EXHIBIT 10.02
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SECOND AMENDED AND RESTATED
UNDERWRITING AND CONTINUING
INDEMNITY AGREEMENT
dated
August 19, 1998
among
GREAT LAKES DREDGE & DOCK CORPORATION,
CERTAIN OF ITS SUBSIDIARIES
and
RELIANCE INSURANCE COMPANY,
UNITED PACIFIC INSURANCE COMPANY,
RELIANCE NATIONAL INSURANCE COMPANY, and
RELIANCE SURETY COMPANY
TABLE OF CONTENTS
Page
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ARTICLE I DEFINITIONS.................................................... 2
1.1 DEFINED TERMS.................................................... 2
1.2 USE OF DEFINED TERMS............................................. 12
1.3 ACCOUNTING PRINCIPLES............................................ 13
ARTICLE II BOND FACILITY.................................................. 13
2.1 BONDS............................................................ 13
2.2 PREMIUM PAYMENT.................................................. 13
ARTICLE III INDEMNIFICATION................................................ 13
3.1 INDEMNITY........................................................ 13
3.2 EXONERATION...................................................... 14
3.3 CASH COLLATERAL.................................................. 14
3.4 WAIVER OF CLAIMS AND HOLD HARMLESS............................... 14
3.5 WITHDRAWAL FROM AND TERMINATION OF AGREEMENT..................... 15
3.6 INDEMNITORS AGREE TO BECOME PARTY DEFENDANTS..................... 15
3.7 INDEMNITORS' WAIVER OF NOTICE.................................... 15
3.8 INDEMNITORS' KNOWING CONSENT TO AGREEMENT........................ 15
3.9 INDEMNITORS' DUTY TO REMAIN INFORMED OF PRINCIPAL'S BUSINESS..... 16
3.10 ENFORCEABILITY OF RIGHTS DIRECTLY AGAINST INDEMNITORS............ 16
ARTICLE IV CONDITIONS PRECEDENT........................................... 16
4.1 CONDITION PRECEDENT TO EFFECTIVENESS OF THIS AGREEMENT........... 16
4.2 CONDITIONS PRECEDENT TO ALL BONDS................................ 17
ARTICLE V REPRESENTATIONS AND WARRANTIES................................. 18
5.1 INCORPORATION, GOOD STANDING, AND DUE QUALIFICATION.............. 18
5.2 CORPORATE POWER AND AUTHORITY.................................... 19
5.3 LEGALLY ENFORCEABLE AGREEMENT.................................... 19
5.4 APPROVALS........................................................ 19
5.5 OWNERSHIP AND LIENS.............................................. 19
5.6 TAXES............................................................ 19
5.7 INSURANCE........................................................ 20
5.8 COMPLIANCE....................................................... 20
5.9 LITIGATION....................................................... 20
5.10 SUBSIDIARIES..................................................... 20
5.11 REAL PROPERTY.................................................... 20
5.12 EQUIPMENT........................................................ 20
5.13 VESSELS.......................................................... 20
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ARTICLE VI COVENANTS...................................................... 21
6.1 CORPORATE EXISTENCE.............................................. 21
6.2 MAINTENANCE OF RECORDS........................................... 21
6.3 MAINTENANCE OF PROPERTIES........................................ 21
6.4 MAINTENANCE OF INSURANCE......................................... 21
6.5 COMPLIANCE WITH LAWS............................................. 21
6.6 TAXES............................................................ 22
6.7 BOOKS AND RECORDS................................................ 22
6.8 FINANCIAL RECORDS AND REPORTS.................................... 22
6.9 PRINCIPALS' REPRESENTATION....................................... 22
6.10 NOTICE OF LITIGATION............................................. 23
6.11 LIENS............................................................ 23
6.12 DEBT AND CONTINGENT LIABILITIES.................................. 23
6.13 DISPOSITION OF ASSETS; ISSUANCE OF EQUITY........................ 25
6.14 MERGERS.......................................................... 26
6.15 INVESTMENTS...................................................... 26
6.16 DIVIDEND RESTRICTIONS............................................ 28
6.17 RESTRICTIONS UPON CONTRACTS WITH AFFILIATES...................... 29
6.18 NATURE OF BUSINESS............................................... 29
6.19 NET WORTH........................................................ 29
6.20 NET CURRENT ASSETS............................................... 30
6.21 SUBORDINATED DEBT AND PAYMENT BLOCKAGE NOTICE.................... 30
ARTICLE VII RIGHTS OF RELIANCE............................................. 31
7.1 FURTHER ASSURANCES/RELIANCE AS ATTORNEY-IN-FACT.................. 31
7.2 CONTRACT FUNDS HELD IN TRUST..................................... 31
7.3 RIGHT OF RELIANCE TO SETTLE CLAIMS............................... 31
7.4 AUTHORITY OF RELIANCE TO MAKE LOANS TO PRINCIPAL................. 32
7.5 AUTHORITY OF RELIANCE TO AMEND BOND.............................. 32
7.6 RIGHTS OF RELIANCE TO TAKE POSSESSION OF THE WORK................ 32
7.7 DEPOSITORY TRUST ACCOUNTS........................................ 32
7.8 PRESERVATION OF RELIANCE'S RIGHTS................................ 33
7.9 AUTHORITY OF RELIANCE TO ELECT REMEDIES.......................... 33
ARTICLE VIII MISCELLANEOUS.................................................. 33
8.1 BENEFICIAL PARTIES............................................... 33
8.2 JOINT AND SEVERAL................................................ 33
8.3 ATTORNEYS FEES................................................... 33
8.4 APPLICABLE LAW................................................... 33
8.5 JURISDICTION FOR SUITS UNDER THIS AGREEMENT...................... 34
8.6 INDEMNITORS WAIVE DEFENSE OF SUBSEQUENT EXECUTION................ 34
8.7 VALIDITY OF AGREEMENT............................................ 34
8.8 ORAL MODIFICATIONS INEFFECTIVE................................... 34
8.9 NOTICES.......................................................... 34
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8.10 REAFFIRMATION AND RESTATEMENT.................................... 35
8.11 CONFIDENTIALITY.................................................. 35
8.12 RELEASE OF LIENS................................................. 35
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EXHIBIT A - Form of Supplemental Signature Page
EXHIBIT B - Form of Pledge Agreement
EXHIBIT C - Form of Security Agreement (Accounts Receivable)
EXHIBIT D - Form of Security Agreement (Equipment)
EXHIBIT E - Form of Vessel Mortgage (First)
EXHIBIT F - Form of Vessel Mortgage (Second)
SCHEDULE 1.1 - Permitted Liens
SCHEDULE 5.7 - Insurance
SCHEDULE 5.9 - Litigation
SCHEDULE 5.10 - Subsidiaries
SCHEDULE 5.11 - Real Property
SCHEDULE 5.12 - Equipment
SCHEDULE 5.13 - Vessels
SCHEDULE 6.12 - Existing Debt and Contingent Liabilities
SCHEDULE 6.15 - Investments
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SECOND AMENDED AND RESTATED
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UNDERWRITING AND CONTINUING
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INDEMNITY AGREEMENT
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THIS SECOND AMENDED AND RESTATED UNDERWRITING AND CONTINUING INDEMNITY
AGREEMENT (the "Agreement"), made and entered into this 19 day of August, 1998,
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is among (i) GREAT LAKES DREDGE & DOCK CORPORATION, a Delaware corporation
("HOLDINGS"), and the SUBSIDIARIES of HOLDINGS from time to time signatories
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hereto (collectively with HOLDINGS, the "INDEMNITORS"), and (ii) RELIANCE
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INSURANCE COMPANY, a Pennsylvania corporation, UNITED PACIFIC INSURANCE COMPANY,
a Pennsylvania corporation, RELIANCE NATIONAL INSURANCE COMPANY, a Delaware
corporation, and RELIANCE SURETY COMPANY, a Delaware corporation (collectively,
the foregoing parties are referred to herein as "RELIANCE").
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R E C I T A L S
WHEREAS, the PRINCIPALS are engaged in the business, among other things, of
dredging, dredging reclamation, aggregate mining and supply, and marine
construction in the United States and in other countries, and any PRINCIPAL,
individually, jointly with others or on behalf of any of its SUBSIDIARIES,
AFFILIATES, or divisions or their SUBSIDIARIES, AFFILIATES or divisions now in
existence or hereafter formed or acquired, or on behalf of third-party Persons,
may desire or be required from time to time in connection with these businesses
to deliver certain BOND(s) to OBLIGEES; and
WHEREAS, certain of the INDEMNITORS, the PRINCIPALS and RELIANCE are
parties to that certain Amended and Restated Underwriting and Continuing
Indemnity Agreement (the "FIRST AMENDMENT AND RESTATEMENT") dated as of
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September 24, 1997, which amended and restated that certain Amended Agreement
dated as of October 15, 1991, among certain of the PRINCIPALS, certain
AFFILIATES of the PRINCIPALS and RELIANCE (as amended and restated by the FIRST
AMENDMENT AND RESTATEMENT, and as otherwise amended or modified, the "ORIGINAL
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AGREEMENT"); and
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WHEREAS, in accordance with the terms of the ORIGINAL AGREEMENT, RELIANCE
has heretofore executed or procured and, upon the express condition that this
Agreement and the other UNDERWRITING DOCUMENTS be executed, RELIANCE may
continue to execute or procure the execution of BOND(s), and RELIANCE may
continue previously executed BOND(s) and may forbear cancellation of such
BOND(s); and
WHEREAS, each of the INDEMNITORS recognizes that BONDS are a necessary and
desirable adjunct to the businesses done and to be done by the PRINCIPALS and
desires to accommodate the financial, security, indemnity, exoneration and other
requirements of RELIANCE as an inducement to RELIANCE to become surety upon
obligations of the
PRINCIPALS and has therefore agreed to be bound by this Agreement and the other
UNDERWRITING DOCUMENTS to which it is a party and has agreed to exercise its
best efforts to permit and require the PRINCIPALS to honor and perform all of
the terms of this Agreement; and
WHEREAS, RELIANCE has agreed to act as surety or procure surety BONDS for
the PRINCIPALS, subject to the understanding of the parties that RELIANCE is
under no obligation to act as surety for every bond of the PRINCIPALS, that
RELIANCE shall have the right to refuse to execute BONDS upon CONTRACTS which in
its sole judgment present risks not contemplated by this Agreement and that the
PRINCIPALS are under no obligation to obtain BONDS from RELIANCE; and
WHEREAS, the INDEMNITORS and the PRINCIPALS now desire to amend and restate
the ORIGINAL AGREEMENT on the terms and conditions set forth in this Agreement.
NOW, THEREFORE, in consideration of the mutual agreements set forth herein,
the execution or procurement of any BOND(s) by RELIANCE or the forbearance or
cancellation of any existing BOND(s) by RELIANCE and as an inducement to such
execution, procurement or forbearance, we, the undersigned PRINCIPALS and
INDEMNITORS, agree and bind ourselves, our successors and assigns, jointly and
severally, as follows:
ARTICLE I
DEFINITIONS
SECTION 1.1 DEFINED TERMS. For the purposes of this Agreement, the
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following terms shall have the meanings listed below:
"AFFILIATE" means, with respect to any PERSON, any other PERSON or group
acting in concert with such PERSON that, directly or indirectly, through one or
more intermediaries, controls, or is controlled by, or is under the common
control with such PERSON. For purposes of this definition, "control"
(including, with correlative meanings, the terms "controlled by" and "under
common control with"), as used with respect to any PERSON or group of PERSONS,
shall mean the possession, directly or indirectly, of the power to direct or
cause the direction of management and policies of such PERSON, whether through
the ownership of voting securities or by contract or otherwise.
"AUTHORIZED OFFICER" means, with respect to any PERSON, the chief executive
officer, president, chief financial officer, treasurer, assistant treasurer,
controller or any vice president of such PERSON.
"BANK LOAN FACILITY" means that certain Credit Agreement dated as of even
date herewith, by and among HOLDINGS, certain corporate affiliates thereof, the
financial institutions from time to time parties thereto, and Bank of America
National Trust and Savings Association, as administrative agent to such
financial institutions, and the documents,
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instruments and agreements executed and delivered in connection therewith, as
all of the same may be amended, restated, supplemented or otherwise modified
from time to time and any credit agreement or other agreement or agreements
relating to any refinancing, extension, renewal or replacement, in whole or in
part, thereof.
"BOND(s)" means any surety agreements, undertakings, or instruments of
guarantee signed by RELIANCE on behalf of any PRINCIPAL, whether executed before
or after the execution of this Agreement.
