon the policy or policies issued by it, or by
independent instrument furnished to the Lender, that (i) it will give the
Lender thirty (30) days’ prior written notice of the effective date of any
material alteration, cancellation or non-renewal of such policy or policies;
and (ii) the insurance as to the interest of any named loss payee other
than the Borrower shall not be invalidated by any actions, inactions, breach of
warranty or condition or neg­ligence of the Borrower with respect to such
policy or policies.


 


Upon the occurrence of:  (i) the actual or constructive total loss or
compromised, agreed or arranged total loss of any of the Vessels; or (ii) the
loss, theft or destruction of any of the Vessels or damage thereto to such
extent as shall make repair thereof uneconomical or shall render any of the
Vessels permanently unfit for normal use for any reason whatsoever; or (iii)
the requisition of title to or other compulsory acquisition of any of the
Vessels (otherwise than by requisition for hire); or (iv) the capture, seizure,
arrest or detention of any of the Vessels by any government or by persons
acting or purporting to act on behalf of any government (as established to the
reasonable satisfaction of the Lender); unless the Vessel(s) shall be released 


 


27

















 


from such capture, seizure, arrest or detention within sixty (60) days
after such occurrence but in all events prior to the maturity of the Loan (any
such occurrence being herein referred to as a “Total Loss”) of any of
the Vessels; or (ii) upon the occurrence and during the continuance of an Event
of Default, the Lender may, by delivery of written notice to the Borrower,
elect to apply all insurance proceeds received by it toward prepayment of the
Loan in accordance with Section 2.1(e).


 


The Borrower shall be responsible for
pursuing all claims under the insurances indicated above, and take such actions
as may be reasonably necessary to satisfy all insurers’ inquiries.  The Borrower agrees that the Vessels shall
be operated within the confines of the cover provided by all insurances.  The Borrower further agrees that it will not
make, do, consent or agree to any act or omission which would or could render
any insurance covering the Vessels invalid, void, voidable, or unenforceable or
render any sum payable thereunder repayable in whole or part.  The Borrower further covenants to make no
changes regarding the management of the Vessels which could invalidate or cause
to be terminated any of the insurance coverages required by the provisions of Section
5.02(l) of this Agreement, in each case without either (i) the prior
written consent of the Lender or (ii) the delivery to the Lender prior to such
change of management an endorsement or endorsements to such policy or policies
confirming that such insurances will be unaffected by such change in
management.


 


(m)          Financial
Responsibility.  The Borrower shall
comply with and satisfy all of the provisions of any applicable law,
regulation, proclamation or order concerning financial responsi­bil­ity for
liabilities imposed on the Borrower or the Vessels with respect to pollution
including, without limitation, the International Convention of Maritime Pollution
of 1973, the International Convention for the Safety of Life at Sea of 1974,
the U.S. Water Pollution Act, as amended by the Water Pollution Control Act
Amendment of 1972, the U.S. Oil Pollution Act of 1990, as the same may be
amended from time to time, and will maintain all certificates or other evidence
of financial responsibility as may be required by any such law, regulation,
proclamation or order with respect to the trade which the Vessels from time to
time engage in and the cargoes carried by them, except in each case where the
failure to so comply and satisfy or maintain could not reasonably be expected
to have a Material Adverse Effect.


 


(n)           Insolvency.  The Borrower shall provide the Lender with
written notice of the commencement of proceedings by or against it, under the
applicable bankruptcy laws or other insolvency laws (as now or hereafter in
effect), involving the Borrower, as a debtor.


 


(o)           Bonding and
Compliance with ERISA.  The Borrower
shall maintain at all times such bonding as is required by § 412 of ERISA.  As soon as practicable and in any event
within thirty (30) days after the Borrower knows or has reason to know that,
with respect to any Plan described in the first sentence of Section 5.1(k),
a “reportable event”, other than an event with respect to which the notice
requirements have been waived by regulation, has occurred, the Borrower shall
deliver to the Lender a certificate signed by its chief financial officer
setting forth the details of such “reportable event.”  With respect to any Plan described in the first sentence of Section
5.1(k) which is maintained by the Borrower or to which the Borrower and/or
any ERISA Affiliate contributes, either now or in the future, neither the
Borrower nor any ERISA Affiliate shall: 
(i) engage in or permit any “prohibited transaction” (as defined in
ERISA § 406 or Code § 4975) to occur; (ii) cause any “accumulated funding
deficiency” as defined in ERISA § 302 


 


