exv10w6






EXHIBIT
10.6




 





Mississippi Business Finance Corporation 




and



Ingalls Shipbuilding, Inc.



 





Loan Agreement 



 





Dated as of May 1, 1999



 




     The interest of Mississippi Business Finance Corporation in this Loan Agreement and all
amounts receivable hereunder (except the right to receive payments, if any, under Sections 4.2(c),
5.2 and 6.3 hereof) has been assigned to The First National Bank of Chicago, as Trustee under the
Indenture of Trust dated as of May 1, 1999 from the Mississippi Business Finance Corporation.



 









 





Loan Agreement




(This Table of Contents is not a part of

this Loan Agreement and is only for

convenience of reference)



Table of Contents



	 	 	 	 	 	 	 
	Section	 	Heading	 	Page
	 
	 	 	 	 	 	 
	Article
I
	 	Definitions	 	 	1	 
	Section 1.1.
	 	Definition of Terms	 	 	1	 
	 
	 	 	 	 	 	 
	Article II
	 	Representations	 	 	4	 
	 
	 	 	 	 	 	 
	Section 2.1.
	 	Representations of the Issuer	 	 	4	 
	Section 2.2.
	 	Representations of the Company	 	 	5	 
	Section 2.3.
	 	Certain Benefits	 	 	6	 
	 
	 	 	 	 	 	 
	Article III
	 	Construction of the Project; Issuance of the Bonds	 	 	9	 
	 
	 	 	 	 	 	 
	Section 3.1.
	 	Agreement to Construct and Equip the Project	 	 	9	 
	Section 3.2.
	 	Agreement to Issue Bonds; Application of Bond Proceeds	 	 	10	 
	Section 3.3.
	 	Disbursements from the Construction Fund	 	 	10	 
	Section 3.4.
	 	Establishment of Completion Date; Obligation of the Company to Complete	 	 	11	 
	Section 3.5.
	 	Investment of Moneys in the Construction Fund, the Bond Fund and the Bond Purchase Fund	 	 	12	 
	 
	 	 	 	 	 	 
	Article IV
	 	Loan of Bond Proceeds; Loan Repayment Amounts; Other Amounts	 	 	12	 
	 
	 	 	 	 	 	 
	Section 4.1.
	 	Loan of Bond Proceeds	 	 	12	 
	Section 4.2.
	 	Loan Repayments; Other Amounts Payable	 	 	12	 
	Section 4.3.
	 	No Defense or Set-Off; Unconditional Obligation	 	 	14	 
	Section 4.4.
	 	Assignment of Issuer’s Rights	 	 	14	 
	 
	 	 	 	 	 	 
	Article V
	 	Special Covenants and Agreements	 	 	14	 
	 
	 	 	 	 	 	 
	Section 5.1.
	 	The Company to Maintain its Existence; Conditions Under Which Exceptions Permitted	 	 	14	 
	Section 5.2.
	 	Release and Indemnification Covenants	 	 	15	 
	Section 5.3.
	 	Insurance	 	 	15	 
	Section 5.4.
	 	Maintenance and Repair	 	 	15	 
	Section 5.5.
	 	Operation of Project	 	 	15	 
	Section 5.6.
	 	Insurance and Condemnation Awards	 	 	16	 
	Section 5.7.
	 	Qualification in State	 	 	16	 






 









 






	 	 	 	 	 	 	 
	Section	 	Heading	 	Page
	Section 5.8.
	 	Taxation Relating to Project	 	 	16	 
	Section 5.9.
	 	Recordation and Other Instruments	 	 	16	 
	Section 5.10.
	 	Compliance With Orders, Ordinances,
Etc.	 	 	16	 
	 
	 	 	 	 	 	 
	Article VI
	 	Events of Default and Remedies	 	 	17	 
	 
	 	 	 	 	 	 
	Section 6.1.
	 	Events of Default	 	 	17	 
	Section 6.2.
	 	Remedies	 	 	18	 
	Section 6.3.
	 	Agreement to Pay Attorneys’ Fees and Expenses	 	 	18	 
	Section 6.4.
	 	No Remedy Exclusive	 	 	18	 
	Section 6.5.
	 	No Additional Waiver Implied by One Waiver	 	 	19	 
	 
	 	 	 	 	 	 
	Article VII
	 	Optional and Mandatory Prepayment	 	 	19	 
	 
	 	 	 	 	 	 
	Section 7.1.
	 	Obligation to Prepay Installments	 	 	19	 
	Section 7.2.
	 	Option to Prepay Installments	 	 	19	 
	Section 7.3.
	 	Amount of Prepayment in Certain Events	 	 	20	 
	Section 7.4.
	 	Option to Prepay Installments for Optional Redemption of Bonds	 	 	20	 
	Section 7.5.
	 	Notice of Prepayment	 	 	21	 
	Section 7.6.
	 	Redemption of Bonds With Prepayment Moneys	 	 	21	 
	 
	 	 	 	 	 	 
	Article VIII
	 	Miscellaneous	 	 	21	 
	 
	 	 	 	 	 	 
	Section 8.1.
	 	Notices	 	 	21	 
	Section 8.2.
	 	Assignments	 	 	22	 
	Section 8.3.
	 	Severability	 	 	22	 
	Section 8.4.
	 	Execution of Counterparts	 	 	22	 
	Section 8.5.
	 	Amounts Remaining in Any Fund With the Trustee	 	 	22	 
	Section 8.6.
	 	Amendments, Changes and Modifications	 	 	22	 
	Section 8.7.
	 	Governing Law	 	 	22	 
	Section 8.8.
	 	Authorized Representatives	 	 	22	 
	Section 8.9.
	 	Term of the Agreement	 	 	23	 
	Section 8.10.
	 	Binding Effect	 	 	23	 
	 
	 	 	 	 	 	 
	Exhibit A
	 	Description of Project	 	 	A-1	 






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Loan Agreement




     This Loan Agreement, made and entered into as of May 1, 1999 by and between
Mississippi Business Finance Corporation, a public corporation of the State of
Mississippi, party of the first part (the “Issuer”), and
Ingalls Shipbuilding, Inc., a corporation
organized and existing under the laws of the State of Delaware, party of the second part (the
“Company”).



W i
t n e s s e t h:




     In consideration of the respective representations and agreements herein contained, the
parties hereto agree as follows (provided, that in the performance of the agreements of the Issuer
herein contained, any obligation it may thereby incur for the payment of money shall be a limited
obligation of the Issuer, payable solely out of the proceeds derived from this Loan Agreement, the
sale of the Bonds, the income from the temporary investment thereof and moneys derived from the
Guaranty, all as herein provided);



Article I




Definitions



     Section 1.1. Definition of Terms. Certain terms used in this Loan Agreement are hereinafter
defined in this Section 1.1. When used herein, such terms shall have the meanings given to them by
the language employed in this Article I defining such terms, and the plural includes the singular
and the singular includes the plural, unless the context clearly indicates otherwise:



     “Act” means Sections 57-10-201 through 57-10-261, inclusive, and Sections 57-10-401 through
57-10-449, inclusive, of the Mississippi Code of 1972, as supplemented and amended.



     “Agreement” means this Loan Agreement as from time to time supplemented and amended.



     “Authorized Company Representative” means such person at the time and from time to time
designated by written certificate furnished to the Issuer and the Trustee containing the specimen
signature of such person and signed on behalf of the Company by the chairman, the president, any
vice president, the treasurer or any assistant treasurer of the Company to act in behalf of the
Company. Such certificate may designate an alternate or alternates.



     “Authorized Issuer Representative” means such person at the time and from time to time
designated by written certificate furnished to the Company and the Trustee containing the specimen
signature of such person and signed on behalf of the Issuer by its Executive Director to act in
behalf of the Issuer. Such certificate may designate an alternate or alternates.