"CONTINGENT LIABILITY" means any agreement, undertaking or arrangement by
which any Person guarantees, endorses or otherwise becomes or is contingently
liable upon (by agreement, contingent, or otherwise, to provide funds for
payment, to supply funds to, or otherwise to invest in, a debtor, or otherwise
to assure a creditor against loss) the indebtedness, obligation or any other
liability of any other Person (other than by endorsements of instruments in the
course of collection), or guarantees the payment of dividends or other
distributions upon the shares of any other Person.
"CONTRACT(s)" means any contract referred to or described in any BOND(s)
issued on behalf of any PRINCIPAL.
"DEBT" means and includes, with respect to any PERSON, (i) indebtedness for
borrowed money, (ii) obligations evidenced by bonds (including, without
limitation, license, bid, performance, lien or payment bonds), debentures, notes
or other similar instruments, (iii) obligations which have been incurred in
connection with the acquisition of property or services (including, without
limitation, obligations to pay the deferred purchase price of property or
services), excluding trade payables and accrued expenses incurred in the
ordinary course of business, (iv) obligations secured by any LIEN or other
charge upon property or assets owned by such PERSON, even though such PERSON has
not assumed or become liable for the payment of such obligations, (v)
obligations created or arising under any conditional sale or other title
retention agreement with respect to property acquired by such PERSON,
notwithstanding the fact that the rights and remedies of the seller, lender or
lessor under such agreement in the event of default are limited to repossession
or sale of property, (vi) the principal amount of any capital lease and (vii)
reimbursement obligations with respect to letters of credit.
"EQUITY DOCUMENTS" means (i) that certain Securities Purchase and Holders
Agreement dated as of the date hereof among HOLDINGS, Vectura Holding, LLC,
certain purchasing management investors and continuing management investors
signatory thereto, and certain individuals who may execute such agreement from
time to time, (ii) that certain Registration Rights Agreement dated as of the
date hereof among HOLDINGS, certain SUBSIDIARIES signatory thereto and
Donaldson, Lufkin & Jenrette Securities Corporation and (iii) each of the
documents, instruments and agreements executed pursuant to or in connection with
any of the foregoing.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended from time to time, and the regulations and published interpretations
thereof.
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"EVENT OF DEFAULT" means any one or more of the following:
(a) Failure by the INDEMNITORS, or any of them, to pay on the date when due
(and after giving effect to any applicable payment period) any
obligation owing to RELIANCE hereunder; provided, however, that any
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BOND premium may be disputed by any PRINCIPAL in good faith in the
ordinary course of business without causing an EVENT OF DEFAULT under
this clause (a);
or
(b) Failure by the INDEMNITORS, or any of them, to comply with or to
perform their respective obligations under Sections 6.7, 6.14, 6.16,
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6.19, 6.20 or 6.21 of this Agreement, and, in the case of Section 6.16,
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such failure shall continue for ten (10) days;
or
(c) Failure by the INDEMNITORS, or any of them, to comply with or perform
their respective obligations under any provision of this Agreement (and
not constituting an Event of Default under any of the other clauses of
this definition) and (1) continuance of such failure for thirty (30)
days after notice thereof to the INDEMNITOR by RELIANCE specifying such
failure if such failure can be cured with diligence within such thirty-
day period by the INDEMNITORS, or can be cured by the payment of money,
or (2) continuance of such failure for sixty (60) days by RELIANCE
specifying such failure if such failure cannot with diligence be cured
within such thirty-day period and cannot be cured by the payment of
money;
or
(d) Any representation or warranty made or deemed made by any INDEMNITOR in
this Agreement or any other UNDERWRITING DOCUMENT, shall prove to have
been incorrect in any material respect on or as of the date made or
deemed made;
or
(e) an OBLIGEE has declared by delivery of written notice to any PRINCIPAL
that such PRINCIPAL is in default of any provision under the respective
CONTRACT(s) between such PRINCIPAL and such OBLIGEE and such PRINCIPAL
has failed to cure such default within that period of time provided to
cure said default within such CONTRACT(s) in which such PRINCIPAL is
alleged to be in default
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and such default results in the termination of such CONTRACT; provided,
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that RELIANCE shall, upon investigation, reasonably determine in good
faith that PRINCIPAL is in default under the CONTRACT(s) or such
PRINCIPAL has acknowledged its default under the CONTRACT(s),
irrespective of whether or not such PRINCIPAL is actually in default of
the CONTRACT(s) (such a determination by RELIANCE shall not be binding
upon such PRINCIPAL in any dispute such PRINCIPAL may have with such
OBLIGEE or a claimant under the related BOND(s); except as provided
above, it shall be no defense to the enforcement of this Agreement by
RELIANCE, and co-sureties, if any, that PRINCIPAL asserts that it is
not in default under the CONTRACT(s));
or
(f) RELIANCE has received notice or knowledge of facts giving rise to a
reasonable good faith belief that it has incurred or may incur a LOSS
and a PRINCIPAL has failed to cure such LOSS or to take reasonable
steps to avoid the incurrence by RELIANCE of such LOSS within thirty
(30) days after receipt of written notice sent by RELIANCE to such
PRINCIPAL; provided, that no EVENT OF DEFAULT under this clause (f)
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shall occur if prior to the expiration of such thirty-day period such
PRINCIPAL causes (1) a letter of credit with a face amount equal to
such LOSS and otherwise in form and substance reasonably acceptable to
RELIANCE to be issued and delivered to RELIANCE or (2) cash collateral
in an amount equal to such LOSS to be pledge to RELIANCE pursuant to
documentation reasonably acceptable to RELIANCE;
or
(g) Any PRINCIPAL within fifteen (15) days after receipt of notice sent by
RELIANCE to such PRINCIPAL has failed, refused or delayed to pay or is
unable to pay any claims, bills or other indebtedness incurred in, or
in connection with, the performance of the CONTRACT(s) which claims,
bills or other indebtedness RELIANCE, upon investigation, shall have
reasonably determined in good faith to be valid;
or
(h) Any INDEMNITOR shall (i) fail to pay any DEBT or CONTINGENT OBLIGATION
of such INDEMNITOR in an aggregate principal amount in excess of
$5,000,000, or any interest or premium thereon, when due whether by
scheduled maturity, required
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prepayment, acceleration, demand, or otherwise (subject to any
applicable grace periods), or (ii) fail to perform or observe any term,
covenant, or condition on its part to be performed or observed under
any agreement or instrument relating to any DEBT or CONTINGENT
OBLIGATION of such INDEMNITOR in an aggregate principal amount in
excess of $5,000,000 (subject to any applicable grace periods), if the
result of such failure to perform or observe is (A) in the case of the
BANK LOAN FACILITY, either to accelerate the maturity of such DEBT or
to cause a PAYMENT BLOCKAGE NOTICE to be delivered to the Trustee under
the 1998 DEBT INDENTURE, (B) in the case of the 1998 DEBT INDENTURE, to
accelerate or permit the acceleration of the maturity of such DEBT and
(C) in the case of any other DEBT or CONTINGENT OBLIGATION, to
accelerate the maturity of such DEBT or CONTINGENT OBLIGATION;
or
(i) Any INDEMNITOR becomes insolvent or generally fails to pay, or admits
in writing its inability to pay, debts as they become due; or any
INDEMNITOR applies for, consents to, or acquiesces in the appointment
of, a trustee, receiver or other custodian for such INDEMNITOR or for a
substantial portion of its property, or makes a general assignment for
the benefit of creditors; or, in the absence of such application,
consent or acquiescence, a trustee, receiver or other custodian is
appointed for any INDEMNITOR or for a substantial part of the property
of any thereof and is not dismissed or discharged within thirty (30)
days; or any bankruptcy, reorganization, debt arrangement, or other
case or proceeding under any bankruptcy or insolvency law, or any
dissolution or liquidation proceeding, is commenced in respect of any
INDEMNITOR and if such case or proceeding is not commenced by such
INDEMNITOR, it is consented to or acquiesced in by such INDEMNITOR or
is not released, dismissed, vacated or fully bonded within thirty (30)
days undismissed; or any INDEMNITOR takes any corporate action to
authorize, or in furtherance of, any of the foregoing;
or
(j) A final judgment or judgments (after the expiration of all times to
appeal therefrom) for the payment of money in excess of $5,000,000 in
the aggregate shall be rendered against any INDEMNITOR and the same
shall not be (i) fully covered by insurance or (ii) vacated, stayed,
bonded, paid or discharged for a period of thirty (30) days.
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"FINANCIAL STATEMENTS" means all those balance sheets, income statements
and other financial statements of any INDEMNITOR or any AFFILIATE thereof which
have been furnished to RELIANCE for the purpose of or in connection with this
Agreement and the transactions contemplated hereby.
"GAAP" is defined as generally accepted accounting principles set forth in
the opinions and pronouncements of the Accounting Principles Board and the
American Institute of Certified Public Accountants and statements and
pronouncements of the Financial Accounting Standards Board.
"GLDDC" means Great Lakes Dredge & Dock Company, a New Jersey corporation.
"GLI" means Great Lakes International, Inc., a Delaware corporation.
"HOLDINGS" has the meaning set forth in the recitals to this Agreement.
"INDEMNITOR" means any of HOLDINGS or any SUBSIDIARY of HOLDINGS which is a
party to this Agreement as of the date hereof or which becomes a party to this
Agreement after the date hereof by hereafter executing and delivering to
RELIANCE a SUPPLEMENTAL SIGNATURE PAGE and INDEMNITORS means, collectively, all
of HOLDINGS and all such SUBSIDIARIES of HOLDINGS.
"INTERCREDITOR AGREEMENT" means that certain Intercreditor Agreement dated
as of even date herewith by and among HOLDINGS, Bank of America National Trust
and Savings Association, as Agent, and RELIANCE, and the documents, instruments
and agreements executed and delivered in connection therewith, as all of the
same may be amended, restated, supplemented or otherwise modified from time to
time and any other intercreditor agreement in replacement thereof which is in
form and substance acceptable to RELIANCE.
"LIEN" means any mortgage, deed of trust, pledge, security interest,
hypothecation, assignment, deposit arrangement to assure payment of DEBT,
encumbrance, lien (statutory or other), charge, or encumbrance of any kind or
nature whatsoever (including, without limitation, any conditional sale or other
title retention agreement, any financing lease having substantially the same
economic effect as any of the foregoing).
"LIMITED SUBSIDIARY" means (a) any SUBSIDIARY which is not an INDEMNITOR
and (b) any INDEMNITOR which is not a wholly-owned SUBSIDIARY of HOLDINGS;
provided, that neither NATCO Limited Partnership nor North American Trailing
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Company shall be deemed to be a LIMITED SUBSIDIARY for purposes of this
Agreement.
"LOSS" means:
(a) All damages, costs, expenses (including all reasonable attorney fees
and liabilities) which RELIANCE may sustain or incur by reason of
executing or procuring the execution of the BOND(s), or any other
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BOND(s) which may be already or hereafter executed on behalf of any
PRINCIPAL, or any renewal or continuation thereof; or which may be
sustained or incurred by reason of making any investigation on account
thereof, prosecuting or defending any action in connection therewith,
obtaining a release, recovering or attempting to recover any salvage in
connection therewith or enforcing by litigation or otherwise any of the
provisions of this Agreement, including, but not limited to:
(1) money judgments, amounts paid in settlement or compromise, the full
amount of reasonable attorney and other professional fees incurred
or paid by RELIANCE, court costs and fees, and interest at the
prime rate or reference rate announced from time to time by Bank of
America National Trust and Savings Association on all sums due it
from the fifteenth day following RELIANCE's demand for said sums,
whether or not interest has been awarded by a court, provided, that
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such LOSS is not due to the gross negligence, bad faith or willful
misconduct of RELIANCE; and
(2) any LOSS which RELIANCE may sustain or incur in connection with the
CONTRACT(s) or BOND(s), whether that LOSS results from the activity
of any PRINCIPAL individually or as part of a joint venture,
partnership or other entity which has been or may be formed in
connection with the performance of the CONTRACT(s) and in which any
PRINCIPAL has an ownership interest, provided, that such LOSS is
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not due to the gross negligence, bad faith or willful misconduct of
RELIANCE; and
(3) any LOSS which RELIANCE may sustain or incur as a result of any
actions taken by RELIANCE upon information provided by any
INDEMNITOR, provided, that such LOSS is not due to the gross
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negligence, bad faith or willful misconduct of RELIANCE;
(b) All reasonable legal and consulting fees and related expenses incurred
in connection with any application or submission by any PRINCIPAL for a
proposal, bid or other BOND, whether or not RELIANCE decides to issue
said BOND; and
(c) All premiums, fees, interest and other charges due RELIANCE in
connection with this Agreement or the BOND(S).
