1
Exhibit 10.1
Supplemental Agreement No. 5
to
Purchase Agreement No. 1810
between
The Boeing Company
and
SOUTHWEST AIRLINES CO.
Relating to Boeing Model 737-7H4 Aircraft
THIS SUPPLEMENTAL AGREEMENT, entered into as of MARCH 13, 1998, by
and between THE BOEING COMPANY, a Delaware corporation with its principal
offices in Seattle, Washington, (Boeing) and SOUTHWEST AIRLINES CO., a Texas
corporation with its principal offices in City of Dallas, State of Texas
(Buyer);
WHEREAS, the parties hereto entered into Purchase Agreement No.
1810 dated January 19, 1994, relating to Boeing Model 737-7H4 aircraft (the
Agreement) and;
WHEREAS, the parties wish to update the agreement to reflect the
acceleration of one (1) Block "L" Aircraft from March 2004 to November 2000;
NOW THEREFORE, in consideration of the mutual covenants herein
contained, the parties agree to amend the Agreement as follows:
-------------------
*** PURSUANT TO 17 CFR, 240.246-2, CONFIDENTIAL INFORMATION HAS BEEN
OMITTED AND HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO A CONFIDENTIAL TREATMENT APPLICATION FILED WITH
THE COMMISSION.
P.A. NO. 1810 SA-5-1
K/SWA
2
1. The Table of Contents of the Agreement is deleted in its entirety
and a new Table of Contents is attached hereto and incorporated into the
Agreement by this reference.
2. Article 2, entitled "Delivery, Title and Risk of Loss," paragraph
2.1, entitled "Time of Delivery," is deleted in its entirety and replaced by a
new paragraph 2.1 revised to reflect the acceleration of the Block "L" March
2004 Aircraft to November 2000. Such new pages 2-1, 2-2 and 2-3 are attached
hereto and incorporated into the Agreement by this reference.
3. Article 3, entitled "Price of Aircraft", subparagraph 3.4.1 entitled
"Advance Payment Base Price" is revised by deleting the Advance Payment Base
Price for the Block "L" March 2004 delivery position. Such new pages 3-1, 3-2,
3-3 and 3-4 are attached hereto and incorporated into the Agreement by this
reference.
4. Within three (3) business days of execution of this Supplemental
Agreement, Boeing will refund to Buyer***. Such amount reflects the difference
in advance payments due as a result of the acceleration of the March 2004 Block
"L" Aircraft to November 2000.
The Agreement will be deemed to be supplemented to the extent herein provided
and as so supplemented will continue in full force and effect.
EXECUTED IN DUPLICATE as of the day and year first above written.
THE BOEING COMPANY SOUTHWEST AIRLINES CO.
By: /S/ XXXX X. XXXXXX By: /S/ XXXX X. XXXXXX
----------------------------- ---------------------------------
Its: Attorney-In-Fact Its: Executive VP and COO
--------------------------- -------------------------------
P.A. NO. 1810 SA-5-2
K/SWA
3
Exhibit 10.1
PURCHASE AGREEMENT
between
THE BOEING COMPANY
and
Southwest Airlines Co.
Relating to Boeing Model 000-0X0 Xxxxxxxx
Xxxxxxxx Agreement Number 1810
*** PURSUANT TO 17 CFR, 240.246-2, CONFIDENTIAL INFORMATION HAS BEEN
OMITTED AND HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO A CONFIDENTIAL TREATMENT APPLICATION FILED WITH THE
COMMISSION.
P.A. No. 1810
K/SWA
4
TABLE OF CONTENTS
Page SA
Number Number
------ ------
ARTICLES
--------
1. Subject Matter of Sale.................................1-1 SA-4
2. Delivery, Title and Risk
of Loss................................................2-1 SA-5
3. Price of Aircraft......................................3-1 SA-5
4. Taxes..................................................4-1
5. Payment................................................5-1
6. Excusable Delay........................................6-1
7. Changes to the Detail
Specification..........................................7-1 SA-1
8. Federal Aviation Requirements and
Certificates and Export License........................8-1
9. Representatives, Inspection,
Flights and Test Data..................................9-1
10. Assignment, Resale or Lease............................10-1
11. Termination for Certain Events.........................11-1
12. Product Assurance; Disclaimer and
Release; Exclusion of Liabilities;
Customer Support; Indemnification
and Insurance..........................................12-1
13. Buyer Furnished Equipment and
Spare Parts............................................13-1
14. Contractual Notices and Requests.......................14-1
15. Miscellaneous..........................................15-1
P.A. No. 1810 i
K/SWA SA-5
5
TABLE OF CONTENTS
SA
Number
------
EXHIBITS
--------
A Aircraft Configuration SA-1
B Product Assurance Document SA-1
C Customer Support Document
D Price Adjustments Due to
Economic Fluctuations - Aircraft
E Buyer Furnished Equipment
Provisions Document
F Defined Terms Document
LETTER AGREEMENTS
1810-1 Waiver of Aircraft Demonstration Flight
P.A. No. 1810 ii
K/SWA SA-5
6
TABLE OF CONTENTS
SA
Number
------
RESTRICTED LETTER AGREEMENTS
----------------------------
6-1162-RLL-932 Promotional Support
6-1162-RLL-933R4 Option Aircraft XX-0
0-0000-XXX-000X0 Xxxxxxxxxx of Confidential SA-1
Information
6-1162-RLL-935R1 Performance Guarantees XX-0
0-0000-XXX-000X0 Xxxxxxx Contractual Matters XX-0
0-0000-XXX-000 Xxxxxxxxx Advance Payment Schedule
6-1162-RLL-938 ***
6-1162-RLL-939R1 Certification Flight Test Aircraft SA-1
6-1162-RLL-940R1 Training Matters SA-1
6-1162-RLL-941R1 Other Matters SA-1
6-1162-RLL-942 Open Configuration Matters
6-1162-RLL-943 Substitution Rights
0-0000-XXX-000 Xxxxxxxx Maintenance Material Cost
Protection Program
6-1162-RLL-945 Comparison of 737-7H4 and 000-0X0
Xxxxx Xxxx Xxxx
0-0000-XXX-0000X0 Additional Contractual Matters SA-4
6-1162-RLL-1856 *** SA-1
6-1162-RLL-1857 Service Ready Validation Program SA-1
Field Test
6-1162-RLL-1858R1 Escalation Matters SA-4
P.A. No. 1810 iii
K/SWA SA-5
7
TABLE OF CONTENTS CON'T
SA
Number
------
RESTRICTED LETTER AGREEMENTS
----------------------------
6-1162-RLL-2036 Amortization of Costs for
Customer Unique Changes XX-0
0-0000-XXX-0000 Xxxxxxxxxxxxxx of the Aircraft SA-1
Basic Price
6-1162-RLL-2073 Maintenance Training Matters SA-1
P.A. No. 1810 iv
K/SWA XX-0
0
XXXXXXXX AGREEMENT NO. 1810
Relating to
BOEING MODEL 737-7H4 AIRCRAFT
-------------------------
This Agreement is entered into as of January 19th 1994, by and between The
Boeing Company, a Delaware corporation, with its principal office in Seattle,
Washington (Boeing), and Southwest Airlines Co., a Texas corporation, with its
principal office in the City of Dallas, State of Texas (Buyer).
Accordingly, Boeing and Buyer agree as follows:
P.A. No. 1810 1
K/SWA
9
ARTICLE 1. Subject Matter of Sale.
1.1 The Aircraft. Subject to the terms and conditions of this
Agreement, Boeing will manufacture and deliver to Buyer and Buyer will purchase
and accept delivery from Boeing of one hundred twenty-nine (129) Boeing Model
737-7H4 aircraft (the Aircraft) manufactured in accordance with Boeing Detail
Specification D6-38808-1, dated October 30, 1996, as described in Exhibit A, as
modified from time to time in accordance with this Agreement (Detail
Specification).
1.2 Additional Goods and Services. In connection with the sale of the
Aircraft, Boeing will also provide to Buyer certain other things under this
Agreement, including data, documents, training and services, all as described
in this Agreement.
1.3 Performance Guarantees. Any performance guarantees applicable to
the Aircraft will be expressly included in this Agreement. Where performance
guarantees are included in this Agreement other than within the Detail
Specification, such guarantees will be treated as being incorporated in the
Detail Specification by this reference.
1.4 Defined Terms. For ease of use, certain terms are treated as
defined terms in this Agreement. Such terms are identified with a capital
letter and set forth and/or defined in Exhibit F.
P.A. No. 1810 1-1
K/SWA SA-4
10
ARTICLE 2. Delivery, Title and Risk of Loss.
2.1 Time of Delivery. The Aircraft will be delivered to Buyer by
Boeing, assembled and ready for flight and Buyer will accept delivery of the
Aircraft, in accordance with the following schedule:
Month and Year
of Delivery Quantity of Aircraft
-------------- --------------------
Block A Aircraft
October 1997 Two (2)
November 1997 Two (2)
Block B Aircraft
January 1998 Two (2)
February 1998 Three (3)
March 1998 Two (2)
April 1998 Two (2)
May 1998 Two (2)
June 1998 One (1)
July 1998 Two (2)
September 1998 Two (2)
Block C Aircraft
February 1999 Four (4)
May 1999 Four (4)
July 1999 Four (4)
September 1999 Four (4)
Block D Aircraft
January 2000 Four (4)
March 2000 Four (4)
July 2000 Four (4)
September 2000 Three (3)
Block E Aircraft
January 2001 Three (3)
March 2001 Three (3)
July 2001 Three (3)
September 2001 Three (3)
Block F Aircraft
October 1998 One (1)
November 1998 Two (2)
December 1998 Two (2)
P.A. No. 1810 2-1
K/SWA SA-5
11
Month and Year
of Delivery Quantity of Aircraft
-------------- --------------------
Block G Aircraft
March 1999 Two (2)
Block H Aircraft
June 1999 Two (2)
August 1999 Two (2)
September 1999 One (1)
October 1999 Two (2)
April 2000 Three (3)
October 2000 Three (3)
April 2001 Three (3)
October 2001 Three (3)
Block I Aircraft
January 2002 Four (4)
March 2002 Four (4)
April 2002 Two (2)
July 2002 Four (4)
October 2002 Four (4)
Block J Aircraft
January 2003 Four (4)
March 2003 One (1)
Block K Aircraft
April 2004 Two (2)
July 2004 Three (3)
Block L Aircraft
November 2000 Two (2)
December 0000 Xxx (1)
July 2001 One (1)
September 2001 One (1)
October 2001 One (1)
September 2002 Three (3)
September 2003 Three (3)
2.2 Notice of Target Delivery Date. Boeing will give Buyer notice of
the Target Delivery Date of the Aircraft approximately 30 days prior to the
scheduled month of delivery.
2.3 Notice of Delivery Date. If Boeing gives Buyer at least 7 days'
notice of the delivery date of the Aircraft, and an Aircraft delivery is
delayed beyond such delivery date due to the responsibility of Buyer, Buyer
will reimburse Boeing for all costs incurred by Boeing as a
P.A. No. 1810 2-2
K/SWA SA-5
12
result of such delay, including amounts for storage, insurance, Taxes,
preservation or protection of the Aircraft and interest on payments due.
2.4 Place of Delivery. The Aircraft will be delivered at an airport
facility selected by Boeing in the State of Washington, unless mutually agreed
otherwise.
2.5 Title and Risk of Loss. Title to and risk of loss of an Aircraft
will pass from Boeing to Buyer upon delivery of such Aircraft, but not prior
thereto.
2.6 Xxxx of Sale. Upon delivery of an Aircraft Boeing will deliver to
Buyer a xxxx of sale conveying good title to such Aircraft, free of all liens,
claims, charges and encumbrances of every kind whatsoever, and such other
appropriate documents of title as Buyer may reasonably request.
P.A. No. 1810 2-3
K/SWA SA-5
13
ARTICLE 3. Price of Aircraft.
3.1 Definitions.
3.1.1 Special Features are the features incorporated in Exhibit A
which have been selected by Buyer.
3.1.2 Base Aircraft Price is the Aircraft Basic Price excluding
the price of Special Features.
3.1.3 Aircraft Basic Price is comprised of the Base Aircraft
Price and the price of the Special Features.
3.1.4 Economic Price Adjustment is the adjustment to the Aircraft
Basic Price (Base Aircraft and Special Features) as calculated pursuant to
Exhibit D.
3.1.5 Aircraft Price is the total amount Buyer is to pay for the
Aircraft at the time of delivery.
3.2 Aircraft Basic Price.
The Aircraft Basic Price, expressed in July 1992 dollars, is set
forth below:
BASE SPECIAL AIRCRAFT
AIRCRAFT PRICE FEATURES BASIC PRICE
BLOCK A, B, C,
D & E AIRCRAFT *** *** ***
BLOCK F & G
AIRCRAFT *** *** ***
BLOCK H
AIRCRAFT *** *** ***
BLOCK I
AIRCRAFT *** *** ***
BLOCK J
AIRCRAFT *** *** ***
BLOCK K
AIRCRAFT *** *** ***
BLOCK L
AIRCRAFT *** *** ***
3.3 Aircraft Price. The Aircraft Price will be established at the time
of delivery of such Aircraft to Buyer and will be the sum of:
P.A. No. 1810 3-1
K/SWA SA-5
14
3.3.1 the Aircraft Basic Price, which is *** for the Block A,
B, C, D and E Aircraft, *** for the Block F and G Aircraft, *** for the Block H
Aircraft, *** for the Block I Aircraft, *** for the Block J Aircraft, *** for
the Block K Aircraft and *** for the Block L Aircraft; plus
3.3.2 the Economic Price Adjustments for the Aircraft Basic
Price, as calculated pursuant to the formulas set forth in Exhibit D (Price
Adjustments Due to Economic Fluctuations - Aircraft); plus
3.3.3 other price adjustments made pursuant to this Agreement or
other written agreements executed by Boeing and Buyer.
