exv10w11






EXHIBIT
10.11




MISSISSIPPI BUSINESS FINANCE CORPORATION




and



NORTHROP GRUMMAN SHIP SYSTEMS, INC.



 






LOAN AGREEMENT




 






Dated as of December 1, 2006




Relating to




$200,000,000

Gulf Opportunity Zone Industrial Development Revenue Bonds

(Northrop Grumman Ship Systems, Inc. Project),

Series 2006








 









 








LOAN AGREEMENT




TABLE OF CONTENTS



(This Table of Contents is for convenience of reference

only and is not a part of this Loan Agreement.)



	 	 	 	 	 
	 	 	PAGE	 
	ARTICLE I DEFINITIONS
	 	 	1	 
	 
	 	 	 	 
	ARTICLE II ACQUISITION AND REHABILITATION OF THE PROJECT; ISSUANCE OF THE BONDS
	 	 	2	 
	SECTION 2.1. Acquisition and Rehabilitation of the Project
	 	 	2	 
	SECTION 2.2. Issuance of the Bonds
	 	 	3	 
	SECTION 2.3. Benefits Under the Act
	 	 	3	 
	SECTION 2.4. Ad Valorem Tax Exemption
	 	 	6	 
	 
	 	 	 	 
	ARTICLE III LOAN BY ISSUER; PROVISIONS FOR PAYMENT
	 	 	6	 
	SECTION 3.1. Loan by Issuer
	 	 	6	 
	SECTION 3.2. Delivery of Note by Company; Other Amounts Payable
	 	 	6	 
	SECTION 3.3. Obligation of the Company Unconditional
	 	 	7	 
	SECTION 3.4. Assignment and Pledge of Payments and Rights Under the Note and the Agreement
	 	 	7	 
	SECTION 3.5. Closeout of the Project Fund
	 	 	8	 
	SECTION 3.6. Disposition of the Balance in the Project Fund
	 	 	8	 
	SECTION 3.7. Company Required to Pay in Event Project Fund Insufficient
	 	 	8	 
	SECTION 3.8. No Third Party Beneficiary
	 	 	8	 
	 
	 	 	 	 
	ARTICLE IV SPECIAL COVENANTS
	 	 	9	 
	SECTION 4.1. Use of Project
	 	 	9	 
	SECTION 4.2. Indemnity Against Claims
	 	 	9	 
	SECTION 4.3. The Company to Maintain Its Corporate Existence; Conditions Under Which Exceptions
Permitted
	 	 	9	 
	SECTION 4.4. Approval of Indenture
	 	 	10	 
	SECTION 4.5. Further Assurances and Corrective Instruments
	 	 	10	 
	SECTION 4.6. Maintenance of Project by Company
	 	 	10	 
	SECTION 4.7. Redemption or Purchase of Bonds
	 	 	10	 
	SECTION 4.8. Non-Arbitrage Covenant
	 	 	11	 
	SECTION 4.9. Company’s Option to Determine Interest Rate Mode: Appointment of Remarketing Agent
	 	 	11	 
	SECTION 4.10. Specific Tax Covenants
	 	 	11	 
	 
	 	 	 	 
	ARTICLE V EVENTS OF DEFAULT AND REMEDIES
	 	 	13	 
	SECTION 5.1. Events of Default
	 	 	13	 






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	 	 	PAGE	 
	SECTION 5.2. Remedies on Default
	 	 	14	 
	SECTION 5.3. Agreement to Pay Attorneys’ Fees and Expenses
	 	 	15	 
	SECTION 5.4. No Additional Waiver Implied by One Waiver
	 	 	15	 
	 
	 	 	 	 
	ARTICLE VI MISCELLANEOUS
	 	 	15	 
	SECTION 6.1. Term of This Agreement
	 	 	15	 
	SECTION 6.2. Notices
	 	 	16	 
	SECTION 6.3. Binding Effect
	 	 	16	 
	SECTION 6.4. Severability
	 	 	16	 
	SECTION 6.5. Amendments
	 	 	17	 
	SECTION 6.6. Execution in Counterparts
	 	 	17	 
	SECTION 6.7. Applicable Law
	 	 	17	 
	SECTION 6.8. Captions
	 	 	17	 
	SECTION 6.9. Other Financing
	 	 	17	 
	SECTION 6.10. No Charge Against Issuer Credit
	 	 	17	 






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     LOAN AGREEMENT dated as of December 1, 2006 between the MISSISSIPPI BUSINESS FINANCE
CORPORATION, a public body corporate and politic duly organized and existing under the Constitution
and laws of the State of Mississippi (the “Issuer”), and NORTHROP GRUMMAN SHIP SYSTEMS, INC., a
corporation organized and existing under the laws of the State of Delaware (the “Company”),
evidencing the agreement of the parties hereto.



     In consideration of the respective representations and agreements hereinafter contained, the
parties hereto agree as follows (provided that in the performance of the agreements of the Issuer
herein contained, any obligation it may thereby incur for the payment of money shall not be a
general debt, liability or obligation of the Issuer, or of the State of Mississippi or any
political subdivision thereof but shall be payable solely out of the revenues and proceeds derived
from this Agreement, the Note (as hereinafter defined) and the Guaranty (as hereinafter defined)
and the sale of the Bonds referred to herein):



ARTICLE I




DEFINITIONS



     “Agreement” means this Loan Agreement and any amendments and supplements hereto.



     “Completion Date” means the date identified in the certificate provided by the Company to the
Trustee pursuant to Section 3.5 of this Agreement.