28

















 


and/or Code §
412; or (iii) terminate any such Plan in a manner that could result in the
imposition of a lien on the property of the Borrower pursuant to ERISA § 4068;
provided, however, the existence of any such prohibited transaction shall not
be an Event of Default if it does not have a Material Adverse Effect.  With respect to any Plan described in the
second sentence of Section 5.1(k) which is maintained by the Borrower or
to which the Borrower and/or any ERISA Affiliate contributes, either now or in
the future, (i) neither the Borrower nor any ERISA Affiliate shall (1) fail to
pay any required payment to any such Plan or (2) incur a complete or partial
withdrawal with respect to any such Plan within the meaning of ERISA § 4203 and
4205, if failure to act or acts could reasonably be expect to have a Material
Adverse Effect; and (ii) within fifteen (15) days after notice is received by
the Borrower or any ERISA Affiliate that any such Plan has been or shall be
placed in “reorganization” within the meaning of ERISA § 4241, which could reasonably
be expected to result in liability to the Borrower in excess of $10,000,000,
the Borrower shall notify the Lender to that effect.  Upon the Lender’s request, the Borrower shall deliver, or cause
to be delivered, to the Lender a copy of the most recent actuarial report,
financial statements and annual report completed with respect to any Plan which
is a “defined benefit plan,” as defined in ERISA § 3(35), to which the Borrower
contributes, other than a Multiemployer Plan.


 


(p)           Environmental.  The Borrower shall advise the Lender in
writing, promptly upon becoming aware of any of the following which could
reasonably be expected to result in liabilities or expenses of the Guarantor or
the Borrower in excess of $10,000,000 in the aggregate:  (i) any and all enforcement, cleanup,
remedial, removal or other governmental or regulatory actions instituted,
completed or threatened pursuant to any applicable federal, state or local
laws, ordinances or regulations relating to any Hazardous Materials affecting the
Borrower’s business operations; (ii) all claims made or threatened by any
third party against the Borrower relating to damages, contribution, cost
recovery, compensation, loss or injury resulting from any Hazardous Materials;
and (iii) any remedial action taken by the Borrower with respect to the
Borrower’s business operations.


 


(q)           Assignment of
Charters.  Within ten (10) Business
Days of the date on which the Borrower enters into any charter for the use,
operation or employment of any Vessel (including renewals and extensions
thereof) having a duration of nine (9) months or more (other than charters
entered into in connection with work being performed on bonded projects) (the “GE
Charters”), the Borrower shall provide the Lender with a copy of such charter,
including all amendments and additions thereto, which shall set out, inter
alia, the name and address of the charterer.  In addition, if requested by the Lender, the Borrower shall use
commercially reasonable efforts to cause the charterer to execute and deliver
to the Lender a consent, acknowledging its consent to the prior assignment and
agreeing upon receipt of written notice from the Lender that an Event of
Default has occurred and is continuing, to make all payments of charter hire
and other amounts directly to the Lender.


 


(r)            Financial
Covenants.  The Borrower covenants
and agrees that so long as any of the Obligations (other than contingent
obligations hereunder for which no claim has been or is reasonably expected to
be made) remain outstanding:


 


(i)            Capital Expenditures.  The Guarantor and its consolidated
Subsidiaries shall not make or permit Capital Expenditures (other than
Permitted Business 


 


29

















 


Acquisitions)
in an aggregate amount in excess of $22,000,000 during any Fiscal Year
commencing with Fiscal Year 2004 (with respect to any such Fiscal Year, the “Base
Capital Expenditure Amount”); provided, however, that the
Base Capital Expenditure Amount for any Fiscal Year after Fiscal Year 2004 may
be increased by (A) an amount equal to the excess, if any, of (i) the Base
Capital Expenditure Amount for the immediately preceding Fiscal Year, over (ii)
the actual amount of Capital Expenditures made by the Guarantor and its
Subsidiaries during such immediately preceding Fiscal Year; plus (B) the amount
of Capital Expenditures permitted in the immediately succeeding Fiscal Year (provided
that the Base Capital Expenditure Amount for such succeeding Fiscal Year shall
be reduced by the amount of any increase pursuant to this Clause (B); and provided,
further, that in no event shall the amount of Capital Expenditures made
by the Borrower and its consolidated Subsidiaries in any Fiscal Year exceed
$26,000,000).  The Guarantor and its
consolidated Subsidiaries shall not make Permitted Business Acquisitions except
to the extent that the aggregate consideration paid (including the assumption
of Debt and the fair market value of any non-cash consideration) to make all
Permitted Business Acquisitions consummated after the Closing Date does not
exceed $20,000,000.


 


(ii)           Maximum Total Leverage.  The Guarantor and its consolidated
Subsidiaries shall not permit the ratio (the “Total Leverage Ratio”) of
(i) the aggregate unpaid principal amount of Total Funded Debt as of the last
day of any Fiscal Quarter ending during the periods described below to (ii)
Adjusted Consolidated EBITDA for the four (4) consecutive Fiscal Quarter period
ending as of such date, to exceed the corresponding ratio set forth below
opposite such period:


 


	
  Period

  	
   

  	
  Ratio

  
	
   

  	
   

  	
   

  
	
  January 1,
  2004 through and including December 31, 2004

  	
   

  	
  5.75 to 1.00

  
	
   

  	
   

  	
   

  
	
  January 1,
  2005 through and including December 31, 2005

  	
   

  	
  5.50 to 1.00

  
	
   

  	
   

  	
   

  
	
