<PAGE>
 
                                                                    EXHIBIT 10.5


--------------------------------------------------------------------------------


                                TRUST INDENTURE



                                    BETWEEN



                   MISSISSIPPI BUSINESS FINANCE CORPORATION

                                      AND


               SOUTHTRUST BANK, NATIONAL ASSOCIATION, AS TRUSTEE

                                ______________


                                JANUARY 1, 1998

                                ______________




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<PAGE>
 
                               TABLE OF CONTENTS

                                                                            PAGE


                                   ARTICLE I

                                  DEFINITIONS


SECTION 1.01.    Definitions................................................   4

                                  ARTICLE II

                     DESCRIPTION, AUTHORIZATION, MANNER OF
                  EXECUTION, AUTHENTICATION, REGISTRATION AND
                               TRANSFER OF BONDS

SECTION 2.01.    Authorization of Bonds.....................................  17
SECTION 2.02.    1998 Series Bonds..........................................  17
SECTION 2.03.    Redemption.................................................  17
SECTION 2.04.    Mandatory Sinking Fund Redemption..........................  19
SECTION 2.05.    Method of Partial Redemption...............................  19
SECTION 2.06.    Additional Bonds...........................................  20
SECTION 2.07.    Bonds Mutilated, Destroyed, Stolen or Lost.................  20
SECTION 2.08.    Temporary Bonds............................................  21
SECTION 2.09.    Execution..................................................  22
SECTION 2.10.    Negotiability, Transfer and Registry.......................  22
SECTION 2.11.    Regulations with Respect to Exchanges and Transfers........  22
SECTION 2.12.    Authentication.............................................  23
SECTION 2.13.    Destruction of Bonds.......................................  23

                                  ARTICLE III

                     AUTHENTICATION AND DELIVERY OF BONDS

SECTION 3.01.    Bonds Equally and Ratably Secured..........................  24
SECTION 3.02.    Provisions for Issuance of 1998 Series Bonds...............  24
SECTION 3.03.    Provisions for Issuance of Additional Bonds................  25
SECTION 3.04.    Provisions for Issuance of Refunding Bonds.................  27
SECTION 3.05.    Limited Obligations........................................  27

                                  ARTICLE IV

                    CONSTRUCTION AND ACQUISITION OF PROJECT

SECTION 4.01.    Covenant to Proceed With Reasonable Dispatch; Revision
                 of Plans and Specifications................................  29
SECTION 4.02.    Covenant to Comply with Laws...............................  29
<PAGE>
 
                         TABLE OF CONTENTS (CONTINUED)

                                                                            PAGE

                                   ARTICLE V

                               CONSTRUCTION FUND

SECTION 5.01.    Establishment of Construction Fund.........................  30
SECTION 5.02.    Held in Trust..............................................  30
SECTION 5.03.    Use of Moneys..............................................  30
SECTION 5.04.    Retention of Requisitions..................................  30
SECTION 5.05.    Completion of Project......................................  30
SECTION 5.06.    Completion of Project - Default............................  31

                                  ARTICLE VI

                                   BOND FUND

SECTION 6.01.    Establishment of Bond Fund.................................  32
SECTION 6.02.    Flow of Funds..............................................  32

                                  ARTICLE VII

                     SECURITY FOR AND INVESTMENT OF MONEYS

SECTION 7.01.    Security...................................................  34
SECTION 7.02.    Investment of Funds........................................  34
SECTION 7.03.    Transfer of Balance........................................  34

                                 ARTICLE VIII

                              REDEMPTION OF BONDS

SECTION 8.01.    Method of Redemption.......................................  35
SECTION 8.02.    Notice of Redemption.......................................  35
SECTION 8.03.    Payment of Redeemed Bonds..................................  35

                                  ARTICLE IX

                      PARTICULAR COVENANTS OF THE ISSUER

SECTION 9.01.    Payment of Bonds...........................................  37
SECTION 9.02.    Maintain Its Existence.....................................  37


                                      ii
<PAGE>
 
                         TABLE OF CONTENTS (CONTINUED)
 
                                                                            PAGE
 
SECTION 9.03.    Payments Under Loan Agreement; No Amendment to
                 Loan Agreement without Consent.............................  37
SECTION 9.04.    Further Documents..........................................  38
SECTION 9.05.    Payment of Taxes and Assessments; Compliance with
                 Regulations; No Creation of Liens or Charges...............  38
SECTION 9.06.    Extension of Payment of Bonds..............................  38

                                   ARTICLE X

                             DEFAULTS AND REMEDIES

SECTION 10.01.   Events of Default..........................................  39
SECTION 10.02.   Right to Declare Bonds Due and Payable.....................  40
SECTION 10.03.   Proceedings by Trustee.....................................  40
SECTION 10.04.   Effect of Discontinuance or Abandonment....................  41
SECTION 10.05.   Rights of Bondholders......................................  41
SECTION 10.06.   Restriction on Bondholders' Action.........................  41
SECTION 10.07.   Power of Trustee to Enforce................................  42
SECTION 10.08.   Remedies Not Exclusive.....................................  42
SECTION 10.09.   Effect of Waiver...........................................  42
SECTION 10.10.   Application of Moneys......................................  42

                                  ARTICLE XI

                                CREDIT FACILITY

SECTION 11.01.   Delivery of Letter of Credit...............................  44
SECTION 11.02.   Credit Facility Drawings...................................  44
SECTION 11.03.   Disposition of Moneys Drawn Under the Credit Facility......  45
SECTION 11.04.   Alternate Letter of Credit.................................  45

                                  ARTICLE XII

                            CONCERNING THE TRUSTEE

SECTION 12.01.   Appointment and Acceptance of Duties.......................  47
SECTION 12.02.   Responsibilities...........................................  47
SECTION 12.03.   Powers.....................................................  47
SECTION 12.04.   Compensation...............................................  47
SECTION 12.05.   No Duty to Maintain Insurance..............................  47
SECTION 12.06.   Notice of Event of Default.................................  48
SECTION 12.07.   Trustee's Actions..........................................  48


                                      iii
<PAGE>
 
                         TABLE OF CONTENTS (CONTINUED)
 
                                                                            PAGE

 
SECTION 12.08.   Limitation of Liability....................................  48
SECTION 12.09.   Ownership of Bonds.........................................  49
SECTION 12.10.   No Duty to Invest..........................................  49
SECTION 12.11.   Construction of Provisions of Indenture....................  49
SECTION 12.12.   Resignation................................................  49
SECTION 12.13.   Removal....................................................  49
SECTION 12.14.   Appointment of Successor Trustee...........................  49
SECTION 12.15.   Successor to be a Bank.....................................  50
SECTION 12.16.   Failure to Appoint a Successor Trustee.....................  50
SECTION 12.17.   Acceptance by Successor Trustee............................  50
SECTION 12.18.   Merger or Consolidation....................................  50
SECTION 12.19.   Action Upon Event of Default...............................  51
SECTION 12.20.   Notice of Occurrence of Event of Default...................  51
SECTION 12.21.   Intervention by Trustee....................................  51
SECTION 12.22.   Appointment and Acceptance of Paying Agent.................  51
SECTION 12.23.   Resignation or Removal of Paying Agent; Appointment of
                 Successor..................................................  51
SECTION 12.24.   Trust Estate May Be Vested in Separate or Co-Trustee.......  52

                                 ARTICLE XIII

                  EXECUTION OF INSTRUMENTS BY BONDHOLDERS AND
                          PROOF OF OWNERSHIP OF BONDS

SECTION 13.01.   Execution of Instruments; Proof of Ownership...............  53

                                  ARTICLE XIV

                  MODIFICATION OF INDENTURE AND SUPPLEMENTAL
                                  INDENTURES

SECTION 14.01.   Supplemental Indentures with Consent of the Company,
                 But Without Consent of Bondholders.........................  54
SECTION 14.02.   Trustee Authorized to Enter Into Supplemental Indenture....  55
SECTION 14.03.   Supplemental Indentures with Consent of Bondholders and
                 the Company................................................  55

                                  ARTICLE XV

                                  DEFEASANCE

SECTION 15.01.   Defeasance.................................................  56
SECTION 15.02.   Bonds Deemed to Have Been Paid.............................  57


                                      iv
<PAGE>
 
                         TABLE OF CONTENTS (CONTINUED)

                                                                            PAGE


                                  ARTICLE XVI

                                 MISCELLANEOUS

SECTION 16.01.   Dissolution of Issuer......................................  59
SECTION 16.02.   Parties Interested Herein..................................  59
SECTION 16.03.   Severability of Invalid Provisions.........................  59
SECTION 16.04.   No Recourse on Bonds.......................................  59
SECTION 16.05.   Notice.....................................................  59
SECTION 16.06.   Counterparts...............................................  60
SECTION 16.07.   Governing Law..............................................  60

                                 ARTICLE XVII

                                   BOND FORM

SECTION 17.01.   Bond Form..................................................  61




                                       v
<PAGE>
 
     THIS TRUST INDENTURE, dated as of January 1, 1998, between the Mississippi
Business Finance Corporation (the "Issuer"), a public corporation organized and
existing under the laws of the State of Mississippi (the "State"), and
SouthTrust Bank, National Association, as trustee (the "Trustee"), a national
banking association organized and existing under the laws of the United States
of America;

                                  WITNESSETH:

     WHEREAS, the Issuer is authorized by the provisions of Sections 57-10-401
et seq., Mississippi Code of 1972, as amended and supplemented and Sections 57-
10-201 et seq., Mississippi Code of 1972, as amended and supplemented
(collectively, the "Act"), to, among other things, provide and finance "economic
development projects" (as defined in the Act) in the State in order to promote,
foster and support economic development within the State and to finance such
projects by the issuance of revenue bonds; and

     WHEREAS, the Issuer has duly authorized as a project under the Act the
following by Halter Marine Group, Inc., a corporation organized and existing
under the laws of the State of Delaware (the "Company"): (a) the acquisition and
improvement on the Project Site (as hereinafter defined) of the Building (as
hereinafter defined) and (b) the acquisition and installation therein and
thereon of the Equipment (as hereinafter defined), which Project Site, Building
and Equipment together, shall constitute the Project (as hereinafter defined);
and

     WHEREAS, the Issuer desires to authorize the issuance of its revenue bonds
hereunder, to secure the payment of the principal, Make-Whole Premium, if
applicable, and the interest thereon and any other payments required under this
Indenture and to assure the performance and observance of the covenants and
conditions herein contained in order to finance the construction, installation
and equipping of the Project; and

     WHEREAS, the Issuer has entered into a Loan Agreement dated as of the date
hereof (the "Loan Agreement") with the Company under which the Company has
agreed to construct, install and equip and/or cause to be constructed, installed
and equipped the Project with the proceeds of the loan from the Issuer and to
repay such loan to the Issuer; and

     WHEREAS, the Issuer has determined to issue hereunder an initial series of
bonds to be designated as Mississippi Business Finance Corporation Taxable
Revenue Bonds, Series 1998 (Halter Marine Group, Inc. Project) (the "1998 Series
Bonds") in the principal amount of $30,000,000, the proceeds of which are to be
used by the Company to pay the costs of constructing, installing and equipping
the Project; and

     WHEREAS, to further secure the 1998 Series Bonds, the Company has
authorized, executed and delivered a Note (as hereinafter defined) to the
Issuer, which Note the Issuer has assigned to the Trustee; and

     WHEREAS, to further secure the prompt payment of the 1998 Series Bonds, the
Company concurrently with the execution hereof, has procured an irrevocable
direct-pay Letter of Credit (as hereinafter defined) from The First National
Bank of Chicago (the "Bank") in favor of the Trustee and for the benefit of the
holders of the 1998 Series Bonds; and
<PAGE>
 
     WHEREAS, the Issuer, at a meeting thereof duly convened and held, has duly
authorized the execution and delivery of this Indenture and the execution and
issuance hereunder of the 1998 Series Bonds upon and subject to the terms and
conditions hereinafter set forth; and

     WHEREAS, all acts and things have been done and performed which are
necessary to make the 1998 Series Bonds, when executed and issued by the Issuer,
authenticated by the Trustee and delivered, the valid and binding legal
obligations of the Issuer in accordance with their terms and to make this
Indenture a valid and binding agreement for the security of the 1998 Series
Bonds authenticated and delivered under this Indenture;

     NOW, THEREFORE, KNOW ALL MEN BY THESE PRESENTS, THIS TRUST INDENTURE
WITNESSETH:

     That the Issuer, in consideration of the premises, the acceptance by the
Trustee of the trusts hereby created, the purchase and acceptance of the 1998
Series Bonds by the purchaser or purchasers thereof, one dollar duly paid to the
Issuer by the Trustee at or before the execution and delivery of these presents
and other good and valuable consideration, the receipt of which is hereby
acknowledged, and in order to secure the payment of the principal of, Make-Whole
Premium, if applicable, and interest on all Bonds outstanding hereunder from
time to time, according to their tenor and effect, and such other payments
required to be made under this Indenture, and to secure the observance and
performance by the Issuer of all the covenants, expressed or implied herein and
in the 1998 Series Bonds, does hereby grant, bargain, sell, convey, assign,
pledge and set over unto the Trustee, and unto its successors in the trusts
hereunder, and to them and their successors and assigns forever, all right,
title and interest of the Issuer in, to and under, subject to the terms and
conditions of this Indenture, any and all of the following:

     (a)  all loan payments, including amounts drawn under the Credit Facility
(as hereinafter defined) and other revenues and receipts to be derived by the
Issuer under the Loan Agreement;

     (b)  the Loan Agreement, including but not limited to the Issuer's rights
to receive the loan payments and other revenues and receipts payable thereunder,
the liens and security interests created thereby, and the Issuer's rights to
enforce the Loan Agreement, provided, however, that the Issuer hereby reserves
its rights under the Loan Agreement to receive notices, the payment of
Administrative Expenses (as hereinafter defined) and indemnification payments,
all as provided in the Loan Agreement;

     (c)  the Note, including, without limitation, all payments to be made by
the Company pursuant to the Note;

     (d) the proceeds of the 1998 Series Bonds (subject to provisions pertaining
to the use thereof set forth herein and in the Loan Agreement) and all funds and
accounts held by the Trustee under this Indenture;

     (e)  any and all other property of every kind and nature from time to time
hereafter by delivery or by writing of any kind, conveyed, mortgaged, sold,
pledged, assigned and transferred, as and for additional security hereunder by
the Issuer or by any other person, firm or entity in its behalf 

                                       2
<PAGE>
 
or with its written consent to the Trustee, and the Trustee is hereby authorized
to receive any and all such property at any and all times and to hold and apply
the same subject to the terms hereof;

     (f)  any income received by the Trustee from the investment of the proceeds
of the 1998 Series Bonds and other funds held by the Trustee hereunder (subject
to provisions pertaining to the use thereof set forth herein and in the Loan
Agreement); and

     (g)  the proceeds of any of the foregoing;

     TO HAVE AND TO HOLD all the same hereby pledged, conveyed and assigned, or
agreed or intended so to be, to the Trustee and its successors in said trust and
to it and its assigns forever;

     PROVIDED, HOWEVER, that if the Issuer, its successors or assigns, shall
well and truly pay, or cause to be paid, the principal of the Bonds issued and
secured hereunder, Make-Whole Premium, if applicable, and the interest due or to
become due thereon, at the times and in the manner mentioned in such Bonds
according to the true intent and meaning thereof, shall well and truly keep,
perform and observe all the covenants and conditions pursuant to the terms of
this Indenture to be kept, performed and observed by it, and shall pay or cause
to be paid to the Trustee all sums of money due or to become due to it in
accordance with the terms and provisions hereof, then upon such final payments
this Indenture and all rights, titles and interests hereby granted shall cease
and terminate, otherwise this Indenture to be and remain in full force and
effect;

     The payment of the principal of, Make-Whole Premium, if applicable, and
interest on the Bonds is further secured by an irrevocable direct-pay Letter of
Credit issued by the Bank in favor of the Trustee and for the benefit of the
holders and owners of the 1998 Series Bonds;

     THIS TRUST INDENTURE FURTHER WITNESSETH:

     That, and it is expressly declared, all Bonds issued and secured hereunder
are to be issued, authenticated and delivered and all of the rights and property
hereby pledged are to be dealt with and disposed of under, upon and subject to
the terms, conditions, stipulations, covenants, agreements, trusts, uses and
purposes as hereinafter expressed, and the Issuer has agreed and covenanted, and
does hereby agree and covenant, with the Trustee and with the respective holders
and owners, from time to time, of the said Bonds, as follows:

                                       3
<PAGE>
 
                                   ARTICLE I

                                  DEFINITIONS

      SECTION 1.01.  DEFINITIONS.  The terms set forth below shall have the
following meanings in this Indenture, unless the context clearly otherwise
requires.  Except where the context otherwise requires, words importing the
singular number shall include the plural number and vice versa. Capitalized
terms used and not defined herein shall have the meanings ascribed to them in
the Loan Agreement and the Letter of Credit.

ACT:

     "Act" shall mean Sections 57-10-401 et seq., Mississippi Code of 1972, as
amended and supplemented and Sections 57-10-201 et seq., Mississippi Code of
1972, as amended and supplemented.

ACT OF BANKRUPTCY:

     "Act of Bankruptcy" shall mean any of the following events:

     (a)  The Company (or any other person or entity obligated, as guarantor or
otherwise, to make payments under the Loan Agreement or Credit Agreement), the
Issuer or the Affiliate shall (1) apply for or consent to the appointment of, or
the taking of possession by, a receiver, custodian, trustee, liquidator or the
like of the Company or such other person or entity, the Issuer or the Affiliate
or of all or any substantial part of its property, (2) commence a voluntary case
under the United States Bankruptcy Code (as now or hereafter in effect), or (3)
file a petition seeking to take advantage of any other law relating to
bankruptcy, insolvency, reorganization, winding-up or composition or adjustment
of debts; or

     (b)  A proceeding or case shall be commenced, without the application or
consent of the Company (or any other person or entity obligated, as guarantor or
otherwise, to make payments under the Loan Agreement or Credit Agreement), the
Issuer or the Affiliate in any court of competent jurisdiction, seeking (1) the
liquidation, reorganization, dissolution, winding-up or composition or
adjustment of debts of the Company or such other person or entity, the Issuer or
the Affiliate, (2) the appointment of a trustee, receiver, custodian, liquidator
or the like of the Company or such other person or entity, the Issuer or the
Affiliate, or of all or any substantial part of its property, or (3) similar
relief in respect of the Company or such other person or entity, the Issuer or
the Affiliate under any law relating to bankruptcy, insolvency, reorganization,
winding-up or composition or adjustment of debts.

ADDITIONAL BONDS:

     "Additional Bonds" shall mean Bonds of any Series, other than the 1998
Series Bonds, duly issued, authenticated and delivered pursuant to this
Indenture.

                                       4
<PAGE>
 
ADMINISTRATION EXPENSES:

     "Administration Expenses" shall mean the reasonable and necessary fees,
costs or expenses incurred or payable by the Company being:  (a) the Initial
Administrative Fee payable to the Issuer and (b) the compensation and expenses
paid to or incurred by the Trustee or any Paying Agent under the Loan Agreement
or this Indenture.

AFFILIATE:

     "Affiliate" shall mean any person, firm or corporation controlled by, or
under common control with the Company and any person, firm or corporation
controlling the Company.

ALTERNATE LETTER OF CREDIT:

     "Alternate Letter of Credit" shall mean an irrevocable, direct-pay
substitute letter of credit or an extension of an existing Credit Facility
delivered to and accepted by the Trustee pursuant to Section 11.04 of this
Indenture provided that any extension or renewal of a Credit Facility (other
than an extension of the Letter of Credit) shall be regarded as the delivery of
an Alternate Letter of Credit for the purposes of this Indenture.  An Alternate
Letter of Credit shall (a) be issued by a commercial bank organized and doing
business in the United States of America or a branch or an agency of a foreign
commercial bank located in the United States of America and subject to
regulation by state or federal banking regulatory authorities, with capital
stock and surplus of at least $50,000,000 and having a rating on its long-term
deposits of not less than Aa3 by Moody's or AA- by Standard & Poor's, (b) have
the same terms as the Letter of Credit (except for the expiration date, which
shall be on a January thirtieth (30th) and shall be at least two (2) years
following the effective date thereof) and (c) be in substantially the form of
the Letter of Credit.  Prior to acceptance of an Alternate Letter of Credit, the
Trustee must be satisfied that certain requirements set forth in Section 11.04
hereof have been met.

ANNEX A:

     "Annex A" shall mean the attachment annexed hereto and made a part hereof
containing such information as is specifically referred to therein.

AUTHORIZED COMPANY REPRESENTATIVE:

     "Authorized Company Representative" shall mean any person or persons at the
time designated to act on behalf of the Company by a written certificate, signed
on behalf of the Company by its President or one of its Vice Presidents or other
duly authorized Person and its Secretary or its Treasurer or its Comptroller or
one of its Assistant Secretaries, Assistant Treasurers or Assistant Comptrollers
or other duly authorized Person and furnished to the Issuer and the Trustee,
containing the specimen signature of each such person.

                                       5
<PAGE>
 
BANK:

     "Bank" shall mean The First National Bank of Chicago which is issuing the
Letter of Credit and its successors and assigns (in whole or in part) under the
Credit Agreement meeting the requirements of a provider of an Alternate Letter
of Credit hereunder, or any issuer of an Alternate Letter of Credit.

BOND COUNSEL:

     "Bond Counsel" shall mean an attorney-at-law or a firm of attorneys,
designated by the Issuer, of nationally recognized standing in matters
pertaining to bonds issued by states and their political subdivisions, duly
admitted to the practice of law before the highest court of any state of the
United States of America.

BOND COUNSEL'S OPINION:

     "Bond Counsel's Opinion" shall mean an opinion signed by Bond Counsel and
satisfactory to the Issuer and the Trustee.

BOND FUND:

     "Bond Fund" shall mean the fund created under Section 6.01 of this
Indenture and held by the Trustee and the accounts created thereunder.

BOND PLACEMENT AGREEMENT:

     "Bond Placement Agreement" shall mean the bond placement agreement
concerning the 1998 Series Bonds among the Issuer, the Company and the Placement
Agents.

BOND REGISTER AND BOND REGISTRAR:

     "Bond Register" and "Bond Registrar" shall have the respective meanings
specified in Section 2.10 of this Indenture.

BONDHOLDER:

     "Bondholder" or "holder of the Bonds" or "holder" shall mean the Registered
Owner of any Bond.

BONDS:

     "Bond" or "Bonds" shall mean any Bond or all of the Bonds, as the case may
be, of the Issuer authorized and issued by the Issuer, authenticated by the
Trustee and delivered under this Indenture.

     The term "outstanding under this Indenture" or "outstanding hereunder" or
"outstanding", when used with reference to Bonds, shall mean, except as
otherwise provided in Sections 9.03 and 

                                       6
<PAGE>
 
14.03 of this Indenture, at any date as of which the amount of outstanding Bonds
is to be determined, the aggregate of all Bonds authorized, issued,
authenticated and delivered under this Indenture, except:

     (a)  Bonds canceled or surrendered to the Trustee for cancellation pursuant
to Section 2.13 of this Indenture prior to such date; and

     (b)  Bonds in lieu of or in substitution for which other Bonds shall have
been authenticated and delivered pursuant to this Indenture unless proof
satisfactory to the Trustee and the Company is presented that any such Bond is
held by a bona fide holder in due course.

     In determining whether holders of a requisite aggregate principal amount of
Bonds outstanding have concurred in any request, demand, authorization,
direction, notice, consent or waiver under this Indenture, Bonds which are owned
by the Company or any Affiliate of the Company or the Issuer shall be
disregarded and deemed not to be outstanding for the purpose of any such
determination; provided, however, that for the purpose of determining whether
the Trustee shall be protected in relying upon any such request, demand,
authorization, direction, notice, consent or waiver, only Bonds which the
Trustee actually knows to be so owned shall be so disregarded.

BUILDING:

     "Building" shall mean the building or buildings located on the Project
Site, as described in Exhibit A to the Loan Agreement, and all additions,
modifications and improvements thereto, as they may at any time exist.

BUSINESS DAY:

     "Business Day" shall mean any day, other than a Saturday or Sunday, on
which neither the Trustee nor the Bank is closed and on which the payment system
of the Federal Reserve System is operational.

COMPANY:

     "Company" shall mean Halter Marine Group, Inc., a corporation organized and
existing under the laws of the State of Delaware.

COMPLETION DATE:

     "Completion Date" shall have the meaning set forth in the Loan Agreement.

CONSTRUCTION FUND:

     "Construction Fund" shall mean the fund created under Section 5.01 of this
Indenture and held by the Trustee.

                                       7
<PAGE>
 
CORPORATE TRUST OFFICE:

     "Corporate Trust Office" shall mean the office of the Trustee at which at
any particular time its corporate trust business shall be principally
administered, which office at the date hereof is located as more particularly
described in Annex A.

COST:

     "Cost" or "Cost of the Project" shall mean and be deemed to include to the
extent permitted by the Act and the Code, whether incurred prior to or after the
date of the Loan Agreement, (a) obligations of the Issuer or of the Company
incurred for labor, materials, machinery, equipment and other expenses and to
architects, contractors, builders and materialmen in connection with the
construction, installation and equipping of the Project and improvements
thereto; (b) the cost of contract or performance bonds or of other bonds and of
insurance of all kinds that may be required or necessary prior to or during the
course of construction, installation and equipping of the Project; (c) all costs
of architectural and engineering services, including the expenses of the Issuer
and the Company for test borings, surveys, test and pilot operations, estimates,
plans and specifications and preliminary investigations therefor, and for
supervising construction, as well as for the performance of all other duties
required by or as a result of the proper construction, installation and
equipping of the Project; (d) compensation and expenses of the Issuer, the Bank
and the Trustee, legal, accounting, financial and printing expenses, fees and
all other expenses incurred in connection with the issuance of the Bonds, which
are not otherwise provided for under the terms of the Loan Agreement; (e) all
other costs which the Issuer or the Company shall be required to pay under the
terms of any contract or contracts for the construction, installation and
equipping of the Project; (f) any sums required to reimburse the Issuer or the
Company for advances made by either of them for any of the above items, or for
any other costs incurred and for work done by either of them, which are properly
chargeable to the Project being constructed, installed and equipped; (g) any
costs and fees incurred in obtaining the Letter of Credit; (h) the Initial
Administrative Fee and Administration Expenses; and (i) any other expenses or
fees of the Issuer, the Trustee or the Bank, which in the opinion of the Issuer
or the Company are related to the Project or the Bonds, including but not
limited to, commitment and legal fees and the costs, fees and expenses of the
Placement Agents in connection with the initial sale and issuance of the Bonds.

CREDIT AGREEMENT:

     "Credit Agreement" shall mean that certain Revolving Credit Agreement,
dated October 31, 1997, among the Company, the Bank, et al, for so long as such
agreement shall be in effect and thereafter any agreement relating to the
obligations of the Company in respect of an Alternate Letter of Credit for so
long as such agreement shall be in effect.

CREDIT FACILITY:

     "Credit Facility" shall mean the Letter of Credit if then in effect or an
Alternate Letter of Credit if then in effect.

                                       8
<PAGE>
 
CURRENT ACCOUNT:

     "Current Account" shall mean the account in the Bond Fund created under
Section 6.01 of this Indenture and held by the Trustee.

EQUIPMENT:

     "Equipment" shall mean those items of machinery, equipment, fixtures and
other tangible personal property which (a) have been or are to be acquired and
installed in the Building or elsewhere at or on the Project Site, (b) were
acquired with proceeds of the 1998 Series Bonds and (c) any item of machinery,
equipment, fixtures and other tangible personal property which may be acquired
and installed in the Building or elsewhere at or on the Project Site in
substitution therefor pursuant to the provisions of the Loan Agreement, and
renewals and replacements of any of the foregoing less such property as may be
released pursuant to the provisions of the Loan Agreement or taken by the
exercise of the power of eminent domain, all as they may at any time exist.

EVENT OF DEFAULT:

     "Event of Default", "event of default", "Default" or "default" shall mean
any Event of Default specified in Section 10.01 of this Indenture.

EXECUTIVE DIRECTOR:

     "Executive Director" shall mean the Executive Director of the Mississippi
Business Finance Corporation.

GOVERNMENT OBLIGATIONS:

     "Government Obligations" shall mean (a) direct obligations of the United
States of America for the payment of which the full faith and credit of the
United States of America is pledged and (b) obligations issued by a person
controlled or supervised by and acting as an instrumentality of the United
States of America, the full and timely payment of the principal of, and premium,
if any, and interest on which is fully guaranteed as a full faith and credit
obligation of the United States of America (including any securities described
in (a) or (b) issued or held in book-entry form on the books of the Department
of Treasury of the United States of America or Federal Reserve Bank), which
obligations, in either case, are not subject to redemption or prepayment prior
to maturity at the option of any one other than the holder.

INDENTURE:

     "Indenture" shall mean this Trust Indenture as amended or supplemented from
time to time in accordance with the provisions hereof.

                                       9
<PAGE>
 
INITIAL ADMINISTRATIVE FEE:

     "Initial Administrative Fee" shall mean (a) the initial fee of the Issuer
with respect to the 1998 Series Bonds in the amount of Thirty Thousand and
No/100ths Dollars ($30,000) which fee is required to be paid by the Company to
the Issuer pursuant to the Loan Agreement, (b) the fee of the Issuer's Financial
Advisor and (c) any initial acceptance fee of the Trustee.

INVESTMENT SECURITIES:

     "Investment Securities" shall mean any one of the following, if and to the
extent the same are at the time legal for the investment of the Issuer's funds:

     (a)  Government Obligations;

     (b)  certificates of deposit, time deposits or other banking arrangements,
whether negotiable or non-negotiable, issued by any bank or national banking
association having a capital stock and surplus of more than $20,000,000,
including the Trustee;

     (c)  commercial paper that is rated A-1 or A-2 by Standard & Poor's or P-1
or P-2 by Moody's;

     (d)  a repurchase agreement with any bank or national banking association
having a capital stock and surplus of more than $20,000,000, including the
Trustee, and a rating by Moody's within its NCO/Moody's ratings of Baa-3 or
prime 3, provided the obligation of the bank to repurchase is within thirty (30)
days of the date of purchase; and

     (e)  interests in any money market mutual fund including those of the
Trustee which invests solely in Government Obligations or repurchase agreements
which are collateralized solely by Government Obligations.

ISSUER:

     "Issuer" shall mean the Mississippi Business Finance Corporation,
constituting a public corporation of the State, its successors and assigns, and
any public corporation resulting from or surviving any consolidation or merger
to which it or its successors may be a party.

LETTER OF CREDIT:

     "Letter of Credit" shall mean the irrevocable direct-pay Letter of Credit
to be delivered by the Bank to the Trustee in accordance with the Credit
Agreement which shall have a scheduled expiration date of January 30, 2000 and
any renewals, extensions, amendments or supplements thereto.  A copy of the
Letter of Credit is attached hereto as Exhibit A.

                                      10
<PAGE>
 
LETTER OF CREDIT ACCOUNT:

     "Letter of Credit Account" shall mean the account in the Bond Fund created
under Section 6.01 of this Indenture and held by the Trustee.

LOAN AGREEMENT:

     "Loan Agreement" shall mean the Loan Agreement dated as of the date hereof
between the Issuer and the Company and any and all modifications, alterations,
amendments and supplements thereto made in accordance with the provisions
thereof and this Indenture.

MAKE-WHOLE PREMIUM:

     "Make-Whole Premium" shall mean, with respect to any 1998 Series Bond, an
amount equal to the excess, if any, of the Discounted Value of the Remaining
Scheduled Payments with respect to the Called Principal of such 1998 Series Bond
over the amount of such Called Principal, provided that the Make-Whole Premium
may in no event be less than zero.  For the purposes of determining the Make-
Whole Premium, the following terms shall have the following meanings:

          "CALLED PRINCIPAL" means, with respect to any 1998 Series Bond, the
     principal of such 1998 Series Bond that is to be prepaid pursuant to
     Section 2.03 of this Indenture or has become or is declared to be
     immediately due and payable pursuant to Sections 10.01 and 10.02 of this
     Indenture, as the context requires.

          "DISCOUNTED VALUE" means, with respect to the Called Principal of any
     1998 Series Bond, the amount obtained by discounting all Remaining
     Scheduled Payments with respect to such Called Principal from their
     respective scheduled due dates to the Settlement Date with respect to such
     Called Principal, in accordance with accepted financial practice and at a
     discount factor (applied on the same periodic basis as that on which
     interest on the 1998 Series Bond is payable) equal to the Reinvestment
     Yield with respect to such Called Principal.

          "REINVESTMENT YIELD" means, with respect to the Called Principal of
     any 1998 Series Bond, the yield to maturity implied by (a) the yields
     reported, as of 10:00 a.m., New York City Time, on the second Business day
     preceding the Settlement Date with respect to such Called Principal, on the
     display designated as the "PX1 Screen" on the Bloomberg Financial Market
     Service (or such other display as may replace the PX1 Screen on the
     Bloomberg Financial Market Service) for actively traded Government
     Obligations having a maturity equal to the Remaining Average Life of such
     Called Principal as of such Settlement Date, or (b) if such yields are not
     reported as of such time or the yields reported as of such time are not
     ascertainable, the Treasury Constant Maturity Series Yields reported, for
     the latest day for which such yields have been so reported as of the second
     Business Day preceding the Settlement Date with respect to such Called
     Principal, in Federal Reserve Statistical Release H.15 (519) (or any
     comparable successor publication) for actively traded Government
     Obligations having a constant maturity equal to the Remaining Average


                                      11
<PAGE>
 
     Life of such Called Principal as of such Settlement Date. Such implied
     yield will be determined, if necessary, by (1) converting Government
     Obligations quotations to bond-equivalent yields in accordance with
     accepted financial practice and (2) interpolating linearly between (A) the
     actively traded Government Obligations with the duration closest to and
     greater than the Remaining Average Life and (B) the actively traded
     Government Obligations with the duration closest to and less than the
     Remaining Average Life.

          "REMAINING AVERAGE LIFE" means, with respect to any Called Principal,
     the number of years (calculated to the nearest one-twelfth year) obtained
     by dividing (a) such Called Principal into (b) the sum of the products
     obtained by multiplying (1) the principal component of each Remaining
     Scheduled Payment with respect to such Called Principal by (2) the number
     of years (calculated to the nearest one-twelfth year) that will elapse
     between the Settlement Date with respect to such Called Principal and the
     scheduled due date of such Remaining Scheduled Payment.

          "REMAINING SCHEDULED PAYMENTS" means, with respect to the Called
     Principal of any 1998 Series Bond, all payments of such Called Principal
     and interest thereon that would be due after the Settlement Date with
     respect to such Called Principal if no payment of such Called Principal
     were made prior to its scheduled due date, provided that if such Settlement
     Date is not a date on which interest payments are due to be made under the
     terms of the 1998 Series Bonds, then the amount of the next succeeding
     scheduled interest payment will be reduced by the amount of interest
     accrued to such Settlement Date and required to be paid on such Settlement
     Date pursuant to Sections 2.03, 10.01 and 10.02 of this Indenture.

          "SETTLEMENT DATE" means, with respect to the Called Principal of any
     1998 Series Bond, the date on which such Called Principal is to be prepaid
     pursuant to Section 2.03 of this Indenture or has become or is declared to
     be immediately due and payable pursuant to Sections 10.01 and 10.02 of this
     Indenture, as the context requires.

     The Make-Whole Premium shall be timely calculated by the Company in
accordance with the above definition thereof and timely written notice thereof
given by the Company to the Trustee, the Bank and the holders of all 1998 Series
Bonds outstanding.

MOODY'S:

     "Moody's" shall mean Moody's Investors Service, Inc., a Delaware
corporation, its successors and assigns and, if dissolved or liquidated or if it
no longer performs the functions of a securities rating agency, "Moody's" shall
be deemed to refer to any other nationally recognized securities rating agency
designated by the Company (with the approval of and the Issuer), by written
notice to the Trustee.

                                      12
<PAGE>
 
1998 SERIES BONDS:

     "1998 Series Bonds" shall mean Mississippi Business Finance Corporation
Taxable Revenue Bonds, Series 1998 (Halter Marine Group, Inc. Project) issued in
the aggregate principal amount of $30,000,000 and initially issued under Section
2.02 of this Indenture.