     “Eligible Equipment” includes non-movable fixtures and equipment to the extent the same is
assembled to construct, reconstruct or renovate the Company’s industrial plants located in the Gulf
Opportunity Zone for the State and includes the equipment described in more detail in Exhibit
A to the Non-Arbitrage Certificate of the Issuer and other items of equipment that are
permitted to be financed under the Gulf Opportunity Zone Act of 2005 pursuant to any private letter
ruling or other official governmental action recognized as binding upon the Internal Revenue
Service and the Company.



     “Event of Default” means any of the occurrences enumerated in Section 5.1 of this Agreement.



     “Guarantor” means Northrop Grumman Corporation, a Delaware corporation.



     “Guaranty” has the meaning set forth in the Indenture.



     “Gulf Opportunity Zone” means that geographic area of Alabama, Mississippi and Louisiana so
defined in Section 1400M(1) of the Code.



 









 





     “Gulf Opportunity Zone Bond” means any bond described in Section 1400N(a)(2) of the Code.



     “Indenture” means the Trust Indenture, dated as of December 1, 2006, relating to the
Mississippi Business Finance Corporation Gulf Opportunity Zone Industrial Development Revenue Bonds
(Northrop Grumman Ship Systems, Inc. Project), Series 2006, between the Issuer and The Bank of New
York Trust Company, N.A., as Trustee, pursuant to which the Bonds are authorized to be issued, and
including any indenture supplemental thereto.



     “Loan” means the loan to be made by the Issuer to the Company of the proceeds (which shall be
deemed to include the underwriting discounts, if any, and original issue discount, if any) of the
sale of the Bonds, exclusive of any accrued interest paid by the initial purchasers of the Bonds
upon the delivery thereof.



     “Note” means the non-negotiable promissory note of the Company issued pursuant to Section 3.2
hereof, in the form set forth in Exhibit A hereto.



     “Official Action” shall mean the action taken by the Issuer in adopting the inducement
resolution of March 14, 2006 in which the Issuer agreed to finance the cost of acquiring,
constructing, installing and equipping the Project.



     “Plans” means the capital improvement plan of the Company for the Project. The Company may
supplement, amend and change the Plans without the approval of the Issuer provided that (i) no
change shall be made to the Plans if such change includes expenditures for costs ineligible for
financing with Gulf Opportunity Zone Bonds; or (ii) such change would render materially incorrect
or incomplete the description of the components of the Project unless an opinion of Tax Counsel is
provided to the Trustee that such alteration or amendment does not adversely affect the exclusion
of interest on the Bonds from gross income for the purposes of federal income taxation.



     “Project” means the project of the Company as described in Exhibit B hereto.



     Terms not defined herein shall have the meaning assigned to them in the Indenture and any
exhibit thereto.



ARTICLE II




ACQUISITION AND REHABILITATION OF THE PROJECT;

ISSUANCE OF THE BONDS



     SECTION 2.1. Acquisition and Rehabilitation of the Project. The Company represents
that it will cause the acquisition, construction, reconstruction and renovation of the Project to
be completed substantially in accordance with the Plans.



2









 





     SECTION 2.2. Issuance of the Bonds. In order to provide funds for the purpose set
forth in Section 3.1 hereof, the Issuer agrees that it will issue and deliver the Bonds to the
purchasers thereof at a price of 100% of the aggregate principal amount of the Bonds and apply and
deposit the proceeds thereof in accordance with the terms of the Indenture and Section 3.1 hereof.
The Indenture shall be satisfactory in form and substance to the Company and shall provide the
manner in which, and the purposes for which, proceeds of Bonds may be used and invested.



     SECTION 2.3. Benefits Under the Act.




	 	(a)	 	The parties hereby acknowledge that the Company has been induced to proceed
with the acquisition, construction and rehabilitation of the Project in part by the
benefits conferred by the Act. The Issuer agrees that the Company shall be permitted to
take advantage of all of the benefits provided by the Act to the fullest extent therein
set forth subject to the rules and regulations of the Issuer. The Issuer agrees that it
will not take any action to limit, curtail or otherwise make unavailable to the Company
any of the benefits available under the Act.
	 
	 	(b)	 	With respect to benefits conferred by the Act referenced in (a) above, the
following shall apply:






	 	(1)	 	the maximum benefits accruing in any calendar year with respect
to the income tax credit (other than any credits which may be carried forward
to future years pursuant to the Act) shall not exceed the payments of the
principal of, premium, if any, and interest payments on the Bonds during such
year, and the fees and expenses of the Trustee and any other fees and expenses
referenced herein.
	 
	 	(2)	 	any benefit claimed or received by the Company for any Cost of
the Project shall not be used as a deduction under the laws of the State of
Mississippi in order to determine the taxable income of Company.
	 
	 	(3)	 	the Trustee shall provide the Issuer, not later than ninety
(90) days after the end of each calendar year, with a certificate setting forth
the amount of all payments made to the Trustee with respect to the Bonds
whether for principal, premium, interest or the fees and expenses of the
Trustee.
	 
	 	(4)	 	the benefits accruing to the Company under this Section 2.3
shall cease in the event:





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	 	(A)	 	an Event of Default should occur under this
Agreement or the Indenture; or
	 
	 	(B)	 	the Company should fail to operate the Project
for a period of nine (9) consecutive months following the initial start
up of the Project except for force majeure, strikes, lockouts, damage,
destruction, act of God or in general, reasons beyond the Company’s
reasonable control excepting, however, general economic conditions.






	 	(5)	 	the Company agrees to comply with the terms and provisions of
the Act in all respects with respect to the benefits available under the Act.
	 
	 	(6)	 	the benefits or credits available under the Act shall cease to
accrue on the date the principal and interest on the Bonds are paid in full
whether at maturity or by way of redemption.
	 
	 	(7)	 	the benefits accruing to the Company under this Section 2.3
shall be limited to the annual debt service payments on the Bonds for qualified
Cost of the Project and shall be reduced by the amount of surplus funds
remaining after completion which shall be used to redeem Bonds as provided for
in Section 3.6 of this Agreement.
	 
