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EXHIBIT 10.4
SUPPLEMENTAL GUARANTY AGREEMENT
THIS SUPPLEMENTAL GUARANTY AGREEMENT ("the "Guaranty"), dated as of
December 30, 1993, is by and between McDonnell Douglas Corporation, a
Maryland corporation (hereinafter called the "Guarantor"), and McDonnell
Douglas Finance Corporation, a Delaware corporation (hereinafter called
"MDFC").
W I T N E S S E T H :
WHEREAS, the Guarantor has previously provided the guaranties listed
on Exhibit A hereto, covering some of the lease or financing agreements
between Continental Airlines, Inc. ("Continental") and MDFC; and
WHEREAS, the parties deem it to be in their mutual best interest to
supplement such existing guaranties in order to safeguard MDFC against a
default affecting MDFC's entire Continental portfolio;
NOW, THEREFORE, in consideration of the premises and for valuable
consideration both parties hereto hereby agree as follows:
1. Upon the occurrence of a material default by Continental under
any of the agreements between Continental (or its affiliates or trustees)
and MDFC (or its affiliates and trustees) listed on Exhibit B hereto (the
"Continental Agreements") under circumstances (such as a Continental
bankruptcy) which lead MDFC to reasonably conclude that it has incurred
or is likely to incur a loss on its Continental portfolio, MDFC shall
promptly estimate and inform Guarantor of the net fair market value,
taking into account the guaranties listed in Exhibit A, of MDFC's
interest in the Continental Agreements. Such estimate shall be
accompanied by a copy of MDFC's calculations and other pertinent
information demonstrating to MDC's reasonable satisfaction the basis
utilized by MDFC in arriving at such estimated value. If such estimated
value is less than the net asset value of the Continental Agreements on
MDFC's books, Guarantor shall, within 30 days of written demand, pay to
MDFC the full amount of such loss (the "Total Portfolio Loss"); provided,
however, that the liability of Guarantor for the Total Portfolio Loss
under this Section 1 shall be limited to an aggregate amount equal to
$15,000,000.
2. Until all the assets covered by the Continental Agreements have
been disposed of, after the end of each calendar quarter following
payment of the Total Portfolio Loss, MDFC will recalculate the Total
Portfolio Loss taking into account (a) any changes in the estimated fair
market value of MDFC's interest in any of the Continental Agreements,
(b) the amount by which any net proceeds received or receivable by MDFC
from the remarketing of any repossessed equipment covered by any
Continental Agreement (together with any proceeds of a guaranty listed on
Exhibit A with respect to such equipment) exceeds or is less than MDFC's
estimated value of such equipment incorporated in any prior calculation
of the Total Portfolio Loss and (c) any recoveries from Continental, and
furnish the Guarantor with a copy of such recalculation. Within 30 days
of receipt of any such recalculation the Guarantor shall (subject to the
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limit in Section 1) pay to MDFC the amount of any increase in the Total
Portfolio Loss or, as the case may be, MDFC shall refund to Guarantor the
amount of any decrease in the Total Portfolio Loss.
3. If no Event of Default under any Continental Agreement has
occurred and is continuing, MDFC may enter into payment deferral
arrangements with Continental without limiting Guarantor's liability
hereunder and without Guarantor's consent. If a material Event of
Default has occurred and is continuing under any Continental Agreement
which could lead to a Total Portfolio Loss, MDFC shall not consent to any
deferral arrangement with Continental without the consent of Guarantor.
If Guarantor consents to any such deferral, it shall pay MDFC the amount
of all deferred payments when such amounts would have been due but for
the granting of the deferral. Only the portion of such payments of
deferred amounts allocable to principal shall be deemed to reduce the
amount of Guarantor's total liability under Section 1.
4. The obligations hereunder of Guarantor shall remain in full
force and effect without regard to, and shall not be impaired or affected
by, (a) any bankruptcy, insolvency, reorganization, arrangement,
readjustment, composition, liquidation or the like of Continental, or
(b) any repudiation or disaffirmance of any Continental Agreement by any
trustee in bankruptcy of Continental.
5. This Guaranty shall remain in full force and effect until
payment in full of all sums payable, and the full and complete
performance and discharge of all covenants, agreements and obligations to
be performed or discharged by Guarantor hereunder; provided, however,
that this Guaranty shall terminate on March 31, 1996 unless (a) an Event
of Default which could result in a Total Portfolio Loss has occurred and
is continuing under any Continental Agreement on such date or (b) the
parties agree that MDFC's exposure on its Continental portfolio justifies
a continuation of all or a portion of this Guaranty. Guarantor agrees
that this Guaranty shall continue to be effective or shall be reinstated,
as the case may be, if any payment of any sum hereby guaranteed is
rescinded or must be otherwise restored or returned by MDFC upon the
insolvency, bankruptcy or reorganization of Continental, all as though
such payment had not been made.
