Document:

exv10w1

Exhibit 10.1

UNITED STATES OF AMERICA

BEFORE THE

BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM

WASHINGTON, D.C.

	 	 	 

	Written Agreement by and between
	 	 
	 

	 	Docket No. 10-243-WA/RB-HC
	COMMUNITY SHORES BANK 

CORPORATION
	 	 
	Muskegon, Michigan
	 	 
	 
	 	 
	and
	 	 
	 
	 	 
	FEDERAL RESERVE BANK OF 

CHICAGO
	 	 
	Chicago, Illinois
	 	 

     WHEREAS, Community Shores Bank Corporation, Muskegon, Michigan (“Community Shores”), a
registered bank holding company, owns and controls Community Shores Bank, Muskegon, Michigan
(“Bank”), a state-chartered nonmember bank, and various nonbank subsidiaries;

     WHEREAS, it is the common goal of Community Shores and the Federal Reserve Bank of Chicago
(the “Reserve Bank”) to maintain the financial soundness of Community Shores so that Community
Shores may serve as a source of strength to the Bank;

     WHEREAS, Community Shores and the Reserve Bank have mutually agreed to enter into this Written
Agreement (the “Agreement”); and

     WHEREAS, on December 15, 2010, the board of directors of Community Shores, at a duly
constituted meeting, adopted a resolution authorizing and directing Heather D.

 

 

Brolick to enter into this Agreement on behalf of Community Shores, and consenting to
compliance with each and every provision of this Agreement by Community Shores and its
institution-affiliated parties, as defined in sections 3(u) and 8(b)(3) of the Federal Deposit
Insurance Act, as amended (the “FDI Act”)(12 U.S.C. §§ 1813(u) and 1818(b)(3)).

     NOW, THEREFORE, Community Shores and the Reserve Bank agree as follows:

Source of Strength

     1. The board of directors of Community Shores shall take appropriate steps to fully utilize
Community Shores’ financial and managerial resources, pursuant to section 225.4(a) of Regulation Y
of the Board of Governors of the Federal Reserve System (the “Board of Governors”)(12 C.F.R. §
225.4(a)), to serve as a source of strength to the Bank, including, but not limited to, taking
steps to ensure that the Bank complies with the Consent Order entered into with the Federal Deposit
Insurance Corporation (“FDIC”) and the Michigan Office of Financial and Insurance Regulation on
September 2, 2010, and any other supervisory action taken by the Bank’s federal or state regulator.

Dividends and Distributions

     2. (a) Community Shores shall not declare or pay any dividends without the prior written
approval of the Reserve Bank and the Director of the Division of Banking Supervision and Regulation
of the Board of Governors (the “Director”).

 

 

          (b) Community Shores shall not directly or indirectly take dividends or any other form of
payment representing a reduction in capital from the Bank without the prior written approval of the
Reserve Bank.

          (c) Community Shores and its nonbank subsidiaries shall not make any distributions of
interest, principal, or other sums on subordinated debentures or trust preferred securities without
the prior written approval of the Reserve Bank and the Director.

          (d) All requests for prior approval shall be received by the Reserve Bank at least 30 days
prior to the proposed dividend declaration date, proposed distribution on subordinated debentures,
or required notice of deferral on trust preferred securities. All requests shall contain, at a
minimum, current and projected information on Community Shores’ capital, earnings, and cash flow;
the Bank’s capital, asset quality, earnings, and allowance for loan and lease losses; and
identification of the sources of funds for the proposed payment. For requests to declare or pay
dividends, Community Shores must also demonstrate that the requested declaration or payment of
dividends is consistent with the Board of Governors’ Policy Statement on the Payment of Cash
Dividends by State Member Banks and Bank Holding Companies, dated November 14, 1985 (Federal
Reserve Regulatory Service, 4-877 at page 4-323).

Debt and Stock Redemption

     3. (a) Community Shores shall not, directly or indirectly, incur, increase, or guarantee any
debt without the prior written approval of the Reserve Bank. All requests for prior written
approval shall contain, but not be limited to, a statement regarding the purpose of the debt, the
terms of the debt, the planned source(s) for debt

 

 

repayment, and an analysis of the cash flow resources available to meet such debt repayment.