3.4 Advance Payment Base Price.
3.4.1 Advance Payment Base Price. For advance payment purposes,
the following estimated delivery prices of the Aircraft (Advance Payment Base
Price) have been established, using currently available forecasts of the
escalation factors used by Boeing as of the date of signing this Agreement. The
Advance Payment Base Price of each Aircraft is set forth below:
Month and Year of Advance Payment Base
Scheduled Delivery Price per Aircraft
------------------ --------------------
Block A Aircraft***
October 1997
November 1997
Block B Aircraft***
January 1998
February 1998
March 1998
April 1998
May 1998
June 1998
July 1998
September 1998
Block C Aircraft***
February 1999
May 1999
July 1999
September 1999
P.A. No. 1810 3-2
K/SWA XX-0
00
Xxxxx D Aircraft***
January 2000
March 2000
July 2000
September 2000
Block E Aircraft***
January 2001
March 2001
July 2001
September 2001
Block F Aircraft***
October 1998
November 1998
December 1998
Block G Aircraft***
March 1999
Block H Aircraft***
June 1999
August 1999
September 1999
October 1999
April 2000
October 2000
April 2001
October 2001
Block I Aircraft***
January 2002
March 2002
April 2002
July 2002
October 2002
Block J Aircraft***
January 2003
March 2003
P.A. Xx. 0000 0-0
X/XXX XX-0
00
Xxxxx X Aircraft***
April 2004
July 2004
Block L Aircraft***
November 2000
December 2000
July 2001
September 2001
October 2001
September 2002
September 2003
3.4.2 Adjustment of Advance Payment Base Prices - Long-Lead
Aircraft. For Aircraft scheduled for delivery 36 months or more after the date
of this Agreement, the Advance Payment Base Prices appearing in Article 3.4.1
will be used to determine the amount of the first advance payment to be made by
Buyer on the Aircraft. No later than 25 months before the scheduled month of
delivery of each affected Aircraft, Boeing will increase or decrease the
Advance Payment Base Price of such Aircraft as required to reflect the effects
of (i) any adjustments in the Aircraft Basic Price pursuant to this Agreement
and (ii) the then-current forecasted escalation factors used by Boeing. Boeing
will provide the adjusted Advance Payment Base Prices for each affected
Aircraft to Buyer, and the advance payment schedule will be considered amended
to substitute such adjusted Advance Payment Base Prices.
P.A. No. 1810 3-4
K/SWA SA-5
17
EXHIBIT 10.1
Supplemental Agreement No. 6
to
Purchase Agreement No. 1810
between
The Boeing Company
and
SOUTHWEST AIRLINES CO.
Relating to Boeing Model 737-7H4 Aircraft
THIS SUPPLEMENTAL AGREEMENT, entered into as of AUGUST 24, 1998, by
and between THE BOEING COMPANY, a Delaware corporation with its principal
offices in Seattle, Washington, (Boeing) and SOUTHWEST AIRLINES CO., a Texas
corporation with its principal offices in City of Dallas, State of Texas
(Buyer);
WHEREAS, the parties hereto entered into Purchase Agreement No.
1810 dated January 19, 1994, relating to Boeing Model 737-7H4 aircraft (the
Agreement) and;
WHEREAS, the parties wish to update the agreement to reflect the
acceleration of two (2) Block "L" Aircraft from September 2003 to November 1999
(1) and December 1999 (1), to update model designators for Substitute Aircraft
and to correct price adjustment language for Option Aircraft;
NOW THEREFORE, in consideration of the mutual covenants herein
contained, the parties agree to amend the Agreement as follows:
-------------------
*** PURSUANT TO 17 CFR, 240.246-2, CONFIDENTIAL INFORMATION HAS BEEN
OMITTED AND HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO A CONFIDENTIAL TREATMENT APPLICATION FILED WITH
THE COMMISSION.
P.A. NO. 1810 SA-6-1
K/SWA
18
1. The Table of Contents of the Agreement is deleted in its entirety
and a new Table of Contents is attached hereto and incorporated into the
Agreement by this reference.
2. Article 2, entitled "Delivery, Title and Risk of Loss," paragraph
2.1, entitled "Time of Delivery," is deleted in its entirety and replaced by a
new paragraph 2.1 revised to reflect the acceleration of two (2) Block "L"
September 2003 Aircraft to November 1999 (1) and December 1999 (1). Such new
pages 2-1, 2-2 and 2-3 are attached hereto and incorporated into the Agreement
by this reference.
3. Article 3, entitled "Price of Aircraft", subparagraph 3.4.1 entitled
"Advance Payment Base Price" is revised by adding the Advance Payment Base Price
for the Block "L" November 1999 and December 1999 delivery positions. Such new
pages 3-1, 3-2, 3-3 and 3-4 are attached hereto and incorporated into the
Agreement by this reference.
4. Letter Agreement No. 6-1162-RLL-933R4 entitled "Option Aircraft" is
deleted in its entirety and replaced with Letter Agreement No. 6-1162-RLL-933R5
attached hereto and incorporated herein by this reference. Article 3 entitled
"Price", Paragraph 3.2 is revised in the last sentence to change the reference
to "...paragraphs 2.3 and 3.2..." to "...paragraphs 2.2 and 3.2...". Attachment
A, Paragraph 2.2 is revised to change the title from "Price Adjustments For
Option Aircraft Delivering from March 2003 through October 2006" to "Price
Adjustments For Option Aircraft Delivering from March 2003 through December
2009". Subparagraph 2.2.2 is revised to change the reference to "...paragraph
2.3.6..." to "...paragraph 2.2.6...". Subparagraph 2.2.5 is revised in the
second sentence to change "...for options delivering in 2005 and 2006..." to
"...for options delivering in 2005 through 2009...", and in the last sentence
"... (July 1992 STE) per year or portion thereof starting in March 2003" is
changed to ".. (July 1992 STE) for Aircraft delivering in 2005 and by a maximum
of*** (July 1992 STE) per year or portion thereof starting in January 2006".
5. Letter Agreement No. 6-1162-RLL-943 entitled "Substitution Rights"
is deleted in its entirety and replaced with Letter Agreement No.
6-1162-RLL-943R1 attached
P.A. NO. 1810 SA-6-2
K/SWA
19
hereto and incorporated herein by this reference. Model designators for
Substitute Aircraft are changed in all instances from 737-400STRX to 737-800 and
from 737-500X to 737-600. Paragraph 1.1 is deleted and following paragraphs are
renumbered accordingly.
6. Concurrent with execution of this Supplemental Agreement, Buyer will
pay to Boeing***. Such amount reflects the difference in advance payments due as
a result of the acceleration of the two September 2003 Block "L" Aircraft to
November 1999 and December 1999.
The Agreement will be deemed to be supplemented to the extent herein provided
and as so supplemented will continue in full force and effect.
EXECUTED IN DUPLICATE as of the day and year first above written.
THE BOEING COMPANY SOUTHWEST AIRLINES CO.
By: /S/ XXXX X. XXXXXX By: /S/ XXXX X. XXXXXX
-------------------------------- -----------------------------
Its: Attorney-In-Fact Its: Executive VP and COO
------------------------------- ----------------------------
P.A. NO. 1810 SA-6-3
K/SWA
20
EXHIBIT 10.1
PURCHASE AGREEMENT
between
THE BOEING COMPANY
and
Southwest Airlines Co.
Relating to Boeing Model 000-0X0 Xxxxxxxx
Xxxxxxxx Agreement Number 1810
-------------------
*** PURSUANT TO 17 CFR, 240.246-2, CONFIDENTIAL INFORMATION HAS BEEN
OMITTED AND HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO A CONFIDENTIAL TREATMENT APPLICATION FILED WITH
THE COMMISSION.
P.A. NO. 1810 SA-6
K/SWA
21
TABLE OF CONTENTS
Page SA
Number Number
------ ------
ARTICLES
--------
1. Subject Matter of Sale..........................................1-1 SA-4
2. Delivery, Title and Risk
of Loss.........................................................2-1 SA-6
3. Price of Aircraft...............................................3-1 SA-6
4. Taxes...........................................................4-1
5. Payment.........................................................5-1
6. Excusable Delay.................................................6-1
7. Changes to the Detail
Specification...................................................7-1 SA-1
8. Federal Aviation Requirements and
Certificates and Export License.................................8-1
9. Representatives, Inspection,
Flights and Test Data...........................................9-1
10. Assignment, Resale or Lease....................................10-1
11. Termination for Certain Events.................................11-1
12. Product Assurance; Disclaimer and
Release; Exclusion of Liabilities;
Customer Support; Indemnification
and Insurance..................................................12-1
13. Buyer Furnished Equipment and
Spare Parts....................................................13-1
14. Contractual Notices and Requests...............................14-1
15. Miscellaneous..................................................15-1
i
P.A. XX. 0000 XX-0
X/XXX
00
TABLE OF CONTENTS
SA
Number
------
EXHIBITS
--------
A Aircraft Configuration SA-1
B Product Assurance Document SA-1
C Customer Support Document
D Price Adjustments Due to
Economic Fluctuations - Aircraft
E Buyer Furnished Equipment
Provisions Document
F Defined Terms Document
LETTER AGREEMENTS
-----------------
1810-1 Waiver of Aircraft Demonstration Flight
P.A. NO. 1810 ii
K/SWA SA-6
23
TABLE OF CONTENTS
SA
Number
------
RESTRICTED LETTER AGREEMENTS
----------------------------
6-1162-RLL-932 Promotional Support
6-1162-RLL-933R5 Option Aircraft XX-0
0-0000-XXX-000X0 Xxxxxxxxxx of Confidential SA-1
Information
6-1162-RLL-935R1 Performance Guarantees XX-0
0-0000-XXX-000X0 Xxxxxxx Contractual Matters XX-0
0-0000-XXX-000 Xxxxxxxxx Advance Payment Schedule
6-1162-RLL-938 ***
6-1162-RLL-939R1 Certification Flight Test Aircraft SA-1
6-1162-RLL-940R1 Training Matters SA-1
6-1162-RLL-941R1 Other Matters SA-1
6-1162-RLL-942 Open Configuration Matters
6-1162-RLL-943R1 Substitution Rights XX-0
0-0000-XXX-000 Xxxxxxxx Maintenance Material Cost
Protection Program
6-1162-RLL-945 Comparison of 737-7H4 and 000-0X0
Xxxxx Xxxx Xxxx
0-0000-XXX-0000X0 Additional Contractual Matters SA-4
6-1162-RLL-1856 *** SA-1
6-1162-RLL-1857 Service Ready Validation Program SA-1
Field Test
6-1162-RLL-1858R1 Escalation Matters SA-4
P.A. NO. 1810 iii
K/SWA SA-6
24
TABLE OF CONTENTS CON'T
SA
Number
------
RESTRICTED LETTER AGREEMENTS
----------------------------
6-1162-RLL-2036 Amortization of Costs for
Customer Unique Changes XX-0
0-0000-XXX-0000 Xxxxxxxxxxxxxx of the Aircraft SA-1
Basic Price
6-1162-RLL-2073 Maintenance Training Matters SA-1
P.A. NO. 1810 iv
K/SWA SA-6
25
ARTICLE 2. Delivery, Title and Risk of Loss.
2.1 Time of Delivery. The Aircraft will be delivered to Buyer by
Boeing, assembled and ready for flight and Buyer will accept delivery of the
Aircraft, in accordance with the following schedule:
Month and Year
of Delivery Quantity of Aircraft
-------------- --------------------
Block A Aircraft
October 1997 Two (2)
November 1997 Two (2)
Block B Aircraft
January 1998 Two (2)
February 1998 Three (3)
March 1998 Two (2)
April 1998 Two (2)
May 1998 Two (2)
June 1998 One (1)
July 1998 Two (2)
September 1998 Two (2)
Block C Aircraft
February 1999 Four (4)
May 1999 Four (4)
July 1999 Four (4)
September 1999 Four (4)
Block D Aircraft
January 2000 Four (4)
March 2000 Four (4)
July 2000 Four (4)
September 2000 Three (3)
Block E Aircraft
January 2001 Three (3)
March 2001 Three (3)
July 2001 Three (3)
September 2001 Three (3)
Block F Aircraft
October 1998 One (1)
November 1998 Two (2)
December 1998 Two (2)
P.A. NO. 1810 2-1
K/SWA XX-0
00
Xxxxx G Aircraft
March 1999 Two (2)
Block H Aircraft
June 1999 Two (2)
August 1999 Two (2)
September 1999 One (1)
October 1999 Two (2)
April 2000 Three (3)
October 2000 Three (3)
April 2001 Three (3)
October 2001 Three (3)
Block I Aircraft
January 2002 Four (4)
March 2002 Four (4)
April 2002 Two (2)
July 2002 Four (4)
October 2002 Four (4)
Block J Aircraft
January 2003 Four (4)
March 2003 One (1)
Block K Aircraft
April 2004 Two (2)
July 2004 Three (3)
Block L Aircraft
November 1999 One (1)
December 1999 One (1)
November 2000 Two (2)
December 0000 Xxx (1)
July 2001 One (1)
September 2001 One (1)
October 2001 One (1)
September 2002 Three (3)
September 2003 One (1)
2.2 Notice of Target Delivery Date. Boeing will give Buyer
notice of the Target Delivery Date of the Aircraft approximately 30 days prior
to the scheduled month of delivery.
