EXHIBIT 10.28

 

December 29, 2004

Gerry Laderman

Senior Vice President Finance and Treasurer

Continental Airlines

1600 Smith Street

Houston, TX 77002

Dear Gerry:

Boeing Capital Corporation is pleased to present the following lease proposal
(this "Proposal") to Continental Airlines based on the following summary of
principal terms and conditions, which proposal replaces the proposal set forth
in our letter dated December 8, 2004:

1. Lessor:

Boeing Capital Corporation ("BCC") or any of its affiliates, successors or
assigns that has a net worth (determined in accordance with U.S. generally
accepted accounting principles ("GAAP")) of $

[CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND
EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT] million or
more (or whose obligations are guaranteed by an affiliate with such net worth)
or a grantor trust, that is not a commercial airline or an affiliate of a
commercial airline and is a "citizen of the United States" under the Federal
Aviation Act ("Lessor"). If BCC is not the Lessor, BCC shall guarantee all
obligations of Lessor in connection with the delivery of the Aircraft, including
Section 8 below.

2. Lessee:

Continental Airlines, Inc. ("Lessee").

3. Equipment:

Not less than eight (8) or more than twelve (12) used Boeing ("Manufacturer")
model 757-300 airframes (each an "Airframe"), each equipped with two Rolls-Royce
model RB211-535E4-C engines (the "Engines") (collectively, together with all
records, logs and manuals required by applicable Federal Aviation Regulations
("FARS"), and parts, accessories and equipment thereon or attached thereto as
delivered from the prior operator, each an "Aircraft" and collectively the
"Aircraft"). Each Airframe, Engine, auxiliary power unit ("APU"), landing gear,
or other part or accessory delivered to Lessee on the Lease Commencement Date
may be individually or collectively referred to herein as the "Equipment".

 

4. Delivery and Lease Commencement Date:

The term of each lease agreement (each a "Lease") shall commence upon delivery
of an Aircraft to Lessee ("Delivery Date"), which shall be scheduled to occur on
or about the dates listed in Schedule A hereto under the column heading "Lease
Commencement Date", with one Aircraft to be delivered approximately every two
weeks after the first Aircraft is delivered (each, a "Lease Commencement Date"),
provided that the seventh and eighth Aircraft shall be scheduled to be delivered
in January 2006, not October 2005. The anticipated Delivery Date for each
Aircraft set forth herein is an approximation only. Lessor shall use reasonable
efforts to tender delivery of the Aircraft on or before the scheduled Delivery
Date, but Lessor shall bear no liability for delivery of an Aircraft after the
anticipated Delivery Date therefor; provided, however, that if BCC is unable to
deliver one or more of the Aircraft to Lessee within

[CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND
EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT] days of
the scheduled Delivery Date, it shall notify the Lessee promptly in writing of
its inability to do so, and in such case, Lessee shall have the right to
terminate its obligation to take delivery of such Aircraft, in which case BCC
(and not the Lessee) shall be responsible for paying Boeing Commercial Airplane
Services ("BCAS") for the engineering costs incurred by BCAS in connection with
the reconfiguration of the cancelled Aircraft. Basic rent under each Lease shall
begin to accrue and be payable on the earlier to occur of (a) the first date on
which the Aircraft covered by such Lease enters Lessee's revenue service and (b)
the [CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND
EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT] day after
Lessor delivers such Aircraft under the Lease to Lessee or Lessee's designee for
modification and induction (the "Initial Rent Payment Date"); provided that no
Aircraft may be delivered prior to the date which is six months following the
earlier of (i) the date that Lessor and Lessee mutually agree that it is
reasonably certain that Lessor will be able to deliver the Aircraft to Lessee
and (ii) the date [CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR CONFIDENTIAL
TREATMENT] provided further, that no more than one Aircraft may be delivered in
any two-week period unless mutually agreed.

5. Lease Term:

The term of the Lease for each Aircraft shall begin on the Delivery Date
therefor and continue until the approximate date shown on Schedule A for such
Aircraft under the column heading "Estimated Base Lease Expiration Date" ("Base
Lease Term"). Unless Lessor receives irrevocable written notice no less than

[CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND
EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT] months
prior to expiration of the Base Lease Term for the first Aircraft to be
delivered to the effect that Lessee does not wish to renew all of the Leases,
then all the Leases will be automatically renewed for the period ending on the
approximate dates shown on Schedule A under the column heading "Renewal Term
Lease Expiration Date" ("Renewal Lease Term") (Base Lease Term plus Renewal
Lease Term, "Lease Term"). If Lessee provides the written notice mentioned above
that it does not wish to renew all the Leases, the term of the Leases shall
expire at the end of the Base Lease Term. For the avoidance of doubt, the dates
shown on Schedule A on which the Base Lease Term and Renewal Lease Term for each
Aircraft shall expire are estimated based on the expected Aircraft utilization,
anticipated check due dates and check interval for the Aircraft. To the extent
that actual utilitzation, check due dates and check intervals vary from those
anticipated, then upon no less than [CONFIDENTIAL MATERIAL OMITTED AND FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT] notice from Lessee, the Base Lease Term and Renewal
Lease Term for each Aircraft may be adjusted accordingly, subject to the
following limitations: (1) Lessee shall provide written notice to Lessor not
less than [CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR CONFIDENTIAL
TREATMENT] prior to the then scheduled expiration date of the Base Lease Term or
the Renewal Lease Term (as the case may be) of the approximate date on which the
last major check to be performed on the Aircraft prior to return shall be
performed, (2) Lessee may not unilaterally accelerate the timing of any C check
for any given Aircraft by more than [CONFIDENTIAL MATERIAL OMITTED AND FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT] and (3) the aggregate number of months in the Base Lease
Terms or Renewal Lease Terms (as the case may be) for all of the Aircraft shall
not be reduced as a result of all such adjustments.

6. Lease Rental Payments:

Commencing on the Initial Rent Payment Date and continuing during the Base Lease
Term, Lessee shall be required to make consecutive monthly lease payments of
basic rent ("Lease Rental Payments"), in advance, in the amount of

[CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND
EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT] per
Aircraft, plus an amount to be agreed equal to the cost of reconfiguring the
relevant Aircraft, not to exceed [CONFIDENTIAL MATERIAL OMITTED AND FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT] on average per Aircraft (it being understood that Lessee
will be responsible for any reconfiguration costs in excess of $[CONFIDENTIAL
MATERIAL OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT] per Aircraft on
average) plus $[CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR CONFIDENTIAL
TREATMENT] per Aircraft for the first eight Aircraft, divided by the number of
months in the Base Lease Term for such Aircraft. During the Renewal Lease Term,
Lessee shall be required to make monthly Lease Rental Payments per Aircraft in
the amount of $300,000. Provided all reconfiguration costs paid for by Lessor
(plus $125,000 per Aircraft for the first eight Aircraft) have been amortized
during the Base Lease Term, no additional payments shall be made under the
Renewal Lease Term with respect to the reconfiguration costs.

7. Delivery Location:

Each Aircraft shall be delivered to Lessee at Victorville, CA or such other
location in the continental United States as Lessor and Lessee shall mutually
agree.

8. Delivery Condition:

At Delivery, each Aircraft shall be

[CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND
EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT]

9. Inspections:

Lessee shall be permitted a reasonable

[CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND
EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT]-day
inspection of each Aircraft and a [CONFIDENTIAL MATERIAL OMITTED AND FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT]-day inspection of the Aircraft records and documents to
be completed not less than [CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY
WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT] days prior to the Delivery Date therefor (the
"Inspection") which may include, at Lessee's option, [CONFIDENTIAL MATERIAL
OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION
PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT] and an operational test flight
using Lessee's criteria conducted by Lessor or its designee not to exceed
[CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND
EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT] hours in
duration. All costs of the Inspection, other than the test flight (which shall
be paid for by [CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR CONFIDENTIAL
TREATMENT]), shall be paid by [CONFIDENTIAL MATERIAL OMITTED AND FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT]. All inspections shall be coordinated by the Lessor.
[CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND
EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT]. During
the Inspection, Lessee and Lessor shall document the condition of the Aircraft
on Delivery and incorporate a description of the condition and technical status
of the Aircraft into an aircraft delivery receipt that will be signed and
delivered under the Lease when the Aircraft is delivered. All Engines delivered
with the Aircraft shall be [CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY
WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT].

10. Title and Registration:

Lessee shall at all times cause the Aircraft to remain duly registered in the
name of the Lessor with the FAA pursuant to and as permitted by the Federal
Aviation Act, subject to (a) the Lessor continuing to be a "citizen of the
United States" (as defined in the Federal Aviation Act) and (b) the Lessor
providing to Lessee all documents and information required from them to continue
such registration. The Leases shall contain customary remedies, including the
right of the Lessor to repossess the Aircraft if an event of default has
occurred and is continuing under the Lease. In addition, the Lease documentation
shall contain a customary quiet enjoyment covenant on behalf of the Lessor and
any other financing party.