	 	(8)	 	the tax credits allowed as a benefit under the Act shall be
further limited so that the credits allowed in any year shall not exceed eighty
percent (80%) of the amount of taxes due to the State prior to the application
of the credits (as directed in Section 27-7-22.3 of the Mississippi Code of
1972, as amended). To the extent that the payments of the principal of,
premium, if any, and interest payments on the Bonds during any year and the
fees and expenses of the Trustee and any other fees and expenses referenced
herein exceed the amount of the tax credit authorized by Section 27-7-22.3, in
any taxable year, such excess payment may be recouped from excess credits in
succeeding years not to exceed three (3) years following the date upon which
the credit was earned.
	 
	 	(9)	 	the Company will report to the Mississippi Employment Security
Commission (“MESC”) its employees as required by law, and shall annually report
to the Issuer the average number of employees reported for each year to the
MESC. This shall be done for each year after the year in which the Project was
induced for financing by the Issuer.




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	 	(10)	 	for purposes of determining the benefits to which the Company
is eligible under the Act, the following definitions shall apply:






(A) (i) “Base Employment” (“BE”) means the average number of
employees of the Company in the State during the preceding twelve
(12) month period ending February 28, 2006, as reported by the
Company to the Mississippi Employment Security Commission.




          (ii) “Base Investment” (“BI”) means the present value of the
capital assets owned or leased by the Company within the State as
determined by the Tax Assessor of each County in which the Company
owns or leases capital assets related to facilities, or corporate or
regional offices.




          (iii) “Future Employment” (“FE”) means the average number of
employees of the Company in the State each year after February 28,
2006, which may be an estimate for the first twelve (12) months, and
as reported by the Company to the Mississippi Employment Security
Commission over each twelve (12) month period thereafter.




          (iv) “Future Investment” (“FI”) means the sum of (a) the Base
Investment; (b) the Costs of the Project paid with proceeds of the
Bonds; and (c) funds of the Company used to pay Costs of the Project
or related improvements.




	 	(B)	 	The Company represents and warrants that as of the date of this
Agreement:






          (i) the Base Employment is 11,540 employees and the Base
Investment is $382,517,732.




          (ii) the Company reasonably anticipates that the Future
Employment for the first twelve (12) months after February 28, 2006
will be 11,038 employees, and the Future Investment will be
approximately $889,463,932 by December 31, 2007, and $1,018,633,932
by December 31, 2008.




	 	(C)	 	The percentage of the Company’s total state income tax
liability in which the Company shall be entitled to an income tax credit
provided by the Act (subject to further limitation as set forth in Section
2.2(b)(8) above) shall be determined annually as follows:




5









 












     (i)
(FE - BE) / FE = Employment Valuation Percentage (“EVP”)




     (ii)
(FI - BI) / FI = Investment Valuation Percentage (“IVP”)




     (iii) [(EVP x 2) + IVP] / 3 = Percentage of income tax
liabilities of the Company to which the Company is entitled to an
income tax credit.




	 	(c)	 	The Issuer makes no warranty or guaranty concerning the availability or
application of the benefits granted or earned by the Company under this Section 2.3 or
the Act.





     SECTION 2.4. Ad Valorem Tax Exemption. The Company hereby acknowledges and agrees that
the Company shall only be entitled to an ad valorem tax exemption from city or county ad valorem
taxes regarding the Project upon making proper application to and obtaining the approval of the
respective Mississippi city or county in which the Project is located. Any such ad valorem tax
exemption may be granted for a term of up to ten (10) years with the approval of each respective
Mississippi city or county in which the Project is located, and in accordance with additional
requirements under State law.



ARTICLE III




LOAN BY ISSUER; PROVISIONS FOR PAYMENT



     SECTION 3.1. Loan by Issuer. The Issuer hereby agrees to make the Loan to the Company
in order to pay the Cost of the Project or to reimburse the Company for any Cost of the Project
paid or incurred by the Company before or after the execution and delivery of this Agreement and
the issuance and delivery of the Bonds but not paid or incurred before January 13, 2006, being the
sixtieth day prior to Official Action (or, in the event that the IRS issues a ruling to the effect
that reimbursement of costs incurred prior to that date will not affect the taxability of the
bonds, such earlier date). Any such payment shall be made by the Issuer pursuant to the Indenture
upon receipt by the Trustee of a requisition certificate substantially in the form attached as
Exhibit C to the Indenture. Repayment of the Loan will be guaranteed by the Guarantor pursuant to
the Guaranty.



     SECTION 3.2. Delivery of Note by Company; Other Amounts Payable. In order to evidence
the Loan and the obligation of the Company to repay the same, the Company shall execute and deliver
the Note in a principal amount equal to the aggregate principal amount of the Bonds and providing
for payments which correspond in time and amount with payments due on the Bonds. The Note shall be
dated the date of the initial authentication of, and mature on the same maturity date as, the
Bonds. If (i) on the date any payments on the Bonds are due, there are



6









 




any available moneys on deposit with the Trustee which are not being held for the payment of
Bonds due and payable but which have not been presented for payment, or (ii) on any date on which
Bonds are required to be purchased pursuant to the Bonds or Article III of the Indenture, there are
available moneys on deposit with the Trustee held for the payment of the purchase price which are
not being held for the payment of Bonds which have not been presented for payment, then, in each
case, such moneys shall be credited against the payment then due under the Note, first in respect
of interest and then, to the extent of remaining moneys, in respect of principal.