2.3 Notice of Delivery Date. If Boeing gives Buyer at least 7
days' notice of the delivery date of the Aircraft, and an Aircraft delivery is
delayed beyond such delivery date due to the responsibility of Buyer, Buyer will
reimburse Boeing for all costs
P.A. NO. 1810 2-2
K/SWA SA-6
27
incurred by Boeing as a result of such delay, including amounts for storage,
insurance, Taxes, preservation or protection of the Aircraft and interest on
payments due.
2.4 Place of Delivery. The Aircraft will be delivered at an
airport facility selected by Boeing in the State of Washington, unless mutually
agreed otherwise.
2.5 Title and Risk of Loss. Title to and risk of loss of an
Aircraft will pass from Boeing to Buyer upon delivery of such Aircraft, but not
prior thereto.
2.6 Xxxx of Sale. Upon delivery of an Aircraft Boeing will
deliver to Buyer a xxxx of sale conveying good title to such Aircraft, free of
all liens, claims, charges and encumbrances of every kind whatsoever, and such
other appropriate documents of title as Buyer may reasonably request.
P.A. NO. 1810 2-3
K/SWA SA-6
28
ARTICLE 3. Price of Aircraft.
3.1 Definitions.
3.1.1 Special Features are the features incorporated
in Exhibit A which have been selected by Buyer.
3.1.2 Base Aircraft Price is the Aircraft Basic Price
excluding the price of Special Features.
3.1.3 Aircraft Basic Price is comprised of the Base
Aircraft Price and the price of the Special Features.
3.1.4 Economic Price Adjustment is the adjustment to
the Aircraft Basic Price (Base Aircraft and Special Features) as calculated
pursuant to Exhibit D.
3.1.5 Aircraft Price is the total amount Buyer is to
pay for the Aircraft at the time of delivery.
3.2 Aircraft Basic Price.
The Aircraft Basic Price, expressed in July 1992 dollars, is
set forth below:
P.A. NO. 1810 15-1
K/SWA
29
BASE SPECIAL AIRCRAFT
AIRCRAFT PRICE FEATURES BASIC PRICE
BLOCK A, B, C,
D & E AIRCRAFT *** *** ***
BLOCK F & G
AIRCRAFT *** *** ***
BLOCK H
AIRCRAFT *** *** ***
BLOCK I
AIRCRAFT *** *** ***
BLOCK J
AIRCRAFT *** *** ***
BLOCK K
AIRCRAFT *** *** ***
BLOCK L
AIRCRAFT *** *** ***
3.3 Aircraft Price. The Aircraft Price will be established at the
time of delivery of such Aircraft to Buyer and will be the sum of:
3.3.1 the Aircraft Basic Price, which is *** for the
Block A, B, C, D and E Aircraft, *** for the Block F and G Aircraft, *** for the
Block H Aircraft, *** for the Block I Aircraft, *** for the Block J Aircraft,
*** for the Block K Aircraft and *** for the Block L Aircraft; plus
3.3.2 the Economic Price Adjustments for the Aircraft
Basic Price, as calculated pursuant to the formulas set forth in Exhibit D
(Price Adjustments Due to Economic Fluctuations Aircraft); plus
3.3.3 other price adjustments made pursuant to this
Agreement or other written agreements executed by Boeing and Buyer.
3.4 Advance Payment Base Price.
3.4.1 Advance Payment Base Price. For advance payment
purposes, the following estimated delivery prices of the Aircraft (Advance
Payment Base Price) have been established, using currently available forecasts
of the escalation factors used by Boeing as of the date of signing this
Agreement. The Advance Payment Base Price of each Aircraft is set forth below:
Month and Year of Advance Payment Base
Scheduled Delivery Price per Aircraft
Block A Aircraft***
October 1997
November 1997
P.A. NO. 1810 15-2
K/SWA
30
Block B Aircraft***
January 1998
February 1998
March 1998
April 1998
May 1998
June 1998
July 1998
September 1998
Block C Aircraft***
February 1999
May 1999
July 1999
September 1999
Block D Aircraft***
January 2000
March 2000
July 2000
September 2000
Block E Aircraft***
January 2001
March 2001
July 2001
September 2001
Block F Aircraft***
October 1998
November 1998
December 1998
Block G Aircraft***
March 1999
Block H Aircraft***
June 1999
August 1999
September 1999
October 1999
April 2000
October 2000
April 2001
October 2001
P.A. NO. 1810 15-3
K/SWA
31
Block I Aircraft***
January 2002
March 2002
April 2002
July 2002
October 2002
Block J Aircraft***
January 2003
March 2003
Block K Aircraft***
April 2004
July 2004
Block L Aircraft***
November 1999
December 1999
November 2000
December 2000
July 2001
September 2001
October 2001
September 2002
September 2003
3.4.2 Adjustment of Advance Payment Base Prices -
Long-Lead Aircraft. For Aircraft scheduled for delivery 36 months or more after
the date of this Agreement, the Advance Payment Base Prices appearing in Article
3.4.1 will be used to determine the amount of the first advance payment to be
made by Buyer on the Aircraft. No later than 25 months before the scheduled
month of delivery of each affected Aircraft, Boeing will increase or decrease
the Advance Payment Base Price of such Aircraft as required to reflect the
effects of (i) any adjustments in the Aircraft Basic Price pursuant to this
Agreement and (ii) the then-current forecasted escalation factors used by
Boeing. Boeing will provide the adjusted Advance Payment Base Prices for each
affected Aircraft to Buyer, and the advance payment schedule will be considered
amended to substitute such adjusted Advance Payment Base Prices.
P.A. NO. 1810 15-4
K/SWA
32
6-1162-RLL-943R1
Southwest Airlines Co.
P.O. Box 36611 - Love Field
Xxxxxx, Xxxxx 00000
Subject: Letter Agreement No. 6-1162-RLL-943R1 to
Purchase Agreement No. 1810 -
Substitution Rights
This Letter Agreement amends Purchase Agreement No. 1810 dated as of even date
herewith (the Agreement) between The Boeing Company (Boeing) and Southwest
Airlines Co. (Buyer) relating to Model 737-7H4 aircraft (the Aircraft) and to
Letter Agreement No. 6-1162-RLL-933R5 dated even date herewith, entitled "Option
Aircraft," relating to the sale by Boeing and purchase by Buyer of sixty-two
(62) additional Model 737-7H4 aircraft (the Option Aircraft) and fifty-nine (59)
Rollover Option Aircraft (Rollover Option Aircraft).
All terms used herein and in the Agreement, and not defined herein, will have
the same meaning as in the Agreement.
1. Right of Substitution, Model 737-800, 737-600.
Buyer shall have the right to substitute in lieu of any of the Aircraft a Boeing
Model 737-800 aircraft or Model 737-600 aircraft, as the case may be,
(hereinafter referred to as the "Substitute Aircraft"), on a one-for-one basis,
subject to the following terms and conditions:
1.1 Buyer must take delivery of a minimum of twenty-five (25) 737-7H4
aircraft before substituting either the 737-800 or the 737-600. Buyer's right to
substitute is also only applicable for Substitute Aircraft delivering after
January 1, 1999.
1.2 Buyer agrees to notify Boeing that it is considering the substitution
of Aircraft provided herein as soon as possible after such substitution comes
under consideration by Buyer and the parties shall thereupon commence technical
discussions relating to configuration of the Substitute Aircraft.
------------------------
*** PURSUANT TO 17 CFR, 240.246-2, CONFIDENTIAL INFORMATION HAS BEEN OMITTED
AND HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION
PURSUANT TO A CONFIDENTIAL TREATMENT APPLICATION FILED WITH THE COMMISSION.
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1.3 In order to support the configuration of Buyer's initial Substitute
Aircraft, Buyer will provide Boeing with its written or telegraphic notice of
its election to substitute the first Substitute Aircraft twenty-four (24) months
prior to the then-current scheduled month of delivery of the aircraft for which
substitution is being made. Buyer and Boeing will define the initial Substitute
Aircraft configuration eighteen (18) months prior to delivery of the aircraft
for which substitution is being made.
1.4 For follow on Substitute Aircraft, Buyer shall provide Boeing with its
written or telegraphic notice of its election to substitute aircraft and the
parties shall execute a definitive agreement for the Substitute Aircraft no
later than eighteen (18) months prior to the then-current scheduled month of
delivery of the aircraft for which substitution is being made.
1.5 The delivery of the Substitute Aircraft shall occur during the same
general time period as the Aircraft for which substitution is being made, unless
otherwise agreed by the parties.
1.6 Promptly after receipt of notice from Buyer of its election to
substitute, Boeing shall prepare and submit to Buyer appropriate documents
amending the Agreement to reflect the manufacture and sale of such Substitute
Aircraft to Buyer.
1.7 If Boeing discontinues production of the Model 737-800 or 737-600
aircraft at any time which would affect Boeing's ability to manufacture and
deliver any Substitute Aircraft to Buyer, the parties will discuss the
substitution of other Boeing model aircraft being offered for delivery during
the delivery period of the affected Aircraft. Any such substitution shall be
subject to mutually agreeable terms and conditions, recognizing that the
delivery month of any substitute aircraft shall be subject to Boeing's then
current manufacturing capabilities and other delivery commitments.
2. Price of Substitute Aircraft.
Upon notification by Buyer of Buyers intent to substitute, Boeing will
provide the then-current price of such Substitute Aircraft to Buyer.
00
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3. Credit Memorandum - 737-800.
In consideration of Buyer's purchase of the model 737-800 Substitute
Aircraft, Boeing will issue to Buyer at the time of delivery of each
model 737-800 Substitute Aircraft a credit memorandum which may be used
by Buyer for the purchase of Boeing goods and services or applied to
the final delivery payment for the model 737-800 Substitute Aircraft
for which the credit was issued. The amount of this credit memorandum
applicable to each model 737-800 Substitute Aircraft will be *** of the
737-800 Substitute Aircraft Base Price (July 1992 STE $) ***.
4. Credit Memorandum - 737-600.
In consideration of Buyer's purchase of the model 737-600 Substitute
Aircraft, Boeing will issue to Buyer at the time of delivery of each
model 737-600 Substitute Aircraft a credit memorandum which may be used
by Buyer for the purchase of Boeing goods and services or applied to
the final delivery payment for the model 737-600 Substitute Aircraft
for which the credit was issued. The amount of this credit memorandum
applicable to each model 737-600 Substitute Aircraft will be *** of the
model 737-600 Substitute Aircraft Base Price (July 1992 STE $) ***.
5. Training Matters.
Specific reference is made to Letter Agreement No. 6-1162-RLL-940
"Training Matters" which does apply to the 737-600 substitute aircraft
but does not apply in any way to the 737-800 substitute aircraft.
6. Engine Thrust for Substitute Aircraft.
Reference is made to Exhibit A to the Agreement and specifically to
Change Request 7200XX3005 where Buyer has selected an increase in
thrust from 20,000 pounds to 22,000 pounds thrust. If Buyer exercises
its option to substitute in accordance with this Letter Agreement, the
additional thrust from 20,000 pounds will be provided free of charge to
Buyer. Buyer will be responsible for the price to increase the thrust
from 22,000 pounds to such higher thrust that Buyer selects for the
737-800.
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7. Confidential Treatment.
Buyer understands that certain commercial and financial information
contained in this Letter Agreement is considered by Boeing as
confidential. Buyer agrees that it will treat this Letter Agreement and
the information contained herein as confidential and will not, without
the prior written consent of Boeing, disclose this Letter Agreement or
any information contained herein to any other person or entity, except
as provided in Letter Agreement 6-1162-RLL-934.
Very truly yours,
THE BOEING COMPANY
By /s/ XXXX X. XXXXXX
----------------------------
Its
---------------------
ACCEPTED AND AGREED TO as of this
date: ______, 1998
Southwest Airlines Co.
By /S/ XXXX X. XXXXXX
----------------------------
Its
---------------------
P.A. No. 1810 SA-6
K/SWA
36
6-1162-RLL-933R5
Southwest Airlines Co.
P.O. Box 36611 - Love Field
Xxxxxx, Xxxxx 00000
Subject: Letter Agreement No. 6-1162-RLL-933R5 to
Purchase Agreement No. 1810 - Option Aircraft
This Letter Agreement amends Purchase Agreement No. 1810 dated as of January 19,
1994 (the Agreement) between The Boeing Company (Boeing) and Southwest Airlines
Co. (Buyer) relating to Model 737-7H4 aircraft (Aircraft).
All terms used and not defined herein will have the same meaning as in the
Agreement.
In consideration of the purchase by Buyer of the Aircraft, Boeing hereby agrees
to manufacture and sell to Buyer sixty-two (62) additional Model 737-7H4
aircraft as described in paragraph 1 of Attachment A hereto (Option Aircraft)
and fifty-nine (59) Model 737-7H4 Rollover Option Aircraft (Rollover Option
Aircraft), subject to the terms and conditions set forth below.