"LYDON" means Lydon Dredging & Construction Company, Ltd., a Canadian
corporation.
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"MATERIAL ADVERSE CHANGE" means a material adverse change in the condition
(financial or otherwise), business, operations or prospects of HOLDINGS and its
SUBSIDIARIES, taken as a whole.
"MERGER AGREEMENT" means that certain Amended and Restated Agreement and
Plan of Merger dated as of August 19, 1998, among Vectura Holding Company LLC,
Great Lakes Dredge & Dock Acquisition, Inc., GLI Acquisition, Inc., HOLDINGS,
Great Lakes International, Inc., Blackstone Dredging Partners L.P. and
Blackstone Family Investment Partnership L.P.
"NATCO" means NATCO Dredging Limited Partnership, a Delaware limited
partnership.
"NET INCOME" means, for any period, the aggregate of all amounts (exclusive
of all amounts in respect of any extraordinary or non-recurring gain or loss
(including, without limitation, any write-off of the Chicago Flood litigation
insurance receivable)) which, in accordance with GAAP, would be included as net
income on a consolidated statement of income of HOLDINGS and its SUBSIDIARIES
for such period.
"1998 DEBT INDENTURE" means that certain Indenture, dated as of August 19,
1998, between HOLDINGS, certain of the SUBSIDIARIES of HOLDINGS, and The Bank of
New York, as Trustee, governing the issuance by HOLDINGS of $115,000,000 in
original principal amount of its 11.25% Senior Subordinated Notes due 2008, as
amended, restated, supplemented or otherwise modified from time to time in
accordance with Section 6.21.
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"NORTH AMERICAN" means North American Trailing Company, a Delaware
corporation.
"OBLIGEE" means any named party or parties appearing on the BOND(s) in
whose favor the BOND(s) are issued.
"ORIGINAL AGREEMENT" has the meaning set forth in the recitals to this
Agreement.
"PAYMENT BLOCKAGE NOTICE" has the meaning assigned thereto in the 1998 DEBT
INDENTURE.
"PERMITTED LIENS" means:
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(a) any LIEN in favor of RELIANCE;
(b) LIENS securing the BANK LOAN FACILITY and the obligations arising
thereunder (provided, that such LIENS are granted in compliance with
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and remain subject to the INTERCREDITOR AGREEMENT);
(c) LIENS for taxes, assessments or other governmental charges or levies
that are either not yet past due or that are being contested in good
faith by appropriate proceedings and for which adequate reserves have
been established in accordance with GAAP;
(d) Carriers', warehousemen's, landlord's, mechanics', workmen's and
repairmen's LIENS or other like LIENS arising by operation of law in
the ordinary course of business and securing sums which are not past
due, or that are being contested in good faith by appropriate
proceedings and for which adequate reserves have been established in
accordance with GAAP;
(e) any LIEN on assets existing on the effective date of this Agreement and
listed on Schedule 1.1 to this Agreement and the continuation of any
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such LIEN upon a refinancing, renewal or extension of the DEBT secured
by such existing LIEN (provided, that the property subject to such LIEN
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is limited to the property to which such LIEN is attached prior to the
effective date of this Agreement and the principal amount of such DEBT
as of the effective date of this Agreement is not increased);
(f) any LIEN on capital equipment granted to secure the purchase price
thereof;
(g) any LIEN on capital equipment granted in connection with capitalized
leases of such equipment in the ordinary course of business;
(h) LIENS arising under workmen's compensation laws, unemployment insurance
laws or other forms of governmental insurance or benefit, or to secure
performance of bids, tenders, contracts (other than for borrowed money)
or leases, or deposits to secure public or statutory obligations, or
deposits of cash or United States Government bonds to secure surety or
appeal bonds, or deposits as security for contested taxes or for the
payment of rent or otherwise in the ordinary course of business;
(i) survey exceptions, encumbrances, easements or reservations of, or
rights of others for, rights-of-way, sewers, electric lines, telegraph
or
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telephone lines and other similar purposes, or zoning or other
restrictions as to the use of real property or liens incidental to the
conduct of such PRINCIPAL or to the ownership of its properties.
(j) judgment LIENS not giving rise to an Event of Default so long as such
LIEN is adequately bonded within 15 days after the entry of such
judgment.
(k) LIENS arising from filing UCC financing statements for precautionary
purposes in connection with true leases of personal property under
which HOLDINGS or any SUBSIDIARY is lessee;
(l) any LIENS on any property or assets acquired by HOLDINGS or any of its
SUBSIDIARIES which LIEN existed prior to the acquisition thereof and
was not created in contemplation of such acquisition, provided, that
--------
such LIENS attach only to the property or assets so acquired;
(m) LIENS securing reimbursement obligations in respect of commercial
letters of credit and covering the goods (or the documents of title in
respect of such goods) financed by such letters of credit, which have
been issued in the ordinary course of business;
(n) any LIEN on any asset of any PERSON existing at the time such PERSON is
merged or consolidated with or into HOLDINGS or any SUBSIDIARY of
HOLDINGS (to the extent such merger or consolidation is permitted
hereunder) and which LIEN was not created in contemplation of such
event, provided, that such LIEN attaches only to the assets acquired
--------
pursuant to such merger or consolidation;
(o) LIENS securing any interest rate, swap, hedging, currency, commodity,
foreign country risk or other similar agreement;
(p) leases or subleases (including bareboat charters) granted and entered
into with others not interfering in any material respect with the
businesses of HOLDINGS and its SUBSIDIARIES;
(q) LIENS securing payment of DEBT permitted and described in clause (m) of
Section 6.12, and LIENS securing payment of DEBT permitted and
------------
described in clause (d) of Section 6.12 to the extent limited to the
------------
accounts receivable financed with such DEBT;
(r) renewals or replacements of any of the foregoing, provided that such
renewed or replaced LIEN does not extend to property other than that
-10-
which was encumbered by the originally permitted LIEN hereunder; and
(s) other LIENS securing obligations that do not exceed an aggregate amount
of $5,000,000 at any time outstanding.
"PERSON" means any entity, whether an individual, trustee, corporation,
partnership, joint stock company, limited liability company, unincorporated
organization, business association or firm, joint venture, a government or any
agent or instrumentality or political subdivision thereof.
"PLAN" means any employee benefit plan (as defined in Section 3(3) of
ERISA) established, maintained or to which contributions have been made by any
PRINCIPAL.
"PLEDGE AGREEMENT" means a Note Pledge Agreement substantially in the form
of Exhibit B hereto, executed by certain of the INDEMNITORS in favor of
---------
RELIANCE, as the same may be amended, restated, supplemented or otherwise
modified from time to time.
"PRINCIPAL" means any of HOLDINGS, GLI, GLDDC, NATCO, LYDON, Gates
Construction Corp., a New Jersey corporation, and any other INDEMNITOR for whom
RELIANCE has executed a BOND; and PRINCIPALS means collectively all of the
foregoing PERSONS.
"RELIANCE" has meaning set forth with recitals to this Agreement.
"RESTRICTED AMOUNTS" means, as of any date, each of the following (a) all
DEBT and CONTINGENT LIABILITIES of the type described in clause (j) of Section
---------- -------
6.12 outstanding on such date, (b) the fair market value of all assets sold from
- ----
the date hereof through such date pursuant to the terms of clause (a)(iv)(B) of
-----------------
Section 6.13, and (c) investments of the type described in clause (e) of Section
- ------------ ---------- -------
6.15 outstanding on such date.
- ----
"SECURITY AGREEMENTS" means, collectively, the SECURITY AGREEMENT (A/R) and
the SECURITY AGREEMENT (EQUIPMENT).
"SECURITY AGREEMENT (A/R)" means Security Agreement (Accounts Receivable)
substantially in the form of Exhibit C hereto, executed by a PRINCIPAL (other
---------
than LYDON) in favor of RELIANCE, as the same may be amended, restated,
supplemented or otherwise modified from time to time.
"SECURITY AGREEMENT (EQUIPMENT)" means Security Agreement (Equipment)
substantially in the form of Exhibit D hereto, executed and delivered by GLDDC
---------
(or any other INDEMNITOR which executes a VESSEL MORTGAGE after the date hereof)
in favor of RELIANCE, as the same may be amended, restated, supplemented or
otherwise modified from time to time.
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"SUBORDINATED DEBT" means all DEBT of HOLDINGS issued pursuant to the 1998
DEBT INDENTURE.
"SUBSIDIARY" of a PERSON means any corporation, association, partnership,
limited liability company, joint venture or other business entity of which more
than 50% of the voting stock or other equity interests, is owned or controlled
directly or indirectly by such PERSON, or one or more of the SUBSIDIARIES of
such PERSON, or a combination thereof. Unless the context otherwise clearly
requires, references herein to a "SUBSIDIARY" refer to a SUBSIDIARY of HOLDINGS.
"SUPPLEMENTAL SIGNATURE PAGE" means a supplemental signature page to this
Agreement in the form of Exhibit A hereto.
---------
"UNDERWRITING DOCUMENTS" means this Agreement, each of the SECURITY
AGREEMENTS, the PLEDGE AGREEMENT, the VESSEL MORTGAGES, each BOND and any other
instrument, document or agreement delivered by any INDEMNITOR in connection
herewith.
"VESSEL MORTGAGES" means, collectively, (i) the Amended and Restated First
Preferred Fleet Mortgage substantially in the form of Exhibit E hereto, executed
---------
by GLDDC in favor of RELIANCE, (ii) the Second Preferred Fleet Mortgage
substantially in the form of Exhibit F hereto, executed by GLDDC in favor of
---------
RELIANCE, (iii) the First Preferred Fleet Mortgage dated March 7, 1990, by North
American Trailing Company to Reliance Insurance Company and certain of its
AFFILIATES, as amended by those certain Supplements to First Preferred Fleet
Mortgage dated as of October 15, 1991, September 24, 1997 and as of even date
herewith, (iv) the Second Preferred Fleet Mortgage dated July 10, 1990, by GLDDC
(as successor by merger to Tidewater Dredging Corporation) to Reliance Insurance
Company and certain of its AFFILIATES, as amended by those certain Supplements
to Second Preferred Fleet Mortgage dated as of October 15, 1991, September 24,
1997 and as of even date herewith, (v) the Second Preferred Fleet Mortgage dated
July 10, 1990, by GLDDC (as successor by merger to Tidewater Dredging
Corporation) to Reliance Insurance Company and certain of its AFFILIATES, as
amended by those certain Supplements to Second Preferred Fleet Mortgage dated as
of October 15, 1991, September 24, 1997 and as of even date herewith; and (vi)
any other fleet mortgages or vessel mortgages at any time hereafter executed and
delivered by any INDEMNITOR in connection with this Agreement and the other
UNDERWRITING DOCUMENTS; in each case as any of the foregoing documents may be
amended, restated, supplemented or otherwise modified from time to time.
SECTION 1.2 USE OF DEFINED TERMS. Any collective defined term and any
------------ --------------------
defined term used in the plural shall be taken to encompass all members of the
relevant class. Any defined term used in the singular preceded by "any" shall
be taken to indicate any number of the members of the relevant class. Any
defined term used in the singular and preceded by the word "each" shall indicate
all members of the relevant class, individually. A Section or an Exhibit or a
Schedule is, unless otherwise stated, a reference to a section hereof or an
exhibit or a
-12-
schedule hereto, as the case may be. The words "hereof," "herein," "hereto" and
"hereunder" and words of similar import when used in this Agreement shall refer
to this Agreement as a whole and not to any particular provision of this
Agreement.
SECTION 1.3 ACCOUNTING PRINCIPLES. Unless the context otherwise clearly
---------------------
requires, all accounting terms not expressly defined herein shall be construed,
and all financial computations required under this Agreement shall be made, in
accordance with GAAP, consistently applied.
ARTICLE II
BOND FACILITY
SECTION 2.1 BONDS. Subject to the terms of this Agreement, RELIANCE
-----
agrees to provide or procure surety bonds for or on behalf of the PRINCIPALS;
provided, that RELIANCE reserves the right to decline to execute any BOND(s) and
- --------
if RELIANCE executes any proposal or bid bond and if any PRINCIPAL is awarded
the CONTRACT(s), RELIANCE shall not be obligated to execute any BOND(s) required
to perform the awarded contract. No claim shall be made, nor any cause of
action asserted against RELIANCE as a consequence of its failure to execute any
BOND(s).