11. Maintenance:

Lessee will

(a)

Maintain the Aircraft in as good operating condition as delivered, ordinary wear
and tear excepted, and in accordance with an FAA (or equivalent) approved
maintenance program, so as to maintain the FAA standard Certificate of
Airworthiness for the Aircraft and the Aircraft's qualification for commercial
operations in accordance with Part 121of the FARs.

(b)

Maintain the Aircraft

[CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND
EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT].

(c)

In the case of any maintenance work performed on the Aircraft by a third party,
use only FAA-approved repair facilities (and Lessee will return to Lessor at the
expiration of the Lease all records from such providers that Lessee is required
to possess and maintain under the FARs as part of the Aircraft records).

(d)

Maintain all records, logs and other materials in English and in a form
consistent with FAA requirements.

12. [CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND
EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT]

13. Insurance:

Each Lease will contain insurance requirements that are substantially the same
as those contained in that certain Mortgage and Security Agreement

[CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND
EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT] dated as
of [CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND
EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT]; provided,
however, that the initial amount of coverage under the hull policy shall be
$[CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND
EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT].

14. Redelivery Conditions:

(a)

Return

: On the expiration of the Lease or upon return of the Aircraft for any other
reason, Lessee, at its own expense, shall return the Aircraft to Lessor, at such
location in the United States as designated by Lessee, in the same operating
order, repair and condition as when originally delivered to Lessee, except for
(1) ordinary wear and tear and (2) modifications performed at the induction of
the Aircraft and other modifications performed subsequent to induction in
accordance with the terms of the Lease. Upon the technical acceptance of the
Aircraft, Lessee shall ferry the Aircraft to a location in the continental
United States selected by Lessor.

(b)

Legal Status Upon Return

: Upon return, the Aircraft (i) will be free and clear of all liens and/or other
encumbrances except for "Lessor Liens" (as customarily defined), and (ii) will
be duly certificated as an airworthy aircraft by the FAA, have a currently valid
standard Certificate of Airworthiness issued by the FAA and be qualified for
operations under Part 121 of the FARs.

(c)

Replacement Engines

: If an engine not owned by Lessor is installed on the Aircraft at redelivery,
such engine shall be the same or an improved model of the Engine it replaces and
shall have a value, utility and performance at least equal to, and be in
operating condition at least as good as, the Engine it replaces, ordinary wear
and tear excepted, assuming the Engine replaced was in the condition required by
the terms of the Lease; [CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH
THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR CONFIDENTIAL
TREATMENT]. Lessee shall provide Lessor with such documentation, in form and
substance satisfactory to Lessor, and evidence as may be necessary to transfer
full and unencumbered title to such engine to the Lessor.

(d)

Records

: Lessee shall deliver to Lessor all documents, logs, manuals, and all other
records pertaining to the Aircraft, Engines, components and equipment related
thereto required to be maintained by Lessee under applicable FARs. Such
documentation shall be in English and shall be current through redelivery and
shall be furnished to Lessor at redelivery, at Lessee's expense.

(e)

Inspection

: At least [CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR CONFIDENTIAL
TREATMENT] days before redelivery of each Aircraft, Lessee shall provide a
detailed, computerized status report for such Aircraft to the Lessor, including
but not limited to AD status of the Aircraft and an installed items report.
During the C check performed immediately prior to redelivery of the Aircraft,
Lessee shall make the Aircraft and records available to Lessor for a detailed
inspection, which shall also include ground functional checks, Engine and APU
borescopes and an operational test flight of the Aircraft conducted by Lessee of
not less than [CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR CONFIDENTIAL
TREATMENT] hours using Lessee's recommended flight test procedures, as mutually
agreed by Lessee and BCC. Lessee shall correct all discrepancies which are
discovered during such inspections which exceed the limits under the Lessee's
maintenance manual at its expense. [CONFIDENTIAL MATERIAL OMITTED AND FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT].

(f)

Conditions and Life Remaining:

 i. If an Aircraft is returned at the end of the Base Lease Term, the following
    return conditions shall be satisfied:
    [CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND
    EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT]

    If an Aircraft is returned at the end of the Renewal Lease Term, the
    following return conditions shall be satisfied:
    [CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND
    EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT]
    

(g)

General Conditions on Return

:

(i) The Aircraft shall be clean by airline standards and have no deferred
maintenance items. Lessee will paint over the Lessee's logos and distinctive
markings in a workmanlike manner.