1. Delivery of Option Aircraft.
The Option Aircraft will be delivered to Buyer during or before the
months set forth in the following schedule:
Number of Option
Month and Year Option Aircraft
of Delivery Aircraft Block
----------- -------- --------
March 2003 Three (3) M
April 2003 Two (2) M
July 2003 Four (4) M
October 2003 Four (4) M
January 2004 Four (4) N
March 2004 One (1) N
April 2004 One (1) N
August 2004 Two (2) N
September 2004 Three (3) N
October 2004 Two (2) N
----------
*** PURSUANT TO 17 CFR, 240.246-2, CONFIDENTIAL INFORMATION HAS BEEN OMITTED AND
HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT
TO A CONFIDENTIAL TREATMENT APPLICATION FILED WITH THE COMMISSION.
P.A. Xx. 0000
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Xxxxxxxxx Xxxxxxxx Xx.
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Number of Option
Month and Year Option Aircraft
of Delivery Aircraft Block
----------- -------- --------
January 2005 Four (4) O
March 2005 Four (4) O
April 2005 Two (2) O
July 2005 Four (4) O
October 2005 Four (4) O
January 2006 Four (4) P
March 2006 Four (4) P
April 2006 Two (2) P
July 2006 Four (4) P
October 2006 Four (4) P
2. Delivery of Rollover Option Aircraft.
2.1 The Rollover Option Aircraft will be delivered to Buyer during or
before the years set forth in the following schedule:
Option
Year of Number of Aircraft
Delivery Option Aircraft Block
-------- --------------- --------
2007 Twenty (20) Q
2008 Twenty (20) R
2009 Nineteen (19) S
2.2 The fifty-nine (59) Rollover Option Aircraft are offered to Buyer
subject to the following conditions:
2.2.1 Buyer can exercise any fifty-nine (59) of the sixty-two
(62) Option Aircraft, and will be offered a Rollover Option Aircraft for each
option aircraft exercised up to and including fifty-nine (59).
2.2.2 Conversely to Article 2.2.1 above, if Buyer does not
exercise a minimum of fifty-nine (59) Option Aircraft, one Rollover Option
Aircraft will be deleted for each Option Aircraft not exercised by Buyer.
2.2.3 When Buyer exercises one or more Option Aircraft,
Boeing will offer the same quantity of Rollover Option Aircraft to Buyer in the
years identified in Article 2.1 above.
2.2.4 The Rollover Option Aircraft delivery month offered by
Boeing to Buyer will be at least 24 months from the Option exercise date of the
corresponding option.
2.2.5 When Boeing offers the Rollover Option Aircraft to
Buyer, Buyer will accept such Rollover Option Aircraft by wire transferring
$100,000 to Boeing. In the event Buyer exercises its option to purchase the
Rollover Option Aircraft, such application will be in accordance with Article
4.1 herein.
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3. Price.
3.1 The advance payment base prices of the Option Aircraft set forth
below and in paragraph 2.1 of Attachment A represent the estimated delivery
prices of the Option Aircraft. The Option Aircraft pricing elements and
associated pricing terms and conditions are given in Attachment A.
3.2 Price and escalation provisions for Model 737-7H4 aircraft
delivering after 2002, are not currently available. The estimated Advance
Payment Base Prices shown in paragraph 3.3 below and in paragraph 2.1 of
Attachment A are based on currently available price and escalation provisions.
As price and escalation provisions become available for Model 737-7H4 aircraft
delivering after 2002, such price and escalation provisions will be
appropriately applied to the applicable Option Aircraft.
For additional information relating to price and escalation provisions
applicable to Option Aircraft delivering after 2002 refer to paragraphs 2.2 and
3.2 of Attachment A.
3.3 The Advance Payment Base Prices of the Option Aircraft indicated
below do include an amount for special features in addition to those
specifically described in Attachment A but do not include any amount for items
of Buyer Furnished Equipment (BFE). An estimate for typical special features is
*** per Aircraft (expressed in 1992 STE dollars) and for BFE is *** per Aircraft
(expressed in delivery year dollars).
Month and Year Advance Payment Base
of Delivery Price per Option Aircraft
----------- -------------------------
Block M Aircraft***
March 2003
April 2003
July 2003
October 2003
Block N Aircraft***
January 2004
March 2004
April 2004
August 2004
September 2004
October 2004
Block O Aircraft***
January 2005
March 2005
April 2005
July 2005
October 2005
Block P Aircraft***
January 2006
March 2006
April 2006
July 2006
October 2006
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3.4 The Option Aircraft purchase price will be the applicable basic
price thereof at the time of Option Aircraft delivery adjusted in accordance
with Boeing's Aircraft escalation provisions contained in the definitive
agreement to purchase the Option Aircraft. The purchase price will include the
price for Seller Purchased Equipment (SPE) if Buyer has elected to change Buyer
Furnished Equipment (BFE) to SPE.
4. Option Aircraft Payment.
4.1 In consideration of the granting of the option as set forth
herein, on or before the date Boeing and Buyer enter into a definitive agreement
to purchase the Aircraft, Buyer will pay a deposit to Boeing of $100,000 for
each Option Aircraft (Deposit). In the event Buyer exercises its option herein,
the amount of the Deposit will be credited against the first advance payment due
for such Option Aircraft pursuant to the advance payment schedule set forth in
paragraph 3 of Attachment A. The Deposits for the Option Aircraft will be
refunded to Buyer, without interest, if the parties do not enter into a
definitive Agreement for the Aircraft.
In the event that, after the parties enter into a definitive agreement to
purchase the Aircraft, Buyer does not exercise its option to purchase the Option
Aircraft pursuant to the terms and conditions set forth herein, Boeing will be
entitled to retain the Deposits for the Option Aircraft except as provided in
paragraphs 6 herein.
4.2 Advance payments in the amount of 30% of the advance payment base
price will be payable on the Option Aircraft in accordance with paragraph 3 of
Attachment A. The remainder of the Option Aircraft purchase price is due at the
time of delivery of the Option Aircraft.
5. Option Exercise.
5.1 To exercise its Option, Buyer will give written or telegraphic
notice thereof to Boeing on or before eighteen (18) months prior to the first
day of the delivery month of each Option Aircraft.
In such notice Buyer will select the Option Model type, and the applicable
delivery positions.
5.2 It is understood and agreed that Boeing may accelerate the option
exercise dates specified above if Boeing must make production decisions which
are dependent on Buyer's decision to buy the Option Aircraft. If Boeing elects
to accelerate the option exercise dates, Boeing will do so by giving written or
telegraphic notice thereof to Buyer. Such notice will specify the revised option
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exercise dates, which will not be earlier than 30 days after the date of
transmittal of such notice, and the Option Aircraft delivery positions affected
by such revision. If Buyer fails to exercise its option for any Option Aircraft
affected by such revised dates, the Deposit applicable to such Option Aircraft
will be promptly refunded, with interest, to Buyer. The interest rate for
calculation of the interest associated with such refund is the rate of two
percent (2%) below the Citibank base rate in effect from time to time during the
period the option deposit is held by Boeing.
6. Contract Terms.
It is understood that Boeing and Buyer will use their best efforts to
enter into a definitive agreement for the Option Aircraft within thirty (30)
days after Buyer exercises an option to purchase Option Aircraft pursuant to
paragraph 5 covering the detailed terms and conditions for the sale of such
Option Aircraft.
Such definitive agreement will include the terms and conditions contained herein
together with the terms and conditions, not inconsistent herewith, contained in
Boeing's then-current standard form of purchase agreement for the sale of Model
737-700 aircraft in effect as of the date of option exercise and such additional
terms and conditions as may be mutually agreed upon. In the event the parties
have not entered into such an agreement within the time period contemplated
herein, either party may, exercisable by written or telegraphic notice given to
the other within thirty (30) days after such period, terminate the purchase of
such Option Aircraft.
7. Termination of Option to Purchase.
Either Boeing or Buyer may terminate the option to purchase an Option
Aircraft if any of the following events are not accomplished by the respective
dates contemplated in this letter agreement, or in the Agreement, as the case
may be:
(i) termination of the purchase of the Aircraft under the
Agreement for any reason;
(ii) payment by Buyer of the Deposit with respect to an Option
Aircraft pursuant to paragraph 4.1 herein;
(iii) exercise of an option to purchase an Option Aircraft
pursuant to the terms hereof. Any termination of an option to purchase by Boeing
which is based on the termination of the purchase of Aircraft under the
Agreement will be on a one-for-one basis, for each Aircraft so terminated.
Any cancellation of an option to purchase which is based on failure to make the
required Deposit or to exercise the option to purchase shall only apply to the
Option Aircraft so canceled.
Termination of an option to purchase provided by this letter agreement will be
caused by either party giving written notice to the other within 10 days after
the applicable date. Upon receipt of such notice, all rights and obligations of
the parties with respect to an Option Aircraft for which the option to purchase
has been terminate will thereupon terminate.
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If termination is result of a revision of an option exercise date by Boeing
pursuant to paragraph 5.2, Boeing will promptly refund to Buyer, without
interest, any payments received from Buyer, including the Deposit, with respect
to the Option Aircraft for which the option is terminated. If termination is for
any other reason, Boeing will promptly refund to Buyer, without interest, any
payments received from Buyer with respect to the affected Option Aircraft,
except the Deposit, which Buyer may apply to any model Boeing aircraft purchased
by Buyer from Boeing at a future date.
8. Confidential Treatment. Buyer understands that certain commercial and
financial information contained in this Letter Agreement including any
attachments hereto is considered by Boeing as confidential. Buyer agrees that it
will treat this Letter Agreement and the
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information contained herein as confidential and will not, without the prior
written consent of Boeing, disclose this Letter Agreement or any information
contained herein to any other person or entity except as provided in Letter
Agreement No. 6-1162-RLL-934R1.
Very truly yours,
THE BOEING COMPANY
By /S/ XXXX X. XXXXXX
----------------------------
Its ATTORNEY-IN-FACT
---------------------------
ACCEPTED AND AGREED TO this
date: AUGUST 24 , 1998
-----------
SOUTHWEST AIRLINES CO.
By /s/ XXXX X. XXXXXX
----------------------------
Its EXECUTIVE VP & COO
---------------------------
Attachments
P.A. No. 1810
K/SWA SA-6
43
Attachment A to
6-1162-RLL-933R5
Page 1
Model 737-7H4 Aircraft
1. Option Aircraft Description and Changes.
1.1 Aircraft Description. The Option Aircraft is described by Boeing
Detail Specification D6-38808-1, Dated October 30 ,1996.
1.2 Changes. The Detail Specification will be revised to include:
(1) Changes applicable to the basic Model 737-700 aircraft
which are developed by Boeing between the date of the Detail Specification and
the signing of a definitive agreement to purchase the Option Aircraft.
(2) Changes mutually agreed upon.
(3) Changes required to obtain a Standard Certificate of
Airworthiness.
(4) To provide sufficient Option Aircraft manufacturing and
procurement lead time it is necessary for Boeing and Buyer to reach final
agreement on the Option Aircraft configuration, including BFE/SPE vendor
selection fifteen (15) months prior to delivery of each Option Aircraft. If such
items are not resolved by the indicated dates, Boeing reserves the right to
amend this letter agreement:
(i) to adjust the scheduled delivery of the Option
Aircraft to a later time period and,
(ii) to make such other changes as are appropriate
and consistent with the revised Option Aircraft deliveries.
1.3 Effect of Changes. Changes to the Detail Specification
incorporated pursuant to the provisions of the clauses above will include the
effects of such changes upon Option Aircraft weight, balance, design and
performance. Performance guarantees for the Option Aircraft which are mutually
acceptable to the parties will be included in the definitive agreement for the
Option Aircraft.
P.A. No. 1810
K/SWA SA-6
44
Attachment A to
6-1162-RLL-933R5
Page 2
2. Price Description
2.1 Price Elements Per Aircraft
1 2 3
AIRCRAFT & ADV. PMT.
AIRCRAFT ESTIMATED SPECIAL ESTIMATED BASE PRICE
DELIVERY FEATURES PRICE ESTIMATED ESCALATION (Elements)
MO. & YR. (JULY 1992$) ESCALATION SHARING 1 + 2 + 3
--------- ----------------- ---------- ---------- ----------
BLOCK M
MARCH 2003 *** *** *** ***
APRIL 2003 *** *** *** ***
JULY 2003 *** *** *** ***
OCTOBER 2003 *** *** *** ***
BLOCK N
JANUARY 2004 *** *** *** ***
MARCH 2004 *** *** *** ***
APRIL 2004 *** *** *** ***
AUGUST 2004 *** *** *** ***
SEPTEMBER 2004 *** *** *** ***
OCTOBER 2004 *** *** *** ***
BLOCK O
JANUARY 2005 *** *** *** ***
MARCH 2005 *** *** *** ***
APRIL 2005 *** *** *** ***
JULY 2005 *** *** *** ***
OCTOBER 2005 *** *** *** ***
BLOCK P
JANUARY 2006 *** *** *** ***
MARCH 2006 *** *** *** ***
APRIL 2006 *** *** *** ***
JULY 2006 *** *** *** ***
OCTOBER 2006 *** *** *** ***
Continued Next Page...
P.A. No. 1810
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45
Attachment A to
6-1162-RLL-933R5
Page 3
2. Price Description. (Continued)
2.2 Price Adjustments For Option Aircraft Delivering From March
2003 through December 2009.