 









 





     “Bond Counsel” means Chapman and Cutler or such other nationally recognized municipal bond
counsel of recognized expertise with respect to such matters as may be mutually satisfactory to the
Issuer, the Company (so long as no event of default is then existing under Section 6.1 (a), (b),
(c), (d) or (e) of this Agreement) and the Trustee.



     “Bond Fund” means the Bond Fund created and established in Section 5.2 of the Indenture.



     “Bonds” means the $83,700,000 aggregate principal amount of Economic Development Revenue Bonds
(Ingalls Shipbuilding, Inc. Project) Taxable Series 1999A authorized to be issued by the Issuer
pursuant to the terms and conditions of Sections 2.1 and 2.2 of the Indenture.



     “Code” means the Internal Revenue Code of 1986, as amended, together with any regulations
promulgated thereunder or applicable thereto.



     “Company” means (i) Ingalls Shipbuilding, Inc., the party of the second part hereto, and its
successors and assigns, and (ii) any surviving, resulting or transferee entity as permitted by
Section 5.1 hereof.



     “Completion Date” means the date of completion of construction of the Project.



     “Construction Fund” means the Construction Fund created and established in Section 5.6 of the
Indenture.



     “Construction Period” means the period between the beginning of construction of the Project or
the date on which the Bonds are first delivered to the purchasers thereof, whichever is earlier,
and the Completion Date.



     “Cost of the Project” means the sum of the items authorized to be paid from the Construction
Fund pursuant to the provisions of Section 3.3 hereof.



     “Event of Default” means any occurrence or event specified as such in and defined as such by
Section 6.1 hereof.



     “Indenture” means the Indenture of Trust, including any indentures supplemental thereto as
therein permitted, between the Issuer and the Trustee, of even date herewith, pursuant to which
certain of the Issuer’s interest in this Agreement is pledged as security for the payment of the
principal of, and premium, if any, and interest on, the Bonds and moneys on deposit in the Bond
Purchase Fund are held in trust for the benefit of the respective owners which have tendered Bonds
for purchase.



     “Initial Administrative Fee” means the initial fee of the Issuer with respect to the Bonds in
the amount of $30,000, which fee is required to be paid by the Company to the Issuer upon the
initial delivery of Bonds hereunder.



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     “Issuer” means the Mississippi Business Finance Corporation, the party of the first part
hereto, and any successor body to the duties or functions of the Issuer.



     “Permitted Investments” means:




     (a) Direct obligations of the United States of America and Canada and obligations fully
guaranteed by any agency thereof;




     (b) Direct obligations of, and obligations fully guaranteed by, any of the fifty states of the
United States of America or the ten provinces of Canada rated a minimum of Aa2 by Moody’s or AA by
S&P or any equivalent rating by any equivalent rating service (such rating requirement can be met
by an attached letter of credit from any bank meeting the requirements stated in clause (e) and/or
(f) below or by municipal bond insurance);




     (c) Indebtedness of any county or other local government body within the United States of
America rated at least Aa2 by Moody’s or AA by S&P or any equivalent rating by any equivalent
rating service (such rating requirement can be met by an attached letter of credit from any bank
meeting the requirements stated in clause (e) and/or (f) below or by municipal bond insurance);




     (d) Indebtedness of any corporation rated at least Aa2 by Moody’s or AA by S&P or any
equivalent rating by any equivalent rating service or any commercial paper of any corporation rated
at least P-2 by Moody’s or A-2 by S&P or any equivalent rating by any equivalent rating service;




     (e) Certificates of deposit, banker’s acceptances or time deposits of any commercial bank,
branch or Edge Act (12 USC 611 et seq.) branch which is a member of the Federal Reserve System, has
a net worth of at least $100 million and whose debt service has an A prefix by McCarthy Crisanti &
Maffei, Inc., Moody’s or S&P or any equivalent rating by any equivalent rating service;




     (f) Certificates of deposit, banker’s acceptances or time deposits of any non-U.S. commercial
bank which is ranked among the 100 largest banks in the world (by assets, as ranked by the American
Banker Journal), has a net worth of at least $500 million and rated B/C or better by International
Business Communications Ltd. or Thomson BankWatch, Inc. rating service or any equivalent rating by
any equivalent rating service;




     (g) Repurchase agreements or reverse repurchase agreements with financial institutions whose
commercial paper is rated at least P-1 by Moody’s or A-1 by S&P or whose debt rating is at least
Aa2 by Moody’s or AA by S&P, or any bank who meets the requirements as stated in clause (e) and/or
(f) above, provided that in all cases the market value of the collateral used for such transactions
must be adequate to insure safety, liquidity and preservation of capital: Aaa or AAA-102%, Aa2 or
AA-110%; and



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          (h) Securities and Exchange Commission Rule 2a-7 money market funds with a net asset value of
one and a parent company rating of P-1 or better by Moody’s or
A-1 or better by S&P or any
equivalent rating by any equivalent rating service.



     “Plans and Specifications” means the plans and specifications prepared for the Project by the
Company, as amended from time to time prior to the Completion Date, which plans and specifications
are on file at the Principal Office of the Company.



     “Plant” means the shipbuilding complex in Jackson County, Mississippi which is owned and
operated by the Company.



     “Project” means those items of machinery, equipment, structures and related property acquired
and constructed or installed with proceeds from the sale of the Bonds or the proceeds of any
payment by the Company pursuant to Section 3.4 of this Agreement, as more particularly described in
Exhibit A hereto.



     “Trustee” means the Trustee and/or co-trustee at the time serving as such under the Indenture.



     The words “hereof,” “herein,” “hereunder” and other words of similar import refer to this
Agreement as a whole.



     Unless otherwise specified, references to Articles, Sections, and other subdivisions of this
Agreement are to the designated Articles, Sections, and other subdivisions of this Agreement as
originally executed.



     The headings of this Agreement are for convenience only and shall not define or limit the
provisions hereof.



     Terms defined in the Indenture and used herein shall have the same meaning herein as set forth
in the Indenture.



Article II




Representations; Certain Benefits



     Section 2.1. Representations of the Issuer. The Issuer makes the following representations as
the basis for the undertakings on its part herein contained:




          (a) The Issuer is a public corporation duly organized and validly existing under the
Constitution and laws of the State. The Issuer has the power, pursuant to the provisions of the
Act, to enter into the transactions contemplated by this Agreement and to carry out its obligations
hereunder. By proper action of the Issuer, the Issuer has been duly authorized to execute and
deliver this Agreement and the Indenture.



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     (b) To finance a portion of the Cost of the Project, the Issuer will issue its Bonds, which will
mature, bear interest and be subject to redemption as set forth in the Indenture.




     (c) The Bonds are to be issued under and secured by the Indenture, pursuant to which certain
of the Issuer’s interests in this Agreement will be pledged to the Trustee as security for payment
of the principal of, premium, if any, and interest on the Bonds.




     (d) The Issuer has not and will not pledge or otherwise transfer its interest in this
Agreement other than to the Trustee to secure the Bonds.




     (e) The Issuer, to its knowledge, is not in default under any of the provisions of the laws of
the State which default would affect its existence or its powers referred to in subsection (a) of
this Section 2.1.




     (f) The issuance of the Bonds for the purpose of financing Cost of the Project will further
the public purposes of the Act.




     (g) The Company qualifies as an eligible company within the meaning of the Act.




     (h) All requirements of the Act have been complied with in connection with the issuance and
sale of the Bonds and the execution of this Agreement and the Indenture.




     (i) No official or officer of the Issuer has any interest, financial, employment or otherwise,
in the Company or in the transactions contemplated hereby, prohibited by any statute or rule of law
of the State.