          (b) Community Shores shall not, directly or indirectly, purchase or redeem any shares of its
stock without the prior written approval of the Reserve Bank.

Cash Flow Projections

     4. Within 30 days of this Agreement, Community Shores shall submit to the Reserve Bank a
written statement of its planned sources and uses of cash for debt service, operating expenses, and
other purposes (“Cash Flow Projection”) for the first full calendar quarter following the date of
this Agreement. For each subsequent calendar quarter, Community Shores shall submit to the Reserve
Bank a Cash Flow Projection for that calendar quarter at least thirty days prior to the beginning
of that quarter.

Affiliate Transactions

     5. (a) Community Shores shall take all necessary actions to ensure that the Bank complies with
sections 23A and 23B of the Federal Reserve Act and Regulation W of the Board of Governors (12
C.F.R. Part 223) in all transactions between the Bank and its affiliates, including, but not
limited to, Community Shores and its nonbank subsidiaries.

          (b) Community Shores and its nonbank subsidiaries shall not cause the Bank to violate any
provision of sections 23A and 23B of the Federal Reserve Act or Regulation W of the Board of
Governors.

Compliance with Laws and Regulations

     6. (a) In appointing any new director or senior executive officer, or changing the
responsibilities of any senior executive officer so that the officer would

 

 

assume a different senior executive officer position, Community Shores shall comply with the
notice provisions of section 32 of the FDI Act (12 U.S.C. § 1831i) and Subpart H of Regulation Y of
the Board of Governors (12 C.F.R. §§ 225.71 et seq.).

          (b) Community Shores shall comply with the restrictions on indemnification and severance
payments of section 18(k) of the FDI Act (12 U.S.C. § 1828(k)) and Part 359 of the FDIC’s
regulations (12 C.F.R. Part 359).

Progress Reports

     7. Within 30 days after the end of each calendar quarter following the date of this Agreement,
the board of directors shall submit to the Reserve Bank written progress reports detailing the form
and manner of all actions taken to secure compliance with the provisions of this Agreement and the
results thereof, and a parent company only balance sheet, income statement, and, as applicable,
report of changes in stockholders’ equity.

Communications

     8. All communications regarding this Agreement shall be sent to:

	 	(a)	 	Mr. Joseph J. Turk

Assistant Vice President

Federal Reserve Bank of Chicago

230 South LaSalle Street

Chicago, Illinois 60604
	 
	 	(b)	 	Ms. Heather D. Brolick

President and CEO

Community Shores Bank Corporation

1030 West Norton Avenue

Muskegon, Michigan 49441

 

 

Miscellaneous

     9. Notwithstanding any provision of this Agreement, the Reserve Bank may, in its sole
discretion, grant written extensions of time to Community Shores to comply with any provision of
this Agreement.

     10. The provisions of this Agreement shall be binding upon Community Shores and its
institution-affiliated parties, in their capacities as such, and their successors and assigns.

     11. Each provision of this Agreement shall remain effective and enforceable until stayed,
modified, terminated, or suspended in writing by the Reserve Bank.

     12. The provisions of this Agreement shall not bar, estop, or otherwise prevent the Board of
Governors, the Reserve Bank, or any other federal or state agency from taking any other action
affecting Community Shores, the Bank, any nonbank subsidiaries of Community Shores, or any of their
current or former institution-affiliated parties and their successors and assigns.

     13. Pursuant to section 50 of the FDI Act (12 U.S.C. § 1831aa), this Agreement is enforceable
by the Board of Governors under section 8 of the FDI Act (12 U.S.C. § 1818).

     IN WITNESS WHEREOF, the parties have caused this Agreement to be executed as of the 16th day
of December, 2010.