2.2.1 Special Features. The price for Special Features
incorporated in the Option Aircraft Detail Specification will be adjusted to
Boeing's then-current prices for such features as of the date of execution of
the definitive agreement for the Option Aircraft.
2.2.2 Escalation Adjustments. For escalation provisions applicable
to Option Aircraft delivering after 2002, see paragraph 2.2.6 below.
2.2.3 Base Price Adjustments for FAA Changes. The Aircraft Basic
Price of the Option Aircraft will be adjusted for any FAA mandated changes
incorporated into the Aircraft.
2.2.4 Price Adjustments for Changes. Boeing may adjust the
Aircraft Basic Price and the Advance Payment Base Price for any changes mutually
agreed upon subsequent to the date that Buyer and Boeing enter into a definitive
agreement for the Option Aircraft.
2.2.5 Base Price Adjustments. The Aircraft Basic Price of the
Option Aircraft will be adjusted to Boeing's then-current prices as of the date
of execution of the definitive agreement for the Option Aircraft in accordance
with the agreement reached below. The Aircraft Basic Price starting point for
options delivering in 2003 is *** (July 1992 STE), for options delivering in
2004 is *** (July 1992 STE), for options delivering in 2005 through 2009 is ***
(July 1992 STE). Such Aircraft Basic Price may increase in accordance with
paragraphs 2.2.1, 2.2.2, 2.2.3 and 2.2.4. For any other changes to the Aircraft
Basic Price, Boeing may increase the Aircraft Basic Price by a maximum of ***
(July 1992 STE) for Aircraft delivering in 2005 and by a maximum of *** (July
1992 STE) per year or portion thereof starting in January 2006.
2.2.6 Prices for Long Lead Time Aircraft. Boeing has not
established escalation provisions for Model 737-700 aircraft for delivery 2003
and after. Such escalation provisions (i) will be incorporated into the Option
Aircraft definitive agreement when such information is available and (ii) will
be the then-current escalation provisions applicable to the same model aircraft
and engines delivering in the same time period as the Option Aircraft. The
resulting revisions to the definitive agreement will include but not be limited
to, adjustment of the Aircraft Basic Price of the Option Aircraft, the Advance
Payment Base Price, the Aircraft escalation provisions and the advance payment
amounts due on the Option Aircraft.
2.2.7 BFE to SPE. An estimate of the total price for items of
Buyer Furnished Equipment (BFE) changed to Seller Purchased Equipment (SPE)
pursuant to the Configuration Specification is included in the Option Aircraft
price build-up. The purchase price of the Option Aircraft will be adjusted by
the price charged to Boeing for such items plus 10% of such price. If all BFE
except developmental avionics is converted to SPE, Boeing will waive the 10%
fee.
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Attachment A to
6-1162-RLL-933R5
Page 4
3. Advance Payment Schedules, Prices and Adjustments.
3.1 Buyer will pay to Boeing advance payments for the Option Aircraft
on the dates and in the amounts determined below.
Amount Due per Aircraft
-----------------------
(Percentage times
Due Date of Payment Advance Payment Base Price)
-------------------
Deposit $100,000 (if applicable)
18 months prior to the first 15% (less the
day of the scheduled delivery Deposit if any)
month of the Aircraft
12 months prior to the first 5%
day of the scheduled delivery
month of the Aircraft
9 months prior to the first 5%
day of the scheduled delivery
month of the Aircraft
6 months prior to the first 5%
day of the scheduled delivery
month of the Aircraft
--
Total 30%
Any advance payments that would be past due as of the date of signing the
definitive purchase agreement for the Option Aircraft in accordance with the
above schedule are due and payable on such date.
3.2 Option Aircraft advance payment base prices will be increased or
decreased, as appropriate, at the time of signing of the definitive purchase
agreement for the Option Aircraft, using the then-current forecasted aircraft
escalation factors used by Boeing, to determine the amount of the advance
payments to be made by Buyer on the Option Aircraft.
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6-1162-RLL-933R5
Page 1
PRICE ADJUSTMENT DUE TO
ECONOMIC FLUCTUATIONS
AIRCRAFT PRICE ADJUSTMENT
(July 1992 Base Price)
1. Formula.
The Aircraft Price Adjustment will be determined at the time of
Aircraft delivery in accordance with the following formula:
Pa = (P)(L + M - 1)
Where:
Pa = Aircraft Price Adjustment.
L = .65 x ECI
-----
116.2
M = .35 x ICI
-----
115.9
P = Aircraft Basic Price (as set forth in Article 3.2 of this
Agreement).
ECI = A value using the "Employment Cost Index for workers in aerospace
manufacturing" (aircraft manufacturing, standard industrial
classification code 3721, compensation, base month and year June 1989 =
100), as released by the Bureau of Labor Statistics, U.S. Department of
Labor on a quarterly basis for the months of March, June, September and
December, calculated as follows: A three-month arithmetic average value
(expressed as a decimal and rounded to the nearest tenth) will be
determined using the months set forth in the table below for the
applicable Aircraft, with the released Employment Cost Index value
described above for the month of March also being used for the months
of January and February; the value for June also used for April and
May; the value for September also used for July and August; and the
value for December also used for October and November.
P.A. Xx. 0000
X/XXX XX-0
00
Xxxxxxxxxx X to
6-1162-RLL-933R5
Page 2
ICI = The three-month arithmetic average of the released monthly values for
the Industrial Commodities Index as set forth in the "Producer Prices
and Price Index" (Base Year 1982 = 100) as released by the Bureau of
Labor Statistics, U.S. Department of Labor values (expressed as a
decimal and rounded to the nearest tenth) for the months set forth in
the table below for the applicable Aircraft.
In determining the value of L, the ratio of ECI divided by 116.2 will
be expressed as a decimal rounded to the nearest ten-thousandth and then
multiplied by .65 with the resulting value also expressed as a decimal and
rounded to the nearest ten-thousandth.
In determining the value of M, the ratio of ICI divided by 115.9 will
be expressed as a decimal rounded to the nearest ten-thousandth and then
multiplied by .35 with the resulting value also expressed as a decimal and
rounded to the nearest ten-thousandth.
Months to be Utilized
Month of Scheduled in Determining the
Aircraft Delivery Value of ECI and ICI
------------------ ---------------------
January June B, July B, Aug. B
February July B, Aug. B, Sept. B
March Aug. B, Sept. B, Oct. B
April Sept. B, Oct. B, Nov. B
May Oct. B, Nov. B, Dec. B
June Nov. B, Dec. B, Jan. D
July Dec. B, Jan. D, Feb. D
August Jan. D, Feb. D, Mar. D
September Feb. D, Mar. D, Apr. D
October Mar. D, Apr. D, May D
November Apr. D, May D, June D
December May D, June D, July D
The following definitions of B and D will apply:
B = The calendar year before the year in which the scheduled month
of delivery as set forth in Paragraph 1 occurs.
D = The calendar year during which the scheduled month of delivery
as set forth in Paragraph 1 occurs.
P.A. Xx. 0000
X/XXX XX-0
00
Xxxxxxxxxx X to
6-1162-RLL-933R5
Page 3
2. If at the time of delivery of an Aircraft Boeing is unable to determine
the Aircraft Price Adjustment because the applicable values to be used to
determine the ECI and ICI have not been released by the Bureau of Labor
Statistics, then:
2.1 The Aircraft Price Adjustment, to be used at the time of delivery
of each of the Aircraft, will be determined by utilizing the escalation
provisions set forth above. The values released by the Bureau of Labor
Statistics and available to Boeing 30 days prior to scheduled Aircraft delivery
will be used to determine the ECI and ICI values for the applicable months
(including those noted as preliminary by the Bureau of Labor Statistics) to
calculate the Aircraft Price Adjustment. If no values have been released for an
applicable month, the provisions set forth in Paragraph 2.2 below will apply. If
prior to delivery of an Aircraft the U.S. Department of Labor changes the base
year for determination of the ECI or ICI values as defined above, such rebased
values will be incorporated in the Aircraft Price Adjustment calculation. The
payment by Buyer to Boeing of the amount of the Purchase Price for such
Aircraft, as determined at the time of Aircraft delivery, will be deemed to be
the payment for such Aircraft required at the delivery thereof.
2.2 If prior to delivery of an Aircraft the U.S. Department of Labor
substantially revises the methodology used for the determination of the values
to be used to determine the ECI and ICI values (in contrast to benchmark
adjustments or other corrections of previously released values), or for any
reason has not released values needed to determine the applicable Aircraft Price
Adjustment, the parties will, prior to delivery of any such Aircraft, select a
substitute for such values from data published by the Bureau of Labor Statistics
or other similar data reported by non-governmental United States organizations,
such substitute to lead in application to the same adjustment result, insofar as
possible, as would have been achieved by continuing the use of the original
values as they may have fluctuated during the applicable time period.
Appropriate revision of the formula will be made as required to reflect any
substitute values. However, if within 24 months from delivery of the Aircraft
the Bureau of Labor Statistics should resume releasing values for the months
needed to determine the Aircraft Price Adjustment, such values will be used to
determine any increase or decrease in the Aircraft Price Adjustment for the
Aircraft from that determined at the time of delivery of such Aircraft.
P.A. Xx. 0000
X/XXX XX-0
00
Xxxxxxxxxx X to
6-1162-RLL-933R5
Page 4
2.3 In the event escalation provisions are made non-enforceable or
otherwise rendered null and void by any agency of the United States Government,
the parties agree, to the extent they may lawfully do so, to equitably adjust
the Purchase Price of any affected Aircraft to reflect an allowance for
increases or decreases in labor compensation and material costs occurring since
February, 1992, which is consistent with the applicable provisions of paragraph
1 of this Exhibit D.
3. For the calculations herein, the values released by the Bureau of
Labor Statistics and available to Boeing 30 days prior to scheduled Aircraft
delivery will be used to determine the ECI and ICI values for the applicable
months (including those noted as preliminary by the Bureau of Labor Statistics)
to calculate the Aircraft Price Adjustment.
Note: Any rounding of a number, as required under this Exhibit D with respect
to escalation of the airframe price, will be accomplished as follows:
if the first digit of the portion to be dropped from the number to be
rounded is five or greater, the preceding digit will be raised to the
next higher number.
P.A. No. 1810
K/SWA SA-6
51
EXHIBIT 10.1
Supplemental Agreement No. 7
to
Purchase Agreement No. 1810
between
The Boeing Company
and
SOUTHWEST AIRLINES CO.
Relating to Boeing Model 737-7H4 Aircraft
THIS SUPPLEMENTAL AGREEMENT, entered into as of DECEMBER 29, 1998, by
and between THE BOEING COMPANY, a Delaware corporation with its principal
offices in Seattle, Washington, (Boeing) and SOUTHWEST AIRLINES CO., a Texas
corporation with its principal offices in City of Dallas, State of Texas
(Buyer);
WHEREAS, the parties hereto entered into Purchase Agreement No. 1810
dated January 19, 1994, relating to Boeing Model 737-7H4 aircraft (the
Agreement) and;
WHEREAS, Buyer has agreed to exercise the option to purchase one (1)
additional Option Aircraft and to accelerate delivery of that Option Aircraft
from October 2006 to December 1999 (1), and to accelerate one Block "H" Aircraft
from August 1999 to July 1999, one Block "C" Aircraft from September 1999 to
August 1999, one Block "H" Aircraft from October 1999 to September 1999, one
Block "L" Aircraft from November 1999 to October 1999, one Block "L" Aircraft
from December 1999 to November 1999, two Block "D" Aircraft from January 2000 to
November 1999, one Block "D" Aircraft from January 2000 to December 1999 and one
Block "L" Aircraft from September 2003 to November 1999;
------------------------
*** PURSUANT TO 17 CFR, 240.246-2, CONFIDENTIAL INFORMATION HAS BEEN OMITTED
AND HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION
PURSUANT TO A CONFIDENTIAL TREATMENT APPLICATION FILED WITH THE COMMISSION.
P.A. No.1810 SA-7-1
K/SWA
52
NOW THEREFORE, in consideration of the mutual covenants herein
contained, the parties agree to amend the Agreement as follows:
1. The Table of Contents of the Agreement is deleted in its entirety and a new
Table of Contents is attached hereto and incorporated into the Agreement by this
reference.
2. Article 1, entitled "Subject Matter of Sale," paragraph 1.1 entitled "The
Aircraft" is deleted in its entirety and replaced by a new paragraph 1.1 revised
to reflect one hundred thirty (130) Aircraft. Such new page 1-1 is attached
hereto and incorporated into the Agreement by this reference.
3. Article 2, entitled "Delivery, Title and Risk of Loss," paragraph 2.1,
entitled "Time of Delivery," is deleted in its entirety and replaced by a new
paragraph 2.1 revised to accelerate one (1) Block "C" Aircraft from September
1999 to August 1999, two (2) Block "D" Aircraft from January 2000 to November
1999, one (1) Block "D" Aircraft from January 2000 to December 1999, one (1)
Block "H" Aircraft from August 1999 to July 1999, one (1) Block "H" Aircraft
from October 1999 to September 1999, one (1) Block "L Aircraft from November
1999 to October 1999, one (1) Block "L" from December 1999 to November 1999, one
(1) Block "L" Aircraft from September 2003 to November 1999 and to add one (1)
Block "L" Aircraft for delivery in December 1999. Such new pages 2-1, 2-2 and
2-3 are attached hereto and incorporated into the Agreement by this reference.