     Section 2.2. Representations of the Company. The Company makes the following representations
as the basis for the undertakings on its part herein contained:




     (a) The Company is a corporation duly organized and validly existing under the laws of the
State of Delaware and is in good standing and is duly qualified to do business in the State of
Mississippi and has power to enter into and by proper action has been duly authorized to execute
and deliver this Agreement.




     (b) Neither the execution and delivery of this Agreement, the consummation of the transactions
contemplated hereby, nor the fulfillment of or compliance with the terms and conditions of this
Agreement conflicts with or results in a breach of any of the terms, conditions or provisions of
the Company’s Restated Certificate of Incorporation, any other organizational restriction or any
agreement or instrument to which the Company is now a party or by which it is bound, or (with or
without the giving of notice or the lapse of time, or both) constitutes a default under any of the
foregoing, or results in the creation or imposition of any lien, charge or encumbrance prohibited
by the terms of any instrument or agreement to which the Company is now a party or by which it is
bound.



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          (c) The loan of the proceeds of the Bonds by the Issuer to the Company hereunder is not being
made to finance any existing debt except for the repayment of existing debt which qualifies as a
Cost of the Project.



     Section 2.3.
Certain Benefits. (a) The parties hereto acknowledge that the Company has been
induced to proceed with the Project in part by the benefits conferred by the Act. The Issuer hereby
agrees that the Company shall be permitted to take advantage of all of the benefits provided by the
Act to the fullest extent therein set forth subject to the rules and regulations of the Issuer to
the extent that such rules are applicable to the Project.



          (b) With respect to income tax credits conferred by the Act referenced in (a) above, and all
calculations in connection therewith, the following shall apply:





	 	(1)	 	the maximum income tax credit to be utilized in any taxable
year of the Company (“Taxable
Year”) is 80% of the tax liability and shall not exceed the payments of the principal of, premium,
if any and interest payments on the Bonds during such year and the fees and expenses of the Trustee
and any other fees and expenses referenced herein.
	 
	 	(2)	 	the deductibility of interest payments on the Bonds shall be determined in accordance with
applicable Mississippi law.
	 
	 	(3)	 	the Company shall request the Trustee to provide the Issuer, not later than ninety (90) days
after the end of each Taxable Year, with a certificate setting forth the amount of all payments
made to the Trustee with respect to the Bonds whether for principal, premium, interest or the fees
and expenses of the Trustee.
	 
	 	(4)	 	it is understood that as an expansion to an existing manufacturing enterprise, the economic
development project to be financed with the proceeds of the Bonds will generate an income tax
credit in an amount equal to the annual payments on the Bonds as provided in this Agreement and the
Indenture (which are described in the Act as “total debt service paid under a financing
agreement”), subject to the following formula calculation which is based on guidelines promulgated
by the Issuer, particularly Section 1 of the Issuer’s Rural Economic Development (RED) Guidelines
which were modified effective July 1, 1998 (the “MBFC Guidelines”). In no case may the credit
exceed 80% of the taxpayer’s liability in a tax year.






	 	i.	 	The Company shall establish an existing employment base which shall be
the average number of employees reported by the Company to the Mississippi Employment Security
Commission for twelve (12) months preceding November 1, 1997 (the first day of the month during
which the Company was induced for financing by the Issuer for the Project). This amount shall
constitute the “Employment Base” for the entire term of this Agreement and for the three years
after the end of the term of this Agreement.





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	 	ii.	 	Commencing with the 1998 Taxable Year and for each Taxable Year thereafter
throughout the term of this Agreement, the Company shall compute the average number
of employees in Mississippi reported by the Company to the Mississippi Employment
Security Commission (the “Future Employment Base”) and calculate the percentage
increase of such employees over the Employment Base. (As noted, this percentage shall
be adjusted annually.)
	 
	 	iii.	 	The percentage of total increased employment described in (ii) above is determined by
subtracting the Employment Base (as defined in (i) above) from the Future Employment Base,
dividing the result by the Future Employment Base and then converting the resulting
fraction to a percentage.
	 
	 	iv.	 	The Company shall establish the present value of the Company’s capital assets
located in Mississippi by using the true value as reflected on the personal and real
property tax rolls of the tax assessor of the county where the Company’s existing plants
are located as of the most recent assessment date(s) immediately prior to commencement of
the Project. This amount shall constitute the “Capital Asset Base” for the entire term of
this Agreement. Since work on the Project commenced in August, 1997, the Capital Asset
Base will be the true value of the personal property as reflected on the Company’s January
1, 1997 rendition form, plus the true value of the real property as reflected on the tax
rolls of the county where the Company’s existing plants are located as of January 1, 1997.
	 
	 	 	 	The percentage of the capital investment increase will be determined by dividing the cost of the
new fixed assets by the total value of the Company’s capital assets upon completion of the Project,
as determined by the tax assessors of the counties in which the Company has facilities and then
converting the resulting fraction to a percentage.
	 
	 	v.	 	For the 1999 Taxable Year, the Company shall calculate the percentage of its capital
investment increase by using a formula, the numerator of which shall consist of the cost of
the fixed assets in connection with the Project purchased from November 1, 1997 through July
31, 1999 with bond proceeds (including the proceeds of any bonds previously issued by the
Issuer on behalf of the Company) or Company Equity (as defined in the MBFC Guidelines), and
the denominator of which shall consist of (a) the cost of the fixed assets purchased from
November 1, 1997 through July 31, 1999 with bond proceeds (including the proceeds of any bonds
previously issued by the Issuer on behalf of the Company) or Company Equity, plus (b) the
Capital Asset Base.





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	 	vi.	 	For each subsequent Taxable Year until the Taxable Year following the Completion
Date, the Company shall calculate the percentage of its capital investment increase
by using the following formula:
	 
	 	 	 	Numerator: (a) Cost of fixed assets in connection with the Project purchased during each respective
Taxable Year with bond proceeds (including the proceeds of any bonds previously issued by the
Issuer on behalf of the Company) or Company Equity excluding the cost of fixed assets purchased in
such Taxable Year from August 1 through December 31 of such Taxable Year, plus (b) the total true
value of the fixed assets in connection with the Project purchased from November 1, 1997 through
the assessment date that occurs in such subsequent Taxable Year with bond proceeds (including the
proceeds of any bonds previously issued by the Issuer on behalf of the Company) or Company Equity,
as reflected on the real and personal property tax rolls for that assessment date.
	 
	 	 	 	Denominator: (a) Cost of fixed assets in connection with the Project purchased during such
subsequent Taxable Year with bond proceeds (including the proceeds of any bonds previously issued
by the Issuer on behalf of the Company) or Company Equity excluding the cost of fixed assets
purchased in such Taxable Year from August 1 through December 31 of such Taxable Year, plus (b) the
total true value of the fixed assets at the Company’s Mississippi Plants as of the assessment date
that occurs in such subsequent Taxable Year.
	 
	 	vii.	 	For the Taxable Year following the Completion Date, the Company shall calculate the
percentage of its capital investment increase by using a formula, the numerator of which
shall consist of the true value of the fixed assets in connection with the Project of the
Company purchased since November 1, 1997 with bond proceeds (including the proceeds of any
bonds previously issued by the Issuer on behalf of the Company) or Company Equity, and the
denominator of which shall consist of the true value of the fixed assets located at the
Company’s Mississippi plants (which shall include the Project) as reflected on the real
and personal property tax rolls as of the most recent assessment date. This quotient
calculated with respect to the year following the Completion Date shall be used for such
Taxable Year and all future years without adjustment.
	 
	 	viii.	 	The Company shall compute its “Economic Tax Valuation Percentage” for each Taxable Year by
multiplying the employment increase percentage (determined in (ii) above) by two (2), adding
the percentage of capital investment increase (determined in (v), (vi) or (vii) above, as the
case may be), and then dividing by three (3).