	 	 	 	 	 	 	 	 	 	 	 

	COMMUNITY SHORES BANK CORPORATION	 	 	 	FEDERAL RESERVE BANK OF CHICAGO	 	 
	 
	 	 	 	 	 	 	 	 	 	 
	By:

	 	/s/ Heather D. Brolick
	 	 	 	By:
	 	/s/ Mark H. Kawa	 	 
	 

	 	 
	 	 	 	 	 	 	 	 
	 

	 	Heather D. Brolick
	 	 	 	 	 	Mark H. Kawaexv10w10

Exhibit 10.10

 

Guaranty Agreement

From

Litton Industries, Inc. 

To

The First National Bank of Chicago, 

as Trustee

Dated as of May 1, 1999

 

 

 

GUARANTY AGREEMENT

(This Table of Contents is not a part of

this Guaranty Agreement and is only for

convenience of reference)

Table of Contents

	 	 	 	 	 	 	 
	Section	 	Heading	 	Page	 
	Section 1.	 	Guaranteed Obligations
	 	 	1	 
	Section 2.	 	Continuing Obligations
	 	 	1	 
	Section 3.	 	Guaranty of Payment
	 	 	2	 
	Section 4.	 	Obligations Unconditional
	 	 	2	 
	Section 5.	 	Waivers
	 	 	2	 
	Section 6.	 	No Set-Off
	 	 	2	 
	Section 7.	 	Books and Records; Financial Statements
	 	 	3	 
	Section 8.	 	Venue
	 	 	3	 
	Section 9.	 	Covenants and Representations
	 	 	4	 
	Section 10.	 	Guarantor to Maintain Its Corporate Existence;
Conditions under Which Exceptions Permitted
	 	 	4	 
	Section 11.	 	Restrictive Covenants
	 	 	5	 
	Section 12.	 	Events of Default
	 	 	5	 
	Section 13.	 	Successors and Assigns; Enforcement of Remedies
	 	 	7	 
	Section 14.	 	Subrogation
	 	 	7	 
	Section 15.	 	Notices
	 	 	7	 
	Section 16.	 	Miscellaneous
	 	 	7	 

 

 

     This Guaranty Agreement (the “Guaranty”), made as of May 1, 1999, by and between
Litton Industries, Inc., a Delaware corporation (the “Guarantor”), and The First
National Bank of Chicago, as Trustee (in such capacity, together with any successor or
successors in such capacity, herein called the “Trustee”):

Witnesseth

     The Mississippi Business Finance Corporation (the “Issuer”) intends to issue its Economic
Development Revenue Bonds (Ingalls Shipbuilding, Inc. Project) Taxable Series 1999A, in the
aggregate principal amount of $83,700,000 (the “Bonds”) under and pursuant to an Indenture of Trust
dated as of May 1, 1999 (the “Indenture”) between the Issuer and the Trustee. The proceeds derived
from the issuance and sale of the Bonds are to be used to finance the acquisition, construction and
installation of certain port facilities (the “Project”) at the shipbuilding complex of Ingalls
Shipbuilding, Inc., a Delaware corporation (the “Company”), in Jackson County, Mississippi. The
proceeds of the Bonds will be loaned by the Issuer to the Company pursuant to the terms of a Loan
Agreement dated as of May 1, 1999 (the “Loan Agreement”) between the Issuer and the Company.

     Now, Therefore, in consideration of the foregoing and as an inducement to the Issuer
to issue the Bonds and in further consideration of the anticipated benefits to the Guarantor, as
the owner of all of the outstanding capital stock of the Company, the Guarantor agrees as follows:

     Section 1. Guaranteed Obligations. The Guarantor hereby unconditionally guarantees to the
Trustee for the benefit of any Bondholder (as defined in the Indenture) of any of the Bonds, the
full and prompt payment of (a) the principal of and redemption premium, if any, on the Bonds when
and as the same shall become due (whether at maturity, by acceleration, call for redemption or
otherwise); (b) the interest on the Bonds when and as the same shall become due; and (c) all
amounts due or to become due from the Company under Section 4.2(a) of the Loan Agreement. In
addition, the Guarantor hereby unconditionally guarantees to the Trustee (a) for the benefit of the
Trustee, the full and prompt payment of all amounts due or to become due from the Company under
Section 4.2(b) of the Loan Agreement and (b) for the benefit of the Issuer, the full and prompt
payment of all amounts due or to become due from the Company under Sections 4.2(c), 5.2 and 6.3 of
the Loan Agreement. Such guaranteed amounts are hereinafter collectively referred to as the
“Guaranteed Obligations.”