SECTION 2.2 PREMIUM PAYMENT. Each PRINCIPAL agrees to pay all premiums
---------------
on the BOND(s) issued for such PRINCIPAL, computed in accordance with the
regular manual of rates in effect on the date such BOND(s) are executed; such
payments to be made within 45 days of receipt by INDEMNITORS of a statement
therefor from RELIANCE pursuant to the payment directions stated therein or as
otherwise agreed to between INDEMNITORS and RELIANCE. The failure of any
PRINCIPAL to pay the bond premiums or the failure of RELIANCE to receive
premiums shall not provide INDEMNITORS with any defense to an action under this
Agreement.
ARTICLE III
INDEMNIFICATION
SECTION 3.1 INDEMNITY. INDEMNITORS agree to indemnify, and keep
---------
indemnified, and hold and save harmless RELIANCE against all LOSS; provided,
--------
that in no event shall any INDEMNITOR indemnify or hold harmless RELIANCE
against any LOSS arising out of the gross negligence, bad faith or willful
misconduct of RELIANCE. The duty of INDEMNITORS to indemnify RELIANCE is a
continuing duty, separate from the duty to exonerate, and survives any payments
made in exoneration of RELIANCE. Amounts due RELIANCE pursuant to this Section
shall be payable within fifteen (15) days of receipt by INDEMNITORS of written
demand therefor. Notwithstanding anything to the contrary herein, any
INDEMNITOR which is not a wholly-owned SUBSIDIARY of HOLDINGS shall indemnify
and hold and save RELIANCE harmless only as to any LOSS incurred by or on behalf
of such INDEMNITOR; provided, that (a) NORTH AMERICAN shall indemnify and hold
--------
and
-13-
save RELIANCE harmless as to any LOSS incurred by or on behalf of NATCO and (b)
NATCO shall indemnify and hold and save RELIANCE harmless as to any LOSS
incurred by or on behalf of NORTH AMERICAN.
SECTION 3.2 EXONERATION. INDEMNITORS recognize and acknowledge the
-----------
common law right of RELIANCE to be exonerated by PRINCIPAL for any LOSS arising
out of any surety obligation undertaken by RELIANCE in connection with any BOND,
provided, that in no event shall any INDEMNITOR exonerate RELIANCE for any LOSS
- --------
arising out of the gross negligence, bad faith or willful misconduct of
RELIANCE. In the event any PRINCIPAL fails or refuses to exonerate RELIANCE for
any LOSS upon written demand therefor, all INDEMNITORS other than such PRINCIPAL
agree, upon such demand by RELIANCE, to exonerate RELIANCE from LOSS to the same
extent such INDEMNITORS agree to indemnify RELIANCE as provided in Sections 3.1,
------------
by satisfying such PRINCIPAL's obligations under the CONTRACT(s) and obtaining
either a withdrawal of all claims against RELIANCE under the BOND(s) or a
general release. Notwithstanding anything to the contrary contained herein, any
INDEMNITOR which is not a wholly-owned SUBSIDIARY of HOLDINGS shall exonerate
RELIANCE only as to BONDS issued for or on behalf of such INDEMNITOR; provided,
--------
that (a) NORTH AMERICAN shall exonerate RELIANCE as to BONDS issued for or on
behalf of NATCO and (b) NATCO shall exonerate RELIANCE as to BONDS issued for or
on behalf of NORTH AMERICAN.
SECTION 3.3 CASH COLLATERAL. Upon refusal or failure of any PRINCIPAL
---------------
to exonerate RELIANCE in accordance with the terms hereof, INDEMNITORS agree
upon demand to deposit with RELIANCE an amount of money or other collateral of
value adequate in the reasonable judgment of RELIANCE to exonerate RELIANCE,
such funds to be held by RELIANCE as collateral pursuant to documentation
reasonably acceptable to RELIANCE, with the right to use such funds or any part
thereof at any time in payment or compromise of such LOSS, and in which funds
INDEMNITORS do hereby grant to RELIANCE a security interest to secure such LOSS.
Unexpended funds by RELIANCE pursuant to a request for exoneration hereunder
shall be repaid to HOLDINGS and its SUBSIDIARIES when the liability of RELIANCE
arising out of the event for which exoneration was requested has been resolved
to the reasonable satisfaction of RELIANCE and RELIANCE shall have been
furnished with full releases of all liability under a surety obligation and have
been reimbursed in full for all LOSS. Interest earned (if any) upon funds held
by RELIANCE pursuant to a request for exoneration under this Section which is
not otherwise expended in accordance with this Section shall be paid to HOLDINGS
and its SUBSIDIARIES.
SECTION 3.4 WAIVER OF CLAIMS AND HOLD HARMLESS. Each INDEMNITOR
----------------------------------
specifically agrees to protect, indemnify and hold harmless RELIANCE, each of
its officers, directors, employees, agents and its attorneys-in-fact against any
and all LOSS that may in any way arise in connection with this Agreement and the
other UNDERWRITING DOCUMENTS and the powers herein granted, specifically waiving
any claim which any INDEMNITOR has or might hereafter have against RELIANCE or
its attorneys-in-fact on account of anything done in enforcing the terms of this
Agreement, the BOND(s) or any other
-14-
UNDERWRITING DOCUMENT except for any LOSS due to the gross negligence, bad
faith, or willful misconduct of RELIANCE.
SECTION 3.5 WITHDRAWAL FROM AND TERMINATION OF AGREEMENT. Each
--------------------------------------------
INDEMNITOR expressly recognizes and covenants this Agreement as its continuing
obligation to protect RELIANCE from all LOSS. Any INDEMNITOR may notify RELIANCE
in writing, of such INDEMNITOR's withdrawal from this Agreement; and such notice
shall state when, not less than fifteen (15) days after receipt of such notice
by RELIANCE, such withdrawal shall be effective. Such INDEMNITOR will not be
liable under this Agreement as to any BOND(s) executed by RELIANCE after the
effective date of such notice; provided, that as to any and all such BOND(s)
--------
executed or authorized by RELIANCE prior to the effective date of such notice
and as to any and all renewals, continuations, extensions, or substitutions
(and, if a proposal or bid bond has been executed or authorized prior to such
effective date, as to any contract bond executed pursuant thereto) regardless of
when the same are executed, such INDEMNITOR shall be and remain fully liable
hereunder, as if notice had not been served. Withdrawal by any INDEMNITOR shall
in no way affect the obligation of any other INDEMNITOR who has given no notice
of termination to RELIANCE.
(b) HOLDINGS may notify RELIANCE of the termination of this Agreement by
delivering written notice of such termination to RELIANCE, such termination to
be effective on a date specified in such notice which date shall not be less
than fifteen (15) days from receipt of such notice; provided, that no such
--------
termination shall be effective at any time when any BONDS shall remain
outstanding or any obligations under this Agreement shall remain unpaid.
SECTION 3.6 INDEMNITORS AGREE TO BECOME PARTY DEFENDANTS. In the event
--------------------------------------------
of legal proceedings against RELIANCE arising out of this Agreement or the
BONDS, RELIANCE may apply for a court order making any or all of the INDEMNITORS
party defendants, and each INDEMNITOR consents to the granting of such
application, including consent to the jurisdiction of the court in which the
application is made, and agrees to become such a party defendant or third-party
defendant and to allow judgment, in the event of judgment against RELIANCE, to
be rendered also against each INDEMNITOR, jointly and severally, in like amount
and in favor of RELIANCE unless such judgment is due to the gross negligence,
bad faith or willful misconduct of RELIANCE.
SECTION 3.7 INDEMNITORS' WAIVER OF NOTICE. INDEMNITORS waive notice of
-----------------------------
the execution, continuation, modification, renewal, enlargement or amendment of
any BOND and of any fact, act or information concerning or affecting the rights
or liabilities of RELIANCE or INDEMNITORS including, but not limited to, any
acts giving rise to any LOSS under the BOND(s).
SECTION 3.8 INDEMNITORS' KNOWING CONSENT TO AGREEMENT. Each INDEMNITOR
-----------------------------------------
warrants that it is specifically and beneficially interested in obtaining the
BOND(s) or the forbearance of cancellation of any existing BOND(s). INDEMNITORS
-15-
acknowledge that the execution of this Agreement and the undertaking of
indemnity was not made in reliance upon any representation concerning the
responsibility of any INDEMNITOR or concerning the competence of PRINCIPAL to
perform. INDEMNITORS agree to make no claim against RELIANCE for any oral
representations, promises or statements made to any of them by RELIANCE or any
of its agents or brokers, or for the failure of RELIANCE to disclose facts or
information to INDEMNITORS.
SECTION 3.9 INDEMNITORS' DUTY TO REMAIN INFORMED OF PRINCIPAL'S
---------------------------------------------------
BUSINESS. INDEMNITORS possess the duty to remain informed of all aspects of
each PRINCIPAL's business and the business activities and financial affairs of
each PRINCIPAL. INDEMNITORS acknowledge that they are presently informed of the
state of business activities and financial affairs of each PRINCIPAL and all
INDEMNITORS. RELIANCE possesses no obligation to inform any INDEMNITOR of any
aspect of any PRINCIPAL's business or the business activities and financial
affairs of the INDEMNITORS or of the request for, or issuance of, any BOND(s).
SECTION 3.10 ENFORCEABILITY OF RIGHTS DIRECTLY AGAINST INDEMNITORS.
-----------------------------------------------------
RELIANCE shall be entitled to enforce the obligations of this AGREEMENT directly
against any INDEMNITOR without the necessity of first proceeding against the
PRINCIPAL. The failure of any INDEMNITOR to perform any of the terms of this
Agreement or the release of any INDEMNITOR by RELIANCE shall not excuse or
release the remaining INDEMNITORS from their obligations under this Agreement.
ARTICLE IV
CONDITIONS PRECEDENT
SECTION 4.1 CONDITION PRECEDENT TO EFFECTIVENESS OF THIS AGREEMENT. The
------------------------------------------------------
effectiveness of this Agreement is subject to the condition precedent that
RELIANCE shall have received on or before the day hereof each of the following,
in form and substance satisfactory to RELIANCE and its counsel:
(a) a SECURITY AGREEMENT (A/R) duly executed by each PRINCIPAL (other
than LYDON) and, unless already filed, executed Financing Statements (UCC-1) to
be filed in all jurisdictions in the opinion of RELIANCE desirable to perfect
the security interest created by such SECURITY AGREEMENT (A/R);
(b) The VESSEL MORTGAGES duly executed by the mortgagee party thereto,
together with (i) any supplements thereto as applicable, and (ii) proper
documentation releasing all other LIENS, if any, on the related vessels;
(c) a SECURITY AGREEMENT (EQUIPMENT) duly executed by each INDEMNITOR
party to a VESSEL MORTGAGE and, unless already filed, executed Financing
Statements (UCC-1) to be filed in all jurisdictions in the opinion of
-16-
RELIANCE desirable to perfect the security interest created by such SECURITY
AGREEMENT (EQUIPMENT);
(d) The PLEDGE AGREEMENT duly executed by the INDEMNITORS referenced on
the signature pages thereto together with a photocopy of the Master Intercompany
Demand Note, evidence that Bank of America National Trust and Savings
Association, as administrative agent under the BANK LOAN FACILITY is in receipt
of the original of such Note and executed Financing Statements (UCC-1) to be
filed in all jurisdictions in the opinion of RELIANCE desirable to perfect the
security interest created by such PLEDGE AGREEMENT;
(e) The INTERCREDITOR AGREEMENT and the Proceeds Agent Agreement
contemplated thereby, duly executed by the PRINCIPALS, RELIANCE and the other
parties thereto;
(f) A favorable opinion of Winston & Strawn, counsel to the PRINCIPALS
and INDEMNITORS, addressing such legal matters as RELIANCE may require;
(g) A secretary's certificate of HOLDINGS certifying that the BANK LOAN
FACILITY and the 1998 DEBT INDENTURE are in full force and effect and attaching
copies of all documentation related thereto;
(h) An officer's certificate of each INDEMNITOR certifying copies of
such party's organizational documents, appropriate resolutions authorizing the
execution, delivery and performance of this Agreement and the other UNDERWRITING
DOCUMENTS to which such party is a party and certifying incumbencies and true
signatures of its officers so authorized;
(i) Evidence of the good standing of each INDEMNITOR in the jurisdiction
in which such party is organized;
(j) Evidence of the existence of insurance on the property of each
PRINCIPAL, together with evidence establishing RELIANCE as a loss payee and/or
additional insured on all insurance policies relating to any tangible property
on which RELIANCE has a first LIEN under the VESSEL MORTGAGES and the SECURITY
AGREEMENT (EQUIPMENT);
(k) Such other information and documents as may reasonably be required
by RELIANCE.