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	 	ix.	 	The Economic Tax Valuation Percentage shall then be applied to the Company’s Mississippi
taxable income in order to determine the amount
of income generated by or arising out of the Project for purposes of calculating the Company’s
income tax liability which may be offset by the income tax credit provided under Section
57-10-409(d)(i) of the Act.






	 	(5)	 	the income tax credits provided by the Act may not be carried forward beyond three years
following the year all of the Bonds are redeemed, whether by maturity, acceleration or redemption.
	 
	 	(6)	 	the benefits accruing to the Company under this Section 2.3 shall cease in the event:






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





          With respect to the benefits that may accrue to the Company under this Section 2.3, the
Company acknowledges and agrees that the Issuer makes no representation, warranty or covenant
regarding the enforceability of the Company’s rights to receive the benefits, the extent that such
benefits may be received nor the term under which the Company may be entitled to receive the
benefits.



Article III




Construction of the Project; Issuance of the Bonds



     Section 3.1. Agreement to Construct and Equip the Project. The Company agrees that it will
acquire or construct, or complete the acquisition and construction of, the Project in Jackson
County, Mississippi substantially in accordance with the Plans and Specifications.



          In the event that Exhibit A hereto is to be amended or supplemented in accordance with
the provisions of Section 11.1 of the Indenture, the Issuer will enter into, and will instruct the
Trustee to consent to, an amendment of or supplement to Exhibit A hereto upon receipt of:




     (i) a certificate of an Authorized Company Representative describing in detail the
proposed changes; and




     (ii) a copy of the proposed
form of amendment or supplement to Exhibit A hereto and
such other documents, certificates and showings as may be required by counsel rendering the opinion
in clause (iii) of this paragraph; and



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     (iii) an opinion of Bond Counsel to the effect that such amendment complies with the requirements
of this Section 3.1, is in proper form for execution and delivery by the Issuer and will not
adversely affect the validity of the Bonds.



     Section 3.2. Agreement to Issue Bonds; Application of Bond Proceeds. In order to provide funds
to finance all or a portion of the Cost of the Project, the Issuer agrees that it will issue under
the Indenture, sell and cause to be delivered to the Underwriter, the Bonds, bearing interest and
maturing as set forth in the Indenture. The Issuer will cause the accrued interest, if any,
received upon the delivery of the Bonds to be deposited in the Bond Fund and the balance of the
proceeds (net of underwriting discount, if any) received from the sale of the Bonds to be deposited
in the Construction Fund.



     Section 3.3. Disbursements from the Construction Fund. The Issuer hereby authorizes and
directs the Trustee, upon compliance with Section 5.7 of the Indenture, to disburse the moneys in
the Construction Fund to or on behalf of the Company for the following purposes (but, subject to
the provisions of Sections 3.4 and 3.5 hereof, for no other purpose):




     (a) Payment to the Company of such amounts, if any, as shall be necessary to reimburse the
Company in full for all advances and payments made by it at any time prior to or after the delivery
of the Bonds for expenditures in connection with the preparation of the Plans and Specifications
(including any preliminary study or planning of the Project or any aspect thereof) and the
construction and acquisition of the Project.




     (b) Payment of the initial or acceptance fee of the Trustee, legal, financial and accounting
fees and expenses, the Issuer’s fees and expenses, Rating Agency fees, original issue discount, and
printing and engraving costs incurred in connection with the authorization, issuance and sale of
the Bonds, the execution and filing of the Indenture and the preparation and recording or filing of
all other documents in connection therewith, and payment of all fees, costs and expenses for the
preparation of this Agreement, the Indenture and all other documents in connection with the
authorization, issuance and sale of the Bonds.




     (c) Payment for labor, services, materials and supplies used or furnished in the construction
and acquisition of the Project, and payment of amounts due under contracts for the acquisition,
construction and installation of the Project, all as provided in the plans, specifications and work
orders therefor.




     (d) Payment of the fees, if any, for architectural, engineering, legal, underwriting and
supervisory services with respect to the Project.




     (e) To the extent not paid by a contractor for construction or installation with respect to
any part of the Project, payment of the premiums on all insurance required to be taken out and
maintained during the Construction Period.



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          (f) Payment of the taxes, assessments and other charges, if any, that may become payable
during the Construction Period with respect to the Project, or reimbursement thereof if paid by the
Company.




          (g) Payment of expenses incurred in seeking to enforce any remedy against any contractor or
subcontractor in respect of any default under a contract relating to the Project.




          (h) Interest on the Bonds during the Construction Period.




          (i) Payment of any other costs which constitute part of the cost of the Project in accordance
with generally accepted accounting principles and which are permitted by the Act.



     All moneys remaining in the Construction Fund after the Completion Date and after payment or
provision for payment of all other items provided for in the preceding subsections (a) to (j),
inclusive, of this Section, shall at the direction of the Company be used in accordance with
Section 3.4 hereof.



     Section 3.4. Establishment of Completion Date; Obligation of the Company to Complete. As soon
as practicable after the completion of construction of the Project, and in any event not more than
ninety (90) days thereafter, the Company shall furnish to the Trustee a certificate signed by an
Authorized Company Representative stating (i) that construction of the Project has been completed
substantially in accordance with the Plans and Specifications, (ii) the Completion Date, (iii) the
Cost of the Project, (iv) the portion of the Cost of the Project which has then been paid and (v)
the portion of the Cost of the Project which has not yet then been paid. Such certificate may state
that it is given without prejudice to any rights against third parties which exist at the date of
such certificate or which may subsequently come into being.



          Moneys (including investment proceeds) remaining in the Construction Fund on the date of such
certificate may be used, at the direction of an Authorized Company Representative, to the extent
indicated, for the payment, in accordance with the provisions of this Agreement, of any Cost of the
Project not then paid as specified in the above-mentioned certificate. Any moneys (including
investment proceeds) remaining in the Construction Fund on the date of the aforesaid certificate
and not so set aside for the payment of such Cost of the Project shall be used as soon as
practicable to redeem Bonds in accordance with Section 3.1(d) of the Indenture.



          In the event the moneys in the Construction Fund available for payment of the Cost of the
Project should not be sufficient to pay the costs thereof in full, the Company agrees to pay
directly, or to deposit in the Construction Fund moneys sufficient to pay, the costs of completing
the Project as may be 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 and which, under the provisions of this Agreement, will be available for
payment of the Cost of the Project, will be sufficient to pay all the costs which will be incurred
in that connection. The Company agrees that if after exhaustion of the moneys in the Construction
Fund the Company should pay, or deposit moneys in the Construction Fund for the




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payment of, any portion of the Cost of the Project pursuant to the provisions of this Section, it shall
not be entitled to any reimbursement therefor from the Issuer or from the Trustee or
from the owners of any of the Bonds, nor shall it be entitled to any diminution of the loan
repayment installments or other amounts payable under Section 4.2 hereof.




     Section 3.5. Investment of Moneys in the Construction Fund, the Bond Fund and the Bond
Purchase Fund. Any moneys held as a part of the Construction Fund or the Bond Fund shall at the
written direction (or the oral direction confirmed in writing) of an Authorized Company
Representative as to specific investments be invested or reinvested by the Trustee as provided in
Article VI of the Indenture, to the extent permitted by law, in Permitted Investments. Any such
direction shall certify that any investment so directed to be made constitutes a Permitted
Investment and that such investment is permitted to be made under the Indenture and the Agreement.
The Trustee may make any and all such investments through its own trust investment department. The
investments purchased pursuant to this Section 3.5 and Article VI of the Indenture shall be held by
the Trustee and shall be deemed at all times a part of the Construction Fund or the Bond Fund, as
the case may be, and the interest accruing thereon and any profit realized therefrom shall be
credited to such fund and any net losses resulting from such investment shall be charged to such
fund.