  January 1,
  2006 through and including December 31, 2006

  	
   

  	
  5.00 to 1.00

  
	
   

  	
   

  	
   

  
	
  January 1,
  2007 through and including December 31, 2007

  	
   

  	
  4.75 to 1.00

  
	
   

  	
   

  	
   

  
	
  January 1,
  2008 through and including December 31, 2008

  	
   

  	
  4.50 to 1.00

  
	
   

  	
   

  	
   

  
	
  January 1,
  2009 through and including December 31, 2009

  	
   

  	
  4.00 to 1.00

  
	
   

  	
   

  	
   

  
	
  January 1,
  2010 and thereafter

  	
   

  	
  3.50 to 1.00

  



 


(iii)          Maximum Senior Leverage.  The Guarantor and its consolidated
Subsidiaries shall not permit the ratio (the “Senior Leverage Ratio”) of
(i) the aggregate unpaid 


 


30

















 


principal
amount of Senior Debt as of the last day of any Fiscal Quarter ending during
the periods described below to (ii) Adjusted Consolidated EBITDA for the four
(4) consecutive Fiscal Quarter period ending as of such date, to exceed the
corresponding ratio set forth below opposite such period:


 


	
  Period

  	
   

  	
  Ratio

  
	
   

  	
   

  	
   

  
	
  January 1,
  2004 through and including December 31, 2004

  	
   

  	
  2.50 to 1.00

  
	
   

  	
   

  	
   

  
	
  January 1,
  2005 through and including December 31, 2005

  	
   

  	
  2.25 to 1.00

  
	
   

  	
   

  	
   

  
	
  January 1,
  2006 through and including December 31, 2006

  	
   

  	
  2.00 to 1.00

  
	
   

  	
   

  	
   

  
	
  January 1,
  2007 through and including December 31, 2007

  	
   

  	
  1.75 to 1.00

  
	
   

  	
   

  	
   

  
	
  January 1,
  2008 through and including December 31, 2008

  	
   

  	
  1.50 to 1.00

  
	
   

  	
   

  	
   

  
	
  January 1,
  2009 and thereafter

  	
   

  	
  1.25 to 1.00

  



 


(iv)          Interest Coverage Ratio.  The Guarantor and its consolidated
Subsidiaries shall not permit the ratio of (i) Adjusted Consolidated EBITDA for
any four (4) consecutive Fiscal Quarter period ending as of the last day of any
Fiscal Quarter ending during the period described below to (ii) Interest
Expense, in each case for the four (4) consecutive Fiscal Quarter period ending
as of such date, to be less than the corresponding ratio set forth below
opposite such period:


 


	
  Period

  	
   

  	
  Ratio

  
	
   

  	
   

  	
   

  
	
  January 1,
  2004 through and including December 31, 2004

  	
   

  	
  1.75 to 1.00

  
	
   

  	
   

  	
   

  
	
  January 1,
  2005 through and including December 31, 2005

  	
   

  	
  2.00 to 1.00

  
	
   

  	
   

  	
   

  
	
  January 1,
  2006 through and including December 31, 2006

  	
   

  	
  2.00 to 1.00

  
	
   

  	
   

  	
   

  
	
  January 1,
  2007 through and including December 31, 2008

  	
   

  	
  2.25 to 1.00

  
	
   

  	
   

  	
   

  
	
  January 1,
  2009 and thereafter

  	
   

  	
  2.50 to 1.00

  



 


31

















 


Section 5.3.            Negative
Covenants.


 


The Borrower
covenants and agrees that so long as any of the Obligations (other than
contingent obligations hereunder for which no claim has been or is reasonably
expected to be made) remain outstanding, the Borrower shall not:


 


(a)           Liens.  Create, incur, assume or suffer to exist any
Lien upon the Collateral except Liens in favor of the Lender and Permitted
Liens.


 


(b)           Jurisdiction of
Incorporation; Place of Business. 
Change its jurisdiction of incorporation or the location of its
principal place of business from that set forth in Section 7.2
without giving the Lender at least fifteen (15) Business Days prior written
notice of such change and setting forth in detail the new jurisdiction of
incorporation and/or complete address of such new place of business, and in
furtherance thereof, the Lender is authorized to authenticate and file Uniform
Commercial Code financing statements, amendments or continuation statements in
such jurisdiction or jurisdictions as the Lender shall deem reasonably
necessary or appropriate.


 


(c)           Assignments.  Assign to any Person other than the Lender
any of GE Charters or any of the insurances (other than liability and protection
and indemnity insurance) in respect of the Vessels.


 


(d)           Sale of Capital
Stock or Assets of the Borrower; Merge. 
Sell all or substantially all of the capital stock or assets of the
Borrower or merge into or consolidate with any other Person, except the
following shall be permitted:


 


(1)           any Subsidiary of the Borrower may
liquidate or dissolve voluntarily into, and may merge with and into, the
Borrower, and the assets or stock of any of the Borrower’s Subsidiaries may be
purchased or otherwise acquired by the Borrower, as the case may be; or


 


(2)           Permitted Business Acquisitions.