     The Company will also pay: (i) the fees, charges and reasonable expenses of the Trustee and
any paying agents under the Indenture, such fees, charges and reasonable expenses to be paid
directly to the Trustee or paying agents for their respective accounts as and when such fees,
charges and reasonable expenses become due and payable, and (ii) any expenses in connection with
any redemption of the Bonds.



     SECTION 3.3. Obligation of the Company Unconditional. The obligation of the Company to
make payments as provided in the Note and to perform and observe the other agreements on its part
contained herein shall be absolute and unconditional notwithstanding any change in the tax or other
laws of the United States of America or of the State of Mississippi or any political subdivision of
either thereof or any failure of the Issuer to perform and observe any agreement, whether express
or implied, or any duty, liability or obligation arising out of or connected with this Agreement.
Nothing contained in this Section 3.3 shall be construed to release the Issuer from the performance
of any of the agreements on its part herein contained; and, in the event the Issuer should fail to
perform any such agreement on its part, the Company may institute such action against the Issuer as
the Company may deem necessary to compel performance so long as such action shall not violate the
agreements on the part of the Company contained in the preceding sentence, but in no event shall
the Company be entitled to any diminution of the amounts payable under the Note and as provided in
Section 3.2 hereof.



     SECTION 3.4. Assignment and Pledge of Payments and Rights Under the Note and the
Agreement. The Issuer shall assign to the Trustee as security under the Indenture all rights,
title and interests of the Issuer in and to (i) the Note and all payments thereunder and (ii) this
Agreement and all moneys receivable hereunder (except for payments under Sections 4.2 and 5.3
hereof or the second paragraph of Section 3.2 hereof). The Company assents to such assignment and
hereby agrees that, as to the Trustee, its obligations to make such payments shall be absolute and
shall not be subject to any defense or any right of set-off, counterclaim or recoupment arising out
of any breach by the Issuer or the Trustee of any obligation to the Company, whether hereunder or
otherwise, or out of any indebtedness or liability at any time owing to the Company by the Issuer
or the Trustee.



7









 





     SECTION 3.5. Closeout of the Project Fund. The Completion Date for the Project shall
be promptly established and evidenced to the Trustee and shall be the date on which the Company
delivers to the Trustee a certificate stating that, except for the amounts retained by the Trustee
at the Company’s written direction for any Cost of the Project not then due and payable, the
Project has been completed substantially in accordance with the Plans, and all costs and expenses
incurred in connection therewith have been paid. Notwithstanding the foregoing, such certificate
may state that it is given without prejudice to any rights against third parties that exist at the
date of such certificate or that may subsequently come into being.



     SECTION 3.6. Disposition of the Balance in the Project Fund. Pursuant to the
Indenture, as soon as practicable after, and in any event within sixty (60) days from, the
Trustee’s receipt of the certificate regarding the Completion Date described in Section 3.5 hereof,
any amounts remaining in the Project Fund, including any unliquidated investments made with money
theretofore deposited in the Project Fund, except for amounts to be retained in the Project Fund
for any Cost of the Project not then due and payable, shall be transferred by the Trustee to the
Bond Fund and shall be applied to the redemption of the Bonds in accordance with the terms of the
Indenture.



     SECTION 3.7. Company Required to Pay in Event Project Fund Insufficient. In the event
the moneys in the Project Fund should not be sufficient to pay the total Cost of the Project, the
Company agrees to complete the Project and to pay that portion of such cost in excess of the moneys
available therefore in the Project Fund, provided that no obligation shall exist under this
covenant in the event that the Bonds are fully repaid. THE ISSUER MAKES NO WARRANTY, EITHER EXPRESS
OR IMPLIED, THAT THE MONEYS PAID INTO THE PROJECT FUND AND AVAILABLE FOR PAYMENT OF THE COST OF THE
PROJECT WILL BE SUFFICIENT TO PAY THE TOTAL COST OF THE PROJECT. The Company agrees that if, after
exhaustion of the moneys in the Project Fund, the Company should pay any portion of the total Cost
of Project pursuant to the provisions of this Section, it shall not be entitled to any
reimbursement therefore from the Issuer, the Trustee, or any Bondholder and it shall not be
entitled to any abatement or diminution of the payments required to be made by the Company pursuant
to the Note or Section 3.1 hereof.



     SECTION 3.8. No Third Party Beneficiary. It is specifically agreed between the parties
executing this Agreement that it is not intended by any of the provisions of any part of this
Agreement to establish in favor of the public or any member thereof, other than as may be expressly
provided herein or as contemplated in the Indenture, the rights of a third party beneficiary
hereunder, or to authorize anyone not a party to this Agreement to maintain a suit for personal
injuries or property damage pursuant to the terms or provisions of this Agreement. The duties,



8









 




obligations, and responsibilities of the parties to this Agreement with respect to third
parties shall remain as imposed by law.




ARTICLE IV




SPECIAL COVENANTS



     SECTION 4.1. Use of Project. The Issuer hereby acknowledges that it shall have no
rights to the use or possession of the Project. The Issuer hereby further acknowledges that the
Project will not constitute any part of the security for the Bonds.



     SECTION 4.2. Indemnity Against Claims. The Company will pay and discharge and will
indemnify and hold harmless the Issuer from (a) any lien or charge upon payments by the Company to
the Issuer under the Note or hereunder, (b) any taxes, assessments, impositions and other charges
upon payments by the Company to the Issuer under the Note or hereunder and (c) any and all
liability, damages, costs and expenses arising out of or resulting from the transactions
contemplated by this Agreement and the Indenture, including the reasonable fees and expenses of
counsel. If any such lien or charge is sought to be imposed upon payments, or any such taxes,
assessments, impositions or other charges are sought to be imposed, or any such liability, damages,
costs and expenses are sought to be imposed, the Issuer will give prompt notice to the Company, and
the Company shall have the sole right and duty to assume, and will assume, the defense thereof,
with full power to litigate, compromise or settle the same in its sole discretion.