Article IV




Loan of Bond Proceeds; Loan Repayment Amounts; Other Amounts



     Section 4.1. Loan of Bond Proceeds. The Issuer hereby agrees, upon the terms and conditions in
this Agreement, to lend to the Company the proceeds (exclusive of accrued interest, if any)
received by the Issuer from the sale of the Bonds.



     Section 4.2. Loan Repayments; Other Amounts Payable. (a) On or before each date provided in or
pursuant to the Indenture for the payment of principal of, premium, if any, and/or interest on the
Bonds, until the principal of, premium, if any, and interest on the Bonds shall have been fully
paid or provision for the payment thereof shall have been made in accordance with the Indenture,
the Company covenants and agrees to pay to the Trustee in federal or other immediately available
funds at the Principal Office of the Trustee for deposit in the Bond Fund, as a loan repayment
installment pursuant to Section 4.1 hereof, a sum equal to the amount payable on such date as
principal (whether at maturity, or upon redemption or acceleration), premium, if any, and interest
upon the Bonds as provided in the Indenture; provided, however, that the obligation of the Company
to make any such payment shall be reduced by the amount of moneys on deposit in the Bond Fund on
any such date and: available to pay the principal of and premium, if any, and interest
on the Bonds on such date (excluding moneys on deposit in the Bond Fund for the payment of past due
principal of or premium, if any, or interest on Bonds in cases where Bonds have not been presented
for payment or interest checks have not been cashed); provided further, that in any event the
payments under this Section 4.2(a) shall at all times be sufficient to pay the principal of and
premium, if any, and interest on the Bonds, and if on any date on which the payment of the
principal of or premium, if any, or interest on Bonds is due, the Trustee shall not have sufficient
moneys on deposit in the Bond Fund and available therefor to make each such payment in full, the
Company shall immediately pay to the Trustee in







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immediately available funds an amount equal to such deficiency. Each payment made pursuant to this
Section 4.2(a) shall be made during normal banking hours. In the event the Company should fail to
make any of the payments required in this Section 4.2(a), the item or installment so in default
shall continue as an obligation of the Company until the amount in default shall have been fully
paid, and the Company agrees to pay the same with interest thereon to the extent permitted by law
at the rate of interest borne by the Bonds from the due date thereof until paid.




     To secure its obligation to make the payments required under this Section 4.2(a), the Company
agrees to cause the Guaranty to be issued and delivered to the Trustee on or prior to the date of
the initial delivery to and payment for Bonds by the Initial Purchaser. The obligation of the
Company to make payments under this Section 4.2(a) shall be fully or partially, as the case may be,
satisfied and discharged to the extent that, at the time any such payments shall be due or owing,
payment of the principal of, premium, if any, and interest on the Bonds which would have been paid
with such payments shall be paid (or provision for such payment shall be made as set forth in the
Indenture) with amounts received by the Trustee from (i) moneys realized under the Guaranty or
(iii) any other source under the Indenture so long as the amounts are available for such purpose.



     (b) The Company agrees to pay the Trustee (1) the reasonable costs and expenses of the
Trustee, including reasonable attorneys’ fees and expenses, incurred by the Trustee in entering
into and executing the Indenture and (2) (i) an amount equal to the reasonable annual fee of the
Trustee for the ordinary services of the Trustee, as trustee, rendered and its reasonable ordinary
expenses incurred under the Indenture, as and when the same become due, (ii) the reasonable fees,
charges and expenses of the Trustee, as paying agent, as tender agent and as bond registrar, as and
when the same become due and (iii) the reasonable fees, charges and expenses (including reasonable
attorneys’ fees and expenses) of the Trustee for any reasonable extraordinary services rendered by
it and extraordinary expenses incurred by it under the Indenture, as and when the same become due.
The Company further agrees to indemnify the Trustee, including its officers, directors, employees
and agents, for, and to hold the Trustee harmless against, any loss, liability or expense incurred
without negligence or willful misconduct on its part, arising out of or in connection with the
issuance or sale of the Bonds or the acceptance or administration of the trusts under the
Indenture, this Agreement and the Guaranty, including the costs and expenses of defending itself
against any claim or liability in connection with the exercise or performance of any of its powers
and duties under the Indenture. In the event the Company should fail to make any of the payments
required in this Section 4.2(b), the item or installment so in default shall continue as an
obligation of the Company until the amount in default shall have been fully paid, and the Company
agrees to pay the same with interest thereon to the extent permitted by law at the prime rate of
the Trustee at the time of such failure from the due date thereof until paid.



     (c) The Company also agrees to pay when due, upon written request, or to promptly reimburse
the Issuer for (i) all costs incurred by the Issuer in connection with the financing and
administration of the Project, except as may be paid out of the proceeds of the Bonds, including
without limitation, any necessary expenses incurred by the Board of Directors or any officer of the
Issuer while engaged in the performance of their duties as such commissioners or officers of the
Issuer, (ii) the reasonable fees and expenses of counsel to the Issuer and (iii) all publication,
filing and recording fees. In the event the Company should fail to make any of the payments







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required in this Section 4.2(c), the item or installment so in default shall continue as an
obligation of the Company until the amount in default shall have been fully paid, and the Company
agrees to pay the same with interest thereon to the extent permitted by law at the rate of interest
borne by the Bonds from the due date thereof until paid.




          (d) The Trustee’s rights to immunities and protection from liability hereunder and its right
to payment of its fees, expenses and indemnities shall survive its resignation or removal and the
final payment or defeasance of the Bonds.



     Section 4.3. No Defense or Set-Off; Unconditional Obligation. The obligations of the Company
to make the payments required in Section 4.2 hereof and to perform and observe the other agreements
on its part contained herein shall be absolute and unconditional, irrespective of any defense or
any rights of set-off, recoupment or counterclaim it might otherwise have against the Issuer or the
Trustee, and the Company shall pay absolutely net during the term of this Agreement the payments to
be made as prescribed in Section 4.2 and all other payments required hereunder free of any
deductions and without abatement, diminution or set-off; and, except as provided in Section 4.2(d)
hereof, until such time as the principal of, premium, if any, and interest on the Bonds shall have
been fully paid, or provision for the payment thereof shall have been made in accordance with the
Indenture, the Company: (i) will not suspend or discontinue any payments provided for in Section
4.2 hereof; (ii) will perform and observe all of its other agreements contained in this Agreement;
and (iii) except as provided in Article VII hereof, will not terminate this Agreement for any
cause, including, without limiting the generality of the foregoing, destruction of or damage to the
Project, commercial frustration of purpose, any change in the tax laws of the United States of
America or of the State or any political subdivision of either of these, or any failure of the
Issuer or the Trustee to perform and observe any agreement, whether express or implied, or any
duty, liability or obligation arising out of or connected with this Agreement or the Indenture,
except to the extent permitted by this Agreement.



     Section 4.4. Assignment of Issuer’s Rights. As security for the payment of the Bonds, the
Issuer will assign to the Trustee the Issuer’s rights under this Agreement, including the right to
receive payments hereunder (except the right to receive payments, if any, under Sections 4.2(c),
5.2 and 6.3 hereof), and hereby directs the Company to make said payments directly to the Trustee.
The Company herewith assents to such assignment and will make such payments directly to the Trustee
without defense or set-off by reason of any dispute between the Company and the Issuer or the
Trustee.