     Section 2. Continuing Obligations. This Guaranty shall be a continuing, absolute and
unconditional Guaranty and shall remain in full force and effect until the entire principal of,
redemption premium, if any, and interest on the Bonds shall have been paid or provided for
according to the terms of the Indenture, at which time this Guaranty shall terminate and be of no
further force and effect. The Guarantor acknowledges and agrees, however, that its obligations
hereunder shall apply to and continue with respect to any amount paid to the Trustee with respect
to the Guaranteed Obligations which is subsequently recovered from the Trustee for any reason
whatsoever (including, without limitation, as a result of a bankruptcy, insolvency or fraudulent
conveyance proceeding but excluding any amounts so recovered due to any willful misconduct

 

 

or bad faith on the part of the Trustee) notwithstanding the fact that the Bonds may have been
previously paid or performed in full or this Guaranty returned, or both.

     Section 3. Guaranty of Payment. This is a guaranty of payment and not of collection, and the
Guarantor expressly waives any right to require that any action be brought against the Issuer, the
Company or any other person or to require that resort be had to any security. If there shall occur
a default by the Company under the Loan Agreement with respect to the payment of the Guaranteed
Obligations when and as the same become due, the Guarantor, upon written demand by the Trustee as
provided herein, without notice other than such demand and without the necessity of further action
by the Trustee, its successors or assigns, shall promptly and fully pay such defaulted payment. In
case of any Event of Default hereunder, the Guarantor shall pay all reasonable costs and expenses,
including reasonable attorneys’ fees and expenses, paid or incurred by the Trustee in connection
with the enforcement of the Guaranteed Obligations or the obligations of the Guarantor under this
Guaranty. All payments by the Guarantor shall be paid in lawful money of the United States of
America in immediately available funds. Each default in payment of the principal of, redemption
premium, if any, or interest on the Bonds or with respect to payments due to the Trustee or the
Issuer under Sections 4.2(b), 4.2(c), 5.2 and 6.3 of the Loan Agreement shall give rise to a
separate cause of action hereunder and separate suits may be brought hereunder as each cause of
action arises.

     Section 4. Obligations Unconditional. The obligations of the Guarantor hereunder shall be
absolute and unconditional and shall not be impaired, modified, released or limited by any
occurrence or condition whatsoever (other than upon the discharge of the lien of the Indenture in
accordance with Article VII thereof), including without limitation (a) any compromise, settlement,
release, waiver, renewal, extension, indulgence, change in, amendment to or modification of any of
the obligations and liabilities contained in the Bonds, the Indenture or the Loan Agreement, (b)
any impairment, modification, release or limitation of the liability of the Issuer or the Company,
or any other security for or guaranty of the Bonds, or any remedy for the enforcement thereof,
resulting from the operation of any present or future provision of the federal bankruptcy laws or
other statutes or from the decision of any court relating thereto, (c) the assertion or exercise by
the Issuer, its successors or assigns, or the Trustee of any rights or remedies under the
Indenture, the Loan Agreement or this Guaranty or their delay in asserting or exercising, or
failure to assert or exercise, any such rights or remedies, (d) the assignment or mortgaging or the
purported assignment or mortgaging of all or any part of the interest of the Company in the
Project, and (e) the purchase or sale of any capital stock of the Company.

     Section 5. Waivers. The Guarantor unconditionally waives notice of any of the matters referred
to in Section 4 and, prior to making payment to the Trustee hereunder, any proof of nonpayment by
the Company under the Loan Agreement with respect to any Guaranteed Obligation other than a
certificate of the Trustee (or, with respect to payments due the Issuer under Sections 4.2(c), 5.2
and 6.3 of the Loan Agreement, the Issuer) stating such nonpayment.