SECTION 4.2 CONDITIONS PRECEDENT TO ALL BONDS. The obligation of
---------------------------------
RELIANCE to issue any BOND shall be subject to the further conditions precedent
that on the date of such issuance:
-17-
(a) The following statements shall be true and, by its request for
the issuance of such BOND, the applicable PRINCIPAL shall be deemed to have
certified to RELIANCE that as of the date of such issuance:
(i) The representations and warranties contained in
Article V of this Agreement, in Section 4 of each SECURITY AGREEMENT
--------- ---------
(A/R), in Section 4 of each SECURITY AGREEMENT (EQUIPMENT), in Section 4
--------- ---------
of the PLEDGE AGREEMENT and in Article I of each of the VESSEL MORTGAGES
---------
are correct in all material respects on and as of the date of such
issuance as though made on and as of such date except to the extent
stated to relate to an earlier date, in which case such representation
and warranty shall be correct as of such earlier date; and
(ii) No EVENT OF DEFAULT has occurred and is continuing, or
would result from the issuance of such BOND;
(b) RELIANCE shall have received each of the following:
(i) a SECURITY AGREEMENT (A/R) duly executed by the
PRINCIPAL (other than LYDON) for whom such BOND is issued unless such
PRINCIPAL previously delivered a SECURITY AGREEMENT (A/R) pursuant to
SECTION 4.1(a), together with acknowledgment copies of the Financing
Statements (UCC-1) required to be filed pursuant to SECTION 4.1(a); and
--------------
(ii) such other approvals and documents as RELIANCE may
reasonably request.
ARTICLE V
REPRESENTATIONS AND WARRANTIES
The PRINCIPALS represent and warrant to RELIANCE that
SECTION 5.1 INCORPORATION, GOOD STANDING, AND DUE QUALIFICATION.
---------------------------------------------------
HOLDINGS and each SUBSIDIARY: (a) is a corporation or other legal entity duly
organized, validly existing and in good standing under the laws of the
jurisdiction of its organization; (b) has the organizational power and
authority, and has all material governmental licenses, authorizations, consents
and approvals, necessary to own its assets and to transact the business in which
it is now engaged or proposed to be engaged, except to the extent the failure
thereof could not reasonably be expected to have a MATERIAL ADVERSE CHANGE; and
(c) is duly qualified as a foreign organization and in good standing under the
laws of each other jurisdiction in which such qualification is required except
to the extent the failure to so qualify could not reasonably be expected to name
a MATERIAL ADVERSE CHANGE.
-18-
SECTION 5.2 CORPORATE POWER AND AUTHORITY. The execution, delivery, and
-----------------------------
performance by each PRINCIPAL and each INDEMNITOR of the UNDERWRITING DOCUMENTS
to which each is a party have been duly authorized by all necessary
organizational and stockholder action and do not and will not (a) contravene
such party's organizational documents; (b) violate any provision of any material
law, rule, regulation, order, writ, judgment, injunction, decree, determination,
or award presently in effect having applicability to such party; (c) result in a
breach of or constitute a default under any material indenture or loan or credit
agreement or any other material agreement, lease, or instrument to which such
party is a party or by which it or its properties may be bound or affected
(except where the appropriate consents have been obtained); (d) result in, or
require, the creation or imposition of any Lien (except LIENS in favor of
RELIANCE and LIENS arising under the BANK CREDIT FACILITY), upon or with respect
to any of the properties now owned or hereafter acquired by such party; or (e)
cause such party to be in default under any such law, rule regulation, order,
writ, judgment, injunction, decree, determination, or award or any such
indenture, agreement, lease, or instrument (except where the appropriate
consents have been obtained).
SECTION 5.3 LEGALLY ENFORCEABLE AGREEMENT. This Agreement is, and each
-----------------------------
of the other UNDERWRITING DOCUMENTS when delivered under this Agreement will be,
legal, valid, and binding obligations of each PRINCIPAL and each INDEMNITOR
party thereto, enforceable against such PRINCIPAL or INDEMNITOR, as the case may
be, in accordance with their respective terms, except to the extent that such
enforcement may be limited by applicable bankruptcy, insolvency, reorganization,
moratorium and other similar laws affecting creditors' rights generally and by
equitable principles (regardless of whether enforcement is sought at law or in
equity).
SECTION 5.4 APPROVALS. Except for filings and recordings of Liens
---------
created pursuant to the SECURITY AGREEMENTS and the VESSEL MORTGAGES, as of the
date of this Agreement, no authorizations, approvals or consents of, and no
filings or registrations with, any governmental or regulatory authority or
agency are necessary for the execution, delivery or performance by each
PRINCIPAL and each INDEMNITOR of the UNDERWRITING DOCUMENTS to which each is a
party or for the validity or enforceability thereof, other than those which have
been heretofore made or obtained.
SECTION 5.5 OWNERSHIP AND LIENS. Each of HOLDINGS and each SUBSIDIARY
-------------------
has title to, or valid leasehold interests in, all of its properties and assets,
real and personal, that are necessary for conduct of such Person's business and
none of the material properties and assets owned by HOLDINGS or any SUBSIDIARY
and none of their respective material leasehold interests is subject to any
LIEN, except such as may be permitted pursuant to Section 6.11 of this
------------
Agreement.
SECTION 5.6 TAXES. Each of HOLDINGS and each SUBSIDIARY has filed all
-----
material tax returns (federal, state, and local) required to be filed and has
paid all taxes, assessments, and governmental charges and levies thereon to be
due, including interest and
-19-
penalties, except to the extent the validity thereof is being contested in good
faith by appropriate proceedings and for which adequate reserves have been set
aside on its books in accordance with GAAP.
SECTION 5.7 INSURANCE. As of the date of this Agreement, each PRINCIPAL
---------
has insurance in force as disclosed in Schedule 5.7 attached hereto and made a
------------
part hereof.
SECTION 5.8 COMPLIANCE. Each of HOLDINGS and each SUBSIDIARY is in
----------
material compliance with all statutes and governmental rules and regulations
applicable to it, including without limitation, ERISA insofar as ERISA applies
to it, except to the extent the failure to be in compliance therewith could not
reasonably be expected to have a MATERIAL ADVERSE CHANGE. No condition exists
or event or transaction has occurred in connection with any PLAN which could
result in any liability, fine or penalty being asserted against HOLDINGS or any
SUBSIDIARY, in an aggregate amount in excess of $5,000,000.
SECTION 5.9 LITIGATION. There is no action, suit or proceeding pending
----------
against, or to the knowledge of HOLDINGS threatened against or affecting,
HOLDINGS or any SUBSIDIARY before any court or arbitrator or any government
body, agency or official in which there is a reasonable likelihood of an adverse
decision which could reasonably be expected to have a MATERIAL ADVERSE CHANGE or
which in any manner draws into question the validity of this Agreement except
those referred to in Schedule 5.9 attached hereto and made a part hereof.
------------
SECTION 5.10 SUBSIDIARIES. Schedule 5.10 attached hereto and made a part
------------ -------------
hereof sets forth a complete and accurate list, as of the date of this
Agreement, of each SUBSIDIARY of HOLDINGS and each SUBSIDIARY set forth on
Schedule 5.10 and designated with an asterisk ("*") is a wholly-owned SUBSIDIARY
- -------------
of HOLDINGS.
SECTION 5.11 REAL PROPERTY. Schedule 5.11 contains a complete and
------------- -------------
accurate list, as of the date of this Agreement, of the address of any real
property owned or leased by each PRINCIPAL with a net book value in excess of
$500,000.
SECTION 5.12 EQUIPMENT. Schedule 5.12 attached hereto and made a part
--------- -------------
hereof sets forth a complete and accurate list, as of the date of this
Agreement, of each item of equipment with a net book value in excess of $500,000
owned or leased by each PRINCIPAL.
SECTION 5.13 VESSELS. Schedule 5.13 attached hereto and made a part
------- -------------
hereof sets forth a complete and accurate list, as of the date of this
Agreement, of all vessels owned of record by any PRINCIPAL with a net book value
in excess of $500,000 and, except as set forth on Schedule 5.13, each such
-------------
vessel has all certificates required under applicable law (except where the
failure could not reasonably be expected to have a MATERIAL ADVERSE CHANGE),
including, without limitation, certificates of documentation, and, except as set
forth on Schedule 5.13, each such vessel has been certified by the U.S. Coast
-------------
Guard. Each such certificate is in full force and effect and each such vessel is
in seaworthy and operational condition. Reliance Insurance Company, as Agent,
has (or will have upon proper filing of the
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VESSEL MORTGAGES with the U.S. Coast Guard) a perfected security interest,
arising pursuant to the VESSEL MORTGAGES, in each vessel set forth on
Schedule 5.13 and designed with an asterisk.
- -------------
ARTICLE VI
COVENANTS
So long as any BONDS shall remain outstanding, HOLDINGS hereby covenants
and agrees with RELIANCE as follows:
SECTION 6.1 CORPORATE EXISTENCE. HOLDINGS will, and will cause each
-------------------
SUBSIDIARY to, maintain its legal existence (in good standing where appropriate
under local law) and remain or become duly qualified or licensed (and in good
standing where appropriate under local law) as a foreign organization in each
jurisdiction in which the conduct of its businesses or location of its assets
requires such qualification or license, except where the failure to take any
such action could not in the aggregate reasonably be expected to have a MATERIAL
ADVERSE CHANGE.
SECTION 6.2 MAINTENANCE OF RECORDS. HOLDINGS will, and will cause each
----------------------
SUBSIDIARY to, keep adequate records and books of account, in which complete
entries will be made in accordance with GAAP consistently applied.
SECTION 6.3 MAINTENANCE OF PROPERTIES. HOLDINGS will, and will cause
-------------------------
each SUBSIDIARY to, maintain, keep and preserve all of its properties (tangible
and intangible) necessary or useful in its business in good working order and
condition, ordinary wear and tear and damage caused by casualty excepted.
SECTION 6.4 MAINTENANCE OF INSURANCE. HOLDINGS will, and will cause
------------------------
each SUBSIDIARY to, maintain insurance with financially sound and reputable
insurance companies or associations in such amounts and covering such risks as
are usually carried by companies engaged in the same or a similar business and
similarly situated, which insurance may provide for reasonable deductibility
from coverage thereof. HOLDINGS further agrees to furnish RELIANCE upon written
request with an annual report on the insurance in force and with copies of the
policies of said insurance evidencing the existence of the coverage called for
by this Agreement.
SECTION 6.5 COMPLIANCE WITH LAWS. HOLDINGS will, and will cause each
--------------------
SUBSIDIARY to, comply in all respects with all applicable laws, rules,
regulations, and orders the failure to comply with which could reasonably be
expected to have a MATERIAL ADVERSE CHANGE, such compliance to include, without
limitation, paying before the same become delinquent all material taxes,
assessments, and governmental charges imposed upon it or upon its property,
except taxes, assessments and governmental charges being contested in good faith
by appropriate proceedings and for which adequate reserves have been set aside
on its books in accordance with GAAP.
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SECTION 6.6 TAXES. HOLDINGS will, and will cause each SUBSIDIARY to,
-----
promptly pay all of its material taxes, assessments and other governmental
charges prior to the date on which all penalties are attached thereto; provided,
--------
that nothing herein contained shall be interpreted to require the payment of any
tax, assessment or charge so long as its validity is being contested in good
faith by appropriate proceedings and for which adequate reserves have been set
aside on its books in accordance with GAAP.
SECTION 6.7 BOOKS AND RECORDS. Until RELIANCE shall have been furnished
-----------------
with evidence satisfactory to it that it has been discharged from its
obligations under all BONDS without LOSS, upon reasonable prior notice RELIANCE
shall have the right at reasonable times during normal business hours to free
access to the books and records of each of HOLDINGS and its SUBSIDIARIES,
including, without limitation, its books, records, accounts, computer software
and other computer-stored information, for the purpose of examining, copying, or
reproducing the same. Following the occurrence and during the continuance of an
EVENT OF DEFAULT, each PRINCIPAL authorizes and requests any and all
depositories in which funds of such PRINCIPAL may be deposited to furnish to
RELIANCE upon RELIANCE's written request statements of its account and any other
documents reflecting its receipts and disbursements, and any PERSON doing
business with such PRINCIPAL is authorized to furnish any information requested
by RELIANCE concerning any transaction. Subject to Section 8.11, RELIANCE may
------------
furnish copies of any and all statements, agreements and FINANCIAL STATEMENTS
and any information which it now has or may obtain concerning each of HOLDINGS
and its SUBSIDIARIES to other PERSONS for the purpose of procuring co-suretyship
or reinsurance.