Article v




Special Covenants and Agreements



     Section 5.1. The Company to Maintain its Existence; Conditions Under Which Exceptions
Permitted. The Company agrees that during the term of this Agreement it will maintain its
existence, will not dissolve or otherwise dispose of all or substantially all of its assets and
will not consolidate with or merge into another entity or permit one or more entities to
consolidate with or merge into it; provided that the Company may, without violating the







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agreement contained in this Section, consolidate with or merge into another entity, or permit one
or more entities to consolidate with or merge into it, or sell or otherwise transfer to another
entity all or substantially all of its assets as an entirety and thereafter dissolve, provided, the
surviving, resulting or transferee entity, as the case may be, if it is other than the Company, (i)
is qualified to do business in the State, and (ii) assumes in writing all of the obligations of the
Company under this Agreement.




     Section 5.2. Release and Indemnification Covenants. The Company releases the Issuer (and its
commissioners, officers, employees and agents) from and covenants and agrees that the Issuer shall
not be liable for, and to indemnify and hold the Issuer (and its commissioners, officers, employees
and agents) harmless against, any loss or damage to property or any injury to or death of any
person occurring on or about or resulting from the Project or the operation thereof; including,
without limiting the generality of the foregoing, all causes of action and attorneys’ fees and any
other expenses incurred in defending any suits or actions which may arise as a result of any of the
foregoing. The Company further releases the Issuer (and its commissioners, officers, employees and
agents) from and covenants and agrees that the Issuer (and its commissioners, officers, employees
and agents) shall not be liable for, and to indemnify and hold the Issuer harmless against, any
liability resulting from or related to the issuance or sale of the Bonds; including, without
limiting the generality of the foregoing, all causes of action and attorneys’ fees and any other
expenses incurred in defending any suits or actions which may arise as a result of any of the
foregoing.



     Section 5.3. Insurance. The Company agrees to maintain, or cause to be maintained, all
necessary insurance with respect to the Project in accordance with its customary insurance
practices, which may include self-insurance. All costs of maintaining insurance with respect to the
Project shall be paid by the Company, and the Issuer shall have no obligation or liability in this
regard.



     Section 5.4. Maintenance and Repair. The Company agrees that it will (i) maintain, or cause to
be maintained, the Project in as reasonably safe condition as its operations shall permit and (ii)
maintain, or cause to be maintained, the Project in good repair and in good operating condition,
ordinary wear and tear excepted, making from time to time all necessary repairs thereto and
renewals and replacements thereof. All costs of operating and maintaining the Project shall be paid
by the Company, and the Issuer shall have no obligation or liability in this regard.



     Section 5.5. Operation of Project. Although the Company intends to operate, or cause to be
operated, the Project for its designed purposes until the date on which no Bonds are outstanding,
the Company is not required by this Agreement to operate, or cause to be operated, any portion of
the Project after the Company shall deem in its discretion that such continued operation is not
advisable, and in such event it is not prohibited by this Agreement from selling, leasing or
retiring all or any such portion of the Project. The net proceeds from such sale, lease or other
disposition, if any, shall belong to, and may be used for any lawful purpose by, the Company. No
such sale, lease or other disposition of all or any portion of the Project shall reduce or
otherwise affect the Company’s obligation to pay amounts under Article IV hereof.



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     Section 5.6. Insurance and Condemnation Awards. The net proceeds of any insurance or
condemnation award as a result of the destruction or condemnation of the Project or any portion
thereof shall belong to, and may be used for any lawful purpose by, the Company.



     Section 5.7. Qualification in State. The Company agrees that throughout the term of this
Agreement it will be qualified to do business in the State.



     Section 5.8. Taxation Relating to Project. During the term of this Agreement, the Company will
promptly remit when due any taxes, assessments or other charges levied or imposed in respect of the
Project or the installments payable hereunder to the appropriate taxing body. The Company may, at
its own expense and in its own name, in good faith contest any such taxes, assessments and other
charges and, in the event of such contest, may permit the taxes, assessments or other charges
contested to remain unpaid during the period of such contest and any appeal therefrom if permitted
by applicable law. All taxes, assessments and other charges levied or imposed with respect to the
Project shall be the obligation of the Company, and the Issuer shall have no obligation or
liability in this regard.



     Section 5.9. Recordation and Other Instruments. In order to perfect the security interest of
the Trustee in the Trust Estate, the Company will cause such security agreements or financing
statements, to be duly filed and recorded in the appropriate state and county offices as required
by the provisions of the Uniform Commercial Code or other similar law as adopted in the State, as
from time to time amended. To continue the perfection of the security interest evidenced by such
security agreements or financing statements, the Company shall file and record such necessary
continuation statements or supplements thereto and other instruments from time to time as may be
required pursuant to the provisions of said Uniform Commercial Code or other similar law to fully
preserve and protect the security interest of the Trustee in the Trust Estate. The Issuer, at the
expense of the Company, shall execute and cause to be executed any and all further instruments as
shall be reasonably requested by the Trustee for such protection and perfection of the interests of
the Trustee and the Bondholders, and the Company shall file and refile such instruments which shall
be necessary to preserve and perfect the lien of the Indenture upon the Trust Estate until the
principal of, premium, if any, and interest on the Bonds issued thereunder shall have been paid or
provision for their payment shall be made as therein provided.



     Section 5.10. Compliance With Orders, Ordinances, Etc. The Company agrees that it will use its
best efforts promptly to comply with all statutes, codes, laws, acts, ordinances, orders,
judgments, decrees, injunctions, rules, regulations, permits, licenses, authorizations, directions
and requirements of all federal, state, county, municipal and other governmental authorities,
foreseen or unforeseen, ordinary or extraordinary, which now or at any time hereafter may be
applicable to the Project or any part thereof, or to any use, manner of use or condition of the
Project or any part thereof.



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Article VI




Events of Default and Remedies



     Section 6.1. Events of Default. The occurrence and continuation of any one of the following
shall constitute an Event of Default:




     (a) failure by the Company to pay any amount required to be paid under Section 4.2(a) hereof
with respect to principal of or premium on any Bond on the dates and at the time specified therein;
or




     (b) failure by the Company to pay any amount required to be paid under Section 4.2(a) hereof
with respect to interest on any Bond on the dates and at the time specified therein; or




     (c) failure by the Company to observe and perform any covenant, condition or agreement on its
part to be observed or performed in this Agreement, other than as referred to in (a) or (b) above,
for a period of 30 days after receipt by the Company of written notice, specifying such failure and
requesting that it be remedied, given to the Company by the Issuer (with a copy to the Trustee) or
the Trustee, unless the Issuer and the Trustee shall agree in writing to an extension of such time
prior to its expiration; provided, however, if the failure stated in the notice can be corrected
but not within such 30-day period, no Event of Default shall have occurred if corrective action is
instituted by the Company within such period and diligently pursued until the default is corrected;
or




     (d) the dissolution or liquidation of the Company or the filing by the Company of a voluntary
petition in bankruptcy, or failure by the Company promptly to cause to be lifted any execution,
garnishment or attachment of such consequence as will impair the Company’s ability to carry on its
obligations hereunder, or the commission by the Company of any act of bankruptcy, or adjudication
of the Company as a bankrupt, or if a petition or answer proposing the adjudication of the Company
as a bankrupt or its reorganization, arrangement or debt readjustment under any present or future
federal bankruptcy act or any similar federal or state law shall be filed in any court and such
petition or answer shall not be discharged or denied within ninety days after the filing thereof,
or if the Company shall admit in writing its inability to pay its debts generally as they become
due, or a receiver, trustee or liquidator of the Company shall be appointed in any proceeding
brought against the Company and shall not be discharged within ninety days after such appointment
or if the Company shall consent to or acquiesce in such appointment, or assignment by the Company
for the benefit of its creditors, or the entry by the Company into an agreement of composition with
its creditors, or a bankruptcy, insolvency or similar proceeding shall be otherwise initiated by or
against the Company under any applicable bankruptcy, reorganization or analogous law as now or
hereafter in effect and if initiated against the Company shall remain undismissed (subject to no
further appeal) for a period of ninety days; provided, the term “dissolution or liquidation of the
Company,” as used in this subsection, shall not be construed to include the cessation of the
existence of the Company resulting either from a merger or consolidation




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of the Company into or with another entity or a dissolution or liquidation of the Company following
a transfer of all or substantially all of its assets as an entirety or under the conditions
permitting such actions contained in Section 5.1 hereof; or




     (e) the occurrence of an “event of default” under the Indenture.