NOTE:

     "Note" shall mean the Promissory Note of the Company issued by the Company
to the Issuer pursuant to the Loan Agreement and any amendments or supplements
thereto.

OFFICERS' CERTIFICATE:

     "Officers' Certificate" shall mean a certificate signed by the President,
Executive Director, or an officer of the Board of Directors of the Issuer duly
authorized by resolution of such Board to sign such certificate and the
Secretary.

OPINION OF COUNSEL:

     "Opinion of Counsel" shall mean an opinion in writing signed by legal
counsel, who may be an employee of or counsel to the Company, and is not
unsatisfactory to the Trustee.  Any Opinion of Counsel in connection with the
Letter of Credit or any Alternate Letter of Credit must opine as to the validity
and enforceability of the Letter of Credit or the Alternate Letter of Credit and
must be given by legal counsel independent from the Bank and licensed to
practice law in the jurisdiction which governs the validity and enforceability
of the Letter of Credit or the Alternate Letter of Credit.

PAYING AGENT:

     "Paying Agent" shall mean any paying agent for the 1998 Series Bonds (and
may include the Trustee) and its successor or successors appointed pursuant to
the provisions of this Indenture.

PAYMENT DATE OR PAYMENT DATES:

     "Payment Date" or "Payment Dates" shall mean (a) as to the 1998 Series
Bonds, December 31 and June 30 of each year commencing June 30, 1998, provided,
however, that if any such Payment Date shall fall on a day other than a Business
Day, the payment due on such Payment Date shall be due on the next succeeding
Business Day, and (b) as to Additional Bonds, each date or dates designated as a
Payment Date or Dates in the Applicable Supplemental Indenture and Additional
Bonds.

PERMITTED ENCUMBRANCES:

     "Permitted Encumbrances" shall mean and include:

     (a)  the lien of taxes and assessments which are not delinquent;

                                      13
<PAGE>
 
     (b)  the lien of taxes and assessments which are delinquent but the
validity of which is being contested as permitted by Section 4.06 of the Loan
Agreement;

     (c)  any liens created by and under this Indenture, the Loan Agreement and
the Note;

     (d)  those liens, charges and encumbrances in Exhibit C attached to the
Loan Agreement, to which the Company's title to the Project Site is subject;

     (e)  easements, exceptions or reservations executed after the date hereof
for the purpose of pipelines, telephone lines, telegraph lines, power lines and
sub-stations, roads, streets, alleys, highways, railroad purposes, drainage and
sewerage purposes, dikes, canals, laterals, ditches, the removal of oil, gas,
coal or other minerals, and other like purposes, or for the joint or common use
of real property, facilities and equipment, which, in the reasonable opinion of
the Company, in the aggregate do not impair the value or the use of such
property for the purposes for which it is or may reasonably be expected to be
held;

     (f)  rights reserved to or vested in any municipality or governmental or
other public authority to control or regulate any portion of the Project which
in the aggregate do not impair the use of the Project for the purposes for
which, in the reasonable opinion of the Company, it is or may reasonably be
expected to be held;

     (g)  the rights of the Issuer, the Trustee and the Bank (as the case may
be) under this Indenture, the Loan Agreement and the Note;

     (h)  any lien on the Project or any part thereof created pursuant to the
Loan Agreement from the Company to the Issuer, as assigned to the Trustee
pursuant to this Indenture; and

     (i)  such other encumbrances as the Bank may approve or that may be
permitted by the Credit Agreement.

PERSON OR PERSON:

     "Person" or "person" shall mean, as the case may be, any individual, sole
proprietorship, corporation, partnership (including, without limitation, general
and limited partnerships), joint venture, association, joint stock company,
trust, unincorporated organization or government, any agency or political
subdivision thereof or public corporation.

PLACEMENT AGENTS:

     "Placement Agents" shall mean SPP Hambro & Co., LLC and Hibernia National
Bank.

PLANS AND SPECIFICATIONS:

     "Plans and Specifications" shall, if such exist, mean the plans and
specifications prepared for the Project, certified by an Authorized Company
Representative, as the same may be implemented, detailed and revised from time
to time.

                                      14
<PAGE>
 
PRESIDENT:

     "President" shall mean the President of the Mississippi Business Finance
Corporation.

PROJECT:

     "Project" shall mean (a) the Project Site, Building and the Equipment
financed with proceeds of the 1998 Series Bonds and as the same may become more
detailed from time to time, including any repair, replacement or modification
thereof, substitutions therefor and additions thereto and excluding deletions
therefrom, and including personal property installed in accordance with Section
4.15 of the Loan Agreement, (b) repairs, replacements, enlargements,
improvements or extensions of said facilities financed by Additional Bonds and
(c) additional facilities financed by Additional Bonds.

PROJECT SITE:

     "Project Site" shall mean the real property described in Exhibit B to the
Loan Agreement on which the Building and Equipment are or will be situated.

PROPERTY:

     "Property" shall mean any interest in any kind of asset, whether real,
personal or mixed, or tangible or intangible.

RATING AGENCY:

     "Rating Agency" shall mean Moody's and/or Standard & Poor's.

RECORD DATE:

     "Record Date" shall mean with respect to any Series of Bonds, the fifteenth
(15th) day of the calendar month preceding any Payment Date.

REDEMPTION PRICE:

     "Redemption Price" shall mean the principal of and interest on the 1998
Series Bonds to be redeemed, and the Make-Whole Premium, if applicable, and all
other amounts due and owing in respect of such 1998 Series Bonds to be redeemed.

REGISTERED OWNER:

     "Registered Owner" shall mean the Person or Persons in whose name or names
the particular Bond or Bonds shall be registered on the Bond Register.

                                      15
<PAGE>
 
REVENUES:

     "Revenues" shall mean all payments, receipts and revenues payable by the
Company to the Issuer under the Loan Agreement (except payment of Administration
Expenses and indemnification payments pursuant to Sections 4.03 and 4.11,
respectively, of the Loan Agreement) and any other payments, receipts and
revenues derived by the Issuer from the Company under the Loan Agreement.

SECRETARY:

     "Secretary" shall mean the Secretary of the Mississippi Business Finance
Corporation.

SERIES OR SERIES OF BONDS:

     "Series" or "Series of Bonds" shall mean all of the Bonds authenticated and
delivered on original issuance in a simultaneous transaction, and any Bonds
thereafter authenticated and delivered in lieu of or in substitution for such
Bonds, pursuant to the provisions of this Indenture, regardless of variations in
maturity, interest rate, or other provisions.

STANDARD & POOR'S:

     "Standard & Poor's" shall mean Standard & Poor's Corporation, a New York
corporation, its successors and assigns and, if dissolved or liquidated or if it
no longer performs the functions of a securities rating agency, "Standard &
Poor's" shall be deemed to refer to any other nationally recognized securities
rating agency designated by the Company (with the approval of the Issuer), by
written notice to the Trustee.

STATE:

     "State" shall mean the State of Mississippi.

SUPPLEMENTAL INDENTURE:

     "Supplemental Indenture" or "indenture supplemental hereto" shall mean any
indenture supplemental to or amendatory of this Indenture as originally executed
which is duly executed and delivered in accordance with the provisions of this
Indenture.

TRUSTEE:

     "Trustee" shall mean SouthTrust Bank, National Association (and its
corporate successors) and its successor under this Indenture, a national banking
association organized and existing under the laws of the United States of
America with its principal corporate trust office located in Birmingham,
Alabama.

16
<PAGE>
 
                                  ARTICLE II

                     DESCRIPTION, AUTHORIZATION, MANNER OF
                  EXECUTION, AUTHENTICATION, REGISTRATION AND
                               TRANSFER OF BONDS

      SECTION 2.01.  AUTHORIZATION OF BONDS.  The Bonds may, at the election of
the Issuer, be issued in one or more Series and, except as hereinafter provided,
shall be designated generally with such appropriate particular designations
added to or incorporated in such title for the Bonds of any particular Series as
the Issuer may determine.  Each Bond shall bear upon the face thereof the
designation so selected for the Series to which it belongs.  The Bonds shall be
issuable only in fully registered form.

      SECTION 2.02.  1998 SERIES BONDS.  There shall be issued under and secured
by this Indenture a Series of Bonds to be designated as Mississippi Business
Finance Corporation Taxable Revenue Bonds, Series 1998 (Halter Marine Group,
Inc. Project) in the aggregate principal amount of $30,000,000, to be dated as
of their date of issuance, to mature (subject to prior redemption at the prices
and dates and upon the terms and conditions hereinafter set forth) on December
31, 2013.

     The 1998 Series Bonds shall bear interest from and including the dated date
thereof if the date of authentication thereof is on or prior to the day
preceding the first Payment Date and otherwise from the Payment Date next
preceding the date of authentication to which interest has been paid, payable
semiannually on December 31 and June 30 of each year, commencing on June 30,
1998, at the rate of interest of 6.39% per annum computed on the basis of a
three hundred sixty (360) day year of twelve (12), thirty (30) day months) until
the earliest of (a) maturity or (b) the date fixed for redemption or
acceleration.  The 1998 Series Bonds shall be issued in denominations of
$500,000 or any integral multiple of $5,000 in excess thereof provided that if
necessary to enable the registration of transfer by a holder of its entire
holding of 1998 Series Bonds, one 1998 Series Bond may be in a denomination of
less than $500,000.

     All payments of principal of, Make-Whole Premium, if applicable, and
interest on the 1998 Series Bonds shall be payable in any coin or currency of
the United States of America which, at the time of payment is legal tender for
the payment of public and private debts and shall be made to the Registered
Owner thereof as of the Record Date, in the case of principal and Make-Whole
Premium, if applicable, at the Corporate Trust Office of the Trustee upon
presentation and surrender thereof, and in the case of interest, by bank wire or
bank transfer as such Registered Owner may specify in writing or otherwise as
the Trustee and such Registered Owner may agree.

      SECTION 2.03.  REDEMPTION.  The 1998 Series Bonds are subject to
redemption prior to maturity, in accordance with Article VIII hereof and subject
to the order of payment as set forth in Section 6.02 hereof, as follows:

     (a)  The 1998 Series Bonds are subject to mandatory redemption in the event
there are moneys remaining in the Construction Fund after the Completion Date,
as provided in Sections 5.05 and 6.01(b) herein.  If called for redemption in
such event, the 1998 Series Bonds shall be subject to redemption on any Payment
Date, in part,  in the inverse order of their maturities (less than all of 

                                      17
<PAGE>
 
said 1998 Series Bonds of a single maturity to be selected pro-rata), at a
Redemption Price for each 1998 Series Bond redeemed equal to the principal
amount thereof and accrued interest thereon to the date of redemption, plus the
Make-Whole Premium.

     (b)  The 1998 Series Bonds are subject to optional redemption at the option
of the Company, which option may be exercised at any time upon not less than
forty-five (45) days' written notice by the Company to the Trustee, in whole at
any time, or in part on any Payment Date, in the inverse order of their
maturities (less than all of said 1998 Series Bonds of a single maturity to be
selected pro-rata), at a Redemption Price for each 1998 Series Bond redeemed
equal to the principal amount thereof and accrued interest thereon to the date
of redemption, plus the Make-Whole Premium.

     (c)  The 1998 Series Bonds are subject to mandatory redemption, in whole,
at any time, or in part on any Payment Date in the inverse order of their
maturities (less than all of said 1998 Series Bonds of a single maturity to be
selected pro-rata), to the extent moneys are deposited in the Bond Fund pursuant
to Sections 4.13 and 4.14 of the Loan Agreement at a Redemption Price for each
1998 Series Bond redeemed equal to the principal amount thereof and accrued
interest thereon to the date of redemption, without premium or penalty. Said
Sections 4.13 and 4.14 of the Loan Agreement are by this reference thereto
incorporated herein as if fully set forth herein.

     (d)  The 1998 Series Bonds are subject to mandatory redemption, in whole,
at a Redemption Price for each 1998 Series Bond redeemed equal to the principal
amount thereof and accrued interest thereon to the date of redemption, plus the
Make-Whole Premium, if the rating assigned by Moody's or Standard & Poor's to
the long-term deposits of the Bank is downgraded to a rating below A1 by Moody's
or below A+ by Standard & Poor's, on the forty-fifth (45th) day following the
date on which the lowered rating is announced by either Rating Agency; provided,
however, the 1998 Series Bonds shall not be subject to mandatory redemption in
such case if the Company shall deliver to the Trustee at least five (5) Business
Days prior to the scheduled date of such redemption, an Alternate Letter of
Credit in accordance with Section 11.04 herein and issued by a Bank the senior
long-term debt or the long-term deposits of which are rated not less than Aa3 by
Moody's or AA- by Standard & Poor's. Written notice of any such downgrade shall
be timely provided by the Company to the Trustee, the Bank and the holders of
all 1998 Series Bonds then outstanding.

     (e)  The 1998 Series Bonds are subject to mandatory redemption, in whole,
five (5) Business Days following the failure of the Company (1) to provide an
irrevocable and unconditional commitment for an Alternate Letter of Credit in
accordance with Section 11.04 herein not later than one (1) year immediately
preceding the expiration of the Letter of Credit or any Alternate Letter of
Credit, or (2) to deliver said Alternate Letter of Credit forty-five (45) days
immediately preceding the expiration of the Letter of Credit or any Alternate
Letter of Credit, at a Redemption Price for each 1998 Series Bond redeemed equal
to the principal amount thereof and accrued interest thereon to the date of
redemption, plus the Make-Whole Premium.

     (f)  The 1998 Series Bonds are subject to mandatory redemption, in whole,
upon acceleration thereof upon the occurrence of an Event of Default on the
earliest Business Day for which any required notice may be given, at a
Redemption Price for each 1998 Series Bond redeemed 

                                      18
<PAGE>
 
equal to the principal amount thereof and accrued interest thereon to the date
of redemption, plus the Make-Whole Premium, for acceleration upon an Event of
Default occurring under Section 10.01 of this Indenture hereof.

     (g)  The 1998 Series Bonds are subject to mandatory redemption, in part, as
provided in Section 2.04.

     If more than one of the events described in paragraphs (a), (c), (d), (e)
and (f) of this Section 2.03 shall occur at any one time requiring a mandatory
redemption of all of the 1998 Series Bonds, the Trustee shall redeem the 1998
Series Bonds according to the paragraph that will result in the 1998 Series
Bonds being redeemed on the earliest possible date.

     A redemption pursuant to this Section 2.03(f) shall occur no later than ten
(10) calendar days after a declaration of acceleration pursuant to Sections
10.01 and 10.02 hereof.

      SECTION 2.04.  MANDATORY SINKING FUND REDEMPTION.  The 1998 Series Bonds
are subject to mandatory sinking fund redemption, in part, prior to maturity or
redemption in whole as otherwise provided under this Indenture, on each December
31, commencing December 31, 2004, in the principal amount for each year
(together with accrued interest to the date of redemption and without premium or
penalty) (the "Sinking Fund Payment") from moneys deposited in the Bond Fund, in
accordance with the provisions of this Section 2.04 and Article VIII of this
Indenture, as follows:
 
                DATE                                     AMOUNT 
                                                                
          December 31, 2004                            $3,000,000
          December 31, 2005                             3,000,000
          December 31, 2006                             3,000,000
          December 31, 2007                             3,000,000
          December 31, 2008                             3,000,000
          December 31, 2009                             3,000,000
          December 31, 2010                             3,000,000
          December 31, 2011                             3,000,000
          December 31, 2012                             3,000,000
          December 31, 2013                             3,000,000

     Not more than sixty (60) days nor less than forty (40) days prior to each
Sinking Fund Payment Date, the Trustee shall select for redemption pro-rata from
all 1998 Series Bonds outstanding a principal amount of 1998 Series Bonds equal
to the Sinking Fund Payment amount for such year and shall call such 1998 Series
Bonds or portions thereof ($500,000 or any integral multiple of $5,000 in excess
thereof) for redemption from amounts deposited therefor in the Bond Fund
following notice thereof as provided in Section 8.02 hereof.

      SECTION 2.05.  METHOD OF PARTIAL REDEMPTION.  Unless otherwise provided
herein, in the event of a partial redemption pursuant to Section 2.03 hereof,
the 1998 Series Bonds to be redeemed 

                                      19
<PAGE>
 
shall be redeemed on a pro-rata basis among all Bondholders and, in case of a
partial redemption of a single maturity, 1998 Series Bonds of such maturity to
be redeemed shall be selected pro-rata.

      SECTION 2.06.  ADDITIONAL BONDS.  Subject to determination from time to
time by the Issuer, and subject to the provisions of Section 3.03 hereof and
with the consent of one hundred percent (100%) of the holders of the 1998 Series
Bonds then outstanding, as expressed from time to time in one or more
Supplemental Indentures, the Bonds of any Series other than the 1998 Series
Bonds:

     (a)  shall be dated, shall bear interest at a rate or rates not in excess
of the maximum rate then permitted by applicable law, shall be payable and shall
mature by their terms at such time or times as may be provided in the
Supplemental Indenture creating the Series of which such Bonds are a part;

     (b)  shall be payable, both as to principal and interest and premium at
such place or places as the Issuer may determine in any coin or currency of the
United States of America which, at the time of payment, is legal tender for the
payment of public and private debts;

     (c)  may have such exchange privileges as may be determined by the Issuer;

     (d)  shall have such particular designations added to their title as the
Issuer may determine, and may be in such denominations as may be determined by
the Issuer;

     (e)  may be limited as to the maximum principal amount thereof which may be
authenticated by the Trustee and delivered or which may be at any time
outstanding, and an appropriate insertion in respect of such limitation may, but
need not, be made in the Bonds of such Series;

     (f)  may contain provisions for the redemption thereof at such redemption
price or prices, at such time or times, upon such notice, in such manner and
upon such other terms and conditions, not inconsistent with the provisions of
Article VIII of this Indenture and the terms of the Loan Agreement, as may be
determined by the Issuer and permitted by applicable law;

     (g)  may have mandatory provisions requiring payments of sinking fund
requirements for the purchase and sinking fund redemption of such Bonds, in such
amounts, at such time or times, in such manner and upon such terms and
conditions, not inconsistent with the provisions of this Indenture, as shall be
set forth in such Supplemental Indenture; and

     (h)  may contain such provisions with respect to acceleration of maturity
on the happening of specified events, and such other special terms and
conditions, not contrary to the provisions hereof or of the Act, as may be
determined by the Issuer.

      SECTION 2.07.  BONDS MUTILATED, DESTROYED, STOLEN OR LOST.  In the event
any outstanding Bond, whether temporary or definitive, is mutilated, lost,
stolen or destroyed, the Trustee shall, upon written request of the Issuer,
authenticate and deliver a new Bond of the same Series, principal amount and
maturity and of like tenor as the mutilated, lost, stolen or destroyed Bond in
exchange and substitution for such mutilated Bond, or in lieu of and
substitution for such lost, stolen

                                      20
<PAGE>
 
or destroyed Bond upon presentation of an open indemnity bond in favor of the
Trustee and the Issuer which is satisfactory to the Trustee.

     Application for exchange and substitution of mutilated, lost, stolen or
destroyed Bonds shall be made to the Trustee, in writing, at the Corporate Trust
Office.  In every case the applicant for a substitute Bond shall furnish to the
Issuer and to the Trustee such security or indemnity as may be required by them
to save each of them and any Paying Agent harmless.  In every case of loss,
theft or destruction of a Bond, the applicant shall also furnish to the Issuer
and to the Trustee evidence to their satisfaction of the loss, theft or
destruction and of the ownership of such Bond, and in every case of mutilation
of a Bond, the applicant shall surrender to the Trustee the Bond so mutilated.

     Notwithstanding the foregoing provisions of this Section 2.07, in the event
any such Bond shall have matured, and no default has occurred which is then
continuing in the payment of the principal of, Make-Whole Premium, if
applicable, or interest on the Bond, the Issuer may authorize, in writing, the
payment of the same (without surrender thereof except in the case of a mutilated
Bond) instead of issuing a substitute Bond provided security or indemnity is
furnished as above provided in this Section 2.07.

     Upon the issuance of any substitute Bond, the Issuer and the Trustee may
charge the holder of such Bond with their fees and expenses in connection
therewith.  Every substitute Bond issued pursuant to the provisions of this
Section 2.07 by virtue of the fact that any Bond is lost, stolen or destroyed
shall constitute an original additional contractual obligation of the Issuer,
whether or not the lost, stolen or destroyed Bond shall be found at any time, or
be enforceable by anyone, and shall be entitled to all the benefits of this
Indenture equally and proportionally with any and all other Bonds duly issued
under this Indenture to the same extent as the Bonds in substitution for which
such Bonds were issued.

     The provisions of this Section 2.07 are exclusive and shall preclude (to
the extent lawful) all of the rights and remedies with respect to the payment of
mutilated, lost, stolen or destroyed Bonds, including those granted by any law
or statute now existing or hereafter enacted.

      SECTION 2.08.  TEMPORARY BONDS.  Until Bonds in definitive form of any
Series are ready for delivery, the Issuer may execute, and upon its request in
writing, the Trustee shall authenticate and deliver in lieu of any thereof and
subject to the same provisions, limitations and conditions, one or more printed,
lithographed or typewritten Bonds in temporary form, substantially of the tenor
of the Bonds as set forth above in this Article II, with appropriate omissions,
variations and insertions. Bonds in temporary form will be for such principal
amounts as the Issuer shall determine.

     Until exchanged for Bonds in definitive form, such Bonds in temporary form
shall be entitled to the lien and benefit of this Indenture.  The Issuer shall,
without unreasonable delay, prepare, execute and deliver to the Trustee, and
thereupon, upon the presentation and surrender of the Bond or Bonds in temporary
form to the Trustee at the Corporate Trust Office, the Trustee shall authenti
cate and deliver, in exchange therefor, a Bond or Bonds of the same maturity and
Series, in definitive form in the authorized denominations, and for the same
aggregate principal amount, as the Bond or Bonds in temporary form surrendered.
Such exchange shall be made at the Issuer's own expense and without making any
charge therefor to any Bondholder.

                                      21
<PAGE>
 
      SECTION 2.09.  EXECUTION.  All the Bonds shall, from time to time, be
executed on behalf of the Issuer by, or bear the manual or facsimile signature
of, the Executive Director or President and its corporate seal (which may be in
facsimile) shall be thereunto affixed (or imprinted or engraved if facsimile)
and attested by the manual or facsimile signature of the Secretary.

     If any of the officers who shall have signed or sealed any of the Bonds or
whose facsimile signature shall be upon the Bonds shall cease to be such officer
of the Issuer before the Bonds so signed and sealed shall have been actually
authenticated by the Trustee or delivered by the Issuer, such Bonds nevertheless
may be authenticated, issued and delivered with the same force and effect as
though the person or persons who signed or sealed such Bonds or whose facsimile
signature shall be upon the Bonds had not ceased to be such officer or officers
of the Issuer; and also any such Bond may be signed and sealed on behalf of the
Issuer by those persons who, at the actual date of the execution of such Bonds,
shall be the proper officers of the Issuer, although at the date of such Bond
any such person shall not have been such officer of the Issuer.

      SECTION 2.10.  NEGOTIABILITY, TRANSFER AND REGISTRY.

     (a)  The Bonds may be transferred and title thereto shall pass, only in the
manner provided and as set forth in paragraph (c) below.  The Issuer hereby
designates the Trustee as initial Bond Registrar to keep the books for the
registration and for the transfer of Bonds as provided in this Indenture.  All
Bonds presented for transfer, exchange, redemption or payment, shall be
accompanied by a written instrument or instruments of transfer or authorization
for exchange, in form and with guaranty of signature satisfactory to the
Trustee, duly executed by the Registered Owner or by his attorney duly
authorized in writing.  No charge shall be made to the Registered Owner for the
transfer and registration of the Bonds except for a sum sufficient to pay any
tax, fee or governmental charge that may be imposed with respect thereto.

     (b)  The Issuer, the Trustee, the Bond Registrar and any Paying Agent may
deem and treat the Registered Owner of any registered Bond as the absolute owner
of such Bond for the purpose of receiving any payment on such Bond and for all
other purposes of this Indenture and the Loan Agreement, whether such Bond shall
be overdue or not, and neither the Issuer, nor the Trustee, nor the Bond
Registrar nor any Paying Agent shall be affected by any notice to the contrary.
Payment of, or on account of, the principal of and interest and Make-Whole
Premium, if applicable, on any registered Bond shall be made to such Registered
Owner or upon his written order.  All such payments shall be valid and effectual
to satisfy and discharge the liability upon such Bond to the extent of the sum
or sums so paid.

     (c)  The Bonds shall be registered in the name of the initial owner as to
principal and interest on the books kept by the Bond Registrar.  Any transfers
involving subsequent registration shall be made on the books kept by the Bond
Registrar.  No transfer shall be valid unless (1) made by written assignment,
(2) noted on books of the Bond Registrar and (3) unless a new registered bond
shall be issued, noted in the books kept by the Bond Registrar as of the date of
registration and the name of the Registered Owner thereof.

      SECTION 2.11.  REGULATIONS WITH RESPECT TO EXCHANGES AND TRANSFERS.  In
all cases in which the privilege of exchanging Bonds or registering the transfer
of Bonds is exercised, the Issuer 

                                      22
<PAGE>
 
shall execute and the Trustee, upon written request of the Issuer, shall
authenticate and deliver Bonds in accordance with the provisions of this
Indenture. All Bonds surrendered in any such exchanges or upon any such
registration of transfer shall forthwith be delivered to the Trustee and
canceled by it. There shall be no charge for any such exchange or registration
of transfer of Bonds to the Registered Owner, but the Issuer may require the
payment of a sum sufficient to pay any tax or other governmental charge required
to be paid with respect to any such exchange or registration of transfer.
Neither the Issuer nor the Trustee shall be required to register the transfer or
exchange of any Bond (a) after the Record Date but before a Payment Date or (b)
called for redemption in whole or in part.

      SECTION 2.12.  AUTHENTICATION.  No Bond shall be secured by this Indenture
or be entitled to the benefit hereof or shall be valid or obligatory for any
purpose unless there shall be endorsed on such Bond the Trustee's certificate of
authentication, substantially in the form prescribed in this Indenture, executed
by the manual signature of a duly authorized officer of the Trustee; and such
certificate on any Bond issued by the Issuer shall be conclusive evidence and
the only competent evidence that such Bond has been duly authenticated and
delivered under this Indenture.

          SECTION 2.13.  DESTRUCTION OF BONDS.  Upon the surrender to the
Trustee of any temporary or mutilated Bond, or any Bond acquired, redeemed, or
paid at maturity, the same shall forthwith be canceled and, not less than six
(6) months thereafter, cremated or otherwise destroyed by the Trustee. If such
Bond is so cremated or destroyed, the Trustee shall deliver its certificate of
such cremation or other destruction to the Issuer.

                                      23
<PAGE>
 
                                  ARTICLE III

                     AUTHENTICATION AND DELIVERY OF BONDS

      SECTION 3.01.  BONDS EQUALLY AND RATABLY SECURED.  The aggregate principal
amount of Bonds which may be executed by the Issuer and authenticated by the
Trustee and delivered and secured by this Indenture is not limited except as is
or may hereafter be provided in this Indenture or as may be limited by the Act
and applicable law.  All Bonds issued and to be issued hereunder are, and are to
be, to the extent provided in this Indenture, equally and ratably secured by
this Indenture without preference, priority or distinction on account of the
actual time or times of the authentication or delivery or maturity of the Bonds,
so that, subject as aforesaid, all Bonds at any time outstanding hereunder shall
have the same right, lien and preference under and by virtue of this Indenture
and shall all be equally and ratably secured hereby with like effect as if they
had all been executed, authenticated and delivered simultaneously on the date
hereof, whether the same or any of them shall actually be disposed of at such
date, or whether they, or any of them, shall be disposed of at some future date,
or whether they, or any of them, shall have been authorized to be executed,
authenticated and delivered under Section 3.02 of this Indenture or may be
authorized to be executed, authenticated and delivered hereafter pursuant to the
provisions of this Indenture.

      SECTION 3.02.  PROVISIONS FOR ISSUANCE OF 1998 SERIES BONDS.  The 1998
Series Bonds in the aggregate principal amount of $30,000,000, being the first
Series of Bonds issued under this Indenture, shall forthwith be executed by the
Issuer and delivered to the Trustee for authentication, together with a
statement as to the amount and disposition of the proceeds of the sale of such
principal amount of said 1998 Series Bonds, and thereupon the 1998 Series Bonds
shall be authenticated by the Trustee and shall be delivered to or upon the
written order of the President or Executive Director, but only upon the receipt
by the Trustee of the aforesaid proceeds of sale which proceeds shall be
deposited in the Construction Fund, except that the amount of accrued interest
thereon, if any, shall be deposited in the Bond Fund.  Prior to authentication
and delivery of the 1998 Series Bonds by the Trustee, the Trustee shall also
have received the following:

     (a)  a copy of the resolution or resolutions adopted by the Issuer
authorizing the execution and delivery of the Loan Agreement and this Indenture
and the sale, issuance and delivery of the 1998 Series Bonds, duly certified by
the Secretary, under its corporate seal, to have been duly adopted by the Issuer
and to be in full force and effect on the date of such certification;

     (b)  an original executed counterpart of the Loan Agreement, this Indenture
and the Note;

     (c)  an original executed direction to the Trustee on behalf of the Issuer
and signed by the Executive Director and by the Secretary to authenticate and
deliver the 1998 Series Bonds to the purchaser therein identified upon payment
to the Trustee, but for the account of the Issuer, of a sum specified in such
direction plus accrued interest on such 1998 Series Bonds to the date of
delivery, if any (such proceeds shall be paid over to the Trustee and deposited
in the manner provided herein);

     (d)  an original executed opinion of independent counsel to the Bank
satisfactory to the original purchasers of the 1998 Series Bonds to the effect
that the Letter of Credit has been duly 

                                      24
<PAGE>
 
authorized, executed and delivered and is valid, binding and enforceable upon
the Bank as regards the 1998 Series Bonds;

     (e)  an original executed counterpart of an opinion of counsel for the
Company, addressed to the Issuer, the Trustee, the Bank and Bond Counsel,
subject to standard assumptions and qualifications of counsel for the Company,
with respect to the due organization and existence in good standing of the
Company; its qualification to do business and its good standing under the laws
of the State of Mississippi; its power to execute, deliver and perform its
obligations under the Loan Agreement, the Note, this Indenture and any other
instruments and documents executed and delivered by the Company in connection
herewith; the due authorization thereof by all requisite authorizing action on
the part of the Company; the due execution and delivery thereof on the part of
the Company; the execution and delivery of the Loan Agreement and the Note; and
the performance of the obligations of the Company thereunder have not resulted
and will not result in a violation of the articles of incorporation of the
Company or its by-laws, and the legality, validity and binding effect thereof as
obligations of the Company enforceable in accordance with their terms (except to
the extent that the validity and enforceability thereof may be limited by
bankruptcy, reorganization or similar laws limiting the enforceability of
creditors rights generally and except that no opinion need be expressed as to
the availability of any discretionary equitable remedies);

     (f)  the original executed Letter of Credit and an original executed
counterpart of the Credit Agreement; and

     (g)  an original executed counterpart of an approving opinion of Bond
Counsel with respect to the validity of the 1998 Series Bonds.

      SECTION 3.03.  PROVISIONS FOR ISSUANCE OF ADDITIONAL BONDS.

     (a)  Subsequent to the authentication, issuance and delivery of the 1998
Series Bonds, and in accordance with Section 2.06 hereof, one or more Series of
Additional Bonds may be authenticated by the Trustee and delivered upon original
issuance for the purpose of providing funds to (1) complete payment of the Cost
of the Project, (2) pay the Cost of (A) enlargements, improvements or extensions
to the Building as described in Exhibit A to the Loan Agreement and/or (B)
additions to or replacement of the items of Equipment as the Company may deem
desirable, or (3) pay the Cost of additional facilities relating to the Project.

     (b)  The Issuer may execute and deliver to the Trustee, and the Trustee
shall thereupon authenticate and deliver, such Additional Bonds to the purchaser
or purchasers thereof, provided that, prior to such authentication and delivery,
there shall have been delivered to the Trustee and the Bank:

          (1) a copy of the resolution or resolutions adopted by the Issuer
authorizing such Additional Bonds and the execution and delivery by the Issuer
of a Supplemental Indenture providing for the terms and conditions upon which
such Bonds are to be issued, duly certified by the Secretary under its corporate
seal, to have been duly adopted by the Issuer and to be in full force and 

                                      25
<PAGE>
 
effect on the date of such certification, together with an executed counterpart
of said Supplemental Indenture;

          (2) a copy, certified by the Secretary as described in paragraph
(b)(1) hereinabove, of the resolution or resolutions adopted by the Issuer
authorizing the execution and delivery by the Issuer of any agreement which is
necessary to amend the Loan Agreement and to provide for an additional
promissory note of the Company to (A) increase or adjust the payments to be made
under the Loan Agreement to an amount sufficient to pay, as and when the same
mature or become due, the principal of and interest and Make-Whole Premium, if
applicable, on all outstanding Bonds, including such Additional Bonds (except to
such extent as the same may be payable out of moneys then in the Bond Fund or
otherwise on deposit with the Trustee in accordance with this Indenture), (B)
include as part of the Project all machinery, equipment, facilities, land and
rights in land to be financed by the issuance and sale of such Additional Bonds
and (C) make such other revisions to the Loan Agreement as are necessitated by
the issuance of such Additional Bonds; provided, however, that such other
revisions shall not prejudice the rights of the holders of outstanding Bonds as
granted them under the terms of this Indenture, together with a duly executed
counterpart of such amendatory agreement;

          (3) an original executed statement by the Company (A) approving the
issuance and delivery of such Additional Bonds and (B) certifying that the
Company is not then in default under the Note, the Loan Agreement or the Credit
Agreement;

          (4) copies, duly certified by the Secretary, of any approvals required
under the Act for the issuance of such Additional Bonds;

          (5) an original executed opinion of Bond Counsel, addressed to the
Trustee and the Issuer, to the effect that all of the conditions precedent to
the issuance of such Additional Bonds set forth in this Indenture, the
Supplemental Indenture and the Act have been satisfied;

          (6) an original executed direction to the Trustee on behalf of the
Issuer and signed by the Executive Director and the Secretary to authenticate
and deliver such Additional Bonds to the purchaser therein identified upon
payment to the Trustee, but for the account of the Issuer, a sum specified in
such direction plus accrued interest on such Additional Bonds to the date of
delivery, if any;

          (7) the Credit Facility in effect at the time of the issuance and
delivery of such Additional Bonds shall be increased to cover the principal of,
Make-Whole Premium, if applicable, and interest on such Additional Bonds;

          (8) the original executed consents to the issuance of such Additional
Bonds required by Section 2.06 hereof; and

                                      26
<PAGE>
 
          (9) (i) confirmation from the Rating Agency then rating the 1998
Series Bonds, if any, that the Additional Bonds will carry the same rating as
the 1998 Series Bonds and that the issuance of such Additional Bonds will not
result in a reduction or withdrawal of the rating on the 1998 Series Bonds, or
(ii) if the Additional Bonds are not to be rated, that they carry a legend
indicating that they are not rated and confirmation from the Rating Agency then
rating the 1998 Series Bonds, if any, that the issuance of such Additional Bonds
will not result in a reduction or withdrawal of the rating on the 1998 Series
Bonds.

     The proceeds of such Additional Bonds shall be deposited with and held and
disbursed by the Trustee as provided in the Supplemental Indenture provided for
such Additional Bonds.