6. This Guaranty contains all of the agreements of Guarantor and
MDFC in connection with the subject matter hereof and supersedes all
prior and contemporaneous agreements, understandings or inducements, oral
or written, except as expressly stated herein. Notwithstanding the
immediately preceding sentence, the guaranty agreements described in
Exhibit A shall continue in full force and effect and nothing in this
Guaranty shall be construed as limiting such guaranty agreements. The
terms of this Guaranty may not be changed orally but only by agreement in
writing, duly executed on behalf of Guarantor and MDFC.
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7. At the end of each calendar quarter commencing in 1994 and so
long as this Guaranty remains in effect, MDFC will pay to the Guarantor a
guaranty fee in an amount equal to $45,000. Such guaranty fee shall
cease to be payable at the time a payment becomes due under this
Guaranty. At the end of each calendar quarter MDFC shall have the option
to terminate or reduce the maximum coverage set forth in Section 1 of
this Guaranty (with a proportionate reduction in future guaranty fees).
Any such voluntary reduction by MDFC shall be permanent for purposes of
this Guaranty.
MCDONNELL DOUGLAS FINANCE MCDONNELL DOUGLAS CORPORATION
CORPORATION
By:___________________________ By:___________________________
Its:__________________________ Its:__________________________
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EXHIBIT "A"
TO
SUPPLEMENTAL GUARANTY AGREEMENT
GUARANTIES FROM MDC TO MDFC
COVERING LEASE AGREEMENTS BETWEEN MDFC AND CONTINENTAL:
SERIAL NO. OF REGIS. NO. OF
TYPE OF GUARANTY LEASED LEASED
AGREEMENT DATE AIRCRAFT AIRCRAFT
Deficiency 9/2/83 49127 N10801
Guaranty
Deficiency 4/4/85 49250 N17812
Guaranty
GUARANTY FROM MDC TO MDFC LOAN CORPORATION COVERING SECURED NOTE:
Guaranty from MDC to MDFC Loan Corporation, dated as of March 29,
1985, covering Continental's obligations under a secured note dated
as of March 29, 1985 relating to Aircraft N12811.
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EXHIBIT "B"
TO
SUPPLEMENTAL GUARANTY AGREEMENT
DESCRIPTION DATE PARTIES A/C SER. NO. A/C REG. NO.
------------- ------- ----------- ------------ ------------
Deferral Note Stip MDFC/ 47638 and N19504 and
6/26/91 Continental 49250 N17812
Note
7/1/92
Deferral Note Stip MDFC/ 49127, 49441 N10801,
12/22/92 Continental and 49439 N35836 and
Note N18835
10/1/93
Deferral Note Stip MDFC Loan 49265 N12811
12/22/92 Corporation/
Note First
10/1/93 Security Bank
of Utah,
National
Association
Deferral Note Stip Manufacturers 48073, 48074 N16883,
12/22/92 Hanover Trust and 49635 N16884 and
Note Company of N14839
10/1/93 California/
Continental
Restructured 4/27/93 MDFC/ N/A N/A
NY Air Spares Continental
and Note from
first Cont.
Bankruptcy
Secured Note 12/23/92 MDFC/ 49122 N92874
Continental
Secured Note 3/29/85 MDFC/Texas 49265 N12811
Air
Corporation
Finance Lease 9/2/83 MDFC/New York 49127 N10801
Airlines,
Inc.
Finance Lease 9/29/88 MDFC/ 49635 N14839
Continental
Finance Lease 4/4/85 MDFC/Texas 49250 N17812
Air
Corporation
Finance Lease 5/28/74 MDFC/Texas 47638 N19504
International
Airlines,
Inc.
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DESCRIPTION DATE PARTIES A/C SER. NO. A/C REG. NO.
------------- -------- -------------- ------------ ------------
Finance Lease 11/12/86 Manufacturer's 48073 N16883
Hanover Trust
Company of
California/
New York
Airlines,
Inc.
Finance Lease 11/12/86 Manufacturer's 48074 N16884
Hanover Trust
Company of
California/
New York
Airlines,
Inc.
Finance Lease 12/8/86 MDFC/ 49441 N35836
Continental
Amended and 7/31/91 MDFC/ 49439 N18835
Restated Continental
Lease
Agreement