     Section 6. No Set-Off. No act of commission or omission of any kind or at any time upon the
part of the Trustee, with respect to any matter whatsoever shall in any way affect or impair the
rights of the Trustee to enforce any right, power or benefit of the Trustee under this Guaranty,
and no set-off, claim, reduction or diminution of any obligation or any defense of any

- 2 -

 

kind or nature which the Guarantor has or may have against the Issuer, the Company or the Trustee
or their assignees or successors shall be available to the Guarantor or against any such assignee
or successor in any suit or action brought by the Trustee or its successors or assigns to enforce
any right, power or benefit under this Guaranty. Nothing in this Guaranty shall be construed as a
waiver by the Guarantor of any rights or claims it may have against the Company or the Trustee or
the Issuer under this Guaranty or otherwise, but any recovery upon such rights and claims shall be
had from the Company or the Trustee or the Issuer separately, it being the intent of this Guaranty
that the Guarantor shall be unconditionally and absolutely obligated to perform fully all of its
obligations, agreements and covenants hereunder for the benefit of the Trustee and the Bondholders
and, with respect to the payments due the Issuer under Sections 4.2(c), 5.2 and 6.3 of the Loan
Agreement, the Issuer. It is the intention of the parties that the Issuer, its commissioners,
elected and appointed officers, officials, agents and employees shall not incur pecuniary liability
by reason of the terms of this Guaranty, the Loan Agreement or the Indenture, or by reason of the
undertakings required of the Issuer, its commissioners, elected and appointed officers, officials,
agents and employees in connection with the issuance of the Bonds, this Guaranty, the Loan
Agreement or the Indenture, the performance of any act required or requested of the Issuer, its
commissioners, elected and appointed officers, officials, agents and employees in connection with
the issuance of the Bonds, this Guaranty, the Loan Agreement or the Indenture, or in any way
arising from the transaction which this Guaranty is a part or arising in any manner in connection
with the Project, and the Guarantor hereby waives any rights or claims it may have against the
Issuer in connection therewith. Notwithstanding the above, no limitation on the Issuer’s liability,
actions, covenants, obligations, agreements or otherwise described above in this Section 6 shall
apply with respect to the Issuer’s obligation to loan the proceeds of the Bonds to the Company on
the date of their issuance pursuant to, and in accordance with the terms of, the Loan Agreement.

     Section 7. Books and Records; Financial Statements. The Guarantor shall maintain proper books of
record and account, in which entries shall be made in accordance with generally accepted accounting
principles (except where noted), consistently applied, of all its business and affairs. Within one
hundred twenty (120) days after the end of each of its fiscal years, if so requested, the Guarantor
shall furnish the Issuer and the Trustee, copies of its annual audited consolidated financial
statements, accompanied by the report of independent certified public accountants. The Guarantor
agrees to provide the Issuer and the Trustee with such other financial information and reports as
the Issuer and the Trustee may reasonably request from time to time. The information contained in
any such statements or reports shall be kept confidential by the Issuer and the Trustee, except
such disclosures as may be required by law.

     Section 8. Venue. The Guarantor agrees that any suit, action or proceeding arising out of or
relating to this Guaranty may be instituted in the State of California, at the option of the person
or entity bringing such suit, action or proceeding; and the Guarantor hereby waives any objection
to the venue of any such suit, action or proceeding, and irrevocably submits to the jurisdiction of
any such court in any such suit, action or proceeding. Nothing herein shall affect the right of the
Trustee to serve process in any other manner permitted by law or to commence legal proceedings or
otherwise proceed against the Guarantor in any other jurisdiction.

- 3 -

 

     Section 9. Covenants and Representations. The Guarantor makes the following
covenants and representations as the basis for its undertakings hereunder:

     (a) It is a corporation duly organized, and validly existing in good standing under the
laws of the State of Delaware, has the corporate power to enter into this Guaranty and to
perform its obligations hereunder, and by proper corporate action has duly authorized the
execution and delivery of this Guaranty and performance of its obligations hereunder.