 


(e)           Flag.  Change the flag of any Vessel.


 


(f)            Conduct of
Business.  Engage in any business
other than (i) the businesses of dredging, aggregate mining and supply, towing
services, marine construction, dredging reclamation activities and demolitions,
and commercial and industrial demolition and (ii) any businesses reasonably
related, complimentary or incidental thereto.


 


(g)           Change of Control.  Allow to occur any Change of Control, except
that the proposed sale or merger (the “Sale”) of the Guarantor, which is
expected to occur prior to March 15, 2004, shall be permitted, provided  that
the following conditions are met (immediately after giving effect to the Sale,
and treating such Sale as having occurred on the last day of the immediately
preceding fiscal quarter of the Borrower):


 


(i)            the
Guarantor and the Borrower and their consolidated Subsidiaries shall have a
ratio of Total Funded Debt to EBITDA (calculated on a rolling 12 month basis
through the end of the then most recent fiscal quarter of the Borrower and the
Guarantor) of less than or equal to 4.25 to 1.0;


 


(ii)           the
Guarantor and the Borrower and their consolidated Subsidiaries 


 


32

















 


shall have no Senior Debt, other than (a) the
Senior Credit Facility, (b) the Loan, and (c) not more than $10,000,000 of
other Senior Debt; and


 


(iii)            the Guarantor and the Borrower and their
consolidated Subsidiaries shall have a ratio of Senior Debt to EBITDA (calculated
on a rolling 12 month basis through the end of the then most recent fiscal
quarter of the Borrower and the Guarantor) less than or equal to 1.8 to 1.0.


 


(h)           Operation of Vessels Outside U.S. Territorial Waters.
The Borrower shall not operate any of the Vessels outside the territorial waters of the United States,
without the Lender’s prior written consent; provided, however, that if the Borrower requests such consent and the Lender
does not so consent, so long as no Event of Default has occurred and is
continuing, the Borrower shall have the right to have the Lender’s Lien on the
subject Vessel released by making a voluntary prepayment on
the Loan in an amount determined by multiplying the remaining unpaid principal
balance of the Loan by the Applicable Percentage for the subject Vessel.  Provided no Event
of Default shall have occurred and be continuing, upon the Lender’s receipt of
such prepayment, together with any applicable Prepayment Premium, Breakage
Fees, if any, and all other sums due in connection therewith, the Lender shall
release such Vessel from the Lien of its Fleet Mortgage and all other Loan
Documents.  The
Lender agrees to execute and deliver to the Borrower any instrument, agreement
or release document necessary to effect such release of Liens, and to take such
other actions as shall be reasonably necessary to release the Liens required to
be released under this Section 5.3(h) promptly upon the reasonable
request and at the sole cost and expense of the Borrower.


 


ARTICLE 6


 


EVENTS OF
DEFAULT; REMEDIES


 


Section 6.1.            Events of Default, Acceleration.  If any of the following events (each an “Event
of Default” and collectively “Events of Default”) shall occur and be
continuing:


 


(a)           the Borrower shall
fail to pay on the date when due (i) any installment of principal due on the
Loan or (ii) any interest due on the Loan or any other amount payable pursuant
to Section 2.3, 2.4(d) or 7.6(a) and such failure
shall continue for three (3) Business Days; or


 


(b)           the Borrower defaults
in the due and punctual performance and observance of any provision of Section 5.2(b),
(e), (f), (h), (l), (n)  (o) and (r)
and Section 5.3; or


 


(c)           the Borrower or the
Guarantor fails to perform or observe, or cause to be performed or observed,
any term, covenant or agreement contained in the Loan Documents or any
certificate delivered pursuant thereto which is not specifically referenced in
this Section 6.1 and such failure shall continue for a period of
thirty (30) days after the giving of written notice thereof by the Lender to
the Borrower; or


 


(d)           any representation
or warranty made by the Borrower or the Guarantor hereunder or by the Borrower
in any of the other Loan Documents shall prove to have been incorrect or
misleading in any material respect on the date when made; or


 


33

















 


(e)           (i)            the Borrower or the Guarantor shall
fail to pay any Debt in an aggregate principal amount in excess of $1,000,000
at its final scheduled maturity date; or


 


(ii)           any
breach, default or event of default shall occur under any instrument, agreement
or indenture pertaining to any Debt referred to in clause (i) above, if the
effect thereof, after giving effect to any applicable grace or cure period, is
to accelerate the maturity of such Debt or cause such Debt to be declared due
and payable or required to be prepaid (other than by a regularly scheduled
required prepayment), repurchased or redeemed prior to the originally stated
maturity thereof; or


 


(f)            one or more final judgments for the
payment of money in the aggregate in excess of $10,000,000 (to the extent not
covered by insurance) entered by a court of competent jurisdiction against the
Borrower or the Guarantor shall remain undischarged, unpaid, unvacated,
unbonded or unstayed for a period of thirty (30) days from the date of its
entry, or there shall be any period of thirty (30) consecutive days during
which a stay of enforcement of such judgment, by reason of a pending appeal or
otherwise, shall not be in effect; or