SECTION 6.8 FINANCIAL RECORDS AND REPORTS. HOLDINGS will provide
-----------------------------
RELIANCE with copies of yearly audited FINANCIAL STATEMENTS of HOLDINGS and its
SUBSIDIARIES on a consolidated basis as soon as possible upon completion and in
no event later than ninety (90) days after the end of the period under audit.
In addition, HOLDINGS will furnish RELIANCE with true copies of quarterly
unaudited FINANCIAL STATEMENTS of HOLDINGS and its SUBSIDIARIES on a
consolidated basis, and such other financial information in a form as RELIANCE
may reasonably request, upon completion and in no event later than forty-five
(45) days after the end of each of the first three fiscal quarters of each
fiscal year. The FINANCIAL STATEMENTS to be provided by HOLDINGS will be
prepared in conformity with GAAP (except, with respect to unaudited FINANCIAL
STATEMENTS, for the absence of footnotes and subject to year-end audit
adjustments) applied on a basis consistent with that of the preceding fiscal
year and in each instance will present fairly and accurately the financial
condition of HOLDINGS and its SUBSIDIARIES on a consolidated basis as at the
dates of the statements and the results of their operations for the periods then
ended. HOLDINGS agrees to promptly notify RELIANCE of the occurrence of any
MATERIAL ADVERSE CHANGE.
SECTION 6.9 PRINCIPALS' REPRESENTATION. HOLDINGS will provide RELIANCE
--------------------------
on a quarterly basis with a letter in which an AUTHORIZED OFFICER of HOLDINGS
represents that to his or her knowledge, as of the date of such quarter end, no
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condition, event or act exists which constitutes, or which with notice or the
lapse of time, or both, would constitute an EVENT OF DEFAULT. This letter shall
accompany each delivery of FINANCIAL STATEMENTS required by Section 6.8 hereof.
-----------
SECTION 6.10 NOTICE OF LITIGATION. HOLDINGS shall promptly give notice
--------------------
in writing to RELIANCE of (a) any litigation filed or threatened against
HOLDINGS or any of its SUBSIDIARIES involving an amount in excess of $5,000,000
which claim is not covered by insurance and (b) all litigation filed against any
INDEMNITOR associated with any CONTRACT with respect to which five or more
separate litigation matters are then pending.
SECTION 6.11 LIENS. HOLDINGS will not, and will not permit any
-----
SUBSIDIARY to create, incur, assume, or suffer to exist any LIEN upon any of its
properties or assets now owned or hereafter acquired, except for PERMITTED
LIENS.
SECTION 6.12 DEBT AND CONTINGENT LIABILITIES. HOLDINGS will not, and
-------------------------------
will not permit any SUBSIDIARY to, incur, assume, or suffer to exist any DEBT or
CONTINGENT LIABILITY, except for:
(a) DEBT and CONTINGENT LIABILITY existing at the effective date of
this Agreement and disclosed on Schedule 6.12 attached hereto and any renewals,
-------------
extensions, refinancings or replacements thereof, provided, that the terms
--------
thereof are not materially more burdensome on the INDEMNITORS than the existing
terms ;
(b) endorsement of instruments for deposit or collection in the ordinary
course of business;
(c) CONTINGENT LIABILITIES in connection with third party leases,
repurchase agreements or sales in the ordinary course of business;
(d) DEBT and CONTINGENT LIABILITIES in respect of factoring or
financing of accounts receivable with respect to any contract or series of
contracts under which the amounts payable to HOLDINGS or any SUBSIDIARY are
payable in whole or in part in the currency of any country other than the United
States of America, sold or pledged on a non-recourse basis in an aggregate
amount not to exceed $10,000,000;
(e) DEBT of the PRINCIPALS and INDEMNITORS arising under this Agreement
and under the other UNDERWRITING DOCUMENTS;
(f) DEBT and CONTINGENT LIABILITIES arising under (i) the BANK LOAN
FACILITY; provided, that the aggregate principal amount of all loans plus the
--------
undrawn face amount of all letters of credit outstanding under the BANK LOAN
FACILITY shall at no time exceed $130,000,000; and (ii) the 1998 DEBT INDENTURE;
provided, that the aggregate principal amount outstanding under the 1998 DEBT
- --------
INDENTURE shall at no time exceed $115,000,000;
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(g) DEBT and CONTINGENT LIABILITIES under or in respect of capital
leases;
(h) DEBT of HOLDINGS to any SUBSIDIARY and DEBT of any SUBSIDIARY to
HOLDINGS or any other SUBSIDIARY to the extent permitted by Section 6.15;
------------
(i) DEBT consisting of deferred payment obligations of a PRINCIPAL
for insurance premiums or of funds borrowed for the payment of such premiums;
(j) CONTINGENT LIABILITIES consisting of guaranties by HOLDINGS or
any SUBSIDIARY of obligations of HOLDINGS or any SUBSIDIARY, as the case may be,
under any DEBT otherwise permitted hereunder or under any lease or other
agreement (not representing DEBT) entered into in the ordinary course of
business; provided, that the aggregate amount of such CONTINGENT LIABILITIES of
--------
INDEMNITORS relating to DEBT of LIMITED SUBSIDIARIES, when added to the other
RESTRICTED AMOUNTS then outstanding, shall not exceed at any time $30,000,000;
(k) DEBT incurred in the ordinary course of business in the nature
of open accounts (extended by suppliers on normal trade terms in connection with
purchasers of goods or services) accrued liabilities and deferred income, taxes
and judgements or orders for the payment of money to the extent such judgments
or orders do not result in any EVENT OF DEFAULT;
(l) DEBT and CONTINGENT LIABILITIES incurred to finance the acquisition
of assets in the ordinary course of business so long as the amount of such DEBT
does not exceed the purchase price of the assets acquired with the proceeds
thereof;
(m) DEBT arising from the issuance of license, bid, performance and
lien bonds, and other undertakings or instruments of guaranty, whether issued by
RELIANCE or any other surety for the benefit of HOLDINGS or any SUBSIDIARY;
(n) DEBT incurred in connection with any interest rate hedging
transaction, foreign currency or commodity hedging transactions, foreign
exchange contract or other similar arrangement entered into by HOLDINGS or any
SUBSIDIARY;
(o) CONTINGENT LIABILITIES consisting of guaranties by HOLDINGS or
any SUBSIDIARY of obligations of Amboy Aggregates, a New Jersey joint venture,
and its SUBSIDIARIES; provided, that the aggregate amount of such CONTINGENT
--------
LIABILITIES of INDEMNITORS, shall not exceed at any time $17,000,000;
(p) DEBT OF SUBSIDIARIES which represents the assumption by such
SUBSIDIARIES of DEBT of another SUBSIDIARY in connection with the merger of
-24-
such other SUBSIDIARY with and into the assuming SUBSIDIARY or the purchase of
all or substantially all of the assets of such other SUBSIDIARY;
(q) all premiums, interest, fees, expenses, indemnities, charges and
additional or contingent interest on obligations described in this Section 6.12;
------------
(r) [Reserved]
(s) other DEBT of HOLDINGS and its SUBSIDIARIES in an aggregate
amount, determined on a consolidated basis with respect to HOLDINGS and its
SUBSIDIARIES, at any time outstanding not to exceed $5,000,000.
SECTION 6.13 DISPOSITION OF ASSETS; ISSUANCE OF EQUITY.
-----------------------------------------
(a) Except for PERMITTED LIENS, HOLDINGS will not, and will not
permit its SUBSIDIARIES to, sell, lease, transfer, or otherwise dispose of its
assets whether now owned or hereafter acquired except for
(i) sales of inventory in the ordinary course of business,
(ii) the sale or other disposition of any investment of the
type described in clauses (a) through (e), (h) and (j) of Section 6.15,
------------
(iii) a disposition made in connection with a sale and
leaseback transaction involving the sale or disposition of capital assets,
provided (A) such sale or disposition is for an amount not less than the
fair market value thereof and (B) any DEBT arising in connection therewith
is permitted by Section 6.12,
------------
(iv) a sale, lease or other disposition that either (A) is
made in the ordinary course of business for fair market value, (B) is a
sale, lease or transfer from HOLDINGS to any SUBSIDIARY or from a
SUBSIDIARY to HOLDINGS or any other SUBSIDIARY; provided, that, in the case
--------
of a sale, lease or other disposition by HOLDINGS or any SUBSIDIARY which
is not a LIMITED SUBSIDIARY to a LIMITED SUBSIDIARY, the fair market value
of such assets, when added to the other RESTRICTED AMOUNTS then
outstanding, shall not exceed at any time $30,000,000 or (C) is a lease (on
a short-term or long-term basis) to another Person of assets no longer
useful or necessary in the operations of businesses of HOLDINGS and its
SUBSIDIARIES,
(v) a sale or other disposition of assets no longer useful
or necessary in the operations or businesses of HOLDINGS and its
SUBSIDIARIES and the purchase price is not less than the fair market value
of the asset sold or disposed of,
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(vi) a sale or other disposition of accounts receivable
arising in the ordinary course of business which are overdue and which
HOLDINGS or any SUBSIDIARY have determined are not economical to collect,
and
(vii) other dispositions, provided, that such dispositions do
--------
not exceed in the aggregate in any fiscal year ten percent (10%) of the
book value of all assets.
(b) HOLDINGS further agrees that it shall not permit its SUBSIDIARIES to
authorize or issue additional shares of their capital stock or similar equity
interest except (i) shares or similar equity interests issued to HOLDINGS or a
wholly-owned SUBSIDIARY of HOLDINGS, (ii) shares of capital stock or equity
interests issued by (1) any non-wholly owned SUBSIDIARY to its holders of
capital stock or equity interests on a proportionate basis and (2) a newly
created SUBSIDIARY to another PERSON in connection with any joint venture,
provided that such newly created SUBSIDIARY's business and activities shall be
- --------
limited to the conduct of such joint venture, and (iii) for directors'
qualifying shares and similar issuances pursuant to local law requirements.
SECTION 6.14 MERGERS. HOLDINGS will not, and will not permit its
-------
SUBSIDIARIES to, merge or consolidate with or into or purchase or otherwise
acquire all or substantially all of the assets of, or stock or other equity
interest in, any PERSON unless (a) after giving effect to such transaction
HOLDINGS shall be in compliance with the provisions of Section 6.19 and 6.20 and
------------ ----
(b) if such transaction involves an INDEMNITOR, the surviving entity shall have
executed and delivered to RELIANCE a SUPPLEMENTAL SIGNATURE PAGE; provided, that
--------
(x) any wholly-owned SUBSIDIARY which is an INDEMNITOR may merge or consolidate
into HOLDINGS or into or with any other wholly-owned SUBSIDIARY which is an
INDEMNITOR, (y) any wholly-owned SUBSIDIARY which is not an INDEMNITOR may merge
or consolidate into HOLDINGS or into or with any other wholly-owned SUBSIDIARY,
provided, that in the event an INDEMNITOR is a party to such merger or
- --------
consolidation, an INDEMNITOR must survive the transaction and (z) any wholly-
owned SUBSIDIARY may sell, transfer, convey, lease or assign its assets or a
substantial part thereof to HOLDINGS or any other wholly-owned SUBSIDIARY,
provided, that in the case of a sale, transfer, conveyance, lease or assignment
- --------
by such a SUBSIDIARY which is an INDEMNITOR, the other party to such transaction
must also be an INDEMNITOR. Notwithstanding the foregoing, HOLDINGS and its
SUBSIDIARIES may consummate the transactions contemplated by the MERGER
AGREEMENT.
SECTION 6.15 INVESTMENTS. HOLDINGS will not, and will not permit its
-----------
SUBSIDIARIES to, make or suffer to exist any investment in any PERSON whether in
the form of equity, DEBT or CONTINGENT LIABILITY, except:
(a) Cash Equivalent Investments;
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(b) investments permitted as DEBT or CONTINGENT LIABILITIES under
Section 6.12 and investments permitted under Section 6.14;
- ------------ ------------
(c) investments existing on the effective date of this Agreement and
disclosed in Schedule 6.15;
-------------
(d) accounts receivable arising from, and credit extended in connection
with, the sale of goods or rendering of services in the ordinary course of
business and promissory notes or other instruments evidencing such credit or
partial satisfaction thereof;
(e) investments, DEBT and CONTINGENT LIABILITIES in HOLDINGS or its
SUBSIDIARIES; provided, that the aggregate amount of investments in LIMITED
--------
SUBSIDIARIES, when added to the other RESTRICTED AMOUNTS then outstanding, shall
not exceed at any time $30,000,000;
(f) loans or advances to employees of HOLDINGS and its SUBSIDIARIES made
in the ordinary course of business consistent with past business practices;
(g) investments made in the ordinary course of business in connection
with its capacity as a co-joint venturer in a joint venture, corporation or
similar pooling of efforts in respect of a specific project or series of
projects for a limited or fixed duration to conduct a business of a type in
which a PRINCIPAL is presently engaged consistent with past practices;
(h) investments in Amboy Aggregates, a New Jersey joint venture,
existing on the date hereof and disclosed on Schedule 6.15 and additional
-------------
investments therein made after the date hereof; provided, that the amount of
--------
such additional investments (excluding increases solely as a result of increases
in the retained earnings of Amboy Aggregates) shall not exceed at any time
$10,000,000.
