Exhibit 10.6
United Air Lines, Inc.
1670-06 Page 1
1670-06
July 12, 1996
United Air Lines Inc.
P.O. Box 66100
Chicago, Illinois 60666
Subject: Letter Agreement No. 1670-06 to
Purchase Agreement No. 1670-
[*CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY
WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT
TO A REQUEST FOR CONFIDENTIAL TREATMENT]
Reference is made to Purchase Agreement No. 1670 dated December
18, 1990 between The Boeing Company (Boeing) and United Air
Lines, Inc. (Buyer) (the Purchase Agreement) relating to the sale
by Boeing and the purchase by Buyer of thirty-nine (39) Model 747-
422 aircraft (the Aircraft).
All terms used herein and in the Purchase Agreement, and not
defined herein, shall have the same meaning as in the Purchase
Agreement.
[*CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT] as more fully described in paragraph 2
below, for any of Buyer's Aircraft which are scheduled to deliver
[*CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT] For the purpose of this Letter Agreement
such Aircraft are referred to as "Eligible Aircraft."
All escalation calculations under this Letter Agreement,
including rounding, will be made in accordance with Exhibit D to
the Purchase Agreement entitled "Price Adjustment Due to Economic
Fluctuations - Airframe Price Adjustment" (hereinafter referred
to as "Exhibit D"), using actual escalation indices published for
the applicable period.
[*CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT]
United Air Lines, Inc.
1670-06 Page 2
Calculation - Eligible Aircraft Delivering in 1997.
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At the time of delivery of each Eligible Aircraft
delivering in 1997, Boeing will issue to Buyer a credit
memorandum (the 1997 Credit Memorandum) which shall be applied to
the Purchase Price of such Aircraft. The 1997 Credit Memorandum
shall be calculated as follows:
[*CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH
THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A REQUEST
FOR CONFIDENTIAL TREATMENT] and the escalation calculated
for the month of delivery of the 1997 Eligible Aircraft;
provided however,
[*CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH
THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A REQUEST
FOR CONFIDENTIAL TREATMENT] pursuant to the following
calculation:
At the time of the delivery of the 1997 Eligible
Aircraft, the Base Airframe Price and Special Features
prices will be escalated to a December 1996 delivery
month. The December 1996 escalated price will be
referred to in the following formula as the "December
1996 Index Amount". The 1997 Credit Memorandum for the
1997 Eligible Aircraft will not exceed an amount equal
to:
[*CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY
WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO
A REQUEST FOR CONFIDENTIAL TREATMENT]
Calculation - Eligible Aircraft Delivering in 1998.
--------------------------------------------------
At the time of delivery of each Eligible Aircraft
delivering in 1998, Boeing will issue to Buyer a credit
memorandum (the 1998 Credit Memorandum) which shall be applied to
the Purchase Price of such Aircraft. The 1998 Credit Memorandum
shall be the sum of:
[*CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH
THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A REQUEST
FOR CONFIDENTIAL TREATMENT]
United Air Lines, Inc.
1670-06 Page 3
[*CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH
THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A REQUEST
FOR CONFIDENTIAL TREATMENT] and the escalation calculated
for the month of delivery of the 1998 Eligible Aircraft:
provided however,
[*CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH
THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A REQUEST
FOR CONFIDENTIAL TREATMENT] pursuant to the following
calculation:
At the time of the delivery of the 1998 Eligible
Aircraft, the Base Airframe Price and Special Features
prices will be escalated to a December 1997 delivery
month. The December 1997 escalated price will be
referred to in the following formula as the "December
1997 Index Amount". The 1998 Credit Memorandum for the
1998 Eligible Aircraft will not exceed an amount equal
to:
[*CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY
WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO
A REQUEST FOR CONFIDENTIAL TREATMENT]
Eligible Aircraft Delivering after 1998.
---------------------------------------
For Eligible Aircraft delivering after the calendar
year 1998, the amount of the Credit Memorandum will be the amount
calculated pursuant to paragraph 2.2 above as if the delivery was
[*CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT] This credit memorandum amount will be
escalated from December 1998 to the month of delivery.
Advance Payment Base Price.
--------------------------
It is agreed that the Advance Payment Base Prices for the
Eligible Aircraft, set forth in Article 5.1 of the Purchase
Agreement [*CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY
WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A REQUEST
FOR CONFIDENTIAL TREATMENT] pursuant to this Letter Agreement.
United Air Lines, Inc.
1670-06 Page 4
Incorporation Point.
-------------------
The revised Advance Payment Base Prices specified in
paragraph 3.1 will be used for all payments due to Boeing after
the date of this Letter Agreement. Boeing will review the
advance payments made prior to the date of this Letter Agreement
and determine if there is an excess. Any excess will be deducted
from the next advance payment due to Boeing.
Escalating Credits (STE).
------------------------
It is agreed that the credit memoranda specified in Letter
Agreement No. 6-1162-TML-DLJ891R1 which escalate in accordance
with Exhibit D, is expressed as a percentage of the escalated
Purchase Price of the Aircraft, will be calculated using the same
factors used to develop the adjusted airframe escalation pursuant
to this Letter Agreement.
Very truly yours,
THE BOEING COMPANY
By /s/ M. O. Hurt
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Its Attorney-In-Fact
ACCEPTED AND AGREED TO this
Date: July 12, 1996
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United Air Lines Inc.
By /s/ Douglas A. Hacker
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Its Senior Vice President and
Chief Financial Officer