 


(g)           the Borrower or the Guarantor shall
(i) apply for or consent to the appointment of or the taking possession by a
receiver, trustee, liquidator, assignee, custodian, sequestrator or the like of
itself or substantially all of its property, (ii) admit in writing its
inability to pay its debts generally, (iii) make a general assignment for the
benefit of creditors, (iv) commence a voluntary case under the bankruptcy laws
of any jurisdiction, (v) file a petition or answer seeking reorganization or an
arrangement with creditors or to take advantage of any insolvency law or an
answer admitting the material allegations of a petition filed against it in any
bankruptcy, reorganization or insolvency proceeding or (vi) take corporate
action or other action for the purpose of effecting any of the foregoing; or


 


(h)           an order, judgment, or decree shall
be entered in any involuntary case with or without the application, approval or
consent of the Borrower or the Guarantor, by a court or governmental agency of
competent jurisdiction, granting relief under or approving a petition seeking
reorganization, or appointing a receiver, trustee, liquidator assignee,
custodian, sequestrator or the like of the Borrower or the Guarantor, or of its
property and such order, judgment or decree shall continue unstayed and in
effect for a period of sixty (60) consecutive days; or


 


(i)            for any reason, the Lender fails to
hold a perfected first preferred mortgage on the Vessels (other than in
accordance with the terms hereof or thereof); or


 


(j)            an event of default shall occur and
be continuing under any of the other Loan Documents and all grace or cure
periods, if any, with respect thereto shall have expired; or


 


(k)                                  the Borrower ceases
operations or is dissolved;


 


(l)            any
notice shall have been issued by the United States Coast Guard to the effect
that any Vessel subject to the Fleet Mortgage is subject to deletion from
registry or the 


 


34

















 


Certificate of Documentation
for any such Vessel or the endorsement noted thereon is subject to revocation
or cancellation, for any reason whatsoever and such notice is not appealed or
challenged by appropriate legal action within thirty (30) days of the
Borrower’s receipt thereof or such other period of times as may be permitted by
law, or any Vessel subject to the Fleet Mortgage is deleted from registry or
the Certificate of Documentation for any such Vessel or the endorsement noted
thereon is revoked or cancelled;


 


then, and in any such event (A) the Lender may declare the Loan to be
in Default, (B) upon written notice to the Borrower, the Lender may declare all
of the Borrower’s Obligations to the Lender hereunder, together with accrued
interest to the date of payment to be, and the same shall forthwith become,
immediately due and payable without presentment, demand, protest or other
notice of any kind, all of which the Borrower hereby waives, and (C) the
Lender may exercise all other remedies available to it under any Loan Document
or any applicable law; provided, however, if a default occurs
under subparts (g) and (h) of this Section 6.1, no such declaration
or notice shall be necessary and subpart (A), (B), and (C) hereof shall operate
as if such declaration and notice had been made.


 


The rights and remedies of the Lender
hereunder and under any documents or instruments executed pursuant hereto are
cumulative, and recourse to one or more rights or remedies shall not constitute
a waiver of the others or an election of remedies.  It is mutually agreed that commercial reasonableness and good
faith require the giving of no more than ten (10) Business Days’ prior written
notice of the time and place of any public sale of any Collateral or of the
time after which any private sale or any other intended disposition thereof is
to be made, and at any such public or private sale, subject to limitations of
law, the Lender, its agents and/or nominees, may purchase the Collateral.  If the net proceeds of any disposition of
Collateral exceed the amount then due and owing, whether by acceleration, at
maturity or otherwise, or on demand, such excess will be remitted to Borrower
or whomsoever shall be legally entitled thereto.  The Borrower shall remain liable for any deficiency remaining
after disposition of Collateral.


 


If the Borrower fails to perform or comply
with any of its obligations contained herein, the Lender shall have the right,
but shall not be obligated, to effect such performance or compliance and the
Borrower, within ten (10) Business Days from the date of demand, shall
reimburse the Lender immediately for such sums so expended, together with
interest thereon at the Default Rate for the actual number of days elapsed from
date of payment by the Lender to the date on which the Lender receives payment
thereof from the Borrower.  Failure of
the Borrower to pay and promptly discharge the aforesaid debts and obligations
shall constitute an Event of Default under this Agreement, but the payment of
the same by the Lender shall not cure or constitute a waiver of such Event of
Default.  Upon the occurrence and during
the continuance of an Event of Default, all payments received by the Lender
from or on behalf of the Borrower shall be applied by the Lender to any
installment(s) due and payable under the Note as the Lender, in its sole
discretion, may determine, without notice to or consent of Borrower, the
Borrower hereby expressly waives (to the extent permitted by law) all rights to
make or manifest any binding instruction upon the Lender as to application of
such pay­ments other than as provided herein. 
Acceptance by the Lender of partial payment(s) or performance by the
Borrower or by any other third party shall not be construed as a waiver of any
Event of Default, nor shall the same affect or in any way impair the rights and
remedies of the Lender hereunder.