(i) other investments in an aggregate amount at any one time not to
exceed $15,000,000;
For purposes of this Section 6.15, "Cash Equivalent Investments" means, at
------------ ---------------------------
any item:
(a) any obligation, maturing not more than one year after such time,
issued or guaranteed by the United States Government or issued by an
agency thereof and backed by the full faith and credit of the United
States of America;
(b) marketable general obligations, maturing not more than six months
after such time, issued by any state of the United States of America
or any political subdivision of any such state or any public
instrumentality thereof and rated A-2 or higher by Standard & Poor's
-27-
Rating Group, a division of McGraw Hill Inc. or P-2 or higher by
Moody's Investors Service, Inc.;
(c) commercial paper, maturing not more than nine months from the date
of issue, which is issued by a corporation organized under the laws
of any state of the United States or of the District of Columbia and
rated A-2 or higher by Standard & Poor's Rating Group, a division of
McGraw Hill Inc. or P-2 or higher by Moody's Investors Service,
Inc.;
(d) any certificate of deposit, time or demand deposit or bankers
acceptance, maturing not more than one year after such time, which
is issued by a commercial banking institution organized under the
laws of the United States of America or any State thereof or the
District of Columbia that has a combined capital, surplus and
undivided profits of not less than $100,000,000, or any Lender or
commercial banking institution organized under the laws of the
United Kingdom, Canada or Japan having combined capital, surplus and
undivided profits of not less than $100,000,000;
(e) fully collateralized repurchase agreements with a term of not more
than 30 days for underlying securities of the type described in
clauses (a) and (b) above, entered into with any institution meeting
----------- ---
the qualifications specified in clause (d) above;
----------
(f) participations in loans made to a borrower with a debt rating of A-2
or higher form Standard & Poor's Rating Group, a division of McGraw
Hill Inc. or P-2 or higher from Moody's Investor Service, Inc.;
provided, that such loans must mature within six months form the
--------
date such participation is purchased;
(g) short-term asset management accounts for the purpose of investing in
notes issued by a corporation organized under the laws of any state
of the United States or of the District of Columbia and rated A-2 or
higher by Standard & Poor's Rating Group, a division of McGraw Hill
Inc. or P-2 or higher by Moody's Investors Service, Inc.; or
(h) bonds issued by a municipality or governmental agency and rate not
lower than (i) BBB by Standard & Poor's Corporation or (ii) Baa2 by
Moody's Investors Service, Inc. and purchased by HOLDINGS or any of
its SUBSIDIARIES in the ordinary course of its business in
connection with retainage under contracts with its customers.
SECTION 6.16 DIVIDEND RESTRICTIONS. HOLDINGS will not pay any dividend
---------------------
or make any other distribution to any PERSON, except:
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(a) dividends or distributions payable in common stock or warrants to
purchase common stock or splitups or reclassification of its stock into
additional or other shares of its common stock;
(b) cash dividends or other distributions payable by HOLDINGS not to
exceed in aggregate during the term of this Agreement the sum of (i) $5,000,000
plus (ii) fifty percent (50%) of the sum of the positive NET INCOME (if any) for
- ----
the fiscal quarter of HOLDINGS ending on or about December 31, 1998 plus (iii)
----
fifty percent (50%) of the sum of positive NET INCOME (if any) for each fiscal
year of HOLDINGS ending on or after December 31, 1999; provided, that both
--------
before and after giving effect to such dividends or distributions HOLDINGS shall
be in compliance with the provisions of Section 6.19 and 6.20; and
------------ ----
(c) cash dividends or distributions made pursuant to (i) the MERGER
AGREEMENT (including, without limitations, dividends or distributions made after
the date of this Agreement pursuant to Sections 2.6 and 2.11 of the MERGER
------------ ----
AGREEMENT) and (ii) the separate agreement entered into by HOLDINGS and certain
members of senior management of HOLDINGS with respect to the reimbursement of
taxes payable by such senior management in connection with the consummation of
the transactions contemplated by the MERGER AGREEMENT, provided, that in the
--------
case of the foregoing clause (ii), such dividends and/or distributions shall not
exceed in aggregate $4,000,000.
SECTION 6.17 RESTRICTIONS UPON CONTRACTS WITH AFFILIATES. Other than
-------------------------------------------
amongst themselves, HOLDINGS and its SUBSIDIARIES will not without the prior
written consent of RELIANCE enter into contracts, equipment leases or other
agreements with any AFFILIATE except on an arms' length basis or except (a)
pursuant to written agreements with third party PERSONS from which HOLDINGS and
its SUBSIDIARIES have been or are being benefitted, including but not limited to
pension plans and other joint employee benefit programs, insurance programs and
other similar joint programs or services, (b) the payment by HOLDINGS and its
SUBSIDIARIES to Vectura Holding Company LLC, or any of its AFFILIATES of out of
pocket costs and expenses owed to PERSONS who are not AFFILIATES and (c)
transactions contemplated by the MERGER AGREEMENT and the EQUITY DOCUMENTS.
SECTION 6.18 NATURE OF BUSINESS. HOLDINGS and its SUBSIDIARIES shall not
------------------
engage in any business activities or operations substantially different from or
unrelated to its present business activities and operations; provided, that
--------
HOLDINGS and its SUBSIDIARIES may engage in activities that are reasonably
related or ancillary to its business activities or operations.
SECTION 6.19 NET WORTH. HOLDINGS and its consolidated SUBSIDIARIES shall
---------
not permit NET WORTH as of the last day of any fiscal quarter of HOLDINGS ending
after the date hereof, to be less than the sum of (i) -56,100,000 plus (ii)
fifty percent (50%) of the
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sum of the positive NET INCOME (if any) for the fiscal quarter of HOLDINGS
ending on or about December 31, 1998, plus (iii) fifty percent (50%) of the sum
----
of the positive NET INCOME (if any) for each fiscal year of HOLDINGS ending on
or after December 31, 1999 and prior to the date of determination hereunder.
SECTION 6.20 NET CURRENT ASSETS. HOLDINGS will not permit the ratio
------------------
of its consolidated current assets to its consolidated current liabilities as of
the last day of each fiscal quarter of HOLDINGS to be less than 1.4 to 1 and
will not permit its net current assets as of the last day of each fiscal quarter
of HOLDINGS to be less than $17,000,000; provided, that in the event HOLDINGS
--------
fails to maintain either of these levels it shall immediately notify RELIANCE
and shall have thirty (30) days in which to restore its position. In the
determination of current assets, pipe inventory shall be classified as a current
asset; and provided further, that for purposes of calculating consolidated
-------- -------
current liabilities, current maturities of DEBT will be excluded from the
calculation thereof to the extent HOLDINGS or any of its SUBSIDIARIES is able to
repay such current maturities through the incurrence of other non-current DEBT
(including, without limitation, through borrowings under the BANK LOAN
FACILITY).
SECTION 6.21 SUBORDINATED DEBT AND PAYMENT BLOCKAGE
NOTICE.
--------------------------
(a) HOLDINGS shall not, and shall not suffer or permit any of its
SUBSIDIARIES to, (i) make any payment (other than any payment utilizing proceeds
from the issuance of any equity securities by HOLDINGS or any parent entity) of
interest on any SUBORDINATED DEBT on any day other than the stated, scheduled
date (subject to any applicable grace period) for such payment set forth in the
document or agreement evidencing or governing such SUBORDINATED DEBT, (ii) make
any voluntary or mandatory prepayment (other than any payment utilizing proceeds
from the issuance of any equity securities by HOLDINGS or any parent entity) of
principal of, or redeem, purchase or defease, any SUBORDINATED DEBT, or (iii)
consent to any amendment, supplement or other modification of any of the terms
or provisions contained in, or applicable to, any document or agreement
evidencing or governing SUBORDINATED DEBT, except to the extent that such
amendment, supplement or other modification would extend the date or reduce the
amount of any required repayment or redemption or would amend, supplement or
modify any term or provision in a manner not adverse to the rights or interests
of RELIANCE.
(b) HOLDINGS shall promptly give notice in writing to RELIANCE of the
receipt by the Trustee under the 1998 DEBT INDENTURE of any PAYMENT BLOCKAGE
NOTICE.
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ARTICLE VII
RIGHTS OF RELIANCE
SECTION 7.1 FURTHER ASSURANCES/RELIANCE AS ATTORNEY-IN-FACT.
-----------------------------------------------
PRINCIPALS agree to sign, execute, file and/or deliver to RELIANCE all
documents, reports, papers, pleadings and/or instruments reasonably requested by
RELIANCE to obtain, and/or perfect any of RELIANCE's rights under this
Agreement. The INDEMNITORS irrevocably nominate and appoint RELIANCE or any
other PERSON(s) designated by RELIANCE, effective upon the occurrence and during
the continuance of an EVENT OF DEFAULT, true and lawful attorney-in-fact of the
INDEMNITORS, with full right and authority, upon the occurrence and during the
continuance of an EVENT OF DEFAULT to execute on behalf of, and sign the names
of each INDEMNITOR to any voucher, release, satisfaction, check, application for
payment, bill of sale of any or all property assigned by this Agreement or any
other UNDERWRITING DOCUMENT to RELIANCE or any other paper or contract necessary
or desired to carry into effect the purposes of this Agreement or any other
UNDERWRITING DOCUMENT, with full right and authority, to satisfy the performance
of the CONTRACT(s); and each INDEMNITOR ratifies and confirms all that such
attorney-in-fact or RELIANCE may lawfully do in the premises and further
authorizes and empowers RELIANCE and such attorney-in-fact and each of them to
enter upon and take possession of the tools, plant, equipment, materials and
subcontracts and all other collateral security mentioned in this Agreement and
enforce, use, employ and dispose thereof for the purposes set forth in this
Agreement, INDEMNITORS recognize that the appointment of such attorney-in-fact
constitutes a power coupled with an interest.
SECTION 7.2 CONTRACT FUNDS HELD IN TRUST. INDEMNITORS and PRINCIPALS
----------------------------
agree and expressly declare that upon the occurrence and during the continuance
of an EVENT OF DEFAULT all funds due or to become due under the CONTRACT(s) will
immediately become trust funds, whether in possession of INDEMNITORS, PRINCIPALS
or another, for the benefit and the payment of all PERSONS to whom a PRINCIPAL
incurs obligations in the performance of the CONTRACT(s), for which RELIANCE
would be liable under the BOND(s). If RELIANCE discharges any such obligations,
with or without a claim asserted against RELIANCE under the BOND(s), it shall be
entitled to assert the right of such PERSON to the trust fund.
SECTION 7.3 RIGHT OF RELIANCE TO SETTLE CLAIMS. RELIANCE shall have
----------------------------------
the exclusive right for itself and for INDEMNITORS and PRINCIPALS to decide and
determine whether any claim, demand, suit or judgment on the BOND(s) shall be
paid, settled, defended or appealed. Any payment or determination made by
RELIANCE under a good faith belief that either RELIANCE was or might be liable
therefor or such payments were necessary or advisable to protect any of
RELIANCE's rights or to avoid or lessen RELIANCE's liability or alleged
liability, shall be final, conclusive and binding upon INDEMNITORS and the
PRINCIPALS; and any LOSS which may be sustained or incurred shall be paid by the
respective PRINCIPAL or by INDEMNITORS within fifteen (15) days of receipt of
written demand by RELIANCE. In the event of any payment, settlement, compromise,
or investigation, an itemized
-31-
statement of LOSS sworn to by an officer or authorized representative of
RELIANCE or voucher(s) or other evidence of such LOSS shall be prima facie
evidence of the fact and extent of the liability of INDEMNITORS and the
PRINCIPALS to RELIANCE in any claim or suit and in any and all matters arising
between INDEMNITORS, the PRINCIPALS and RELIANCE.