     (b) The execution and delivery of this Guaranty and all documents, instruments and
certificates relating thereto and the performance of its obligations hereunder do not and will
not conflict with, or constitute a breach or result in a violation of, its articles or
incorporation or bylaws, or any material agreement or other material instrument to which it is a
party or by which it is bound or any constitutional or statutory provision or order, rule,
regulation, decree or ordinance of any court, government or governmental authority having
jurisdiction over it or its property, the violation of any of which would have a material
adverse effect upon the Guarantor’s ability to perform its obligations hereunder.

     (c) Except for the matters disclosed in the Private Offering Memorandum with respect to the
Bonds dated May 12, 1999 or in the Guarantor’s Annual Report on Form 10-K, Quarterly Reports on
Form 10-Q or Periodic Reports on Form 8-K filed with the U.S. Securities and Exchange
Commission, there are no pending or, to the best of its knowledge, threatened actions, suits,
proceedings or investigations of a legal, equitable, regulatory, administrative or legislative
nature, which could reasonably be expected to adversely affect in a material way its business or
financial condition or its ability to perform its obligations under this Guaranty.

     (d) The Guarantor hereby covenants to notify the Trustee and the Issuer immediately of the
occurrence of any Event of Default hereunder or upon becoming aware (i) that any representation
made in this Guaranty was false, misleading or incorrect when made or (ii) of a breach or
violation of any material agreement or other material instrument to which it is a party or by
which it is bound or any constitutional or statutory provision or order, rule, regulation,
decree or ordinance of any court, government or governmental authority having jurisdiction over
it or its property, in any such case to the extent such breach or violation would, in the
Guarantor’s judgment, materially adversely affect the Guarantor’s ability to perform its
obligations under Section 1 hereof.

     Section 10. Guarantor to Maintain Its Corporate Existence; Conditions under Which Exceptions
Permitted. The Guarantor agrees that during the term of this Guaranty, it will maintain its
corporate existence, will not dissolve or otherwise dispose of all or substantially all of its
assets and will not consolidate with or merge into another corporation unless the acquirer of its
assets or the corporation with which it shall consolidate or into which it shall merge shall assume
in writing all of the obligations of the Guarantor under this Guaranty.

- 4 -

 

     Any transfer of all or substantially all of the Guarantor’s assets to any of its wholly owned
direct or indirect subsidiaries, including the Company, shall not be deemed to constitute a
disposition “of all or substantially all of the Guarantor’s assets,” within the meaning of the
preceding paragraph.

     Any transfer of the Guarantor’s assets under this Section 10 shall not relieve the Guarantor
of any of its obligations under this Guaranty.

     Section 11. Restrictive Covenants. The Guarantor will not, and will not permit any Subsidiary
to, create, assume or suffer to exist any lien on any Restricted Property to secure any debt of the
Guarantor, any Subsidiary or any other person, without securing the Guarantor’s obligations under
this Guaranty equally and ratably with such debt for so long as such debt shall be so secured,
subject to certain exceptions. Exceptions consist of: (a) existing liens or liens on facilities of
corporations at the time they become Subsidiaries; (b) liens existing on facilities when acquired,
or incurred to finance the purchase price, construction or improvement thereof; (c) liens required
by contracts with, and in favor of, governmental entities; and (d) liens otherwise prohibited by
such covenant, securing indebtedness which, together with the aggregate amount of outstanding
indebtedness secured by liens otherwise prohibited by such covenant and the value of sale and
leaseback transactions, does not exceed 15% of the Guarantor’s consolidated net tangible assets
(defined as total assets less current liabilities and intangible assets).