     Section 6.2. Remedies. Whenever any Event of Default shall have happened and is subsisting,
the Trustee may take any one or more of the following remedial steps, subject to Article IX of the
Indenture:




     (a) By notice in writing to the Company, declare the unpaid loan repayment installments
payable under Section 4.2(a) of this Agreement to be due and payable immediately, if concurrently
with or prior to such notice the unpaid principal amount of the Bonds has become or has been
declared to be due and payable under the Indenture, and upon any such declaration under this
Section 6.2(a) the amounts payable under Section 4.2(a) hereof shall become and shall be
immediately due and payable in the amount set forth in Section 8.2 of the Indenture; provided,
however, that an Event of Default shall be deemed waived and a declaration accelerating payment of
unpaid loan repayment installments payable under Section 4.2(a) of this Agreement shall be deemed
rescinded without further action on the part of the Trustee or the Issuer upon any rescission by
the Trustee of the corresponding declaration of acceleration of the Bonds under Section 8.11 of the
Indenture. The Trustee shall as soon as possible after any such declaration provide the Company
with written notice thereof.




     (b) Whatever action at law or in equity may appear necessary or desirable to collect the
payments and other amounts then due or to enforce performance and observance of any obligation,
agreement or covenant of the Company under this Agreement.



       In case the Trustee shall have proceeded to enforce its rights under this Agreement and such
proceedings 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 Company and the Trustee shall
be restored respectively to their several positions and rights hereunder, and all rights, remedies
and powers of the Issuer, the Company and the Trustee shall continue as though no such proceeding
had been taken.



     Section 6.3. Agreement to Pay Attorneys’ Fees and Expenses. In the event the Company should
default under any of the provisions of this Agreement and the Issuer or the Trustee should employ
attorneys or incur other expenses for the collection of the payments due under this Agreement or
the enforcement of performance or observance of any obligation or agreement on the part of the
Company herein contained, the Company agrees that it will on demand therefor pay to the Issuer or
the Trustee the reasonable fees and expenses of such attorneys and such other reasonable expenses
so incurred by the Issuer or the Trustee.



     Section 6.4. No Remedy Exclusive. No remedy herein conferred upon or reserved to the Trustee
is intended to be exclusive of any other available remedy or remedies, but each and




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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, except that the
remedy of acceleration shall be exercised only in the manner set forth in Section 6.2(a) hereof. 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. Such rights and remedies as
are given the Trustee hereunder are also for the benefit of the Issuer and the owners of the Bonds,
and the Issuer and the owners of the Bonds shall be deemed third party beneficiaries of all
covenants and agreements herein contained. In order to entitle the Trustee to exercise any remedy
reserved to it in this Article, it shall not be necessary to give any notice, other than such
notice as may be herein expressly required.




     Section 6.5. No Additional Waiver Implied by One Waiver. In the event any agreement contained
in this Agreement should be breached by the Company and thereafter waived by the Trustee, such
waiver shall be limited to the particular breach so waived and shall not be deemed to waive any
other breach hereunder.



Article VII




Optional and Mandatory Prepayment



     Section 7.1. Obligation to Prepay Installments. The Company shall have the obligation to
prepay installments payable hereunder in whole (or in the case of the event stated in (b) of this
Section 7.1 in whole or in part), if any of the following shall have occurred:




     (a) As a result of any changes in the Constitution of the State or the Constitution of the
United States of America or by legislative or administrative action (whether state or federal) or
by final decree, judgment or order of any court or administrative body (whether state or federal)
this Agreement shall have become void or unenforceable or impossible of performance in accordance
with the intent and purposes of the parties as expressed in this Agreement; or




     (b) Proceeds of the Bonds, including income from the investment thereof, shall
remain after completion of the Project and the payment of the Cost of the Project.



     In case of the event stated in Section 7.1(b) hereof, the Company agrees it will fulfill its
obligation and prepay within 180 days after the Company has notice or actual knowledge of such
event.



     Section 7.2. Option to Prepay Installments. The Company shall have the option to prepay the
installments payable hereunder in whole, but not in part, if any of the following shall have
occurred:




     (a) The Project or the Plant shall have been damaged or destroyed (in whole or in part) by
fire or other casualty to such extent that in the opinion of the Company it is not practicable or
desirable to rebuild, repair or restore the Project or the Plant; or



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     (b) Title to, or the temporary use of, all or substantially all the Project or the Plant shall
have been taken under the exercise of the power of eminent domain by any governmental authority, or
person, firm or corporation acting under governmental authority.



     Section 7.3. Amount of Prepayment in Certain Events. To fulfill the obligation set forth in
Section 7.1 hereof or to exercise an option granted in Section 7.2 or 7.4 hereof, the Company shall
give written notice to the Issuer and to the Trustee as provided in Section 7.5 hereof. Such notice
shall specify the date for the prepayment of the installments which shall be on or before the
redemption date for the Bonds (the date for redemption of the Bonds being hereinafter called the
“Redemption Date”).



     The amount payable by the Company in the event of its exercise of the obligation set forth in
Section 7.1(a) hereof and the option granted in Section 7.2 hereof to prepay installments in whole
shall be the sum of the following:




     (1) an amount of money which, when added to the amount then on deposit in the Bond Fund, will
be sufficient to redeem (or when invested in Governmental Obligations in which such money is
required to be invested will without reinvestment mature as to principal and interest, if any, at
times and in amounts sufficient to redeem) the outstanding Bonds on the Redemption Date, which
amount shall consist of the principal amount thereof, all interest accrued and to accrue to the
Redemption Date and expenses incurred or to be incurred in connection with the prepayment of
installments and the redemption of the Bonds,




     (2) an amount of money equal to the Trustee’s fees and expenses under the Indenture accrued
and to accrue until the Redemption Date, and




     (3) an amount of money sufficient to discharge all other liabilities of the Company accrued
under this Agreement.



     Upon the occurrence of the event stated in Section 7.1(b) hereof, the amount payable by the
Company hereunder will be an amount which, together with the amount then remaining on deposit in
the Construction Fund and available for such purpose, will be sufficient to redeem (or when
invested in Governmental Obligations in which such money is required to be invested will without
reinvestment mature as to principal and interest, if any, at times and in amounts sufficient to
redeem) the Bonds or portions thereof (in Authorized Denominations) to be redeemed on the
Redemption Date, which amount shall consist of the principal amount thereof, all interest accrued
and to accrue thereon to said Redemption Date, and expenses incurred or to be incurred in
connection with such prepayment of installments and such redemption of Bonds.



     Section 7.4. Option to Prepay Installments for Optional Redemption of Bonds. The Company shall
have, and is hereby granted, the option to prepay from time to time installments under this
Agreement in the manner, from the sources and on the dates specified in Section 3.1(a) of the
Indenture and at prices sufficient to redeem (or when invested in Governmental Obligations in which
such money is required to be invested will without




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reinvestment mature as to principal and interest, if any, at times and in amounts sufficient to
redeem) all or part of the Bonds in Authorized Denominations in accordance with the provisions of
the Indenture.