SECTION 7.4 AUTHORITY OF RELIANCE TO MAKE LOANS TO PRINCIPAL. In
------------------------------------------------
addition to the other remedies provided herein, RELIANCE is authorized and
empowered, but is not obligated, to advance or loan money or guarantee loans to
any PRINCIPAL as RELIANCE may see fit for the purpose of any of the CONTRACT(s),
or for the purpose of meeting operational expenses or paying other obligations,
bonded or unbonded. Such funds may be advanced or guaranteed at anytime,
whether before or after default of such PRINCIPAL under the CONTRACT(s). Upon
demand by RELIANCE, each INDEMNITOR shall be responsible to reimburse RELIANCE
for all funds so loaned, advanced, or guaranteed and all LOSS incurred by
RELIANCE in relation thereto, notwithstanding the failure of any PRINCIPAL to so
use those funds. INDEMNITORS waive all notice of such advance, loan, or
guarantee.
SECTION 7.5 AUTHORITY OF RELIANCE TO AMEND BOND. RELIANCE shall have
-----------------------------------
the right, and is hereby authorized and empowered, but not required: (a) upon
the request of any INDEMNITOR to increase or decrease the penalty or penalties
of any BOND(s), to change the OBLIGEE(s) therein, to execute any continuation,
enlargements, modifications and renewals thereof or substitute therefor with the
same or different conditions, provisions or OBLIGEE(s), and with the same,
larger or smaller penalties, it being agreed that this instrument shall apply to
and cover such new or changed BOND(s) or renewals even though the consent of
RELIANCE may or does substantially increase the liability of the INDEMNITORS and
the PRINCIPALS; or (b) to take such steps as it may deem necessary or proper to
obtain release from liability under the BOND(s); or (c) to assent to any changes
in any CONTRACT, including but not limited to, any change in the time for
completion of any CONTRACT and to payments or advances thereunder.
SECTION 7.6 RIGHTS OF RELIANCE TO TAKE POSSESSION OF THE WORK. Upon
-------------------------------------------------
the occurrence and during the continuance of an EVENT OF DEFAULT (for the
avoidance of doubt, after giving effect to all applicable grace periods
contained in the definition of EVENT OF DEFAULT), in addition to other remedies
provided herein, RELIANCE is authorized and empowered, but is not obligated, to
take possession of the work under any CONTRACT(s) and at the expense of the
respective PRINCIPAL and of INDEMNITORS to complete or to contract for the
completion of the same, or to consent to the reletting of the completion thereof
by OBLIGEE, or to take such other steps as in the discretion of RELIANCE may be
advisable or necessary to obtain its release or to avoid LOSS.
SECTION 7.7 DEPOSITORY TRUST ACCOUNTS. Upon the occurrence and during
-------------------------
the continuance of an EVENT OF DEFAULT (for the avoidance of doubt, after giving
effect to all applicable grace periods contained in the definition of EVENT OF
DEFAULT), PRINCIPALS shall, upon demand of RELIANCE, open an account(s) with a
bank or similar depository designated by PRINCIPALS and approved by RELIANCE,
which account(s) shall be
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designated as trust account(s) for the deposit of such trust funds, and shall
deposit therein all monies paid or to be paid under the CONTRACT(s). Withdrawals
from such account(s) shall be by check or similar instruments signed by a
representative of RELIANCE and, at RELIANCE's option, countersign by an
PRINCIPAL. Said trust(s) shall terminate on the payment by INDEMNITORS and
PRINCIPALS of all the contractual obligations for the payment of which the
trust(s) are created or upon the expiration of seven (7) years from the date
thereof, whichever shall first occur.
SECTION 7.8 PRESERVATION OF RELIANCE'S RIGHTS. RELIANCE shall have
---------------------------------
every right and remedy which a personal surety without compensation would have,
including the right to secure its discharge from the suretyship, and nothing in
this Agreement shall waive, abridge or diminish any right which RELIANCE might
have if this Agreement were not executed.
SECTION 7.9 AUTHORITY OF RELIANCE TO ELECT REMEDIES. Each right,
---------------------------------------
remedy and power of RELIANCE provided in this Agreement or by law, equity, or
statute shall be cumulative, and the exercise by RELIANCE of any right, remedy
or power shall not preclude RELIANCE's simultaneous or subsequent exercise of
any or all other rights, powers or remedies. The failure or delay by RELIANCE to
exercise any right, power or remedy shall not waive any right, power or remedy.
No notice or demand upon RELIANCE by any INDEMNITOR or any PRINCIPAL shall limit
or impair RELIANCE's right to take any action under this Agreement or to
exercise any right, power or remedy, subject to the provisions of Section 3.5
-----------
herein.
ARTICLE VIII
MISCELLANEOUS
SECTION 8.1 BENEFICIAL PARTIES. This Agreement shall, in all its terms
------------------
and agreements, be for the benefit of and protect any PERSON joining with
RELIANCE in executing any BOND or BONDS or executing at the request of RELIANCE
said BOND or BONDS as well as any PERSON assuming co-suretyship or reinsurance
thereupon.
SECTION 8.2 JOINT AND SEVERAL. The agreements and covenants herein
-----------------
contained shall be binding upon the undersigned, both jointly and severely, upon
their successors and assigns jointly and severely, provided, that the PRINCIPALS
--------
and the INDEMNITORS may not assign their rights hereunder without the prior
written consent of RELIANCE.
SECTION 8.3 ATTORNEYS FEES. The INDEMNITORS agree hereby to pay the
--------------
reasonable attorneys fees and expenses incurred by RELIANCE in the preparation
and enforcement of this Agreement and the other UNDERWRITING DOCUMENTS.
SECTION 8.4 APPLICABLE LAW. The terms and conditions of this Agreement
--------------
shall be construed under the laws of Pennsylvania.
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SECTION 8.5 JURISDICTION FOR SUITS UNDER THIS AGREEMENT. Separate
-------------------------------------------
suits may be brought hereunder as causes of action may accrue, and the pendency
or termination of any such suit shall not bar any action, whether previously or
subsequently arising. PRINCIPALS and INDEMNITORS consent to the jurisdiction of
the state and federal court located in Philadelphia, PA to bring any action
against them under this Agreement or the BOND(s). Each PRINCIPAL and each
INDEMNITOR are the agents for all PRINCIPALS and all INDEMNITORS for the purpose
of accepting service of process.
SECTION 8.6 INDEMNITORS WAIVE DEFENSE OF SUBSEQUENT EXECUTION.
-------------------------------------------------
INDEMNITORS waive any defense that this Agreement was executed subsequent to any
BOND, admitting that such BOND was executed pursuant to each INDEMNITOR'S
request and in reliance upon INDEMNITORS' promise to execute this Agreement.
SECTION 8.7 VALIDITY OF AGREEMENT. Failure to execute, or defective
---------------------
execution, by any party shall not affect the validity of this Agreement as to
any other party executing the same and each other party shall remain fully bound
and liable hereunder. Invalidity of any portion or provision of this Agreement
by reason of the laws of any state or for any other reason shall not render the
other provisions or portions invalid. Executions of any application or
submission for any BOND by any PRINCIPAL, or of any other indemnity agreement by
any INDEMNITOR for the PRINCIPALS shall not abrogate, waive or diminish any
rights of RELIANCE under this Agreement. This Agreement may be executed
simultaneously in one or more counterparts, each of which shall be an original,
but all of which together shall constitute one and the same instrument.
SECTION 8.8 ORAL MODIFICATIONS INEFFECTIVE. This Agreement may not be
------------------------------
changed or modified orally. No change or modification to this Agreement shall
be effective unless specifically agreed to in writing and executed by RELIANCE
and HOLDINGS.
SECTION 8.9 NOTICES. It is mutually agreed that any and all notices or
-------
demands herein provided for must be given in writing and shall be deemed given
if and when delivered in person or duly deposited in the United States mails,
postage prepaid for regular or certified mail, properly addressed to the party
to whom given at the address of such party shown in this Agreement; provided,
--------
that any party may specify any other post office address in the United States by
giving at least ten (10) days written notice thereof to the other party.
Notice to RELIANCE shall be sent to:
Reliance Insurance Company
Three Parkway
Philadelphia, PA 19102-1376
Attention: Surety Department
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Notice to any PRINCIPAL or to any INDEMNITOR shall be sent to:
Great Lakes Dredge & Dock Corporation
2122 York Road
Oak Brook, IL 60523
Attention: Bruce J. Biemeck
Chief Financial Officer
With a copy to:
Winston & Strawn
35 W. Wacker Drive
Chicago, Illinois 60601
Attention: Brian S. Hart, Esq.
SECTION 8.10 REAFFIRMATION AND RESTATEMENT. and restatement of the
-----------------------------
ORIGINAL AGREEMENT and the DEBT evidenced by the ORIGINAL AGREEMENT is
continuing DEBT. Nothing herein shall be deemed to constitute a payment,
settlement or novation of the DEBT evidenced by the ORIGINAL AGREEMENT, or to
release or otherwise adversely affect any LIEN securing such DEBT or any rights
RELIANCE has against any guarantor, surety or other party primarily or
secondarily liable for such DEBT.
SECTION 8.11 CONFIDENTIALITY. RELIANCE agrees that they will maintain
---------------
the confidentiality of any written or oral information provided to RELIANCE by
or on behalf of HOLDINGS or any of its SUBSIDIARIES (hereinafter collectively
called "Confidential Information"), subject to RELIANCE'S (a) obligation to
------------------------
disclose any such Confidential Information pursuant to a request or order under
applicable laws and regulations or pursuant to a subpoena or other legal
process, (b) right to disclose any such Confidential Information to its
examiners, auditors, counsel and other professional advisors, (c) right to
disclose any such Confidential Information in connection with any litigation or
dispute involving RELIANCE and HOLDINGS or any of its SUBSIDIARIES (d) right to
provide such information to other Persons for the purpose of procuring co-
suretyship or reinsurance if such Person agrees in writing to maintain the
confidentiality of such information on terms substantially similar to those of
this Section as if it were a party hereto. Notwithstanding the foregoing, any
such information supplied to RELIANCE or another Person under this Agreement
shall cease to be Confidential Information if it is or becomes known to such
Person by other than unauthorized disclosure, or if it becomes a matter of
public knowledge.
SECTION 8.12 RELEASE OF LIENS. RELIANCE agrees to release the LIENS
----------------
under the SECURITY AGREEMENTS, the VESSEL MORTGAGES, and any other UNDERWRITING
DOCUMENTS, and to execute and deliver such documents and instruments requested
by any PRINCIPAL to effect such release;
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(a) on any property or assets in which the agent under the BANK LOAN
FACILITY has a first priority LIEN and if such first priority LIEN is released
by the agent under the BANK LOAN FACILITY;
(b) on any property or assets for which substitute collateral is provided
with an appraisal value at least equal to the value of the property or assets
released;
(c) on all collateral upon termination of this Agreement and payment in
full of all obligations under this Agreement; and
(d) on any property or assets upon the sale, transfer or other disposition
of such property or assets which is otherwise permitted under this Agreement, up
to an aggregate fair market value, as determined in good faith by the applicable
PRINCIPAL selling such property or assets, not to exceed $5,000,000 during the
term of this Agreement; provided, that RELIANCE is given prior written notice of
--------
the fair market value of such transaction.
IN WITNESS WHEREOF, this Agreement is executed by the parties on the day and
date first set forth above.
GREAT LAKES DREDGE & DOCK CORPORATION
BY:
--------------------------------
Its
-----------------------------
GREAT LAKES INTERNATIONAL, INC.
BY:
--------------------------------
Its
-----------------------------
GREAT LAKES DREDGE & DOCK COMPANY
BY:
--------------------------------
Its
-----------------------------
LYDON DREDGING & CONSTRUCTION COMPANY, LTD.
BY:
--------------------------------
Its
-----------------------------
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GATES CONSTRUCTION CORPORATION
BY:
--------------------------------
Its
-----------------------------
NATCO DREDGING LIMITED PARTNERSHIP
BY:
--------------------------------
Its
-----------------------------
NORTH AMERICAN TRAILING COMPANY
BY:
--------------------------------
Its
-----------------------------
FIFTY-THREE DREDGING COMPANY
BY:
--------------------------------
Its
-----------------------------
DAWSON DREDGING COMPANY
BY:
--------------------------------
Its
-----------------------------
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RELIANCE INSURANCE COMPANY
UNITED PACIFIC INSURANCE COMPANY
RELIANCE NATIONAL INSURANCE COMPANY
RELIANCE SURETY COMPANY
BY:
--------------------------------
--------------------------------
Its
-----------------------------
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