(ii) The Aircraft shall have installed the full complement of Engines and other
equipment, parts, accessories, galley inserts and loose equipment as delivered
to Lessee, excepting modifications, additions and replacements made in
accordance with the Lease, and be in a condition suitable for immediate
operation in commercial passenger service under FAR Part 121.

[CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND
EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT]

(iii) The Aircraft will be in compliance with Lessee's maintenance program,
including

[CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND
EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT]. The
Aircraft will be in compliance with all applicable FAA Airworthiness Directives
and Regulations requiring compliance [CONFIDENTIAL MATERIAL OMITTED AND FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT].

(iv) Each Engine and APU shall

[CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND
EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT].

15. Net Lease:

Each Lease will be net, whereby Lessee will be obligated to pay all costs,
charges, fees, expenses, imposts, duties and taxes (including any and all trade,
value-added, or withholding taxes) associated with the delivery of the Aircraft
to Lessee under the Lease, use, possession, control, maintenance, repair, lease,
sublease, insurance, storage or operation of the applicable Aircraft except
Lessor Taxes.

15A. Tax Matters:

To be separately negotiated by

[CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND
EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT], including
taxes that might be incurred as a result of an engine exchange or a sublease.

16. Covenants:

Lessee shall:

(a)

not assign any of its rights under the Lease without the prior written consent
of Lessor (other than in connection with a merger, consolidation or similar
transaction);

[CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND
EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT].

(b)

provide Lessor with (i) fiscal year-end audited financial statements within 120
days following the end of its fiscal year and (ii) quarterly financial
statements within 90 days after the end of each quarter during the Lease Term.
Lessee may satisfy this requirement by providing to Lessor (1) a copy of its
report on Form 10-K for such fiscal year or its report on Form 10-Q for such
fiscal quarter, as the case may be, or (2) an e-mail notice that such report has
been filed with the Securities and Exchange Commission and providing a website
address at which such report may be accessed, in each case so long as Lessee is
subject to the reporting requirements of the Securities Exchange Act of 1934.

(c)

permit Lessor or its designee at reasonable times upon reasonable notice to
inspect the Aircraft; provided, however, that such inspection shall not
unreasonably interfere with the Lessee's maintenance and use of the Aircraft,
and Lessee agrees to provide Lessor with a summary of the technical status of
the Aircraft when requested to do so by Lessor,

[CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND
EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT].

17.

[CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND
EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT]

18. Assignment:

Lessor shall have the right to transfer its entire ownership interest in an
Aircraft and the related Lease documentation to a third party on substantially
the same terms and conditions and subject to the same limitations as set forth
in Section 9.1 of that certain Participation Agreement

[CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND
EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT] dated as
of [CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND
EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT] among
Lessee, U.S. Bank Trust National Association, Lessee and BCC. In determining
whether a proposed third party transferee meets the minimum net worth
requirement contained in the definition of "Permitted Institution", net worth
shall be determined in accordance with GAAP. Lessor may also arrange third party
debt or lease-in/lease-out financing on substantially the same terms and
conditions, and subject to the same limitations as set forth in Section 9.3 of
P.A. [CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND
EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT]. Lessee
shall cooperate with Lessor in complying with reasonable documentation and
insurance/indemnity requirements.

19. Documentation:

Documentation for this transaction will be prepared by

[CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND
EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT] and will
be governed by the laws of the State of New York.

The definitive documentation will contain conditions precedent comparable to
those in recent transactions negotiated between Lessee and Lessor, such as
opinions of counsel, insurance documentation, delivery of various certificates,
inspections, government approvals (if any are required), etc. as well as
representations, warranties, indemnities, covenants, events of default, cross
default, remedies, events of loss and other provisions customary for
transactions of this nature.

20. Transaction Expenses:

[CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND
EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT]

21. Prior Disposition:

The Aircraft are subject to sale, lease or other disposition or removal from the
market without notice until Lessee returns a copy of this Proposal signed by
Lessee to Lessor and Lessor's Investment Committee approves the transaction. If
Lessee does not obtain final Board approval for this transaction prior to the
close of business on February 28, 2005, Lessee at its option may terminate its
obligation to take delivery of and lease all of the Aircraft as contemplated
hereunder by notifying Lessor in writing of its election to so terminate prior
to the start of business on March 1, 2005, in which case

[CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND
EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT]. Nothing
in this section is intended to vitiate the Lessor conditions precedent set forth
below.