     In addition, the Guarantor will not, and will not permit any Subsidiary to, enter into any
sale and leaseback transaction covering any Restricted Property unless (a) the Guarantor would be
entitled under the provisions described above to incur debt equal to the value of such sale and
leaseback transaction, secured by liens on the facilities to be leased, without equally and ratably
securing the Guarantor’s obligations under this Guaranty, or (b) the Guarantor, during the six
months following the effective date of such sale and leaseback transaction, applies an amount equal
to the value of such sale and leaseback transaction to the voluntary retirement of long-term
indebtedness or to the acquisition of Restricted Property.

     “Restricted Property” is defined as (a) any manufacturing facility (or portion thereof) owned
or leased by the Guarantor or any Subsidiary and located within the continental United States
which, in the opinion of the Board of Directors of the Guarantor, is of material importance to the
business of the Guarantor and its Subsidiaries taken as a whole, but no such manufacturing facility
(or portion thereof) shall be deemed of material importance if its gross book value (before
deducting accumulated depreciation) is less than 2% of the Guarantor’s consolidated net tangible
assets, or (b) any shares of capital stock or indebtedness of any Subsidiary owning any such
manufacturing facility.

     “Subsidiary” means any corporation or other entity as to which the Guarantor, or any
Subsidiary of the Guarantor, has the voting power under ordinary circumstances to elect a majority
of the board of directors or other governing body of such corporation or other entity.

     Section 12. Events of Default. Each of the following events shall be an Event of Default
hereunder:

- 5 -

 

     (a) Failure of the Guarantor to pay any Guaranteed Obligations upon receipt of demand by
the Trustee or the Issuer to the Guarantor given in accordance with Section 15.

     (b) Failure of the Guarantor to observe or perform any of the other covenants, conditions
or agreements hereunder for a period of sixty (60) days after notice (unless the Guarantor and
the Trustee and, with respect to payments due the Issuer under Sections 4.2(c), 5.2 and 6.3 of
the Loan Agreement, the Issuer shall agree in writing to an extension of such time prior to its
expiration), specifying such failure and requesting that it be remedied, given by the Trustee or
the Issuer to the Guarantor; provided, that if said default is such that it can be corrected but
cannot be corrected within the applicable period, it shall not constitute an Event of Default if
corrective action is instituted by the Guarantor within the applicable period and is diligently
pursued until the default is corrected.

     (c) The dissolution or liquidation of the Guarantor or the filing by the Guarantor of a
voluntary petition in bankruptcy, or failure by the Guarantor promptly to cause to be lifted any
execution, garnishment or attachment of such consequence as will impair the Guarantor’s ability
to carry on its obligations hereunder, or the commission by the Guarantor of any act of
bankruptcy, or adjudication of the Guarantor as a bankrupt, or if a petition or answer proposing
the adjudication of the Guarantor 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 Guarantor shall admit in writing its
inability to pay its debts generally as they become due, or a receiver, trustee or liquidator of
the Guarantor shall be appointed in any proceeding brought against the Guarantor and shall not
be discharged within ninety days after such appointment or if the Guarantor shall consent to or
acquiesce in such appointment, or assignment by the Guarantor for the benefit of its creditors,
or the entry by the Guarantor into an agreement of composition with its creditors, or a
bankruptcy, insolvency or similar proceeding shall be otherwise initiated by or against the
Guarantor under any applicable bankruptcy, reorganization or analogous law as now or hereafter
in effect and if initiated against the Guarantor shall remain undismissed (subject to no further
appeal) for a period of ninety days; provided, the term “dissolution or liquidation of the
Guarantor,” as used in this subsection, shall not be construed to include the cessation of the
existence of the Guarantor resulting either from a merger or consolidation of the Guarantor into
or with another entity or a dissolution or liquidation of the Guarantor following a transfer of
all or substantially all of its assets as an entirety or under the conditions permitting such
actions contained in Section 10 hereof.

     (d) If any representation contained in this Guaranty or any financial statement or other
information furnished to the Trustee or the Issuer in connection with this Guaranty was false or
misleading in any material respect at the time it was made or delivered.