     SECTION 4.3. The Company to Maintain Its Corporate Existence; Conditions Under Which
Exceptions Permitted. The Company agrees that during the term of this Agreement it will
maintain its corporate existence and its qualification to do business in Mississippi, will not
dissolve or otherwise dispose of all or substantially all of its assets and will not consolidate
with or merge into another corporation or permit one or more other corporations to consolidate with
or merge into it; provided, that the Company may, without violating the agreements contained in
this Section 4.3, consolidate with or merge into another domestic corporation (i.e., a corporation
incorporated and existing under the laws of one of the states of the United States of America or
under the laws of the United States of America) or permit one or more other corporations to
consolidate with or merge into it, or sell or otherwise transfer to another domestic corporation
all or substantially all of its assets as an entirety and thereafter dissolve, provided that, in
the event the Company is not the surviving, resulting or transferee corporation, as the case may
be, the surviving, resulting or transferee corporation assumes, accepts and agrees in writing to
pay and perform all of the obligations of the Company herein and under the Note and is a
Mississippi corporation or is qualified to do business in Mississippi as a foreign corporation and
that such consolidation or merger does not



9









 




result in the loss of the exclusion from gross income for federal income tax purposes of
interest on the outstanding Bonds.




     SECTION 4.4. Approval of Indenture. The Company acknowledges that the Issuer and
Trustee have entered into the Indenture at the request of the Company. The Company approves the
terms of the Indenture and agrees to perform any covenants and/or obligations contained therein
required to be performed by the Company.



     SECTION 4.5. Further Assurances and Corrective Instruments. The Issuer and the Company
agree that they will, from time to time, execute, acknowledge and deliver, or cause to be executed,
acknowledged and delivered, such supplements hereto and such further instruments as may reasonably
be required for correcting any inadequate or incorrect description of the Project.



     SECTION 4.6. Maintenance of Project by Company. The Company agrees for so long as any
of the Bonds remain outstanding, it will pay all costs of operating, maintaining and repairing the
Project; provided, however, that the Company shall not be under any obligation to renew, repair or
replace any inadequate, obsolete, worn-out, unsuitable, undesirable or unnecessary portion of the
Project.



     SECTION 4.7. Redemption or Purchase of Bonds. The Issuer shall take all steps then
necessary under the applicable provisions of the Indenture, at no expense to the Issuer, for the
redemption or purchase (other than a purchase pursuant to tenders as provided in the form of Bonds
and as provided in Section 3.07 of the Indenture) of Bonds upon receipt, not less than ten days
prior to the day on which the Trustee is required to give notice (if any) thereof pursuant to the
Indenture, by the Issuer and the Trustee from the Company of a written notice specifying:




	 	(a)	 	the principal amount of Bonds to be redeemed or purchased;
	 
	 	(b)	 	the date of such redemption or purchase; and
	 
	 	(c)	 	in the case of a redemption of Bonds, directions to mail a notice of
redemption.





     In the case of a purchase of Bonds, the written notice to the Trustee shall, if available
moneys on deposit with the Trustee are insufficient to purchase the principal amount of Bonds
specified in (a) above, be accompanied by a deposit with the Trustee of cash or Government
Obligations sufficient, together with other available moneys on deposit with the Trustee, to make
the directed purchase of Bonds. The Company may purchase Bonds from time to time and deliver them
to the Trustee for cancellation pursuant to Section 2.08 of the Indenture.



10









 





     SECTION 4.8. Non-Arbitrage Covenant. The Company and the Issuer each covenants that it
shall take no action, nor shall the Company direct the taking of any action or the making of any
investment or use of the proceeds of the Bonds or any other moneys, which would cause the Bonds to
be treated as “arbitrage bonds” within the meaning of Section 148 of the Internal Revenue Code of
1986, as amended, and the proposed, temporary or final regulations thereunder as such may be
applicable or proposed to be applicable to the Bonds at the time of such action, investment or use.



     Without limiting the generality of the foregoing, the Company covenants and agrees to comply
with the requirements of Section 148(f) of the Internal Revenue Code of 1986, as amended, and any
temporary or final regulations thereunder as may be applicable to the Bonds or the proceeds derived
from the sale of the Bonds or any other moneys.



     SECTION 4.9. Company’s Option to Determine Interest Rate Mode: Appointment of Remarketing
Agent. The Issuer and the Company agree that the Company shall have the option to change the
interest rate determination method for the Bonds in the manner provided in the Indenture. The
Company agrees, in connection with any change in the interest rate determination method, to provide
for the appointment of a Remarketing Agent as provided in Section 10.15 of the Indenture if no
Remarketing Agent has been appointed and is serving as such under the Indenture and for the
appointment of an Auction Agent and one or more Broker-Dealers, as appropriate.



     SECTION 4.10. Specific Tax Covenants. The Company hereby agrees to comply with the
following tax covenants and such other covenants as may be necessary to qualify the interest on the
Bonds for exclusion from gross income for federal income tax purposes:




     (a) The Project shall constitute land or property of a character subject to the
allowance for depreciation provided by the Code, and at least 95 percent of the Net Proceeds
of the Bonds (the “Net Proceeds” being equal to the sale proceeds of the Bonds increased by
investment proceeds with respect thereto) will be used to acquire land and nonresidential
real property including fixed improvements associated with such property and subject to such
allowance.




     (b) The proceeds of the Bonds shall be used to acquire, construct re-construct or
rehabilitate facilities located in the Gulf Opportunity Zone in Mississippi and no portion
of such proceeds shall be used to acquire “movable equipment or fixtures” within the meaning
of the Joint Committee on Taxation’s Technical Explanation of the Revenue Provisions of H.R.
4440, the “Gulf Opportunity Zone Act of 2005” other than those that are assembled to
construct an industrial plant.