     Section 7.5. Notice of Prepayment. To exercise an option granted in or an obligation required
by this Article VII, the Company shall give written notice to the Issuer and the Trustee not less
than 45 days prior to the Redemption Date (or such later date as is acceptable to the Issuer and
the Trustee) which shall specify therein the amount of such prepayment, the provisions of this
Agreement permitting or requiring such prepayment and the date upon which such prepayment will be
made, which date shall be not later than the Redemption Date, together with such other information,
if any, as shall be reasonably necessary in order to enable the Trustee to call Bonds for
redemption under the applicable provisions of the Indenture. In the Indenture the Issuer will
forthwith take all steps necessary under the applicable provisions of the Indenture to effect
redemption of all or part of the then outstanding Bonds, as may be the case, under applicable
provisions of the Indenture.



     Section 7.6. Redemption of Bonds With Prepayment Moneys. By virtue of the assignment of the
rights of the Issuer under this Agreement to the Trustee as provided in Section 4.4 hereof, the
Company agrees to and shall pay any amount required or permitted to be paid by it under this
Article VII directly to the Trustee. The Trustee shall use the moneys so paid to it by the Company
to redeem (directly or through the application of maturing principal and interest, if any, of
Governmental Obligations in which such moneys are required to be invested) the Bonds on the date
set for such redemption pursuant to Sections 7.3 and 7.5 hereof.



Article VIII




Miscellaneous



     Section 8.1. Notices. Unless otherwise specifically provided, all notices, certificates or
other communications shall be sufficiently given if in writing and shall be deemed given: (i) three
days after the same are deposited in the United States mail and sent by registered or certified
mail, return receipt requested, or (ii) when the same are delivered by hand, or (iii) when the same
are sent by confirmed facsimile transmission, or (iv) on the next Business Day when the same are
sent by overnight delivery service (with the signature of the receiving party required), in each
case to the parties at the addresses set forth below: if to the Issuer, to Mississippi Business
Finance Corporation, Department of Economic and Community Development, Corner of President and
High, Sillers Building — 13th Floor, P.O. Box 849, Jackson, Mississippi 39205, or Telecopy Number
(601) 359-2832, Attention: Executive Director; if to the Trustee, to The First National Bank of
Chicago, One First National Plaza, Chicago, Illinois 60670, or Telecopy No. (312) 407-1708,
Attention: Corporate Trust Services Division, Suite 0126; if to the Company, to Ingalls
Shipbuilding, Inc., 1000 Litton Access Road, Pascagoula, Mississippi 39567, or Telecopy Number
(228) 935-4864, Attention: Division Counsel, with a copy to the Guarantor at the address stated
below; if to the Guarantor, to Litton Industries, Inc., 21240 Burbank Boulevard, Woodland Hills,
California 91367, or Telecopy Number (818) 598-2025, Attention: General Counsel. A duplicate copy of
each notice, certificate or other communication given hereunder by either the Issuer or the Company
shall




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also be
given to the Trustee. The Issuer, the Company and the Trustee may, by written notice
given hereunder, designate any further or different addresses to which subsequent notices,
certificates or other communications shall be sent.




     Section 8.2. Assignments. This Agreement may not be assigned by either party without consent
of the other and the Trustee, except that the Issuer shall assign to the Trustee certain of its
rights under this Agreement as provided by Section 4.4 hereof and the Company may assign to any
transferee or any surviving or resulting entity its rights under this Agreement as provided by
Section 5.1 hereof.



     Section 8.3. Severability. If any provision of this Agreement shall be held or deemed to be or
shall, in fact, be illegal, inoperative or unenforceable, the same shall not affect any other
provision or provisions herein contained or render the same invalid, inoperative or unenforceable
to any extent whatever.



     Section 8.4. Execution of Counterparts. This Agreement may be simultaneously executed in
several counterparts, each of which shall be an original and all of which shall constitute but one
and the same instrument.



     Section 8.5. Amounts Remaining in Any Fund With the Trustee. It is agreed by the parties
hereto that after payment in full of (i) the principal of, premium, if any, and interest on the
Bonds (or provision for the payment thereof having been made in accordance with the provisions of
the Indenture), (ii) the fees, charges and expenses of the Issuer and the Trustee in accordance
with this Agreement and the Indenture and (iii) all other amounts required to be paid under this
Agreement and the Indenture, any amounts remaining in any fund or accounts maintained under this
Agreement or the Indenture and not applied to the payments of the above in accordance with the
provisions of this Agreement and the Indenture shall belong to and be paid to the Company by the
Trustee as an overpayment of loan repayment installments upon receipt of a written request from the
Company.



     Section 8.6. Amendments, Changes and Modifications. Except as otherwise provided in this
Agreement or the Indenture, subsequent to the issuance of Bonds and prior to their payment in full
(or provision for payment thereof having been made in accordance with the provisions of the
Indenture), this Agreement may not be effectively amended, changed, modified, altered or terminated
without the written consent of the Trustee and only in accordance with the provisions of Article XI
of the Indenture.



     Section 8.7. Governing Law. This Agreement shall be governed exclusively by and construed in
accordance with the applicable laws of the State.



     Section 8.8. Authorized Representatives. Whenever under the provisions of this Agreement the
approval of the Company is required or the Issuer or the Trustee is required to take some action at
the request of the Company, such approval or such request shall be given for the Company by an
Authorized Company Representative, and the Issuer and the Trustee shall be authorized to act on any
such approval or request and neither party hereto shall have any complaint against the other or
against the Trustee as a result of any such action taken. Whenever







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under the provisions of this Agreement the approval of the Issuer is required or the Company or the
Trustee is required to take some action at the request of the Issuer, such approval or such request
shall be given for the Issuer by an Authorized Issuer Representative, and the Company and the
Trustee shall be authorized to act on any such approval or request and neither party hereto shall
have any complaint against the other or against the Trustee as a result of any such action taken.




     Section 8.9. Term of the Agreement. The term of this Agreement shall commence as of the date
hereof and, unless sooner terminated as provided in this Agreement, shall expire on the date that
all of the Bonds and all fees, indemnities, expenses and charges of the Issuer and the Trustee have
been fully paid or provision made for such payment.



     Section 8.10. Binding Effect. This Agreement shall inure to the benefit of and shall be
binding upon the Issuer, the Company and their respective successors and assigns; subject, however,
to the limitations contained in Sections 4.4, 5.1 and 8.2 hereof.



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     In
Witness Whereof, the Mississippi Business Finance Corporation and Ingalls
Shipbuilding, Inc. have caused this Agreement to be executed in their respective names and attested
by their duly authorized officers and have caused their corporate seals to be affixed hereto, all
as of the date first above written.



	 	 	 	 	 	 	 

	 	 	Mississippi
Business Finance Corporation	 	 
	 
	 	 	 	 	 	 
	 

	 	

By
	 	
 

	 	 
	 

	 	 	 	Executive Director	 	 











(Seal)




Attest:




	 	 	 	 	 

	
By

	 	
 

Secretary
	 	 






	 	 	 	 	 	 	 
	 	 	Ingalls Shipbuilding, Inc.	 	 
	 
	 	 	 	 	 	 
	 

	 	By	 		 	 
	 

	 	 	 	 
       Treasurer
	 	 






(Seal)




Attest:




	 	 	 	 	 

	By
	 		 	 
	 

	 	 

Assistant Secretary
	 	 






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Exhibit A




Description of Project



     Port facilities at the shipbuilding complex of Ingalls Shipbuilding, Inc. in Jackson County,
Mississippi, in the following areas:



Pontoon Expansion




Land Improvements




Production Buildings and Support




Equipment Improvements




Pontoon