      SECTION 3.04.  PROVISIONS FOR ISSUANCE OF REFUNDING BONDS.  The Issuer, if
and to the extent authorized by law, in addition to the Bonds authorized to be
executed, authenticated and delivered pursuant to the other provisions of this
Article III, may execute and deliver to the Trustee, and the Trustee shall
thereupon authenticate and deliver to or upon the written order of the President
or the Executive Director, Additional Bonds for the purpose of refunding all or
any part of the Bonds of any one or more Series issued under the provisions of
this Indenture and then outstanding, but only upon the receipt by the Trustee
and the Bank, in addition to the items required under Section 3.03 of this
Indenture, of:

     (a)  a copy of a resolution or resolutions adopted by the Issuer describing
the Series of Bonds to be refunded and authorizing all necessary action in
connection with the refunding thereof pursuant to the provisions of this
Indenture, certified by the Secretary under its corporate seal to have been duly
adopted by the Issuer and to be in full force and effect on the date of such
certification;

     (b)  evidence in the form of an affidavit of publication satisfactory to
the Trustee that notice of redemption of the Bonds to be redeemed has been
published or given as provided in this Indenture, or that provisions
satisfactory to the Trustee have been made for the publication or giving of such
notice; and

     (c)  either (1) moneys in an amount sufficient to effect payment at the
applicable Redemption Price of those Bonds, if any, to be redeemed or of the
principal amount of those Bonds, if any, to be paid at maturity, together with
accrued interest on such Bonds to the redemption or maturity date, which moneys
shall be held by the Trustee or the Paying Agent in a separate account
irrevocably in trust for and assigned to the respective holders of the Bonds to
be refunded, or (2) Government Obligations in such principal amounts, of such
maturities, bearing such interest, and otherwise having such terms and
qualifications, as shall be necessary to comply with the provisions of Section
15.02 of this Indenture, and any moneys required pursuant to said Section, which
securities and moneys shall be held in trust and used only as provided in said
Section.

          SECTION 3.05.  LIMITED OBLIGATIONS.  The 1998 Series Bonds together
with the interest thereon, are limited obligations of the Issuer payable solely
by the Issuer from the Revenues and other funds and collateral pledged hereunder
and under the Loan Agreement.  Neither the Issuer, the 

                                      27
<PAGE>
 
State, or any other political subdivision thereof, shall be obligated to pay the
Bonds, premium, if any, or the interest thereon or other costs incident thereto
except from the Revenues pledged by the Issuer or other monies held hereunder
for such purpose, and neither the faith and credit nor the taxing power of the
State or any political subdivision thereof is pledged to the payment of the
principal of, Make-Whole Premium, if applicable, or the interest on the Bonds.



                                      28
<PAGE>
 
                                  ARTICLE IV

                    CONSTRUCTION AND ACQUISITION OF PROJECT

      SECTION 4.01.  COVENANT TO PROCEED WITH REASONABLE DISPATCH; REVISION OF
PLANS AND SPECIFICATIONS.  Subject to the provisions of the Loan Agreement, the
Issuer covenants that it will cause the Company to complete the Project with
reasonable dispatch according to the Plans and Specifications.

     The Company may revise the Plans and Specifications at any time and from
time to time prior to the completion of the Project.  No material revision in
the Plans and Specifications shall be made in the course of construction of the
Project unless and until such revision shall have been certified by an
Authorized Company Representative and filed with the Trustee.

      SECTION 4.02.  COVENANT TO COMPLY WITH LAWS.  The Issuer covenants that in
the construction, installation and equipping of the Project it will comply and
will cause the Company to comply with all applicable requirements of the laws of
the State and with all applicable lawful requirements of any agency, board or
commission created under the laws of the State or of any other duly constituted
public authority with respect to the Project.

                                      29
<PAGE>
 
                                   ARTICLE V

                               CONSTRUCTION FUND

      SECTION 5.01.  ESTABLISHMENT OF CONSTRUCTION FUND.  There is hereby
created and established with the Trustee a Construction Fund.  The Issuer shall
pay or cause to be paid to the Trustee the proceeds from the sale by the Issuer
of each Series of Bonds, and the Trustee shall deposit the same in the
Construction Fund, except that an amount thereof equal to any interest accrued
on such Series of Bonds to the date of their delivery to the initial purchasers
thereof shall be deposited by the Trustee in the Bond Fund hereinafter created
and established.

      SECTION 5.02.  HELD IN TRUST.  The moneys in the Construction Fund, until
applied in payment of any item of the Cost of the Project, shall be held in
trust by the Trustee and, pending such application, shall be subject to a lien
and charge in favor of the holders of the Bonds and for the further security of
such holders until paid out as herein provided.

      SECTION 5.03.  USE OF MONEYS.

     The Trustee shall make payments from the Construction Fund to pay the Cost
of the Project upon receipt by the Trustee of (a) original executed requisitions
(upon which both the Trustee and the Issuer may conclusively rely and shall be
protected in relying) signed by an Authorized Company Representative, stating
with respect to each payment to be made: (1) the requisition number, (2) the
name and address of the person to whom payment is due or, in the event such
payment is to reimburse the Issuer or the Company, the name and the address of
the person to whom payment previously has been made (or, in the case of payments
to the Bond Fund, instructions to make such payments to the Bond Fund), (3) the
amount to be paid, (4) that there has been no Event of Default by the Company
(as defined in the Loan Agreement) under the Loan Agreement and (5) that each
obligation, item of cost or expense mentioned therein has been properly
incurred, is a proper charge against the Construction Fund and has not been the
basis of any previous withdrawal; (b) if required by the Credit Agreement,
executed copies of certifications of work completed by a licensed architect, if
the work is of the type which a licensed architect would be able to certify as
complete, which certifications shall be prepared on AIA draw forms or comparable
documents; and (c) if required by the Credit Agreement, an endorsement to the
title insurance policy related to the Project indicating no encumbrances to
title other than Permitted Encumbrances and reflecting the payments made.

      SECTION 5.04.  RETENTION OF REQUISITIONS.  Until the satisfaction and
discharge of this Indenture pursuant to Section 15.01 of this Indenture, the
Trustee shall retain in its possession all requisitions or copies thereof
received by it as in this Indenture required, subject to the inspection of the
Issuer, its agents and representatives, the Company, the Bank and the
Bondholders and their representatives at all reasonable times at the Corporate
Trust Office.

      SECTION 5.05.  COMPLETION OF PROJECT.  Upon the Completion Date (as
defined in the Loan Agreement) or completion of any enlargements, improvements
or extensions thereof or 

                                      30
<PAGE>
 
completion of any additional facilities for which Bonds shall be issued, the
Trustee and the Issuer shall be furnished with the certificate of an Authorized
Company Representative described in Section 3.05 of the Loan Agreement.
Thereupon, any balance in the Construction Fund not reserved for the payment of
the Cost of the Project shall (a) subject to the order of payment as set forth
in Section 6.02 hereof, be deposited in the Bond Fund and used, at the earliest
date permissible under the terms of this Indenture without the payment of any
premium or penalty, to pay principal on such Series of Bonds through redemption
or retirement or, at the option of the Company, be used to pay principal on the
Bonds of such Series purchased by the Company at such earlier date or dates as
the Company may elect; and (b) be invested in accordance with Article VII
hereof. Such deposits and investments shall be made by the Trustee pursuant to
written instructions of an Authorized Company Representative.

          SECTION 5.06.  COMPLETION OF PROJECT - DEFAULT.  If, prior to the
Completion Date, an Event of Default shall occur under this Indenture resulting
in the mandatory redemption, in whole, of the 1998 Series Bonds under Section
2.03(f) of this Indenture, any balance in the Construction Fund not reserved for
the payment of the Cost of the Project shall be transferred to the Bond Fund for
use in said redemption of the 1998 Series Bonds.



                                      31
<PAGE>
 
                                  ARTICLE VI

                                   BOND FUND

      SECTION 6.01.  ESTABLISHMENT OF BOND FUND.  There is hereby created and
established a Bond Fund and a Current Account and a Letter of Credit Account
therein which shall be held by the Trustee.  There shall be deposited into the
Bond Fund from the proceeds of the 1998 Series Bonds, immediately upon the
receipt thereof, the amount of accrued interest on the 1998 Series Bonds, if
any.  In addition, there shall be deposited into the Bond Fund as and when
received: (a) all loan payments specified in Section 4.02 of the Loan Agreement
and all payments made on the Note; (b) after completion of the Project, such
amounts in the Construction Fund as are required to be deposited in the Bond
Fund by Section 5.05 of this Indenture; (c) any amounts to be deposited in the
Bond Fund pursuant to the provisions of a Supplemental Indenture; (d) all money
received for deposit in the Bond Fund resulting from draws on the Credit
Facility pursuant to Article XI hereof; (e) all moneys received to make Sinking
Fund Payments pursuant to Section 2.04 of this Indenture; (f) all moneys
received to effect any redemption of the 1998 Series Bonds pursuant to Section
2.03 of this Indenture; and (g) all other moneys received by the Trustee that
are required under or pursuant to any of the provisions of the Loan Agreement,
the Note or the Indenture to be paid into the Bond Fund. The Issuer hereby
covenants and agrees that so long as any of the Bonds issued hereunder are
outstanding, it will deposit or cause to be deposited in the Bond Fund sums, but
only from the Revenues or other moneys or securities available therefor,
sufficient to meet and pay promptly the principal, Make-Whole Premium, if
applicable, and interest on the Bonds as the same become due and payable;
provided, however, that it is hereby acknowledged that a payment pursuant to the
Credit Facility shall constitute a credit against the obligations of the Company
to make a payment pursuant to the provisions of subsections (a) and (e) hereof
and under the Loan Agreement; however, nothing herein shall mitigate the
obligations of the Company to make such payments under the Loan Agreement.

      SECTION 6.02.  FLOW OF FUNDS.  To the extent moneys are available in the
Bond Fund, the Trustee shall, without indemnity, in the order provided below,
withdraw from the Bond Fund and apply such moneys on or before each date on
which principal, Make-Whole Premium, if applicable, and interest is due for any
Series of Bonds, an amount which will be sufficient to pay the principal, Make-
Whole Premium, if applicable, and interest on such Series of Bonds which will
become due on each such date to the holders of the Bonds.

     Except for moneys drawn by Trustee under the Credit Facility, each deposit
into the Bond Fund shall be placed in the Current Account within the Bond Fund.
Moneys from drawings under the Credit Facility shall be placed in the Letter of
Credit Account within the Bond Fund.

     Moneys in the Bond Fund shall be held in trust exclusively for the
Bondholders and shall be used solely for the payment of the interest on the
Bonds and for the payment of principal of and the Make-Whole Premium, if
applicable, on the Bonds upon maturity, whether stated or accelerated, or upon
mandatory or optional redemption.

                                      32
<PAGE>
 
     Neither the Company, the Bank nor any other party, other than the
Bondholders and the Trustee acting solely for the benefit of the Bondholders
pursuant to the terms of this Indenture or at their direction, shall have any
interest in or rights to the Bond Fund, including the Letter of Credit Account
and the Current Account therein.

     The Issuer hereby authorizes and directs the Trustee, and the Trustee
hereby agrees, to withdraw and make available at the principal office of the
Paying Agent sufficient funds from the Bond Fund to pay the principal of, Make-
Whole Premium, if applicable, and interest on the Bonds upon maturity, whether
stated or accelerated, or upon mandatory or optional redemption, only, in the
following order of payment:

     FIRST: Amounts held by the Trustee in the Letter of Credit Account of the
Bond Fund.

     SECOND:  Amounts held by the Trustee in the Current Account of the Bond
Fund to the extent that moneys under item FIRST are not sufficient to make
payment of principal, Make-Whole Premium, if applicable, and interest on the
Bonds.

     Any amounts remaining in the Bond Fund after payment in full of the Bonds
and all other amounts required to be paid under this Indenture or the Loan
Agreement, shall be paid to the Bank, to the extent of any amounts owing under
the Credit Agreement, or, if there are no such amounts owed, to the Company upon
the expiration or sooner cancellation or termination of the term of the Loan
Agreement as provided in the Loan Agreement.

     All moneys held in the Bond Fund, including the Letter of Credit Account
and the Current Account therein, shall be held absolutely and unconditionally
for the payment of the interest on the Bonds and for the payment of the
principal of and the Make-Whole Premium, if applicable, on the Bonds upon
maturity, whether stated or accelerated, or upon mandatory or optional
redemption, and are not subject to any right of set-off, counterclaim or
recoupment of any kind of the Company or any other party.

                                      33
<PAGE>
 
                                  ARTICLE VII

                     SECURITY FOR AND INVESTMENT OF MONEYS

      SECTION 7.01.  SECURITY.  All moneys from time to time received by the
Trustee and held in any fund created under this Indenture shall be held in trust
by the Trustee for the benefit of the holders from time to time of the Bonds
entitled to be paid therefrom, subject to the provisions of Section 12.04 of
this Indenture and any other provisions of this Indenture (including provisions
relating to the payment to the Bank of any amounts due the Bank from the Company
under the Credit Agreement).

      SECTION 7.02.  INVESTMENT OF FUNDS.  So long as the Bonds are outstanding
and there is no default under the Loan Agreement, moneys on deposit to the
credit of the Construction Fund or the Bond Fund shall, in accordance with
Section 3.08 of the Loan Agreement, be invested by the Trustee, to the extent
permitted by law, in any Investment Securities; provided, however, moneys in the
Bond Fund shall only be invested in Government Obligations.  The Trustee shall
have no obligation to invest any moneys on deposit pursuant to this Indenture in
the absence of the direction of an Authorized Company Representative except for
moneys on deposit in the Bond Fund which shall at all times be invested in
Government Obligations for which the Company shall have no authority to direct
the investment thereof.  Such investments shall have maturity dates, or shall be
subject to redemption by the holder, at the option of the holder, on or prior to
the dates the moneys invested therein will be needed for the purposes of such
funds.  The Trustee may make such invest  ments utilizing the services of any
qualified, duly licensed securities agent or broker of its choice including the
investment or bond department of the Trustee.

     The securities purchased with the moneys in each such fund shall be deemed
a part of such fund.  The interest, including realized interest on securities
purchased at a discount, received on all such securities (after deduction for
accrued interest, commissions, if any, and premium paid from such fund at time
of purchase) shall be deposited by the Trustee in the fund from which such
investment was made.  The Trustee shall not be liable or responsible for any
loss resulting from any such investment or resulting from the redemption, sale
or maturity of any such investment as authori  zed pursuant to this Section
7.02.  If at any time it shall become necessary that some or all of the
securities purchased with the moneys in any such fund be redeemed or sold in
order to raise moneys necessary to comply with the provisions of this Indenture,
the Trustee shall effect such redemption or sale, employing, in the case of a
sale, any commercially reasonable method of effecting the same.

      SECTION 7.03.  TRANSFER OF BALANCE.  Any balance in any of the Funds
created under this Indenture or otherwise held by the Trustee after all the
Bonds, premium, if any, together with the interest thereon, have been paid in
full or provision for such payment has been made in accordance with Section
15.02 of this Indenture and all amounts due to the Trustee, Paying Agent and the
Issuer have been paid, shall be paid over to the Company, provided, however,
that any such balance shall be paid to the Bank to the extent of any amount
owing from the Company to the Bank under the Credit Agreement.

                                      34
<PAGE>
 
                                 ARTICLE VIII

                              REDEMPTION OF BONDS

      SECTION 8.01.  METHOD OF REDEMPTION.  Any redemption of all or any part of
the Bonds which are subject to redemption or such purchase shall be made in the
manner provided in this Article VIII.

      SECTION 8.02.  NOTICE OF REDEMPTION.  In the case of any redemption, the
Trustee shall give notice in its own name or in the name of the Issuer, as
hereinafter provided in this Section 8.02, that Bonds of a particular Series and
maturity date identified by serial and/or CUSIP numbers have been called for
redemption and, in the case of Bonds to be redeemed in part only, the portion of
the principal amount thereof that has been called for redemption (or if all the
outstanding Bonds are to be redeemed, so stating, in which event such serial
numbers may be omitted), that they will be due and payable on the date fixed for
redemption (specifying such date) upon surrender thereof at the Corporate Trust
Office, at the applicable Redemption Price (specifying such price), that all
interest on the Bonds, or portions thereof, so to be redeemed will cease to
accrue on and after such date and that the Registered Owners thereof are
required to surrender such Bonds on or before the date fixed for redemption.

     Such notice shall be given, on such date so as to insure the redemption of
the Bonds on the earliest possible date by overnight carrier delivery and by
first class mail, in a sealed envelope, postage prepaid, at least thirty (30)
days before the date fixed for redemption, to the Registered Owners of such
Bonds, or portions thereof, so called for redemption, at their respective
addresses as the same shall last appear on the Bond Register, and the Bank;
provided, however, that in the event of a redemption pursuant to Section
2.03(d), (e) and (f) hereof, notice of redemption shall be mailed at least five
(5) days before the date fixed for redemption.

     In case, by reason of the suspension of or irregularities in regular mail
service, it shall be impractical to mail to the Registered Owners of registered
Bonds notice of any event when such notice is required to be given pursuant to
any provision of this Indenture, then any manner of giving such notice as shall
be satisfactory to the Trustee shall be deemed to be a sufficient giving of such
notice.

     To the extent applicable, such notice may be conditioned upon the deposit
of sufficient moneys to effect such redemption at or prior to the date fixed for
redemption and if such moneys are not deposited, said Bonds shall continue to be
outstanding under this Indenture and not subject to redemption pursuant to said
notice.

      SECTION 8.03.  PAYMENT OF REDEEMED BONDS. If notice of redemption has been
given as provided in Section 8.02 of this Indenture, the Bonds or portions
thereof called for redemption shall be due and payable on the date fixed for
redemption at the Redemption Price.  Payment of the Redemption Price shall be
made by the Trustee upon surrender of such Bonds.  The Redemption Price shall be
paid out of the Bond Fund.  The expense of giving notice and any other expenses
of 

                                      35
<PAGE>
 
redemption shall be paid by the Company. If there shall be called for redemption
less than the principal amount of a registered Bond, the Issuer shall execute
and deliver and the Trustee shall authenticate, upon surrender of such Bond, and
without charge to the Registered Owner thereof, at the option of the Registered
Owner, registered Bonds of like Series and maturity date for the unredeemed
portion of the principal amount of the registered Bond so surrendered.

          From and after the date fixed for redemption designated in such notice
(deposit of the Redemption Price having been made with the Trustee with such
moneys to be held in trust and uninvested in a separate subaccount of the Bond
Fund and notice having been given or waived), notwithstanding that any Bonds so
called for redemption in whole or in part shall not have been surrendered for
cancellation, no further interest shall accrue upon the principal of any of the
Bonds or portions thereof so called for redemption; and such Bonds or portions
thereof so to be redeemed shall cease to be entitled to any lien, benefit or
security under this Indenture, and the holders thereof shall have no rights in
respect of such Bonds or portions thereof except to receive payment of the
Redemption Price thereof.

                                      36
<PAGE>
 
                                  ARTICLE IX

                      PARTICULAR COVENANTS OF THE ISSUER

      SECTION 9.01.  PAYMENT OF BONDS.  The Issuer will promptly pay from the
Revenues and other funds and collateral pledged hereunder the principal of,
Make-Whole Premium, if applicable, and the interest on every Bond issued under
and secured by this Indenture at the places, on the dates and in the manner
specified in this Indenture and in said Bonds according to the true intent and
meaning thereof.

      SECTION 9.02.  MAINTAIN ITS EXISTENCE.  The Issuer will at all times
maintain its existence and will use its best efforts to maintain, preserve and
renew all its rights, powers, privileges and franchises; and it will cause the
Company to covenant to comply with all valid acts, rules, regulations, orders
and directions of any legislative, executive, administrative or judicial body
applicable to the Project or the Project Site.

      SECTION 9.03.  PAYMENTS UNDER LOAN AGREEMENT; NO AMENDMENT TO LOAN
AGREEMENT WITHOUT CONSENT.  So long as any of the Bonds are outstanding, the
Issuer will require the Company to pay, or cause to be paid, all the payments
and other costs and charges payable by the Company under the Loan Agreement.
The Loan Agreement may not be amended, changed, modified, altered or terminated
without the prior written consent of the Trustee and the Issuer and (a) the
holders of at least sixty-six and two-thirds percent (66-2/3%) in aggregate
principal amount of the Bonds then outstanding, or (b) in case less than all of
the several Series of Bonds, if any, then outstanding are affected by the
modifications or amendments, the holders of not less than sixty-six and two-
thirds percent (66-2/3%) in aggregate principal amount of the Bonds of each
Series so affected then outstanding; provided, however, that if such
modification or amendment will, by its terms, not take effect so long as any
Bonds of any specified Series remain outstanding, the consent of the holders of
such Bonds shall not be required and such Bonds shall not be deemed to be
outstanding for the purpose of any calculation of outstanding Bonds under this
Section 9.03; provided, further, that no such amendment, change, modification,
alteration or termination will reduce the percentage of the aggregate principal
amount of outstanding Bonds the consent of the holders of which is a requirement
for any such amendment, change, modification, alteration or termination.  No
amendment, change, modification, alteration or termination of the Loan Agreement
shall be made other than pursuant to a written instrument signed by the Issuer
and the Company.  The Loan Agreement may be amended, changed, modified, altered
or terminated without the consent of the holders of outstanding Bonds (a) to
provide necessary changes in connection with the issuance of Additional Bonds
and (b) to cure any ambiguity or to cure, correct or supplement any inconsistent
provisions of the Loan Agreement.

     The Issuer will require the Company to make the payments due under the Loan
Agreement and to observe faithfully all of its covenants and agreements under
the Loan Agreement; and, in case the Company shall fail to make such payments or
observe said covenants and agreements, the Issuer will institute and prosecute
all such legal proceedings as may be appropriate for the protection of the

                                      37
<PAGE>
 
holders of the Bonds.  The Loan Agreement specifically provides that the rights
of the Company under the Loan Agreement are subject to the lien and rights,
remedies and powers of the Trustee under this Indenture.

      SECTION 9.04.  FURTHER DOCUMENTS.  The Issuer covenants that it will from
time to time execute and deliver such further instruments and take such further
action as may be reasonable and as may be required to carry out the purpose of
this Indenture; provided, however, that no such instruments or actions shall
pledge the faith and credit or taxing power of the State, or any political
subdivision or public corporation of the State.

      SECTION 9.05.  PAYMENT OF TAXES AND ASSESSMENTS; COMPLIANCE WITH
REGULATIONS; NO CREATION OF LIENS OR CHARGES.  The Issuer will: (a) pay or make
provision for payment of, or cause the Company to pay or make provision for
payment of, all lawful taxes and assessments, including income, profits,
property or excise taxes, if any, or other municipal or governmental charges
lawfully levied or assessed by the federal, state or municipal government upon
the Issuer with respect to or upon the Project or the Project Site or any part
thereof or upon any payments in respect thereof under the Loan Agreement when
the same shall become due and (b) not create or suffer to be created any lien or
charge upon the payments in respect to the Loan Agreement or the Note; provided,
however, that nothing in this Section 9.05 contained shall require the Issuer or
the Company to pay any tax or assessment, observe or comply with any requirement
or pay or cause to be discharged or make provision for any such lien or charge
so long as the validity thereof shall be contested in good faith by appropriate
legal proceedings duly prosecuted or there shall have been provided a bond
satisfactory to the Trustee to discharge such lien or charge.

      SECTION 9.06.  EXTENSION OF PAYMENT OF BONDS.  In order to prevent any
accumulation of claims for interest after maturity, the Issuer will not directly
or indirectly extend or assent to the extension of time of payment of any claims
for interest on any of the Bonds and will not directly or indirectly be a party
to or approve any such arrangement by purchasing or funding such claims for
interest or in any other manner.  In case any such claim for interest shall be
extended or funded in violation of this Section 9.06, such claim for interest
shall not be entitled, in case of any default under this Indenture, to the
benefit or security of this Indenture except subject to the prior payment in
full of the principal of and Make-Whole Premium, if applicable, on all Bonds
issued and outstanding under this Indenture, and of all claims for interest
which shall not have been so extended or funded.

                                      38
<PAGE>
 
                                   ARTICLE X

                             DEFAULTS AND REMEDIES

      SECTION 10.01.  EVENTS OF DEFAULT.  In case one or more of the following
events, in this Indenture referred to as the "Events of Default", shall happen
and be continuing, that is to say, if

     (a)  payment of the principal of, Make-Whole Premium, if applicable, or
interest on the Bonds shall not be made when the same shall become due and
payable; or

     (b)  the Interest Component of the Letter of Credit or any Alternate Letter
of Credit is not reinstated by the eleventh day following the payment of an
interest draw thereunder; or

     (c)  an "event of default" occurs and is continuing under the Loan
Agreement or the Note; or

     (d)  the Issuer shall fail to observe or perform in any material way any
covenant, condition, agreement or provision contained in the Bonds or in this
Indenture on the part of the Issuer to be performed other than those set forth
in (a), (b), (c) and (e) of this Section 10.01, and such failure shall continue
for thirty (30) days after written notice specifying such failure and requiring
the same to be remedied shall have been given to the Issuer, the Bank and the
Company by the Trustee, which notice may be given by the Trustee in its
discretion and shall be given by the Trustee at the written request of the
holders of not less than sixty-six and two-thirds percent (66-2/3%) in aggregate
principal amount of all Bonds then outstanding; or

     (e)  an Act of Bankruptcy shall occur;

then, in each such case, unless the principal of all the Bonds shall have become
due and payable otherwise than by acceleration, or by acceleration as described
in the next succeeding paragraph, the Trustee may, and upon written request of
the holders of at least sixty-six and two-thirds percent (66-2/3%) in aggregate
principal amount of all Bonds then outstanding, the Trustee shall, by written
notice given to the Issuer, the Bank and the Company by the Trustee, declare the
principal of and the Make-Whole Premium, if applicable, on all Bonds then
outstanding, together with interest accrued thereon, to be due and payable
immediately, and upon such declaration the said principal, and the Make-Whole
Premium, if applicable, thereon, together with interest accrued thereon, shall
become due and payable immediately at the place of payment provided in the said
notice, anything in this Indenture or in said Bonds to the contrary
notwithstanding.

     With respect to any Events of Default specified in paragraphs (a) and (b)
of this Section 10.01, without any notice to the Issuer, the Bank or the Company
or any other act by the Trustee or the Bondholders, the Trustee shall declare
the principal of and the Make-Whole Premium, if applicable, on all Bonds then
outstanding, together with interest accrued thereon, to be immediately due and
payable and the Trustee shall immediately draw on the Credit Facility pursuant
to Section 11.02 hereof.  The Trustee shall immediately, upon such declaration,
provide notice thereof by first 

                                      39
<PAGE>
 
class mail, in a sealed envelope, postage prepaid, to the Registered Owners of
the Bonds. Pursuant to such acceleration, interest on the Bonds shall accrue to
the date of payment thereof but for no more than ten (10) calendar days
thereafter. Upon any declaration or acceleration hereunder, the Trustee shall
immediately exercise such rights as it may have under the Loan Agreement to
declare all payments thereunder to be immediately due and payable.

     Immediately following any such declaration of acceleration, the Trustee
shall mail notice of such acceleration by first class mail to each holder of the
Bonds at his last address appearing on the Bond Register.  Any defect in or
failure to give such notice of such declaration shall not affect the validity of
such declaration.

     There shall not be so waived any Event of Default described in paragraphs
(a), (b) and (e) of this Section or any declaration of acceleration in
connection therewith rescinded or annulled except with the written consent of
the holders of all Bonds then outstanding. In the case of the waiver or
rescission and annulment, or in case any suit, action or proceedings taken by
the Trustee on account of any Event of Default shall have been discontinued,
abandoned or determined adversely to it, the Issuer, the Trustee, the Bank and
the holders shall be restored to their former positions and rights hereunder,
respectively.  No waiver or rescission shall extend to any subsequent or other
Event of Default or impair any right consequent thereon.

      SECTION 10.02.  RIGHT TO DECLARE BONDS DUE AND PAYABLE.  In any case in
which under the provisions of Section 10.01 of this Indenture the Trustee has
the right to declare the principal of all Bonds then outstanding to be due and
payable immediately, or when the Bonds by their terms mature (upon redemption or
otherwise) and are not paid, the Trustee, as the assignee and pledgee of all the
right, title and interest of the Issuer in and to the Loan Agreement, may
enforce each and every right granted to the Issuer under the Loan Agreement and
this Indenture except those rights specifically retained by the Issuer.

      SECTION 10.03.  PROCEEDINGS BY TRUSTEE.  Upon the happening and
continuance of any Event of Default, then and in every such case the Trustee in
its discretion may, and upon the written request of the holders of at least
sixty-six and two-thirds percent (66-2/3%) in aggregate principal amount of the
Bonds then outstanding, and upon receipt of indemnification satisfactory to it,
shall:

     (a)  by mandamus, or other suit, action or proceeding at law or in equity,
enforce all rights of the Bondholders and require the Issuer or the Company to
carry out any agreements with or for the benefit of the Bondholders and to
perform its or their duties under the Act, the Loan Agreement and this
Indenture;

     (b)  bring suit upon the Bonds;

     (c)  by action or suit in equity require the Issuer to account as if it
were the trustee of an express trust for the Bondholders;

                                      40
<PAGE>
 
     (d)  by action or suit in equity enjoin any acts or things which may be
unlawful or in violation of the rights of the Bondholders; or

     (e)  exercise any and all rights available under law.

     If Events of Default set forth in Section 10.01 of this Indenture shall
require a mandatory redemption of the Bonds pursuant to Section 2.03 hereof, the
Trustee shall immediately take all such actions required by Sections 2.03 and
11.02 hereof without indemnity or direction.

      SECTION 10.04.  EFFECT OF DISCONTINUANCE OR ABANDONMENT.  In case any
proceeding taken by the Trustee on account of any default shall have been
discontinued or abandoned for any reason, or shall have been determined
adversely to the Trustee, then and in every such case the Issuer, the Bank, the
Trustee and the Bondholders shall be restored to their former positions and
rights under this Indenture, respectively, and all rights, remedies and powers
of the Trustee shall continue as though no such proceeding had been taken.

      SECTION 10.05.  RIGHTS OF BONDHOLDERS.  Anything in this Indenture to the
contrary notwithstanding, upon the happening and continuance of any Event of
Default the holders of not less than sixty-six and two thirds percent (66 2/3%)
in aggregate principal amount of the Bonds then outstanding shall have the right
upon providing the Trustee security and indemnity reasonably satisfactory to it
against the costs, expenses and liabilities to be incurred therein or thereby,
by an instrument in writing executed and delivered to the Trustee, to direct the
method and place of conducting all remedial proceedings to be taken by the
Trustee under this Indenture.

      SECTION 10.06.  RESTRICTION ON BONDHOLDERS' ACTION.  No holder of any of
the Bonds shall have any right to institute any suit, action or proceeding in
equity or at law for the enforcement of any trust under this Indenture, or any
other remedy under this Indenture or on said Bonds, unless such holder
previously shall have given to the Trustee written notice of an Event of Default
as hereinabove provided and unless also the holders of not less than sixty-six
and two-thirds percent (66 2/3%) in aggregate principal amount of the Bonds then
outstanding shall have made written request of the Trustee to institute any such
suit, action, proceeding or other remedy, after the right to exercise such
powers or rights of action, as the case may be, shall have accrued, and shall
have afforded the Trustee a reasonable opportunity either to proceed to exercise
the powers in this Indenture granted, or to institute such action, suit or
proceeding in its or their name; nor unless there also shall have been offered
to the Trustee security and indemnity reasonably satisfactory to it against the
costs, expenses and liabilities to be incurred therein or thereby, and the
Trustee shall not have complied with such request within a reasonable time; and
such notification, request and offer of indemnity are hereby declared in every
such case to be conditions precedent to the execution of the trusts of this
Indenture or for any other remedy under this Indenture; it being understood and
intended that no one or more holders of the Bonds secured by this Indenture
shall have any right in any manner whatever by his or their action to affect,
disturb or prejudice the security of this Indenture, or to enforce any right
under this Indenture or under the Bonds, except in the manner in this Indenture
provided, and that all proceedings at law or in equity shall be instituted, had
and 

                                      41
<PAGE>
 
maintained in the manner in this Indenture provided and for the equal benefit of
all holders of outstanding Bonds. Notwithstanding the foregoing provisions of
this Section 10.06 or any other provision of this Indenture, the obligation of
the Issuer shall be absolute and unconditional to pay, but solely from the
Revenues and other funds and collateral pledged under this Indenture, the
principal of and Make-Whole Premium, if applicable, and interest on the Bonds to
the respective holders thereof at the respective due dates thereof, and nothing
herein shall affect or impair the right of action, which is absolute and
unconditional, of such holders to enforce such payment.

      SECTION 10.07.  POWER OF TRUSTEE TO ENFORCE.  All rights of action under
this Indenture or under any of the Bonds secured by this Indenture which are
enforceable by the Trustee may be enforced by the Trustee without the possession
of any of the Bonds, or the production thereof at the trial or other proceedings
relative thereto, and any such suit, action or proceedings instituted by the
Trustee shall be brought in its name, as trustee, for the equal and ratable
benefit of the holders of the Bonds, subject to the provisions of this
Indenture.

      SECTION 10.08.  REMEDIES NOT EXCLUSIVE.  No remedy in this Indenture
conferred upon or reserved to the Trustee or to the holders of the Bonds is
intended to be exclusive of any other remedy or remedies, and each and every
such remedy shall be cumulative, and shall be in addition to every other remedy
given under this Indenture or now or hereafter existing at law or in equity or
by statute.

      SECTION 10.09.  EFFECT OF WAIVER.  No delay or omission of the Trustee or
of any holder of the Bonds to exercise any right or power accruing upon any
default or Event of Default shall impair any such right or power or shall be
construed to be a waiver of any such default or Event of Default, or an
acquiescence therein; and every power and remedy given by this Article X to the
Trustee and to the holders of the Bonds, respectively, may be exercised from
time to time and as often as may be deemed expedient.

      SECTION 10.10.  APPLICATION OF MONEYS.  All moneys received by the Trustee
after acceleration of the maturity of the Bonds and derived from any drawing
made upon the Letter of Credit shall be applied by the Trustee to and only to
the payment of the principal, Make-Whole Premium, if applicable, and interest on
the 1998 Series Bonds.  Subject to the foregoing, any moneys received by the
Trustee pursuant to this Article X or deposited pursuant to Article XV hereof
shall, after payment of all amounts payable to the Trustee, be deposited in the
Bond Fund and be applied as follows:

     FIRST - To the payment of the persons entitled thereto of all installments
of interest then due on the Bonds, in the order of the maturity of the
installments of such interest and, if the amount available shall not be
sufficient to pay in full any particular installment, then to the payment
ratably, according to the amounts due on such installment, to the persons
entitled thereto, without any discrimination or privilege;

                                      42
<PAGE>
 
     SECOND - To the payment to the persons entitled thereto of the unpaid
principal of and Make-Whole Premium, if applicable, on any of the Bonds which
shall have become due (other than Bonds matured or called for redemption for the
payment of which moneys are held pursuant to the provisions of this Indenture),
in the order of their due dates, with interest on the principal of such Bonds
accruing from the respective dates upon which they became due, to the extent
permitted by law, at the rate per annum borne by any Bonds issued under this
Indenture and then outstanding and, if the amount available shall not be
sufficient to pay in full Bonds and premium, if any, due on any particular date,
together with such interest, then to the payment ratably, according to the
amount of principal due on such date, to the persons entitled thereto without
any discrimination or privilege;

     THIRD - To be held for the payment to the persons entitled thereto as the
same shall become due of the principal of and Make-Whole Premium, if applicable,
and interest on the Bonds which may thereafter become due either at maturity or
upon call for redemption prior to maturity and, if the amount available shall
not be sufficient to pay in full Bonds due on any particular date, together with
interest and premium, if any, then due and owing thereon, payment shall be made
ratably according to the amount of principal due on such date to the persons
entitled thereto without any discrimination or privilege;

     FOURTH - To the payment of Administration Expenses;

     FIFTH - To the Bank any amounts owing to the Bank under the Credit
Agreement; and

     SIXTH - To the Company any remaining amounts.

     Whenever moneys are to be applied pursuant to the provisions of this
Section 10.10, such moneys shall be applied at such times, and from time to
time, as the Trustee shall determine, having due regard to the amount of such
moneys available for application and the likelihood of additional moneys
becoming available for such application in the future.  Whenever the Trustee
shall apply such funds, it shall fix the date (which shall be the next
succeeding Payment Date) upon which such application is to be made and upon such
date interest on the amounts of principal to be paid on such dates shall cease
to accrue.  The Trustee shall give, by mailing, pursuant to Section 16.05
hereof, such notice of the deposit with it of any such moneys and of the fixing
of any such date.