     Whenever an Event of Default hereunder shall have happened and be continuing, (a) the Trustee in
the manner provided in the Indenture may declare the entire unpaid principal of,

- 6 -

 

redemption premium, if any, and interest on the Bonds to be immediately due and payable, and
(b) the Trustee may take whatever action at law or in equity as may appear necessary or desirable
to collect payments then due or thereafter to become due hereunder or to enforce observance or
performance of any covenant, condition or agreement of the Guarantor under this Guaranty.

     Section 13. Successors and Assigns; Enforcement of Remedies. This Guaranty shall be binding
upon the Guarantor, its successors and assigns, and all rights against the Guarantor arising under
this Guaranty shall be for the sole benefit of the Trustee and the Bondholders and, with respect to
payments due the Issuer under Sections 4.2(c), 5.2 and 6.3 of the Loan Agreement, the Issuer. The
Trustee shall be entitled to bring any suit, action or proceeding against the Guarantor for the
enforcement of any provision of this Guaranty without exhausting any other remedies which it may
have pursuant to the terms of the Bonds, the Indenture or the Loan Agreement and without resort to
any other security held by or available to the Issuer or the Trustee.

     Section 14. Subrogation. Prior to payment in full of all Guaranteed Obligations, the Guarantor
shall have no right and shall assert no right to be subrogated to any right of the Trustee or the
Issuer. No subrogation of the Guarantor shall require the Trustee to proceed against any person or
entity or to resort to any security or to take any other action of any kind as a result of
subrogation.

     Section 15. Notices. Demand for payment by the Guarantor of the amounts guaranteed hereunder
shall be made by notice in writing as provided in the next sentence. All demands, notices,
approvals, consents, requests and other communication hereunder shall be in writing addressed to
the addresses as set forth in Section 12.4 of the Indenture and shall be deemed to have been 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). The Guarantor, the Company, the Issuer and the Trustee may, by notice given hereunder,
designate any further or different addresses to which subsequent demands, notices, approvals,
consents, requests or other communications shall be sent or persons to whose attention the same
shall be directed. Any notice sent by the Issuer or the Trustee to the Guarantor, or vice versa,
shall also be sent to the Company.

     Section 16. Miscellaneous. (a) If any provision of this Guaranty shall be held invalid by any
court of competent jurisdiction, such holding shall not invalidate any other provision hereof.

     (b) This Guaranty shall be governed by and construed in accordance with the laws of the State of New
York.

     (c) This Guaranty, together with the Indenture and the Loan Agreement, expresses the entire
understanding and all agreements between the parties and may not be modified or amended except in
writing signed by the parties as described in (h) below.

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     (d) All capitalized terms not otherwise defined herein shall have the same meaning as set
forth in Article I of the Indenture.

     (e) The Guarantor consents to all the terms, covenants and conditions of the Indenture and the
Loan Agreement.

     (f) This Guaranty is necessary to promote and further the business of the Guarantor. The
assumption by the Guarantor of the obligations hereunder will result in direct financial benefits
to the Guarantor, as the owner of all of the outstanding capital stock of the Company.

     (g) This Guaranty may be executed in one or more counterparts, each of which shall constitute
an original and all of which together shall constitute but one and the same instrument.

     (h) Subject to the provisions of Article XI of the Indenture, this Guaranty may be amended,
changed, modified, altered or terminated only by written instrument executed by the Guarantor and
the Trustee and, in certain instances described in Section 11.5 of the Indenture, only with the
prior written consent of the Issuer and/or the Bondholders.

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     In Witness Whereof, the parties have caused this Guaranty to be executed by their
duly authorized representatives as of the date first above written.

	 	 	 	 	 
	 	Litton Industries, Inc.

 	 
	 	By  	/s/ Timothy G. Paulson
 	 
	 	 	Name:  	Timothy G. Paulson 	 
	 	 	Title:  	Vice President and Treasurer 	 
	 

Accepted:

The First National Bank of Chicago, as Trustee

	 	 	 	 	 	 	 

	By

	 	/s/ Leland Hauser
 

	 	 
	 

	 	Name:
	 	Leland Hauser
 

	 	 
	 

	 	Title:
	 	Assistant Vice President
 

	 	 

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