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     (c) No proceeds of the Bonds (including investment proceeds) other than an amount
approximately equal to $2,100,000 will be used directly or indirectly to pay any issuance
costs. Such amount does not exceed 2 percent of the proceeds of the Bonds (equal for this
purpose to the stated principal amount).




     (d) No portion of the Net Proceeds of the Bonds will be used to provide any private or
commercial golf course, country club, massage parlor, tennis club, skating facility
(including roller skating, skateboard and ice skating), racquet sports facility (including
any handball or racquetball court), hot tub facility, suntan facility, racetrack, airplane,
skybox or other private luxury box, health club facility, facility primarily used for
gambling, or store the principal business of which is the sale of alcoholic beverages for
off premises consumption.




     (e) Less than 25 percent of the Net Proceeds of the Bonds will be used to acquire land.
No portion of the proceeds of the Bonds will be used to acquire land (or an interest
therein) to be used for farming purposes.




     (f) No portion of the Net Proceeds of the Bonds will be used for the acquisition of any
property (or an interest therein) unless (i) the first use of such property is pursuant to
such acquisition or (ii) if the first use of such property is not pursuant to such
acquisition, then the rehabilitation expenditures of the Company with respect to such
property equals or exceeds (A) 50% of the portion of the cost of acquiring such property
financed with the Net Proceeds of the Bonds, if such property is a building or (B) 100% of
the portion of the cost of acquiring such property financed with the Net Proceeds of the
Bonds, if such property is a structure other than a building. In the case of an integrated
operation contained in a building before its acquisition, such term includes rehabilitating
existing equipment in such building or replacing it with equipment having substantially the
same function. The “first use” of any property for purposes of this Section 4.10(f) shall
have the meaning assigned to such term under Section 147(d) of the Code, any Regulations
promulgated thereunder and any revenue rulings, private letter rulings or other written
determinations or announcements issued by the Internal Revenue Service from time to time.




     (g) The payment of principal or interest with respect to the Bonds is not guaranteed in
whole or in part by the United States or any agency or instrumentality thereof. The Bonds
will not constitute an issue 5 percent or more of the proceeds of which is to be used in
making loans the payment of principal or interest with respect to which is to be guaranteed
in whole or in part by the United States or any agency or instrumentality thereof, or
invested directly or indirectly in federally insured deposits or accounts, other than those
proceeds invested during applicable temporary periods or as



12









 







investments in a bona fide debt service fund or investments in permissible reserves or
in obligations issued by the United States Treasury. The payment of principal of or interest
on the Bonds is not otherwise indirectly guaranteed in whole or in part by the United States
or any agency or instrumentality thereof within the meaning of Section 149(b) of the Code.




     (h) The average reasonably expected economic life of the facilities of the Project
being financed with the Net Proceeds of the Bonds, excluding land, as of the Bond issuance
date, is 18.34 years.




     (i) The weighted average maturity of the Bonds is 21.94 years, which does not exceed
120 percent of the average reasonably expected economic life of the facilities of the
Project being financed with the Net Proceeds of the Bonds.




     (j) Except for preliminary expenditures for architectural engineering, surveying, soil
testing, bond issuance, and similar costs (not including costs of land acquisition, site
preparation, and similar costs incident to commencement of project) that were incurred prior
to commencement of acquisition, construction or rehabilitation of the facilities comprising
the Project, and did not exceed in the aggregate 20 percent of the issue price of the Bonds,
no proceeds of the Bonds will be allocated to the reimbursement of an expenditure for costs
of the Project paid prior to January 13, 2006, which is 60 days prior to March 14, 2006, the
date on which the Issuer adopted a resolution declaring official intent to finance a portion
of the costs thereof with the Bonds.



ARTICLE V




EVENTS OF DEFAULT AND REMEDIES



     SECTION 5.1. Events of Default. Each of the following shall be an “Event of Default”
under this Agreement:




     (a) Failure by the Company to pay when due the amounts required to be paid pursuant to
the Bonds, or the failure by the Company to pay within 30 days of the date due any other
amounts required to be paid pursuant to this Agreement.




     (b) Failure by the Company to observe and perform any covenant, condition or agreement
on its part to be observed or performed hereunder, other than as referred to in subsection
(a) of this Section 5.1, for a period of 90 days after written notice, specifying such
failure and requesting that it be remedied, is given to the Company by the Issuer or the
Trustee, unless the Issuer and the Trustee shall agree in writing to an extension of such
period prior to its expiration; provided, however, if the failure stated in the notice



13









 







cannot be corrected within the applicable period, the Issuer and the Trustee will not
unreasonably withhold their consent to an extension of such period if corrective action is
instituted by the Company within the applicable period and diligently pursued until the
default is corrected.




     (c) The dissolution or liquidation of the Company, except as permitted by Section 4.3
hereof, or the commencement by the Company of any case or proceeding seeking to have an
order for relief entered on its behalf as a debtor or to adjudicate it as bankrupt or
insolvent or seeking reorganization, liquidation, dissolution, winding-up, arrangement,
composition, readjustment of its debts or any other relief under any bankruptcy, insolvency,
reorganization or other similar law of the United States or any state, or adjudication of
the Company as bankrupt, or an assignment by the Company for the benefit of its creditors,
or the entry by the Company into an agreement of composition with its creditors, or the
approval by a court of competent jurisdiction of a petition applicable to the Company in any
proceeding for its reorganization instituted under the provisions of Title 11 of the United
States Code, as amended, or under any similar statutory provision which may hereafter be
enacted.