 


35

















 


Section 6.2.            Additional Rights.  The Borrower hereby irrevocably appoints the
Lender as its attorney-in-fact (which power shall be deemed coupled with an
interest) to, following the occurrence and during the continuance of an Event
of Default execute, endorse and deliver any deed, conveyance, assignment or
other instrument in writing as may be required to vest in the Lender any right,
title or power which by the terms hereof are expressed to be conveyed to or
conferred upon the Lender, including any documents and checks or drafts
relating to or received in payment for any loss or damage under the policies of
insurance required by the provisions of Section 5.2(l) hereof, but
only to the extent that the same relates to the Collateral.


 


 


ARTICLE 7


 


MISCELLANEOUS


 


Section 7.1.            Amendments, etc.  No amendment or waiver of any provision of
this Agreement nor consent to any departure by the Borrower therefrom shall in
any event be effective unless the same shall be in writing and signed by the
Lender and the Borrower and then such waiver or consent shall be effective only
in the specific instance and for the specific purpose for which given.


 


Section 7.2.            Notices, etc.  All notices and other communications
provided for hereunder shall be in writing and mailed, facsimile transmitted or
delivered as follows:


 


	
  To the Borrower:

  	
   

  	
  Great Lakes Dredge & Dock Company

  
	
   

  	
   

  	
  2122 York Road

  
	
   

  	
   

  	
  Oak Brook, Illinois 60521

  
	
   

  	
   

  	
  Attn:

  	
  Deborah A. Wensel

  
	
   

  	
   

  	
   

  	
  Senior Vice President,

  
	
   

  	
   

  	
   

  	
  Chief Financial Officer and Treasurer

  
	
   

  	
   

  	
  Fax: (630) 574-2981

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  with a copy
  to:

  	
   

  	
  Brian S.
  Hart

  
	
   

  	
   

  	
  Winston
  & Strawn LLP

  
	
   

  	
   

  	
  35 W. Wacker
  Drive

  
	
   

  	
   

  	
  Chicago,
  Illinois 60601

  
	
   

  	
   

  	
  Fax:  (312) 558-5700

  



 


36

















 


 


	
  To the Lender:

  	
   

  	
  General Electric Capital Corporation

  
	
   

  	
   

  	
  500 West Monroe Street

  
	
   

  	
   

  	
  Suite 2900

  
	
   

  	
   

  	
  Chicago, Illinois  60661

  
	
   

  	
   

  	
  Attn: Walter R. Schoultz

  
	
   

  	
   

  	
  Facsimile: (312) 441-7395

  
	
   

  	
   

  	
   

  
	
  with a copy
  to:

  	
   

  	
  Patrick K. Cameron, Esq.

  
	
   

  	
   

  	
  Ober, Kaler, Grimes & Shriver

  
	
   

  	
   

  	
  120 E. Baltimore Street, 9th Floor

  
	
   

  	
   

  	
  Baltimore, Maryland 21202

  
	
   

  	
   

  	
  Fax:  (410) 547-0699

  



 


or to such other address as shall be designated by such party in a
written notice to the other party.  All
such notices and communica­tions shall, when mailed be sent by first class
registered mail postage prepaid and be effective three (3) calendar days after
being deposited in the U.S. mails addressed as aforesaid.  All notices sent by facsimile transmission
shall be effective when sent.  All other
forms of written notice or other communication shall be effective upon receipt.


 


Section 7.3.            Governing Law.  THIS AGREEMENT SHALL BE DEEMED TO BE A
CONTRACT MADE UNDER THE LAWS OF THE STATE OF NEW YORK, AND FOR ALL PURPOSES
SHALL BE CONSTRUED IN ACCORDANCE WITH THE LAWS AND DECISIONS OF SAID STATE,
INCLUDING SECTIONS 5-1401 AND 5-1402 OF THE NEW YORK GENERAL OBLIGATIONS LAW
BUT EXCLUDING ALL OTHER CHOICE OF LAW AND CONFLICTS OF LAWS.


 


Section 7.4.            Service of Process and Consent to
Jurisdiction; Waiver of Venue.  Each
party hereto hereby irrevocably submits to the non-exclusive jurisdiction of
the Federal and State courts located in the State of New York, in any action
brought under this Agreement, the Note, or any other Loan Document and agrees
that a summons and complaint commencing any action or proceeding in such court
shall be properly served if delivered personally or by registered mail to such
party at its address set forth in Section 7.2 above, or otherwise
served under the laws of the State of New York, and each party hereto hereby
waives any objection to venue and jurisdiction which the Borrower may now or
hereafter have.  Each party shall
promptly notify the other party of any change in such address.  Nothing herein shall affect the right of the
Lender to serve process in any other matter prescribed by law or the right of
the Lender to bring legal proceedings in any other competent jurisdiction.