4. Article 3, entitled "Price of Aircraft", paragraph 3.4 entitled "Advance
Payment Base Price," subparagraph 3.4.1 entitled "Advance Payment Base Price" is
revised by adding Advance Payment Base Prices for the Block "C" August 1999
Aircraft, for the Block "D" November 1999 and December 1999 Aircraft, for the
Block "H" July 1999 Aircraft, and for the Block "L" October 1999 Aircraft and to
delete the Advance Payment Base Price for the Block "L" September 2003 Aircraft.
Such new pages 3-1, 3-2, 3-3 and 3-4 are attached hereto and incorporated into
the Agreement by this reference.
5. Letter Agreement No. 6-1162-RLL-933R5 entitled "Option Aircraft" is deleted
in its entirety and replaced with Letter Agreement No. 6-1162-RLL-933R6 attached
hereto and incorporated herein by this reference. The third paragraph is revised
to refer to fifty-eight (58) Rollover Option Aircraft. Article 2 entitled
"Delivery of Rollover Option Aircraft," paragraph 2.1 is revised to change the
P.A. No. 1810 SA-7-2
K/SWA
53
quantity of Rollover Option Aircraft from nineteen (19) to eighteen (18) in the
year 2009; paragraph 2.2 and subparagraphs 2.2.1 and 2.2.2 are revised by
changing the quantity of Rollover Option Aircraft from fifty-nine (59) to
fifty-eight (58).
6. All references in the Letter Agreements associated with Purchase Agreement
No. 1810 shall be deemed to refer to the purchase by Buyer of one hundred thirty
(130) Model 737-7H4 Aircraft, sixty-two (62) Model 737-7H4 Option Aircraft and
fifty-eight (58) Model 737-7H4 Rollover Option Aircraft, to the extent such
reference is not specifically addressed herein.
7. Concurrent with execution of this Supplemental Agreement, Buyer will pay to
Boeing***. Such amount reflects the difference in advance payments due as a
result of the acceleration of the Aircraft as described above, the exercise of
the Option to purchase one Aircraft and the deposit due for one Rollover Option
Aircraft converted to an Option Aircraft.
The Agreement will be deemed to be supplemented to the extent herein provided
and as so supplemented will continue in full force and effect.
EXECUTED IN DUPLICATE as of the day and year first above written.
THE BOEING COMPANY SOUTHWEST AIRLINES CO.
By: /S/ XXXX X. XXXXXX By: /S/ XXXX X. XXXXXX
----------------------- ------------------------
Its: Attorney-In-Fact Its: EXECUTIVE V.P. & COO
---------------------- -----------------------
P.A. No. 1810 SA-7-3
K/SWA
54
Exhibit 10.1
PURCHASE AGREEMENT
between
THE BOEING COMPANY
and
SOUTHWEST AIRLINES CO.
Relating to Boeing Model 000-0X0 Xxxxxxxx
Xxxxxxxx Agreement Number 1810
------------------------
*** PURSUANT TO 17 CFR, 240.246-2, CONFIDENTIAL INFORMATION HAS BEEN OMITTED AND
HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION
PURSUANT TO A CONFIDENTIAL TREATMENT APPLICATION FILED WITH THE COMMISSION.
P.A. No. 1810
K/SWA
55
TABLE OF CONTENTS
Page SA
Number Number
------ ------
ARTICLES
--------
1. Subject Matter of Sale..........................................1-1 SA-7
2. Delivery, Title and Risk
of Loss.........................................................2-1 SA-7
3. Price of Aircraft...............................................3-1 SA-7
4. Taxes...........................................................4-1
5. Payment.........................................................5-1
6. Excusable Delay.................................................6-1
7. Changes to the Detail
Specification...................................................7-1 SA-1
8. Federal Aviation Requirements and
Certificates and Export License.................................8-1
9. Representatives, Inspection,
Flights and Test Data...........................................9-1
10. Assignment, Resale or Lease....................................10-1
11. Termination for Certain Events.................................11-1
12. Product Assurance; Disclaimer and
Release; Exclusion of Liabilities;
Customer Support; Indemnification
and Insurance..................................................12-1
13. Buyer Furnished Equipment and
Spare Parts....................................................13-1
14. Contractual Notices and Requests...............................14-1
15. Miscellaneous..................................................15-1
P.A. No. 1810
K/SWA i SA-7
56
TABLE OF CONTENTS
SA
Number
------
EXHIBITS
--------
A Aircraft Configuration SA-1
B Product Assurance Document SA-1
C Customer Support Document
D Price Adjustments Due to
Economic Fluctuations - Aircraft
E Buyer Furnished Equipment
Provisions Document
F Defined Terms Document
LETTER AGREEMENTS
-----------------
1810-1 Waiver of Aircraft Demonstration Flight
P.A. No. 1810 ii
K/SWA SA-7
57
TABLE OF CONTENTS
SA
Number
RESTRICTED LETTER AGREEMENTS ------
----------------------------
6-1162-RLL-932 Promotional Support
6-1162-RLL-933R6 Option Aircraft XX-0
0-0000-XXX-000X0 Xxxxxxxxxx of Confidential SA-1
Information
6-1162-RLL-935R1 Performance Guarantees XX-0
0-0000-XXX-000X0 Xxxxxxx Contractual Matters XX-0
0-0000-XXX-000 Xxxxxxxxx Advance Payment Schedule
6-1162-RLL-938 ***
6-1162-RLL-939R1 Certification Flight Test Aircraft SA-1
6-1162-RLL-940R1 Training Matters SA-1
6-1162-RLL-941R1 Other Matters SA-1
6-1162-RLL-942 Open Configuration Matters
6-1162-RLL-943R1 Substitution Rights XX-0
0-0000-XXX-000 Xxxxxxxx Maintenance Material Cost
Protection Program
6-1162-RLL-945 Comparison of 737-7H4 and 000-0X0
Xxxxx Xxxx Xxxx
0-0000-XXX-0000X0 Additional Contractual Matters SA-4
6-1162-RLL-1856 *** SA-1
6-1162-RLL-1857 Service Ready Validation Program SA-1
Field Test
6-1162-RLL-1858R1 Escalation Matters SA-4
P.A. No. 1810 iii
K/SWA SA-7
58
TABLE OF CONTENTS CON'T
SA
Number
RESTRICTED LETTER AGREEMENTS ------
----------------------------
6-1162-RLL-2036 Amortization of Costs for
Customer Unique Changes XX-0
0-0000-XXX-0000 Xxxxxxxxxxxxxx of the Aircraft SA-1
Basic Price
6-1162-RLL-2073 Maintenance Training Matters SA-1
P.A. No. 1810 iv
K/SWA XX-0
00
XXXXXXXX AGREEMENT NO. 1810
Relating to
BOEING MODEL 737-7H4 AIRCRAFT
----------
This Agreement is entered into as of January 19th 1994, by and between
The Boeing Company, a Delaware corporation, with its principal office in
Seattle, Washington (Boeing), and Southwest Airlines Co., a Texas corporation,
with its principal office in the City of Dallas, State of Texas (Buyer).
Accordingly, Boeing and Buyer agree as follows:
P.A. No. 1810 1
K/SWA
60
ARTICLE 1. Subject Matter of Sale.
1.1 The Aircraft. Subject to the terms and conditions of this
Agreement, Boeing will manufacture and deliver to Buyer and Buyer will purchase
and accept delivery from Boeing of one hundred thirty (130) Boeing Model 737-7H4
aircraft (the Aircraft) manufactured in accordance with Boeing Detail
Specification D6-38808-1, dated October 30, 1996, as described in Exhibit A, as
modified from time to time in accordance with this Agreement (Detail
Specification).
1.2 Additional Goods and Services. In connection with the sale of the
Aircraft, Boeing will also provide to Buyer certain other things under this
Agreement, including data, documents, training and services, all as described in
this Agreement.
1.3 Performance Guarantees. Any performance guarantees applicable to
the Aircraft will be expressly included in this Agreement. Where performance
guarantees are included in this Agreement other than within the Detail
Specification, such guarantees will be treated as being incorporated in the
Detail Specification by this reference.
1.4 Defined Terms. For ease of use, certain terms are treated as
defined terms in this Agreement. Such terms are identified with a capital letter
and set forth and/or defined in Exhibit F.
P.A. No. 1810 1-1
K/SWA SA-7
61
ARTICLE 2. Delivery, Title and Risk of Loss.
2.1 Time of Delivery. The Aircraft will be delivered to Buyer by
Boeing, assembled and ready for flight and Buyer will accept delivery of the
Aircraft, in accordance with the following schedule:
Month and Year
of Delivery Quantity of Aircraft
-------------- --------------------
Block A Aircraft
October 1997 Two (2)
November 1997 Two (2)
Block B Aircraft
January 1998 Two (2)
February 1998 Three (3)
March 1998 Two (2)
April 1998 Two (2)
May 1998 Two (2)
June 1998 One (1)
July 1998 Two (2)
September 1998 Two (2)
Block C Aircraft
February 1999 Four (4)
May 1999 Four (4)
July 1999 Four (4)
August 1999 One (1)
September 1999 Three (3)
Block D Aircraft
November 1999 Two (2)
December 1999 One (1)
January 0000 Xxx (1)
March 2000 Four (4)
July 2000 Four (4)
September 2000 Three (3)
Block E Aircraft
January 2001 Three (3)
March 2001 Three (3)
July 2001 Three (3)
September 2001 Three (3)
Block F Aircraft
October 1998 One (1)
November 1998 Two (2)
December 1998 Two (2)
P.A. No. 1810 2-1
K/SWA XX-0
00
Xxxxx G Aircraft
March 1999 Two (2)
Block H Aircraft
June 1999 Two (2)
July 1999 One (1)
August 1999 One (1)
September 1999 Two (2)
October 1999 One (1)
April 2000 Three (3)
October 2000 Three (3)
April 2001 Three (3)
October 2001 Three (3)
Block I Aircraft
January 2002 Four (4)
March 2002 Four (4)
April 2002 Two (2)
July 2002 Four (4)
October 2002 Four (4)
Block J Aircraft
January 2003 Four (4)
March 2003 One (1)
Block K Aircraft
April 2004 Two (2)
July 2004 Three (3)
Block L Aircraft
October 1999 One (1)
November 1999 Two (2)
December 1999 One (1)
November 2000 Two (2)
December 0000 Xxx (1)
July 2001 One (1)
September 2001 One (1)
October 2001 One (1)
September 2002 Three (3)
2.2 Notice of Target Delivery Date. Boeing will give Buyer notice of the Target
Delivery Date of the Aircraft approximately 30 days prior to the scheduled month
of delivery.
P.A. No. 1810 2-2
K/SWA SA-7
63
2.3 Notice of Delivery Date. If Boeing gives Buyer at least 7 days'
notice of the delivery date of the Aircraft, and an Aircraft delivery is delayed
beyond such delivery date due to the responsibility of Buyer, Buyer will
reimburse Boeing for all costs incurred by Boeing as a result of such delay,
including amounts for storage, insurance, Taxes, preservation or protection of
the Aircraft and interest on payments due.
2.4 Place of Delivery. The Aircraft will be delivered at an airport
facility selected by Boeing in the State of Washington, unless mutually agreed
otherwise.
2.5 Title and Risk of Loss. Title to and risk of loss of an Aircraft
will pass from Boeing to Buyer upon delivery of such Aircraft, but not prior
thereto.
2.6 Xxxx of Sale. Upon delivery of an Aircraft Boeing will deliver to
Buyer a xxxx of sale conveying good title to such Aircraft, free of all liens,
claims, charges and encumbrances of every kind whatsoever, and such other
appropriate documents of title as Buyer may reasonably request.
P.A. No. 1810 2-3
K/SWA SA-7
64
ARTICLE 3. Price of Aircraft.
3.1 Definitions.
3.1.1 Special Features are the features incorporated in
Exhibit A which have been selected by Buyer.
3.1.2 Base Aircraft Price is the Aircraft Basic Price
excluding the price of Special Features.
3.1.3 Aircraft Basic Price is comprised of the Base Aircraft
Price and the price of the Special Features.
3.1.4 Economic Price Adjustment is the adjustment to the
Aircraft Basic Price (Base Aircraft and Special Features) as calculated pursuant
to Exhibit D.
3.1.5 Aircraft Price is the total amount Buyer is to pay for
the Aircraft at the time of delivery.
3.2 Aircraft Basic Price.
The Aircraft Basic Price, expressed in July 1992 dollars, is
set forth below:
P.A. No. 1810 3-1
K/SWA SA-7
65
Base Special Aircraft
Aircraft Price Features Basic Price
Block A, B, C,
D & E Aircraft *** *** ***
Block F & G
Aircraft *** *** ***
Block H
Aircraft *** *** ***
Block I
Aircraft *** *** ***
Block J
Aircraft *** *** ***
Block K
Aircraft *** *** ***
Block L Aircraft *** *** ***
3.3 Aircraft Price. The Aircraft Price will be established at the time
of delivery of such Aircraft to Buyer and will be the sum of:
3.3.1 the Aircraft Basic Price, which is *** for the Block A,
B, C, D and E Aircraft, *** for the Block F and G Aircraft, *** for the Block H
Aircraft, *** for the Block I Aircraft, *** for the Block J Aircraft, *** for
the Block K Aircraft and *** for the Block L Aircraft; plus
3.3.2 the Economic Price Adjustments for the Aircraft Basic
Price, as calculated pursuant to the formulas set forth in Exhibit D (Price
Adjustments Due to Economic Fluctuations - Aircraft); plus
3.3.3 other price adjustments made pursuant to this Agreement
or other written agreements executed by Boeing and Buyer.