     The foregoing provisions of Section 5.1(b) are subject to the limitation that, if by reason of
force majeure the Company is unable in whole or in part to carry out its agreements herein
contained other than those set forth in Sections 4.3 and 4.8 hereof, an Event of Default shall not
be deemed to have occurred during the continuance of such inability. The term “force majeure” as
used herein shall mean the following: acts of God; strikes; lockouts or other industrial
disturbances; acts of public enemies; orders of any kind of the government of the United States or
of the State of Mississippi or any of their departments, agencies or officials or of any civil or
military authority; insurrections; riots; epidemics; landslides; lightning; earthquakes; fire;
hurricanes; tornadoes; storms; floods; washouts; droughts; arrests; restraints of government and
people; civil disturbances; explosions; breakage or accident to machinery, transmission lines,
pipes or canals; partial or entire failure of utilities; or any other cause or event not reasonably
within the control of the Company. The Company agrees, however, to remedy to the extent practicable
with all reasonable dispatch the effects of any force majeure preventing the Company from carrying
out its agreements; provided that the settlement of strikes, lockouts and other industrial
disturbances shall be entirely within the discretion of the Company, and the Company shall not be
required to make settlement of strikes, lockouts and other industrial disturbances by acceding to
the demands of the opposing party or parties when such course is in the judgment of the Company
unfavorable to the Company.



     SECTION 5.2. Remedies on Default. Whenever any Event of Default shall have occurred
and be continuing, the Issuer may, in addition to any other remedy



14









 




now or hereafter existing at law, in equity or by statute, take either or both of the
following remedial steps:





     (a) By written notice to the Company, the Issuer may declare all amounts payable
pursuant to the Note to be immediately due and payable, whereupon the same shall become
immediately due and payable; and




     (b) The Issuer may take whatever action at law or in equity may appear necessary or
desirable to collect the amounts referred to in (a) above then due and thereafter to become
due, or to enforce performance and observance of any obligation, agreement or covenant of
the Company under this Agreement.



     Any amounts collected pursuant to action taken under this Section 5.2 shall be deposited with
the Trustee and applied in accordance with the provisions of the Indenture or, if the Bonds have
been fully paid (or provision for payment thereof has been made in accordance with the provisions
of the Indenture) and the fees and expenses of the Trustee and the paying agents and all other
amounts required to be paid under the Indenture shall have been paid, returned to the Company.



     SECTION 5.3. Agreement to Pay Attorneys’ Fees and Expenses. In the event the Company
should breach any of the provisions of the Note or this Agreement and the Issuer should employ
attorneys or incur other expenses for the collection of amounts payable hereunder or the
enforcement of performance or observance of any obligation or agreement on the part of the Company
herein contained, the Company agrees that it will on demand therefor pay to the Issuer the
reasonable fees of such attorneys and such other reasonable expenses so incurred by the Issuer.



     SECTION 5.4. No Additional Waiver Implied by One Waiver. In the event any agreement
contained in the Note or in this Agreement should be breached by either party and thereafter waived
by the other party, such waiver shall be limited to the particular breach so waived and shall not
be deemed to waive any other breach hereunder.



ARTICLE VI




MISCELLANEOUS



     SECTION 6.1. Term of This Agreement. This Agreement shall remain in full force and
effect from the date hereof until such time as all of the outstanding Bonds shall have been fully
paid or provision made therefor in accordance with the provisions of the Indenture, whichever shall
first occur, and the fees and expenses of the Trustee and any paying agents and all other amounts
payable by the Company under this Agreement and the Note shall have been paid.



15









 





     SECTION 6.2. Notices. All notices, certificates or other communications hereunder
shall be sufficiently given and shall be deemed given when delivered or mailed by registered or
certified mail, postage prepaid, addressed as follows:



	 	 	 

	If to the Issuer:

	 	Mississippi Business Finance Corporation
	 

	 	735 Riverside Drive, Suite 300
	 

	 	Jackson, Mississippi 39201
	 

	 	Attention: Executive Director
	 
	 	 
	With copies to:

	 	Tim Ford, Esq.
	 

	 	Balch & Bingham, LLP
	 

	 	401 East Capitol Street
	 

	 	Suite 200
	 

	 	Jackson, Mississippi 39201-2608
	 
	 	 
	If to the Company:

	 	Northrop Grumman Ship Systems, Inc.
	 

	 	1840 Century Park East
	 

	 	Los Angeles, California 90067
	 

	 	Attn: Assistant Treasurer
	 
	 	 
	If to the Trustee:

	 	The Bank of New York Trust Company, N.A.
	 

	 	505 North 20th Street
	 

	 	Suite 950
	 

	 	Birmingham, Alabama 35203
	 

	 	Attn: Rick Schaal
	 
	 	 
	If to the Guarantor:

	 	Northrop Grumman Corporation
	 

	 	1840 Century Park East
	 

	 	M/5 152/CC
	 

	 	Los Angeles, CA 90067
	 

	 	Attn: Assistant Treasurer





A duplicate copy of each notice, certificate or other communication given hereunder by either the
Issuer or the Company to the other shall also be given to the Trustee and Guarantor. The Issuer,
the Company, the Guarantor and the Trustee may, by notice given hereunder, designate any further or
different addresses to which subsequent notices, certificates or other communications shall be
sent.




     SECTION 6.3. Binding Effect. This Agreement shall inure to the benefit of and shall be
binding upon the Issuer, the Company and their respective successors and assigns, subject, however,
to the limitations contained in Section 4.3 hereof.



     SECTION 6.4. Severability. In the event any provision of this Agreement shall be held
invalid or unenforceable by any court of competent jurisdiction, such holding shall not invalidate
or render unenforceable any other provision hereof.