                                      43
<PAGE>
 
                                  ARTICLE XI

                                CREDIT FACILITY

      SECTION 11.01.  DELIVERY OF LETTER OF CREDIT.  Pursuant to the Credit
Agreement, the Bank has agreed, subject to certain conditions, to deliver to the
Trustee on the date of delivery of the 1998 Series Bonds for the account of the
Company, the Letter of Credit, to be held by the Trustee in trust in order to
provide for the payment of principal of, Make-Whole Premium, if applicable, and
interest on the 1998 Series Bonds (based upon the actual rates of interest on
the Bonds) for a period of two hundred ten (210) days (computed on the basis of
a three hundred sixty (360) day year of twelve (12), thirty (30) day months) and
the Trustee hereby agrees to accept the Letter of Credit and any Alternate
Letter of Credit and to perform its obligations with respect thereto in
accordance with the express terms and conditions of this Indenture, the Letter
of Credit and any Alternate Letter of Credit.

      SECTION 11.02.  CREDIT FACILITY DRAWINGS.   The Trustee shall, without
seeking indemnity or direction, draw moneys under the Credit Facility in the
following circumstances and only in the following circumstances:

     (a)  The Trustee shall, without making any prior demand or claim upon the
Company or the Issuer, and without regard to any other amounts on deposit for
such purposes in the funds created hereunder, make a drawing under and in
accordance with the Credit Facility so as to receive moneys thereunder in an
amount which shall be sufficient to pay in full the principal of, Make-Whole
Premium, if applicable, and interest on the Bonds when due, including on each
Payment Date, at maturity, and upon the date of any redemption pursuant to
Section 2.03 hereof, on the date such principal, Make-Whole Premium, if
applicable, or interest is required to be paid on the 1998 Series Bonds
according to the terms and provisions of this Indenture.

     (b)  Upon the occurrence of an Event of Default and (1) the acceleration of
payment of the 1998 Series Bonds pursuant to Sections 10.01 and 10.02 hereof or
(2) the mandatory redemption of the 1998 Series Bonds pursuant to Section
2.03(f) hereof, the Trustee shall, without making any prior demand or claim upon
the Company or the Issuer, and without regard to any other amounts on deposit
for such purposes in the funds created hereunder, immediately make a drawing
under and in accordance with the Credit Facility so as to receive moneys
thereunder in an amount which will be sufficient to pay in full the principal
of, Make-Whole Premium, if applicable, and accrued interest on the 1998 Series
Bonds on the date of payment or redemption of the 1998 Series Bonds resulting
from such declaration of acceleration or mandatory redemption.

     (c)  In the case of a mandatory redemption pursuant to Section 2.03(d) or
(e) hereof, the Trustee shall, without seeking indemnity or direction, draw
moneys under the Credit Facility at such time to insure the timely payment of
the Redemption Price of the 1998 Series Bonds on the date fixed for redemption.

                                      44
<PAGE>
 
      SECTION 11.03.  DISPOSITION OF MONEYS DRAWN UNDER THE CREDIT FACILITY.
All amounts drawn by the Trustee under the Credit Facility shall be deposited
into the Letter of Credit Account of the Bond Fund and applied as provided in
Sections 6.01 and 6.02 hereof.

      SECTION 11.04.  ALTERNATE LETTER OF CREDIT.  The Company may, at any time,
provide an Alternate Letter of Credit by delivery of such Alternate Letter of
Credit to the Trustee upon satisfaction of the following provisions of this
Section 11.04:

     (a)  Any Alternate Letter of Credit shall provide that funds may be
obtained for the purposes, in the manner and at the times as provided under the
Letter of Credit, and shall include (a) an amount sufficient to pay the
principal amount of the 1998 Series Bonds, plus (b) an amount equal to two
hundred ten (210) days' accrued interest on the outstanding 1998 Series Bonds,
based upon the actual rates of interest on the 1998 Series Bonds and computed on
the basis of a three hundred sixty (360) day year of twelve (12), thirty (30)
day months, plus (c) an amount equal to $1,600,000, as the Premium Component,
due in whole or in part upon the occurrence of certain circumstances as provided
in this Indenture.

     (b)  Any Alternate Letter of Credit shall be in effect for a period of at
least two (2) years, unless the Company elects to provide an Alternate Letter of
Credit having a term in excess of two (2) years, and shall have a scheduled
expiration of January thirtieth (30th) and shall be effective no later than
forty-five (45) days immediately preceding the scheduled expiration of the
Credit Facility then in effect.

     (c)  The Trustee shall have timely received written evidence that the
issuer of such Alternate Letter of Credit is a commercial bank organized and
doing business in the United States of America or a branch or agency of a
foreign commercial bank located and doing business in the United States of
America and subject to regulation by state or federal banking regulatory
authorities.

     (d)  The Trustee shall have timely received an opinion or opinions of
counsel satisfactory in form and substance to the Trustee to the effect that the
Alternate Letter of Credit is the valid and binding obligation of the Bank (or,
in the case of a branch or agency of a foreign commercial bank, the branch or
agency) issuing the same and enforceable in accordance with its terms.  Said
opinion or opinions shall comply with the requirements set forth in the
definition of Opinion of Counsel herein.

     (e)  In the case of an Alternate Letter of Credit issued by a branch or
agency of a foreign commercial bank there shall also be timely delivered to the
Trustee an opinion of counsel licensed to practice law in the jurisdiction in
which the primary corporate office of such bank is located (which counsel shall
be satisfactory to the Trustee), satisfactory in form and substance to the
Trustee to the effect (1) that the Alternate Letter of Credit is the valid and
binding obligation of such bank, enforceable in accordance with its terms in the
courts of the jurisdiction in which the primary corporate office of such bank is
located, (2) that such bank has consented to jurisdiction in the United States
of America, (3) that such branch or agency is subject to banking regulations of
the 

                                      45
<PAGE>
 
United States of America or any state thereof and (4) that a judgment upon the
Alternate Letter of Credit obtained in the United States of America against such
branch or agency would be enforceable against such bank in the courts of the
jurisdiction in which the primary corporate office of such bank is located
without relitigation of the merits.

     (f)  The Trustee must timely receive written evidence that the rating of
the long-term deposits of the Bank providing such Alternate Letter of Credit
shall not be less than Aa3 by Moody's or AA-by Standard & Poor's.

     The Trustee shall not accept any Alternate Letter of Credit unless the
conditions set forth above are satisfied.

     Notice of the proposed issuance of an Alternate Letter of Credit shall be
given by the Trustee, by first-class mail, postage prepaid, to the Bondholders
at their addresses appearing on the Bond Register; such notice shall be mailed
to the Bondholders and the Bank at least thirty (30) days prior to the proposed
effective date of the Alternate Letter of Credit.  Such notice shall specify
that an Alternate Letter of Credit is being obtained, the proposed effective
date of such Alternate Letter of Credit, the name of the entity providing such
Alternate Letter of Credit and a general description of the Alternate Letter of
Credit.

                                      46
<PAGE>
 
                                  ARTICLE XII

                            CONCERNING THE TRUSTEE

      SECTION 12.01.  APPOINTMENT AND ACCEPTANCE OF DUTIES.  The Trustee hereby
accepts and agrees to the trusts hereby created, but only upon the additional
terms set forth in this Article XII, to all of which the Issuer agrees and the
respective holders of the Bonds, by their purchase and acceptance thereof,
agree.

      SECTION 12.02.  RESPONSIBILITIES.  The recitals, statements and
representations in this Indenture or in the Bonds contained, save only the
Trustee's certificate of authentication upon the Bonds, shall be taken and
construed as made by and on the part of the Issuer, and not by the Trustee, and
the Trustee does not assume, and shall not have, any responsibility or
obligation for the correctness of any hereof or thereof.  The Trustee shall have
no responsibility for any funds other than those funds actually paid to or
received or held by it hereunder.  The Trustee shall pay to the Issuer the
Issuer's Administration Expenses immediately upon their receipt from the
Company.  The Trustee shall be responsible for insuring that Uniform Commercial
Code continuation statements necessary to preserve and maintain the security
interest created hereunder are timely and properly recorded as required by law.

      SECTION 12.03.  POWERS.  The Trustee may execute any of the trusts or
powers of this Indenture and perform the duties required of it under this
Indenture by or through attorneys, agents, receivers, or employees, and shall be
entitled to obtain and rely on advice of counsel concerning all matters of trust
and its duties under this Indenture and the Trustee shall not be answerable for
the default or misconduct of any such attorney, agent, receiver, or employee
selected by it with reasonable care.  The Trustee shall not be answerable for
the exercise of any discretion or power under this Indenture or for anything
whatever in connection with the trusts in this Indenture created, except only
for its own wilful or intentional misconduct or wanton or gross negligence.

      SECTION 12.04.  COMPENSATION.  The Issuer shall pay or cause the Company
to pay to the Trustee reasonable compensation for all services rendered by it
under this Indenture and also all its reasonable expenses, charges and other
disbursements and those of its attorneys, agents, receivers and employees
incurred in and about the administration and execution of the trusts by this
Indenture created and the performance of its powers and duties under this
Indenture.  In default of such payment, the Trustee may deduct the same from any
moneys coming into its hands except (a) moneys received by the Trustee from any
drawing made upon the Letter of Credit (b) moneys held under the provisions of
Article XV of this Indenture and (c) moneys held under Section 8.03 of this
Indenture and shall be entitled to a preference in payment over any of the Bonds
outstanding under this Indenture.

      SECTION 12.05.  NO DUTY TO MAINTAIN INSURANCE.  Subject to the provisions
of Article X, the Trustee shall be under no duty to effect or to renew any
policies of insurance or under any liability for the failure of the Issuer or
the Company to effect or renew insurance; or to report or file 

                                      47
<PAGE>
 
claims or proofs of loss for any loss or damage insured against or which may
occur; nor shall the Trustee be liable as an insurer.

      SECTION 12.06.  NOTICE OF EVENT OF DEFAULT.  The Trustee shall not be
required to take notice, or to be deemed to have notice, of any default or Event
of Default under this Indenture other than a default or Event of Default under
Section 10.01(a), (b) or (d) of this Indenture, unless specifically notified in
writing of such default or Event of Default by the holders of at least ten
percent (10%) in aggregate principal amount of the Bonds then outstanding.  The
Trustee may, however, at any time, in its discretion, require of the Issuer full
information and advice as to the performance of any of the covenants, conditions
and agreements contained in this Indenture.

      SECTION 12.07.  TRUSTEE'S ACTIONS.  The Trustee shall be under no
obligation to take any action in respect of any default or Event of Default or
otherwise, or toward the execution or enforcement of any of the trusts by this
Indenture created (with the exception of any actions required to be taken under
Sections 11.02 and 12.20 hereof and under Sections 10.01 and 10.02 hereof to
accelerate the payment of the Bonds, and under Sections 2.03 and 8.02 hereof to
redeem the Bonds, and to make drawings under the Letter of Credit required
thereunder, which actions the Trustee shall take without seeking indemnity or
direction), or to institute, appear in or defend any suit or other proceeding in
connection therewith, unless requested in writing so to do by holders of at
least sixty-six and two thirds percent (66-2/3%) in aggregate principal amount
of the Bonds then outstanding as provided in Article X, and if in its opinion
such action may tend to involve it in expense or liability, unless furnished,
from time to time as often as it may require, with reasonable security and
indemnity satisfactory to it; but the foregoing provisions are intended only for
the protection of the Trustee, and shall not affect any discretion or power
given by any provisions of this Indenture to the Trustee to take action in
respect of any default or Event of Default without such notice or request from
the Bondholders, or without security or indemnity.  In the event of a default by
the Bank under the Credit Facility, the Trustee is authorized and required to
enforce all of its rights in and under the Credit Facility by such action, at
law or in equity, as it deems necessary to protect the interests of the
Registered Owners of the Bonds.  The Trustee shall not sell, assign or transfer
the Credit Facility except to a successor Trustee under this Indenture.

      SECTION 12.08.  LIMITATION OF LIABILITY.  The Trustee shall be protected
and shall incur no liability in acting or proceeding in good faith upon any
resolution, notice, telegram, request, consent, waiver, certificate, statements,
affidavit, voucher, bond, requisition or other paper or document which it shall
in good faith believe to be genuine and to have been authorized or signed by the
proper board or person or to have been prepared and furnished pursuant to any of
the provisions of this Indenture, and the Trustee shall be under no duty to make
any investigation or inquiry as to any statements contained or matters referred
to in any such instrument, but may accept and rely upon the same as conclusive
evidence of the truth and accuracy of such statements.  The Trustee shall not be
bound to recognize any person as a holder of any Bond or to take any action at
his request unless such Bond shall be deposited with the Trustee or evidence
satisfactory to the Trustee of the ownership of such Bond shall be furnished to
the Trustee.

                                      48
<PAGE>
 
      SECTION 12.09.  OWNERSHIP OF BONDS.  The Trustee and any bank or trust
company in common control with the Trustee may in good faith buy, sell, own,
hold and deal in any of the Bonds issued under and secured by this Indenture,
and may join in or take any action which any Bondholder may be entitled to take
with like effect as if the Trustee were not a party to this Indenture.  The
Trustee and any bank or trust company in common control with the Trustee, as
principal or agent, may also engage in or be interested in any financial or
other transaction with the Issuer or the Company, and may act as depository,
trustee, or agent for any committee or body of holders of the Bonds issued under
or secured by this Indenture or other obligations of the Issuer as freely as if
it were not Trustee under this Indenture.

      SECTION 12.10.  NO DUTY TO INVEST.  The Trustee shall be under no
liability for interest upon any moneys which it may at any time receive under
any of the provisions of this Indenture, except (a) to the extent it fails to
comply with Section 7.02 of this Indenture, or (b) such as it may agree in
writing with the Issuer or the Company to pay thereon.

      SECTION 12.11.  CONSTRUCTION OF PROVISIONS OF INDENTURE.  The Trustee may
construe any of the provisions of this Indenture insofar as the same may appear
to be ambiguous or inconsistent with any other provision thereof, and any
construction of any such provisions of this Indenture by the Trustee in good
faith shall be binding upon the Bondholders.

      SECTION 12.12.  RESIGNATION.  The Trustee may at any time and for any
reason resign and be discharged of the trusts created by this Indenture by
executing an instrument in writing resigning such trust and specifying the date
when such resignation shall take effect, and filing the same with the Secretary
of the Issuer with a copy to the Bank not less than thirty (30) days before the
date specified in such instrument when such resignation shall take effect.  Such
resignation shall take effect on the day specified in such instrument and
notice, unless a successor Trustee shall not have been previously appointed and
accepted such appointment as hereinafter in this Article XII provided, in which
event such resignation and the transfer of the Credit Facility to such successor
Trustee shall take effect immediately on the appointment of and acceptance by
such successor Trustee.

      SECTION 12.13.  REMOVAL.  The Trustee at any time and for any reason may
be removed by an instrument or instruments in writing appointing a successor
filed with the Trustee so removed and executed by the holders of at least sixty-
six and two thirds percent (66-2/3%) in aggregate principal amount of the Bonds
then outstanding.  Such removal shall take effect upon the transfer of the
Credit Facility to such successor Trustee.

      SECTION 12.14.  APPOINTMENT OF SUCCESSOR TRUSTEE.  In case at any time the
Trustee shall resign, or shall be removed, or be dissolved, or if its property
or affairs shall be taken under the control of any state or federal Court or
administrative body because of insolvency or bankruptcy, or for any other
reason, a vacancy shall forthwith and ipso facto exist in the office of Trustee,
a successor may be appointed by the holders of at least sixty-six and two thirds
percent (66-2/3%) in aggregate principal amount of the Bonds then outstanding,
by an instrument or instruments in writing filed with the Secretary of the
Issuer, signed by such Bondholders or by their attorneys-in-fact duly 

                                      49
<PAGE>
 
authorized in writing. Copies of each instrument shall be promptly delivered by
the Issuer to the predecessor Trustee and to the Trustee so appointed.

     Until a successor Trustee shall be appointed by the Bondholders or by a
court of competent jurisdiction following the application therefor as authorized
by this Section 12.14, the Issuer, by an instrument authorized by resolution,
shall appoint a Trustee to fill such vacancy.  Any new Trustee so appointed by
the Issuer shall immediately and without further act be superseded by a Trustee
appointed by the Bondholders or by a court of competent jurisdiction in the
manner hereinabove in this Section 12.14 provided.

      SECTION 12.15.  SUCCESSOR TO BE A BANK.  Every successor in the trust
hereunder appointed pursuant to Section 12.14 of this Indenture shall be a bank
organized and doing business under the laws of the United States of America or
any state or territory thereof with trust powers, having combined capital and
surplus of at least $50,000,000.

      SECTION 12.16.  FAILURE TO APPOINT A SUCCESSOR TRUSTEE.  In case at any
time the Trustee shall resign and no appointment of a successor Trustee shall be
made pursuant to the foregoing provisions of this Article XII prior to the date
specified in the notice of resignation as the date when such resignation shall
take effect, the Trustee or the holder of any Bond may apply to any court of
competent jurisdiction to appoint a successor Trustee.  Such court may
thereupon, after such notice, if any, as it may deem proper, appoint a successor
Trustee.

      SECTION 12.17.  ACCEPTANCE BY SUCCESSOR TRUSTEE.  Any successor Trustee
appointed under this Article XII shall execute, acknowledge and deliver to the
Issuer an instrument accepting such appointment under this Indenture, and
thereupon such successor Trustee, without any further act, deed or conveyance,
shall become duly vested with all the estates, property, rights, powers, trusts,
duties and obligations of its predecessor in the trust under this Indenture,
with like effect as if originally named Trustee in this Indenture.  Upon the
written request of such successor Trustee, the Trustee ceasing to act and the
Issuer shall execute and deliver an instrument transferring to such successor
Trustee all the estates, property, rights, powers and trusts under this
Indenture of the Trustee so ceasing to act, and the Trustee so ceasing to act
shall pay over to the successor Trustee all moneys and other assets at the time
held by it under this Indenture.

     Any Trustee ceasing to act shall nevertheless retain a lien upon all
property and funds held or collected by such Trustee to secure any amount then
due it pursuant to the provisions of Section 12.04 of this Indenture, except
moneys received by the Trustee from any drawing made upon the Letter of Credit.

      SECTION 12.18.  MERGER OR CONSOLIDATION.  Any corporation or association
into which any Trustee under this Indenture may be merged or with which it may
be consolidated, or any corporation or association resulting from any merger or
consolidation to which any Trustee under this Indenture shall be a party, or any
corporation or association to which any Trustee under this Indenture may
transfer substantially all of its assets, shall be the successor Trustee under
this

                                      50
<PAGE>
 
Indenture, without the execution or filing of any paper or any further act on
the part of the parties hereto, anything in this Indenture to the contrary
notwithstanding. The Trustee shall timely advise the Company of any such merger
or consolidation.

      SECTION 12.19.  ACTION UPON EVENT OF DEFAULT.  Notwithstanding any other
provisions of this Article XII, the Trustee shall, provided it is indemnified to
its satisfaction, except as provided in Section 12.07 hereof, during the
existence of an Event of Default actually known to the Trustee, exercise such of
the rights and powers vested in it by this Indenture and use the same degree of
skill and care in their exercise as a prudent man would use and exercise under
the circumstances in the conduct of his own affairs provided, however, that the
liability of the Trustee shall only be to the extent provided in Section 12.03.

      SECTION 12.20.  NOTICE OF OCCURRENCE OF EVENT OF DEFAULT.  Upon the
occurrence of an Event of Default actually known to the Trustee, the Trustee
shall, within thirty (30) days of such Event of Default becoming known to the
Trustee give written notice thereof by first class mail, postage prepaid, as
provided in Section 16.05 of this Indenture to each Registered Owner of Bonds
then outstanding at his last address appearing upon the Bond Register and to the
Bank and the Company, unless such Event of Default shall have been cured before
the giving of such notice.

      SECTION 12.21.  INTERVENTION BY TRUSTEE.  In any judicial proceeding to
which the Issuer is a party and which in the opinion of the Trustee and its
counsel has a substantial bearing on the interests of holders of the Bonds, the
Trustee may in its own name and as trustee of an express trust intervene on
behalf of the holders of the Bonds and shall, upon receipt of indemnity
satisfactory to it, do so if requested in writing by the holders of at least
twenty-five percent (25%) in aggregate principal amount of the Bonds then
outstanding if permitted by the court having jurisdiction in the premises.

      SECTION 12.22.  APPOINTMENT AND ACCEPTANCE OF PAYING AGENT. The Trustee is
hereby appointed and does hereby accept its appointment as Paying Agent for the
1998 Series Bonds.  The Issuer may at any time or from time to time appoint one
or more other Paying Agents for the 1998 Series Bonds or any other Bonds, in the
manner and subject to the conditions set forth in Section 12.23 of this
Indenture for the appointment of a successor Paying Agent.  Each Paying Agent
(other than the Trustee) shall signify its acceptance of the duties and
obligations imposed upon it by written instrument of acceptance deposited with
the Issuer and the Trustee.

      SECTION 12.23.  RESIGNATION OR REMOVAL OF PAYING AGENT; APPOINTMENT OF
SUCCESSOR. Any Paying Agent may at any time resign and be discharged of the
duties and obligations created by this Indenture by giving at least sixty (60)
days written notice to the Issuer, the Bank and the Trustee.  Any Paying Agent
may be removed at any time by an instrument filed with such Paying Agent and the
Trustee and signed by the Issuer.  Any successor Paying Agent shall be appointed
by the Issuer, with the prior approval of the Trustee and the Company and shall
be a bank or trust company duly organized under the laws of the United States of
America or any state or territory thereof, having a capital stock and surplus
aggregating at least $50,000,000 and willing and able to 

                                      51
<PAGE>
 
accept the office on reasonable and customary terms and authorized by law to
perform all the duties imposed upon it by this Indenture.

     In the event of the resignation or removal of any Paying Agent, such Paying
Agent shall pay over, assign and deliver any moneys held by it as Paying Agent
to its successor, or to the Trustee. In the event that for any reason there
shall be a vacancy in the office of any Paying Agent, the Trustee shall act (or
continue to act, as the case may be) as such Paying Agent.

      SECTION 12.24.  TRUST ESTATE MAY BE VESTED IN SEPARATE OR CO-TRUSTEE.  It
is the purpose of this Indenture that there shall be no violation of any law of
any jurisdiction (including particularly the laws of the State) denying or
restricting the right of banking corporations or associations to transact
business as a trustee in such jurisdiction.  It is recognized that in case of
litigation under this Indenture, the Loan Agreement or the Note, and in
particular in case of the enforcement of any of them, either on default, or in
case the Trustee, in reliance upon an opinion of counsel, deems that by reason
of any present or future law of any jurisdiction it may not exercise any of the
powers, rights or remedies herein granted to the Trustee or take any other
action which may be desirable or necessary in connection therewith, it may be
necessary that the Trustee appoint an additional individual or institution as a
separate or co-trustee.  The following provisions of this Section 12.24 are
adopted to these ends:

     (a)  In the event that the Trustee appoints an additional individual or
institution as a separate or co-trustee, each and every remedy, power, right,
claim, demand, cause of action, immunity, estate, title, interest and lien
expressed or intended by this Indenture to be exercised by or vested in or
conveyed to the Trustee with respect thereto shall be exercisable by and vest in
such separate or co-trustee but only to the extent necessary to enable such
separate or co-trustee to exercise such powers, rights and remedies, and every
covenant and obligation necessary to the exercise thereof by such separate or
co-trustee shall run to and be enforceable by either of them.

     (b)  Should any deed, conveyance or instrument in writing from the Issuer
be required by the separate trustee or co-trustee so appointed by the Trustee
for more fully and certainly vesting in and confirming to him or it such
properties, rights, powers, trusts, duties and obligations, any and all such
deeds, conveyances and instruments in writing shall, on request, be executed,
acknowledged and delivered by the Issuer.

     (c)  In case any separate trustee or co-trustee, or a successor to either,
shall die, become incapable of acting, resign, be removed or be dissolved, or
shall be in the course of dissolution or liquidation, all the estates,
properties, rights, powers, trusts, duties and obligations of such separate
trustee or co-trustee, so far as permitted by law, shall vest in and be
exercised by the Trustee until the appointment of a new trustee or successor to
such separate trustee or co-trustee.

                                      52
<PAGE>
 
                                 ARTICLE XIII

                  EXECUTION OF INSTRUMENTS BY BONDHOLDERS AND
                          PROOF OF OWNERSHIP OF BONDS

      SECTION 13.01.  EXECUTION OF INSTRUMENTS; PROOF OF OWNERSHIP.  Any
request, direction, consent or other instrument in writing required or permitted
by this Indenture to be signed or executed by Bondholders may be in any number
of concurrent instruments of similar tenor and may be signed or executed by such
Bondholders in person or by agent appointed by an instrument in writing.  Proof
of the execution of any such instrument and of the ownership of Bonds shall be
sufficient for any purpose of this Indenture and shall be conclusive in favor of
the Trustee and any Paying Agent with regard to any action taken, suffered or
omitted by any of them under such instrument if made in the following manner:

     (a)  The fact and date of the execution by any Person of any such
instrument may be proved by the certificate of any officer in any jurisdiction
who, by the laws thereof, has power to take acknowledgments within such
jurisdiction, to the effect that the Person signing such instrument acknowledged
before him the execution thereof, or by an affidavit of a witness to such
execution.

     (b)  The fact of the holding of Bonds under this Indenture by any
Bondholder and the serial numbers of such Bonds and the date of his holding the
same shall be proved by the Bond Register.

     Nothing contained in this Article XIII shall be construed as limiting the
Trustee to such proof, it being intended that the Trustee may accept any other
evidence of the matters in this Article XIII stated which to it may seem
sufficient.  Any request or consent of the holder of any Bond shall bind every
future holder of the same Bond and any Bond or Bonds issued in exchange or
substitution therefor or upon the registration of transfer thereof in respect of
anything done by the Trustee in pursuance of such request or consent.

                                      53
<PAGE>
 
                                  ARTICLE XIV

                  MODIFICATION OF INDENTURE AND SUPPLEMENTAL
                                  INDENTURES

      SECTION 14.01.  SUPPLEMENTAL INDENTURES WITH CONSENT OF THE COMPANY, BUT
WITHOUT CONSENT OF BONDHOLDERS.  Subject to the conditions and restrictions in
this Indenture contained, the Issuer, when the execution thereof is consented to
in writing by the Company, may, without the consent of the Bondholders, enter
into a Supplemental Indenture or Supplemental Indentures with the Trustee (other
than with respect to Sections 10.01, 10.02, 11.01, 11.02, 11.03, 11.04, 14.01
and 14.02) which thereafter shall form a part of this Indenture, for any one or
more of the following purposes:

     (a)  to add to the covenants and agreements of the Issuer in this Indenture
contained other covenants and agreements thereafter to be observed, and to
surrender any right or power in this Indenture reserved to or conferred upon the
Issuer;

     (b)  to cure any ambiguity or to cure, correct or supplement any
inconsistent provision contained in this Indenture or in any Supplemental
Indenture;

     (c)  to assign additional revenues under this Indenture;

     (d)  to accept additional security and instruments and documents of further
assurance with respect to the Project;

     (e)  to add to the covenants, agreements and obligations of the Issuer
under this Indenture, other covenants, agreements and obligations to be observed
for the protection of the Bondholders, or to surrender or limit any right, power
or authority reserved to or conferred upon the Issuer in this Indenture,
including without limitation, the limitation of rights of redemption so that in
certain instances Bonds of different Series will be redeemed in some prescribed
relationship to one another for the protection of the holders of a particular
Series of Bonds;

     (f)  to evidence any succession to the Issuer and the assumption by its
successor of the covenants, agreements and obligations of the Issuer under this
Indenture, the Loan Agreement and the Bonds; or

     (g)  to make necessary or advisable amendments or additions in connection
with the issuance of Additional Bonds in accordance with Section 3.03 hereof as
do not adversely affect the interests of holders of outstanding Bonds.

     The Issuer hereby covenants that it will perform all the requirements of
any such Supplemental Indenture which may be in effect from time to time; but no
restriction or obligation imposed by this Indenture upon the Issuer in respect
of any of the Bonds outstanding under this 

                                      54
<PAGE>
 
Indenture may, except as otherwise provided in Section 14.03 of this Indenture,
be waived or modified by such Supplemental Indenture, or otherwise. Nothing in
this Article XIV contained shall affect or limit the right or obligation of the
Issuer to execute and deliver to the Trustee any instrument of further assurance
or other instrument which elsewhere in this Indenture it is provided shall be
delivered to the Trustee.

      SECTION 14.02.  TRUSTEE AUTHORIZED TO ENTER INTO SUPPLEMENTAL INDENTURE.
The Trustee is hereby authorized to enter into with the Issuer any Supplemental
Indenture authorized or permitted by the terms of this Indenture, and to make
the further agreements and stipulations which may be therein contained, and the
Trustee, in entering into any Supplemental Indenture, shall be fully protected
in relying on an Opinion of Counsel, in form and substance satisfactory to the
Trustee, to the effect that such Supplemental Indenture is authorized or
permitted by the provisions of this Indenture and is not inconsistent with this
Indenture.

      SECTION 14.03.  SUPPLEMENTAL INDENTURES WITH CONSENT OF BONDHOLDERS AND
THE COMPANY.  Exclusive of Supplemental Indentures to which reference is made in
Section 14.01 hereof, any modification or alteration of this Indenture or of the
rights and obligations of the Issuer or of the holders of the Bonds in any
particular may be made with the consent of the Company and (a) the holders of
not less than sixty-six and two thirds percent (66-2/3%) in aggregate principal
amount of the Bonds then outstanding, or (b) in case less than all of the
several Series of Bonds, if any, then outstanding are affected by the
modifications or amendments, the holders of not less than sixty-six and two
thirds percent (66-2/3%) in aggregate principal amount of the Bonds of each
Series so affected then outstanding; provided, however, that if such
modification or amendment will, by its terms, not take effect so long as any
Bonds of any specified Series remain outstanding, the consent of the holders of
such Bonds shall not be required and such Bonds shall not be deemed to be
outstanding for the purpose of any calculation of outstanding Bonds under this
Section 14.03. No such modification or alteration shall be made which will
reduce the percentage of aggregate principal amount of Bonds the consent of the
holders of which is required for any such modification or alteration, or permit
the creation by the Issuer of any lien prior to or, except to secure Additional
Bonds, on a parity with the lien of this Indenture upon the Revenues and other
funds and collateral pledged hereunder or which will affect the currency of
payment of the principal of, or interest or premium, if any, on, the Bonds.

     For the purposes of this Indenture, a Series shall be deemed to be affected
by a modification or amendment of this Indenture if the same adversely affects
or diminishes the rights of the holders of Bonds of such Series.  The Trustee
shall determine whether or not in accordance with the foregoing provisions Bonds
of any particular Series would be affected by any modification or amendment of
this Indenture and any such determination shall be binding and conclusive on the
Issuer and all the holders of Bonds.

     For all purposes of this Article XIV, the Trustee shall be entitled to rely
upon an Opinion of Counsel with respect to the extent, if any, to which any
action affects the rights under this Indenture of any holders of Bonds then
outstanding.

                                      55
<PAGE>
 
                                  ARTICLE XV

                                  DEFEASANCE

      SECTION 15.01.  DEFEASANCE.  When at any time the whole amount of the
principal, Make-Whole Premium, if applicable, and the interest so due and
payable upon all of the Bonds shall be paid, or provision shall have been made
for the payment of the same, together with all other sums payable under this
Indenture by the Issuer, and all Administration Expenses shall have been paid or
provided for through the deposit with the Trustee of Government Obligations, the
principal of and the interest to be earned thereon is sufficient to pay all sums
due in respect of the Bonds, which Government Obligations shall have been
purchased with funds held by the Trustee for a period of three hundred sixty-
seven (367) days prior to and during which time no Act of Bankruptcy shall have
occurred, then and in that case, this Indenture and the lien created hereby
shall be discharged and satisfied and the Issuer shall be released from the
covenants, agreements and obligations of the Issuer contained in this Indenture,
and the Trustee shall assign and transfer to the Company, all property (in
excess of the amounts required for the foregoing) then held by the Trustee
(including the Loan Agreement and all payments thereunder and all balances in
any fund or account created under this Indenture free and clear of any
encumbrances other than Permitted Encumbrances and shall execute such documents
as may be reasonably required by the Company in this regard.

     All moneys and Government Obligations delivered and held pursuant to this
Section 15.01 shall be held absolutely and unconditionally for the payment of
the interest on the Bonds and for the payment of the principal of and the Make-
Whole Premium, if applicable, on the Bonds upon maturity or earlier redemption,
and are not subject to any right of set-off, counterclaim or recoupment of any
kind of the Company or any other party.

     When all of the Bonds of a particular Series shall have been paid and if,
at the time of such payment, the Issuer shall have kept, performed and observed
all the covenants and promises in such Bonds of a particular Series and in this
Indenture required or contemplated to be kept, performed and observed by the
Issuer or on its part on or prior to that time, and all amounts owed to the Bank
under the Credit Agreement shall have been paid, and the Credit Agreement shall
no longer be in effect, then this Indenture shall be considered to have been
discharged in respect of such Bonds of a particular Series and such Bonds shall
cease to be entitled to the lien of this Indenture.

     Notwithstanding the satisfaction and discharge of this Indenture or the
discharge of this Indenture in respect of a particular Series of Bonds, the
Trustee shall continue to be obligated to hold in trust any moneys or
investments then held by the Trustee for the payment of the principal of, Make-
Whole Premium, if applicable, and interest on the Bonds, to pay to the holders
of Bonds the funds so held by the Trustee as and when such payment becomes due,
and, on written demand of the Company and the Issuer, the Trustee shall assign
and transfer to the Company, all property (in excess of the amounts required for
the foregoing) then held by the Trustee (including the Loan Agreement and all
payments thereunder and all balances in any Fund or account created under this
Indenture and shall execute such documents as may be required by the Company in
this regard; provided, however, 

                                      56
<PAGE>
 
that if any amounts are then owed to the Bank under the Credit Agreement, any
property then held by the Trustee shall first be paid to the Bank to the extent
of the amounts due under the Credit Agreement. Notwithstanding the satisfaction
and discharge of this Indenture or the discharge of this Indenture with respect
to a particular Series of Bonds, the covenants of the Issuer contained in
Section 7.03 shall survive any such satisfaction and discharge.

      SECTION 15.02.  BONDS DEEMED TO HAVE BEEN PAID.  Bonds of any one or more
Series or interest installments for the payment or redemption of which
sufficient moneys shall have been held by the Trustee at the maturity or
redemption date thereof shall be deemed to be paid within the meaning and with
the effect provided in Section 15.01 of this Indenture.  All outstanding Bonds
of any one or more Series shall prior to the maturity or redemption date thereof
be deemed to have been paid within the meaning and with the effect expressed in
Section 15.01 if (a) in case said Bonds are to be redeemed on any date prior to
their maturity, the Issuer shall have given to the Trustee in form satisfactory
to it irrevocable instructions to mail on a date in accordance with the
provisions of Section 8.02 hereof notice of redemption of such Bonds on said
redemption date, such notice to be given in accordance with the provisions of
Section 8.02 hereof, (b) there shall have been deposited with the Trustee
Government Obligations purchased with funds which shall have been held by the
Trustee for a period of three hundred sixty-seven (367) days prior to and during
which time no Act of Bankruptcy shall have occurred, the principal of and the
interest on which when due, and without any reinvestment thereof, will provide
moneys which are certified by an independent public accounting firm of
nationally recognized standing to be of such maturities or redemption dates and
interest payment dates, and to bear such interest, as shall be sufficient to pay
when due the principal of and Make-Whole Premium, if applicable, and interest
due and to become due on said Bonds on and prior to the redemption date or
maturity date thereof, as the case may be, (c) in the event any of said Bonds
are not to be redeemed within the next succeeding sixty (60) days, the Issuer
shall have given the Trustee in form satisfactory to it irrevocable instructions
to mail, as soon as practicable in the same manner as a notice of redemption is
mailed pursuant to Section 8.02 hereof, a notice to the holders of such Bonds
that the deposit required by (b) above has been made with the Trustee and that
said Bonds are deemed to have been paid in accordance with this Section 15.02
and stating such maturity or redemption dates upon which moneys are to be
available for the payment of the principal of and Make-Whole Premium, if
applicable, on said Bonds (d) all amounts owed to the Bank under the Credit
Agreement shall have been paid in full and the Credit Agreement shall no longer
be in effect and (e) an acceptable preference opinion shall have been provided
to the Issuer and the Trustee.  The securities deposited with the Trustee
pursuant to this Section 15.02 nor principal or interest payments on any such
securities shall be withdrawn or used for any purpose other than, and shall be
held in trust for, the payment of the principal of and Make-Whole Premium, if
applicable, and interest on said Bonds.