3.4 Advance Payment Base Price.
3.4.1 Advance Payment Base Price. For advance payment
purposes, the following estimated delivery prices of the Aircraft (Advance
Payment Base Price) have been established, using currently available forecasts
of the escalation factors used by Boeing as of the date of signing this
Agreement. The Advance Payment Base Price of each Aircraft is set forth below:
Month and Year of Advance Payment Base
Scheduled Delivery Price per Aircraft
------------------ --------------------
Block A Aircraft***
October 1997
November 1997
P.A. Xx. 0000 0-0
X/XXX XX-0
00
Xxxxx X Aircraft***
January 1998
February 1998
March 1998
April 1998
May 1998
June 1998
July 1998
September 1998
Block C Aircraft***
February 1999
May 1999
July 1999
August 1999
September 1999
Block D Aircraft***
November 1999
December 1999
January 2000
March 2000
July 2000
September 2000
Block E Aircraft***
January 2001
March 2001
July 2001
September 2001
Block F Aircraft***
October 1998
November 1998
December 1998
Block G Aircraft***
March 1999
Block H Aircraft***
June 1999
July 1999
August 1999
September 1999
October 1999
April 2000
October 2000
April 2001
October 2001
P.A. No. 1810 3-3
K/SWA XX-0
00
Xxxxx I Aircraft***
January 2002
March 2002
April 2002
July 2002
October 2002
Block J Aircraft***
January 2003
March 2003
Block K Aircraft***
April 2004
July 2004
Block L Aircraft***
October 1999
November 1999
December 1999
November 2000
December 2000
July 2001
September 2001
October 2001
September 2002
3.4.2 Adjustment of Advance Payment Base Prices - Long-Lead
Aircraft. For Aircraft scheduled for delivery 36 months or more after the date
of this Agreement, the Advance Payment Base Prices appearing in Article 3.4.1
will be used to determine the amount of the first advance payment to be made by
Buyer on the Aircraft. No later than 25 months before the scheduled month of
delivery of each affected Aircraft, Boeing will increase or decrease the Advance
Payment Base Price of such Aircraft as required to
P.A. No. 1810 3-4
K/SWA SA-7
68
reflect the effects of (i) any adjustments in the Aircraft Basic Price pursuant
to this Agreement and (ii) the then-current forecasted escalation factors used
by Boeing. Boeing will provide the adjusted Advance Payment Base Prices for each
affected Aircraft to Buyer, and the advance payment schedule will be considered
amended to substitute such adjusted Advance Payment Base Prices.
P.A. No. 1810 3-5
K/SWA SA-7
69
6-1162-RLL-933R6
Southwest Airlines Co.
P.O. Box 36611 - Love Field
Xxxxxx, Xxxxx 00000
Subject: Letter Agreement No. 6-1162-RLL-933R6 to
Purchase Agreement No. 1810 -
Option Aircraft
This Letter Agreement amends Purchase Agreement No. 1810 dated as of January 19,
1994 (the Agreement) between The Boeing Company (Boeing) and Southwest Airlines
Co. (Buyer) relating to Model 737-7H4 aircraft (Aircraft).
All terms used and not defined herein will have the same meaning as in the
Agreement.
In consideration of the purchase by Buyer of the Aircraft, Boeing hereby agrees
to manufacture and sell to Buyer sixty-two (62) additional Model 737-7H4
aircraft as described in paragraph 1 of Attachment A hereto (Option Aircraft)
and fifty-eight (58) Model 737-7H4 Rollover Option Aircraft (Rollover Option
Aircraft), subject to the terms and conditions set forth below.
1. Delivery of Option Aircraft.
The Option Aircraft will be delivered to Buyer during or before the
months set forth in the following schedule:
Number of Option
Month and Year Option Aircraft
of Delivery Aircraft Block
-------------- ---------- ---------
March 2003 Three (3) M
April 2003 Two (2) M
July 2003 Four (4) M
October 2003 Four (4) M
January 2004 Four (4) N
------------------------
*** PURSUANT TO 17 CFR, 240.246-2, CONFIDENTIAL INFORMATION HAS BEEN OMITTED
AND HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION
PURSUANT TO A CONFIDENTIAL TREATMENT APPLICATION FILED WITH THE COMMISSION.
P.A Xx. 0000
X/XXX XX-0
00
Xxxxxxxxx Xxxxxxxx Xx.
0-0000-XXX-000X0 Page 2
March 2004 One (1) N
April 2004 One (1) N
August 2004 Two (2) N
September 2004 Three (3) N
October 2004 Two (2) N
Number of Option
Month and Year Option Aircraft
of Delivery Aircraft Block
-------------- ---------- ---------
January 2005 Four (4) O
March 2005 Four (4) O
April 2005 Two (2) O
July 2005 Four (4) O
October 2005 Four (4) O
January 2006 Four (4) P
March 2006 Four (4) P
April 2006 Two (2) P
July 2006 Four (4) P
October 2006 Four (4) P
2. Delivery of Rollover Option Aircraft.
2.1 The Rollover Option Aircraft will be delivered to Buyer during or
before the years set forth in the following schedule:
Option
Year of Number of Aircraft
Delivery Option Aircraft Block
-------- --------------- --------
2007 Twenty (20) Q
2008 Twenty (20) R
2009 Eighteen (18) S
2.2 The fifty-eight (58) Rollover Option Aircraft are offered to Buyer
subject to the following conditions:
2.2.1 Buyer can exercise any fifty-eight (58) of the
sixty-two (62) Option Aircraft, and will be offered a Rollover Option Aircraft
for each option aircraft exercised up to and including fifty-eight (58).
2.2.2 Conversely to Article 2.2.1 above, if Buyer does not
exercise a minimum of fifty-eight (58) Option Aircraft, one Rollover Option
Aircraft will be deleted for each Option Aircraft not exercised by Buyer.
P.A Xx. 0000
X/XXX XX-0
00
Xxxxxxxxx Xxxxxxxx Xx.
0-0000-XXX-000X0 Page 3
2.2.3 When Buyer exercises one or more Option Aircraft, Boeing
will offer the same quantity of Rollover Option Aircraft to Buyer in the years
identified in Article 2.1 above.
2.2.4 The Rollover Option Aircraft delivery month offered by
Boeing to Buyer will be at least 24 months from the Option exercise date of the
corresponding option.
2.2.5 When Boeing offers the Rollover Option Aircraft to
Buyer, Buyer will accept such Rollover Option Aircraft by wire transferring
$100,000 to Boeing. In the event Buyer exercises its option to purchase the
Rollover Option Aircraft, such application will be in accordance with Article
4.1 herein.
3. Price.
3.1 The advance payment base prices of the Option Aircraft set forth
below and in paragraph 2.1 of Attachment A represent the estimated delivery
prices of the Option Aircraft. The Option Aircraft pricing elements and
associated pricing terms and conditions are given in Attachment A.
3.2 Price and escalation provisions for Model 737-7H4 aircraft
delivering after 2002, are not currently available. The estimated Advance
Payment Base Prices shown in paragraph 3.3 below and in paragraph 2.1 of
Attachment A are based on currently available price and escalation provisions.
As price and escalation provisions become available for Model 737-7H4 aircraft
delivering after 2002, such price and escalation provisions will be
appropriately applied to the applicable Option Aircraft.
For additional information relating to price and escalation provisions
applicable to Option Aircraft delivering after 2002 refer to paragraphs 2.2 and
3.2 of Attachment A.
3.3 The Advance Payment Base Prices of the Option Aircraft indicated
below do include an amount for special features in addition to those
specifically described in Attachment A but do not include any amount for items
of Buyer Furnished Equipment (BFE). An estimate for typical special features is
*** per Aircraft (expressed in 1992 STE dollars) and for BFE is *** per Aircraft
(expressed in delivery year dollars).
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Month and Year Advance Payment Base
of Delivery Price per Option Aircraft
--------------- -------------------------
Block M Aircraft***
March 2003
April 2003
July 2003
October 2003
Block N Aircraft***
January 2004
March 2004
April 2004
August 2004
September 2004
October 2004
Block O Aircraft***
January 2005
March 2005
April 2005
July 2005
October 2005
Block P Aircraft***
January 2006
March 2006
April 2006
July 2006
October 2006
3.4 The Option Aircraft purchase price will be the applicable basic
price thereof at the time of Option Aircraft delivery adjusted in accordance
with Boeing's Aircraft escalation provisions contained in the definitive
agreement to purchase the Option Aircraft. The purchase price will include the
price for Seller Purchased Equipment (SPE) if Buyer has elected to change Buyer
Furnished Equipment (BFE) to SPE.
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4. Option Aircraft Payment.
4.1 In consideration of the granting of the option as set forth herein,
on or before the date Boeing and Buyer enter into a definitive agreement to
purchase the Aircraft, Buyer will pay a deposit to Boeing of $100,000 for each
Option Aircraft (Deposit). In the event Buyer exercises its option herein, the
amount of the Deposit will be credited against the first advance payment due for
such Option Aircraft pursuant to the advance payment schedule set forth in
paragraph 3 of Attachment A. The Deposits for the Option Aircraft will be
refunded to Buyer, without interest, if the parties do not enter into a
definitive Agreement for the Aircraft.
In the event that, after the parties enter into a definitive agreement to
purchase the Aircraft, Buyer does not exercise its option to purchase the Option
Aircraft pursuant to the terms and conditions set forth herein, Boeing will be
entitled to retain the Deposits for the Option Aircraft except as provided in
paragraphs 6 herein.
4.2 Advance payments in the amount of 30% of the advance payment base
price will be payable on the Option Aircraft in accordance with paragraph 3 of
Attachment A. The remainder of the Option Aircraft purchase price is due at the
time of delivery of the Option Aircraft.
5. Option Exercise.
5.1 To exercise its Option, Buyer will give written or telegraphic
notice thereof to Boeing on or before eighteen (18) months prior to the first
day of the delivery month of each Option Aircraft.
In such notice Buyer will select the Option Model type, and the applicable
delivery positions.
5.2 It is understood and agreed that Boeing may accelerate the option
exercise dates specified above if Boeing must make production decisions which
are dependent on Buyer's decision to buy the Option Aircraft. If Boeing elects
to accelerate the option exercise dates, Boeing will do so by giving written or
telegraphic notice thereof to Buyer. Such notice will specify the revised option
exercise dates, which will not be earlier than 30 days after the date of
transmittal of such notice, and the Option Aircraft delivery positions affected
by such revision. If Buyer fails to exercise its option for any Option Aircraft
affected by such revised dates, the Deposit applicable
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to such Option Aircraft will be promptly refunded, with interest, to Buyer. The
interest rate for calculation of the interest associated with such refund is the
rate of two percent (2%) below the Citibank base rate in effect from time to
time during the period the option deposit is held by Boeing.
6. Contract Terms.
It is understood that Boeing and Buyer will use their best efforts to
enter into a definitive agreement for the Option Aircraft within thirty (30)
days after Buyer exercises an option to purchase Option Aircraft pursuant to
paragraph 5 covering the detailed terms and conditions for the sale of such
Option Aircraft.
Such definitive agreement will include the terms and conditions contained herein
together with the terms and conditions, not inconsistent herewith, contained in
Boeing's then-current standard form of purchase agreement for the sale of Model
737-700 aircraft in effect as of the date of option exercise and such additional
terms and conditions as may be mutually agreed upon. In the event the parties
have not entered into such an agreement within the time period contemplated
herein, either party may, exercisable by written or telegraphic notice given to
the other within thirty (30) days after such period, terminate the purchase of
such Option Aircraft.
7. Termination of Option to Purchase.
Either Boeing or Buyer may terminate the option to purchase an Option
Aircraft if any of the following events are not accomplished by the respective
dates contemplated in this letter agreement, or in the Agreement, as the case
may be:
(i) termination of the purchase of the Aircraft under the
Agreement for any reason;
(ii) payment by Buyer of the Deposit with respect to an Option
Aircraft pursuant to paragraph 4.1 herein;
(iii) exercise of an option to purchase an Option Aircraft pursuant
to the terms hereof. Any termination of an option to purchase by Boeing which is
based on the termination of the purchase of Aircraft under the Agreement will be
on a one-for-one basis, for each Aircraft so terminated.
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Any cancellation of an option to purchase which is based on failure to make the
required Deposit or to exercise the option to purchase shall only apply to the
Option Aircraft so canceled.
Termination of an option to purchase provided by this letter agreement will be
caused by either party giving written notice to the other within 10 days after
the applicable date. Upon receipt of such notice, all rights and obligations of
the parties with respect to an Option Aircraft for which the option to purchase
has been terminate will thereupon terminate.
If termination is result of a revision of an option exercise date by Boeing
pursuant to paragraph 5.2, Boeing will promptly refund to Buyer, without
interest, any payments received from Buyer, including the Deposit, with respect
to the Option Aircraft for which the option is terminated. If termination is for
any other reason, Boeing will promptly refund to Buyer, without interest, any
payments received from Buyer with respect to the affected Option Aircraft,
except the Deposit, which Buyer may apply to any model Boeing aircraft purchased
by Buyer from Boeing at a future date.