16









 





     SECTION 6.5. Amendments. This Agreement may not be effectively terminated except in
accordance with the provisions hereof and may not be effectively amended except by a written
agreement in accordance with Article XII and Article XIII of the Indenture and signed by the
parties hereto.



     SECTION 6.6. Execution in Counterparts. This Agreement may be executed in several
counterparts, each of which shall be an original and all of which shall constitute but one and the
same instrument.



     SECTION 6.7. Applicable Law. This Agreement and the Note shall be governed by and
construed in accordance with the laws of the State of Mississippi.



     SECTION 6.8. Captions. The captions or headings in this Agreement are for convenience
only and in no way define, limit or describe the scope or intent of any provisions or sections of
this Agreement.



     SECTION 6.9. Other Financing. Notwithstanding anything in this Agreement to the
contrary, the Issuer and the Company may hereafter enter into agreements to provide for the
financing or refinancing of costs of the Project or any portion thereof.



     SECTION 6.10. No Charge Against Issuer Credit. No provision hereof shall be construed
to impose a charge against the general credit of the Issuer or any personal or pecuniary liability
upon any director, officer, employee or agent of the Issuer.



17









 





     IN WITNESS WHEREOF, the Issuer and the Company have caused this Agreement to be executed in
their respective corporate names and their respective corporate seals to be hereunto affixed and
attested by their duly authorized officers, all as of the date first above written.



	 	 	 	 	 	 	 

	 	 	 	 	MISSISSIPPI BUSINESS FINANCE
 CORPORATION
	 
	 	 	 	 	 	 
	 

	 	 	 	By:	 	 
	 

	 	 	 	 	 	 
	 

	 	 	 	 	 	Executive Director

	 
	 	 	 	 	 	 
	ATTEST:
	 	 	 	 	 	 
	 
	 	 	 	 	 	 
	 	 	 	 	 	 	 
	Secretary
	 	 	 	 	 	 
	 
	 	 	 	 	 	 
	 	 	 	 	NORTHROP GRUMMAN SHIP 
SYSTEMS, INC.
	 
	 	 	 	 	 	 
	 

	 	 	 	By:	 	 
	 

	 	 	 	 	 	 
	 

	 	 	 	 	 	(Assistant) Treasurer
	 
	 	 	 	 	 	 
	ATTEST:
	 	 	 	 	 	 
	 
	 	 	 	 	 	 
	 	 	 	 	 	 	 
	Assistant Secretary
	 	 	 	 	 	 











18









 








	 	 	 	 	 

	STATE OF MISSISSIPPI
	 	)	 	 
	 
	 	)	 	SS:
	COUNTY OF HINDS
	 	)	 	 






     I, the undersigned Notary Public, certify that CINDY CARTER personally came before me this day
and acknowledged that she is the Secretary of Mississippi Business Finance Corporation, and that by
authority duly given and as the act of said Mississippi Business Finance Corporation, the foregoing
instrument was signed in its name by William T. Barry, its Executive Director, sealed with its
official seal, and attested by her/him as its Secretary.



     WITNESS my hand and official seal, this the __th day of December, 2006.



	 	 	 	 	 

	 

	 	 

Notary Public

	 	 






My Commission expires:




	 	 	 

	 


	 	 
	(Notary Seal)
	 	 











 









 








	 	 	 	 	 

	STATE OF _______________
	 	)	 	 
	 
	 	)	 	SS:
	COUNTY OF _____________
	 	)	 	 






     I, the undersigned Notary Public, certify that _______________ personally came before me this
day and acknowledged that he/she is the (Assistant) Treasurer of Northrop Grumman Ship Systems,
Inc., and that by authority duly given and as the act of said Northrop Grumman Ship Systems, Inc.,
the foregoing instrument was signed in its name by _______________, its (Assistant) Treasurer,
sealed with its official seal, and attested by her/him as its (Assistant) Treasurer.



     WITNESS my hand and official seal, this the __th day of December, 2006.



	 	 	 	 	 

	 

	 	 

Notary Public

	 	 





My Commission expires:




	 	 	 

	 


	 	 
	(Notary Seal)
	 	 











 









 








EXHIBIT A




A-1









 





EXHIBIT B



The construction, reconstruction, repair, replacement and modification of buildings and immovable
equipment located at its shipbuilding facilities in Pascagoula and Gulfport Mississippi including:





	 	1.	 	Buildings: Maintenance shop, panel shop, metal processing building, shell shop,
aluminum shop, multi-purpose warehouse, COSAL warehouse, combined shop, steel fabrication
shop, paint storage shop (Gulfport), blast and paint hall, CDI building, Hiller building,
Sonar Dome House, containment screen, administration buildings I, II, III, IV, PC
buildings 1 and 2, Multipurpose warehouse, cafeteria, LBTF building, blast and paint hall,
CSA I and II, panel shop, combined shop, propulsion assembly, maintenance depot, training
center, headhouse 2 and 3, medical center, fire/safety, wetdock, bays 1-5 and chiller plant
(Gulfport), Krebs, Chem lab, Resource recovery, transportation, sand blasting, blast and
paint, security, LHD test team, propulsion, booster pump building, wet dock, FSO, HR
building, Hiller building, carpenter shop, miscellaneous building, EDC, fuel depot, guard
shack, computer center, welding lab.
	 
	 	2.	 	Fixed and immovable equipment housed in the foregoing buildings.
	 
	 	3.	 	Fixed and immovable equipment not intended to be housed in any building but permanently
associated with the shipyard.
	 
	 	4.	 	Other buildings and equipment eligible for financing under the Gulf Opportunity Zone
Act of 2005 including such items that are permitted to be financed under the Gulf
Opportunity Zone Act of 2005 pursuant to any private letter ruling or other official
governmental action recognized as binding upon the Internal Revenue Service and the
Company.






B-1