     Subject to the provisions of Section 12.04 of this Indenture, any release
under this Section 15.02 shall be without prejudice to the right of the Trustee
to be paid reasonable compensation for all services rendered by it under this
Indenture and all its reasonable expenses, charges and other disbursements and
those of its attorneys, receivers, agents and employees, incurred on and about
the 

                                      57
<PAGE>
 
administration of trusts by this Indenture created and the performance of its
powers and duties under this Indenture.

                                      58
<PAGE>
 
                                  ARTICLE XVI

                                 MISCELLANEOUS

      SECTION 16.01.  DISSOLUTION OF ISSUER.  In the event of the dissolution of
the Issuer, all the covenants, stipulations, promises and agreements in this
Indenture contained, by or on behalf of, or for the benefit of, the Issuer,
shall bind or inure to the benefit of the successors of the Issuer from time to
time and any officer, board, commission, agency or instrumentality to whom or to
which any power or duty of the Issuer shall be transferred.

      SECTION 16.02.  PARTIES INTERESTED HEREIN.  Except as in this Indenture
otherwise specifically provided, nothing in this Indenture expressed or implied
is intended or shall be construed to confer upon any Person other than the
Company, the Issuer, the Trustee, the Bank and the holders of the Bonds issued
under this Indenture, any right, remedy or claim under or by reason of this
Indenture, this Indenture being intended to be for the sole and exclusive
benefit of the Company, the Issuer, the Trustee, the Bank and the holders of the
Bonds issued under this Indenture.

      SECTION 16.03.  SEVERABILITY OF INVALID PROVISIONS.  If any clause,
provision or section of this Indenture be held illegal or invalid by any court,
the invalidity of such clause, provision or section shall not affect any of the
remaining clauses, provisions or sections hereof, and this Indenture shall be
construed and enforced as if such illegal or invalid clause, provision or
section had not been contained herein.

      SECTION 16.04.  NO RECOURSE ON BONDS.  No covenant or agreement contained
in the Bonds or in this Indenture shall be deemed to be the covenant or
agreement of any member, agent, or employee of the Issuer in his individual
capacity, and neither the members of the Issuer nor any official executing the
Bonds shall be liable personally on the Bonds or be subject to any personal
liability or accountability by reason of the issuance thereof.

      SECTION 16.05.  NOTICE.  All notices, certificates, requests or other
communications under this Indenture shall be sufficiently given and shall be
deemed given, unless otherwise required by this Indenture, when mailed by
registered or certified mail, return receipt requested (except as otherwise
provided in this Indenture), postage prepaid, addressed as set forth in Annex A
provided, however, all notices to Bondholders shall be given by overnight
carrier delivery and by first class mail, in a sealed envelope, postage prepaid,
to each Registered Owner of Bonds then outstanding at his last address appearing
upon the Bond Register.  A duplicate copy of each notice, certificate, request
or other communication given under this Indenture to the Issuer, the Company,
the Trustee or the Bank shall also be given to the others.  The Company, the
Issuer, the Bank and the Trustee may, by notice given under this Section 16.05,
designate any further or different addresses to which subsequent notices,
certificates, requests or other communications shall be sent.

                                      59
<PAGE>
 
      SECTION 16.06.  COUNTERPARTS.  This Indenture may be executed in any
number of counterparts, each of which, when so executed and delivered, shall be
an original; but such counterparts shall together constitute but one and the
same instrument.

      SECTION 16.07.  GOVERNING LAW.  This Indenture shall be governed as to
validity, construction and performance by the laws of the State.


                                      60
<PAGE>
 
                                  ARTICLE XVI

                                   BOND FORM

      SECTION 17.01.  BOND FORM.  The 1998 Series Bonds to be issued under this
Indenture, the form of Assignment, the provisions for registration and the
Trustee's Certificate of Authentication to be endorsed thereon are to be in
substantially the following form, respectively, with necessary and appropriate
variations, omissions and insertions as permitted or required by this Indenture:

NOTICE:  NO PURCHASE OR SUBSEQUENT TRANSFER OF ANY BOND OR ANY INTEREST THEREIN
MAY BE MADE TO ANY PERSON (1) WHO IS NOT EITHER (A) AN "ACCREDITED INVESTOR"
WITHIN THE MEANING OF REGULATION D PROMULGATED UNDER THE SECURITIES ACT OF 1933,
AS AMENDED, OR (B) A "QUALIFIED INSTITUTIONAL BUYER" WITHIN THE MEANING OF RULE
144A PROMULGATED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, (2) WHO IS ACTING
AS A BROKER OR OTHER INTERMEDIARY, (3) WHO IS NOT PURCHASING SUCH BOND OR
INTEREST THEREIN AS AN INVESTMENT FOR SUCH PERSON'S OWN ACCOUNT OR FOR ONE OR
MORE SEPARATE ACCOUNTS MAINTAINED BY IT OR FOR THE ACCOUNT OF ONE OR MORE
PENSION OR TRUST FUNDS FOR WHICH IT EXERCISES SOLE INVESTMENT DISCRETION OR (4)
IN A MANNER THAT RESULTS IN SUCH PURCHASER OR TRANSFEREE OWNING LESS THAN
$500,000 AGGREGATE PRINCIPAL AMOUNT OF BONDS WITHOUT A PRESENT VIEW TO RESALE OR
OTHER DISTRIBUTION TO THE PUBLIC.  THE TRUSTEE AND THE ISSUER SHALL BE ENTITLED
TO RECEIVE EVIDENCE WITH RESPECT THERETO AS IT SHALL REASONABLY REQUIRE THAT,
BASED UPON REPRESENTATIONS THEREIN DESCRIBED, THE TRANSFEREE IS AN "ACCREDITED
INVESTOR" OR "QUALIFIED INSTITUTIONAL BUYER".  ALTHOUGH A BONDHOLDER MAY NOT
INTEND AT THE TIME OF PURCHASE TO DISPOSE OF ALL OR ANY PART OF ITS BONDS, IT IS
HEREBY ACKNOWLEDGED AND AGREED THAT SUCH BONDHOLDER'S RIGHT TO SELL AND TRANSFER
ITS BONDS SHALL AT ALL TIMES BE WITHIN ITS CONTROL, SUBJECT TO THE LIMITATION
THAT THE BONDHOLDER MAY NOT SELL AND TRANSFER ANY PORTION OF ITS BONDS UNLESS
THERE IS FULL COMPLIANCE WITH THIS NOTICE.

             INTEREST ON THIS BOND SHOULD BE TREATED AS INCLUDABLE
                   IN GROSS INCOME OF THE HOLDER HEREOF FOR
                          FEDERAL INCOME TAX PURPOSES

                           UNITED STATES OF AMERICA
                             STATE OF MISSISSIPPI
                   MISSISSIPPI BUSINESS FINANCE CORPORATION

                      TAXABLE REVENUE BONDS, SERIES 1998
                      (HALTER MARINE GROUP, INC. PROJECT)


NO. R-___________                                                $____________


                                      61
<PAGE>
 
INTEREST RATE          MATURITY DATE        DATED DATE           CUSIP

   6.39%             December 31, 2013     March 3, 1998

REGISTERED OWNER

PRINCIPAL SUM                                                    DOLLARS

     The Mississippi Business Finance Corporation, constituting a public
corporation of the State of Mississippi (the "Issuer"), for value received,
hereby promises to pay solely from the sources specified herein to the
Registered Owner or registered assigns, on the Maturity Date stated above
(unless redeemed prior thereto as provided herein), the principal amount stated
above and interest on said principal amount from and including the date
specified above, if the date of authentication hereof is on or prior to the day
preceding the first Payment Date (as hereinafter defined), and otherwise from
the Payment Date next preceding the date of authentication to which interest has
been paid, payable semiannually on December 31 and June 30 (a "Payment Date") in
each year, commencing June 30, 1998, at the rate per annum specified above (the
"Interest Rate"), until maturity, the date fixed for redemption or acceleration,
and the Make-Whole Premium (as hereinafter defined), if applicable.

     This Bond represents a part of the issue of bonds of the Issuer designated
as "Mississippi Business Finance Corporation Taxable Revenue Bonds, Series 1998
(Halter Marine Group, Inc. Project)" (the "Bonds"), issued in the aggregate
principal amount of $30,000,000 under and pursuant to the Constitution and laws
of the State of Mississippi, particularly Sections 57-10-401, et seq.,
Mississippi Code of 1972, as amended and as supplemented, and Sections 57-10-201
et seq., Mississippi Code of 1972, as amended and supplemented (collectively,
the "Act"), and under and secured by a Trust Indenture between the Issuer and
SouthTrust Bank, National Association, Birmingham, Alabama (the "Trustee"),
dated as of January 1, 1998 (hereinafter, together with any and all indentures
supplementary thereto and amendatory thereof called the "Indenture").  This Bond
is issued for the purpose of, and the proceeds will be used for, financing the
cost of an "economic development project" (as defined in the Act), by Halter
Marine Group, Inc., a Delaware corporation (the "Company") under and pursuant to
a Loan Agreement between the Issuer and the Company, dated as of January 1, 1998
(hereinafter, together with any and all amendments thereof, called the "Loan
Agreement"), pursuant to which the Company is obligated to make loan payments
sufficient to pay the principal of, Make-Whole Premium, if applicable, and
interest on this Bond.  The obligation to make loan payments is evidenced by a
promissory note, dated March 3, 1998 (the "Note"), executed by the Company.  As
provided in the Indenture, Additional Bonds (as defined in the Indenture) may be
issued in one or more Series for the purpose of financing the completion of such
facilities, the cost of enlargements, improvements or expansions of such
facilities and the cost of acquisition and installation of additional facilities
(such facilities, together with any enlargements, improvements or expansions
thereof, and any such additional facilities and real property herein
collectively called the "Project").

                                      62
<PAGE>
 
     Copies of the Indenture, the Loan Agreement and the Note are on file at the
Corporate Trust Office of the Trustee and reference is made to the Indenture and
the Loan Agreement for the provisions relating, among other things, to the terms
and security of the Bonds, the collection and disposition of the revenues and
receipts of the Issuer from or in connection with the Project, the custody and
application of the proceeds of the Bonds, the rights and remedies of the holders
of the Bonds, the rights, duties and obligations of the Issuer, the Company and
the Trustee, and the modification or amendment of any of the foregoing
documents.  Capitalized terms used and not defined herein shall have the
meanings ascribed to them in the Indenture and the Loan Agreement.

     The principal of, Make-Whole Premium, if applicable, and interest on the
Bonds are payable from moneys deposited in the Bond Fund, (a) from moneys drawn
by the Trustee under the Credit Facility, or (b) to the extent necessary, from
any other moneys which have been on deposit in the Bond Fund with the Trustee.

     The Company has caused to be delivered to the Trustee an irrevocable
direct-pay letter of credit (the "Letter of Credit") of The First National Bank
of Chicago (the "Bank").  The Letter of Credit will expire at the close of the
Bank's business on January 30, 2000, unless an Alternate Letter of Credit (as
defined in the Indenture) is provided in accordance with the Indenture.  The
Trustee shall be entitled under the Letter of Credit to draw up to (a) an amount
sufficient to pay the principal amount of the Bonds, plus (b) an amount equal to
two hundred ten (210) days' accrued interest on the outstanding Bonds, based
upon the actual rates of interest on the Bonds and computed on the basis of a
three hundred sixty (360) day year of twelve (12), thirty (30) day months, plus
(c) an amount equal to $1,600,000, as the Premium Component under the Letter of
Credit, due in whole or in part upon the occurrence of certain circumstances as
provided in the Indenture.

     Notice of the proposed issuance of an Alternate Letter of Credit shall be
given by the Trustee, by first-class mail, postage prepaid, to the Bondholders
at least thirty (30) days prior to the proposed effective date of such Alternate
Letter of Credit.  Each such notice shall specify that an Alternate Letter of
Credit is being obtained, the proposed effective date of such Alternate Letter
of Credit, the name of the entity providing such Alternate Letter of Credit and
a general description of the Alternate Letter of Credit.

     The principal of, Make-Whole Premium, if applicable, and interest on this
Bond shall be payable in any coin or currency of the United States of America
which, at the time of payment is legal tender for the payment of public and
private debts and shall be made to the Registered Owner thereof in the case of
principal and Make-Whole Premium, if applicable, at the Corporate Trust Office
of the Trustee upon presentation and surrender thereof, and in the case of
interest, to the Registered Owner hereof at the close of business on the Record
Date which shall be the fifteenth (15th) day of the calendar month preceding a
Payment Date, by bank wire or bank transfer as such Registered Owner may specify
or otherwise as the Trustee and such Registered Owner may agree.

     This Bond and any Additional Bonds issued under and secured by the
Indenture are, and are to be, equally and ratably secured, to the extent
provided in the Indenture, solely by a pledge of the revenues and receipts
derived by the Issuer from or in connection with the Project, including payments
received under the Loan Agreement and the Note.  This Bond, together with the
interest 

                                      63
<PAGE>
 
hereon, is a limited obligation of the Issuer payable solely from the Revenues
(as defined in the Indenture) and other funds and collateral pledged under the
Indenture and the Loan Agreement. Neither the Issuer, the State of Mississippi
nor any other political subdivision thereof shall be obligated to pay the Bonds
or the interest thereon or other costs incident thereto except from the Revenues
pledged by the Issuer, and neither the faith and credit nor the taxing power of
the Issuer, the State of Mississippi or any political subdivision thereof is
pledged to the payment of the principal of, Make-Whole Premium, if applicable,
or the interest on, this Bond.

     The transfer of this Bond is registrable, as provided in the Indenture,
upon the Bond Register kept for that purpose at the above mentioned office of
the Trustee by the Registered Owner hereof in person, or by his attorney duly
authorized in writing, upon surrender of this Bond together with a written
instrument of transfer satisfactory to the Trustee duly executed by the
Registered Owner or his attorney duly authorized in writing.  The Issuer and the
Trustee may deem and treat the person in whose name this Bond is registered as
the absolute owner hereof for the purpose of receiving payment of, or on account
of, the principal or Make-Whole Premium, if applicable, hereof and interest due
hereon and for all other purposes.

     The Bonds shall be subject to redemption prior to maturity in accordance
with Article VIII of the Indenture and as follows:

     (a)  The Bonds shall be subject to mandatory redemption in the event there
are moneys remaining in the Construction Fund after the Completion Date (as
defined in the Indenture), as provided in Sections 5.05 and 6.01(b) of the
Indenture.  If called for redemption in such event, the Bonds shall be subject
to redemption on any Payment Date, in part, to the extent such moneys in the
Construction Fund are available therefor, in the inverse order of their
maturities (less than all of said Bonds of a single maturity to be selected pro-
rata), at a Redemption Price (as defined in the Indenture) for each Bond
redeemed equal to the principal amount thereof and accrued interest thereon to
the date of redemption, plus the Make-Whole Premium.

     (b)  The Bonds shall be subject to optional redemption at the option of the
Company, which option may be exercised at any time upon not less than forty-five
(45) days' written notice by the Company to the Trustee, in whole at any time,
or in part on any Payment Date, in the inverse order of their maturities (less
than all of said Bonds of a single maturity to be selected pro-rata), at a
Redemption Price for each Bond redeemed equal to the principal amount thereof
and accrued interest thereon to the date of redemption, plus the Make-Whole
Premium.

     (c)  The Bonds shall be subject to mandatory redemption, in whole, at any
time, or in part on any Payment Date in the inverse order of their maturities
(less than all of said Bonds of a single maturity to be selected pro-rata), to
the extent moneys are deposited in the Bond Fund pursuant to Sections 4.13 and
4.14 of the Loan Agreement at a Redemption Price for each Bond redeemed equal to
the principal amount thereof and accrued interest thereon to the date of
redemption, without premium or penalty.

     (d)  The Bonds shall be subject to mandatory redemption, in whole, at a
Redemption Price for each Bond redeemed equal to the principal amount thereof
and accrued interest thereon to the 

                                      64
<PAGE>
 
date of redemption, plus the Make-Whole Premium, if the rating assigned by
Moody's Investors Services, Inc. ("Moody's") or Standard & Poor's Ratings Group
("Standard & Poor's") to the long-term deposits of the Bank is downgraded to a
rating below A1 by Moody's or below A+ by Standard & Poor's, on the forty-fifth
(45th) day following the date on which the lowered rating is announced by either
Rating Agency (as defined in the Indenture); provided, however, the Bonds shall
not be subject to mandatory redemption in such case if the Company shall deliver
to the Trustee at least five (5) Business Days prior to the scheduled date of
such redemption, an Alternate Letter of Credit in accordance with Section 11.04
of the Indenture and issued by a Bank the senior long-term debt or the long-term
deposits of which are rated not less than Aa3 by Moody's or AA- by Standard &
Poor's. Written notice of any such downgrade shall be timely provided by the
Company to the Trustee and the holders of all 1998 Series Bonds then
outstanding.

     (e)  The Bonds shall be subject to mandatory redemption, in whole, five (5)
Business Days following the failure of the Company (1) to provide an irrevocable
and unconditional commitment for an Alternate Letter of Credit in accordance
with Section 11.04 of the Indenture, not later than one (1) year immediately
preceding the expiration of the Letter of Credit or any Alternate Letter of
Credit, or (2) to deliver said Alternate Letter of Credit forty-five (45) days
immediately preceding the expiration of the Letter of Credit or any Alternate
Letter of Credit, at a Redemption Price for each Bond redeemed equal to the
principal amount thereof and accrued interest thereon to the date of redemption,
plus the Make-Whole Premium.

     (f)  The Bonds shall be subject to mandatory redemption, in whole, upon
acceleration thereof upon the occurrence of an Event of Default on the earliest
Business Day for which any required notice may be given, at a Redemption Price
for each Bond redeemed equal to the principal amount thereof and accrued
interest thereon to the date of redemption, plus the Make-Whole Premium, for
acceleration upon an Event of Default occurring under Section 10.01 of the
Indenture.

     If more than one of the events described in paragraphs (a), (c), (d), (e)
and (f) above, shall occur at any one time requiring a mandatory redemption of
all of the Bonds, the Trustee shall redeem the Bonds according to the paragraph
that will result in the Bonds being redeemed on the earliest possible date.

     A redemption pursuant to paragraph (f) above shall occur no later than ten
(10) calendar days after a declaration of acceleration pursuant to Sections
10.01 and 10.02 of the Indenture.

     The Bonds shall be subject to mandatory sinking fund redemption, in part,
prior to maturity or in whole as provided in the Indenture on each December 31,
commencing December 31, 2004, in the principal amount for each year (together
with accrued interest to the date of redemption and without premium or penalty)
from moneys deposited in the Bond Fund in the amount and manner set forth in
Section 2.04 of the Indenture.

     Unless otherwise provided in the Indenture, in the event of any partial
redemption of the Bonds, the Bonds to be redeemed shall be redeemed on a pro-
rata basis among all Bondholders and, in case of a partial redemption within a
maturity, Bonds of such maturity to be redeemed shall be selected pro-rata.

                                      65
<PAGE>
 
     Any redemption of this Bond, either in whole or in part, shall be made upon
at least thirty (30) days' prior notice in the manner and upon the terms and
conditions provided in the Indenture; provided, however, that in the event of a
redemption pursuant to paragraphs (d), (e) and (f) above, notice shall be mailed
at least five (5) days before the date fixed for redemption.  If this Bond or
any portion hereof shall have been duly called for redemption and payment of the
Redemption Price shall have been made or provided for, all as more fully set
forth in the Indenture, interest on this Bond or such portion shall cease to
accrue from such date, and, from and after such date this Bond or such portion
shall no longer be entitled to any lien, benefit, or security under the
Indenture, and the holder hereof shall have no rights in respect of this Bond or
such portion except to receive payment of such Redemption Price.

     For purposes of this Bond, Make-Whole Premium shall mean, with respect to
any Bond, an amount equal to the excess, if any, of the Discounted Value of the
Remaining Scheduled Payments with respect to the Called Principal of such Bond
over the amount of such Called Principal, provided that the Make-Whole Premium
may in no event be less than zero.  For the purposes of determining the Make-
Whole Premium, the following terms shall have the following meanings:

          "CALLED PRINCIPAL" means, with respect to any Bond, the principal of
     such Bond that is to be prepaid pursuant to Section 2.03 of the Indenture
     or has become or is declared to be immediately due and payable pursuant to
     Sections 10.01 and 10.02 of the Indenture, as the context requires.

          "DISCOUNTED VALUE" means, with respect to the Called Principal of any
     Bond, the amount obtained by discounting all Remaining Scheduled Payments
     with respect to such Called Principal from their respective scheduled due
     dates to the Settlement Date with respect to such Called Principal, in
     accordance with accepted financial practice and at a discount factor
     (applied on the same periodic basis as that on which interest on the Bond
     is payable) equal to the Reinvestment Yield with respect to such Called
     Principal.

          "REINVESTMENT YIELD" means, with respect to the Called Principal of
     any Bond, the yield to maturity implied by (a) the yields reported, as of
     10:00 a.m., New York City Time, on the second Business day preceding the
     Settlement Date with respect to such Called Principal, on the display
     designated as the "PX1 Screen" on the Bloomberg Financial Market Service
     (or such other display as may replace the PX1 Screen on the Bloomberg
     Financial Market Service) for actively traded Government Obligations having
     a maturity equal to the Remaining Average Life of such Called Principal as
     of such Settlement Date, or (b) if such yields are not reported as of such
     time or the yields reported as of such time are not ascertainable, the
     Treasury Constant Maturity Series Yields reported, for the latest day for
     which such yields have been so reported as of the second Business Day
     preceding the Settlement Date with respect to such Called Principal, in
     Federal Reserve Statistical Release H.15 (519) (or any comparable successor
     publication) for actively traded Government Obligations having a constant
     maturity equal to the Remaining Average Life of such Called Principal as of
     such Settlement Date.  Such implied yield will be 

                                      66
<PAGE>
 
     determined, if necessary, by (1) converting Government Obligations
     quotations to bond-equivalent yields in accordance with accepted financial
     practice and (2) interpolating linearly between (A) the actively traded
     Government Obligations with the duration closest to and greater than the
     Remaining Average Life and (B) the actively traded Government Obligations
     with the duration closest to and less than the Remaining Average Life.

          "REMAINING AVERAGE LIFE" means, with respect to any Called Principal,
     the number of years (calculated to the nearest one-twelfth year) obtained
     by dividing (a) such Called Principal into (b) the sum of the products
     obtained by multiplying (1) the principal component of each Remaining
     Scheduled Payment with respect to such Called Principal by (2) the number
     of years (calculated to the nearest one-twelfth year) that will elapse
     between the Settlement Date with respect to such Called Principal and the
     scheduled due date of such Remaining Scheduled Payment.

          "REMAINING SCHEDULED PAYMENTS" means, with respect to the Called
     Principal of any Bond, all payments of such Called Principal and interest
     thereon that would be due after the Settlement Date with respect to such
     Called Principal if no payment of such Called Principal were made prior to
     its scheduled due date, provided that if such Settlement Date is not a date
     on which interest payments are due to be made under the terms of the Bonds,
     then the amount of the next succeeding scheduled interest payment will be
     reduced by the amount of interest accrued to such Settlement Date and
     required to be paid on such Settlement Date pursuant to Sections 2.03,
     10.01 and 10.02 of the Indenture.

          "SETTLEMENT DATE" means, with respect to the Called Principal of any
     Bond, the date on which such Called Principal is to be prepaid pursuant to
     Section 2.03 of the Indenture or has become or is declared to be
     immediately due and payable pursuant to Sections 10.01 and 10.02 of the
     Indenture, as the context requires.

     The Make-Whole Premium shall be timely calculated by the Company in
accordance with the above definition thereof and timely written notice thereof
given by the Company to the Trustee, the Bank and the holders of all Bonds
outstanding.

     This Bond shall not be entitled to any benefit under the Indenture or be
valid or become obligatory for any purpose until this Bond shall have been
authenticated by the execution by the manual signature of a duly authorized
officer of the Trustee of the Trustee's certificate of authentication hereon.

     No covenant or agreement contained in this Bond or the Indenture shall be
deemed to be a covenant or agreement of any member, agent, or employee of the
Issuer in his individual capacity, and neither the members of the Issuer nor any
officer thereof executing this Bond shall be liable personally on this Bond or
be subject to any personal liability or accountability by reason of the issuance
of this Bond.

                                      67
<PAGE>
 
     It is hereby certified and recited that all conditions, acts and things
required by law and the Indenture to exist, to have happened and to have been
performed precedent to an in the issuance of this Bond exist, have happened and
have been performed in due time, form and manner as required by law and the
Indenture, and that the issuance of this Bond and the issue of which it forms a
part are within every debt and other limit prescribed by the laws of the State
of Mississippi.

     IN WITNESS WHEREOF, the Issuer has caused this Bond to be signed in its
name and on its behalf by the manual or facsimile signature of its Executive
Director and its seal or a facsimile thereof to be impressed, imprinted or
otherwise reproduced hereon and attested by the manual or facsimile signature of
its Secretary as of the 3rd day of March, 1998.

(SEAL)                              MISSISSIPPI BUSINESS FINANCE
                                    CORPORATION
Attest

____________________________        By___________________________
Secretary                             Executive Director


                    TRUSTEE'S CERTIFICATE OF AUTHENTICATION

     This Bond is one of the Mississippi Business Finance Corporation Taxable
Revenue Bonds, Series 1998 (Halter Marine Group, Inc. Project) described in the
within mentioned Indenture.

                                    SOUTHTRUST BANK, NATIONAL
                                    ASSOCIATION, AS TRUSTEE

                                    By___________________________
                                      Authorized Representative

Date of Authentication ________


                            VALIDATION CERTIFICATE

     The issuance of the Bonds of which this Bond is one has been validated and
confirmed by decree of the Chancery Court of the First Judicial District of
Hinds County, Mississippi, rendered on the 26th day of January, 1998.

(SEAL)                              MISSISSIPPI BUSINESS FINANCE
                                    CORPORATION

                                    By___________________________
                                      Secretary


                                      68
<PAGE>
 
                                  ASSIGNMENT

                              FOR VALUE RECEIVED

     The undersigned hereby sells, assigns and transfers unto (Please insert
name, address and Social Security Number or other identifying number of
Assignee)
________________________________________________________________________________
________________________________________________________________________________
the within Bond of the MISSISSIPPI BUSINESS FINANCE CORPORATION and does hereby
constitute and appoint__________________________ as attorney to transfer the 
said Bond on the books of the within named Issuer, with full power of 
substitution in the premises.

Dated: _______________


Signature guaranteed

--------------------------------------   --------------------------------------
Insert Social Security Number or Other   Registered Owner
Tax Identification Number of Assignor:
                                         Notice: Signature(s) to this
______________________________________   assignment must correspond with the
                                         name(s) of the Registered Owner(s) as
                                         it appears on the face of the within
--------------------------------------   Bond in every particular, without
                                         alteration or enlargement or any
                                         change whatever and must be
                                         guaranteed by a member firm of the
                                         New York Stock Exchange or a
                                         commercial bank or trust company who
                                         is a member of a Medallion Signature
                                         Guarantee Program acceptable to the
                                         Trustee.


                                      69
<PAGE>
 
     IN WITNESS WHEREOF, the Mississippi Business Finance Corporation has caused
this Indenture to be executed by its Executive Director and its corporate seal
to be hereunto affixed, attested by its Secretary, and SouthTrust Bank, National
Association has caused this Indenture to be executed by its duly authorized
officer and (if applicable) its corporate seal to be hereunto affixed, attested
by its duly authorized officer, all as of the day and year first above written.

(SEAL)                              MISSISSIPPI BUSINESS FINANCE
                                    CORPORATION
Attest

                                 
_______________________________     By_____________________________
Secretary                             Executive Director



(SEAL)                              SOUTHTRUST BANK, NATIONAL
                                    ASSOCIATION, AS TRUSTEE
Attest

_______________________________     By_____________________________

Title__________________________     Title__________________________


                                      70
<PAGE>
 
                           ACKNOWLEDGMENT OF ISSUER

STATE OF MISSISSIPPI   )
                       ) SS.
COUNTY OF HINDS        )

     Personally appeared before me, the undersigned authority in and for the
said county and state, on this _____ day of March, within my jurisdiction, the
within named William T. Barry and James Vernon Smith, Sr., who acknowledged they
are the Executive Director and Secretary, respectively, of the Mississippi
Business Finance Corporation, a Mississippi corporation, and that for and on
behalf of said corporation, and as its act and deed they executed the above and
foregoing instrument, after first having been duly authorized by said
corporation so to do.

                                    _______________________________
                                    Notary Public


(SEAL)

My Commission Expires:

__________________________


                                      71
<PAGE>
 
                           ACKNOWLEDGMENT OF TRUSTEE

STATE OF __________________   )
                              ) SS.
COUNTY OF _____________       )

     Personally appeared before me, the undersigned authority in and for the
said county and state, on this _____ day of March, within my jurisdiction, the
within named _____________________ and _____________________, who acknowledged 
they are the _____________________ and _____________________, respectively, of 
SouthTrust Bank, National Association, a national banking association organized
and existing under the laws of the United States of America, and that for and on
behalf of said banking association and as its act and deed, they executed the
foregoing instrument, after first having been duly authorized by said banking
association so to do.

                                    ____________________________
                                    Notary Public

(SEAL)

My Commission Expires:

__________________________

                                      72
<PAGE>
 
                                    ANNEX A
                                      TO
                                TRUST INDENTURE


If to the Issuer -     Mississippi Business Finance Corporation
                       1306 Walter Sillers Building
                       Post Office Box 849
                       Jackson, Mississippi 39201

If to the Trustee -    SouthTrust Bank, National Association
                       100 Office Park Drive, Lower Level
                       Birmingham, Alabama (35223)
                       Post Office Box 2554
                       Birmingham, Alabama 35290

If to the Company -    Halter Marine Group, Inc.
                       13085 Seaway Road
                       Gulfport, Mississippi 39505

If to the Bank    -    The First National Bank of Chicago
                       One First National Plaza, Suite 0801
                       Chicago, Illinois 60670


                                      73
<PAGE>
 
                                   EXHIBIT A

                           FORM OF LETTER OF CREDIT


                      THE FIRST NATIONAL BANK OF CHICAGO

                    IRREVOCABLE DIRECT-PAY LETTER OF CREDIT
                                   NO.______

                                                                   March 3, 1998

SouthTrust Bank, National Association,
as Trustee
100 Office Park Drive, Lower Level
Birmingham, Alabama (35223)
Post Office Box 2554
Birmingham, Alabama 35290
 
Attention:   Corporate Trust Services

Gentlemen:

     We hereby establish at the request and for the account of Halter Marine
Group, Inc. (the "Company"), in your favor, as Trustee under the Trust Indenture
dated as of January 1, 1998, (the "Indenture") between the Mississippi Business
Finance Corporation (the "Issuer") and you, pursuant to which $30,000,000 in
aggregate principal amount of the Issuer's Taxable Revenue Bonds, Series 1998
(Halter Marine Group, Inc. Project) (the "Bonds") are being issued, our
Irrevocable Letter of Credit No. ____________________ in the amount of
$32,718,250 (the "Stated Amount") of which (a) an amount not exceeding
$30,000,000 may be drawn upon with respect to payment of the unpaid principal
amount of the Bonds (said amount equal to the principal amount of Bonds
outstanding under the Indenture from time to time, the "Principal Component"),
(b) an amount not exceeding $1,118,250, representing two hundred ten (210) days'
interest on the Bonds at an interest rate of 6.39% per annum, may be drawn upon
with respect to payment of interest accrued on the Bonds (said amount based upon
the principal amount of Bonds outstanding under the Indenture from time to time,
the "Interest Component"), and (c) an amount $1,600,000 may be drawn upon with
respect to payment of a Make-Whole Premium (as defined in the Indenture) on the
Bonds, the "Premium Component") on or prior to the Bonds' stated maturity date,
effective immediately and expiring on January 30, 2000, unless terminated
earlier in accordance with the provisions hereof.  All drawings under this
Letter of Credit will be paid with our own funds.

     Funds under this Letter of Credit will be made available to you against
your sight draft on us and upon receipt by us of your written certificate in
substantially the form of Annex A attached hereto appropriately completed and
signed by an Authorized Officer accompanied by a photocopy of this Letter of
Credit.  Presentation of such certificate should be made at our office located
at The 

                                      A-1
<PAGE>
 
First National Bank of Chicago, Global Trade Services, Suite 0236, Seventh
Floor, 300 South Riverside, Chicago, Illinois 60670, Attention: Letter of Credit
Department (or at any other office which may be designated by us by written
notice delivered to you). Moneys drawn under this Letter of Credit shall be
applied to the timely payments of principal of, premium, if any, and interest on
the Bonds, whether upon redemption, at maturity, on the date principal and
interest is payable, or upon acceleration of maturity.

     The amount of this Letter of Credit shall be decreased, upon receipt by us
of your written certificate in substantially the form of Annex C attached hereto
appropriately completed and signed by an Authorized Officer (relating to a
redemption or defeasance of less than all the Bonds outstanding), by an amount
equal to the amount stated in said certificate, and the amounts available to be
drawn by you by any subsequent draft, shall be decreased, upon our receipt of
such certificate, to the amounts stated in such certificate.

     If you shall draw on this Letter of Credit for the payment of interest and
we shall not have sent to you within ten (10) days from the date of such drawing
a notice from us to the effect that we have not been reimbursed for such drawing
and that the Letter of Credit will not be reinstated as to the portion of the
Interest Component drawn and not reimbursed, your right to draw the Interest
Component on us by your draft for the payment of interest to become due and
payable shall be automatically reinstated and effective the eleventh (11th) day
from the date of such drawing and you shall be authorized to draw on us for the
Interest Component by your draft and Annex A.  This automatic reinstatement of
your right to draw the Interest Component on us by your draft for the payment of
interest shall be applicable to successive drawings by your drafts for the
payment of interest so long as this Letter of Credit shall not have terminated
in accordance with its terms.  In the event this Letter of Credit has not been
reinstated as to the portion of the Interest Component drawn, you shall be
entitled to draw for the payment of interest, the difference between the
Interest Component (calculated based on the principal amount of bonds
outstanding immediately preceding the interest drawing which has not been
reinstated) and the portion of the Interest Component drawn and not reinstated.
Reductions in the Stated Amount which are the result of payments under the
Letter of Credit honoring a demand for principal shall not be reinstated.

     If a drawing is made by you hereunder at or prior to 11:00 a.m., Central
Standard Time, on a Business Day, and provided that such drawing and the
documents and other items presented in connection therewith conform to the terms
and conditions hereof, payment shall be made to you, or to your designee, of the
amount specified, in immediately available funds, not later than 1:30 p.m.,
Central Standard Time, on the same Business Day or not later than 1:30 p.m.,
Central Standard Time, on such later Business Day as you may specify.  If
requested by you, payment under this Letter of Credit will be made by deposit of
immediately available funds into a designated account that you maintain with us.
If a demand for payment made by you hereunder does not, in any instance, conform
to the terms and conditions of this Letter of Credit, we shall give you written
notice within 24 hours that the demand for payment was not effected in
accordance with the terms and conditions of this Letter of Credit, stating the
reasons therefor and that we will upon your instructions hold any documents at
your disposal or return the same to you.  Upon being notified that the demand
for payment was not effected in conformity with this Letter of Credit, you may
attempt to correct any such non-conforming demand for payment.

                                      A-2
<PAGE>
 
     Subject to the reinstatement provisions for the Interest Component
described herein, demands for payment hereunder honored by us shall not, in the
aggregate, exceed the Stated Amount.

     Only you or your successor as Trustee may make a drawing under this Letter
of Credit.  Upon the payment to you, to your designee or to your account of the
amount demanded hereunder, we shall be fully discharged on our obligation under
this Letter of Credit with respect to such demand for payment and we shall not
thereafter be obligated to make any further payments under this Letter of Credit
in respect of such demand for payment to you or any other person who may have
made to you or makes to you a demand for payment of principal of, premium, if
any, or interest on, any of the Bonds.  By paying to you an amount demanded in
accordance herewith, we make no representation as to the correctness of the
amount demanded.