In addition to Lessee's foregoing termination option, BCC hereby exercises its
unilateral right to reduce the number of Aircraft to be delivered hereunder from
12 to 8 Aircraft, as BCC has decided to keep such Aircraft on lease to the
current operator. BCC will determine which 8 Aircraft are delivered to Lessee.
BCC and Lessee shall each have the option to cause the other on

[CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND
EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT] months
notice delivered on or before [CONFIDENTIAL MATERIAL OMITTED AND FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT] to lease any of the 4 Aircraft that may subsequently
become available for lease by BCC to anyone other than the current operator, and
if BCC or Lessee exercises the foregoing option, the lease and other documents
covering such Aircraft shall be on the same terms and conditions as those set
forth herein. BCC agrees to notify Lessee promptly if any of the 4 Aircraft
subsequently become available for lease.

22. Lessor Conditions Precedent

The terms of this Proposal and obligation of Lessor to close this transaction
for any Aircraft are subject to the following:

(a)

Receipt of Lessee's signature on this Proposal no later than the close of
business (Seattle time) on December 29, 2004.

(b)

Execution and delivery of transaction documentation satisfactory in form and
substance to Lessor on or before February 28, 2005.

(c)

No event of default shall exist under any material agreement between Lessee or
any of its affiliates and Lessor or any of its affiliates.

(d)

Return of the Aircraft to Lessor by the current operator of the Aircraft.

(e)

Lessee shall not have filed a voluntary petition in bankruptcy or shall have had
an involuntary petition in bankruptcy filed against it that remains undismissed
after

[CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND
EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT] days, nor
shall the Lessee be insolvent or not be paying its debts generally as they
become due; and no event of default shall have occurred and be continuing under
any aircraft financing transaction between BCC or its affiliates and Lessee and
Lessee shall not be in default of any aircraft purchase agreement with BCC or
its affiliates.

(f)

Lessee shall have entered into Purchase Agreement No. 2484 with The Boeing
Company relating to model 7E7 aircraft.

23. Lessee Conditions

Precedent

(a)

Execution and delivery of transaction documentation satisfactory in form and
substance to Lessee on or before February 28, 2005.

(b)

Lessee shall have received the final engineering documentation to reconfigure
the Aircraft from BCAS at least two months prior to the Lease Commencement Date
for the first Aircraft to be delivered.

24.

[CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND
EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT]

NOTE: This Proposal and the above terms are subject to the approval by the
Investment Committee. The Investment Committee may (i) approve the Proposal as
written, (ii) reject the Proposal, or (iii) approve the Proposal subject to
additional terms and conditions. If either (ii) or (iii) occurs, this Proposal
as originally written shall be null and void. Continental Airlines shall be
informed of the decision of the Investment Committee and any additional
conditions or terms imposed by the Investment Committee. If the Investment
Committee seeks to impose such additional conditions or terms, Continental
Airlines may, in its sole discretion, reject them.

This Proposal, and the information set forth herein, is confidential and shall
not be disclosed by either party to any third party without the prior written
consent of the other party, except as may be required by law or compelled by
judicial process. Notwithstanding the foregoing, either party may disclose this
Proposal to its attorneys and auditors.

This Proposal shall be governed by the laws of the State of New York.

This Proposal is a summary only and is not an exhaustive discussion of the
issues arising from the proposed transaction. If the terms and conditions of
this Proposal meet with your approval, please indicate your acceptance by
signing two copies of this Proposal in the space provided below and returning
one signed copy to the undersigned. If BCC has not received Lessee acceptance of
this Proposal by December 29, 2004, this Proposal shall expire.

If you have any questions, please do not hesitate to call the undersigned at
(425) 965-4052. BCC looks forward to this opportunity to be of service to
Continental Airlines.

Best regards,

 

 

 

/s/ Jordan Weltman

Managing Director, Aircraft Financial Services

Boeing Capital Corporation

 

AGREED AND ACCEPTED:

Continental Airlines

 

 

 

By: /s/ Jeffrey J. Misner

Its: Executive Vice President and

Chief Financial Officer 

Date:                                              

 

Schedule A

 

 

#

Aircraft Number

 

MSN *

Lease

Commencement Date

Estimated Base Lease

Expiration Date

Renewal Term Lease

Expiration Date

1

[CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND
EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT]

July 1, 2005

July 2009

July 2012

2

[CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND
EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT]

3

4

5

6

7

8

   

January 15, 2006

[CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND
EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT]

9

   

TBD

10

   

TBD

11

   

TBD

12

   

TBD

August 2010

August 2013

 

* BCC will determine which aircraft are delivered to Lessee no later than
January 30, 2005.