8. Confidential Treatment. Buyer understands that certain commercial and
financial information contained in this Letter Agreement including any
attachments hereto is considered by Boeing as confidential. Buyer agrees that it
will treat this Letter Agreement and the
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information contained herein as confidential and will not, without the prior
written consent of Boeing, disclose this Letter Agreement or any information
contained herein to any other person or entity except as provided in Letter
Agreement No. 6-1162-RLL-934R1.
Very truly yours,
THE BOEING COMPANY
By /s/ XXXX X. XXXXXX
------------------------------------
Its ATTORNEY-IN-FACT
------------------------------------
ACCEPTED AND AGREED TO this
date: DECEMBER 29, 1998
-----------
SOUTHWEST AIRLINES CO.
By /s/ XXXX X. XXXXXX
------------------------------------
Its EXECUTIVE V.P. & COO
------------------------------------
Attachments
P.A No. 1810
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Attachment A to
6-1162-RLL-933R6
Page 1
Model 737-7H4 Aircraft
1. Option Aircraft Description and Changes.
1.1 Aircraft Description. The Option Aircraft is described by Boeing
Detail Specification D6-38808-1, Dated October 30 ,1996.
1.2 Changes. The Detail Specification will be revised to include:
(1) Changes applicable to the basic Model 737-700 aircraft
which are developed by Boeing between the date of the Detail Specification and
the signing of a definitive agreement to purchase the Option Aircraft.
(2) Changes mutually agreed upon.
(3) Changes required to obtain a Standard Certificate of
Airworthiness.
(4) To provide sufficient Option Aircraft manufacturing and
procurement lead time it is necessary for Boeing and Buyer to reach final
agreement on the Option Aircraft configuration, including BFE/SPE vendor
selection fifteen (15) months prior to delivery of each Option Aircraft. If such
items are not resolved by the indicated dates, Boeing reserves the right to
amend this letter agreement:
(i) to adjust the scheduled delivery of the Option
Aircraft to a later time period and,
(ii) to make such other changes as are appropriate
and consistent with the revised Option Aircraft deliveries.
1.3 Effect of Changes. Changes to the Detail Specification incorporated
pursuant to the provisions of the clauses above will include the effects of such
changes upon Option Aircraft weight, balance, design and performance.
Performance guarantees for the Option Aircraft which are mutually acceptable to
the parties will be included in the definitive agreement for the Option
Aircraft.
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Attachment A to
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Page 2
2. Price Description
2.1 Price Elements Per Aircraft
1 2 3
- - -
AIRCRAFT & ADV. PMT.
AIRCRAFT ESTIMATED SPECIAL ESTIMATED BASE PRICE
DELIVERY FEATURES PRICE ESTIMATED ESCALATION (Elements)
MO. & YR. (JULY 1992$) ESCALATION SHARING 1 + 2 + 3
--------- -------------- ---------- ---------- ----------
BLOCK M
March 2003 *** *** *** ***
April 2003 *** *** *** ***
July 2003 *** *** *** ***
October 2003 *** *** *** ***
BLOCK N
January 2004 *** *** *** ***
March 2004 *** *** *** ***
April 2004 *** *** *** ***
August 2004 *** *** *** ***
September 2004 *** *** *** ***
October 2004 *** *** *** ***
BLOCK O
January *** *** *** ***
March 2005 *** *** *** ***
April 2005 *** *** *** ***
July 2005 *** *** *** ***
October 2005 *** *** *** ***
BLOCK P
January 2006 *** *** *** ***
March 2006 *** *** *** ***
April 2006 *** *** *** ***
July 2006 *** *** *** ***
October 2006 *** *** *** ***
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Attachment A to
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Page 3
2. Price Description. (Continued)
2.2 Price Adjustments For Option Aircraft Delivering From
March 2003 through December 2009.
2.2.1 Special Features. The price for Special Features
incorporated in the Option Aircraft Detail Specification will be adjusted to
Boeing's then-current prices for such features as of the date of execution of
the definitive agreement for the Option Aircraft.
2.2.2 Escalation Adjustments. For escalation provisions
applicable to Option Aircraft delivering after 2002, see paragraph 2.2.6 below.
2.2.3 Base Price Adjustments for FAA Changes. The Aircraft
Basic Price of the Option Aircraft will be adjusted for any FAA mandated changes
incorporated into the Aircraft.
2.2.4 Price Adjustments for Changes. Boeing may adjust the
Aircraft Basic Price and the Advance Payment Base Price for any changes mutually
agreed upon subsequent to the date that Buyer and Boeing enter into a definitive
agreement for the Option Aircraft.
2.2.5 Base Price Adjustments. The Aircraft Basic Price of the
Option Aircraft will be adjusted to Boeing's then-current prices as of the date
of execution of the definitive agreement for the Option Aircraft in accordance
with the agreement reached below. The Aircraft Basic Price starting point for
options delivering in 2003 is *** (July 1992 STE), for options delivering in
2004 is *** (July 1992 STE), for options delivering in 2005 through 2009 is ***
(July 1992 STE). Such Aircraft Basic Price may increase in accordance with
paragraphs 2.2.1, 2.2.2, 2.2.3 and 2.2.4. For any other changes to the Aircraft
Basic Price, Boeing may increase the Aircraft Basic Price by a maximum of ***
(July 1992 STE) for Aircraft delivering in 2005 and by a maximum of *** (July
1992 STE) per year or portion thereof starting in January 2006.
2.2.6 Prices for Long Lead Time Aircraft. Boeing has not
established escalation provisions for Model 737-700 aircraft for delivery 2003
and after. Such escalation provisions (i) will be incorporated into the Option
Aircraft definitive agreement when such information is available and (ii) will
be the then-current escalation provisions applicable to the same model aircraft
and engines delivering in the same time period as the Option Aircraft. The
resulting revisions to the definitive agreement will
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Attachment A to
6-1162-RLL-933R6
Page 4
include but not be limited to, adjustment of the Aircraft Basic Price of the
Option Aircraft, the Advance Payment Base Price, the Aircraft escalation
provisions and the advance payment amounts due on the Option Aircraft.
2.2.7 BFE to SPE. An estimate of the total price for items of
Buyer Furnished Equipment (BFE) changed to Seller Purchased Equipment (SPE)
pursuant to the Configuration Specification is included in the Option Aircraft
price build-up. The purchase price of the Option Aircraft will be adjusted by
the price charged to Boeing for such items plus 10% of such price. If all BFE
except developmental avionics is converted to SPE, Boeing will waive the 10%
fee.
3. Advance Payment Schedules, Prices and Adjustments.
3.1 Buyer will pay to Boeing advance payments for the Option Aircraft
on the dates and in the amounts determined below.
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Attachment A to
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Page 5
Amount Due per Aircraft
-----------------------
(Percentage times
Due Date of Payment Advance Payment Base Price)
-------------------
Deposit $100,000 (if applicable)
18 months prior to the first 15% (less the
day of the scheduled delivery Deposit if any)
month of the Aircraft
12 months prior to the first 5%
day of the scheduled delivery
month of the Aircraft
9 months prior to the first 5%
day of the scheduled delivery
month of the Aircraft
6 months prior to the first 5%
day of the scheduled delivery
month of the Aircraft
--------
Total 30%
Any advance payments that would be past due as of the date of signing the
definitive purchase agreement for the Option Aircraft in accordance with the
above schedule are due and payable on such date.
3.2 Option Aircraft advance payment base prices will be increased or
decreased, as appropriate, at the time of signing of the definitive purchase
agreement for the Option Aircraft, using the then-current forecasted aircraft
escalation factors used by Boeing, to determine the amount of the advance
payments to be made by Buyer on the Option Aircraft.
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PRICE ADJUSTMENT DUE TO
ECONOMIC FLUCTUATIONS
AIRCRAFT PRICE ADJUSTMENT
(July 1992 Base Price)
1. Formula.
The Aircraft Price Adjustment will be determined at the time of
Aircraft delivery in accordance with the following formula:
Pa = (P)(L + M - 1)
Where:
Pa = Aircraft Price Adjustment.
L = .65 x ECI
-----
116.2
M = .35 x ICI
-----
115.9
P = Aircraft Basic Price (as set forth in Article 3.2 of this
Agreement).
ECI = A value using the "Employment Cost Index for workers in
aerospace manufacturing" (aircraft manufacturing, standard
industrial classification code 3721, compensation, base month
and year June 1989 = 100), as released by the Bureau of Labor
Statistics, U.S. Department of Labor on a quarterly basis for
the months of March, June, September and December, calculated
as follows: A three-month arithmetic average value (expressed
as a decimal and rounded to the nearest tenth) will be
determined using the months set forth in the table below for
the applicable Aircraft, with the released Employment Cost
Index value described above for the month of March also being
used for the months of January and February; the value for
June also used for April and May; the value for September also
used for July and August; and the value for December also used
for October and November.
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ICI = The three-month arithmetic average of the released monthly
values for the Industrial Commodities Index as set forth in
the "Producer Prices and Price Index" (Base Year 1982 = 100)
as released by the Bureau of Labor Statistics, U.S. Department
of Labor values (expressed as a decimal and rounded to the
nearest tenth) for the months set forth in the table below for
the applicable Aircraft.
In determining the value of L, the ratio of ECI divided by 116.2 will
be expressed as a decimal rounded to the nearest ten-thousandth and then
multiplied by .65 with the resulting value also expressed as a decimal and
rounded to the nearest ten-thousandth.
In determining the value of M, the ratio of ICI divided by 115.9 will
be expressed as a decimal rounded to the nearest ten-thousandth and then
multiplied by .35 with the resulting value also expressed as a decimal and
rounded to the nearest ten-thousandth.
Months to be Utilized
Month of Scheduled in Determining the
Aircraft Delivery Value of ECI and ICI
------------------ --------------------------
January June B, July B, Aug. B
February July B, Aug. B, Sept. B
March Aug. B, Sept. B, Oct. B
April Sept. B, Oct. B, Nov. B
May Oct. B, Nov. B, Dec. B
June Nov. B, Dec. B, Jan. D
July Dec. B, Jan. D, Feb. D
August Jan. D, Feb. D, Mar. D
September Feb. D, Mar. D, Apr. D
October Mar. D, Apr. D, May D
November Apr. D, May D, June D
December May D, June D, July D
The following definitions of B and D will apply:
B = The calendar year before the year in which the
scheduled month of delivery as set forth in Paragraph 1
occurs.
D = The calendar year during which the scheduled month of
delivery as set forth in Paragraph 1 occurs.
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2. If at the time of delivery of an Aircraft Boeing is unable to determine
the Aircraft Price Adjustment because the applicable values to be used to
determine the ECI and ICI have not been released by the Bureau of Labor
Statistics, then:
2.1 The Aircraft Price Adjustment, to be used at the time of delivery
of each of the Aircraft, will be determined by utilizing the escalation
provisions set forth above. The values released by the Bureau of Labor
Statistics and available to Boeing 30 days prior to scheduled Aircraft delivery
will be used to determine the ECI and ICI values for the applicable months
(including those noted as preliminary by the Bureau of Labor Statistics) to
calculate the Aircraft Price Adjustment. If no values have been released for an
applicable month, the provisions set forth in Paragraph 2.2 below will apply. If
prior to delivery of an Aircraft the U.S. Department of Labor changes the base
year for determination of the ECI or ICI values as defined above, such rebased
values will be incorporated in the Aircraft Price Adjustment calculation. The
payment by Buyer to Boeing of the amount of the Purchase Price for such
Aircraft, as determined at the time of Aircraft delivery, will be deemed to be
the payment for such Aircraft required at the delivery thereof.
2.2 If prior to delivery of an Aircraft the U.S. Department of Labor
substantially revises the methodology used for the determination of the values
to be used to determine the ECI and ICI values (in contrast to benchmark
adjustments or other corrections of previously released values), or for any
reason has not released values needed to determine the applicable Aircraft Price
Adjustment, the parties will, prior to delivery of any such Aircraft, select a
substitute for such values from data published by the Bureau of Labor Statistics
or other similar data reported by non-governmental United States organizations,
such substitute to lead in application to the same adjustment result, insofar as
possible, as would have been achieved by continuing the use of the original
values as they may have fluctuated during the applicable time period.
Appropriate revision of the formula will be made as required to reflect any
substitute values. However, if within 24 months from delivery of the Aircraft
the Bureau of Labor Statistics should resume releasing values for the months
needed to determine the Aircraft Price Adjustment, such values will be used to
determine any increase or decrease in the Aircraft Price Adjustment for the
Aircraft from that determined at the time of delivery of such Aircraft.
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2.3 In the event escalation provisions are made non-enforceable or
otherwise rendered null and void by any agency of the United States Government,
the parties agree, to the extent they may lawfully do so, to equitably adjust
the Purchase Price of any affected Aircraft to reflect an allowance for
increases or decreases in labor compensation and material costs occurring since
February, 1992, which is consistent with the applicable provisions of paragraph
1 of this Exhibit D.
3. For the calculations herein, the values released by the Bureau of Labor
Statistics and available to Boeing 30 days prior to scheduled Aircraft delivery
will be used to determine the ECI and ICI values for the applicable months
(including those noted as preliminary by the Bureau of Labor Statistics) to
calculate the Aircraft Price Adjustment.
Note: Any rounding of a number, as required under this Exhibit D with
respect to escalation of the airframe price, will be accomplished as
follows: if the first digit of the portion to be dropped from the
number to be rounded is five or greater, the preceding digit will be
raised to the next higher number.
P.A No. 1810
K/SWA SA-7