     This Letter of Credit does not apply to any interest that may accrue
thereon or any principal, premium or interest which may be payable with respect
thereto after the date of expiration of this Letter of Credit.

     This Letter of Credit is effective immediately and shall terminate on the
earliest of (a) 5:00 p.m., Central Standard Time, on January 30, 2000, or, if
such day is not a Business Day, the next following Business Day, (b) the date on
which there has been a drawing and payment under this Letter of Credit of the
Stated Amount in connection with the maturity, redemption or acceleration of all
of the Bonds, or (c) the date following our receipt of a certificate from you
stating that you have received an Alternate Letter of Credit in accordance with
the Indenture.

     Communications with respect to this Letter of Credit shall be in writing
and shall be addressed to us at The First National Bank of Chicago, Global Trade
Services, Suite 0236, Seventh Floor, 300 South Riverside, Chicago, Illinois
60670, Attention: Letter of Credit Department, specifically referring thereon to
this Letter of Credit by number.

     This Letter of Credit is irrevocable and transferable in its entirety to
any transferee whom you certify to us has succeeded you as Trustee under the
Indenture, and may be successively transferred. Transfer of the available
balance under this Letter of Credit to such transferee shall be effected upon
receipt by us of this Letter of Credit accompanied by your written certificate
in substantially the form of Annex B attached hereto appropriately completed and
signed by an Authorized Officer.  Upon such presentation we shall forthwith
transfer the same to your transferee or, if so requested by your transferee,
issue a letter of credit to your transferee with provisions therein consistent
with this Letter of Credit.

     All drafts under this Letter of Credit will be duly honored, provided the
terms and conditions contained herein are complied with.

     As used herein (a) "Authorized Officer" shall mean any of your authorized
signors and (b) "Business Day" shall mean any day, except a Saturday or Sunday,
on which we and you are not required or authorized by law to remain closed and
on which the payment system of the Federal Reserve System is operational.

                                      A-3
<PAGE>
 
     This Letter of Credit sets forth in full our undertaking, and such
undertaking shall not in any way be modified, amended, amplified or limited by
reference to any document, instrument or agreement referred to herein
(including, without limitation, the Bonds), except only the certificate(s)
referred to herein; and any such reference shall not be deemed to incorporate
herein by reference any document, instrument or agreement except for such
certificate(s).

     The Company has no interest in this Letter of Credit.

     This Letter of Credit is subject to the Uniform Customs and Practices for
Documentary Credits, 1993 Revision, International Chamber of Commerce
Publication No. 500, which is incorporated herein by reference (the "UCP").  To
the extent not covered by the UCP, this Letter of Credit shall be governed by
the laws of the State of Illinois, including the Uniform Commercial Code as in
effect in the State of Illinois.

                                    Very truly yours,

                                    THE FIRST NATIONAL BANK OF
                                    CHICAGO

                                    By
                                      ----------------------------
                                    Title
                                         -------------------------

                                    By
                                      ----------------------------
                                    Title
                                         -------------------------


                                      A-4
<PAGE>
 
                                                                         ANNEX A


                           CERTIFICATE AS TO DRAWING


The First National Bank of Chicago
Global Trade Services
Suite 0236, Seventh Floor
300 South Riverside
Chicago, Illinois 60670

Attention:  Letter of Credit Department

     Re:  Irrevocable Direct-Pay Letter of Credit No. _____

Gentlemen:

     The undersigned, a duly authorized officer of ____________________ (the
"Trustee"), hereby certifies to the addressee (the "Bank"), with reference to
Irrevocable Letter of Credit No. ________ (the "Letter of Credit") issued by the
Bank in favor of the Trustee as follows:

     1.   The Trustee is the Trustee under the Indenture for 
          the holders of the Bonds.

     2.   The Trustee is making a drawing under the above-referenced 
          Letter of Credit in the amount of $____________ with respect
          to the payment of the principal of, premium, if any, and/or 
          interest due and payable on the Bonds which amount consists 
          of $___________ of principal, $___________ of premium 
          and $___________ of interest.

     3.   The amount, if any, demanded hereby on account of the principal 
          of the Bonds does not exceed the Principal Component of the 
          Letter of Credit.

     4.   The amount, if any, demanded hereby on account of interest 
          on the Bonds does not exceed the Interest Component of 
          the Letter of Credit.

     5.   The amount, if any, demanded hereby on account of a 
          premium on the Bonds does not exceed the Premium Component 
          of the Letter of Credit.


                                      A-5
<PAGE>
 
     6.   Upon receipt by the undersigned of the amount demanded 
          hereby, (a) the undersigned will apply the same to the 
          payment of the principal of, premium, if any, and/or 
          interest due and payable on the Bonds in accordance with 
          Sections 6.01, 6.02 and 11.03 of the Indenture, (b) no
          portion of said amount shall be applied by the undersigned 
          for any other purpose and (c) no portion of said amount 
          shall be commingled with other funds held by the undersigned.

     Capitalized terms used herein and not defined shall have the meanings
assigned to such terms in the Letter of Credit.

     IN WITNESS WHEREOF, the Trustee has executed and delivered this Certificate
as of the __ day of _________________, 19__.


                                             _____________________________,
                                             AS TRUSTEE

                                             By
                                               ---------------------------

                                             Title 
                                                  ------------------------


                                      A-6
<PAGE>
 
                                                                         ANNEX B


                            INSTRUCTION TO TRANSFER


                                                          ________________, 19__

The First National Bank of Chicago
Global Trade Services
Suite 0236, Seventh Floor
300 South Riverside
Chicago, Illinois 60670

Attention:  Letter of Credit Department

     Re:  Irrevocable Direct-Pay Letter of Credit No. _______

Gentlemen:

     For value received, the undersigned beneficiary hereby irrevocably
transfers to:

          ---------------------------------
          (Name of Transferee)

          ----------------------------------
          (Address)

all rights of the undersigned beneficiary to draw under the above-captioned
Letter of Credit (the "Letter of Credit").  The transferee has succeeded the
undersigned as Trustee under the Indenture.

     By this transfer, all rights of the undersigned beneficiary in the Letter
of Credit are transferred to the transferee and the transferee shall hereafter
have the sole rights as beneficiary thereof; provided, however, that no right
shall be deemed to have been transferred to the transferee until such transfer
complies with the requirements of the Letter of Credit pertaining to transfers.

     The Letter of Credit is returned herewith and in accordance therewith we
ask that this transfer be effective and that you transfer the Letter of Credit
to our transferee or that, if so requested by the transferee, you issue a new
irrevocable Letter of Credit in favor of the transferee with provisions
identical with the Letter of Credit.


                                      A-7
<PAGE>
 
     Capitalized terms used herein and not defined shall have the meanings
assigned to such terms in the Letter of Credit.

                                    Very truly yours,

                                    _______________________________,
                                    as Trustee


                                    By
                                      -----------------------------

                                    Title
                                         --------------------------



                                      A-8
<PAGE>
 
                                                                         ANNEX C


              CERTIFICATE FOR THE REDUCTION OF AMOUNTS AVAILABLE



                                                         _________________, 19__


The First National Bank of Chicago
Global Trade Services
Suite 0236, Seventh Floor
300 South Riverside
Chicago, Illinois 60670

Attention:  Letter of Credit Department

     Re:  Irrevocable Direct-Pay Letter of Credit No. _____

Gentlemen:

     The undersigned, an Authorized Officer of the undersigned Trustee (the
"Trustee"), hereby certifies to the addressee (the "Bank"), with reference to
Irrevocable Letter of Credit No. ________ (the "Letter of Credit") issued by the
Bank in favor of the Trustee as follows:

     1.   The Trustee is the Trustee under the Indenture for the holders of the
Bonds.

     2.   The Trustee hereby notifies you that on or prior to the date hereof
Bonds in an aggregate principal amount of $____________________ have been
redeemed and paid or have been defeased pursuant to the Indenture.

     3.   Following the redemption and payment or the defeasance referred to in
paragraph (2) above, the aggregate principal amount of all of the Bonds which
are outstanding within the meaning of the Indenture is $_________________.

     4.   The amount available to be drawn by the Trustee under the Letter of
Credit as Interest Component is reduced to $_______________ upon receipt by the
Bank of this Certificate.

     5.   The amount available to be drawn by the Trustee under the Letter of
Credit as Principal Component is reduced to $__________________ upon receipt by
the Bank of this Certificate.

     6.   The amount available to be drawn by the Trustee under the Letter of
Credit as Premium Component is reduced to $________________ upon receipt by the
Bank of this Certificate.


                                      A-9
<PAGE>
 
     7.   The Stated Amount of the Letter of Credit is reduced to $_____________
(such amount being equal to the sum of the amounts specified in paragraph 4, 5
and 6 above) upon receipt by the Bank of this Certificate.

     Capitalized terms used herein and not defined shall have the meanings
assigned to such terms in the Letter of Credit.

     IN WITNESS WHEREOF, the Trustee has executed and delivered this Certificate
as of the __ day of _______________, 19__.


                                    _____________________________,
                                    as Trustee

                                    By
                                      ---------------------------
                                    Title
                                         ------------------------




                                     A-10
<PAGE>
 
--------------------------------------------------------------------------------



                                LOAN AGREEMENT



                                    BETWEEN



                   MISSISSIPPI BUSINESS FINANCE CORPORATION

                                      AND


                           HALTER MARINE GROUP, INC.

                                 ____________


                                JANUARY 1, 1998

                                 ____________


--------------------------------------------------------------------------------
<PAGE>
 
                               TABLE OF CONTENTS

                                                                            PAGE
                                  ARTICLE I  

                                  DEFINITIONS

SECTION 1.01.    Definitions...............................................   3

                                 ARTICLE II

                                REPRESENTATIONS

SECTION 2.01.    Representations of the Issuer..............................  14
SECTION 2.02.    Representations of Company.................................  14
SECTION 2.03.    Benefits under the Act.....................................  16

                                 ARTICLE III

                 COMPLETION OF PROJECT; ISSUANCE OF THE BONDS

SECTION 3.01.    Completion of Project; Best Efforts........................  20
SECTION 3.02.    Issuance of Bonds..........................................  20
SECTION 3.03.    Requisition for Construction Funds.........................  21
SECTION 3.04.    Revisions to Plans and Specifications......................  21
SECTION 3.05.    Certificate of Completion..................................  21
SECTION 3.06.    Completion of Project if Bond Proceeds Insufficient;
                 Surplus Proceeds...........................................  21
SECTION 3.07.    Default by Contractors.....................................  22
SECTION 3.08.    Investment of Construction Fund............................  22

                                 ARTICLE IV

                           ASSIGNMENT; LOAN PAYMENTS

SECTION 4.01.    Assignment of this Agreement...............................  23
SECTION 4.02.    Loan Payments and the Note.................................  23
SECTION 4.03.    Assignment to Trustee; Obligation to Make Payments
                 Absolute...................................................  24
SECTION 4.04.    Sole Possession of Project by the Company..................  25
SECTION 4.05.    Maintenance of Project.....................................  25
SECTION 4.06.    Payment of Taxes and Assessments; Compliance with Law;
                 No Further Liens...........................................  25
SECTION 4.07.    Operation of Project.......................................  26
SECTION 4.08.    Payment of Expenses........................................  26
SECTION 4.09.    Payments Continue Upon Destruction of Project..............  26
<PAGE>
 
                         TABLE OF CONTENTS (CONTINUED)
 
                                                                            PAGE
 
SECTION 4.10.    Amendment to Agreement.....................................  26
SECTION 4.11.    Release and Indemnification of Issuer, Bank and Trustee....  26
SECTION 4.12.    Insurance..................................................  27
SECTION 4.13.    Application of Insurance Proceeds..........................  27
SECTION 4.14.    Condemnation...............................................  28
SECTION 4.15.    After-Acquired Property as Part of the Project.............  29
SECTION 4.16.    Letter of Credit...........................................  29
SECTION 4.17.    Continuing Disclosure......................................  30

                                  ARTICLE V

                               SPECIAL COVENANTS

SECTION 5.01.    No Warranty as to Suitability of Project by Issuer.........  31
SECTION 5.02.    Continuation of Existence of Company.......................  31
SECTION 5.03.    Covenant by the Company to Leave Project Free of
                 Other Liens or Encumbrances................................  31
SECTION 5.04.    Agreement to Cooperate.....................................  31
SECTION 5.05.    Covenant by Issuer to Maintain Present Status..............  32
SECTION 5.06.    Qualification in Mississippi...............................  32
SECTION 5.07.    Notice of Default..........................................  32
SECTION 5.08.    Acknowledgments of Issuer and Company with Respect to
                 Federal Income Tax Matters.................................  32
SECTION 5.09.    Company Approval of Indenture..............................  32
SECTION 5.10.    Title Covenants............................................  32
SECTION 5.11.    Covenant Against Waste.....................................  32
SECTION 5.12.    Environmental Covenants....................................  33

                                 ARTICLE VI

               ASSIGNMENT, LEASE AND SALE; PROJECT NOT SECURITY

SECTION 6.01.    Disposal of Project and Assets by Company..................  34
SECTION 6.02.    Assignment by Issuer.......................................  34


                                      ii
<PAGE>
 
                         TABLE OF CONTENTS (CONTINUED)

                                                                            PAGE

                                 ARTICLE VII  

                        EVENTS OF DEFAULT AND REMEDIES

SECTION 7.01.    Events of Default..........................................  35
SECTION 7.02.    Remedies...................................................  36
SECTION 7.03.    No Remedy Exclusive........................................  37
SECTION 7.04.    Payment of Fees and Expenses...............................  37
SECTION 7.05.    Effect of Waiver...........................................  37

                                ARTICLE VIII

             ACCELERATION OF LOAN PAYMENTS; SURVIVAL OF OBLIGATION

SECTION 8.01.    Acceleration of Loan Payments..............................  38
SECTION 8.02.    Survival of Obligation.....................................  38

                                 ARTICLE IX

                                 MISCELLANEOUS

SECTION 9.01.    Excess Payments............................................  39
SECTION 9.02.    Tax Exemptions.............................................  39
SECTION 9.03.    Notices....................................................  39
SECTION 9.04.    Parties Interested.........................................  39
SECTION 9.05.    Counterparts...............................................  40
SECTION 9.06.    Severability of Invalid Provisions.........................  40
SECTION 9.07.    Governing Law..............................................  40
 

                                      iii
<PAGE>
 
     THIS LOAN AGREEMENT, dated as of January 1, 1998 between the Mississippi
Business Finance Corporation (the "Issuer"), a public corporation organized and
existing under the laws of the State of Mississippi (the "State") and Halter
Marine Group, Inc. (the "Company"), a corporation organized and existing under
the laws of the State of Delaware.

                                  WITNESSETH:

     WHEREAS, the Issuer is authorized by the provisions of Sections 57-10-401
et seq., Mississippi Code of 1972, as amended and supplemented and Sections 57-
10-201 et seq., Mississippi Code of 1972, as amended and supplemented
(collectively, the "Act"), to, among other things, provide and finance "economic
development projects" (as defined in the Act) in the State in order to promote,
foster and support economic development within the State and to finance such
projects by the issuance of revenue bonds; and

     WHEREAS, the Issuer is further authorized to issue revenue bonds for the
purpose of providing funds to pay all or a part of the cost of providing the
aforementioned economic development projects; to sell, lease, exchange, transfer
or otherwise dispose of any real or personal property; to pledge or assign any
money, rents, charges, fees or other revenues and any proceeds derived from
sales of property, insurance or condemnation awards; and

     WHEREAS, the Issuer has duly authorized as a project under the Act the
following by the Company: (a) the acquisition and improvement on the Project
Site (as hereinafter defined) of the Building (as hereinafter defined) and (b)
the acquisition and installation therein and thereon of the Equipment (as
hereinafter defined), which Project Site, Building and Equipment together shall
constitute the Project (as hereinafter defined); and

     WHEREAS, the Issuer has duly authorized the issuance of its revenue bonds
more particularly designated as Mississippi Business Finance Corporation Taxable
Revenue Bonds, Series 1998 (Halter Marine Group, Inc. Project) (the "1998 Series
Bonds") pursuant to the Act in the aggregate principal amount of $30,000,000 in
order to loan the proceeds thereof to the Company to finance the acquisition,
improvement and installation of the Project pursuant to a contractual
arrangement whereby the amount of loan payments to be made to the Issuer by the
Company shall be sufficient to pay the principal of, Make-Whole Premium, if
applicable, and interest on the 1998 Series Bonds as and when the same shall
become due and payable; and

     WHEREAS, the 1998 Series Bonds are to be issued pursuant to and secured by
a trust indenture (the "Indenture") dated as of the date hereof, by and between
the Issuer and SouthTrust Bank, National Association, located in Birmingham,
Alabama (the "Trustee"); and

     WHEREAS, The First National Bank of Chicago (the "Bank") has agreed to
issue its irrevocable direct-pay letter of credit (the "Letter of Credit") in
favor of the Trustee in order to further secure the payment of the principal of,
Make-Whole Premium, if applicable, and interest on the 1998 Series Bonds; and
<PAGE>
 
     WHEREAS, to further secure the payment of the 1998 Series Bonds, the
Company has authorized, executed and delivered a Note (as hereinafter defined)
to the Issuer, which Note the Issuer has assigned to the Trustee;

     NOW, THEREFORE, KNOW ALL MEN BY THESE PRESENTS, THIS LOAN AGREEMENT
WITNESSETH:

     That the parties hereto, intending to be legally bound hereby and in
consideration of the mutual covenants hereinafter contained, do hereby agree as
follows:



                                       2
<PAGE>
 
                                   ARTICLE I

                                  DEFINITIONS

     SECTION 1.0  DEFINITIONS.  The terms set forth below shall have the
following meanings in this Loan Agreement, unless the context clearly otherwise
requires.  Except where the context otherwise requires, words importing the
singular number shall include the plural number and vice versa.  Capitalized
terms used and not defined herein shall have the meanings ascribed to them in
the Indenture and the Letter of Credit.

ACT:

     "Act" shall mean Sections 57-10-401 et seq., Mississippi Code of 1972, as
amended and supplemented and Sections 57-10-201 et seq., Mississippi Code of
1972, as amended and supplemented.

ADDITIONAL BONDS:

     "Additional Bonds" shall mean Bonds of any Series, other than the 1998
Series Bonds, duly issued, authenticated and delivered pursuant to the
Indenture.

ADMINISTRATION EXPENSES:

     "Administration Expenses" shall mean the reasonable and necessary fees,
costs or expenses incurred or payable by the Company being: (a) the Initial
Administrative Fee payable to the Issuer and (b) the compensation and expenses
paid to or incurred by the Trustee or any Paying Agent under this Agreement or
the Indenture.

AFFILIATE:

     "Affiliate" shall mean any person, firm or corporation controlled by, or
under common control with the Company and any person, firm or corporation
controlling the Company.

AGREEMENT:

     "Agreement" shall mean this Loan Agreement between the Issuer and the
Company and any and all modifications, alterations, amendments and supplements
hereto made in accordance with the provisions hereof and the Indenture.

ALTERNATE LETTER OF CREDIT:

     "Alternate Letter of Credit" shall mean an irrevocable, direct-pay
substitute letter of credit or an extension of an existing Credit Facility
delivered to and accepted by the Trustee pursuant to


                                       3
<PAGE>
 
Section 11.04 of the Indenture provided that any extension or renewal of a
Credit Facility (other than an extension of the Letter of Credit) shall be
regarded as the delivery of an Alternate Letter of Credit for the purposes of
the Indenture.  An Alternate Letter of Credit shall (a) be issued by a
commercial bank organized and doing business in the United States of America or
a branch or an agency of a foreign commercial bank located in the United States
of America and subject to regulation by state or federal banking regulatory
authorities with capital stock and surplus of at least $50,000,000 and having a
rating on its long-term deposits of not less than Aa3 by Moody's or AA- by
Standard & Poor's, (b) have the same terms as the Letter of Credit (except for
the expiration date, which shall be on a January thirtieth (30th) and shall be
at least two (2) years following the effective date thereof) and (c) be in
substantially the form of the Letter of Credit.  Prior to acceptance of an
Alternate Letter of Credit, the Trustee must be satisfied that certain
requirements set forth in Section 11.04 of the Indenture have been met.

ANNEX A:

     "Annex A" shall mean the attachment annexed hereto and made a part hereof
containing such information as is specifically referred to therein.

AUTHORIZED COMPANY REPRESENTATIVE:

     "Authorized Company Representative" shall mean any person or persons at the
time designated to act on behalf of the Company by a written certificate, signed
on behalf of the Company by its President or one of its Vice Presidents or other
duly authorized Person and its Secretary or its Treasurer or its Comptroller or
one of its Assistant Secretaries, Assistant Treasurers or Assistant Comptrollers
or other duly authorized Person and furnished to the Issuer and the Trustee,
containing the specimen signature of each such person.

BANK:

     "Bank" shall mean The First National Bank of Chicago which is issuing the
Letter of Credit and its successors and assigns (in whole or in part) under the
Credit Agreement meeting the requirements of a provider of an Alternate Letter
of Credit hereunder, or any issuer of an Alternate Letter of Credit.

BOND COUNSEL:

     "Bond Counsel" shall mean an attorney-at-law or a firm of attorneys,
designated by the Issuer, of nationally recognized standing in matters
pertaining to bonds issued by states and their political subdivisions, duly
admitted to the practice of law before the highest court of any state of the
United States of America.


                                       4
<PAGE>
 
BOND COUNSEL'S OPINION:

     "Bond Counsel's Opinion" shall mean an opinion signed by Bond Counsel and
satisfactory to the Issuer and the Trustee.

BOND FUND:

     "Bond Fund" shall mean the fund created under Section 6.01 of the Indenture
and held by the Trustee and the accounts created thereunder.

BONDHOLDER:

     "Bondholder" or "holder of the Bonds" or "holder" shall mean the Registered
Owner of any Bond.

BONDS:

     "Bonds" or "Bond" shall mean any Bond or all of the Bonds, as the case may
be, of the Issuer authorized and issued by the Issuer, authenticated by the
Trustee and delivered under the Indenture.

     The term "outstanding", when used with reference to Bonds, shall mean, at
any date as of which the amount of outstanding Bonds is to be determined, the
aggregate of all Bonds authorized, issued, authenticated and delivered under the
Indenture, except:

          Bonds canceled or surrendered to the Trustee for cancellation pursuant
to Section 2.13 of the Indenture prior to such date; and

          Bonds in lieu of or in substitution for which other Bonds shall have
been authenticated and delivered pursuant to the Indenture unless proof
satisfactory to the Trustee and the Company is presented that any such Bond is
held by a bona fide holder in due course.

     In determining whether holders of a requisite aggregate principal amount of
Bonds outstanding have concurred in any request, demand, authorization,
direction, notice, consent or waiver under the Indenture, Bonds which are owned
by the Company or any Affiliate of the Company or the Issuer shall be
disregarded and deemed not to be outstanding for the purpose of any such
determination; provided, however, that for the purpose of determining whether
the Trustee shall be protected in relying upon any such request, demand,
authorization, direction, notice, consent or waiver, only Bonds which the
Trustee actually knows to be so owned shall be so disregarded.

BUILDING:

     "Building" shall mean the building or buildings located on the Project Site
described in Exhibit A, and all additions, modifications and improvements
thereto, as they may at any time exist.


                                       5
<PAGE>
 
 BUSINESS DAY:

     "Business Day" shall mean any day, other than a Saturday or Sunday, on
which neither the Trustee nor the Bank is closed and on which the payment system
of the Federal Reserve System is operational.

COMPANY:

     "Company" shall mean Halter Marine Group, Inc., a corporation organized and
existing under the laws of the State of Delaware, or any corporation,
partnership or sole proprietorship which is the surviving, resulting or
transferee person in any merger, consolidation or transfer of assets permitted
under Section 5.02 of this Agreement and shall also mean, unless the context
otherwise requires, an assignee of this Agreement as permitted by Section 6.02
of this Agreement.

COMPLETION DATE:

     "Completion Date" shall mean the date of completion of the acquisition,
construction, installation and equipping of the Project, as that date shall be
certified pursuant to Section 5.05 of the Indenture and Section 3.05 of this
Agreement.

CONSTRUCTION FUND:

     "Construction Fund" shall mean the fund created under Section 5.01 of the
Indenture and held by the Trustee.

COST:

     "Cost" or "Cost of the Project" shall mean and be deemed to include to the
extent permitted by the Act and the Code, whether incurred prior to or after the
date of the Loan Agreement, (a) obligations of the Issuer or of the Company
incurred for labor, materials, machinery, equipment and other expenses and to
architects, contractors, builders and materialmen in connection with the
construction, installation and equipping of the Project and improvements
thereto; (b) the cost of contract or performance bonds or of other bonds and of
insurance of all kinds that may be required or necessary prior to or during the
course of construction, installation and equipping of the Project; (c) all costs
of architectural and engineering services, including the expenses of the Issuer
and the Company for test borings, surveys, test and pilot operations, estimates,
plans and specifications and preliminary investigations therefor, and for
supervising construction, as well as for the performance of all other duties
required by or as a result of the proper construction, installation and
equipping of the Project; (d) compensation and expenses of the Issuer, the Bank
and the Trustee, legal, accounting, financial and printing expenses, fees and
all other expenses incurred in connection with the issuance of the Bonds, which
are not otherwise provided for under the terms of the Loan Agreement; (e) all
other costs which the Issuer or the Company shall be required to pay under the
terms of any contract or contracts for the construction, installation and
equipping of the Project; (f) any sums required to


                                       6
<PAGE>
 
reimburse the Issuer or the Company for advances made by either of them for any
of the above items, or for any other costs incurred and for work done by either
of them, which are properly chargeable to the Project being constructed,
installed and equipped; (g) any costs and fees incurred in obtaining the Letter
of Credit; (h) the Initial Administrative Fee and Administration Expenses; and
(i) any other expenses or fees of the Issuer, the Trustee or the Bank, which in
the opinion of the Issuer or the Company, are related to the Project or the
Bonds, including but not limited to, commitment and legal fees and the costs,
fees and expenses of the Placement Agents in connection with the initial
issuance and sale of the Bonds.

CREDIT AGREEMENT:

     "Credit Agreement" shall have the meaning set forth in the Indenture.

CREDIT FACILITY:

     "Credit Facility" shall mean the Letter of Credit if then in effect or an
Alternate Letter of Credit if then in effect.

EQUIPMENT:

     "Equipment" shall mean those items of machinery, equipment, fixtures and
other tangible personal property which (a) have been or are to be acquired and
installed in the Building or elsewhere at or on the Project Site, (b) were
acquired with proceeds of the 1998 Series Bonds and (c) any item of machinery,
equipment, fixtures and other tangible personal property which may be acquired
and installed in the Building or elsewhere at or on the Project Site in
substitution therefor pursuant to the provisions of this Agreement, and renewals
and replacements of any of the foregoing less such property as may be released
pursuant to the provisions of this Agreement or taken by the exercise of the
power of eminent domain, all as they may at any time exist.

EVENT OF DEFAULT:

     "Event of Default", "event of default", "Default" and "default" shall mean
any Event of Default specified in Section 7.01 of this Agreement.

GOVERNMENT OBLIGATIONS:

     "Government Obligations" shall mean (a) direct obligations of the United
States of America for the payment of which the full faith and credit of the
United States of America is pledged and (b) obligations issued by a person
controlled or supervised by and acting as an instrumentality of the United
States of America, the full and timely payment of the principal of, and premium,
if any, and interest on which is fully guaranteed as a full faith and credit
obligation of the United States of America (including any securities described
in (a) or (b) issued or held in book-entry form on the books of the Department
of Treasury of the United States of America or Federal Reserve Bank),


                                       7
<PAGE>
 
which obligations, in either case, are not subject to redemption or prepayment
prior to maturity at the option of any one other than the holder.

INDENTURE:

     "Indenture" shall mean the Trust Indenture, dated as of the date hereof,
between the Issuer and the Trustee, pursuant to which the Bonds are to be issued
and secured, as the same may be amended or supplemented from time to time in
accordance with the provisions thereof.

INITIAL ADMINISTRATIVE FEE:

     "Initial Administrative Fee" shall mean (a) the initial fee of the Issuer
with respect to the 1998 Series Bonds in the amount of Thirty Thousand and
No/100ths Dollars ($30,000) which fee is required to be paid by the Company to
the Issuer pursuant to this Agreement, (b) the fee of the Issuer's Financial
Advisor and (c) any initial acceptance fee of the Trustee.

INVESTMENT SECURITIES:

     "Investment Securities" shall mean any one of the following, if and to the
extent the same are at the time legal for the investment of the Issuer's funds:

     (a)  Government Obligations;

     (b)  certificates of deposit, time deposits or other banking arrangements,
whether negotiable or non-negotiable, issued by any bank or national banking
association having a capital stock and surplus of more than $20,000,000,
including the Trustee;

     (c)  commercial paper that is rated A-1 or A-2 by Standard & Poor's or P-1
or P-2 by Moody's;

     (d)  a repurchase agreement with any bank or national banking association
having a capital stock and surplus of more than $20,000,000, including the
Trustee, and a rating by Moody's within its NCO/Moody's ratings of Baa-3 or
prime 3, provided the obligation of the bank to repurchase is within thirty (30)
days of the date of purchase; and

     (e)  interests in any money market mutual fund including those of the
Trustee which invests solely in Government Obligations or repurchase agreements
which are collateralized solely by Government Obligations.


                                       8
<PAGE>
 
ISSUER:

     "Issuer" shall mean the Mississippi Business Finance Corporation,
constituting a public corporation of the State, its successors and assigns, and
any public corporation resulting from or surviving any consolidation or merger
to which it or its successors may be a party.

LETTER OF CREDIT:

     "Letter of Credit" shall have the meaning set forth in the Indenture.

MAKE-WHOLE PREMIUM:

     "Make-Whole Premium" shall have the meaning set forth in the Indenture.

MOODY'S:

     "Moody's" shall mean Moody's Investors Service, Inc., a Delaware
corporation, its successors and assigns and, if dissolved or liquidated or if it
no longer performs the functions of a securities rating agency, "Moody's" shall
be deemed to refer to any other nationally recognized securities rating agency
designated by the Company (with the approval of  the Issuer), by written notice
to the Trustee.

1998 SERIES BONDS:

     "1998 Series Bonds" shall mean Mississippi Business Finance Corporation
Taxable Revenue Bonds, Series 1998 (Halter Marine Group, Inc. Project) and
issued in the aggregate principal amount of $30,000,000 and initially issued
under the Indenture.

NOTE:

     "Note" shall mean the Promissory Note of the Company issued by the Company
to the Issuer in accordance with Section 4.02 hereof, the form of which is
attached hereto as Exhibit D and any amendments or supplements thereto.

OPINION OF COUNSEL:

     "Opinion of Counsel" shall mean an opinion in writing signed by legal
counsel, who may be an employee of or counsel to the Company, and is not
unsatisfactory to the Trustee.  Any Opinion of Counsel in connection with the
Letter of Credit or any Alternate Letter of Credit must opine as to the validity
and enforceability of the Letter of Credit or the Alternate Letter of Credit and
must be given by legal counsel independent from the Bank and licensed to
practice law in the jurisdiction which governs the validity and enforceability
of the Letter of Credit or the Alternate Letter of Credit.


                                       9
<PAGE>
 
PAYMENT DATE OR PAYMENT DATES:

     "Payment Date" or "Payment Dates" shall mean (a) as to the 1998 Series
Bonds, December 31 and June 30 of each year commencing June 30, 1998, provided,
however, that if any such Payment Date shall fall on a day other than a Business
Day, the payment due on such Payment Date shall be due on the next succeeding
Business Day and (b) as to Additional Bonds, each date or dates designated as a
Payment Date or Dates in the applicable Supplemental Indenture and Additional
Bonds.

PERMITTED ENCUMBRANCES:

     "Permitted Encumbrances" shall mean and include:

     (a)  the lien of taxes and assessments which are not delinquent;

     (b)  the lien of taxes and assessments which are delinquent but the
validity of which is being contested as permitted by Section 4.06 of this
Agreement;

     (c)  any liens created by and under the Indenture, this Agreement and the
Note;

     (d)  those liens, charges and encumbrances in Exhibit C attached hereto, to
which the Company's title to the Project Site is subject;

     (e)  easements, exceptions or reservations executed after the date hereof
for the purpose of pipelines, telephone lines, telegraph lines, power lines and
sub-stations, roads, streets, alleys, highways, railroad purposes, drainage and
sewerage purposes, dikes, canals, laterals, ditches, the removal of oil, gas,
coal or other minerals, and other like purposes, or for the joint or common use
of real property, facilities and equipment, which, in the reasonable opinion of
the Company, in the aggregate do not impair the value or the use of such
property for the purposes for which it is or may reasonably be expected to be
held;

     (f)  rights reserved to or vested in any municipality or governmental or
other public authority to control or regulate any portion of the Project which
in the aggregate do not impair the use of the Project for the purposes for
which, in the reasonable opinion of the Company, it is or may reasonably be
expected to be held;

     (g)  the rights of the Issuer, the Trustee and the Bank (as the case may
be) under this Agreement, the Indenture and the Note;

     (h)  any lien on the Project or any part thereof created pursuant to this
Agreement from the Company to the Issuer, as assigned to the Trustee pursuant to
the Indenture; and


                                      10
<PAGE>
 
     (i)  such other encumbrances as the Bank may approve or that may be
permitted by the Credit Agreement.

PERSON OR PERSON:

     "Person" or "person" shall mean, as the case may be, any individual, sole
proprietorship, corporation, partnership (including without limitation, general
and limited partnerships), joint venture, association, joint stock company,
trust, unincorporated organization or government, any agency or political
subdivision thereof, or public corporation.

PLACEMENT AGENTS:

     "Placement Agents" shall mean SPP Hambro & Co., LLC and Hibernia National
Bank.

PLANS AND SPECIFICATIONS:

     "Plans and Specifications" shall, if such exist, mean the plans and
specifications prepared for the Project, certified by an Authorized Company
Representative, as the same may be implemented, detailed and revised from time
to time.

PROJECT:

     "Project" shall mean (a) the Project Site, Building and/or the Equipment
financed with proceeds of the 1998 Series Bonds as the same may become more
detailed from time to time, including any repair, replacement or modification
thereof, substitutions therefor and additions thereto and excluding deletions
therefrom, and including personal property installed in accordance with Section
4.15 of this Agreement, (b) repairs, replacements, enlargements, improvements or
extensions of said facilities financed by Additional Bonds and (c) additional
facilities financed by Additional Bonds.

PROJECT SITE:

     "Project Site" shall mean the real property described in Exhibit B attached
hereto on which the Building and the Equipment are or will be situated.

PROPERTY:

     "Property" shall mean any interest in any kind of asset, whether real,
personal or mixed, or tangible or intangible.

RATING AGENCY:

     "Rating Agency" shall mean Moody's and/or Standard & Poor's.


                                      11
<PAGE>
 
 REDEMPTION PRICE:

     "Redemption Price" shall mean the principal of and interest on the 1998
Series Bonds to be redeemed, and the Make-Whole Premium, if applicable, and all
other amounts due and owing in respect of such 1998 Series Bonds to be redeemed.

REGISTERED OWNER:

     "Registered Owner" shall mean the Person or Persons in whose name or names
the particular Bond or Bonds shall be registered on the Bond Register.

RELATED COMPANY OR RELATED COMPANIES:

     "Related Company: or "Related Companies" shall mean Halter Pascagoula, Inc.
("Pascagoula"), Gulf Coast Fabrication, Inc. ("Gulf Coast") and Halter Gulfport,
Inc. ("Gulfport"), all of which are wholly owned subsidiaries, directly or
individually, of the Company.

SERIES OR SERIES OF BONDS:

     "Series" or "Series of Bonds" shall mean all of the Bonds authenticated and
delivered on original issuance in a simultaneous transaction, and any Bonds
thereafter authenticated and delivered in lieu of or in substitution for such
Bonds, pursuant to the provisions of the Indenture, regardless of variations in
maturity, interest rate, or other provisions.

STANDARD & POOR'S:

     "Standard & Poor's" shall mean Standard & Poor's Corporation, a New York
corporation, its successors and assigns and, if dissolved or liquidated or if it
no longer performs the functions of a securities rating agency, "Standard &
Poor's" shall be deemed to refer to any other nationally recognized securities
rating agency designated by the Company (with the approval of the Issuer), by
written notice to the Trustee.