 


Section 7.5.            No Remedy Exclusive.  Each and every right, power and remedy given
to the Lender in this Agreement, the Note, and the other Loan Documents shall
be cumulative and shall be in addition to every other right, power and remedy
herein or therein given now or hereafter existing at law, in equity, in
admiralty, by statute or otherwise. 
Each and every right, power and remedy whether given therein or
otherwise existing may be exercised from time to time as often and in such
order as may be determined by the Lender, and neither the failure or delay in
exer­cising any power or right nor the exercise or partial exercise of any
right, power or remedy shall be construed to be a waiver of or acquiescence in
any default therein; nor shall the acceptance of any security or of any payment
of or on account of the Loan, obligations, 


 


37

















 


expenses, interest or fees maturing after a
default or of any payment on account of any past default be construed to be a
waiver of any right to take advantage of any future default or of any past
default not completely cured thereby.


 


Section 7.6.            Payment of Costs.  Whether or not the transactions contemplated
herein shall be consummated, the Borrower hereby agrees to pay (a) all
reasonable out-of-pocket costs and expenses (evidenced by invoices in
reasonable detail) incurred by the Lender (including the reasonable fees and
expenses of its counsel) in connection with the preparation, execution and
delivery of this Agreement and any Loan Document or any amendment to any Loan
Document, and (b) all losses, costs and expenses (including, but not limited
to, reasonable attorneys’ fees and expenses) in connection with (i) the
preservation of any rights of the Lender under, or legal advice in respect of,
the rights or responsibilities of the Lender under this Agreement and the Loan
Documents or (ii) the enforcement of any Loan Document.  The Borrower agrees to indemnify and hold
the Lender harmless from and against any documentary taxes, assessments or
charges made by any governmental authority by reason of the execution, delivery,
filing or recordation of this Agreement or any Loan Document.


 


Section 7.7.            Further Assurances.  The Borrower further agrees to execute such
other and further assurances and documents as reasonably requested by the
Lender to more effectively to carry out the terms of this Agreement or of any
other Loan Document.


 


Section 7.8.            Counterparts.  This Agreement may be executed in
counterparts, each of which when so executed shall be deemed an original but
all such counterparts shall together constitute but one and the same
instrument.


 


Section 7.9.            Headings.  The titles of the Articles and the Section
headings of this Agreement are for convenience only and shall not affect the
construction of this Agreement.


 


Section 7.10.          Severability.  If any term or provision of this Agreement
or any other Loan Document shall be determined to be invalid or unenforceable
for any reason, such determination shall not adversely affect any other term or
provision of this Agreement or such other Loan Document which shall remain in
full force and effect and the effect of such determination shall be limited to
the territory or the jurisdiction in which made.


 


Section 7.11.          Survival.  The Borrower’s agreements, representations,
warranties and conditions contained in this Agreement and made pursuant to the
provisions hereof shall survive the execution and delivery of this Agreement
until the Loan and all interest thereon shall have been repaid in full in
accordance with the terms of this Agreement, and any and all other moneys, payments,
obligations and liabilities which the Borrower shall have made, incurred or
become liable for pursuant to the terms of this Agreement or any other Loan
Document shall have been paid in full.


 


Section 7.12.          WAIVER OF TRIAL BY JURY.  THE PARTIES HERETO HEREBY WAIVE TRIAL BY
JURY IN ANY ACTION OR PROCEEDING TO WHICH THEY MAY BE PARTIES, ARISING OUT OF
OR IN ANY WAY PERTAINING TO (A) THIS AGREEMENT OR (B) THE OTHER LOAN
DOCUMENTS.  IT IS AGREED AND UNDERSTOOD
THAT THIS WAIVER CONSTITUTES A WAIVER OF TRIAL BY JURY


 


38

















 


OF ALL CLAIMS AGAINST ALL PARTIES TO SUCH
ACTIONS OR PROCEEDINGS, INCLUDING CLAIMS AGAINST PARTIES WHO ARE NOT PARTIES TO
THIS AGREEMENT.  THIS WAIVER IS
KNOWINGLY, WILLINGLY AND VOLUNTARILY MADE BY EACH OF THE PARTIES HERETO, AND
THE PARTIES HEREBY REPRE­SENT THAT NO REPRESENTATIONS OF FACT OR OPINION HAVE
BEEN MADE BY ANY INDIVIDUAL TO INDUCE THIS WAIVER OF TRIAL BY JURY OR TO IN ANY
WAY MODIFY OR NULLIFY ITS EFFECT.  THE
PARTIES FURTHER REPRESENT THAT THEY HAVE BEEN REPRESENTED IN THE SIGNING OF
THIS AGREEMENT AND IN THE MAKING OF THIS WAIVER BY INDEPENDENT LEGAL COUNSEL,
SELECTED OF THEIR OWN FREE WILL, AND THEY HAVE HAD THE OPPORTUNITY TO DISCUSS
THIS WAIVER WITH COUNSEL.