STATE:

     "State" shall mean the State of Mississippi.

SUPPLEMENTAL INDENTURE:

     "Supplemental Indenture" or "indenture supplemental hereto" shall mean any
indenture supplemental to or amendatory of the Indenture as originally executed
which is duly executed and delivered in accordance with the provisions of the
Indenture.


                                      12
<PAGE>
 
TRUSTEE:

     "Trustee" shall mean SouthTrust Bank, National Association (and its
corporate successors) and its successor under the Indenture, a national banking
association organized and existing under the laws of the United States of
America with its principal corporate trust office located in Birmingham,
Alabama.



                                      13
<PAGE>
 
                                  ARTICLE II

                                REPRESENTATIONS

     SECTION 2.01.  REPRESENTATIONS OF THE ISSUER. The Issuer makes the
following representations as the basis for the undertakings on the part of the
Company herein contained.

     (a)  The Issuer is a public corporation of the State and is authorized
pursuant to the provisions of the Act to enter into the transactions
contemplated by this Agreement.

     (b)  The Issuer has full power and authority to enter into the transactions
contemplated by this Agreement and the Indenture and to carry out its
obligations hereunder and thereunder.

     (c)  To the best of its knowledge, the Issuer is not in default under any
provisions of the laws of the State material to the performance of its
obligations under this Agreement.

     (d)  The Issuer has been duly authorized to execute and deliver this
Agreement, the Indenture and the assignments of this Agreement and the Note to
the Trustee and by proper corporate action has duly authorized the execution and
delivery hereof and thereof and as to the Issuer, this Agreement and the
Indenture are valid and legally binding and enforceable in accordance with their
terms, except to the extent that the enforceability thereof may be limited (1)
by bankruptcy, reorganization, or similar laws limiting the enforceability of
creditors' rights generally or (2) by the availability of any discretionary
equitable remedies.

     (e)  The loan of the proceeds of the 1998 Series Bonds for the
construction, installation and equipping of the Project by the Company, as
provided by this Agreement, will further the purposes of the Act, to wit: to
induce the location or expansion of manufacturing facilities within the State by
granting tax credits to approved companies and thereby advance the public
purpose of relieving unemployment by creating new jobs within the State and to
create new sources of tax revenues for the support of public services provided
by the State.

     (f)  Under existing statutes and decisions no taxes on income or profits
are imposed on the Issuer.

     (g)  The Company is an "eligible company" within the meaning of the Act and
is entitled to the benefits provided by the Act.

     SECTION 2.02.  REPRESENTATIONS OF COMPANY.  The Company makes the following
representations as the basis for the undertakings on the part of the Issuer
herein contained:

     (a)  the Company is a corporation duly incorporated under the laws of the
State of Delaware and the Company is in good standing and is duly qualified to
transact business in the State, has power to enter into the Note and this
Agreement and by proper corporate action has duly


                                      14
<PAGE>
 
authorized the execution and delivery of the Note and this Agreement and as to
the Company, this Agreement and the Note are valid and legally binding and
enforceable in accordance with their respective terms, except to the extent that
the enforceability thereof may be limited (1) by bankruptcy, reorganization, or
similar laws limiting the enforceability of creditors' rights generally or (2)
by the availability of any discretionary equitable remedies;

     (b)  the Company is not in violation of any provision of its certificate of
incorporation, its by-laws or any laws in any manner material to its ability to
perform its obligations under this Agreement or the Note, has power to enter
into this Agreement and the Note and has duly authorized the execution and
delivery of this Agreement and the Note by proper corporate action;

     (c)  the Project consists of (1) the acquisition and construction on the
Project Site as more particularly described in Exhibit B to this Agreement of
the Building as more particularly described in Exhibit A to this Agreement and
in the Plans and Specifications, and (2) the acquisition and installation on the
Project site and in the Building of the Equipment;

     (d)  the estimated Cost of the Project is not less than the principal
amount of the 1998 Series Bonds;

     (e)  the Company is an "eligible company" within the meaning of the Act and
the Company is engaged in manufacturing within the meaning of Section 57-10-
401(g)(i) and 57-10-401(j) of the Act in connection with the Project.

     (f)  neither the execution and delivery of this Agreement, the Credit
Agreement or the Note, the consummation of the transactions contemplated hereby
or thereby, nor the fulfillment of or compliance with the terms and conditions
of this Agreement or the Note, conflicts with or results in a breach of the
terms, conditions or provisions of any corporate restriction or any agreement or
instrument to which the Company is now a party or by which it, or any of its
property, is bound, or constitutes a default under any of the foregoing, or
results in the creation or imposition of any impermissible lien, charge or
encumbrance whatsoever upon any of the property or assets of the Company under
the terms of any instrument or agreement;

     (g)  there are no pending, or to the knowledge of the Company, threatened
actions or proceedings before any court or administrative agency which are
likely in any case or in the aggregate to materially adversely affect the
financial condition or business or operations of the Company, nor is the Company
aware of any facts or circumstances that would give rise to any such actions or
proceedings;

     (h)  all information furnished by the Company to the Issuer for the purpose
of approving the financing of the Project through the sale and issuance of the
1998 Series Bonds including, but not limited to, its application for financing
is true, accurate and complete as of the date hereof and thereof; and


                                      15
<PAGE>
 
     (i)  the financing of the Project will result in the creation of
approximately 926 new net full time jobs.

     SECTION 2.03.   BENEFITS UNDER THE ACT.

     (a)  The parties hereto acknowledge that the Company has been induced to
proceed with the construction and installation of the Project in part by the
benefits conferred on the Company and the Related Companies by the Act.  The
Issuer agrees that it will not take any action to limit, curtail or otherwise
make unavailable to the Company and the Related Companies 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
     on the 1998 Series Bonds during such year and the fees and expenses of the
     Trustee, costs of issuance, letter of credit fees and expenses and such
     other fees and expenses referenced herein;

          (2) any benefit claimed or received by the Company and/or the Related
     Companies for any Cost shall not be used as a deduction under the laws of
     the State in order to determine the taxable income of the Company and/or
     the Related Companies in the State;

          (3) the Company shall request the Trustee to 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 1998 Series Bonds whether for principal, Make-Whole
     Premium, if applicable, interest or the fees and expenses of the Trustee
     and the percentage of said amount attributable to each of the Related
     Companies;

          (4) the benefits accruing to the Company and the Related Companies
     under this Section 2.03 shall cease in the event:

              (A)  a 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 placement of the Project
          in operation 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;
          provided, however, if the Company or a Related Company should fail to
          operate its portion of the Project for such period, the loss of
          benefits shall apply only to such portion of the Project;


                                      16
<PAGE>
 
          (5)  the Company agrees to comply and to have the Related Companies
     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 1998 Series Bonds are
     paid in full whether at maturity or by way of redemption and any benefits
     or credits carried forward as permitted by the Act shall be available to
     the Company and/or the applicable Related Company for three (3) years from
     such date of payment or redemption at which time all benefits under the Act
     shall cease to exist and all unused benefits or credits shall be forfeited;

          (7)  the benefits accruing to the Company and each Related Company
     under this Section 2.03 shall be limited to the annual debt service
     payments on the 1998 Series Bonds for qualified Cost of the Project and
     shall be reduced by the amount of surplus funds remaining after completion
     of the Project which shall be used to redeem Bonds as provided for in
     Section 3.06 of this Agreement;

          (8)  the Company and/or each Related 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 and this shall be done for
     each year after the year in which the Project was induced for financing by
     the Issuer;

          (9)  for purposes of determining the benefits to which the Company
     and/or the Related Companies are eligible under the Act, the following
     definitions shall apply:

               (A) (i)   BASE EMPLOYMENT ("BE") means the average number of
          employees of each Related Company in the State during the preceding
          twelve (12) month period ending February 14, 1996 for Pascagoula and
          June 26, 1997 for Gulf Coast and Gulfport, as reported by the Company
          and/or each Related Company to the MESC.

                   (ii)  BASE INVESTMENT ("BI") means the present true value of
               the capital assets owned or leased by the each Related Company
               within the State as determined by the Tax Assessor of each county
               in which each Related Company owns or leases capital assets
               related to manufacturing, processing, distribution or warehousing
               facilities or corporate or regional offices.

                   (iii) FUTURE EMPLOYMENT ("FE") means the average number of
               employees of each Related Company in the State after the
               applicable portion of the Project is completed, which may be an
               estimate for the first twelve (12) months after completion, and
               as reported by the Company and/or each


                                      17
<PAGE>
 
               Related Company to the MESC over each twelve (12) month period
               thereafter.

                   (iv)  FUTURE INVESTMENT ("FI") means the sum of (x) the Base
               Investment; (y) the Cost of the Project for each applicable
               portion of the Project paid with the proceeds of the 1998 Series
               Bonds; and (z) funds of each Related Company used to pay its Cost
               of the Project, including the cost of any machinery, equipment,
               fixtures or other tangible personal property located or to be
               located at or on the applicable portion of the Project Site or
               installed in the applicable portion of the Building.

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

                   (i)   the Base Employment for Pascagoula is 83 employees and
               the Base Investment is $0.00, and

                   (ii)  the Company reasonably anticipates that the Future
               Employment for the first twelve (12) months after completion of
               the applicable portion of the Project for Pascagoula will be 800
               employees which represents increased employment of 717 employees
               in connection with the applicable portion of the Project, and the
               Future Investment in connection therewith will be $25,000,000.

                   (iii) the Base Employment for Gulf Coast is 180 employees and
               the Base Investment is $8,153,526.00, and

                   (iv)  the Company reasonably anticipates that the Future
               Employment for the first twelve (12) months after completion of
               the applicable portion of the Project for Gulf Coast will be 250
               employees which represents increased employment of 70 employees
               in connection with the applicable portion of the Project, and the
               Future Investment in connection therewith will be $3,000,000.

                   (v)   the Base Employment for Gulfport is 311 employees and
               the Base Investment is $21,076,723.00, and

                   (vi)  the Company reasonably anticipates that the Future
               Employment for the first twelve (12) months after completion of
               the applicable portion of the Project for Gulfport will be 450
               employees which represents increased employment of 139 employees
               in connection with the applicable portion of the Project, and the
               Future Investment in connection therewith will be $2,000,000.


                                      18
<PAGE>
 
               (C) The percentage of the Company's or each Related Company's
          total state income tax liability in which it shall be entitled to an
          income tax credit provided by the Act shall be determined annually as
          follows:

                   (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
               liability of the Company or each Related Company to which it is
               entitled to an income tax credit.

     With respect to the benefits that may accrue to the Company and each
Related Company under this Section 2.03, the Company acknowledges and agrees
that the Issuer makes no representation, warranty or covenant regarding the
enforceability of the Company's or each Related Company's rights to receive the
benefits, the extent that such benefits may be received nor the term under which
the Company or each Related Company may be entitled to receive the benefits.

     The Issuer agrees to provide reasonable assistance to the Company and/or
each Related Company in securing any other State tax exemptions which the
Company and/or each Related Company may legally qualify for, including, but not
limited to, sales tax exemptions and ad valorem tax exemptions, in connection
with each applicable portion of the Project.


                                      19
<PAGE>
 
                                  ARTICLE III

                 COMPLETION OF PROJECT; ISSUANCE OF THE BONDS

     SECTION 3.01.  COMPLETION OF PROJECT; BEST EFFORTS.  Except as provided in
Section 3.06 hereof, the Company will timely construct, install and equip the
Project or timely cause the Project to be constructed, installed and equipped in
accordance with the Plans and Specifications and as herein provided, will use
its best efforts to cause the construction, installation and equipping thereof
to be completed with all reasonable dispatch, but if for any reason such
construction, installation and equipping shall not be completed there shall be
no resulting diminution in or postponement of the loan payments required in
Section 4.02 hereof to be paid by the Company.

     Anything in this Agreement notwithstanding, the Issuer shall not be
obligated to complete the construction, installation and equipping of the
Project upon acceleration of the payment of the unpaid portion of the loan
payments due pursuant to this Agreement and the making of all payments in the
amount required by, and in accordance with the terms of, this Agreement.

     In order to effectuate the purposes of this Agreement, the Company will
make, execute, acknowledge and deliver, or cause to be made, executed,
acknowledged and delivered, all contracts, orders, receipts, writings and
instructions, in the name of the Company or otherwise, with or to other persons,
firms or corporations, and in general do or cause to be done all such other
things as may be requisite or proper for the construction, installation and
equipping of the Project and fulfillment of the obligations of the Company under
this Agreement.

     The Company will maintain such records in connection with the Cost of the
construction, installation and equipping of the Project as to permit ready
identification thereof.

     The Company hereby grants to the Issuer the right, privilege and authority
to take all action and to do all other things necessary to effectuate the
purposes of this Agreement.

     SECTION 3.02.  ISSUANCE OF BONDS. In order to provide funds for payment of
the Cost of the Project, the Issuer, concurrent with or as soon as practicable
after the execution of this Agreement, and subject to the provisions of Section
3.02 of the Indenture, will sell, issue and deliver to the initial purchaser or
purchasers of the 1998 Series Bonds, as directed by the Placement Agents, the
1998 Series Bonds and deposit the proceeds thereof with the Trustee, as follows:
(a) in the Bond Fund, a sum equal to the accrued interest, if any, paid by the
initial purchaser or purchasers of the 1998 Series Bonds and (b) in the
Construction Fund, the balance of the proceeds to be received from said sale.

     Upon written request from the Company to the Issuer to issue Additional
Bonds to complete payment of the Cost of the Project and subject to Sections
2.06 and 3.03 of the Indenture, the Issuer shall use its best efforts to issue
such Bonds in one or more Series for such purpose in accordance with the
provisions of the Indenture and the Act; provided, however, that the failure of
the Issuer to


                                      20
<PAGE>
 
issue Additional Bonds shall not release the Company from any of the provisions
of this Agreement, regardless of the reason for such failure.

     SECTION 3.03.  REQUISITION FOR CONSTRUCTION FUNDS.  The Issuer has, in the
Indenture, authorized and directed the Trustee to make payments from the
Construction Fund to pay the Cost of the Project, upon receipt by the Trustee of
(a) original executed requisitions (upon which both the Issuer and the Trustee
may rely conclusively and shall be protected in relying) signed by an Authorized
Company Representative, stating with respect to each payment to be made: (1) the
requisition number, (2) the name and address of the Person to whom payment is
due or, in the event such payment is to reimburse the Issuer or the Company, the
name and address of the Person to whom payment previously has been made (or, in
the case of payments to the Bond Fund, instructions to make such payments to the
Bond Fund), (3) the amount to be paid, (4) that there has been no default by the
Company under this Agreement, and (5) that each obligation, item of cost or
expense mentioned therein has been properly incurred, is a proper charge against
the Construction Fund and has not been the basis of any previous withdrawal; (b)
if required by the Credit Agreement, executed copies of certifications of work
completed by a licensed architect, if the work is of the type which a licensed
architect would be able to certify as complete, which certifications shall be
prepared on AIA draw forms or comparable documents; and (c) if required by the
Credit Agreement, an endorsement to the title insurance policy related to the
Project Site, if any, indicating no encumbrances to title other than Permitted
Encumbrances and reflecting the payments made.

     SECTION 3.04.  REVISIONS TO PLANS AND SPECIFICATIONS.  The Company may
revise the Plans and Specifications at any time and from time to time prior to
the Completion Date. No material revision in the Plans and Specifications will
be made in the course of construction of the Project unless and until such
revision shall have been certified by an Authorized Company Representative and
filed with the Trustee.

     SECTION 3.05.  CERTIFICATE OF COMPLETION. When the Project is completed and
ready to be placed in service (the "Completion Date"), the Trustee and the
Issuer shall receive a certificate of an Authorized Company Representative
stating, as applicable, that (a) the construction of the Building has been
completed substantially in accordance with the Plans and Specifications and that
the Project complies with all zoning, planning, building and environmental
regulations and all regulations of any other governmental entities having
jurisdiction over the Project, (b) the acquisition of the Equipment has been
completed, (c) payment, or provision therefor of the Cost of the Building and
the Equipment has been made except for any Cost of the Building and the
Equipment not then due and payable or the liability for payment of which is
being contested or disputed by the Company and (d) the Company has received a
certificate of occupancy, if applicable, or that a certificate of occupancy is
not required. Notwithstanding the foregoing, such certificate shall state that
it is given without prejudice to any rights against third parties which exist at
the date thereof or which may subsequently come into being. The Issuer and the
Company agree to cooperate in causing such certificates to be furnished to the
Trustee and the Issuer.

     SECTION 3.06.  COMPLETION OF PROJECT IF BOND PROCEEDS INSUFFICIENT; SURPLUS
PROCEEDS.  If the moneys in the Construction Fund available for payment of the
Cost of the Project


                                      21
<PAGE>
 
(including moneys from the proceeds of any Additional Bonds sold pursuant to the
terms and provisions of the Indenture to finance completion of the Project) are
not sufficient to pay the Cost of the Project in full, the Company will complete
or cause to be completed the Project and pay or cause to be paid all of that
portion of the Cost of the Project in excess of the moneys available therefor in
the Construction Fund.  The Issuer does not make any warranty, either express or
implied, that the moneys which will be paid into the Construction Fund will be
sufficient to pay the Cost of the Project.  If the Company shall pay any portion
of the Cost of the Project pursuant to the provisions of this Section 3.06, it
shall not be entitled to any reimbursement therefor (except to the extent of
reimbursement from the proceeds of any Additional Bonds sold to finance
completion of the Project) from the Issuer, the Trustee, the Bank or the holders
of any of the Bonds, nor shall it be entitled to any diminution in or
postponement of the loan payments required in Section 4.02 hereof to be paid by
the Company.

     If, upon the Completion Date, there shall be any surplus funds remaining in
the Construction Fund not reserved to pay for the Cost of the Project, such
funds shall, (a) be deposited in the Bond Fund and used, at the earliest date
permissible under the terms of the Indenture without the payment of a call
premium or penalty, to pay principal on such Series of Bonds through redemption
or retirement or, at the option of the Company, be used to pay principal on the
Bonds of such Series purchased by the Company at such earlier date or dates as
the Company may elect and (b) be invested as provided in the Indenture.

     SECTION 3.07.  DEFAULT BY CONTRACTORS.  In the event of default of any
contractor or subcontractor under any contract made by it in connection with the
Project or in the event of a breach of warranty with respect to any materials,
workmanship or performance guaranty, the Company may proceed, either separately
or in conjunction with others, to pursue such remedies against the contractor or
subcontractor so in default and against each surety for the performance of such
contract as it may deem advisable.  The Company will advise the Issuer, the Bank
and the Trustee of the steps it intends to take in connection with any such
default.  If the Company shall so notify the Issuer, the Bank and the Trustee,
the Company may, in its own name or in the name of the Issuer, prosecute any
action or proceeding or take any other action involving any such contractor,
subcontractor or surety which the Company deems reasonably necessary, and in
such event the Issuer will cooperate fully with the Company.  Any amounts
recovered by way of damages, refunds, adjustments or otherwise in connection
with the foregoing prior to the Completion Date shall be paid into the
Construction Fund or, if recovered after the Completion Date and full
disposition of the Construction Fund, shall be deposited in the Bond Fund and
used in the same manner as provided in Section 3.06 hereof for surplus funds in
the Construction Fund.

          SECTION 3.08.  INVESTMENT OF CONSTRUCTION FUND.  Any moneys held as a
part of the Construction Fund shall, at the telephonic request of an Authorized
Company Representative, confirmed in writing within two (2) Business Days be
invested or reinvested by the Trustee as provided in Article VII of the
Indenture.


                                      22
<PAGE>
 
                                  ARTICLE IV

                           ASSIGNMENT; LOAN PAYMENTS

     SECTION 4.01.  ASSIGNMENT OF THIS AGREEMENT.  The Issuer will assign this
Agreement, pursuant to the Indenture, on the date of delivery of the 1998 Series
Bonds to the Trustee.  The Company acknowledges that its rights under this
Agreement are subject to the lien, and the rights, remedies and powers, of the
Trustee under the Indenture.

     The Company shall, at its expense, promptly and duly execute, acknowledge
and deliver to the Trustee and the Issuer, as appropriate, such documents,
instruments and assurances and take such further action as may from time to time
be reasonably required or requested by the Trustee or the Issuer in order to
more effectively carry out the intent and purposes of this Agreement, the
Indenture and the Bonds issued thereunder, and the other instruments
contemplated thereby.

     SECTION 4.02.  LOAN PAYMENTS AND THE NOTE.  The Company agrees to pay or
cause to be paid to the Issuer, in immediately available funds, a sum equal to
the aggregate principal amount of the Bonds issued under the Indenture for the
Project, Make-Whole Premium, if applicable, together with interest on the unpaid
balances thereof at the rates payable by the Issuer on such Bonds, in the
amounts and on the Payment Dates as follows:

     (a)  on the date of the issuance and delivery of the 1998 Series Bonds, the
sum which equals the amount of accrued interest due on such date, if any;

     (b)  on or before each Payment Date on which interest on the Bonds is due,
commencing June 30, 1998, the amount which equals the interest to be paid on
such Series of Bonds on such Payment Date; and

     (c)  on or before each Payment Date on which principal of the Bonds is due,
the amount which equals the sum of (1) the principal of Bonds of any Series
which will be due and payable on such Payment Date and (2) the amount of the
Redemption Price (including any Make-Whole Premium, if applicable) due and
payable on such Payment Date;

provided, however, that if the Bonds shall theretofore have been deemed to have
been paid pursuant to the Indenture no further payments need be made under
subsections (b) and (c) of this Section.

     In the event the Company shall fail to make or cause to be made any of the
payments required in this Section 4.02, the payment so in default shall continue
as an obligation of the Company until the amount in default shall have been
fully paid, and the Company will pay the same with interest thereon until paid
at the rate or rates per annum borne by the Bonds issued under the Indenture.

     The Company shall execute the Note to evidence its obligation to make loan
payments and any other sums payable by the Company to the Issuer hereunder and
in respect of the Bonds and the


                                      23
<PAGE>
 
Issuer will assign and deliver the Note to the Trustee concurrently with the
execution of this Agreement.

     The Company hereby agrees to deliver to the Trustee the Letter of Credit
and the Issuer acknowledges and agrees that a payment pursuant to the Letter of
Credit shall constitute a credit against the obligation of the Company to make a
corresponding payment pursuant to subsections (b) and (c) of this Section 4.02.
The Company hereby further agrees to comply with the provisions of the Indenture
concerning Alternate Letters of Credit.

     The Company further agrees to pay to the party to whom such payment is due
the Initial Administrative Fee and the Administration Expenses, all sums
constituting a Cost of the Project and all other amounts due in respect of the
1998 Series Bonds as same shall have become due and payable.

     In addition, the Company is obligated to make payments which are
accelerated hereunder upon the occurrence of certain events, all as described in
Article VIII hereof, including in the event of the mandatory redemption of all
or part of the 1998 Series Bonds as a result of the failure to obtain an
Alternate Letter of Credit in accordance with Section 11.04 of the Indenture,
such payments are to be made in an amount sufficient, together with other funds
held by the Trustee and available for such purpose, (a) to redeem at the
earliest date permitted under the Indenture the 1998 Series Bonds to be redeemed
at the Redemption Price (including any Make-Whole Premium, if applicable), (b)
to pay any interest which will become due on such 1998 Series Bonds to the
redemption date, (c) to pay all Administration Expenses accrued and to accrue
through the date fixed for redemption and (d) to pay any and all other amounts
owed on the Bonds under the terms and provisions of the Indenture, this
Agreement and the Note.

     SECTION 4.03.  ASSIGNMENT TO TRUSTEE; OBLIGATION TO MAKE PAYMENTS ABSOLUTE.
It is understood and agreed that all payments by the Company under this
Agreement (except payment of Administration Expenses pursuant to this Section
4.03, indemnification payments pursuant to Section 4.11 and fees and expenses
pursuant to Section 7.04 of this Agreement) are to be assigned by the Issuer to
the Trustee.  The Company assents to such assignment and agrees that its
obligation to make such payments to the Trustee is absolute and unconditional
and is not subject to any defense (other than payment) or any right of set-off,
counterclaim or recoupment arising out of any breach by the Issuer 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 by
any holder of any Bond.  The Issuer directs the Company, and the Company agrees,
to pay to the Trustee at its Corporate Trust Office as stated in the Indenture
all payments (except payment of Administration Expenses pursuant to this Section
4.03, indemnification payments pursuant to Section 4.11 and fees and expenses
pursuant to Section 7.04 of this Agreement) payable by the Company pursuant to
this Agreement.

     So long as any Bonds are outstanding, the Company will pay directly to the
Issuer, the Bank or the Trustee, as the case may be, on each Payment Date the
amount of Administration Expenses


                                      24
<PAGE>
 
payable to them respectively not theretofore provided for which have then
accrued and become payable; provided, however, that before any such payment is
due and payable, the Issuer, the Bank or the Trustee, as the case may be, will
give notice to the Company, at least fifteen (15) days prior to such Payment
Date, of the amount and nature of such Administration Expenses.

     SECTION 4.04.  SOLE POSSESSION OF PROJECT BY THE COMPANY.  The Company is
entitled to sole and exclusive possession of the Project.

     SECTION 4.05.  MAINTENANCE OF PROJECT.  The Company will maintain, preserve
and keep the Project or cause the Project to be maintained, preserved and kept,
with the appurtenances and every part and parcel thereof, in good repair,
working order and condition and will from time to time make or cause to be made
all necessary and proper repairs, replacements and renewals.

     Subject to Section 6.01 of this Agreement, the Company shall have the
privilege of remodeling the Project or making substitutions, modifications and
improvements to the Project from time to time as it, in its discretion, may deem
to be desirable for its uses and purposes, the cost of which remodeling,
substitutions, modifications and improvements shall be paid by the Company, and
the same shall be included under the terms of this Agreement as part of the
Project.

     SECTION 4.06.  PAYMENT OF TAXES AND ASSESSMENTS; COMPLIANCE WITH LAW; NO
FURTHER LIENS.  The Company will:  (a) pay, or make provision for payment of,
all lawful taxes and assessments, including income, profits, property or excise
taxes, if any, or other municipal or governmental charges, levied or assessed by
the federal, state or any municipal government with respect to or upon the
Project or any part thereof or upon any payments hereunder when the same shall
become due; (b) duly observe and comply with all valid requirements of any
governmental authority relative to the Project; and (c) not create or suffer to
be created any lien or charge upon the Project (except for Permitted
Encumbrances) or the payments in respect to this Agreement; provided, however,
that nothing in this Section 4.06 contained shall require the Company to pay or
make provision for payment of any such taxes or assessments, or comply with any
such requirements or cause to be discharged any such lien or charge so long as
the validity thereof shall be contested in good faith by appropriate proceedings
duly prosecuted by the Company, at its expense and in its own name and behalf or
in the name and on behalf of the Issuer.  In the event of any such contest, the
Company may permit the taxes, assessments or other charges so contested to
remain unpaid during the period of such contest and any appeal therefrom,
unless, by nonpayment of any such items, the liens or security interests of this
Agreement or the Indenture as to the loan payments, other revenues and proceeds
derived from the Project will be materially endangered or will be subject to
loss or forfeiture, in which event such taxes, assessments or charges shall be
paid promptly, provided, however, that if, by posting a cash bond or surety
bond, the Company can cause such lien to be satisfied and discharged it may post
such bond in lieu of payment.  The Issuer, at the expense of the Company, will
cooperate fully with the Company in any such contest provided, however, that
prior to any such contest the Company shall notify the Trustee in writing of its
intention to contest the same setting forth the grounds for such contest.


                                      25
<PAGE>
 
     SECTION 4.07.  OPERATION OF PROJECT. The Company agrees that so long as any
of the Bonds are outstanding and the Project is in operation it will operate the
Project, or cause the Project to be operated, as an "eligible company" in
accordance with the Act.

     SECTION 4.08.  PAYMENT OF EXPENSES.  The Company will pay, or cause to be
paid, in addition to the payments provided for in Sections 4.02 and 4.03 hereof,
all of the expenses of operation of the Project, including, without limitation,
the cost of all necessary and proper repairs, replacements and renewals made
pursuant to Section 4.05 hereof and any and all taxes and assessments payable
pursuant to Section 4.06 hereof.

     SECTION 4.09.  PAYMENTS CONTINUE UPON DESTRUCTION OF PROJECT.  It is
understood and agreed that the payments under Section 4.02 and on the Note and
other charges payable hereunder shall continue to be payable at the time and in
the amounts herein specified, whether or not the Project, or any portion
thereof, shall have been condemned or taken by eminent domain or destroyed,
wholly or partially, by fire or other casualty, and that there shall be no
abatement or diminution of any such payments and other charges by reason
thereof.

     SECTION 4.10. AMENDMENT TO AGREEMENT.  The Company agrees that in the event
the Issuer shall, at the request of the Company and with the approval of the
Bondholders and the Trustee, issue Additional Bonds under the Indenture for the
purpose of completing the installation, equipping and/or construction of the
Project or repairing, replacing, enlarging, improving or expanding the Project,
the Company will, if necessary, enter into an amendment to this Agreement or a
separate agreement related thereto with the Issuer which will contain such
provisions as shall be required in respect of the issuance of such Additional
Bonds.

     SECTION 4.11. RELEASE AND INDEMNIFICATION OF ISSUER, BANK AND TRUSTEE.  The
Company hereby releases the Issuer, the Bank and the Trustee from, and agrees
that the Issuer, the Bank and the Trustee and their respective officers,
directors, members, employees, attorneys, and agents shall not be liable for,
and agrees to indemnify and hold the Issuer, the Bank and the Trustee and their
respective officers, directors, members, employees, attorneys, and agents
harmless against:

     (a)  any liability, cost or expense in the administration of the Indenture
and this Agreement and the obligations imposed on the Issuer, the Bank and the
Trustee thereby and hereby;

     (b)  any or all liability or loss, cost or expense, including reasonable
attorneys' fees, resulting from or arising out of any loss or damage to property
or any injury to or death of any person occurring on or about the Project Site
or resulting from any defect in the fixtures, machinery, equipment or other
property located on the Project Site or arising out of, pertaining to, or having
any connection with the Project or the financing thereof (whether or not arising
out of acts, omissions or negligence of the Company); and

     (c)  any or all liability or loss, cost or expense, including attorneys'
fees, arising out of or in connection with, or pertaining to the sale, issuance
or delivery of the Bonds, including, but not


                                      26
<PAGE>
 
limited to, liabilities arising under the Securities Act of 1933, the Securities
Exchange Act of 1934 or any applicable state securities laws, but such indemnity
for securities liability shall be subject to the limitation that such indemnity
shall not have been determined by a binding legal precedent to be void as
contrary to public policy and such indemnity for securities liability shall not
include any liability or loss, cost or expense including attorneys' fees,
arising out of or in connection with any legal opinion rendered pursuant to
Section 3.02(j) of the Indenture.

     The indemnity specified in this Section 4.11 shall not be effective to
relieve the Issuer, the Bank or the Trustee or their respective officers,
directors, members, employees, attorneys and agents from damages that result
from (a) wanton or gross negligence or intentional or wilful misconduct on the
part of the party seeking such indemnity, or (b) any misstatement or omission
appearing in any offering circular, official statement or other document solely
in reliance on information furnished by the party seeking such indemnity.  This
indemnification covenant shall survive the termination of this Agreement with
respect to liability arising out of any event or act occurring prior to such
termination.

     SECTION 4.12. INSURANCE.  Throughout the term of this Agreement and to the
extent required in the Credit Agreement, the Company shall keep the Project
continuously insured against such risks as are customarily insured against by
businesses of like size and type (other than business interruption insurance),
paying as the same become due all premiums in respect thereto, including but not
necessarily limited to casualty insurance against loss and/or damage to the
Project, worker's compensation insurance and, if required by the Credit
Agreement, flood insurance.

     In addition, the Company shall, throughout the term of this Agreement,
maintain comprehensive general public liability insurance protecting the
Company, the Issuer, the Bank and the Trustee, as named co-insureds, against
liability for death and injuries to persons and damage to property, occurring
on, in or about the Project, in minimum amounts satisfactory to the Bank.

     All insurance required hereby shall be taken out and maintained in
generally recognized responsible insurance companies qualified to do business in
the State and selected by the Company.  The insurance herein required may be
contained in blanket policies now or hereafter maintained by the Company.

     To the extent required by the Credit Agreement, all such policies, or a
certificate or certificates of insurance showing that such insurance is in force
and effect, shall be deposited with the Bank and copies thereof with the Trustee
and shall contain a provision that such policies may not be canceled unless the
Trustee and the Bank are notified at least thirty (30) days prior to
cancellation.  At least thirty (30) days prior to expiration of any such policy,
the Company shall furnish the Trustee and the Bank with evidence satisfactory to
the Trustee and the Bank that the policy has been renewed or replaced or is no
longer required by this Agreement.

     SECTION 4.13. APPLICATION OF INSURANCE PROCEEDS.  Immediately after the
occurrence of any damage or loss to the Project the Company shall notify the
Issuer, the Bank and the Trustee


                                      27
<PAGE>
 
as to the nature and extent of such damage or loss and if the Company determines
that it will be unable to use the Project for a period in excess of six (6)
consecutive months, the Company shall, within one hundred twenty (120) days
after the occurrence of such damage or loss, notify the Issuer, the Bank and the
Trustee whether the Company deems it practicable and desirable to rebuild,
repair or restore such damage or loss.  If the Company shall determine that such
rebuilding, repairing or restoring is practicable and desirable, the Company
shall forthwith proceed with such rebuilding, repairing or restoring and shall
notify the Issuer, the Bank and the Trustee upon the completion thereof;
provided, however, that if the cost of such loss or damage to the Project
exceeds $500,000.   In the event the Company determines that it will be unable
to use the Project for a period in excess of six (6) months and chooses not to
rebuild, repair or restore the Project, the Company shall pay or cause to be
paid to the Issuer for deposit by the Trustee to the Bond Fund as the entire
amount of loan payments due hereunder a sum which when added to the amounts in
the Construction Fund and the Bond Fund, will equal an amount of money equal to
the aggregate principal amount of the Bonds outstanding with interest on the
unpaid principal amount thereof, plus an amount equal to the accrued
Administration Expenses, if any, and, after the payment of said amounts, the
Company shall be paid any remaining insurance proceeds, provided, however, that
such insurance proceeds shall be paid to the Bank to the extent of any amount
owing from the Company to the Bank under the Credit Agreement.

     The Issuer shall cooperate fully with the Company in the handling and the
conduct of any prospective or pending insurance claims with respect to the
Project or any portion thereof.  In no event will the Issuer voluntarily settle
or consent to the settlement of any prospective or pending insurance claims with
respect to the Project or any portion thereof without the written consent of the
Company.

     Any provisions of this Agreement to the contrary notwithstanding, the
Company shall be entitled to, receive, keep and retain that portion of insurance
proceeds received for damages to its own property other than the Project subject
to the rights of the Bank under the Credit Agreement.

     SECTION 4.14. CONDEMNATION.  In the event that title to or the temporary
use of the Project, or any portion thereof, for a period in excess of six (6)
consecutive months, shall be taken in condemnation or by the exercise of the
power of eminent domain by any governmental body or by any person, firm or
corporation acting under governmental authority, the Company shall notify the
Issuer, the Bank and the Trustee as to the nature and extent of such
condemnation or eminent domain proceedings and shall, within one hundred twenty
(120) days after such taking, notify the Issuer, the Bank and the Trustee
whether the Company deems it practicable and desirable to replace or restore
that portion of the Project taken in or affected by condemnation or by the
exercise of the power of eminent domain. If the Company shall determine that
such replacement or restoration is practicable and desirable, the Company shall
forthwith proceed with such replacement or restoration and shall notify the
Issuer, the Bank and the Trustee upon the completion thereof, and such replaced
or restored property shall become part of the Project subject to the security
interests granted herein; provided, however, if the proceeds of such taking
exceed $500,000. In the event the Company determines that it will be unable to
use the Project for a period in excess of six (6) months and


                                      28
<PAGE>
 
chooses not to replace or restore the Project, the Company shall pay or cause to
be paid to the Issuer for deposit by the Trustee to the Bond Fund as the entire
amount of loan payments due hereunder a sum which when added to the amount in
the Construction Fund and the Bond Fund, will equal an amount of money equal to
the aggregate principal amount of the Bonds outstanding, with interest on the
unpaid principal amount thereof, plus an amount equal to the accrued
Administration Expenses, if any, and after the payment of said amounts, the
Company shall be paid any remaining condemnation proceeds, provided, however,
that such condemnation proceeds shall be paid to the Bank to the extent of any
amount owing from the Company to the Bank under the Credit Agreement.