 


Section 7.13.          Assignment by The Lender.  The Lender may assign its rights and
obligations under this Agreement or any of the other Loan Documents and may
sell to any other Person participations in the Loan.  If the Lender shall assign or participate its interest in the
Loan to any Person that is a U.S. Person and is not taxed as a corporation for
federal income tax purposes, such Person shall deliver to Borrower a completed
IRS Form W-9 certifying that such Person is exempt from backup withholding on
all payments under this Agreement.  If
the Lender shall assign or participate its interest in the Loan to any Person
that is not a U.S. Person, such Person shall deliver to the Borrower a
completed IRS Form W-8BEN or IRS Form W-8ECI certifying that such Person is
exempt from withholding on all payments under this Agreement.  Such Person’s shall update such forms as
necessary to reflect a change in circumstances or the passage of time.  If an assignee or participant does not
deliver the forms required under this Section 7.13 certifying that such
Person is exempt from withholding, the Borrower shall not be required (i) to
increase any payments as required under Section 2.4(d) with respect to
withholding taxes imposed on payments with respect to such Person’s interest in
the Loan or (ii) indemnify any Person for any taxes under Section 2.4(d)
imposed on any payments with respect to such Person’s interest in the Loan.


 


Section 7.14.          Confidentiality.  The Lender hereby agrees to maintain the
confidentiality of the Information (as defined below), except that Information
may be disclosed (a) to its and its Affiliates’ directors, officers,
employees and agents, including accountants, legal counsel and other advisors
(it being understood that the Persons to whom such disclosure is made will be informed
of the confidential nature of such Information and instructed to keep such
Information confidential); (b) to the extent requested by any regulatory
authority; (c) to the extent 
required by applicable laws or regulations or by any subpoena or similar
legal process; (d) to any other party to this Agreement; (e) in connection with
the exercise of any remedies hereunder or any suit, action or proceeding
relating to this Agreement or the enforcement of rights hereunder; (f) subject
to an agreement containing provisions substantially the same as those of this Section
7.14, to (i) any assignee of or participant in, or any prospective assignee
of or participant in, any of its rights or obligations under this Agreement or
(ii) any direct or indirect contractual counterparty or prospective
counterparty (or such contractual counterparty’s or prospective counterparty’s
professional advisor) to any credit derivative transaction relating to
obligations of the Borrower; (g) with the consent of the Borrower; (h) to
the extent such Information (1) becomes publicly available other than as a
result of a breach of this Section 7.14 or (2) becomes available to
the Lender on a nonconfidential basis from a source other than the Borrower  (unless such information became
available from such source in violation of a 


 


39

















 


confidentiality
obligation of such source with respect to such Information, of which obligation
the Lender was aware); or (i) to any nationally
recognized rating agency that requires access to information about the Lender’s
or its Affiliates’ investment portfolio in connection with ratings issued with
respect to such Lender or its Affiliates. 
For the purposes of this Section 7.14, “Information” means
all information received from the Borrower relating to the Borrower or its
business, other than any such information that is available to the Lender on a
nonconfidential basis prior to disclosure by the Borrower.  Any Person required to maintain the
confidentiality of Information as provided in this Section 7.14 shall be
considered to have complied with its obligation to do so if such Person has
exercised the same degree of care to maintain the confidentiality of such
Information as such Person would accord to its own confidential
information.  Notwithstanding anything
herein to the contrary, Information shall not include, and the Borrower and the
Lender (and each employee, representative or other agent of the Borrower and
the Lender) may disclose to any and all persons without limitation of any kind,
any information with respect to the U.S. federal income tax treatment and U.S.
federal income tax structure of the transactions contemplated hereby and all
materials of any kind (including opinions or other tax analyses) that are
provided to the Borrower or the Lender relating to such tax treatment and tax
structure.


 


 


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40

















 


IN WITNESS WHEREOF, the parties hereto have
caused this Credit Agreement to be duly executed as of the day and year first
above written.


 


	
   

  	
  GREAT LAKES DREDGE & DOCK COMPANY

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
   /s/ Deborah A. Wensel

  	
   

  
	
   

  	
   

  	
  Name: Deborah A. Wensel

  
	
   

  	
   

  	
  Title: Senior Vice President, Chief Financial Officer and Treasurer

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  GENERAL ELECTRIC CAPITAL

  CORPORATION

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   /s/ Walter R. Schoultz

  	
   

  
	
   

  	
   

  	
  Name: Walter R. Schoultz

  
	
   

  	
   

  	
  Title: Vice President

  
					



 


 

















 


Schedule 5.2(l)


 


Insurance Providers


 


 


1.                                       The
West of England Ship Owners Mutual Insurance Association


 


2.                                       Lloyds
of London and London Insurance Companies


 

















 


Exhibit A


 


Vessels


 


 




	
  Vessel Name

  	
   

  	
  Official
  Number

  
	
   

  	
   

  	
   

  
	
  FLORIDA

  	
   

  	
  506446

  
	
  KEY WEST

  	
   

  	
  684596

  
	
  G.L. 184

  	
   

  	
  652202