     The Issuer shall cooperate fully with the Company in the handling and the
conduct of any prospective or pending condemnation proceedings with respect to
the Project or any portion thereof.  In no event will the Issuer voluntarily
settle or consent to the settlement of any prospective or pending condemnation
proceedings with respect to the Project or any portion thereof without the
written consent of the Company.

     Any provisions of this Agreement to the contrary notwithstanding, the
Company shall be entitled to receive, keep and retain that portion of the
proceeds of any condemnation award made for damages to or taking of its own
property other than the Project subject to the rights of the Bank under the
Credit Agreement.

     SECTION 4.15. AFTER-ACQUIRED PROPERTY AS PART OF THE PROJECT.  All Property
comprising a part of the Project and all other buildings, structures,
improvements, furnishings, machinery, equipment and other property which shall
be constructed, placed or installed in or upon the Project Site as a
substitution for or in renewal or replacement of, any buildings, structures,
improvements, furnishings, machinery, equipment or other property constituting
part of the Project and financed with proceeds of the 1998 Series Bonds, shall
become a part of the Project.  All other additions and improvements to the
Project which are constructed, placed or installed by the Company in or upon the
Project or the Project Site after the Completion Date, the cost of which is
financed from sources other than Bonds, shall remain the property of the Company
and may be altered, removed, replaced or otherwise used by the Company at any
time subject to the terms and provisions of the Credit Agreement.

     SECTION 4.16. LETTER OF CREDIT.

     (a)  The Letter of Credit shall be delivered to the Trustee simultaneously
with the issuance and delivery of the 1998 Series Bonds.  The Letter of Credit
shall be an obligation of the Bank to pay to the Trustee, against presentation
of a certificate required by the Bank, up to (1) an amount equal to the
aggregate principal amount of the 1998 Series Bonds then outstanding to be used
to pay the principal of the 1998 Series Bonds, whether at maturity or upon
redemption or acceleration, (2) plus an amount equal to at least 210 days'
interest on the 1998 Series Bonds (calculated at the rate or rates of interest
on the 1998 Series Bonds), and (3) plus an amount of Make-Whole Premium equal to
$1,600,000.00.  Further, the Letter of Credit shall terminate on the earliest of
(A) 5:00 p.m., Central Standard Time, on January 30, 2000, or if such day is not
a Business Day, the next following


                                      29
<PAGE>
 
Business Day, (B) the date on which there has been a drawing and payment under
the Letter of Credit of the "Stated Amount" of the Letter of Credit in
connection with the maturity, redemption or acceleration of all of the 1998
Series Bonds, or (C) the date following the Bank's receipt of a certificate of
the Trustee stating that the Trustee has received an Alternate Letter of Credit
in accordance with the Indenture.

     (b)  At any time prior to the termination or expiration of the Letter of
Credit, the Company may, at its option, provide for the delivery to the Trustee
of an Alternate Letter of Credit pursuant to the provisions and subject to the
requirements set forth in Section 11.04 of the Indenture.

     SECTION 4.17. CONTINUING DISCLOSURE.  The Company hereby represents that
pursuant to the provisions of Securities and Exchange Commission Rule 15c2-
12(d)(1), the 1998 Series Bonds are exempt from the provisions of said Rule
15c2-12.


                                      30
<PAGE>
 
                                   ARTICLE V

                               SPECIAL COVENANTS

     SECTION 5.01.  NO WARRANTY AS TO SUITABILITY OF PROJECT BY ISSUER.  The
Issuer makes no warranty, either express or implied, as to the actual or
designed capacity of the Project, as to the suitability of the Project for the
purposes specified in this Agreement, as to the condition of the Project, or
that the Project will be suitable for the Company's purposes or needs.

     SECTION 5.02.  CONTINUATION OF EXISTENCE OF COMPANY.  The Company covenants
that it will maintain its existence in its present form, will not dissolve or
otherwise dispose of all or substantially all its assets and will not
consolidate with or merge into another person or permit one or more other
persons (other than a subsidiary) to consolidate with or merge into it (unless
the Company shall be the surviving or continuing person); provided, however,
that, if no Event of Default hereunder shall have occurred and be continuing,
and if the Issuer shall consent thereto in writing, the Company may consolidate
with or merge into another person, or permit one or more other persons to
consolidate with or merge into it, or sell or otherwise transfer to another
person all or substantially all its assets as an entirety and thereafter
dissolve if the successor person or transferee has a net worth at least equal to
that of the Company prior to such transaction, and, if such successor is not the
Company, assumes in writing all the obligations of the Company herein, and is
duly qualified to do business in the State.  Upon any consolidation or merger,
or any conveyance or transfer of the assets of the Company substantially as an
entirety in accordance with this Section 5.02, the successor Company formed by
such consolidation or into which the Company is merged or to which such
conveyance or transfer is made shall succeed to, and be substituted for, and may
exercise every right and power of, the Company under this Agreement with the
same effect as if such successor Company had been named as the Company herein.

     In the event of any such conveyance or transfer, the Company as the
predecessor person may be dissolved, wound up and liquidated (if applicable) at
any time thereafter.

     If a consolidation, merger or sale or other transfer is made as permitted
by this Section 5.02, the provisions of this Section 5.02 shall continue in full
force and effect and no further consolidation, merger or sale or other transfer
shall be made except in compliance with the provisions of this Section 5.02 and
Section 6.01 hereof.

     SECTION 5.03.  COVENANT BY THE COMPANY TO LEAVE PROJECT FREE OF OTHER LIENS
OR ENCUMBRANCES.  The Company covenants that it shall not create or suffer to be
created any lien, charge or encumbrance on the Project or any part thereof,
except Permitted Encumbrances.

     SECTION 5.04.  AGREEMENT TO COOPERATE. In the event it may be necessary for
the proper performance of this Agreement, or for the exercise of any rights
hereunder, on the part of the Issuer or the Company that any application or
applications for any permit or license or authorization to do or to perform
certain things be made to any governmental or other agency by the Company or the


                                      31
<PAGE>
 
Issuer, or both, the Company and the Issuer each agree to execute and prosecute
upon the request of the other such application or applications.

     SECTION 5.05.  COVENANT BY ISSUER TO MAINTAIN PRESENT STATUS.  The Issuer
will use its best efforts to maintain, preserve and renew all the rights,
powers, privileges and franchises owned by it; and will comply with all valid
acts, rules, regulations, orders and directions of any legislative, executive,
administrative or judicial body applicable to the Project and the Project Site.
The Issuer further covenants that it will not take or fail to take any action
that would result in the loss of any exemption from taxes which it presently
enjoys or to which it may subsequently become entitled.

     SECTION 5.06.  QUALIFICATION IN MISSISSIPPI. Subject to Section 5.02
hereof, the Company warrants that it is and throughout the term of this
Agreement will continue to be duly qualified to do business in the State.

     SECTION 5.07.  NOTICE OF DEFAULT.  Within three (3) Business Days of any
officer of the Company obtaining actual knowledge of the occurrence of any Event
of Default hereunder or under the Indenture or any event which, with the passage
of time or the giving of notice would constitute such an Event of Default, the
Company shall notify the Trustee, the Bank and the Issuer of such Event of
Default, which notice shall specify the nature and period of existence thereof.

     SECTION 5.08. ACKNOWLEDGMENTS OF ISSUER AND COMPANY WITH RESPECT TO FEDERAL
INCOME TAX MATTERS.  The Issuer and the Company acknowledge that the 1998 Series
Bonds are being issued as taxable bonds and interest thereon should be treated
as includable in the gross income of the holders thereof for federal income tax
purposes.

     SECTION 5.09.  COMPANY APPROVAL OF INDENTURE.  The Company has reviewed the
Indenture and the 1998 Series Bonds and the Company hereby approves the form of
the Indenture and the 1998 Series Bonds and covenants that it will faithfully
perform at all times any and all covenants, undertakings, stipulations and
provisions contained in the Indenture, in the 1998 Series Bonds authenticated
and delivered thereunder and in all proceedings of the Issuer pertaining
thereto, on its part to be observed or performed, whether express or implied.

     SECTION 5.10. TITLE COVENANTS.  The Company covenants that the Project and
each component thereof including the Project Site is free from all encumbrances
except for Permitted Encumbrances, that lawful seisin of and good right to
encumber the Project and each component thereof including the Project Site is
vested in the Company, and that the Company hereby fully warrants the title to
the Project and each component thereof subject to Permitted Encumbrances
including the Project Site and will defend the same against the lawful claims of
all persons whomsoever.

     SECTION 5.11. COVENANT AGAINST WASTE.   The Company will not permit or
commit any waste on the Project Site and will keep the Building and the
Equipment therein in good repair, and


                                      32
<PAGE>
 
promptly comply with all laws, ordinances, regulations, and requirements of any
governmental body affecting the Project Site.

     SECTION 5.12. ENVIRONMENTAL COVENANTS.  The Company covenants that, to the
best of its knowledge, no portion of the Project contains any matter or
substance which has or may cause or result in any material violation of local,
federal or State environmental laws, rules or regulations or which may result in
any material liability or obligation being imposed on the Project, the Company,
the Issuer, the Bank or the Trustee under or pursuant to such laws, rules or
regulations.  In addition, the Company covenants, at its own expense, to
materially comply with all existing or hereafter enacted local, federal or State
environmental cleanup responsibility laws, rules and regula  tions.


                                      33
<PAGE>
 
                                  ARTICLE VI

               ASSIGNMENT, LEASE AND SALE; PROJECT NOT SECURITY

     SECTION 6.01.  DISPOSAL OF PROJECT AND ASSETS BY COMPANY.  The Project may
be sold or leased, as a whole or in part, without the necessity of obtaining the
consent of either the Issuer or the Trustee; provided, however, that no such
assignment, sale or lease shall violate any provisions of the Act; provided
further, however, that no such assignment, sale or lease shall relieve the
Company of any of its then applicable obligations under this Agreement.

     SECTION 6.02.  ASSIGNMENT BY ISSUER.  The Issuer may assign its rights
(except its right to receive payments pursuant to Section 4.03 and Section 4.11
of this Agreement) under, and interest in, this Agreement, and may pledge and
assign all loan payments and receipts and revenues receivable under or pursuant
to this Agreement, any moneys receivable by the Issuer due to other payments and
income earned by the investment of funds held under the Indenture for the Cost
of the Project and otherwise, as provided herein and in the Indenture, to the
Trustee pursuant to the Indenture as security for payment of the principal of,
Make-Whole Premium, if applicable, and interest on the Bonds, but such
assignment or pledge shall be subject to this Agreement.  Except as provided in
this Section 6.02, the Issuer will not sell, assign, transfer, convey or
otherwise dispose of the loan payments, receipts and the revenues during the
term of this Agreement and will not, without the written consent of the Company
create or suffer to be created any lien, charge or encumbrance thereon other
than those consented to by the Company, or arising from the action or inaction
of, the Company.


                                      34
<PAGE>
 
                                  ARTICLE VI

                        EVENTS OF DEFAULT AND REMEDIES

     SECTION 7.01.  EVENTS OF DEFAULT.  The following shall be "events of
default" under this Agreement, and the terms "event of default" or "default"
shall mean, whenever they are used in this Agreement, any one or more of the
following events:

     (a)  failure by the Company to pay or cause to be paid when due any loan
payment required to be paid under Section 4.02 hereof and the Note;

     (b)  failure by the Company to pay when due any payment required to be made
under this Agreement other than loan payments under Section 4.02 hereof, which
failure shall continue for a period of thirty (30) days after written notice,
specifying such failure and requesting that it be remedied, is given to the
Company by the Issuer or the Trustee, as the case may be;

     (c)  failure by the Company to observe and perform in any material way any
covenant, condition or agreement on its part to be observed or performed as set
forth herein, other than as referred to in subsections (a) and (b) of this
Section 7.01, which failure shall not be cured to the satisfaction of the Issuer
and the Trustee within the earlier of ten (10) days after actual knowledge
thereof by the Company or written notice, specifying such failure and requesting
that it be remedied, is given to the Company by the Issuer or the Trustee, as
the case may be;

     (d)  any written representation or written warranty made by the Company in
or with respect to this Agreement shall prove to have been false in any material
respect at the time of execution by the Company of this Agreement;

     (e)  the occurrence of an event of default under the Note or the Indenture;

     (f)  the Company shall commence a voluntary case or other proceeding in
bankruptcy or seeking liquidation, reorganization, arrangement, readjustment of
its debts or for any other relief under the federal bankruptcy laws, as amended,
or under any other insolvency act or law, state or federal, now or hereafter
existing, or shall take any other action indicating its consent to, approval of,
or acquiescence in any such case or proceedings, and said proceeding is not
dismissed within thirty (30) days after the commencement thereof; the Company
shall apply for, or consent to or acquiesce in the appointment of a receiver,
liquidator, custodian, sequestrator, or a trustee for all or a substantial part
of its property; the Company shall make an assignment for the benefit of its
creditors; or the Company shall fail, or shall admit in writing its failure, to
pay its debts generally as such debts become due; or

     (g)  there shall be filed against the Company an involuntary petition in
bankruptcy or seeking liquidation, reorganization, arrangement, readjustment of
its debts or any other relief under the federal bankruptcy laws, as amended, or
under any other insolvency act or law, state or federal,


                                      35
<PAGE>
 
now or hereafter existing, and such petition is not set aside within thirty (30)
days after such filing; or a receiver, liquidator, custodian, sequestrator, or
trustee of the Company for all or a substantial part of its property shall be
appointed without the consent or approval of the Company or a warrant of
attachment, execution or similar process against any substantial part of the
property of the Company is issued; and the continuance of any of such events for
thirty (30) days undismissed or undischarged or within such thirty (30) days,
the entering of an order for relief under the United States Bankruptcy Code.

     The foregoing provisions of subsection (c) of this Section 7.01 are subject
to the following limitations: if by reason of acts of God; strikes, lockouts or
other industrial disturbances; acts of public enemies; orders of any kind of the
Government of the United States of America or of the State or any department,
agency, political subdivision or official of either of them, or any civil or
military authority; insurrections; riots; epidemics; lightning; earthquakes;
fires; hurricanes; storms; floods; washouts; droughts; arrests; restraint of
government and people; civil disturbances; explosions; breakage or accident to
machinery; partial or entire failure of utilities; or any cause or event not
reasonably within the control of the Company, the Company is unable in whole or
in part to carry out its agreements herein contained, other than the obligations
on the part of the Company contained in Sections 4.02, 4.03, 4.06, 4.12 and 5.02
hereof, the Company shall not be deemed in default during the continuance of
such inability.  The Company agrees, however, to use its best efforts to remedy
with all reasonable dispatch the cause or causes preventing it 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 settlements 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.  Any failure of the Company to perform its obligations under
Sections 4.02, 4.03, 4.06, 4.12 and 5.02 hereof shall constitute an Event of
Default as set forth in subsections (a), (b) and (c) above regardless of the
reason for such failure to perform.

     SECTION 7.02.  REMEDIES.  Whenever any Event of Default referred to in
Section 7.01 hereof shall have occurred and be continuing, any one or more of
the following remedial steps may be taken; provided that written notice of the
default has been given to the Company by the Issuer or the Trustee and the
default has not theretofore been cured; and provided further that no remedial
steps shall be taken by the Issuer the effect of which would be to entitle the
Issuer to provide funds necessary for the payment of principal and interest on
Bonds which have not yet matured unless such principal and interest shall have
been declared due and payable in accordance with the Indenture and such
declaration shall not have been rescinded.

     (a)  If acceleration of the principal amount of the 1998 Series Bonds has
been declared or has occurred pursuant to Sections 10.01 and 10.02 of the
Indenture, the Issuer shall declare all unpaid loan payments and amounts due
under the Note, together with interest then due thereon, to be immediately due
and payable, whereupon the same shall become immediately due and payable.


                                      36
<PAGE>
 
     (b)  The Issuer and the Trustee may take any action at law or in equity to
enforce this Agreement, to collect the payments 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 or the Note.

     SECTION 7.03.  NO REMEDY EXCLUSIVE.  No remedy conferred upon or reserved
to the Issuer by this Agreement is intended to be exclusive of any other
available remedy or remedies, but each and every such remedy shall be cumulative
and shall be in addition to every other remedy given under this Agreement or now
or hereafter existing at law or in equity or by statute. No delay or omission to
exercise any right or power accruing upon any default shall impair any such
right or power or shall be construed to be a waiver thereof, but any such right
and power may be exercised from time to time and as often as may be deemed
expedient. In order to entitle the Issuer to exercise any remedy reserved to it
in this Article VII, it shall not be necessary to give any notice, other than
such notice as may be herein expressly required.

     SECTION 7.04.  PAYMENT OF FEES AND EXPENSES.  If the Company shall default
under any of the provisions of this Agreement and the Issuer, the Bank or the
Trustee shall employ attorneys or incur other expenses for the collection of the
loan payments or for the enforcement of performance or observance of any
obligation or agreement on the part of the Company contained in this Agreement,
the Company will on demand therefor pay the reasonable fees and expenses of the
Issuer, the Bank, the Trustee and their attorneys as they are incurred including
all fees of counsel including those incurred for negotiation, trial, appeals of
ruling of any lower tribunals, administrative hearings, bankruptcy and creditors
reorganization proceedings.

          SECTION 7.05.  EFFECT OF WAIVER.  In the event any agreement contained
in this Agreement shall be breached and such breach shall thereafter be waived,
such waiver shall be limited to the particular breach so waived and shall not be
deemed to waive any other breach hereunder.  In view of the assignment of the
Issuer's rights (except the rights of the Issuer to receive payments of
Administration Expenses under Section 4.03 of this Agreement, indemnification
under Section 4.11 of this Agreement and fees and expenses under Section 7.04 of
this Agreement) in and under this Agreement to the Trustee pursuant to the
Indenture, the Issuer shall have no power to waive any default hereunder by the
Company without the consent of the Trustee to such waiver.


                                      37
<PAGE>
 
                                 ARTICLE VIII

             ACCELERATION OF LOAN PAYMENTS; SURVIVAL OF OBLIGATION

     SECTION 8.01.  ACCELERATION OF LOAN PAYMENTS.  Loan payments and amounts
due under the Note shall be accelerated prior to the maturity of the Bonds if
the Bonds shall be subject to redemption pursuant to Section 2.03 of the
Indenture. In such case, the total amount due shall be the sums required
pursuant to Section 2.03 of the Indenture as applicable, including any premium
thereon, if any, and on the dates required by Section 2.03 of the Indenture.

     SECTION 8.02.  SURVIVAL OF OBLIGATION.  All of the Company's
representations and covenants herein shall survive the payment (or deemed
payment) of all of the amounts specified in Section 4.02(a), (b) and (c) hereof
and the performance of all other obligations under this Agreement, the Indenture
and the Bonds.


                                      38
<PAGE>
 
                                  ARTICLE IX

                                 MISCELLANEOUS

     SECTION 9.01.  EXCESS PAYMENTS.  Any amounts remaining in the Bond Fund and
other funds established under the Indenture after payment in full of the Bonds
(including interest and premiums, if any, thereon, and all other payments
required under the Indenture and this Agreement) or provision for payment
thereof having been made in accordance with the provisions of the Indenture, and
payment of all other reasonable and necessary obligations incurred by the Issuer
to pay for the Cost of the Project, including interest, premiums and other
charges, if any, thereon, and the payment of Administration Expenses, shall
belong to and be paid to the Company by the Trustee provided, however, that such
balance shall be first paid to the Bank to the extent of any amount owing from
the Company to the Bank under the Credit Agreement.

     SECTION 9.02.  TAX EXEMPTIONS.  The Company may take action to secure
certain ad valorem tax and sales tax exemptions available under Section 57-10-
255 of the Act as well as under other provisions of the Mississippi Code of
1972, as amended. The Issuer will assist the Company in securing said tax
exemptions.

     SECTION 9.03.  NOTICES.  All notices, certificates, requests or other
communications hereunder shall be sufficiently given and shall be deemed given
when mailed by registered or certified mail, return receipt requested (except as
otherwise specified herein and in the Indenture), postage prepaid, addressed as
set forth in Annex A.  A duplicate copy of each notice, certificate, request or
other communication given hereunder to the Issuer, the Company, the Trustee or
the Bank shall also be given to the others.  The Company, the Issuer, the Bank
and the Trustee may, by notice given under this Section 9.03, designate any
further or different addresses to which subsequent notices, certificates,
requests or other communications shall be sent.

     SECTION 9.04.  PARTIES INTERESTED.  This Agreement shall inure to the
benefit of the Issuer, the Bank, the Company, the Trustee and the holders from
time to time of the Bonds, and shall be binding upon the Issuer, the Company and
their respective successors and assigns, subject to the limitation that any
obligation or liability of the Issuer created by or arising out of this
Agreement shall not be a general debt of the Issuer, but shall be payable by the
Issuer solely out of the proceeds derived from this Agreement or the sale of the
Bonds or income earned on invested funds as provided herein or in the Indenture.

     No covenant, stipulation, obligation or agreement contained in the Bonds,
the Indenture or this Agreement shall be deemed or construed to be a covenant,
stipulation, obligation or agreement of any present or future member, agent, or
employee of the Issuer in his individual capacity, and neither the present or
future members of the Issuer nor any official executing the Bonds shall be
liable personally, for any breach or non-observance or failure to comply with
the above mentioned covenants, stipulations, obligations, or on the Bonds or be
subject to any personal liability or accountability by reason of the issuance
thereof or by reason of the said covenants, stipulations, obligations or
agreements, above mentioned.  Nothing in the provisions of the Indenture or this
Agreement or the Bonds shall obligate the Issuer, or any member, agent or
employee thereof to expend any funds other than those available therefor, which
are derived exclusively from the sale


                                      39
<PAGE>
 
of said Bonds or from the Company or Trustee under the terms and provisions of
this Agreement and the Indenture or those derived from the loan payments from
the Company.  No present or future member, agent or employee of the Issuer shall
incur any personal liability in acting or proceeding or in not acting or
proceeding, in good faith, reasonably, under the provisions of the Bonds or the
Indenture or this Agreement.  If in or by or as a result of the execution of the
Bonds or of the Indenture or this Agreement or any other document in connection
with this transaction or any other related transaction, the Issuer or any
member, agent or employee thereof shall become obligated in excess of or
contrary to the provisions of the statutory authority granted by the Act then
such excess or contrary obligation shall not be binding on or enforceable
against the Issuer or any present or future member, agent, employee or official
thereof.

     SECTION 9.05.  COUNTERPARTS.  This Agreement may be executed in any number
of counterparts, each of which, when so executed and delivered, shall be an
original; but such counterparts shall together constitute but one and the same
Agreement.

     SECTION 9.06.  SEVERABILITY OF INVALID PROVISIONS.  If any clause,
provision or section of this Agreement be held illegal or invalid by any court,
the invalidity of such clause, provision or section shall not affect any of the
remaining clauses, provisions or sections hereof, and this Agreement shall be
construed and enforced as if such illegal or invalid clause, provision or
section had not been contained herein.

     SECTION 9.07.  GOVERNING LAW.  This Agreement shall be governed as to
validity, construction and performance by the laws of the State.


                                      40
<PAGE>
 
     IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed as of the day and year first above written on the cover page
hereof.

(SEAL)                              MISSISSIPPI BUSINESS FINANCE
                                    CORPORATION
Attest

________________________            By________________________
Secretary                             Executive Director


(SEAL)                              HALTER MARINE GROUP, INC.
Attest

By                                  By
  ----------------------              ------------------------
Title___________________              Title___________________



                                      41
<PAGE>
 
                                    ANNEX A
                                      TO
                                LOAN AGREEMENT

If to the Issuer -     Mississippi Business Finance Corporation
                       1306 Walter Sillers Building
                       Post Office Box 849
                       Jackson, Mississippi 39201

If to the Company -    Halter Marine Group, Inc.
                       13085 Seaway Road
                       Gulfport, Mississippi 39505

If to the Trustee -    SouthTrust Bank, National Association
                       100 Office Park Drive
                       Lower Level
                       Birmingham, Alabama (35223)
                       Post Office Box 2554
                       Birmingham, Alabama 35290

If to the Bank  -      The First National Bank of Chicago
                       One First National Plaza, Suite 0801
                       Chicago, Illinois 60670



                                      42
<PAGE>
 
                                   EXHIBIT A

                             BUILDING DESCRIPTION


All buildings presently located on the Project Site and all buildings
subsequently located on the Project Site and financed with the proceeds of the
1998 Series Bonds, and all Additional Bonds, and all additions, modifications
and improvements thereto financed with the proceeds of the 1998 Series Bonds and
all Additional Bonds, as they may at any time exist.



                                      43
<PAGE>
 
                                   EXHIBIT B

                               THE PROJECT SITE


All real property presently owned by the Company in Jackson County, Mississippi,
Harrison County, Mississippi and Hancock County, Mississippi, and all additional
real property owned by the Company and acquired with the proceeds of the 1998
Series Bonds and all Additional Bonds.



                                      44
<PAGE>
 
                                   EXHIBIT C

                   PERMITTED LIENS, CHARGES AND ENCUMBRANCES


     1.   All Permitted Encumbrances and other allowed liens, charges and
          encumbrances under this Agreement and the Credit Agreement.

     2.   Any prior reservation or conveyance of minerals of every kind and
          character, including, but not limited to, oil, gas, sand and gravel,
          in, on, and under the Project Site.

     3.   Any lien, or right to a lien, for services, labor or material
          heretofore or hereafter furnished, imposed by law and not shown by the
          public records.

     4.   Encroachments, variation in area or in measurements, boundary line
          disputes, roadways and matters not of record, including lack of
          access, which would be disclosed by accurate survey and inspection of
          the Project Site.

     5.   Easements or other uses of the Project Site not visible from the
          surface, or easements or claims of easements, not shown by the public
          records.


                                      45
<PAGE>
 
                                   EXHIBIT D

                           HALTER MARINE GROUP, INC.

                                PROMISSORY NOTE


Date:  March __, 1998                                              $30,000,000


No. 1

     FOR VALUE RECEIVED Halter Marine Group, Inc., a corporation organized and
existing under the laws of the State of Delaware (the "Company"), hereby
promises to pay to the order of the Mississippi Business Finance Corporation
(the "Issuer") or its assigns, the principal sum of $30,000,000 together with
interest on the unpaid principal balance thereof from the date hereof until
fully and finally paid, together with Make-Whole Premium (as defined in the
Indenture, as hereinafter defined), if applicable, together with all taxes
levied or assessed on this Note or the debt evidenced hereby against the holder
hereof and all other amounts payable by the Company under the Agreement (as
hereinafter defined). This Note shall bear interest at the prevailing rate or
rates of interest on the Bonds (as hereinafter defined) except as otherwise
provided hereunder.

     This Note has been executed under and pursuant to a Loan Agreement, dated
as of January 1, 1998, between the Issuer and the Company (the "Agreement")
which Agreement is incorporated herein in its entirety by reference.  This Note
is issued to evidence the obligation of the Company under the Agreement to repay
the loan made by the Issuer from the proceeds of its $30,000,000 Taxable Revenue
Bonds, Series 1998 (Halter Marine Group, Inc. Project) (the "Bonds"), together
with interest thereon at the interest rate or rates as defined and set forth in
the Indenture (as hereinafter defined), Make-Whole Premium, if applicable, and
all other amounts, fees, penalties, premiums, adjustments, expenses, counsel
fees and other payments of any kind required to be paid by the Company under the
Agreement.  The Agreement includes provisions for prepayment of this Note as a
whole or in part as more particularly described in Section 2.03 of the
Indenture.  In the event that the terms of this Note conflict with the terms of
the Indenture or the Agreement the terms of the Indenture or the Agreement shall
control.

     The Agreement and this Note have been or will be assigned to SouthTrust
Bank, National Association, as Trustee (the "Trustee") pursuant to an Indenture,
dated as of January 1, 1998, by and between the Issuer and the Trustee (the
"Indenture").  Such assignment is made as security for the payment of the Bonds
issued by the Issuer pursuant to the Indenture.

     As provided in the Agreement and subject to the provisions thereof,
payments hereon are to be made at the Corporate Trust Office of the Trustee in
an amount which, together with other


                                      46
<PAGE>
 
moneys available therefor pursuant to the Indenture, will equal the amount
payable as principal of, Make-Whole Premium, if applicable, and interest on the
Bonds outstanding on such due date.

     The Company shall make payments on this Note on the dates and in the
amounts specified herein and in the Agreement and in addition shall make such
other payments as are required pursuant to the Agreement, the Indenture and the
Bonds.  Upon the occurrence of an Event of Default, as defined in the Indenture
or the Agreement, the principal of, Make-Whole Premium, if applicable, and
interest on this Note may be declared immediately due and payable as provided in
the Agreement.  Upon any such declaration the Company shall pay all costs,
disbursements, expenses and reasonable counsel fees of the Issuer and the
Trustee in seeking to enforce their rights under the Agreement and this Note.

     The Company (a) waives diligence, demand, presentment for payment, notice
of nonpayment, protest and notice of protest and (b) agrees that the time for
payment of this Note may be extended at the sole discretion of the Trustee
without impairing its liability hereon.  Any delay on the part of the Issuer or
the Trustee in exercising any right hereunder shall not operate as a waiver of
any such right, and any waiver granted with respect to one default shall not
operate as a waiver in the event of any subsequent or continuing default.

     This Note shall be governed and construed in accordance with the laws of
the State of Mississippi.

     IN WITNESS WHEREOF, the undersigned has caused this Note to be executed in
its name and, if applicable, its corporate seal to be hereunto affixed and
attested to by its duly authorized officers all as of the day and year first
above written.

(SEAL)                              HALTER MARINE GROUP, INC.
Attest

___________________________         By___________________________

Title______________________         Title________________________


                                      47
<PAGE>
 
      [The following language will be contained on the face of the Note]

                                  ASSIGNMENT

     FOR VALUE RECEIVED, pay this Promissory Note to SouthTrust Bank, National
Association, as Trustee under the Indenture herein mentioned, without recourse.

(SEAL)                              MISSISSIPPI BUSINESS FINANCE
                                    CORPORATION
Dated: March _______, 1998
                                    By____________________________
                                      Executive Director



                                      48
<PAGE>
 
                           ACKNOWLEDGMENT OF COMPANY


STATE OF MISSISSIPPI     )
                         ) SS:
COUNTY OF HINDS          )


     Personally appeared before me, the undersigned authority in and for the
said county and state, on this 3rd day of March, 1998, within my jurisdiction,
the within named Keith L. Voigts and Don M. Patterson, respectively, who
acknowledged they are the Senior Vice-President and Treasurer and Vice-
President/Taxation, of Halter Marine Group, Inc., a Delaware corporation, and
that for and on behalf of said corporation and as its act and deed, they
executed the above and foregoing instrument, after first having been duly
authorized by said corporation so to do.

                                         ____________________________
                                         Notary Public

(SEAL)

My Commission Expires:

______________________________ 


                                      49
<PAGE>
 
                           ACKNOWLEDGMENT OF ISSUER


STATE OF MISSISSIPPI     )
                         ) SS:
COUNTY OF HINDS          )

     Personally appeared before me, the undersigned authority in and for the
said county and state, on this the 3rd day of March, 1998, within my
jurisdiction, the within named William T. Barry and James Vernon Smith, Sr., who
acknowledged they are the Executive Director and Secretary, respectively, of the
Mississippi Business Finance Corporation, a Mississippi public corporation, and
that for and on behalf of said corporation and as its act and deed, they
executed the above and foregoing instrument, after first having been duly
authorized by said corporation so to do.

                                           _________________________
                                           Notary Public

(SEAL)

My Commission Expires:

----------------------


                                      50
<PAGE>
 
                           HALTER MARINE GROUP, INC.


                                PROMISSORY NOTE



Date:  March 3, 1998                                             $30,000,000



No.  1

     FOR VALUE RECEIVED Halter Marine Group, Inc., a corporation organized and
existing under the laws of the State of Delaware (the "Company"), hereby
promises to pay to the order of the Mississippi Business Finance Corporation
(the "Issuer") or its assigns, the principal sum of $30,000,000 together with
interest on the unpaid principal balance thereof from the date hereof until
fully and finally paid, together with Make-Whole Premium (as defined in the
Indenture, as hereinafter defined), if applicable, together with all taxes
levied or assessed on this Note or the debt evidenced hereby against the holder
hereof and all other amounts payable by the Company under the Agreement (as
hereinafter defined). This Note shall bear interest at the prevailing rate or
rates of interest on the Bonds (as hereinafter defined) except as otherwise
provided hereunder.

     This Note has been executed under and pursuant to a Loan Agreement, dated
as of January 1, 1998, between the Issuer and the Company (the "Agreement")
which Agreement is incorporated herein in its entirety by reference.  This Note
is issued to evidence the obligation of the Company under the Agreement to repay
the loan made by the Issuer from the proceeds of its $30,000,000 Taxable Revenue
Bonds, Series 1998 (Halter Marine Group, Inc. Project) (the "Bonds"), together
with interest thereon at the interest rate or rates as defined and set forth in
the Indenture (as hereinafter defined), Make-Whole Premium, if applicable, and
all other amounts, fees, penalties, premiums, adjustments, expenses, counsel
fees and other payments of any kind required to be paid by the Company under the
Agreement.  The Agreement includes provisions for prepayment of this Note as a
whole or in part as more particularly described in Section 2.03 of the
Indenture.  In the event that the terms of this Note conflict with the terms of
the Indenture or the Agreement the terms of the Indenture or the Agreement shall
control.

     The Agreement and this Note have been or will be assigned to SouthTrust
Bank, National Association, as Trustee (the "Trustee") pursuant to an Indenture,
dated as of January 1, 1998, by and between the Issuer and the Trustee (the
"Indenture").  Such assignment is made as security for the payment of the Bonds
issued by the Issuer pursuant to the Indenture.

     As provided in the Agreement and subject to the provisions thereof,
payments hereon are to be made at the Corporate Trust Office of the Trustee in
an amount which, together with other moneys available therefor pursuant to the
Indenture, will equal the amount payable as principal of, Make-Whole Premium, if
applicable, and interest on the Bonds outstanding on such due date.
<PAGE>
 
     The Company shall make payments on this Note on the dates and in the
amounts specified herein and in the Agreement and in addition shall make such
other payments as are required pursuant to the Agreement, the Indenture and the
Bonds.  Upon the occurrence of an Event of Default, as defined in the Indenture
or the Agreement, the principal of, Make-Whole Premium, if applicable, and
interest on this Note may be declared immediately due and payable as provided in
the Agreement.  Upon any such declaration the Company shall pay all costs,
disbursements, expenses and reasonable counsel fees of the Issuer and the
Trustee in seeking to enforce their rights under the Agreement and this Note.

     The Company (a) waives diligence, demand, presentment for payment, notice
of nonpayment, protest and notice of protest and (b) agrees that the time for
payment of this Note may be extended at the sole discretion of the Trustee
without impairing its liability hereon.  Any delay on the part of the Issuer or
the Trustee in exercising any right hereunder shall not operate as a waiver of
any such right, and any waiver granted with respect to one default shall not
operate as a waiver in the event of any subsequent or continuing default.

     This Note shall be governed and construed in accordance with the laws of
the State of Mississippi.

     IN WITNESS WHEREOF, the undersigned has caused this Note to be executed in
its name and, if applicable, its corporate seal to be hereunto affixed and
attested to by its duly authorized officers all as of the day and year first
above written.

(SEAL)                              HALTER MARINE GROUP, INC.

ATTEST

___________________________         By____________________________
 
Title______________________         Title_________________________


                                  ASSIGNMENT

     FOR VALUE RECEIVED, pay this Promissory Note to SouthTrust Bank, National
Association, as Trustee under the Indenture herein mentioned, without recourse.

(SEAL)                              MISSISSIPPI BUSINESS FINANCE
                                    CORPORATION
Dated: March 3, 1998
                                    By____________________________
                                      Executive Director


                                       2